European stocks surge on declining Eurozone inflation

The Stoxx Europe 600 Index rose 0.1% on Monday as new data showed the euro zone economy returned to growth in the three months through June and inflation fell.

The combined gross domestic product of the 20 countries that use the euro grew at an annualized rate of 1.1% in the second quarter. There was also good news on the inflation front. The annual rate of consumer-price inflation in the euro zone fell to 5.3% in July from 5.5% in June

While the summer will see inflation blurred by base effects from government measures, we do expect a much lower reading in inflation by the end of the year. Still, the ECB’s September meeting will come too early for that, which means that the concern around services inflation will remain key to the central bank’s next move.