Europe Sluggish

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Special Guest Blogger: Tim Kearney

Christine Lagarde, managing director of the International Monetary Fund (IMF), is ringing a warning bell over the direction of the global economy. At the World Government Summit in Dubai, she reportedly spoke of four “clouds” darkening the global outlook: 1) trade disputes 2) financial conditions tightening 3) Brexit uncertainty and 4) China’s slowdown.[1] The speech followed a markdown of the Fund’s global growth expectations for 2019 from 3.5% to 3.7% in late-January. European data continue this “slowing theme.” Throughout the Eurozone, a malaise is setting in. At the Eurozone aggregate level in January, the Business Climate Index, Services Confidence Index, Industrial Confidence, Consumer Confidence and Sentix Investor Confidence all fell. (Sentix was a February reading.) The unemployment rate fell steadily from spring 2013 to fall 2018, but appears to be stalling. Consequently, euro-denominated yields are falling. The 10-year Bund yield has slipped back towards zero. With the euro stable, yields down, the economy soft and inflation muted, there will be an argument for the European Central Bank to hold off on further hikes.

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