Quiet start to week

A relatively quiet day yesterday with US markets closed for the 4th of July, the euro remains at $1.04 to the dollar and 86p to sterling. In turn, sterling remains around $1.21 to the dollar

Equity markets that were open in European saw small gains with the Eurostoxx up 0.1%, the FTSE up  0.9% following losses last week. Bond yields rose – following sharp falls last week – with German 10-year yields up 10bps to 1.33%

Producer prices in the Euro area rose 0.7% in May, down from a monthly increase of 1.2% in April, and the smallest monthly increase since April of last year. A modest easing in energy cost pressures appears to be behind the lower increase with the year-on-year change also easing back, although it remains at an eye watering 36.3% (from 37.2% in April)

As the ECB prepares a new ‘anti-fragmentation’ tool there are signs agreeing policy around the design and use of such a tool is fraught with difficulties for the central bank. Front and center yesterday was Bundesbank President Nagel who warned that monetary policy cannot be driven by ‘short-lived’ developments in the financial markets and anti-fragmentation measures can only be justified in ‘exceptional’ and ‘narrowly-defined’ circumstances or the Bank could easing find itself in ‘dire straits’

Data due today includes services PMIs and US factory orders