Danger of “mini-recession” as German growth goes soft

After being let off the hook in the third quarter of this year, experts are predicting the German economy will enter a trying period as growth has dipped to its lowest ebb for one and a half years.

According to Markit Economics, a leading provider of global financial information, a purchasing gauge for manufacturing and services fell to 51.6 at the end of last month compared with 51.8 in December.

A measure for factories jumped to 51.3 from 49.4 marching across the 50 point mark that technically defines a contraction of the economy. A similar service gauge fell.

Europe’s biggest economy appears to have had a mediocre end to the year but economists at the Bundesbank are optimistic for the future. Asset purchases by Europe’s central bank could increase in response to lack of growth in the euro zone as a whole and minimal inflation.

Other observers in the field are more cautious. James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International said “When you look at the most recent reports, the GDP growth looks extremely soft. If the figures continue to go this way then the start of next year could usher in a time of mini-recession”

Coping with competition

Another factor clarified by the report was the seeming slide in profits from major companies for the second month in a row, who have cited a decrease in capital investment and a jump in competition from smaller firms.

The European Central Bank (ECB) will be looking to boost the economy with major asset purchases and a spokesman said that “everything apart from gold” is being considered. Partnered with this stimulus will be the welcome oil price decreases which will offer some mild relief for German consumers.

Data for France and the euro zone itself will be released today, and economists are expecting a similar pattern as they have seen in the German reports.

Market recovery will come, regardless Fed and war policies

Stock markets around the world have taken a collective hit in response to the latest beating of war drums, as the U.S. ramped up its preparations for a full scale attack on Syria. Another major factor affecting the American market in particular, whose index has slumped 4 percent below last year’s highs, is backing off by the Fed from their recent purchasing of assets.

The gloomy news hasn’t deterred Tony Harris Senior Vice President of Equity Trading at Softbank CIBC International. His investments, he says, are safe in the long-term and this sentiment may be confirmed as stocks jumped again in response to latest news the U.S. could be having second thoughts on Syrian action.

“What we see currently is further economic development. There’s a lot of naysaying going around but the fact is we are at record highs in the stock markets and we don’t expect the economy to fail to return……for the first time ever!”

Harris is not fazed that stocks may take a dip as the Federal Reserve reigns in its asset purchase policy having spent billions on a monthly basis propping up the economy. “Previous experience has shown that as the Fed winds down its monetary injections the market will bounce back, as we saw in the late nineties.”

He shared a similar positive outlook towards Syria, “The global markets are traditionally thought to suffer with rumours of war. The same could be said of China’s economic health…but the fact is we are looking at a booming market.”

“My best advice,” he continued, “is to stay relatively neutral when it comes to attention grabbing headlines. Continue looking for investments involving companies who are going into agreements, coming up with innovations, or who are trading cheap on the markets.”

The Senior VP at Softbank is convinced the Dow is moving towards 20,000 within the next two years, and the safest bets are still on the classic long-term high yield stocks.

“Trading cheap at the moment are old favourites like Microsoft and Exxon, they will continue to grow alongside the market. Also Apple.”

Bank of England warns of chaos if Greeks leave euro

Amid rumours that gigantic sums of cash are being smuggled out of Greece, the on looking governor of the BOE, Sir Mervyn King, said the euro zone could enter a “period of intense economic chaos” if the Greeks decide to separate themselves from the single currency.

Britain’s economy, itself in dire straits, could be severely affected by the Greek fallout as one estimate put a Greek exit and the resulting cost to the E.U. at a stunning one trillion dollars.

The British PM David Cameron commented on a situation where Europe needed to “make up or break up” adding that swift and decisive policy making by the euro zones economic ministers was needed.

If, as expected, Greece makes a disorderly exit from the euro it is predicted by some financial experts it will be the biggest financial crisis since the total evaporation of Lehman Brothers four years ago, and could result in up to a 5 percent fall in output equalling a cool one trillion dollars.

“It’s utterly unthinkable,” said Tony Harris, Senior Vice President of Equity Trading at Softbank CIBC International, “We could be looking at a decade or more of stagnation in Europe. The zone could probably handle a planned split with the single currency, losses of say 300 billion dollars, but if the current chaotic conditions are perpetuated it will be a disastrous outcome.”

With prospects of a coalition government off the table this month, capital has been shifting out of the country at an alarming rate amid fears the negative developments could result in panic and public disorder. In a single day, the central bank reported, over 900 million euro was cleared out.

The mood hit the markets this week as European shares and the single currency both took a slide in response to press releases revealing the E.U. would halt its financial aid to Greece.