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Japan & Europe Provide Upbeat End to a Difficult Week

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Looking back on this week in the markets, it started on a down note with Chinese trade figures and then proceeded to deteriorate from there. All indications so far today however are that the trading week is likely to end with a positive tone.

The Ukrainian backdrop is still ever present, tensions are undoubtedly heightening again and Washington’s deeper involvement is doing nothing to calm nervousness. Geopolitics aside, the fundamental economic indicators are all pointing in the right direction this morning.

Japan, which has been fighting a tough battle to re-ignite it’s flagging economy, has posted some strong data overnight. Year-on-year Industrial Production figures for February jumped to 10.3% from a previous reading of 7.1%. The month-on-month figure missed expectations but was still well ahead of January giving rise to some cautious optimism for the core Japanese economy. There still remains concern around the impact of the impending sales tax rise that comes into effect in two weeks time. This is weighing on Japan’s stock index, the Yen however will continue to benefit from safe haven buying while the Ukraine remains on the agenda.

Back in Europe, further confirmation of a stabilizing inflation situation was in evidence following the publication this morning of both the German Consumer Price (CPI) Index and the Harmonised Index of Consumer Prices (HICP). The HICP came in as expected at 1% and unsurprisingly Germany’s CPI was slightly higher at 1.2%.

Yesterday the European Central Bank published it’s Monthly Report, in which it maintained it’s 2% inflation target but hinted that this may take longer to achieve than initially anticipated.

Any sign of an increase in the inflation data this morning would have greatly pleased the markets. Solace however was taken in the fact that there was no further slippage and for now at least falling inflation appears to have bottomed out.

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