European Economic Update – 15 August 2014

European markets fall at the close on elevated risks emanating from Ukraine; growth stalls

European markets fell at the close on Friday as reports surfaced from Kiev indicating that Ukrainian forces had fired on a Russian military column after it had crossed the border some time late on Thursday night. This follows a week long period of increased tension over Russia’s proposal to deliver 260 trucks of humanitarian aid to eastern Ukraine.

While the threat of a further escalation in the conflict has been most prominent throughout the week, investors were also reminded, in light of a looming Russia V West trade war, of the fragility of Europe’s economies. This was as some of the most underwhelming GDP figures of the last 18 months emerged from Germany, France and the wider eurozone on Thursday.

Here the French economy was revealed to have stalled with nil growth reported for the second quarter while the German economy contracted for the first time since Q4 2012.

The EU bloc as a whole also flatlined when GDP for the region came in at 0.0%; representing nil growth for the period as a contraction at the core as well as on the periphery offset positive performances from the likes of Portugal and Spain.

While the week’s data does little to change our medium to long term outlook, we will look for indications of an evolving tone toward the European economies among policy makers during the months ahead.

On this note and looking ahead, Mario Draghi is scheduled to speak at the Jackson’s Hole Symposium in Wyoming, North America, on Friday. No change is expected in the ECB President’s mantra at this time although the appearance will doubtless be watched closely by investors. In relation to economic data, French & German manufacturing and services PMI’s will form the focal point of the week for investors.

Germany’s DAX

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France’s CAC 40

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Spain’s IBEX 35

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