uploads///Germany inflation and EWG

FEZ Up 0.36%, EWG Up 0.86% on Good Inflation News from Germany


Nov. 20 2020, Updated 10:57 a.m. ET

Positive Inflation News from Germany

The Eurozone’s strongest economy has managed to move out of the deflation zone, recording a positive change in consumer prices in March. Rising wages in Germany have been a boon for private consumption, while the weaker euro, tempered by the ECB’s (European Central Bank) bond buying program, has helped German exports.

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German stock markets gain on positive indicator readings

German stocks (listed in the US) advanced on positive inflation news on March 30 from the region. Aixtron SE (AIXG) advanced 2.71%, Deutsche Bank AG (DB) gained 1.45%, SAP SE (SAP) advanced 0.25%, and Daimler AG (DDAIY) gained 1.38% on March 30. The iShares MSCI Germany (EWG), which tracks German equity market performance, gained 0.86%.

The German Federal Statistics Office came out with its preliminary estimates for inflation rate in March. The German Federal Statistics Office measures the inflation rate as annual changes in the consumer price index. In contrast, the US (SPY) Federal Reserve prefers to use the PCE index (personal consumption expenditure) as its preferred gauge.

Inflation rate in Germany turns positive at 0.1% from -0.1%

According to the report, Germany’s EU-harmonized inflation rate stood at 0.1% in March on a year-over-year basis, against the -0.1% rate in February. Consumer prices in Germany were up by 0.3% year-over-year in March, against a 0.1% rise in the previous month. Month-over-month, consumer prices rose by 0.5% in March.

The National Statistics Institute in Spain also came out with its EU-harmonized inflation rate for Spain, which recovered to -0.7% in March against the -1.1% recorded in February.

The news was received positively by broader Eurozone-tracking ETFs such as the SPDR EURO STOXX 50 ETF (FEZ), the Vanguard FTSE Europe ETF (VGK), and the iShares MSCI EAFE (EFA), which gained 0.36%, 0.22%, and 0.06%, respectively. It looks like the ECB’s recently launched 60-billion-euro quantitative easing program, meant to ward off deflation and boost economic growth across the Eurozone, is having the desired effect! Read our series Can 60 billion euros a month turn Eurozone indicators positive? for our detailed analysis of Eurozone indicators and the ECB’s stimulus program.

While low consumer prices are a problem in the Eurozone, the Central Bank of Brazil is currently striving to rein in inflation by raising the SELIC rate.


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