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StockBeat: Markets Rise as Miserable German Data Boost QE Hopes

By Geoffrey Smith -- Europe’s stock markets opened higher on Friday after data showing that German economic weakness continued into the second quarter encouraged speculation that the European Central Bank may have to follow through on its hints of resuming its bond-buying program to keep the economy on track.

Germany’s statistics office Destatis said exports fell by 3.7% on the month in April, while industrial production fell 1.9% - the most in over two years - and manufacturing output fell 2.5%.

At 03:20 AM ET (0720 GMT), the benchmark Euro Stoxx 600 was up 2.1 points, or 0.6% at a two-week high of 376.12.

“This is a horrible start to the second quarter for German industry, as global trade tensions as well as temporary problems in the automotive sector and chemical industry have left their marks,” said Carsten Brzeski, an economist with ING in Frankfurt.

Separately, the Deutsche Bundesbank, Germany’s central bank, slashed its growth forecast for 2019 to 0.6% from 1.6%.

Germany’s automakers, in particular, are bracing for further trouble ahead as the U.S. prepares to levy its first import tariffs on Mexico over its perceived unwillingness to stop illegal immigration into the U.S. All of the big three names have either assembly plants on Mexico, or vital suppliers to their factories in the U.S.

U.S. Vice President Mike Pence said overnight that the U.S. still intends to impose a tariff of 5% on Mexican goods on Monday, despite an offer from Mexico to assign 6,000 police to the issue. The proposed tariffs, which have taken some 3% off the peso in little more than a week, also have negative implications for Spain’s largest banks, Banco Santander (MC:SAN) and BBVA (MC:BBVA), which have large operations there.

Elsewhere, French pharma giant Sanofi (PA:SASY) rose 3.8% on news that it has chosen Novartis’ Paul Hudson to replace Olivier Brandicourt. Hudson has been CEO of Novartis '(SIX:NOVN) pharmaceuticals unit since 2016. That helped the CAC 40 to outperform with a 0.9% rise, while Germany’s Dax and the U.K. FTSE both gained 0.6%.

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