The Looming Global Economy

It’s been another dreadful day for traders today as most of the market sector closed at red with the stocks at suddenly falling at 2%. Among Nasdaq, DOW and S&P, only Nasdaq has barely turned green for the year. Both DOW and S&P are in red. But not just the US market is falling, but several global market movers are also on edge.

While EU is at odds with the UK regarding Brexit and with Italy’s deficit-boosting budget, the traders are staggering from diving oil prices sending shockwaves in the stock market. Moreover, let’s take a look at some of the market movers shrinking situation:

Japan’s GDP falters

Japan’s economy went down once again in the third quarter after it’s rebound in Q2 from Q1. Mainly, the numbers are a result of the natural disasters experienced by the country. In June and July, the massive flooding killed nearly 200 people, and millions evacuated. This was followed by typhoon Jebi in September causing closure of one of its busiest airport in the western side of Japan.

As if this is not yet enough, an earthquake with a magnitude of 6.7 was felt right after the deadly typhoon. Q3 GDP contracted at 1.2% compared to Q2’s 3.0 %, and while they are expecting for a quick recovery in Q4 following investments for 2020 Tokyo Olympics, the global trade conflicts threaten to hamper Japan’s growth.

Italy’s High Spending Budget

Italy just resisted EU’s instruction to cut its budget for 2019 which will result in a deficit in GDP by 2.4% and economic growth by 1.5%. This big budget by the four-month-old government aims to cut its taxes, lower its retirement age and a minimum basic income. While this is all good, the country’s mounting debt makes its economy very vulnerable.

Italy’s finance minister Mr. Tria said that they aim to have at least 1% of GDP by selling its state-owned assets, but a lot of things could still happen that could have a significant impact on its economy. Their current situation in Genoa’s collapsed Morandi bridge would mean a 0.2% GDP for the next three years for the repairs. And aside from that, there could still be unavoidable events that can happen within the year.

source: tradingeconomics.com

Germany and the trade war

German exports fell last September, the largest since February and its GDP also declined by 0.2%, an indication that Europe’s largest economy is now getting a feel of the global slowdown. According to the Federal Statistics Office, Germany’s exports fell by 0.8% while its imports fell by 0.2%, one general reason could be the declining demand from China due to the trade war. Donald Trump’s furious attacks on Germany may also have an effect on the economy as the balance of its trade in goods is now at 190bn in the pound against 204bn in pound last year for the same period. According to Carsten Brzeski, ING’s chief economist for Germany, 

“A combination of slowing world trade and temporary factors like the new emissions norms for autos hit the German export sector over the summer months.” “Available monthly data suggests that the economy had its worst quarterly performance in 3Q since the beginning of 2015.”

source: tradingeconomics.com