Germany’s shrinking economy on edge of recession, DIW says

Bloomberg

German output will probably shrink by 0.2% in the third quarter, putting Europe’s largest economy into recession, according to the DIW economic institute.
A DIW gauge of activity fell to 89 points in August, the lowest since late 2012, pointing to another contraction after GDP declined 0.1% in the April-to-June period, the institute said.
“Manufacturing is in a crisis and is slowly but surely dragging services down along with it,” said Claus Michelsen, DIW’s head of forecasting and economic policy.
Weak export demand, particularly in the European Union, is hurting German companies while the threat of a no-deal Brexit, global trade disputes and Italian political instability all add to the pain, said Simon Junker, another economist of the DIW.
On the plus side, domestic demand is holding up as consumers benefit from “fiscal impulses” and the construction industry is in good shape, DIW said in a statement.

Shorting German Stocks?
If you’re considering shorting China-exposed German stocks because of the ongoing trade war, it may be too late, says Jefferies.
While recent data from Europe’s biggest economy presents a “full-blown horror show,” there is some indication the negativity may be bottoming out, according to strategists led by Sean Darby. A bounce in China’s credit impulse, which is strongly correlated with German PMI data, and already depressed share prices are reasons to be cautious with any short plays on companies with high exposure to China, they wrote in a note on Wednesday.
Short positions look limited for two of the biggest exchange-traded funds tracking the DAX. Short interest for the iShares Core Dax ETF stands at 0.2% of shares outstanding, down from 1.3% in October, while it’s at 2.5% for the iShares MSCI Germany ETF, down by more than half since a high in July, data compiled by Markit show.
Jefferies strategists say that they remain bullish on German equities, even as sentiment suggests some caution. While a “triple witching” of autos dependent on diesel and China trade, a trade conflict with the US and Brexit concerns have weighed on its economy, wages are still firm, they wrote.