Spreadex Market Update
Negative UK inflation and year low German ZEW economic sentiment figure take toll on markets
As expected, the pound’s post-SABMiller deal surge soon disappeared as it was revealed that the UK’s inflation turned negative for the second month of 2015, with clothing and fuel prices responsible as they have been (alongside falling food prices) for most of the year. That 0.1% dip into deflation territory didn’t help the FTSE much either and, combined with a further slide into the red for its commodity stocks, helped the UK index widen its losses to 50 points. However, boosted by a soaring SABMIller, following its ‘in principle’ agreement with Anheuser-Busch InBev, the FTSE was one of the better performing indices this Tuesday morning, especially compared with its German cousin.
In a sign of just how tough things have been for Germany of late, its ZEW economic sentiment figure plunged to a year low of 1.9 from 12.1 last month, in stark contrast to the more stable (if still falling) 30.1 from the Eurozone as a whole. The ongoing, China-inspired slowdown in emerging markets, consistently weak manufacturing and services data, the destabilising refugee crisis, Deutsche Bank’s colossal third quarter loss and, most damagingly, the Volkswagen scandal have all taken their toll on Germany’s economic outlook. Even news that VW intends to cut its investment by €1 billion a year couldn’t help matters, leaving the DAX in its all-too familiar 3 digit decline mode.
With a quiet US afternoon ahead, and a 60 point drop for the Dow Jones on the cards at the open, things are unlikely to change as Tuesday continues, today’s data perhaps serving as an unwelcome reminder of the global issues facing the markets after a fortnight of exuberant trading.
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