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European Equity Benchmarks Close Lower; IMF Downgrades Euro Area Growth Forecasts


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The broad-based major European indices closed lower Tuesday led by falling mining stocks, banks and consumer goods companies.

In economic news, the International Monetary Fund (IMF) reported in its January World Economic Outlook that growth in the euro area is set to slow to 1.6% and 1.7% in 2019 and 2020 respectively, from 1.8% in 2018.

"Growth rates have been marked down for many economies, notably Germany (due to soft private consumption, weak industrial production following the introduction of revised auto emission standards, and subdued foreign demand," said the report. It also said there is "substantial uncertainty" around the baseline projection of 1.5% growth in the UK in 2019-20. The baseline projection assumes that a Brexit deal is reached in 2019 and that the UK transitions gradually to the new regime.

"However, as of mid-January, the shape that Brexit will ultimately take remains highly uncertain," said the report.

Meanwhile, Eurostat, the statistical office of the European Union, reported that the government debt-to-GDP ratio in the euro area (EA19) was 86.1% at the end of Q3 2018, compared with 86.3% at the end of the previous quarter. In the EU28, the ratio decreased to 80.8% from 81.0%. Compared with Q3 of 2017, the government debt to GDP ratio fell in both the euro area (from 88.2% to 86.1%) and the EU28 (from 82.5% to 80.8%).

Compared with Q3 of 2017, four member states registered an increase in their debt-to-GDP ratio at the end of Q3 2018, while 24 reported a decrease. An increase in the ratio was recorded in Cyprus, Greece, the UK, and Slovakia. The largest decreases were recorded in Slovenia, Malta, Portugal, Austria, Lithuania, the Netherlands, Ireland and Croatia.

Eurostat also reported the seasonally adjusted general government deficit to GDP ratio stood at 0.5% in the euro area (EA19) in Q3 of 2018, up from 0.3% in Q2 2018. In the EU28, the deficit to GDP ratio stood at 0.6%, up from 0.4% the previous quarter.

In the UK, the headline seasonally adjusted IHS Markit Household Finance Index (HFI), which measures households' overall perceptions of financial wellbeing, increased in January to a three-month high of 44.8, from 44.0 in December. However, because it remained below the no-change mark of 50.0, it indicates pessimism toward current financial prospects among UK households.

"There was no financial respite at the beginning of 2019 for UK households, with survey data showing current finances once again deteriorating," said Joe Hayes, an economist at IHS Markit. "Expectations remain anchored upon this downbeat trend continuing throughout the year ahead. A number of other survey indicators reinforce the negative stance by households, as job security perceptions deteriorated to a near one-year low, while there was no bounce back from the stark drop in house price expectations seen in December."

Also in the UK, the Office for National Statistics (ONS) reported that estimates from the Labor Force Survey show that the number of people in work increased, the number of unemployed people was little changed and the number of people aged from 16 to 64 years not working and not seeking nor available to work decreased between June to August 2018 and September to November 2018.

There were an estimated 32.53 million people in work, 141,000 more than for June to August 2018 and 328,000 more than for a year earlier. The employment rate was estimated at 75.8%, higher than for a year earlier (75.3%) and the highest since comparable estimates began in 1971, said in the ONS.

And in Germany, the index of producer prices for industrial products (domestic sales) for Germany in 2018 rose 2.6% on an annual average from 2017, according to the Federal Statistical Office (Destatis). In 2017 the index had increased by 2.7% compared with 2016. In December the index of producer prices for industrial products rose 2.7% compared with the same month the previous year. In November the annual rate of change all over had been 3.3%.

In equities, mining stocks helped weigh down the FTSE in London as Evraz fell 3.5%, while Rio Tinto, Glencore, Antofagasta, lost 2.2%, 2.1%, and 2% respectively. Energy services firm John Wood Group led all decliners shedding 4.1%, while online gambling company GVC Holdings, and oil company Royal Dutch Shell fell 3% and 2.9%.

In Frankfurt, adhesives manufacturers Covestro led the DAX lower, falling 3.2%, followed by industrials group Thyssenkrupp, and semiconductor company Infineon were down 2.3% and 1.8% respectively. Deutsche Bank and chemcials and consumer goods company Henkel each closed 1.5% lower, while industrial conglomerate Siemens, and personal-care company Beiersdorf were off 1.3% each.

In Paris, banks stocks burdened the CAC as BNP Paribas, Societe Generale, and Credit Agricole lost 1.9%, 1.6%, and 1.5% respectively, while steel and mining company ArcelorMittal led all decliners falling 4.6%. Semiconductor company STMicroelectronics was off 3.4%, while oilfield services firm TechnipFMC, and software firm Dassault Systemes were down 1.4% and 1.3%.

The FTSE fell 0.99%, the DAX lost 0.41%, and the CAC-40 dropped 42%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 MTNewswires.com. All rights reserved. Unauthorized reproduction is strictly prohibited.





This article appears in: Investing , Stocks , ETFs
Referenced Symbols: DAX



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