What's going on?

An influential German research group cut its forecast for the country�s 2019 economic growth from 1.1% to 0.6% on Thursday. And judging by two major German companies simultaneously reporting earnings, it�s not wrong�

What does this mean?

Germany�s Lufthansa, Europe�s largest airline, disclosed descending profit last quarter. It fell 11%, thanks to a fare-war headwind � and investors sent Lufthansa�s stock down 6% on Thursday. The airline also announced a cautious forecast for 2019 as it struggles with higher fuel prices (costing it an estimated $735 million extra this year) and losses at its Eurowings budget carrier.


RWE, meanwhile � Germany�s largest electricity producer � reported 2018 annual profit that short-circuited and fell 29%, thanks to lower electricity prices in the country. RWE also said further declines this year are likely � one major reason being the shrinking profitability at its �conventional� power plants.

Why should I care?

For markets: The best offense is a good defense.

Despite its fizzling profit, RWE increased the dividend it pays investors on Thursday � and they sent its stock up 2%. The company is in the process of swapping assets with soon-to-be ex-rival E.ON: focusing, respectively, on renewable energy production and power grids should mean less competition and more profit. E.ON also increased its dividend on Wednesday, even as its own profit fell. Such �defensive� stocks are in vogue with investors this year: good times or bad, people will always need power � and the utility companies that provide it have reasonably stable cash flows.

The bigger picture: Germany is no help to the eurozone.

A sizable chunk of Germany�s economy is driven by selling goods overseas. With the country�s giant autos sector suffering � partly from the US-China trade war � and the global economy losing steam, things aren�t looking so bright in 2019. As the eurozone�s biggest economy, weakness in Germany begets weakness overall: last week, the European Central Bank lowered its eurozone growth forecast for 2019 and announced additional support for banks in its 19 countries.