Europe close: Positive headlines out of Germany and China drive gains
By Alexander Bueso
Date: Tuesday 15 Jan 2019
(Sharecast News) - Stocks on the Continent managed to reverse a midday swoon, helped by more positive news out of Germany and China, although investors were treading cautiously ahead of the vote on the Prime Minister's withdrawal plans later in the day in the British parliament's.
According to Germany's Ministry of Finance, the country's economy expanded by 1.5% in 2018, after recording "a small plus" over the last three months of last year, putting paid to speculation that the country might have fallen into a technical recession at the tail-end of last year.
For Holger Schmieding at Berenberg, Germany's fundamentals were "solid enough" such that its highly cyclical economy would "bounce back nicely" once the uncertainty around trade wars, the Chinese correction and a possible hard Brexit faded.
"We expect that to happen from spring 2019 onwards after a grey winter," he said.
By the end of trading, the benchmark Stoxx 600 was ahead by 0.35% or 1.20 points to 348.71, alongside a dip of 0.03% or 6.0 points to 19,165.48 for the FTSE Mibtel and an advance of 0.33% or 35.88 points to 10,891.79 for the German Dax.
Euro/dollar was retreating 0.38% to 1.14252, alongside a three basis point fall on the yield for the benchmark 10-year German bund to 0.21%.
Front month Brent crude oil futures meanwhile were up by 1.387% to $59.82 a barrel on the ICE.
Meanwhile, in China, its central bank released better-than-expected data on credit growth, although money supply growth continued to languish after authorities moved to curb local government bond issuance.
As well, overnight Chinese authorities announced that tax cuts "on a larger scale" were in the policy pipeline. The news came amid data showing more stable credit conditions, although some analysts called attention to the still weak money supply growth dynamics as measured by M1.
And the country's premier, Liu He, reportedly accepted an invitation to the next phase of talks in Washington DC.
Freya Beamish at Pantheon Macroeconomics believed the Asian country's authorities had already done enough "to ensure a recovery".
Nevertheless, she added that: "economic activity is set to get weaker before this feeds through, not until well into the second half. In the meantime, the PBoC will get scared and cut rates, particularly now that the Fed now looks likely to pause in March."
At the euro area level, Eurostat reported that in seasonally adjusted terms the bloc's trade surplus increased from €13.5bn (Preliminary: €12.5bn) for October to €15.1bn in November (consensus: €12.6bn). According to economists, a 1.9% month-on-month drop in the single currency bloc's imports buoyed the outcome, with the fall in crude oil prices likely to have played a role.
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