- The European indices are trading higher in today’s session after trading lower for six consecutive days. European equities are trading higher on the back of rising commodity prices.

- European government bonds opened lower in the session, and continued to decline following somewhat hawkish comments from the ECB’s Liebscher. In new supply overnight the Italian treasury sold €2.0B 3-Yr BTPs with an average yield of 4.47% and a bid-to-cover of 1.73 (previously covered 1.7x), as well as €1.5B in 7-Yr CCTs with an average yield of 4.29% (floating), and €2.0B 10-Yr BTPs with an average yield of 4.74% and a bid-to-cover of 1.52 (previously covered 1.45x). Over in the UK gilts are trading lower as well following stronger-than-expected Nationwide house prices as well as mixed comments from the Bank of England’s monetary policy committee in its testimony to the UK treasury committee.

- As expected German ILO unemployment was 6.4% for the month of May. Adjusted employment rose by 14K to 39.5M, the sixteenth consecutive monthly increase. The German unemployment change for the month of June was –37K, below estimates of –20K. The June unemployment rate declined to 9.1% from 9.2% in May for its lowest reading since March of 1995. The decline in unemployment comes as the robust German economy has prompted companies to hire more employees in order to keep up with growing demand.

- In the UK Nationwide house prices for the month of June rose by 1.1% m/m up from 0.5% in May, and rose to 11.1% y/y from 10.3% in May to its highest level since February of 2005.

- The Euro-Zone M3 YoY reading was 10.7% for the month of May, above estimates of 10.4%. The 3-month average was also 10.7%, and beat out estimates of 10.6%. M3 rose to its second highest level in 24 years perhaps signaling that the ECB will have to combat inflation pressures in the coming months.

- State CPI figures for the German states of Saxony, Hesse, and Brandenburg were released overnight. Both the m/m and y/y readings for each state declined from levels seen in May signaling that inflationary pressures may be beginning to recede in the Euro-Zone’s largest economy. , The North Rhine-Westphalia state CPI (the most heavily weighted) was released as well, and, conversely to the other three states seen thus far, showed that the y/y reading rose above to 2.0% inflation target to 2.1%, still leaving some room for uncertainty on the German inflation outlook despite the readings in Saxony, Hesse, and Brandenburg.

- The ECB’s Liebscher said overnight that great vigilance is needed to control inflation expectations. Liebscher reiterated that the ECB must act in a firm and timely manner, noting that liquidity is ample, and that policy is still accommodative. Liebscher also reiterated that wage developments must consider productivity.

- In its quarterly report the Swiss National Bank said that rates will need to rise if the Franc loosens monetary conditions. The SNB said that more interest rates hikes would be necessary if economic momentum remains unchanged, noting that the broad based economic upswing in the Swiss economy continued during the first-half. The SNB also said that the inflation outlook has deteriorated since March, and said that Swiss companies are increasingly able to raise prices.

- In its monthly testimony to the treasury committee the Bank of England’s monetary policy committee came out with mixed comments, with an overall tone that was more dovish than anything else, however, on the hawkish side, the BOE’s Besley said that a 50 basis point rate hike is always a possibility. Besley’s comment marks the first time that a BOE member openly suggested the possibility of a 50 basis point rate hike. Bank of England governor King, who was outvoted at the last policy-setting meeting, said in the BOE testimony that the outlook remains one of modest demand balance, noting that there are no signs that wage pressures have increased. King also said that consumer spending is a downside risk to prices and that the underlying money supply growth presents an upside risk.

- The German Retailers Association said overnight that they see nominal retail sales growth of 0.5% during the first-half, and forecasted 2007 nominal retail sales growth of 1.0%. The Retail Association also said that they see stronger retail sales growth in 2008.

- As expected, the Czech Central Bank left their key interest rate unchanged at 2.75% overnight.