Euro zone inflation rises to 4.0% in October, highest level in around three years
The increase is driven by energy, and the market is already reinforcing its bet on a new interest rate hike by the ECB in December, according to Reuters.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM INFOMONEY · 3 MIN
In October, the euro zone's annual price index rose to 4.0%, compared to 3.8% in September, according to Eurostat data reported by InfoMoney. It is the highest level in around three years and was in line with the Reuters survey of economists, which covered 21 countries in the region.
The core index, which excludes food and energy, was 2.5% in October, also within expectations. This indicates that the advance in general inflation is concentrated in energy prices, according to the InfoMoney reading.
Reuters projects that inflation will continue to rise in the next readings. Given this, the market tends to price more strongly a new increase in the base rate by the ECB in December, according to the same agency.
In the industrial sector, the euro zone PMI calculated by S&P Global reached 52.7 in October, down from 52.9 in September. Before the release, analysts expected 52.4, according to Reuters. As readings above 50 signal expansion, the index remains positive, although the recent peak was in September, when it reached the highest level since May 2022. The loss of pace in new orders, the increase in energy prices and bottlenecks in the supply of inputs have squeezed companies' profitability.
On the Chinese side, the S&P Global/RatingDog industrial indicator closed October at 52.0, falling from 52.1 in the previous month. Orders from abroad rose for the fourth consecutive time, but with less strength and at the lowest level in the last three months. The analysis of the survey was carried out by Yao Yu, founder of RatingDog, according to InfoMoney.
What changes for the investor
The frame combines two signals. On the one hand, higher-than-expected inflation in energy reinforces expectations of higher interest rates in Europe, a variable that usually weighs on assets sensitive to interest rates. On the other hand, the industry continues to expand both in the euro zone and in China, which indicates that demand is still active. For those who follow interest rates, stock markets and the dollar, the point to watch is whether the cost pressure on company margins and the ECB's possible interest rate hike in December will be confirmed in the next inflation and activity readings.
Automatically translated from Portuguese.
