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Global markets ponder inflation puzzle

Friday, March 31, 2017 - 01:49

Mixed signals are given on the global outlook as China and Japan's manufacturing data surprise to the upside - but euro zone inflation slips backwards by more than expected. David Pollard reports.

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If one flag's dominated Europe's market news, Asia was focused on others. Traders looking for red alerts as both China and Japan released new manufacturing numbers. And finding few. Japanese factory output in February rose at its fastest in eight months. Chinese factory activity in March at its fastest in nearly five years. (SOUNDBITE) (English) CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "Ultimately I think we're seeing a decent tail wind, not only from the domestic Chinese economy, but also from the global economy as well." Chinese stocks rose but Japanese markets were still unhappy - the Nikkei closing point 8 per cent down. As - amid a recent sag in the dollar - Japan posted a slight rise in inflation for the second month in a row. (SOUNDBITE) (English) CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "That's the first time that that's happened in around 18 months, and I think it's probably feeding into a little bit of a narrative that that could strengthen the yen and obviously a stronger yen is not good for Japanese stocks." For Europe too, the puzzle was inflation. CPI plunged this month, according to flash figures. The headline rate at just one and half per cent after two in February. Even though consumers - apparently - are still spending. German retail sales in February jumping by a surprise 1.8 per cent on the month. (SOUNDBITE) (English) CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "If you look at German retail sales data on a year-on-year basis, we've actually seen an annual decline. So even though on a monthly basis we saw a pick-up, I wouldn't necessarily say the recent decline that we're seeing in inflation is a bad thing at a time when wage growth continues to remain a little bit weak." Consumers the winners - and Mario Draghi too perhaps. The ECB chief's reluctance to pull back from ultra-loose stimulus now seen by some as vindicated for an economy still in recovery mode.

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Global markets ponder inflation puzzle

Friday, March 31, 2017 - 01:49