Market Commentary: Euro area inflation at its weakest in more than four years

Yesterday the US Federal Reserve released their minutes from the March meeting. The minutes indicated that there was almost unanimous agreement for getting rid of the 6.5% unemployment target as a gauge for interest rate increase timing. Market participants interpreted this as a sign that interest rate would remain lower for longer.

Meanwhile Alcoa unofficially launched the first quarter’s earnings season. Alcoa reported earnings that topped expectations, diluting anticipation of a weak quarter for stocks in general. Earnings will most likely be the main catalyst for markets in the coming weeks. Analysts seem to be in consensus that results will be subdued. Expectations are mounting for next Friday when J.P. Morgan and Wells Fargo report.

Early this morning Chinese data showed that exports fell 6.6 percent in March - market estimates had previously anticipated a 4.8 percent gain. Subsequently, emerging market currencies and commodities fell as this data continues to fuel concerns about growth in emerging market economies.

European markets opened positively for a second day in a row following the optimism in the US and amid expectation that the ECB will react to threats of deflation. Economists are expecting a rate cut or other monetary measures within two months. The Euro area inflation is at its weakest in more than four years and policy makers want to avoid what is termed ‘Japanization’ of the European economy; a prolonged period of flat or negative growth characterized by negative inflation.

This article was issued by Calamatta Cuschieri, visit www.cc.com.mt  for more information.

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