LONDON — Europe’s stock markets maintained their gains in early afternoon trading despite new statistics from Eurostat confirming the specter of deflation has finally landed in the euro zone.
The CAC 40 in Paris, the DAX in Frankfurt, and the FTSE MIB in Milan were all up 1 percent to 4,127.01, to 9,567.62, and to 18,331.49 respectively, while the FTSE 100 in London advanced 0.9 percent to 6,423.76 at 1:00 pm CET.
Eurostat, the statistical office of the European Union, had said earlier in its monthly preliminary “flash” report that euro area inflation fell to minus 0.2 percent, compared with November’s gain of 0.3 percent. Eurostat said the drop was driven by a fall in energy prices.
On Wednesday, the price of Brent crude oil dropped below $50 per barrel for the first time in nearly six years.
Eurostat added that prices remained stable for food, alcohol and tobacco. The report added the only annual increase is expected for services. The full inflation report for December 2014 is expected to be released on January 16.
Eurostat’s report should come as no surprise: Last week, European Central Bank president Mario Draghi indicated in an interview with a German newspaper that he was prepared to broaden and strengthen fiscal stimulus measures in the region in reaction to falling prices and the stagnating economy.
“If inflation remains low for a long time, people might expect prices to fall even further and postpone their spending. We are not there yet. But we need to tackle this risk,” he told Handelsblatt on Jan. 2.
“We have to avoid too high inflation and we have to avoid too low inflation as well…We are making technical preparations to alter the size, pace and composition of our (fiscal stimulus) measures in early 2015, should it become necessary to further address risks of a too prolonged period of low inflation. The Governing Council agrees unanimously on that,” he added.