1. German Output Goes Missing
The latest industrial data coming out of Germany shows a drop-off in productivity for a third straight month, falling by 1.9% in November alone. Needless to say, Europe’s auto-making powerhouse has shifted down a gear, and investors are starting to worry about a recession.
The German economy felt the brunt of the slowdown in intermediate, capital and consumer goods as well as the construction, automotive and energy industries. Ouch, did anything improve at all?
Germany’s Economic Ministry pointed at new rigorous emissions standards, Brexit and Trump’s ‘America First’ policy as the key factors hindering its traditionally relentless growth trajectory. It also pointed out that the fundamental components of its economy, such as consumer spending, employment levels and wage rates all remain strong.
However, with global growth concerns on the rise, European political uncertainty persisting and Brexit likely to annihilate its auto-market, Germany’s export-driven growth strategy has left it extremely exposed to a recession in 2019.
Investors will be eyeing up its preliminary 2018 GDP data closely for any signs of life next week Tuesday, and so should you.
2. Currency Wars: Rupiah Vs Rupee
The gloves are off in 2019 and these two heavyweights are fighting it out for the high-yield title. However, Goldman Sachs has pegged the Rupiah to be the winner, thanks to a few key differences in the structure of its economy that will likely give it the edge over its Indian counterpart.
As a net commodities exporter with a lower fiscal deficit, Indonesia will benefit from higher prices for its coal, while India will take a beating thanks to its massive oil-dependency and its status as a net commodities importer.
Until October, India’s Rupee was the worst-performing currency thanks to a surge in oil prices. Since then, the Rupee has appreciated significantly in line with plunging oil prices. However, with the prospect of greater supply cuts and decreasing inventories, Oil prices are likely to appreciate in the near-term and put downward pressure on the rupee.
India also faces a significant amount of political risk ahead of its general elections which may force a shift in power within the Indian government and likely weigh heavily on the Rupee. Conversely, Indonesian President, Joko Widiodo, is expected to win a second term without causing too much fuss.
The Rupiah kicked off the New Year by appreciating 2%, outpacing its Asian peers to reach a 6-month high. Indonesia has taken the gloves off and this may just be the start!
Today we are watching…
1. Takeda Pharmaceuticals (#takeda)
Takeda completed the $59 billion takeover of UK-based company, Shire, ahead of schedule Yesterday. The shock sent Takeda’s share price 11% into the green as investors welcomed the formation of a new pharma giant with open arms. Takeda is now one of the world’s 10 largest pharma companies. Definitely one to watch.
2. PG&E Corp. (#pge)
PG&E suffered a serious blow on Monday after S&P global ratings agency stripped the US utilities company of its investment-grade credit rating. The company was downgraded to junk status, pending further investigation. The downgrade is a result of political and regulatory pressure regarding the massive claims PG&E faces from the Californian wildfires. Further downgrades may be on the cards, so keep your eyes peeled!