Eurozone periphery bonds mixed after industrial production misses estimates in June; German Q2 GDP in focus

The Eurozone periphery bonds remained mixed Monday after industrial production of the region for the month of June missed market expectations, while investors remain keen to focus on Germany’s second-quarter gross domestic product (GDP), scheduled to be released on August 15 by 06:00GMT.

The benchmark German 10-year bond yields, which moves inversely to its price, jumped 3-1/2 basis points to 0.42 percent, the French 10-year bond yields climbed 3 basis points to 0.72 percent, Irish 10-year bond yields surged 3-1/2 basis points to 0.75 percent; however, Italian 10-year bond yields fell 1-1/2 basis points to 2.02 percent, Netherlands 10-year bond yields rose nearly 4 basis points to 0.54 percent, Portuguese equivalents down 3-1/2 basis points to 2.82 percent and the Spanish 10-year yields traded 1-1/2 basis points lower at 1.43 percent by 09:30GMT.

The European Union's statistics agency said Monday that industrial production was 0.6 percent lower in June than in May, while being 2.6 percent higher than in the same month last year. The decline in output was the largest since December 2016, and more than the 0.4 percent forecast by economists.

This week will also bring further estimates of Q2 GDP, as well as final readings of July inflation. In terms of growth, the preliminary release of Q2 GDP in Germany is due tomorrow and is expected to show that growth accelerated by 0.1ppt to 0.7 percent q/q, which would be the joint-highest reading since 2014. Equivalent figures from Italy and the Netherlands will follow on Wednesday, as will the second reading of euro area GDP, which is expected to align with the initial estimate of 0.6 percent q/q.

Inflation-wise, the final estimate of euro area CPI in July is due on Thursday. Assuming revised figures from the largest four member states (due tomorrow) align with the preliminary estimates, we expect the euro area figure to be confirmed at the flash reading of 1.3 percent y/y, the joint-lowest so far in 2017, and the core measure likewise to be confirmed at the flash estimate of 1.2 percent y/y, up 0.1ppt from June.

Thursday will also bring the ECB account from its 20 July Governing Council meeting, as well euro area trade figures for June, which will be followed on Friday by balance of payments and construction output numbers for the same month.   

Meanwhile, the pan-European STOXX 600 index rose 0.76 percent to 374.98, German DAX jumped 1.14 percent to 12,150.75, France’s CAC 40 climbed 0.93 percent to 5,107.80 and the PSI20 Index traded 0.69 percent higher at 5,237.46 by 09:50 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained slightly bullish at 95.75 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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