Tradeline Financials - European Union Update - Week 31, 2014
According to Mario Draghi at the ECB the European Union is potentially facing deflation. For the last 10 months inflation has been below 1%. The preferred rate, set at 2% is far off what we have seen this past few months.
With June's inflation at 0.5% and now July showing just 0.4% the ECB may be one step closer to implementing new quantitive easing measures previously only seen in the US and UK.
Despite their rate changes a few months ago and policy changes on bank lending the head of the European Central Bank may now have to start thinking outside the box and look if it is even possible for the ECB to start some form of asset buying program. In the US, buying government bonds was easy for the Federal Reserve as it only had to deal with one government. In the EU they have 28 members and how the ECB could purchase asset and whom from would be quite a tricky task to decide.
Whilst many of the 28 countries are starting to see improvements in their economies the Eurozone is still lagging in its recovery and the strong performers are starting to feel the strain of its worse off members.
With unemployment continuing to drop, all be it marginally, and production and manufacturing starting to turn a corner the EU thought it was on the mend, however with the issues in the Ukraine right on its doorstep and with the US looking to get Europe to push as hard as they are against Russia, it is a precarious time as countries start to work out the implications of the sanctions and how badly they may or may not be affected.
Across the board European markets saw red yesterday and it is possible they will continue to drop ahead of unemployment data out of the US.
Major Indices as of 1st August 2014:
Hang Seng - 24,512.24 -0.99%
Dow Jones - 16,563.30 _1.88%
FTSE 100 - 6,679.36 -0.75%
DAX - 9,329.20 -0.83%
MICEX - 1,379.61 -0.18%
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