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Although the growth dynamic is more robust in the United States than in other regions, activity is weak in the critical automobile and real estate sectors. In Germany, GDP fell quarter-on-quarter between July and September.

 So says Guy Wagner, Chief Investment Officer at BLI - Banque de Luxembourg Investments, and his team, in their monthly analysis, “Highlights”.

Signs of a slowdown in global economic growth continued in November. Although the growth dynamic is more robust in the United States than in other regions, activity is weak in the critical automobile and real estate sectors. In Germany, GDP fell by 0.2% quarter-on-quarter between July and September, “mainly due to the temporary interruption of vehicle production linked to new emissions tests. Normalisation of activity in the automobile sector should lead to a rebound in growth in the fourth quarter”, indicates Guy Wagner, Chief Investment Officer and managing director of the asset management company BLI - Banque de Luxembourg Investments.

Trade tensions with the US have clearly led to economy slowing down in China

In Japan, the decline in GDP in the third quarter also looks temporary since the latest statistics suggest growth stepping up in the last three months of the year. In China, trade tensions with the United States have clearly led to the economy slowing down. “The government's recent and future support measures should generate an improvement in the economic situation in the first half of next year”, thinks the Luxembourgish economist.

Government bond yields ease

The fall in oil prices and signs of a slowdown in the global economy led to government bond yields easing in November. The yield on the 10-year US Treasury bond dropped under 3%. “Given the prospect of economic slowdown, government bond yields could continue to decline in the United States.” In the eurozone, negotiations between the Italian government and the European Commission have raised hopes that a compromise will be reached, which has led to a slight drop in Italian bond yields. During the month, the 10-year government bond yield also fell in Germany, and in Spain. Guy Wagner: “Given the current low level, there would seem to be limited potential for bond yields to reduce further in the eurozone.”

Equity markets stabilised in November

After October's correction, equity markets stabilised in November. Following the truce arrived at between the two presidents Donald Trump and Xi Jinping at the G20 summit in Argentina, market conditions for a year-end-rally seemed to be in place. The arrest of the chief financial officer of Chinese equipment maker Huawei in Canada could, however, considerably strain negotiations between China and the United States. “The geopolitical conflict between the world's two leading powers could go on next year, and in all likelihood generate a still volatile equity market environment”, concludes Guy Wagner.

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