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Germany shrugs off recession fears by returning to growth - business live Germany shrugs off recession fears, but China's economy stumbles - business live
(about 5 hours later)
Germany’s economy ministry Peter Altmaier has hailed today’s growth figures, calling them a “first ray of hope”. Back in Germany, police, prosecutors and tax investigators have launched a series of raids today, looking for evidence of tax fraud.
But Altmaier has also warned that the US-China trade war is still threatening the German economy. The probe is centred on Deutsche Bank, and allegations that some wealthy customers hid money in offshore companies.
“The international trade disputes are still unresolved. We must do everything possible to find acceptable solutions that enable free trade.” According to Bloomberg, eight suspects’ homes were raided, along with offices of more than 20 banks, tax advisers and asset-management companies.
Altmaier also called for red tape and taxes to be cut to support German firms. The Financial Times has more details:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. German criminal prosecutors, police and tax investigators this morning began raiding eleven German lenders looking for evidence of suspected tax fraud by clients of a former Deutsche Bank offshore unit.
Germany’s economy has shrugged off the risk of a recession by bursting back to growth. The raids are taking place in Frankfurt and six other cities across Germany and involve officers from the Federal Criminal Police, the Hamburg State Office of Criminal investigation and six different regional tax authorities. Eight individuals who were clients of a British Virgin Islands-based former Deutsche Bank unit are in the crosshairs of the investigators.
New government figures show that German GDP expanded by 0.4% in January-March, an encouraging sign for the European economy. German authorities raid 11 banks in tax fraud probe. Another headache for @DeutscheBank that could really do with a few weeks w/ no negative headlines @OlafStorbeck https://t.co/mcAwDO5npt via @financialtimes
That ends a six-month period with no growth at all! Germany contracted by 0.2% in July-September last year, and then stagnated in October-December. Deutsche Bank has tweeted about the raids, saying its offices are not among the ones searched:
That means Germany has only grown by 0.7% over the last 12 months, dragged down by a weak global economy and problems in its car sector. The investigations today are not directed against Deutsche Bank. The public prosecutor's office is investigating private individuals. Deutsche Bank cooperates and voluntarily submits all requested documents. A search of our business premises has therefore not taken place.
#Bruttoinlandsprodukt im 1. Quartal 2019 um 0,4 % gegenüber dem Vorquartal gestiegen. https://t.co/pgK7FiOAUO #BIP pic.twitter.com/YN0It3u6VD President Xi also told his fellow Asian leaders that countries shouldn’t dictate to each other -- another jibe at America’s foreign policy approach?
At 0.4%, Germany has matched the average eurozone growth so far this year- but is a little slower than the UK’s 0.5% growth. “Exchanges and mutual learning among civilizations should be reciprocal and equal.
Statistics body Destatis reports that private consumption, construction and business investment all boosted German growth, while government sending declined. They should be diversified and multidirectional, rather than compulsory or coercive. They should not be one-way.”
Both imports and exports rose during the quarter, which also suggests domestic and overseas demand has picked up. China’s president has blasted trade protectionism in his first major speech since the US imposed higher tariffs on $200bn of Chinese goods.
More to follow! Opening the Conference on Dialogue of Asian Civilizations in Beijing, Xi Jinping urged countries not to “close their doors and hide behind them -- a clear signal to Washington.
Also coming up Xi also criticised as “just stupid” those who think their race are superior to others.
The US-China trade war still hangs over the global economy like a smog. CNN has more details:
Investors are clinging to hopes of an eventual deal, sending stocks higher in Asia today after a bounce back on Wall Street last night. Some conciliatory tweets from Donald Trump last night, promising a deal ‘when the time is right’, are helping. Opening the Conference on Asian Civilizations Dialogue in Beijing on Wednesday, Xi said there was no need for “civilizations to clash with each other.””No civilization is superior over others.
When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense. We have to be allowed to make up some..... The thought that one’s own race and civilization are superior and the inclination to remold or replace other civilizations are just stupid,” he said, adding to do so would invite “catastrophic consequences.”
....of the tremendous ground we have lost to China on Trade since the ridiculous one sided formation of the WTO. It will all happen, and much faster than people think! Nancy Curtin, chief investment officer of Close Brothers Asset Management, has welcomed the pick-up in eurozone growth last quarter.
We’ll also be watching the energy sector, after it emerged that the opposition Labour government has drawn up plans to nationalist Britain’s energy networks below their market value, if they won the next election “Growth in the EU continues to beat expectations, proving the disastrous beginning of the year to be an anomaly. While the region has a long way to go, things are looking up; the services and housebuilding sectors are doing better than expected, eurozone unemployment is at a ten year low, and wage growth is beginning to improve. This should help consumer confidence and, in turn, consumption.
Energy bosses hoping for a loophole in Corbyn's nationalisation pledge will be disappointed: Labour is out to take it all in what could prove to be the biggest energy shakeup of a generation https://t.co/Fl6SyefLQV However, she also warns that the US-China trade war could Europe, so governments may need to boost spending to help the economy:
The agenda The eurozone is an export-led economy, and global trade is at its weakest in a decade. Trade tensions continue to take centre stage for the world economy, looming as a circuit breaker to global recovery. Unless we reach resolution, the EU must be open to fiscal intervention to avoid a downturn.”
10am BST: Eurozone GDP for Q1 2019 (second estimate) Employment growth across the eurozone has also picked up, in another encouraging sign for the region:
1.30pm BST: US retail sales Euro area employment growth picks up again, to an annualised rate of 1.4% in Q1 (+0.3% QoQ). pic.twitter.com/HHKgsA8sEH
We now have confirmation that the eurozone grew by 0.4% in the first quarter of 2019.
That matches the initial estimate two weeks ago (before this morning’s German GDP had been calculated), and is twice as fast as in Q4 2018.
Eurostat has also confirmed that the wider European Union grew by 0.5%, with the UK one of the best-faring major economies.
However, that’s still slower than the US which managed 0.8% growth last quarter
Here’s some highlights from the EU:
Eurozone: +0.4% quarter-on-quarter
European Union: +0.5%
Spain: +0.7%
UK: +0.5%
Netherlands: +0.5%
Portugal: +0.5%
Germany: +0.4%
France: +0.3%
Austria: +0.3%
Euro area #GDP +0.4% in Q1 2019, +1.2% compared with Q1 2018: flash estimate from #Eurostat https://t.co/dyguU4HN6Y pic.twitter.com/7UB6dgTAmO
Back in the eurozone, Portugal has posted solid growth in the last quarter.
Portuguese GDP increased by 0.5% in January-March, a little faster than Germany, matching the UK’s growth rate for Q1.
Domestic spending and investment drove growth.
#Portugal #GDP Growth Rate QoQ Prel at 0.5% https://t.co/o9PhlMR2av pic.twitter.com/1NDm93FlXX
In another worrying sign, China’s fixed-asset investment growth also slowed last month.
FAI grew 6.1% year on year in the first four months of 2019, down from 6.3% in January-March alone, the National Bureau of Statistics reported.
That shows companies are cutting back on new equipment and property, as the trade war with the US hits demand.
Fears grow that tariffs will hurt a H2 recovery in #China after data disappoints again. pic.twitter.com/7ts9DE7ZHe
Today’s disappointing Chinese economic data isn’t a blip.
As this tweet shows, retail sales and business investment growth have been slowing for months, while industrial production has been jittery:
With markets in rebound mode, it was a good day for Chinese data to disappoint. Chart shows yoy changes in YTD data to smooth out fluctuations. Investment (blue) looks to have stabilised since mid-2018 but retail sales (red) are still decelerating. IP (white) is inconclusive. pic.twitter.com/8h8NIH8zJO
European stock markets have fallen into the red this morning, despite the encouraging news from Germany.
Instead, the disappointing slowdown in China’s retail sales and industrial output growth is worrying investors, coming on top of the existing trade war jitters.
Italy’s FTSE MIB is the worst performer, down 0.7% after deputy prime minister Matteo Salvini threatened to break EU budget rules yesterday.
The French CAC and German DAX are both down 0.5%, while the UK’s FTSE 100 is basically flat.