Low inflation stimulating stock markets in Europe


Stubbornly low inflation in the eurozone helped perk up equities yesterday as an indication that the ECB will likely only slowly reduce its easy money policies to support the economy.
“An easing of trade war tensions and further evidence of low inflation generated some optimism for European shares while the euro sunk for a third day to a two-week low,” said Jasper Lawler, head of research at London Capital Group.
The final eurozone inflation reading for February came in at 1.1%, a drop from the initial reading of 1.2%, and considerably below the European Central Bank’s target of just under 2.0%.
“Eurozone inflation trickling along at nearly half of the ECB’s target implies a very gradual removal of the punchbowl.
That’s a clear positive for risky assets,” said Lawler.
The ECB has only been inching towards an exit from its stimulus programme, the main element of which is buying €30bn of bonds per month until at least September.
“Clearly whatever the ECB is doing to get that CPI (consumer price index) figure creeping higher isn’t working, news that helped send the…DAX and CAC up,” said Connor Campbell, analyst at Spreadex traders.
Frankfurt stocks climbed 0.4% at 12,389.58 points, helped by shares in Siemens’ Healthineers unit surging more than 8% after the industrial giant raised €4.2bn in an initial public offering.
Meanwhile, Paris shares added 0.3% at 5,282.75 points and outside the eurozone, the London FTSE 100 index also rose 0.3% at 7,164.14 points.—Reuters

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