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  • The US Retail sales figures for the month of December highlighted the negative impact on consumer confidence caused by confused monetary policy, a government shutdown and lingering trade war issues. Investors were shocked by the weakness in the figure reflecting the dominant role consumption plays in US GDP.
  • Thankfully, for the global economy comments emanating from delegates at recent trade talks between China and US have been positive. Investors expect there will be some form of partial agreement put in place with the more difficult aspects of the negotiations (structural changes to the Chinese economy) postponed until a much later date.
  • Germany just about escaped a technical recession with the release of their Q4 ’18 GDP figure. A slowdown in the Chinese economy combined with sector specific issues associated with the auto sector has delivered a blow to the German economy. The implications and the considerations with regards this figure are many. What will it mean for the ECB and their monetary policy aspirations? Will the auto sector be further undermined by belligerent trade policy as conducted by the Trump administration? Is there the political will In Germany to provide a compensatory fiscal package in a worst-case scenario?
  • There is more political uncertainty in the Eurozone – this time in Spain where the minority government have called a snap election for April 28. Despite the instability of the political environment in Spain, investors have taken solace in the country’s positive GDP growth, a banking sector that availed of the presence of a “Bad Bank” and a more flexible labour market, which saw a material drop in unit labour costs and an improvement in the unemployment rate post the credit crisis. If only the same could be said for Italy – see the graph which highlights the Italian and Spanish 10 year yields versus the German equivalent. (German (orange), Spanish (blue) & Italian (black))