Comment: Financial Markets In Europe Move Higher; Eyes On Inflation Data
March 31, 2014 6:05 am
European markets moving higher Monday, extending their previous week’s gains amid growing speculations that the ECB and China would announce further stimulus measures. It’s the last day of a turbulent quarter which has seen geopolitical tensions, downbeat China data and a hawkish Fed all rattle confidence. Further, deflation worries in the euro zone after German and Spanish CPI declined last week triggered hopes for further stimulus measures by the ECB this week at the monthly policy meetings.
The real test will be today’s harmonized inflation report which is likely to confirm the deflationary picture in the euro zone with the Italian number now sharply in focus. ECB will undoubtedly have to act to stimulate the euro zone economy as a result, whether that be through further rate cuts, negative deposit rates or even another LTRO operation. Earlier today, German retail sales rose 1.3% month-on-month in February, much better than the expectations of a 0.5% decline. Elsewhere over the weekend, French president Francois Hollande’s Socialist Party lost ground in yesterday’s second round of local elections capturing 40% of the vote vs. the centre-right party of erstwhile President Nicolas Sarkozy UMP’s 46% – this means Hollande now has to reshuffle his cabinet.
Meanwhile, French GDP was confirmed at 0.3% in Q413 after falling by 0.1% the prior quarter – a decent number suggesting the economy is starting to show signs of recovery. Closer home, Hometrack reported that UK house prices rose 0.6% MoM in March, compared to a 0.7% increase in the earlier month. This week, we have a slew of economic data with the focus on Friday’s US nonfarm payrolls report.
European markets moving higher Monday, extending their previous week’s gains amid growing speculations that the ECB and China would announce further stimulus measures. It’s the last day of a turbulent quarter which has seen geopolitical tensions, downbeat China data and a hawkish Fed all rattle confidence. Further, deflation worries in the euro zone after German and Spanish CPI declined last week triggered hopes for further stimulus measures by the ECB this week at the monthly policy meetings.
The real test will be today’s harmonized inflation report which is likely to confirm the deflationary picture in the euro zone with the Italian number now sharply in focus. ECB will undoubtedly have to act to stimulate the euro zone economy as a result, whether that be through further rate cuts, negative deposit rates or even another LTRO operation. Earlier today, German retail sales rose 1.3% month-on-month in February, much better than the expectations of a 0.5% decline. Elsewhere over the weekend, French president Francois Hollande’s Socialist Party lost ground in yesterday’s second round of local elections capturing 40% of the vote vs. the centre-right party of erstwhile President Nicolas Sarkozy UMP’s 46% – this means Hollande now has to reshuffle his cabinet.
Meanwhile, French GDP was confirmed at 0.3% in Q413 after falling by 0.1% the prior quarter – a decent number suggesting the economy is starting to show signs of recovery. Closer home, Hometrack reported that UK house prices rose 0.6% MoM in March, compared to a 0.7% increase in the earlier month. This week, we have a slew of economic data with the focus on Friday’s US nonfarm payrolls report.
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