FTSE lower on ECB China trade

It’s the morning after and the FTSE is struggling. The London gauge is down 0.7% after the ECB’s grim assessment of the state of the European economy yesterday and the index’s chance of recovery has been dealt a further blow by data pointing to an increasingly serious slowdown in China. Some of the UK blue chips that have reported earlier this week are among the main fallers including Ashtead Group and Paddy Power with one rare glimpse of light being Debenhams with its 17% rally this morning. 

The retailer’s shares have perked up after Sports Direct boss Mike Ashley launched a coup to take over the company’s board and install himself as the new chair. Sports Direct has already moved into higher end retail with the acquisition of House of Fraser last year and Debenhams could become the next feather in its hat. It would certainly help its shares which are one of the most frequently shorted UK stocks because of the ongoing pressure on high end retailers.

Euro comes up for breath after the post ECB plunge

The Euro is in a slightly better shape this morning, recovering from the ECB-induced plunge Thursday after the central bank revised down its growth projections and committed to keep rates lower for longer. 

The central bank’s stance on the Eurozone economy has turned from confidence into concern only a few months after it decided to phase out the economic stimulus programme that has been in place since the last financial crisis. 

The region’s largest economy Germany has been hit hard by the US trade war with China where Germany sells a significant portion of its luxury cars, tools and industrial equipment. Normally Germany has been the one economy that balances out any other economic crises in the Eurozone such as Italy but now Germany itself is teetering  on the edge of recession. 

The common currency is up at $1.1206 against the dollar but for it to show any permanent improvement the underlying economic picture would have to change far more substantially over the coming months. 

Ominous tone of China’s economic slowdown

However, the chance of an economic turnaround in Europe is looking increasingly unlikely if China continues to slow down. The country has already lowered its growth target for 2019 this week to between 6% and 6.5%, the lowest level in almost 30 years, and this morning’s data added to the unsettling picture showing that February exports from the Asian powerhouse plummeted by 20%. 

Although February is traditionally the weakest month for China’s foreign trade because the country closes down for a week during the local New Year festivities, this year’s decline has been exacerbated both by a slowdown in the domestic economy and the ongoing trade dispute with the US.