Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Deutsche Returns To Profit; Manufacturing PMIs Disappoint

By CMC Markets (Michael Hewson)Stock MarketsFeb 01, 2019 09:03
uk.investing.com/analysis/deutsche-returns-to-profit-manufacturing-pmis-disappoint-200205955
Deutsche Returns To Profit; Manufacturing PMIs Disappoint
By CMC Markets (Michael Hewson)   |  Feb 01, 2019 09:03
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

While European markets enjoyed a decent January performance with a strong performance, the recovery seen over the past few weeks hasn’t, as yet, been enough to reverse the losses seen in December, however as a start to the year, it’s still been an encouraging rebound.

This rebound has come about despite a continued deterioration in economic data from around the world, as well as little evidence of significant progress in US, China trade talks. The change in sentiment has been largely brought about by a change of tone from the US Federal Reserve, which was confirmed earlier this week with a very dovish tone from US policymakers on the prospect for future rate rises, as well as balance sheet reduction.

On the data front we’ve seen further evidence of a deterioration in economic activity as the latest Caixin manufacturing survey from China showed the weakest reading in two years, slipping further into contraction territory in January to 48.3. In Japan manufacturing activity stagnated, coming in at 50.3, a slight improvement on December’s 50 reading.

Yesterday we had confirmation that Italy had slipped back into a recession after Q4 GDP contracted by 0.2%, following on from a similar decline in Q3, and thus far the data seen at the beginning of this year has shown little sign of picking up. Italy is not alone in its economic woes with Germany’s economy more or less grinding to a halt in Q4, and today’s manufacturing PMI’s for January appear to show that there are few signs of a recovery as we head into 2019.

The latest manufacturing PMI’s for Spain, Italy, France and Germany show some evidence of an improvement in economic conditions in January, but it was patchy. Spain improved to 52.4, from 51.1, however Italy weakened further to 47.8 from 49.2, and well below expectations of 48.8.

It is becoming increasingly improbable that the Italian government will be able to stick to its spending plans against a backdrop of a continued weakening in the growth outlook. These growth forecasts were optimistic even before this morning’s numbers, now they have more than an element of wishful thinking about them.

French manufacturing came in at 51.2, while German manufacturing contracted further, coming in at 49.7, below expectations of 49.9.

These weak numbers will only increase the pressure on the European Central Bank to consider further liquidity measures in the coming months in order to offset the end of its asset purchase program at the end of last year, especially if this morning’s inflation numbers for January continue to show little sign of improving.

The German banking sector underwent a bit of a sell off yesterday on reports that Deutsche Bank (DE:DBKGn) senior executives are concerned that they are running out of road in their attempts to turn around the struggling lender, and that they may be forced to consider a merger with Commerzbank (DE:CBKG) by the middle of this year if all else fails.

This morning’s latest numbers don’t really offer that much encouragement that management are on track to turn the business around. It is welcome that the bank has managed to return an annual net profit for the first time since 2014. Last year the bank posted a loss of €735m, so this year’s modest profits of €341m is welcome, but it still came in below expectations, while the performance in Q4 was disappointing, posting a loss of €319m, with trading revenues continuing to act as a drag on the overall business. Here we saw turnover of €5.58bn with fixed income showing a decline of 23% to €786m, despite the last quarter seeing a significant amount of market volatility.

The bank did succeed in reducing costs in line with market expectations, and management have pledged to keep reducing them in the year ahead as they look to improve margins, but other than that there was little to cheer in this morning’s update, which is probably why the shares have slid back further this morning, after yesterday’s losses.

In the UK markets weren’t overly enthused about the latest Q3 numbers from telecoms provider Talk Talk (LON:TALK) as it continues its attempts to compete with the larger players of BT (LON:BT), Sky and Virgin media in the broadband and telecoms space. Customer numbers showed some decent growth of 44k, while the churn rate came down to 1.16%, down from the same period a year ago.

Total revenues rose 2.9% to £386m, and the company said it was on track to deliver full year profits of between £245m-£250m, which was slightly down from the £259m that markets had been expecting, though a 7% decline in the share price seems somewhat excessive given that the numbers are still projected to be well above last year’s numbers.

Glencore (LON:GLEN) also reported strong increases in copper, cobalt and nickel production in its latest 2018 production update. The company also said that its guidance for 2019 remained in line from the update it gave at the beginning of December last year.

US markets will be looking at today’s US employment report for January after the surprise bumper December report which saw 312k new jobs added at the end of last year.

Events have moved on since the beginning of this year, with a much more dovish Fed, as well as the disruption of an almost month long US government shutdown. Today’s January payrolls report is unlikely to be anywhere near as good as December’s but it doesn’t need to be, given the Feds policy shift to neutral. Markets are expecting a number in the region of 165k for January while wages growth is expected to remain steady at 3.2%.

Amazon shares (NASDAQ:AMZN) are expected to be in focus today after the company reported some decent numbers after the bell last night. As expected sales increased in Q4, coming in at $72.4bn a 20% increase, however the shares fell in post market trade after the company said that it expected Q1 slow against a backdrop of a rise in costs, and difficulties in its Indian operations.

Dow Jones is expected to open 50 points higher at 25,049

S&P500 is expected to open unchanged at 2,704

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Original post

Deutsche Returns To Profit; Manufacturing PMIs Disappoint
 

Related Articles

Deutsche Returns To Profit; Manufacturing PMIs Disappoint

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The inherent concept of such investments means that they are not suitable for the investor seeking income from such investments, and are only suitable for those who have the required experience and understand the market risks. You should carefully consider your investment objectives, level of experience, and seek advice from an independent financial advisor if you have any doubts.
Continue with Google
or
Sign up with Email