German facing economic strain as Trump announces troop withdrawal

U.S. President Donald Trump decided to withdraw thousands of troops from Germany. Meanwhile, European markets opened lower on Monday, as new data showed German factories suffered their steepest decline in production on record in April. Yahoo Finance’s Tom Belger weighs in.

Video Transcript

ADAM SHAPIRO: Bad economic news out of Germany as well as a threat to pull US troops out of Germany. Tell us about this.

TOM BELGER: Yeah, Germany is seen as doing pretty well for keeping COVID-19 under control, but what analysts say is with these new official figures out today on the economy is that they underscore-- underline how two months of the pandemic have done more harm than the entire financial crisis.

These figures are for April, so obviously backward looking, but they show a record slump, 18% in industrial output. Germany's important car makers taking a 70% hit for output in April. That's worse than expected in a Reuters poll. It comes on top of weak import data for China overnight. So that seems to be weighing on European stocks today.

But stocks are only down slightly today. And really, this is-- as I say, this is old data maybe priced in. Really, the big story is the rally in European indices that we've seen, like the DAX, since February. It's not as steep as in the US, but as one analyst put it, markets are really looking past the bad news, all the bad data, and looking at-- concentrating on the good news, the reopening of Europe's economies that continues to grow apace, fiscal and monetary stimulus, and lack of a big second wave so far.

Interestingly, though, ING, a note out today this morning. They were saying it's-- they're more pessimistic about the speed of German recovery, saying Asian demand is not going to be a savior as it was after the last global crisis. They say longstanding issues like the US-China tensions, diesel scandal, those kind of things still weighing on the German economy even before this hit.

And it's also worth highlighting pressing political issue facing Germany. As you say, reports that a third of US troops currently stationed there are going to be withdrawn. We think speculation over something like this happening before. Trump wants Germany to foot the bill for more defense spending. But it still apparently shocked a lot of policymakers in Berlin, and German government sources told Reuters that they received, interestingly, still no official confirmation of this a couple of days after the story first came out, and they see that as a sign that maybe every US-- not every US decision maker is on board with this decision.

One member going public though of Angela Merkel's government. He was saying that they see this as shaking the pillars of the transatlantic relationship, as the West weakening itself, and that this is in neither Europe's or Germany's interest. So tensions there and strong words indeed.

ADAM SHAPIRO: Tom, shifting to British Petroleum and BP's announcement that they're going to, by the end of the year, lay off or eliminate 10,000 jobs. How is this news being received in the UK?

TOM BELGER: Well, really, really grim day for anyone working at BP today, naturally. And 2,000 of those jobs are reported to be in London, so a lot of people affected here. They previously paused redundancies as well at BP for several months during the pandemic. So quite a change of course from BP.

But yeah, 15% of the global workforce set to be hit by this by the end of the year. Staff found this out in a webcast today-- that's the world we're in-- from the CEO Bernard Looney. He said it's mainly going to infect office-space workers. He seemed quite keen, maybe looking at investors to reassure them that protecting the front line-- what he calls the front line of their operations and also setting out quite bluntly, in his words, why these cuts are happening.

Obviously people will be aware of what's been happening to the oil price, but he says the oil price has plunged well below the level we need to turn a profit. We're spending much, much more than we make. Adam.

ADAM SHAPIRO: Tom, real quick, when you say pause redundancies, that means layoffs, right?

TOM BELGER: Yeah. Yeah.

ADAM SHAPIRO: All right, Tom Belger, thank you for joining us from London.