E Markets: Hell

This puts the EU commission forecasts for Winter 2019 in the spotlight on the day as well. The sharp cuts in 2019 growth from the Autumn outlook hit markets today and much of the growth remains predicated on the uncertainties receding rather than getting worse. 

What Happened?

  • Japan December LEI preliminary 97.9 from 99.1 – as expected. The coincident index drops to 102.3 from 102.9. The Cabinet Office assessment of the current conditions is  “weakening”

  • India RBI cuts rates 25bps to 6.25%- surprising market – first easing since Aug 2017. Most expected a shift in policy stance then a rate cut in April or later. The easing action was by a 4-2 vote. Deputy Governor Viral Acharya and another MPC member, Chetan Ghate, voted for status quo in interest rates, while Das and three others voted for a cut in interest rates. The MPC also changed the policy stance to ‘neutral’ from ‘calibrated tightening’. This was first money policy review for Shaktikanta Das the former economic affairs secretary, who took over as RBI Governor in the second week of December 2018. The RBI sees FY2020 GDP at 7.4%, CPI is seen at 2.4% in 1Q2019 and 3.2%-3.4% for 2Q and 3Q. They think the FY2020 budget proposals will likely boost demand. They also raised the limit for collateral free farm loans and linked bank ratings to exposure to NBFCsDas said that shift in stance to neutral provides flexibility to meet growth challenges. "Farm output was expected to decelerate in FY19. Continuing deflation in food and crude led to decline in headline inflation,” he added. Das also emphasized on the need to strengthen private investment activity.

  • German December industrial production -0.4% m/m, -3.9% y/y after revised -1.3% m/m (pre -1.9%), -4.0% y/y – weaker than +0.6% m/m expected.  Ex-energy and construction, production rose 0.2% m/m. Within industry, capital goods rose 0.9%, intermediate goods fell 0.4%, consumer goods fell 0.5%. Outside industry, energy was flat and construction fell 4.1% m/m. 
  • Spain December industrial production -1.4% m/m, -6.2% y/y after revised -1.8% m/m, -3.2% y/y (pre -2.6%) – weaker than -2% y/y expected.  By industry, non-durable consumer goods fell 0.1% m/m, capital goods -2.5% m/m, intermediate goods -0.3% m/m, consumer durable goods -5% m/m.  Energy fell 3.4% m/m. 

  • French December trade deficit E4.7bn after revised E4.8bn (pre E5.1bn) – more than E4bn expected. Exports rose 2.2% m/m while imports rose 1.7% m/m. The French C/A deficit narrows to E1.1bn from revised E3bn (pre E2.8bn) – worse than E0.8bn expected.  The services surplus rose E2.9bn from E2.0% and secondary income deficit narrowed to E3.7bn from E5bn, but the goods gap widened to E4.7bn from E4.6bn and primary income surplus fell to E4.4bn from E4.5bn. 
  • Italy December retail sales -0.7% m/m after revised 0.6% m/m (pre 0.7%) – weaker than +0.7% m/m expected. Sales by product shows pharmaceutical products -3.3%, sporting and toys -2.7% while furniture/textiles rose 1.9% and other products rose 2.9%. Internet sales slowed to up 0.6% y/y from +22.7% in November.  Overall, sales for 2018 were up 0.2% y/y. For December, growth was 0.6% y/y in value and -0.5% y/y in quantity. 
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