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German industry, Italy banks on ECB policy radar

Wednesday, December 07, 2016 - 01:46

German industrial production rose less than expected in October due to stagnating factory output and falling energy activity. As David Pollard reports, with a crisis developing in Italy, all eyes are now on the ECB which meets on Thursday.

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German industry is clocking up the gains for Europe's biggest economy - but did disappoint in October. An expected 0.8 per cent rise in output coming through at just 0.3 per cent. No fear, say economists - orders rose at their fastest pace in over two years. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "The ongoing weakness of the euro should play into the hands of an exporter such as Germany. It does remain the powerhouse of the European economy." Italy's banks are altogether a different worry for the ECB. As it neared this week's monetary policy decision, Monte dei Paschi - the most fragile - looked set for a bailout. Others - including Germany's Deutsche - vulnerable to the crisis fallout if that doesn't happen - in already difficult conditions. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "Historically low interest rates normally don't play into the hands of banks and as we continue to see regulatory fines and censures, let alone the increasing cost of compliance, all these things are very much headwinds." An extension of the ECB's QE programme beyond its March cut-off is seen as a given at the meeting. But investors ask whether Mario Draghi could also signal an eventual end to the programme. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "It's probably run its course in terms of what it's designed for and as we've hearing in other countries and other sectors, apart from the euro zone, it may well be that we need fiscal stimulus." Especially given the risks outside the euro zone ... British industry suffered its biggest monthly drop in output for over four years in October. An oil-field shutdown a one-off factor - though manufacturing was down - in what could be a crack in a robust post-Brexit performance.

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German industry, Italy banks on ECB policy radar

Wednesday, December 07, 2016 - 01:46