STOCK MARKET WATCH -- Tuesday, 3 June 2014

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14. EUROZONE INFLATION DROPS, KEEPING PRESSURE ON ECB

http://hosted.ap.org/dynamic/stories/E/EU_EUROPE_ECONOMY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-06-03-06-40-25

FRANKFURT, Germany (AP) -- Inflation in the eurozone sagged more than expected to 0.5 percent in May, increasing pressure on the European Central Bank to take action this week to support the weak economic recovery.

The figure released Tuesday by the European Union's statistics agency fell from 0.7 percent in April and was short of market analysts' forecasts for 0.6 percent.

Inflation has been low for several months, increasing concerns that the 18-country eurozone could fall into outright deflation, a sustained drop in prices that chokes off growth as consumers delay purchases in hopes of bargains and businesses postpone investment.

Even merely weak inflation can hold back the economy if it lasts too long. It can make it harder for indebted companies and governments to reduce debt, and it also makes it harder for weaker countries such as Greece or Portugal to become more competitive relative to their stronger trade partners such as Germany.