Inflation in the Eurozone grew moderately at 1.2 per cent in February, which was largely in line with the prevailing market expectations, but below the 1.4 per cent that was recorded in January.
Eurozone Inflation Rate. Image source: TradingEconomics.com
The indirect cause for the drop in consumer prices is unsurprisingly the spread of the coronavirus.
The falling energy prices globally are attributed to the subdued industrial productivity in China, which, in turn, is the consequence of the government-imposed quarantines in large industrial areas around Hubei.
We have already covered the stark drop in the price of crude oil, which is underscored by the subdued demand in China.
That is why Eurostat attributed the waning inflation rate in the Eurozone to this drop in energy prices globally:
“Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in February (2.2%, compared with 2.1% in January), followed by services (1.6%, compared with 1.5% in January), non-energy industrial goods (0.5%, compared with 0.3% in January) and energy (-0.3%, compared with 1.9% in January)”
The falling inflation rate was the main contributing factor that partially wiped out some of the profit in Euro stocks that was generated yesterday.
Nevertheless, the Euronext 100 continues to trade above the 61.8 per cent Fibonacci retracement at 1005.46, which has psychological importance due to its proximity to the crucial 1000 mark.
The price action of the index is finding strong support there, which is what is currently giving investors and traders reasons to believe that last week’s selloff is going to be halted there.
N100 1W Price Chart. Image source: Trendsharks ©, created with TradingView.com
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