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Deflation & Terrorism knock oil off top spot

Published Thursday, January 8th, 2015

So far this year it is falling oil prices that have been making the headlines. That changed yesterday with two highly significant developments – one economic and one political. The economic was the descent of the eurozone into deflation in December and the political was the terrorist attack on Charlie Hebdo in Paris.

Mario Draghi and his ECB allies now have a cast iron excuse to launch full-blown QE when they meet on Jan 22 and given the price fall maybe even the Bundesbank may acquiesce. Sadly as the day comes closer more and more voices can be heard doubting that it will “do the job”, given the lack of demand for commercial loans. The terrorist attack will embolden and increase the popularity of the so called “populist” parties in Europe all of who have a common disdain for the eurozone.

As far as the markets were concerned, it was a case of bad news being good news on global stock indices yesterday after they staged an impressive rebound following the release of soft eurozone inflation data. The weaker-than-expected figures revealed that the currency-bloc slipped into deflation last month as consumer prices fell 0.2% from the same period a year earlier.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.