The Week In Hindsight; 17 Jan 2014

Europe received a double boost this week despite a relatively quiet diary in the economic data department. This was as Portuguese bond yields declined to their lowest level in four years, prompting a similar drop in yields across the periphery.

ECB governing member Klaas Knot also sounded the alarm during the week, this time against pessimistic sentiment toward continental economies. Although he acknowledged that economic conditions are less than ideal he did offer words of praise and encouragement for euro zone governments working hard to reduce fiscal deficits and return their economies to growth.

CPI figures also showed bloc wide inflation to be stable at 0.8%, in line with expectations, while core CPI which strips out big ticket items underperformed against forecasts by a modest margin.

Should this trend of stability at low levels continue, or if inflation were to drop further; the ECB could be forced to cut rates once again. Such a move would be positive for investors holding European stocks while it would also be expected to boost commercial and consumer activity across the bloc. This again would be positive for European stocks.

The next major releases due from the continent are Manufacturing and Services numbers for both France and Germany. These are expected on Thursday next week.

European Markets; DAX (Black), IBEX (Blue), CAC 40 (Red)