The European consumer price index released Tuesday showed a 0.7% increase in core inflation in December, well below the European Central Bank's 2% target. The data come on the heels of strong manufacturing and services sector numbers. That raises the question about why prices aren't also increasing.
If strong manufacturing data translate to growth, then the next logical step would be for prices to move higher. The ECB will meet on Thursday to discuss policy, and deflation will almost certainly be one of the talking points
The central bank may not implement new stimulus measures at the meeting, but it will probably attempt to talk down fears. Still, the U.S. dollar is likely to strengthen versus the euro, especially if fears about deflation in Europe persist.Meanwhile, U.S. trade data, released Tuesday, showed that the country's trade deficit was shrinking. Lower oil prices in recent months led to cheaper import prices, and stronger domestic output caused exports to accelerate. The U.S. trade deficit is factored into the country's gross domestic product measurement. When exports grow faster than imports do, then the deficit narrows, which is bullish for growth. The improvement in the trade data caused analysts to raise their projections for first-quarter growth.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV