· German economy at a standstill
· Entire eurozone suffering due to slow Southern European economies
· China raises reserve ratio, risky assets fall
· Leading economists back Conservatives plan for fiscal consolidation

Investor sentiment continued to drift out of the eurozone as Friday’s ‘flash’ GDP figure showed that the union was slipping.

Growth for the entire region slowed to 0.1% with Germany posting a figure of 0.0% down from a Q3 figure of 0.4%. France continued to expand (0.6%) but the Spanish (-0.1%) and Greeks (-0.8%) weighed on the release. This is a sign that the recovery in the EU is not strong enough to sustain itself and must still rely on the government syringe. This was evident if we compare France and Germany. France’s positive figure was buoyed by consumer expenditure on items such as cars which have received a lot of government subsidisation; Germany has halted these subsidies and has suffered as a result

European GDP was expected to slip however given the problems they have had over there. One thing we didn’t see coming was the surprise announcement from the People’s Bank of China (PBOC)

In hiking their reserve ratio (increasing the amount that banks must keep in reserve and not lend) by 50bps they have tightened monetary policy. This caused a shift out of risky assets and into havens such as US treasury debt and the dollar.

It was another political weekend for the pound as a group of leading economists wrote an open letter to The Sunday Times backing the Conservatives plans for rascal reduction in a post-election Britain. It has however had little effect on sterling and it is very much in the same place as Friday’s COB.

Markets may be volatile today as it is President’s Day in the US and the subsequent lack of liquidity may see prices move violently. There is little other data apart from the Eurogroup meeting on Greece.