Markets had been unsettled by news of weak US retail sales which were revised downwards yesterday. Equities brushed off the decision from the US rating agency Moody’s on Tuesday to downgrade a number of European countries' credit ratings; banking stocks predominately led London’s blue-chip index lower as it ended the session at 5,899 just 0.1% lower. Economic data published this morning emphasised European recession concerns as the German economy shrank quarter on quarter, although at a slower pace than anticipated. GDP figures came in at -0.2% against a market consensus of -0.3%. French GDP data also released today, produced a positive reading as the French economy grew marginally in the final quarter of 2011, brining annual economic growth to 1.7% for last year.
The governor of the Bank of England is expected to announce the bank's expectations for domestic inflation at 10:30 today. Mr King is likely to suggest that inflation will continue to fall throughout the year as unemployment and low wage growth remains precarious.
The CPI index fell to 3.6% yesterday while many economists suggest that inflation could now fall below the BoE long term target of 2% by the end of the year. Markets will also be focusing their attention on the Federal Open Market Committee minutes released this evening.
