GERMAN DATA: August PPI Softer-than-expected; Disinflationary Forces Intact
German August PPI was softer-than-expected at -0.5% M/M, below the -0.1% consensus and prior reading. The pullback was mostly driven by the energy component, with PPI ex-energy falling -0.2% M/M (vs -0.2% prior).
- On a 3m/3m basis, PPI ex-energy fell for the fourth consecutive month to 0.1% (vs 0.3% in July). All major sub-components (investment goods, intermediate goods and consumption goods) have contributed to this move lower.
- Weaker momentum in pipeline pressures is also reflected in the EC’s industry expected prices series, which remains at subdued levels.
- Until the impulse from higher fiscal spending starts to feed through, German inflationary pressures appear to be contained by weaker commodity prices, the stronger Euro, continued disinflationary Chinese trade diversion and soft (but improving) domestic demand.
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GILTS: Opening calls
Wide calls for Gilts given the divergence between Bund and Tnotes, also note that the Roll will now also start to distort the Calls, and these DO NOT take the UK CPI into account.
- Range 90.69/90.86, some will favour downside risks.
EQUITIES: EU Cash Opening calls
Estox 50: -0.57%, Dax: -0.70%, CAC: -0.18%, FTSE -0.10%, SMI -0.39%.
EGBS: Positioning & Weaker Equities Provide Support
Some desks point towards already short positioning as a factor behind this morning’s quick recovery from lows in Bunds/wider EGB futures. Commerzbank also pointed to the negative move for equity futures as Bund-supportive ahead of the UK CPI data.
