Europe midday: Stocks dip on Italian impasse
By Alexander Bueso
Date: Wednesday 14 Nov 2018
(Sharecast News) - Stocks on the Continent are trading slightly lower on Wednesday after the Italian government stuck to its deficit targets for next year, despite opposition from the European Commission, and following the release of a mixed set of data on China's economy overnight.
On Tuesday evening, Italy responded to Brussels's request for modifications to its budget plans for next year, although Rome did offer to boost the generation of proceeds from privatisations, from 0.6% worth of GDP to 1.0%. Italy also indicated it would take whatever measures were necessary in order to forestall a public deficit greater than 2.4% of GDP.
Nevertheless, after an early sharp rise, Italian government bond yields had fallen back.
As of 1156 GMT, the benchmark Stoxx 600 was off by 0.48% or 1.75 points to 362.69, alongside a drop of 1.08% or 207.42 points on the FTSE Mibtel to 19,019.67, while the Cac-40 was down by 0.58% or 30.50 points at 5,069.68.
In parallel, the yield on the benchmark 10-year Italian government note was four basis points higher to 3.49%.
From a sector standpoint, the Stoxx 600's gauge of Basic Resources was the main drag on markets, retreating by 2.21% to 412.65 after data released overnight revealed a slowdown in Chinese retail sales for the month of October to a pace of 8.6% year-on-year (consensus: 9.2%), although readings for industrial value-added and fixed asset investment were as or better-than-expected by analysts.
Back in Europe, and also on the economic front, all eyes were on German economy, after the Federal Office of Statistics reported that the country's gross domestic product shrank at a quarter-on-quarter pace of 0.2% over the three months to September, double what economists had anticipated.
Nevertheless, economists at Barclays Research remained upbeat, telling clients: "We forecast GDP growth to accelerate in Q4 18 (+0.3% q/q) and remain buoyant in 2019 (avg. 0.45% q/q) with risks skewed to the downside due to ongoing deterioration in global trade.
"Interestingly, countries involved in Germany's supply chain all surprised to the upside in Q3 18. This suggests that either the slowdown was only regulation related, or that the negative growth impulse via trade from Germany on CEE countries is just delayed. Likely, both factors were at play.2
Euro area industrial output slowed by less than anticipated last month, according to Eurostat, from a year-on-year clip of 1.1% in August to 0.9% for September (consensus: 0.5%).
Separately, Eurostat reported that employment within the single currency bloc was up by 0.2% quarter-on-quarter over the three months to September.
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