Anyone confused why futures are doing their best to surge in the overnight session, the answer is simple: first it was Japan reporting the latest batch of atrocious economic data, which an hour ago was followed by Europe own abysmal econofreakshow, where Eurostat just reported that in September Eurozone inflation rose a meager 0.3% from a year ago, the lowest annual increase since October 2009.This marks the 12th straight month that Euro inflation has been below 1%, and far below the ECB's goal of 2% inflation.
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More importantly, it also shows that some 3 months of a sliding Euro have not only had zero impact on European export competitiveness, as the entire continent is careening into a triple dip recession, but that the ECB is completely powerless to create an inflationary spark, as not only is the bulk of the Eurozone flirting with disinflation but more and more European countries are in outright deflation.
Also of note, while headline inflation was in line with expectations, it was core CPI that missed expectations of a 0.9% increase, and rose by only 0.7%, confirming that the most recent bout of deflation in Europe is about far more than just sliding energy prices. In fact for the culprit, perhaps look at Japan which is now exporting deflation hand over fist.
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Then again, there is always hope. From the WSJ [13]:
There are reasons to expect the rate of inflation will begin to pick up from next month. With food and energy prices very low in Europe last fall, annual comparisons for these sectors should start rising in October. Analysts refer to these statistical forces as base effects.
However, inflationary pressures are likely to remain very weak. Surveys of businesses have pointed to a weakening of activity as the third quarter has progressed, making it unlikely that the eurozone economy has picked up significantly after stagnating in the second quarter.
To be sure, the already weak and sliding EUR welcomed the news with open arms, weakening and sliding even more.
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As for the great news, here is Bloomberg [15]:
European stocks rebounded from a five-week low, as investors speculated on the possibility of further European Central Bank stimulus, after data showed euro-area inflation slowed this month. U.S. stock futures gained, while Asian shares fell.
The Stoxx 600 Europe Index climbed 0.6 percent to 342.87 at 10:17 a.m. in London, extending earlier gains. The equity benchmark fell 0.4 percent yesterday, as banks slid and data showed economic confidence in the region dropped to the lowest since November.
“The ECB has done a lot already to stimulate economic activity in Europe,” Teis Knuthsen, chief investment officer at Saxo Bank A/S’s private-banking unit, said by phone from Hellerup, Denmark. “This week we’ll look for more details regarding the asset-backed securities program and covered bond program. We’re still waiting for the big bazooka, which would be the ECB really expanding their balance sheet.”
In other words, the European economic collapse is bullish because it means more failed monetarist experiments to make rich richer. QE and D.
