Euro area M3 money supply growth and credit growth for May

Market movers today

• We expect today’s euro-area inflation to increase to 0.7% y/y (from 0.5% y/y in May) from an initial forecast of just 0.5% y/y on the back of the higher-than-expected German inflation numbers released on Friday. Core inflation probably also edged higher from 0.7% y/y in May. That said, there could be some downside risk to our forecast as Spanish inflation released on Friday increased less than expected in May.

• In the euro area M3 money supply growth and credit growth for May will also be released today. For now we expect both money supply and credit growth to remain subdued at current levels but there are tentative signs that the trend could be turning and ECB’s recent easing measures should also gradually support credit growth.

• In the US pending home sales and a number of regional manufacturing surveys including Chicago purchasing manager survey are due for release.

• The political situation in Iraq remains highly unstable and will probably demand some attention from the global oil market, although the threat to Iraqi oil production is limited.

• Norwegian retail sales and credit growth are on top of today’s agenda in the Scandi markets.

Selected market news

Japan’s industrial production rose 0.5% m/m in May following the 2.8% m/m drop in April. The increase was more or less in line with our own and the market consensus. The development in industrial production suggests that GDP in Japan is poised to contract in Q2.

Argentina may enter technical default today as a consequence of a US ruling last week – a verdict so far dismissed by Argentine politicians. The ruling is the latest highlight in a long fought legal battle between the Argentine state and international investors. Should Argentina enter default the market impact will probably be limited, as Argentina has already de facto been shut out of the international financial markets.

At its annual meeting the Bank of International Settlements (BIS) advocated a firm focus on continued debt deleveraging, supply side reforms, financial regulations and a normalisation of monetary policy. With regard to the latter, BIS repeated its earlier message that, in its own view, there are limits to what monetary policy can achieve.

On Friday, as expected, former Luxembourg Prime Minister Jean-Claude Juncker was named as new chairman of the EU commission. The UK and Hungary were the only two out of the 28 EU member states not to favour Juncker’s appointment. Over the coming weeks focus will turn to the likely candidates to fill the empty seats as EU president and EU foreign policy chief.