The Italian Job
Europe equities stayed largely flat in the second half of 2018. With rising regional event risks and a turbulent geopolitical environment, there is little to cheer about in the coming months. Anxieties remain over Italy’s budget development and the trade bloc’s collective fate going forward. As such, we remain wary of Europe’s outlook.
The leading indicator, Industrial Production (ex-construction), dipped further toward end-2018 on adverse macro conditions, dragging down GDP growth. This looks to persist in 2019, against the backdrop of trade headwinds, disagreements among member countries, rise in populist ruling parties in Italy and Sweden, and the ending of the ECB’s bond purchase programme. Correspondingly, forward-looking sentiment indicators have started a downward movement and such down trends could continue throughout the coming quarters.
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