Stocks in the eurozone gained Monday morning after fresh data revealed a stronger economy than forecast.
Monday, March 2, 2015
Unemployment in the area fell to its lowest mark since 2012 and inflation rose from minus 0.6% in January to minus 0.3% in February.
As a result, the euro moved up to $1.1235 against the US dollar. The Stoxx Europe 600 added 0.1% after registering its strongest close since July 2007 on Friday. The German DAX rose 0.3% and the UK’s FTSE 100 strengthened as well. However, the French CAC 40 dipped by 0.1%.
“This may dilute fears that pervasive deflation could become entrenched in the eurozone with long-term debilitating growth effects,” Howard Archer, chief UK and European economist at IHS Global Insight, told MarketWatch. “The further drop in unemployment should be supportive to eurozone consumers, and they are benefiting from the boost to their purchasing power coming from deflation.”
Eurozone inflation gain provides some relief
For a region poised to enact a groundbreaking stimulus program through quantitative easing, the recent uptick for inflation offered some much-needed support, Bloomberg reported. While the economy is not suddenly fixed, the European Central Bank now has a bit more room for maneuvering ahead of its bond-buying program, set to begin soon.
Though inflation is still at minus 0.3 percent for February in the eurozone, that mark is better than January’s and higher than most economists expected. In addition, unemployment is still high but reached 11.2% in January – the strongest since April 2012.
Markit Economics released its eurozone manufacturing index on Monday, which maintained its reading of 51 from January to February. The level was slightly lower than forecasts, but any number above 50 indicates expansion. The report showed a high degree of divergence within the region, as the Irish manufacturing expansion rate was the highest in 15 years while French manufacturing took a downward turn.
With all of this considered, Bloomberg analysts predicted the eurozone economy will grow 0.3% in the first two quarters of 2015, and accelerate to 0.4% per quarter through the third quarter of 2016.
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