Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The euro is under pressure. Fears of a eurozone recession this year have driven the single currency down to its lowest level since May 2017.
With factories already hit by trade war tensions, the disruption caused by the coronavirus crisis is threatening to wipe out growth altogether. European airlines have already been hit by the Covid-19, and supply chains around the world are already feeling the strain.
The cancellation last night of Mobile World Congress, the huge business conference in Barcelona, has shown that business leaders are more jittery.
This has pushed the euro down to just $1.086 against the US dollar, as traders rush into safe haven assets.
Holger Zschaepitz
(@Schuldensuehner)Ouch! #Euro breached key support at 1.0879, falling to lowest since May 2017, amid momentum selling, stop-loss activity & after horrible econ data. Euro-Area industrial output slumped most in 4yrs. Production dropped 2.1% in December, more than forecast. pic.twitter.com/CmkpyWZL4g
Steve Englander, head of global G10 FX research and North America macro strategy at Standard Chartered, says the markets are concerned about the European economy.
The eurozone economy almost stalled in the last quarter, with GDP rising by just 0.1% in October-December. Hopes of a pick-up in Q1 2020 are fading…
…especially after data yesterday showed eurozone industrial production slumped 4.1% in December, its weakest performance since the 2012 sovereign debt crisis.
Englander says (via the FT) that:
“The main impact of coronavirus for Europe is growth.
“The euro area started the year with low growth and an ECB largely out of policy options. The hope was that . . . fiscal expansion would begin.
However, the negative growth shock has reduced this hope.”
Deutsche Bank warned earlier this week that the coronavirus crisis could drive Germany into recession this year, as its manufacturing sector will be hurt by slowing demand from China.
It’s a headache for the European Central Bank, where new chief Christine Lagarde is reviewing the bank’s strategy.
European stock markets have shrugged off these concerns, hitting record highs yesterday. But they’re going to drop back today, after a sharp jump in coronavirus cases and deaths.
Later today the European Commission will publish its new winter forecasts, which may show that Brussels policymakers are getting gloomier.
The agenda
- 10am GMT: European Commission presents its winter forecasts
- 1.30pm GMT: US inflation for January; expected to rise to 2.5% year on year, from 2.3%
- 1.30pm GMT: US weekly jobless numbers; expected to show a rise of 210k, up from 202k
