Monday’s a slow day for economic releases, in part because the US markets are closed for the President’s Day holiday. Meanwhile, India’s recent progress in taming inflation will be in focus today with the monthly update on wholesale prices.
Later, the Eurozone’s monthly merchandise trade report will be closely read for any signs that the weak euro is boosting exports. A weak currency seems to be helping Germany’s export machine, a trend that’s a factor in the recent strength in the country’s stock market.
India: Wholesale Price Index (06:30 GMT) India is now the world’s fastest-growing economy, according to official GDP statistics. Economic growth was 7.5% in last year’s fourth quarter over the same quarter in the previous year – slightly faster than China’s 7.3% rise. The comparison comes with footnotes, of course. China is still a much bigger economy and will remains so for years to come. Meanwhile, the latest figures for India reflects a new methodology that boosted the country’s estimated growth rate compared with the old methodology.
India's upbeat news looks even better when you consider that the previously high rate of inflation has dropped sharply. The softer pricing pressure allowed the Reserve Bank of India to trim its policy rate in January for the first time in 20 months.
India's wholesale inflation is heading in the right direction. Photo: iStock Last week’s update on consumer inflation reflects a slightly faster annual pace – 5.11% in January, up from 4.74% in the previous month. But that’s still well below the 7% to 10% inflation that prevailed throughout 2014. More importantly, consumer inflation is comfortably below the central bank’s 6% target. "The headline number has surprised on the downside," an economist at HDFC Bank said last week. “All this data is reassuring, as we were of the opinion that space exists for more monetary easing.”
Today’s influential wholesale inflation report for January will provide more context for deciding if India has inflation under control. In last month’s update, prices rose 0.11% year-on-year, slightly higher than the flat performance in November.
But here, too, the latest figures are low relative to much faster inflation earlier in 2014. Economists think that today’s release will show another marginal acceleration to around the 0.4% range, but that’s still far below the 5%-plus level that prevailed in last year’s first half. 
EU: Merchandise Trade (10:00 GMT) Europe’s exports surged last September, inspiring forecasts of a revival in trade driven by a weaker euro. But exports withered in October and November. Will today’s update on foreign trade for December tell a different story?
We already know that Germany’s exports soared in last year’s final month, rising 3.4% in the monthly comparison and 10% in year-on-year terms. In both cases, the numbers beat expectations by a wide margin.
The weak euro is a bullish factor for German exports – will the same hold true for today’s Eurozone data? The general trend certainly looks favourable. Some analysts worry, however, that the macro spoils are mainly going to Germany, which sends roughly two-thirds of its exports to markets beyond the euro area.
Consider last week’s flash fourth-quarter GDP data. Eurozone 0.3% growth was a bit stronger than the 0.2% rise that analysts were expecting. Germany’s GDP also beat expectations for Q4’s initial estimate, but by a wider margin: 0.7% vs. 0.3% in the consensus forecast. Will we see a repeat performance in today’s report on exports?
Even if Germany maintains its edge in leading Europe’s export revival, there will still be benefits to spread around the currency union. “A euro devaluation favours suppliers from other Eurozone countries,” noted an economist at the Kiel Institute. 
Germany: DAX Index It’s debatable how much influence Germany’s accelerating export machine will bring to the rest of the Eurozone, but the outlook has certainly improved for the currency union’s largest economy. The stock market has been expecting as much and closed at a record high on Friday.
Market sentiment at the moment seems inclined to minimise the potential for trouble via Grexit risk and the Russia-Ukraine crisis. What threats these factors pose, will to some extent be offset by 1) a weaker euro, which provides support for Germany’s exports; 2) sharply lower energy costs, a major plus as the country is heavily reliant on oil and gas imports; and 3) a new phase of monetary easing via the European Central Bank’s announcement last month that it would soon launch an aggressive quantitative easing program.
How effective will these factors be in boosting growth? It’s hard to say, but investors for the moment are inclined to think positively. Bullish momentum has picked up lately. The DAX is now well above its 50- and 200-day moving averages. In fact, the 50-day average has been above the slower-moving 200-day average in recent weeks. The optimism may be overheated, but for the moment the crowd’s enthusiasm is supported by the hard data.
