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Events that marked the week:

Monday's session was marked by Eurozone CPI and German Retail Sales data. Euro area annual inflation is expected to be -0.2% in February 2016, down from 0.3% in January, according to a flash estimate from Eurostat, the statistical office of the European Union. Looking at the main components of euro area inflation, services is expected to have the highest annual rate in February (1.0%, compared with 1.2% in January), followed by food, alcohol & tobacco (0.7%, compared with 1.0% in January), non-energy industrial goods (0.3%, compared with 0.7% in January) and energy (-8.0%, compared with -5.4% in January).

Earlier on Monday, German Retail Sales figures were released. According to provisional results of the Federal Statistical Office (Destatis), retail turnover in January 2016 in Germany decreased 0.8% in real terms and 0.4% in nominal terms compared with the corresponding month of the previous year. The number of days open for sale was 25 in January 2016 and 26 in January 2015. When adjusted for calendar and seasonal variations the January 2016 turnover was in real terms 0.7% and in nominal terms 0.6% larger than that in December 2015. Analysts were expecting 0.3% increase.

 

From Eurozone, on Tuesday, Spanish and Italian Manufacturing PMI, as well as Eurozone Unemployment Rate and German Unemployment Change data was published. Despite a slight slowdown in growth in February, the Spanish manufacturing sector continued to record a marked improvement in business conditions in the latest survey period. Moreover, the rate of job creation quickened to a seven-month high. Lower prices for oil and steel were the main factors behind an accelerated pace of decline in input costs, in turn leading firms to lower their output prices. The seasonally adjusted Markit Spain Purchasing Managers’ Index posted 54.1 in February, slightly below January’s reading of 55.4 but still signalling a solid improvement in the health of the sector.

 

Manufacturing output in Italy rose at the slowest rate for over a year in February, reflecting a further easing in the pace of expansion in new orders. Employment continued to increase, but buying levels stagnated to end a 12-month sequence of growth. Elsewhere, there was a further sharp decrease in manufacturers’ purchasing costs amid lower global commodity prices. The headline Markit Italy Manufacturing Purchasing Managers’ Index registered a 12-month low of 52.2 in February, slipping from January’s 53.2 and falling further below December’s 57-month high.

 

The euro area (EA19) seasonally-adjusted unemployment rate was 10.3% in January 2016, down from 10.4% in December 2015, and from 11.3% in January 2015. No change was forecasted. This is the lowest rate recorded in the euro area since August 2011. The EU28 unemployment rate was 8.9% in January 2016, down from 9.0% in December 2015, and from 9.8% in January 2015. This is the lowest rate recorded in the EU28 since May 2009.

 

German joblessness fell for a fifth month in February in a sign that economic momentum will continue to be underpinned by household spending. The number of people out of work declined by a seasonally adjusted 10,000 to 2.72 million, data from the Federal Labor Agency in Nuremberg showed on Tuesday. That matched the median estimate of economists. The jobless rate was unchanged at 6.2%, the lowest level since German reunification.

 

Wednesday's session brought Spanish Unemployment Change data from Eurozone. The number of unemployed in Spain registered at the offices of the Public Employment Services rose by 2,231 people in February over the previous month. Analysts predicted increase by 200. In 2015 it fell by 13,538 in 2014 and 1,949 people. The total number of registered unemployed stood at 4,152,986. In seasonally adjusted terms, unemployment fell in February at 21,959 people. In the last 12 months unemployment has fallen by 359,167 people. This is the largest reduction of the entire series in February. Registered unemployment rate is reducted on yearly basis by around 8% (7.95%).

 

Thursday's session was marked by Spanish and Italian Services PMI data. The Spanish service sector continued to record growth of activity, new orders and employment during February, but there were signs that the political uncertainty following December’s general election had subdued demand, leading to weaker rates of expansion. The headline seasonally adjusted Business Activity Index posted 54.1 in February, down from 54.6 in January but still signalling a solid expansion of activity during the month. 

 

February’s headline Markit/ADACI Business Activity Index – which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago – read 53.8 to signal a solid rate of growth that was slightly faster than in January (53.6). It was the twelfth month in a row that the index has registered above the 50.0 no-change threshold. 

 

This week markets will be looking at:

 

German Factory Orders (Monday 8:00)

Minimum Bid Rate/ECB Press Conference (Thursday 14:30)

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