Here’s What to Watch in European Stocks This Morning

(Bloomberg) -- Good morning. Here’s what we’re watching ahead of the market open in Europe, including slowing growth in China, Italian politics and the U.S. government shutdown.

New Year, Same as the Old Year

Stocks in Asia sank, oil erased gains and jitters gripped markets about slowing growth in China. It would appear 2019 is starting off with much the same tone as last year finished and European markets, after a thin trading day on New Year’s Eve when many key benchmarks were closed, are pointing to a lower start. Manufacturing data showed factory conditions across many export-driven Asian economies slumped and Hak Bin Chua, an economist at Maybank in Singapore, said the data are ``signaling trouble ahead.’’ Happy new year, all!

Italy’s Budget

To continue the theme of the new year echoing the hold, another stalwart of 2018 is likely to play its part: Italian politics. Italy’s government passed its budget before the year turned but Italian markets weren’t open to react, so you can anticipate a delayed reaction in the country’s bonds and banks. Attention, however, will now turn to whether Italy’s government can hold together given the fractious relationship between the two populist parties in the coalition and given the year begins with the president chastising the government over the budget process, there’s no guarantee it’s going to be an easy ride.

Trade Easing

U.S. President Donald Trump told Fox News he predicts some ``tremendous’’ trade deals in 2019, the latest in a series of more positive signals from the U.S. side about the possibility trade tensions with China will ease this year. Given that Germany’s automaker-heavy DAX was closed on Dec. 31, we could see a delayed reaction to these developments too, though they may be overshadowed by the worries about China’s slowing factory growth.

Oil’s Volatile Start

Crude oil suffered its first annual decline last year since 2015 and, as with many of the above issues, its influence is continuing into 2019. WTI and Brent futures are both sinking in part over the same supply concerns that plagued the fourth quarter of 2018. An end to the U.S government shutdown could help investor sentiment and push prices higher and a supply disruption in Libya is also putting a cap on today’s losses for now, but this will remain a very important issue through the year.

Shutdown

The partial shutdown of the U.S. government and the ongoing tensions between President Trump and Democrat lawmakers are likely to attract some attention. Trump has indicated he may be willing to make a deal and a meeting with lawmakers has been called for Wednesday, so perhaps the new year will begin with this risk being taken off the table. If there’s no deal, it could provide another overhang for stock markets still reeling from a weak 2018 and battling against many of the same risks.

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