Daily Market Report - 27/02/2015

British business investment fell at its sharpest rate in nearly six years late last year, after tumbling global oil prices hit the North Sea petroleum industry, but stronger exports helped make economic growth a bit more balanced.

Gross domestic product between October and December grew by a quarterly 0.5 percent. That was the slowest growth rate in a year, although there have been signs the economy started 2015 more strongly.

Economists said the second consecutive quarterly fall in business investment raised questions about the recovery. The 1.4 percent drop in business investment was the biggest since mid-2009. Economists had expected it to rise slightly. 

The slowdown in overall growth at the end of last year has not prevented Prime Minister David Cameron from putting the economy front and centre in the campaigning by his Conservative Party ahead of national elections on May 7.Britain's economic growth of 2.6 percent in 2014 as a whole was the fastest in seven years.

German unemployment dropped twice as much as forecast in February after the country returned to its position as Europe’s economic powerhouse. The number of people out of work declined a seasonally adjusted 20,000 to 2.81 million, the Federal Labour Agency in Nuremberg said on Thursday.The adjusted jobless rate remained at 6.5 percent, the lowest level in records going back more than two decades. 

Germany’s economic growth accelerated in the fourth quarter, led by domestic spending and exports, and the Bundesbank said last month that higher wages are bolstering consumption. Plunging energy costs, while contributing to a negative inflation rate in Germany and the euro area, are also providing stimulus. 

U.S. consumer prices fell over the past year for the first time since 2009 as gasoline prices continued to tumble, which could allow a cautious Federal Reserve more room to hold off on raising interest rates. Other data on Thursday showed a rebound in business investment spending plans and a steadily firming labour market, suggesting the move into deflation territory would be brief. In addition, gasoline prices have been rising in recent weeks.

The CPI dropped 0.7 percent from December, the largest fall since December 2008. It had slipped 0.3 percent in the prior month. Fed officials, who have long viewed the energy-driven drop in inflation as transitory, could take comfort from a rise in underlying price pressures last month. 

Core CPI, which strips out food and energy costs, rose 0.2 percent last month after December's 0.1 percent pain. Economists, however, believe the effects of lower energy prices and a strong dollar still have to work their way through to the core CPI, which could mean tame readings ahead.

Key Announcements:
EUR- 09:30 : German Inflation (YoY) for Jan expected to rise to 0.7% from -1.3%
USD- 15:30 :US Preliminary GDP (Q4) Expected to be lower at 2.1% from 2.6%

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