What's going on?
The UK and Europe had better watch out: their respective business activity surveys didn’t show anything nice on Monday, and – wait, let us just check ‘em twice… yep, both places will be on Santa’s naughty list this Christmas.
What does this mean?
Activity in the UK’s manufacturing sector slowed sharply ahead of last week’s election, as uncertainty continued to weigh on the country’s businesses. And with factory production suffering its worst month in over seven years, speculation’s now rife that the economy as a whole might contract this quarter. There are reasons for businesses to be hopeful, mind you: the prime minister’s definitive win could provide the certainty they’ve all been craving.
In Europe, meanwhile, manufacturing activity fell for the eleventh straight month as the US-China trade war and a weak economy continued to take their toll. Germany didn’t do it any favors: the bloc’s largest manufacturing producer suffered a worse-than-expected drop in activity, given its struggling auto industry and significant exposure to global trade tensions.
Why should I care?
For markets: Better not cry.
Bleak data or no bleak data, European stocks hit an all-time high on Monday. Perhaps overshadowing the manufacturing survey – backward-looking by definition – was the trade-war truce struck over the weekend, which might’ve raised hopes for Europe’s factories. And with the UK election bringing some much-needed clarity to proceedings (Brexit really might mean Brexit this time), the region’s markets had even more reason to celebrate on Monday.
Zooming out: Better not pout.
China was in the Christmas spirit over the weekend: not only could it boast a successful trade agreement, data released on Monday showed both industrial production and retail sales in November climbed more than expected. If next year sees a complete trade deal that lifts tariffs on even more Chinese goods, it’d go some way to dispelling the gloom that’s long been hanging over the world’s second-largest economy.