Recession fears in focus as German investor morale nosedives
Recession fears in focus as German investor morale nosedives
Berlin, Germany - September 28: A German flag blows in the wind at Bellevue Castle on September 28, 2018 in Berlin, Germany. (Photo by Inga Kjer/Photothek via Getty Images)
Deutsche Bank expects the German economy to contract this quarter after recent business surveys The warning from Germany ’s biggest bank comes just days after Bundesbank President Jens 22. In its first assessment last month, the office said Europe’s largest economy dodged recession with a
Germany on brink as warning issued over Deutsche Bank . FEARS of a recession in the Eurozone are rising as Germany 's economy shows yet more signs of buckling under global and domestic financial pressures. It's the second month in a row factory output in Germany has slowed, and suggests the
Germany is likely in the midst of a technical recession, according to Deutsche Bank.
“We see Germany in a technical recession, as we expect another 0.25% GDP drop in Q3,” Deutsche Bank’s chief economist Stefan Schneider wrote in a note sent to clients on Friday.
A technical recession is two quarters of contracting economic activity. Deutsche Bank’s prediction comes after data last week showed the German economy shrunk by 0.1% in the second quarter, signalling “the end of a golden decade for the German economy.”
Yield Curves Invert in U.S., U.K. as `Doom and Gloom' Spreads
The stream of investors seeking refuge in the safest parts of the market has triggered yet another recession warning, with yield curves inverting from the U.S. to the U.K. The gap between two- and 10-year yields dropped below zero on both sides of the Atlantic after a wave of soft economic data globally. Weaker-than-forecast Chinese retail sales and industrial output set the mood for the markets, with data later in the day showing Germany’s economy contracted, adding to the gloom. © Bloomberg U.S. and U.K.
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As a result, Deutsche Bank trimmed its forecast for full-year growth in Germany to 0.3% this year and 0.7% in 2020.
Gallery: US-China Trade War: A timeline (Photos)
Two of the biggest economies in the world – the U.S. and China – have been caught in the throes of a bitter and potentially catastrophic (for themselves and the world) trade war over the past year. Take a look at this timeline to understand the progression of the dispute between Washington, D.C. and Beijing.
April 2017: Trump investigates steel imports
One of U.S. President Donald Trump’s biggest campaign promises was to bring manufacturing jobs back to the country. In April, after becoming president, Trump directed the Commerce Department to determine whether the scale of import of steel from China (and other countries) posed a threat to national security.
Dow Sheds 800 in Biggest Drop of Year
U.S. stocks tumbled and Treasury markets sent a new recession signal after weak German and Chinese economic data stoked fears of an impending global slowdown.
Germany officially slid into recession today according to economic data showing that Europe's largest economy shrank in the last quarter. The Federal Statistics Office said GDP contracted 0.5% in the third quarter, following a 0.4% drop in the second
The so-called yield curve suggests there's a 60% chance of a U.S. recession occurring in the next 12 months, according to analysts at Deutsche Bank , led by Dominic Konstam. The calculations attach the highest probability to an economic contraction since the financial crisis.
When announcing the investigation, Trump said: "For decades America has lost our jobs and our factories to unfair foreign trade. And one steel mill after another has been shut down, abandoned, and closed. And we're going to reverse that."
August 2017: Trump targets China's 'unfair trade practices'
A few months later, Trump expanded the scope of investigation, calling on U.S. Trade Representative Robert Lighthizer (L) to decide on a probe of "unfair Chinese trade practices" in general. The Executive Order focused on alleged theft of American intellectual property through spying and hacking.
In response, the Chinese Commerce Ministry said: “… any actions of trade protectionism from the U.S. side would be harmful to the bilateral trade and business relationship and the interests of companies on both sides."
August 2017: China responds through state media
In a sign of deteriorating relations between the two countries, China’s Ministry of Foreign Affairs hit out at Trump for launching the investigations and trying to use them to pressure Chinese President Xi Jinping into supporting the U.S. in its efforts to control North Korea.
Is there about to be a recession?
Investors are losing confidence in the global economy amid the ongoing US-China trade war and the stuttering performance of key economies
For Merkel, Deutsche 's woes could hardly have flared up at a worse time. Her Christian Democrats are losing support to the far-right Alternative for Germany (AfD) and are at loggerheads with their Bavarian allies over migrant policy. With her strength in a fractured post-Brexit European Union also sapped
Deutsche Bank 's chief economist Norbert Walter on Friday warned Germany could be in for a The German central bank said on Friday it expects the economy to contract by 0.8 percent next German output shrank in the second and third quarters of 2008, putting the country in a technical recession .
The state-run China Daily newspaper wrote: "His idea of exploiting trade as a bargaining chip in dealings with China dates back to the campaign trail. But instead of advancing the United States' interests, politicizing trade will only acerbate the country's economic woes, and poison the overall China-U.S. relationship."
January 2018: US slaps tariffs on solar panels and washing machines
Undeterred by Beijing’s warnings, the Trump administration initiated its first major trade action against China – a 30 percent tax on imported solar panels (the majority of these come from China). In addition, a 20 percent tax was levied on large residential washing machines.
In his statement, Lighthizer (pictured) said: “The President's action makes clear again that the Trump Administration will always defend American workers, farmers, ranchers, and businesses in this regard.”
January 2018: China blasts new tariffs
On Jan. 23, China’s Commerce Ministry issued a statement condemning the U.S. move to tax solar panels. Part of the statement said: “China hopes the U.S. will exercise restraint in using trade restrictions.” Beijing also aid it would “resolutely defend its legitimate interests.”
Hong Kong economy grows less than expected as recession fears hit
Hong Kong’s economy grew less than expected at just 0.5 per cent year-on-year for the second quarter, the government revealed  The post Hong Kong economy grows less than expected as recession fears hit appeared first on CityAM.
Deutsche Bank expects the German economy to contract this quarter after recent business surveys pointed to souring moods at companies and “The start of the German economy into 2019 has been a major disappointment so far,” Deutsche Bank economists including Sebastian Becker wrote in a
A recession is a macroeceonomic term that refers to a significant decline in general economic activity in a region, country, or the entire world that goes on for more than a few months. It is visible in industrial production, employment, real income, and wholesale-retail trade.
The Trump administration’s move to tax the import of washing machines upset South Korea as well. Seoul’s Trade Minister, Kim Hyun-chong, said the move was an “excessive and a clear violation of World Trade Organization (WTO) rules.
March 2018: US imposes tariffs on steel and aluminum
On March 9, Trump imposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum. The tariffs would impact every country exporting either material to the U.S., with the exception of Canada and Mexico. Trump said: “America will remain open to modifying or removing the tariffs for individual nations as long as we can agree on a way to ensure that their products no longer threaten our security.”
China responded by calling the tariffs “a serious attack on normal international trade order” and said it is “firmly opposed” to the move.
April 2018: China hits back with its tariffs
On April 2, Beijing announced tariffs on nearly $3 billion of U.S. imports. These tariffs included a 15 percent duty on products like fruits, wine, nuts and steel pipes. In addition, China also levied a 25 percent tax on goods like pork and recycled aluminum. The latter move alarmed the U.S. National Pork Producers Council, who claimed the $1.1 billion in exports to the Asian giant would be negatively impacted.
Deutsche Bank is fined £13m by US regulators over nepotistic behaviour
Germany's biggest lender has been fined £13million by US regulators over claims it gave jobs to the relatives of rich government officials to win business overseas. The Securities and Exchange Commission accused Deutsche Bank of hiring the children of powerful apparatchiks in China and Russia as part of a push to win business. The SEC said the bank carried out this nepotistic behaviour for eight years between 2006 and 2014. Deutsche did not admit wrongdoing when it coughed up the cash. Other lenders have already had to settle over similar allegations.
Deutsche Bank said it was cooperating with authorities and would release more details in due course. "As far as we are concerned, we have already provided the authorities with all the relevant information regarding [the] Panama Papers," it said in a statement. "Of course, we will cooperate closely with the
Deutsche Bank Australia has pledged its support to the # UluruStatement . CEO Anthony Miller said : “It takes voices from all corners of society, including In an interview with the @ EconomicTimes India, James von Moltke explains why the comparisons between Deutsche Bank and the failed Lehman
China’s Ministry of Commerce said it hoped the U.S. would withdraw its tariffs “as soon as possible so that the trading of products between China and the United States will return to a normal track.”
April 2018: US taxes 1,300 Chinese products
The two countries continued to trade blows, with the U.S. adding 1,300 more items to the list of taxed goods. The products taxed included those from the aerospace and medical industries, both of whom were the subject Trump’s 2017 investigation into China’s “unfair trade practices.” The sum total of Chinese exports to be taxed was $50 billion.
The decision was criticized by the U.S. Chamber of Commerce, whose executive vice president, Myron Brilliant, said that although the move to restore balance in trade was correct, “… imposing taxes on products used daily by American consumers is not the way to achieve those ends.”
April 2018: China retaliates with tariffs worth $50 billion
China then announced plans to impose a 25 percent tariff on U.S. exports worth $50 billion. The list of products to be affected included soybeans, chemicals, aircraft and automobiles. At the time, there was confusion over the date on which these tariffs would come into effect. In response, China’s vice finance minister, Zhu Guangyao, said the intervening period could be used as a “time to negotiate and compromise.”
April 2018: US threatens $100 billion of tariffs
An apparently frustrated Trump then threatened a further (and steeper) range of tariffs. On April 6, he said: “In light of China’s unfair retaliation, I have instructed the [United States Trade Representative] to consider whether $100 billion of additional tariffs would be appropriate.” China’s response, via Commerce Ministry spokesperson Gao Feng (pictured), was to say: “We are prepared and have already formulated very detailed countermeasures.”
German business confidence slumps to lowest point since 2012
German business confidence slumps to lowest point since 2012 appeared first on CityAM. Gallery: 10 Stocks to Own Through a Global Recession (InvestorPlace) Explore the issues faced by the UK’s most vulnerable children and young people this summer and discover what you can do to help.
That being said , Deutsche Bank ’s recession model based on the yield curve had reached the low 70s prior to the last two recessions . What’s more, the Fed has been buying billions of dollars of longer-term bonds as well in the past few years to boost the economy. Some have suggested all that buying has
Deutsche Bank 's Disturbing Answer! As a near-term indicator, we watch for increases in the unemployment rate that occur near the beginning of recessions . So this morning's move down in the unemployment rate lowered the recession probability in our near-term model.
Trump’s announcement was criticized by members of the Republican party, with Nebraska senator Ben Sasse calling it “the dumbest possible way to do this.”
April 2018: US bans Chinese tech giant
Washington, D.C.’s next move was against Chinese telecom giant ZTE. The firm was banned from purchasing components from U.S. companies. The U.S. Commerce Department claimed ZTE lied about punishing employees who violated sanctions against North Korea and Iran and slapped a seven-year ban on the company.
Meanwhile, the U.K. government made a similar move, warning its companies from using the Chinese one’s equipment and services.
April 2018: China's 179 percent sorghum tax
The following day, China’s Commerce Ministry announced a staggering 179 percent fee on sorghum imports from the U.S. The grain is used in animal feed but is also popular in the country for making a local liquor. China imported over $960 million of sorghum in 2017, according to data from CNN.
April 2018: Both sides show interest in talks
In the first sign of a potential thaw in relations, on April 21 U.S. Treasury Secretary Steven Mnuchin (pictured) said a trip to China was possible and that he was “cautiously optimistic” a trade deal could be agreed between the two countries.
In response, on April 22, China’s Commerce Ministry said: “China has received a message from the U.S. about its willingness to hold bilateral trade talks in Beijing. China welcomes this move."
May 2018: First round of talks
Talks between senior U.S. and Chinese officials began in May, in Beijing. They were described by the White House as “frank discussions.” The Chinese were more circumspect, with official news agency Xinhua saying: “Both sides realized there are some relatively big differences on some issues. And more work needs to be done to achieve more progress.”
Why the UK might already be in recession
The UK might be in recession.
Chances are remote the U.S. economy will fall into a recession in the next 12 months despite a recent flattening of the U.S. yield curve suggesting growing recession risk, Deutsche Bank 's economists said on Monday. Based on other bond market indicators, they estimated the probability of a U.S. recession .
May 2018: Trump tweets in favor of ZTE
On May 13, Trump tweeted: “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”
A spokesperson for China’s Foreign Ministry responded: “We very much appreciate the positive statement from the U.S. side on ZTE and maintain close communication with them on the issue.”
May 2018: Rumors of Chinese purchases surface
On May 17, U.S. officials told CNN Beijing had proposed a boost in Chinese purchases of U.S. products by nearly $200 billion, in order to address trade imbalances between the two nations.
The following day, Lu Kang (pictured) responded, “These rumors are not true.” At the same time, China also announced it was removing the 179 percent tax on the import of U.S. sorghum.
May 2018: Mnuchin says trade war 'on hold'
Four days later, Mnuchin told Fox News: “We're putting the trade war on hold. We have agreed to put the tariffs on hold while we try to execute the framework.” The statement came after news U.S. and China had agreed to not impose tariffs while talks were ongoing.
May 2018: China reduces tariffs on imported cars
In response, China then announced, with effect from July 1, a reduction in import duties on passenger cars from the U.S., from 25 percent to 15 percent. The decision was one of some promises made by Jinping to Trump and included a significant reduction of fees on imported auto parts as well.
May 2018: US revives tariff threats
What followed was a surprising revival of tariff threats against Beijing. On May 29, the White House announced it would go ahead with an earlier plan to levy a 25 percent duty on $50 billion of Chinese goods “containing industrially significant technology.”
In its statement, the U.S. government said: “The United States will request that China remove all of its many trade barriers, including non-monetary trade barriers, which make it both difficult and unfair to do business there.”
May 2018: China 'not afraid of fighting trade war'
Beijing issued a strong response to the new threats, with Foreign Ministry spokesperson Hua Chunying saying: “We want to reiterate that we don't want a trade war, but we aren't afraid of fighting one. If the U.S. insists on acting arbitrarily and recklessly, China will take firm and powerful measures to safeguard its own legitimate rights.”
Beijing also decried what it saw as U.S. efforts to unsettle China ahead of talks with American Commerce Secretary Wilbur Ross, saying: In international relations, an about-face or constant change of positions is bound to damage or squander a country’s credibility.”
June 2018: Wilbur Ross holds talks in Beijing
Ross met with Chinese vice premier Liu He in Beijing over the first week of June. At the end of that discussion, China said it would purchase U.S. products worth nearly $25 billion in 2018. The decision was seen as Beijing’s attempt to reduce the deficit in trade balances between the two countries – something Trump repeatedly pointed out in his relationship with China.
June 2018: US allows ZTE to return to business, if it pays a fine
On June 7, the U.S. government said it had reached a deal with Chinese firm ZTE that would allow the telecom giant to return to trading with American partners. The deal included the payment of a record $1.4 billion ($400 million in escrow) fine and proposed management changes.
July 2018: US slaps $34 billion duty
The Trump administration’s unpredictable handling of the trade issue took a new turn on July 6, with the U.S. slapping $34 billion of tariffs on products like farming plows and airplane parts. The government said a further $16 billion in tariffs could be imposed in two weeks or less.
The move was criticized by Robert Holleyman, a senior trade official who served under former president Barack Obama, who said: “Once these tariffs start going into effect, it’s pretty clear the conflict is real. If we don’t find an exit ramp, this will accelerate like a snowball going down a hill.”
July 2018: China hits back
The latest salvo in a rapidly escalating trade war was fired by China, who imposed a similar $34 billion of tariffs on 545 American products. Lu Kang confirmed the development, saying: “After the U.S. activated its tariff measures against China, China’s measures against the U.S. took effect immediately.”
July 2018: US announces second list of tariffs
The Trump administration retaliated by imposing a 10 percent tariff on an additional $200 billion of Chinese imports. Some of the products included in the list facing tariff were manufactured under the Made in China 2025 initiative, which is a strategic plan to help China dominate the major global industries.
August 2018: Both sides unveil new tariffs
The Trump administration directed the Office of the United States Trade Representative (USTR) to consider a 25 percent tariff – more than double the one in July – on $200 billion worth of goods, including construction materials, textiles, tools, food and agricultural products. China also issued a second round of tariffs.
On Aug. 7, the USTR issued a final list of Chinese goods worth $16 billion that will be hit with tariffs. In response, China imposed a 25 percent tariff on $16 billion worth of U.S. imports, such as medical equipment, fuel, steel products and autos – both effective from Aug. 23.
September 2018: Trump threatens new duties
Broadening the divide in an already escalating trade dispute, Trump threatened to impose tariffs on another $267 billion of goods. Speaking about the additional tariffs, Trump said, “The $200 billion we are talking about could take place very soon depending on what happens with them. To a certain extent it’s going to be up to China. And I hate to say this, but behind that is another $267 billion ready to go on short notice if I want. That totally changes the equation.”
September 2018: US invites China for trade talks
In a what was then viewed as a positive move in Asian markets, the U.S. sought to reinitiate trade talks with China before the proposed increase of tariffs on $200 billion worth of Chinese goods. “There’s some discussions and information that we received that the Chinese government – the top of the Chinese government wished to pursue talks. And so, Secretary Mnuchin, who is the team leader with China, has apparently issued an invitation,” explained Larry Kudlow (pictured), director of the U.S. National Economic Council.
September 2018: USTR finalizes tariffs worth $200 billion
On Sept. 18, USTR released a list of approximately $200 billion worth of Chinese imports to be subject to an additional 10 percent starting Sept. 24. The level would increase to 25 percent starting Jan. 1, 2019. Though Trump warned “we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports” if China takes retaliatory actions, China hit back with plans to impose tariffs on U.S. goods worth $60 billion.
September 2018: China cancels trade talks
Amid escalating tariff threats and trade tensions, China pulled out of proposed talks on Sept. 22.
Two days later, the U.S. and China imposed another round of tariffs against each other’s goods. China also published a white paper against the “economic hegemony” and “trade bullyism practices of the U.S. administration.”
October 2018: Senior officials meet
Senior trade officials of both sides met for a working-level contact that could possibly lead to a meeting between Trump and Xi on the sidelines of the G20 Summit in Argentina. Bloomberg reported that if the planned meeting between the two world leaders does not yield any favorable result, then the U.S. will prepare to announce tariffs on remaining goods imports from China by early December.
November 2018: Trade talks resume
Weeks before Trump and Xi were due to meet at the G20 Summit, U.S. Treasury Secretary Steven Mnuchin (pictured) and his Chinese counterpart Vice Premier Liu He spoke on phone and resumed discussion on ways to ease the trade tension. While the U.S. maintained that China make an offer before negotiations can start, China decided to wait for the discussion to begin before making a formal proposal.
December 2018: Temporary trade truce
Defusing tensions caused by months of trade threats, Trump and Xi met for a dinner meeting at the G20 Summit on Dec. 1 and agreed to halt new trade tariffs for a period of 90 days to facilitate talks. The first face-to-face meeting between the two leaders since the trade war erupted was described by Trump as an “amazing and productive meeting with unlimited possibilities for both the United States and China.”
December 2018: China lowers tariffs on auto parts, buys US soybean
After the 90-day negotiation window was put in place, China temporarily lowered tariffs on cars and parts originating in the U.S. for three months. The country also resumed purchase of soybeans from the U.S. – a practice it had stopped in July 2018.
January 2019: Three-day trade talks in Beijing
Between Jan. 7 and Jan. 9, the two met to reach a consensus.
The U.S. noted China had agreed to purchase “a substantial amount of agricultural, energy, manufactured goods, and other products and services from the United States.” In a separate statement, China said both sides “held broad, deep and meticulous discussions on shared observations on trade issues and structural problems, laying the foundation for addressing areas of common concern.” A second round of talks was held Jan. 30-31.
In an interview with The New York Times after the talks, Trump said, “Without the tariffs, we wouldn’t be talking. And I make this point clear to them.”
(Pictured) Trump meets with China Vice Premier Liu He (2nd L) at the White House in Washington, D.C., on Jan. 31, 2019.
February 2019: Trade talks continue
Ahead of the March 1 deadline of the 90-day trade truce, top officials engaged in several rounds of talks to reach a consensus on issues from currency manipulation to market access. A side-by-side comparison by Bloomberg of the statements released by the two countries after their meeting in Beijing showed that while the U.S. made no mention of a consensus, China noted the “sides reached ‘consensus in principle on major issues,’ with a view toward a ‘memorandum of understanding on bilateral economic and trade issues.’”
(Pictured) Lighthizer (2nd L) speaks with Xi, next to Mnuchin (L), during a meeting at the Great Hall of the People in Beijing on Feb. 15, 2019.
May 5, 2019: Talks fall apart
Trump announced plans to increase tariff rates on Chinese goods, claiming talks with China are moving "too slowly as they attempt to renegotiate." The White House also accused Beijing of backing out of key commitments in a developing agreement. The tariff rates on $200 billion worth of Chinese goods were hiked from 10 percent to 25 percent a few days later on May 10. China retaliated by increasing duties on $60 billion in U.S. goods to up to 25 percent on June 1.
June 29, 2019: US and China agree to restart trade talks
Trump and Xi agreed to resume trade negotiations during a bilateral meeting on the sidelines of the G20 Summit in Osaka, Japan. After the meeting, Trump said trade relations with China were "back on track." According to Chinese state media, the two countries would resume trade talks and the U.S. has agreed not to impose new tariffs on Chinese imports.
The investment bank warned larger downgrades to growth may be necessary if certain geopolitical factors turn against Germany. Deutsche Bank said the US-China trade conflict and Brexit were the two biggest risk factors to forecasts.
“The probability that one or more of these key assumptions might turn out differently, i.e., worse than assumed, is unusually high, in our view,” Schneider wrote. “In such a case, another reduction by a few tenth of a percentage point might not be sufficient, as we might find ourselves in a completely different scenario.”
A hard Brexit, which looks increasingly likely, would damage the German economy, as would a prolonged US-China trade war that depressed Chinese demand for German imports.
However, Schneider said these events were “unpredictable” and so Deutsche Bank was not building possible negative fallout from them into its economic forecasting models.
“Even the best attempts trying to assess the actual size of the impact need to be taken with a large grain of salt,” he wrote.
“It is probably fair to say that with respect to both events the market consensus has been much too optimistic and failed to see the permanent deteriorations in both during the last few quarters.”
Explore the issues faced by the UK’s most vulnerable children and young people this summer and discover what you can do to help.
Why the UK might already be in recession.
The UK might be in recession.