Eurozone: Weakness to extend to the first half of 2019? – Nordea Markets

Analysts at Nordea Markets think that the Eurozone economy will take time for any rebound to materialise and expects the first half of the year to be characterised by weak development.

Key Quotes

“We cautiously look for a rebound during the second half of the year. Why would such a rebound materialise?

• For a start, we think that the underlying potential of the economy is stronger than suggested by the recent growth numbers, and a rebound to potential or slightly higher should materialize, when the downward pressure from the negative shocks described above abates.
• We think the trade conflict between the US and China will prove to be a prolonged one but expect to see some clarification in the US-EU relationship, which should reduce uncertainty.
• There has already been a clear de-escalation in terms of the stance of the Italian government and the rest of the EU, while the problems of the German car sector and the French riots will probably fade in early 2019.”
• Regarding Brexit, there is no real possibility of all the open questions being resolved any time soon, but the biggest uncertainty will probably lift during the first half of the year, as we will at least know more about the terms of the UK exit.
• Finally, the European Parliamentary elections scheduled for May will probably mostly increase political uncertainty around the time of the vote, not long after it.”