Merkel points to Brexit role as WTO forecasts global economic slowdown

October 02, 2019

German Chancellor Angela Merkel implicated Brexit as one of the causes of a worsening global economy, speaking after a meeting with leaders of multilateral financial institutions in Berlin on Tuesday.

Britain’s impending divorce from the European Union is a significant source of uncertainty for world economies, Merkel said following her annual meeting with top officials from the International Monetary Fund, World Bank, Organization for Economic Cooperation and Development, World Trade Organization (WTO) and International Labor Organization.

She declined to lay the blame for the world’s slowing economy soley on the US-China trade war, saying Europe had “nothing to be smug about.”

“We’ve been negotiating an orderly British exit for three years. And that brings us great uncertainty when you consider that that exit should happen on October 31. And people still don’t know how supply chains will look” said Merkel.

Angela Merkel around a board table in Berlin with top officials from the WTO, IMF, OECD, World Bank and ILO.

Merkel met with the heads of international economic institutions in Berlin on Tuesday

A slowing global economy

The WTO forecast on Tuesday that global trade is expected to slow to its slowest pace since the Great Recession which began in 2008, largely because of the ongoing trade dispute between the US under President Donald Trump, and China.

Read more: IMF warns of trade tensions in global outlook downgrade

The WTO said it expects volumes of traded goods to rise 1.2% in 2019, well below the 2.6% estimate it issued in April and the weakest growth rate for world trade since 2009.

World economic growth is also forecast to drop from 3% to 2.7%.

“The darkening outlook for trade is discouraging but not unexpected,” said WTO chief Roberto Azevedo in response.

German employment rises, despite slowdown

Germany’s economy is heading toward recession, and Merkel on Tuesday also noted that this would have some effect on the job market.

The German government reported that unemployment dropped from 5.1% in August to 4.9% according to figures announced on Monday.

Read more: Opinion: Are the good years over for German firms?

The nation’s economy contracted by 0.1% in this year’s second quarter and experts believe data will show an additional slowdown between July and September.

Germany’s DAX index turns 30

The first day

The DAX was introduced on July 1, 1988 by the Frankfurt Stock Exchange — the predecessor of the Deutsche Börse, which is now itself listed on the DAX index. Until then, banks such as Commerzbank, as well as media outlets like the Börsen-Zeitung and the Frankfurter Allgemeine Zeitung had been the ones to track market development in their own indices.

Germany’s DAX index turns 30

The inventor

Frank Mella has gone down in history as the creator of the DAX. As an editor of a stock market newspaper he had previously developed an index. His publisher commissioned him to come up with another stock market index for Germany — thus the DAX was born. It technically debuted on July 1, 1988,but mathematically speaking, December 30, 1987 was its base date with a starting value of 1,000 points.

Germany’s DAX index turns 30

German heavyweights

To this day, the DAX lists the shares of the 30 largest and most lucrative German companies from the Frankfurt Stock Exchange. It is the most important German stock index and represents around 80 percent of the market capitalization of listed stock corporations in Germany.

Germany’s DAX index turns 30

It’s all about performance

Every second from 9 a.m. to 5:30 p.m., DAX figures are calculated using the Xetra electronic trading system. Thus, the DAX is a so-called performance index — in contrast to America’s Dow Jones Industrial Average index in which market capitalization is not weighed.

Germany’s DAX index turns 30

A family of indices

In the spring of 1994, the new DAX 100 index was introduced. This index was created to reflect the performance of the 100 most liquid stocks on the stock market. In 1996, the MDAX was added. It represented 70 medium-sized companies, but was reduced to 50 in 2003. In the same year, the HDAX replaced the DAX 100. Today in addition to these are the ÖkoDAX, TecDax, SDAX among other segments.

Germany’s DAX index turns 30

The first of many bad days

Those who are really in for the long term can rejoice over big profits. But there have been many ups and downs over the last 30 years. The DAX experienced its first really bad day on October 16, 1989. In the wake of the stock market crash on Wall Street, the German index lost about 13 percent of its value in a single day. After that came more losses at some of the most renowned companies.

Germany’s DAX index turns 30

A comeback in slow motion

Shortly after the turn of the millennium, enthusiasm for tech stocks fizzled. Too many investors had gotten burned. The DAX slipped below 2,200 points in March 2003 a low not seen since late 1995. Then the global economy recovered and confidence once again grew, yet it took until the summer of 2007 before the DAX again hit the record of 8,000 points from the year 2000. This climb ended in a crash.

Germany’s DAX index turns 30

The global economy on its knees

After the American investment bank Lehman Brothers declared bankruptcy on September 15, 2008, a financial crisis hit the global economy hard. In October 2008, the DAX was hit by one bad day after the other. By March 9, 2009, the DAX had lost 56 percent since its high on July 13, 2007. Shortly thereafter, the US Federal Reserve turned on the printing presses and things started to look better.

Germany’s DAX index turns 30

An all-time high

When the European Central Bank decided to follow the policy of cheap money it drove the DAX over the 10,000-point mark for the first time on June 5, 2014. When the ECB decided to turn on the printing presses for even more money on January 22, 2015, the index went over 10,400. The DAX closed at its highest ever mark on January 23, 2018 with 13,559 points, but has yet to break the 14,000 ceiling.

Author: Insa Wrede (tr)