Deflation is stalking the euro area.
As European Central Bank policy makers gather for their first meeting of 2015 today, the backdrop is a 0.2 per cent annual drop in consumer prices, the first in more than five years. For President Mario Draghi, who wants to open the money tap, the data may push the central bank closer to the unprecedented step of buying government bonds to revive growth and inflation.
If there was one thing that the market was demanding after last night's disappointing March HSBC manufacturing PMI, which has now fallen so low, local market participants are convinced a stimulus is imminent (despite China's own warnings not to expect this), and sent both the SHCOMP and the CNY surging, it would have been further weak data out of Europe, where the other possible, if not probable, "QE-stimulus" bank is located now that the Fed is in full taper mode.
FRANKFURT — The European Central Bank caught financial markets off-guard on Thursday by announcing it would trim asset buys from April next year, even as it reserved the right to increase purchases again if the eurozone’s recovery faltered.
Global stocks extended the longest winning streak since September, with Asia up 0.8% and Europe rising 0.7% while bonds and credit markets strengthened amid hopes that the European Central Bank will prolong quantitative easing, while optimism an Italian bailout of Monte Paschi will prevent European bank contagion, has pushed European financial stocks higher. US equity futures were little changed.