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- Digesting China CPI, PPI and better than expected French Output, awaiting
Draghi speech, US Import Prices, EIA oil inventories, Fed speak, German
and US auctions, Tillerson-Lavrov meeting

- China CPI/PPI: food price base effects still acting as a very large drag,
non-Food prices a better indication of trend, PPI confirms past cyclical
peak

- US Import Prices: petroleum prices likely to restrain, some downside risks,
non-petroleum prices likely to remain subdued, but still at 5-yr high

..........................................................................

********************
** EVENTS PREVIEW **
********************

Once again the highlight of the statistical schedule is likely to have been the overnight China CPI and PPI, with Norwegian CPI, French Production and Trade data at best have a passing local impact, while the afternoon brings the first of this week's US inflation readings in the shape of Import and Export Prices. French Production data were encouraging, comfortably beating expectations at 2.0% m/m with Manufacturing Output even stronger at 2.5% m/m, thus offering some 'hard' data to corroborate the recent jump in surveys, even if this did follow drops of -1.7% and -0.7% m/m in February. Draghi's speech will be the highlight of the policy day, especially with the French election 'risk' now out of the way, though he will probably be keen to stress that as much as risks to the growth outlook are now roughly balanced, the core inflation trend is far from indicating a clear uptrend, notwithstanding the April jump. The RBNZ meets, with recent data in New Zealand having been rather better than most had anticipated, above all the uptick in Q1 CPI, Employment and Wages, and many are expecting that the RBNZ may bring forward its expectations for when it might implement an initial rate hike (from the current 1.75%) from 2019 to 2018. The Platts Crude Oil Summit may offer some insights into industry and market views on the outlook for oil production and demand, with EIA oil inventories data due this afternoon, after a mixed API report (Crude inventories posting a much larger than expected fall, while Gasoline inventories posted an unexpected jump. Politically, the meeting between Tillerson and Lavrov will inevitably spawn a slew of headlines and soundbites, but still signal a wide gulf of opinion between the two nations. Govt bond supply sees German sell a modest EUR 3.0 Bln of 5-yr and the US offer USD 23.0 Bln of 10-yr.

** China - April CPI / PPI **
- A marginally higher than expected rise to 1.2% y/y (vs. f'cast 1.1%) for CPI from March's recent low of 0.9% continues to be predicated on huge food price base effects, with Food Price deflation easing to -3.5% y/y vs. March's -4.4%, but having been as high as +2.6% y/y in January, with Non-food Prices offering a rather more accurate profile of underlying consumer price trends at 2.4% y/y (March 2.3%). As was to be expected PPI dropped slightly more sharply than forecast to 6.4% y/y vs. March's 7.6% and February's cyclical peak of 7.8%, as energy and industrial prices dropped sharply, again on base effects. Unsurprisingly market reaction was limited, given that this easing in price pressures will make little if any difference to the Chinese authorities' ongoing efforts to rein in leverage, above all in terms of shadow banking and WMP credit creation.

** U.S.A. - April Import Prices **
- Both Import and Export Prices are forecast to post a 0.2% m/m 3.6% y/y rise, with some downside risks on Import Prices given a likely quite substantial drag from Petroleum Products, with the ex-Petroleum measure likely to be around March's 0.2% m/m or higher. While certainly not an inflationary threat, it should be noted that the non-petroleum prices are likely to rise to around 1.2% y/y, which would be a 5-yr high, and underline that the drag from import prices in recent years has all but vanished.


from Marc Ostwald
 
Ftse stops tight now
Nearly 50 point move....then add a few scalps
Decent stuff for ftse
As we said at the open....7336.....whamm
 
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