Good news for a change!
Inflation has dominated the headlines for the last 15 months and there is no doubt we are near the end of the cycle. However, just when we think we are making progress, data has a habit of suggesting otherwise – food inflation being the latest data to cause alarm. However, yesterday, the data from Spain was really encouraging with inflation falling to 3.1%. As you might expect, equity markets liked the news. The Eurostoxx 600 has risen to its highest level in two weeks.
Economists had forecast 4% inflation in Spain, which is significantly higher in percentage terms than the 3.1% which was posted. By way of perspective, inflation, year to date, in the previous month was 6%, meaning that Spanish inflation fell by nearly a half in just one month!
Fears around the banking sector have also eased. Confidence has been shaken but there were specific reasons which should not be extrapolated onto the whole banking regime. Furthermore, swift action contained the problems.
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