Spreadex Market Update
Data heavy Tuesday morning leads to gains in Europe
Following Draghi’s confident statement yesterday afternoon, these figures are the latest sign that the ECB’s stimulus is having the desired effect. This news also had the important consequence of drawing focus back onto the Eurozone’s positives, rather than the ongoing Greek saga that dominated proceedings throughout Monday. This led the Eurozone indices to (very) slowly regain yesterday’s losses, even with the euro having a spirited morning against the dollar, something that has been at odds with the region’s indices growth of late.
The FTSE benefited from record low CPI data as it reached fresh highs as the morning went on. Hitting 0.0% for February, this inflation indicator reached zero for the first time since its implementation in 1989. Luckily for the UK index, investors followed the Tory-line that this fall means more money in the public’s pockets, despite it providing another obstacle on the road to the Bank of England’s targeted 2% inflation, with analysts warning that it could soon turn negative. The main causes of this inflation decline are the usual suspects: the supermarket price war is having very real effects, with food prices falling 3.4%; whilst the continued lows in oil has caused a 16.6% drop in motor fuel prices.
Like in the UK, inflation remains a tricky issue for the US markets: an upswing in inflation is a key part of the Fed’s rate-hike checklist, something that has been giving the US markets a headache of late. Strong inflation information this afternoon could cause the dollar to recover its losses against the euro, and potentially eat into the early gains made by the US futures. Yet at the same time, the continuation of this downward inflation trend isn’t an unambiguous positive either. However, given the prominence the strength of the US dollar, and its role in the rate-hike debate, has in investors’ minds, for now the US markets may be pleased by another fall in this key figure.
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