The US S&P 500 closed above 1950 for the first time since January 6. Global equity markets are broadly higher in response. At the same time, ahead of the G20 meeting, the world’s second and third-largest economies have signaled additional stimulus will be forthcoming.  

In Japan, the Abe government is reportedly considering a front-loaded supplemental budget for the start of the new fiscal year. The disappointing CPI figures reported earlier today, with headline and core measure easing back to zero,  adds pressure on the BOJ to provide more monetary stimulus as early as next month. 

Earlier this week, Chinese officials suggested there was scope for some further fiscal easing. Today’s news is that the PBOC appears to have confirmed a somewhat easier monetary stance. Governor Zhou characterized the policy as “prudent with a slight easing bias.” In the recent past, he said it was a “prudent policy, making reasonably ample liquidity.”  

Germany stuck to its position, refusing to provide additional fiscal stimulus. However, preliminary February inflation reading from both Germany and Spain will only add to the pressure on the ECB to ease monetary policy again when it meets on March 10. Spain’s preliminary harmonized CPI fell to -0.9% from -0.4% in January. This was greater deflation than the market is expected. The month-over-month decline of 0.4% was twice the consensus forecasted decline.  

The German states have been reporting their preliminary readings today, and shortly the national figure will be released. Nearly all the states have reported new deflation pressures, and this warns of downside risks on the flat consensus forecast after a 0.4% year-over-year pace in January. German CPI (harmonized) has been above zero since September, which was the only negative CPI print since January 2015.  

On Monday, the preliminary February eurozone CPI will be published. The consensus was for a pullback to 0.1% year-over-year from 0.3%. Given indications from Germany and Spain, the risk is on the downside. This coupled with the confirmation of softer PMI readings will likely encourage speculation of additional ECB action.