Frankfurt, 15 May 2020 (LS NEWS) – Germany has fallen into recession in a coronavirus-driven contraction likely to accelerate in the second quarter even as Europe’s largest economy slowly exits lockdown. Seasonally adjusted GDP dropped at a quarterly rate of 2.2pct in the first quarter, a decline in-line with market estimates. But the German statistics office lowered the country’s growth rate for the final quarter of 2019 to 0.1pct from 0.0pct, which put the economy in recession.

The first-quarter contraction was the largest in 11 years and the second worst since German reunification in 1999. Growth fell 4.7pct in the first quarter of 2009.  “Two weeks of lockdown as well as supply chain disruptions on the back of lockdown measures elsewhere brought the German economy to its knees,” said ING Chief German Economist Carsten Brzeski. 
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The Trump administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action that could ramp up tensions with China. The U.S. Commerce Department said it was amending an export rule to “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”

The department added the “announcement cuts off Huawei’s efforts to undermine U.S. export controls.” The rule change is a blow to Huawei, the world’s no. 2 smartphone maker, as well as to Taiwan’s TSMC, a major producer of chips for Huawei’s HiSilicon unit as well as mobile phone rivals Apple Inc and Qualcomm Inc.

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On Jan. 15, it seemed like the US and China had avoided a quick descent into a new Cold War.

In Washington, U.S. President Donald Trump declared that “our relationship with China is the best it’s ever been” while signing a preliminary trade deal that “unifies the countries.” The pact between Trump and China’s Xi Jinping raised hopes that the world’s predominant superpower could peacefully resolve differences with a rising China. That same day, health officials in the central Chinese city of Wuhan acknowledged that they couldn’t rule out human-to-human transmission of a mysterious new pneumonia that had already sickened 41 people.

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The Federal Reserve’s balance sheet grew to a record $6.98 trillion in the week ended May 13, up from $6.72 trillion in the prior week, the central bank said Thursday. Much of the balance sheet’s expansion was due to an increase in its holdings of mortgage-backed bonds by $178 billion.

Analysts noted most of these purchases had, in fact, taken place a few weeks ago and were showing up on the balance sheet in the most recent weekly period because that was when they were finally transferred into the Fed’s hands. Meanwhile, holdings of Treasuries rose by $37 billion.

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