Daily Market Report - 18/02/2015

British consumer price inflation eased last month to its lowest level since records began in 1989 and looks set to slow further, lifting voters' disposable incomes as national elections approach. Annual CPI fell to 0.3 percent in January, Tuesday's official figures showed, down from 0.5 percent in December.

The fall largely reflected a slide in oil prices, which last month hit a near six-year low below $45 a barrel, as well as lower food costs. Finance minister George Osborne welcomed the figures, published less than three months before the election, as boosting households' spending power after years of weak wage growth.

Economists expect data on Wednesday to show wages rose 1.8 percent in the three months to December, which would be the fourth straight month of above-inflation increases. CPI models for periods before official estimates were produced showed inflation was last lower in 1960.

Easing inflation could delay a first Bank of England interest rate rise since the financial crisis, though for that to happen the price falls would have to spread beyond food and energy and show signs of becoming self-reinforcing.Stripping out energy and food, prices rose last month by 1.4 percent, a three-month high.

Food and non-alcoholic drink prices, pushed down by a supermarket price war and low commodity prices, fell 2.5 percent, the biggest drop on record. Last week, BoE Governor Mark Carney said inflation would probably soon fall below zero due to tumbling oil prices, but the Bank also forecast a rebound to its 2 percent inflation target in about two years' time.

German investor confidence rose to the highest level in a year in February, buoyed by the imminent arrival of fresh central-bank stimulus. The ZEW Center for European Economic Research in Mannheim said on Tuesday that its index of investor and analyst expectations, which aims to predict economic developments six months in advance, climbed to 53.0 from 48.4 in January. Economists had forecast an increase to 55.0. 

Growth accelerated at the end of last year in Germany, the region’s largest economy, helping the rest of the currency bloc to better-than-forecast output. With oil prices and the euro sinking, and the European Central Bank scheduled to start quantitative easing next month, investors have stayed upbeat even as the mounting risk of a crisis in Greece threatens renewed turmoil. 

A gauge of the current situation climbed to 45.5 in February from 22.4 the previous month, ZEW said. A measure of expectations for the euro area rose to 52.7 from 45.2. The survey of 227 analysts was conducted from Feb. 2 to Feb. 16. 

The outlook for the Euro-zone remains clouded by the intensification of the Ukraine crisis and the “collision course” of Greece’s new government, ZEW President Clemens Fuest said in the report. Even so, ZEW economist Michael Schroeder said German investors are relatively relaxed on Greece. 

Key Announcements:
GBP- 09:30 :Bank of England Meeting Minutes
GBP- 09:30 :Unemployment claimant count change (Jan) expected to rise to -25K from -29K
GBP- 09:30 :UK ILO Unemployment Rate 3M Dec expected to remain unchanged at 5.8%
USD- 14:15 :US Industrial Production expected to rise to 0.3% from -0.1% 

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