Major European markets posted solid gains Monday, with the FTSE up 0.8 percent, the CAC closing 1.1 percent higher, and the DAX advancing 1.0 percent. Italy’s MIB was the strongest major index in the region, up 1.2 percent, with domestic banks receiving a boost on news that their capital positions are above levels required by the European Central Bank.
UK data showed a slowdown in economic growth in the three months to December, with Brexit uncertainty clearly having a major impact on activity. GDP increased 0.2 percent on the quarter, down from an increase of 0.6 percent in the three months to September, while year-on-year growth fell from 1.6 percent to 1.3 percent, its lowest level since mid-2012. Household spending and government spending made solid contributions to headline growth, but business investment fell 1.4 percent on the quarter, its fourth consecutive quarterly decline. Net exports also made a small negative contribution to growth. In annual terms, the UK economy grew 1.4 percent in 2018, down from 1.8 percent in 2017 and the weakest growth since 2012.
Monthly UK data were broadly in line with the GDP report. Industrial production fell 0.5 percent on the month in December, its fifth consecutive monthly decline, and dropped 0.9 percent on the year. Trade data showed a modest narrowing of the deficit from £12.4 billion in November to £12.1 billion in December, with both exports and imports falling 2.3 percent on the month.
UK Chancellor of the Exchequer Philip Hammond pointed to the ongoing contraction in business investment as another reason to resolve uncertainty about Brexit as soon as possible, though he also noted that slower global growth was a factor contributing to domestic weakness. The UK and Switzerland completed a trade deal Monday as part of efforts to minimise disruptions to bilateral trade ahead of the Brexit deadline.