EUROPEAN INFLATION: French Flash July HICP Slightly Above Consensus
French flash HICP inflation was higher-than-expected in July at 0.94% Y/Y unrounded (vs 0.8% rounded consensus, 0.86% prior). This follows a stronger-than-expected reading in Spain yesterday. CPI inflation meanwhile was in line with expectations at 1.00% Y/Y (vs 0.97% prior).
- Looking at major sub-components on a CPI basis:
- Services inflation accelerated a touch to 2.48% Y/Y (vs 2.44% prior), now at the highest since August 2024.
- Non-energy industrial goods inflation trends remain muted at -0.23% Y/Y. It has tracked at a rounded -0.2% Y/Y for five consecutive months now.
- Food inflation rose to 1.61% Y/Y (vs 1.37% prior), the highest rate since March 2024.
- Energy inflation was -7.20% Y/Y (vs -6.71% prior).
- On a sequential NSA basis CPI rose 0.21% M/M, with services inflation rising 1.26% M/M (vs 0.62% prior). The press release notes that this is “explained by the seasonal increase in the prices of services, particularly transport and accommodation”. These dynamics were broadly expected by analysts ahead of the release.
- Non-energy industrial goods prices fell -2.38% M/M due to summer sales.
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EQUITY TECHS: E-MINI S&P: (U5) Approaching The Bull Trigger
- RES 4: 6300.00 Round number resistance
- RES 3: 6281.12 1.618 proj of the Apr 7 - 10 - 21 price swing
- RES 2: 6277.50 High Feb 19 and a bull trigger
- RES 1: 6265.50 High Jun 30
- PRICE: 6243.25 @ 07:25 BST Jul 1
- SUP 1: 6087.08/5964.66 20- and 50-day EMA values
- SUP 2: 5811.50 Low May 23
- SUP 3: 5645.75 Low May 7
- SUP 4: 5500.00 Low Apr 30
The trend condition in S&P E-Minis is unchanged, it remains bullish and the contract has started this week on a firm note. Short-term resistance and a bull trigger at 6128.75, the Jun 11 high, has recently been breached. The clear break confirms a resumption of the uptrend that started Apr 7. The 6200.00 handle has been cleared too, this opens 6277.50, the Feb 21 high and bull trigger. Key support is at the 50-day EMA - at 5964.66.
GILT AUCTION PREVIEW: 1.50% Jul-53 green gilt
- The DMO will kick off issuance for the week this morning with GBP2.0bln nominal of the 1.50% Jul-53 green gilt on offer via auction.
- The auction follows last week’s soft 15-year 4.375% Jan-40 gilt auction (which saw a tail of 1.0bp) and the even softer tender of the off-the-run long 20-year 4.25% Dec-46 gilt which saw a tail of 1.5bp.
- Both of those auctions saw the publication of the results pull gilt futures lower and with this even longer duration 1.50% Jul-53 green gilt auction coming on the day of the welfare reform Commons vote, there is scope for another soft auction here.
- Comparing to recent auctions of this gilt, the nominal size matches that of the February auction but is smaller than any auction held in 2024.
- Tails have varied a little but most auctions have been between 0.3-0.6bp (with an October 2023 auction seeing a tail of 1.0bp).
- This is the only green gilt auction planned in FQ2 and will see the 1.50% Jul-53 green gilt reach a similar terminal size to other 30-year gilts issued over the past couple of years.
- Timing: The auction window will close at 10:00BST with results announced soon after. As this is a green auction there will be no PAOF held.
EGB OPTIONS: Bund Put Fly
RXV5 126.50/125.0/125.00p fly, bought for 12 in 2k.
