- Eurozone inflation falls
- Euro-area jobless rate dips
- UK confidence improves
- EU banks face capital hurdle
FTSE 100: -1.18%
CAC 40: -1.36%
FTSE MIB: -1.32%
IBEX 35: -1.48%
Stoxx 600: -1.28%
European stocks declined after an unexpected fall in Eurozone consumer prices added to concerns of deflation.
Eurozone inflation dropped to 0.7% in January from 0.8% in December, edging further away from the European Central Bank's (ECB) 2% target. Economists had predicted inflation would rise to 0.9%.
Today's report is likely to put extra pressure on the ECB to tackle deflation risks.
In November the monetary authority slashed interest rates to 0.25% from 0.5% but is has so far failed to curb falling prices.
"The problem the ECB now faces is that any interest rate cut to, say, 0.1%, will probably have minimal impact, which means they will be forced to consider more unconventional measures," said Alpari Analyst, Craig Erlam.
Other options that the ECB may consider include introducing negative deposit rates and another round of long term refinancing operations (LTROs).
ECB President Mario Draghi on Monday signalled a move towards monetary stimulus to ward off deflation. He said the ECB would be prepared to buy packages of bank loans to households and companies.
On a brighter note for markets this morning, Eurozone unemployment dropped to 12% in December and the November reading was already revised down to this level from 12.1%. Analysts had expected it to remain unchanged.
UK consumer confidence, European banks
UK consumer confidence rose more than expected in January as the economy showed further signs of recovery, GfK revealed on Friday.
The sentiment index jumped to -7 this month from -31 in December, surprising analysts who had predicted a reading of -12. It marks the highest level since September 2007.
Europe's largest banks will have to show their capital won't fall below 5.5% of their assets in an economic crisis, the European Union's top banking regulator said today. The European Banking Authority is examining a sample of 124 banks that cover more than half of each EU member state's banking industry and the results will be published at the end of October.
Later today in the US, attention will turn to the release of reports on personal income and spending along with the Chicago purchasing managers' index and the University of Michigan's confidence data.
Electrolux, BT Group
Electrolux slumped after the world's second-biggest maker of home appliances reported quarterly profit that missed consensus forecasts.
BT Group advanced after the UK phone company reported third-quarter earnings that beat analysts' estimates.
Next, which announced on January 3rd that it would pay a special dividend of 50p per share to shareholders on February 3rd, said it would make a further special dividend payment of 50p on May 1st following a good Christmas.
Diageo declined after Goldman Sachs cut its recommendation on the world's biggest distiller to 'neutral' from 'buy', citing continued challenges to growth in emerging markets.
Banco Bilbao Vizcaya Argentaria rallied after the Spanish lender posted a smaller quarterly loss than analysts had forecast.
LVMH Moet Hennessy Louis Vuitton led European luxury-goods stocks higher after saying growth in fashion and leather-goods sales rebounded in the fourth quarter.
The euro fell 0.02% to $1.3552.
Brent crude futures fell $0.653 to $107.250 per barrel, according to the ICE.