While in the U.S. we’re waiting for a solution for the partial government shutdown that enters its 11th day, we got a lot of important PMI data from China as well as from Europe that are impacted by the U.S. – China trade war.

Caixin China General Manufacturing PMI

As expected, after the official PMI already contracted last week, today the privately measured Caixin China General Manufacturing PMI started 2019 dipping down to 49.7 or just a fraction below 50 that marks the border line between expansion and contraction.

This situation reflects in part the ongoing trade tensions between the U.S. and China. Overall, it is noteworthy that the manufacturing sector also faced weakening domestic demand.

In summary, and notwithstanding we saw renewed expansion of output, but at the same time overall new business falling for first time in two-and-a-half years and input costs declining for the first time since May 2017.

Confidence towards the 12-month outlook for production edged up to a three-month high, but remained subdued overall. Of course the trade talks that start next week in Beijing will have a big impact and, of course, it’s way too early to have an idea what could come out of it.

HIS Markit Eurozone Manufacturing PMI

We got also the IHS Markit Eurozone Manufacturing PMI that came in at 51.4 in December while a fall in new work was signaled for 3rd month running and confidence about the future hitting a fresh 6-year low during December.

The last three months of 2018 saw manufacturers report the worst quarterly performance in terms of production since the second quarter of 2013.

The undercurrent of weak demand and growing risk aversion that are evident across the surveys suggest that any rebound could prove modest at best, with Brexit representing a particularly worrying unknown for the outlook.

IHS Markit / BME Germany Manufacturing PMI

The IHS Markit / BME Germany Manufacturing PMI slipped to 51.5 in December, down from 51.8 in November and at its lowest reading since March 2016.

The performance of the sector continued to be undermined by falling inflows of new orders. December's decrease was the 3rd in as many months and the steepest since November 2014.

Business confidence towards the year-ahead outlook stayed close to last October's near six-year low. Sentiment was curbed by uncertainty relating to Brexit, trade frictions and the slowdown in the automotive industry.

For investors it remains important to keep these data in mind in the context of the future path of the monetary policy of the European Central Bank (ECB).

Europe faces huge challenges in 2019 beginning with Brexit and of course the Italian budget deficit.

IHS Markit Italy Manufacturing PMI

The IHS Markit Italy Manufacturing PMI came in at 49.2 and below the 50.0 no-change mark for the 3rd month running. Falling new orders contributed to further deterioration in Italian manufacturing performance.

With business confidence at a six-year low, there appears little sense of optimism that Italy’s current soft patch will come to an end in the near future.

As there is some speculation we could see a softer dollar somewhere during the second half of the year, then I ask myself what do we have to think about the euro?

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.