“The economic outlook in the euro area is going from bad to worse.
“The 19-nation region has had a poor start to 2019: disappointingly weak indicators keep rolling in, the list of one-off growth inhibitors is getting longer, and a slew of institutions are downgrading their forecasts. Now, the bloc’s executive sees “substantial” risks — a change in tone that goes beyond the downbeat assessment of the European Central Bank.
“The European Commission says an Italian economy close to stagnation [in recession, actually] and significantly weaker momentum in Germany will weigh on growth in the euro area this year, and has issued sweeping downward revisions to most of the region’s major economies.
“Gloomier prospects reflect the protracted impact from unrest in Italy and France, and changing regulations that held back car production — particularly in Germany. Also looming are uncertainty around global trade and a sharper-than-expected slowdown in China…
“Clouds on the horizon are getting darker, the commission said…”
“Emergency plans to stimulate the economy if Britain leaves the European Union without a deal next month have been drawn up in secret by senior government figures.
“The move emerged as Mark Carney, the Bank of England Governor, warned of the growing risk of recession following a no-deal Brexit and cut Britain’s growth forecasts to their lowest for a decade.”
“France has recalled its ambassador in Rome following a string of “repeated, baseless attacks” from Italy’s political leaders.
“Tensions have been mounting between the two countries for months as Italy’s deputy prime ministers Matteo Salvini and Luigi Di Maio have criticised French President Emmanuel Macron on a number of issues.”
“Italian industrial production fell for a fourth straight month, in a sign the recession that started late last year may persist.
“The populist coalition government has been swamped by a rash of negative economic data, including the European Commission’s slashing of this year’s growth forecast by a full percentage point.”
““[Greek] Small and medium enterprises with excellent know-how and solid business propositions and around 30 million euros in revenues or less, are in great need of funding,” said Petros Doukas, chairman of advisory boutique Capital Partners SA and a former deputy finance minister.
“One of the biggest obstacles to providing that money is the ongoing legacy of the country’s debt crisis that forced it to seek multiple international bailouts. Borrowers are failing to meet payments on almost half the debt owed to Greece’s banks. In other words, there’s 88.6 billion euros ($101 billion) of bad loans weighing down the balance sheets of Greek lenders, equivalent to about half the country’s annual economic output.”
“The extent of price gouging in Turkey is unclear but—ahead of the late March local elections—the Erdogan administration is making a big play out of targeting anybody it alleges is exploiting soaring prices by adding excessive amounts to their margins.
“Rather than face the suspicion and wrath of officials, some supermarkets have even stopped selling expensive agricultural produce altogether… Food prices—fuelled by poor weather including flash floods in big farming regions—surged 31% y/y in January,”
“Global economic growth is being hit more significantly than many anticipate and calls for an impending U.S. recession now look increasingly credible, which is bad news for risk assets, according to Europe’s top-ranked strategy team at Societe Generale SA.
“The Fed’s dovish pivot should cast doubts on how the last leg of this cycle will unfold, with investors likely to see profit warnings, defaults and increased volatility over the next 12 months, they wrote in a report Thursday.”
“Fears of an earnings recession are cropping up in the market as company profits are expected decline for the first time in two years. While the possibility wouldn’t necessarily signal an economic recession to follow, it paints an important picture of flattening growth trends and a looming global slowdown.”
“This level of debt has occurred just twice in the past 120 years, first during the second world war and then again during the 2008 financial crisis.
“…The second time it relied on its central bank’s balance sheet via quantitative easing.
“However, the US Federal Reserve is now trying to unwind QE…[and faces a battle to find buyers for its bonds].”
“There are no plans yet for US President Donald Trump and his Chinese counterpart Xi Jinping to meet soon in hope of finalising a trade deal, the former has said.
“On Thursday, asked by a reporter whether there would be a meeting before a March 1 deadline for the two countries to reach a trade deal, Trump said: “No.” …Kudlow told Fox Business that there was still a “sizable distance” separating the two sides.”
“Rogoff said, “China really does seem to be slowing down more than the official number. It has probably slowed down a lot. In Europe that is what Germany is feeling, that is what a lot of Asia is feeling.
“So, looking more broadly globally that is much slower and the whole world affects interest rates, it is not just the United States.””
“When China used easy credit and infrastructure spending to avoid the global financial crisis, it reversed years of reforms to open its economy, economists say. That’s because that credit went to unproductive state-owned enterprises and starved the private sector.
“Now, China risks unemployment and social unrest if it doesn’t breakdown the state-owned enterprises, and getting trapped in a vicious economic cycle if it does.”
“After the 2008 financial crisis, China launched a stimulus program of mind-boggling proportions. The stimulus was essentially built on debt from the non-financial sector, aka shadow banking.
“All this debt will have to be paid off, which is why a trade war is so threatening to China. Worse, debt is no longer having the desired effect on China. So, in the next downturn, slowdown, or whatever you call it, Beijing may not be able to borrow its way out of the hole.”
“Copper prices eased overnight as worries over global economic growth lingered, with aluminium also weakening after a major producer warned about softer demand…
“A steady drum beat of weak economic data in recent weeks, including in top metals consumer China, has stoked fears of a global recession.”