Today’s economic calendar is a bit light, so investors’ focus will probably remain on Greece and the bond markets. Government bond yields rose during the early part of the week, but yesterday fell back to where they started the week.
European equity markets pretty much shared the same pattern, as the earlier hopes of an imminent deal on Greece were squashed yesterday. Perhaps the last trading day of the week will resemble Thursday as investors decrease their portfolio risk levels.
The focus is beginning to shift to the next week’s meeting of the Federal Open Market Committee. A speech gag for the Fed presidents leaves investors guessing whether the Fed’s statement or chairwoman Janet Yellen’s speech will signal a rate hike in September. The recent employment report, core inflation and retail sales data suggest that the economy is strong enough for a rate hike, so it all comes down to Fed’s preferences.
There are several possible credit rating announcements scheduled for this weekend, including Italy and France – see the full list here.
European Union April Industrial Production (09:00 GMT): The consensus forecast expects industrial production to have increased by 0.4% from month ago, which is not a terribly good performance as production fell 0.3% in March. This would imply an year-on-year increase of 0.9%, much less than the 1.8% in March.
The EU’s manufacturing purchasing managers index has remained above the 50-line recently, suggesting a pick-up in real activity (see chart) but the growth will not be distributed evenly within the EU and will on average remain modest.

European industry is showing strength, but only in slight increments. Photo: iStock
US May Producer Price Index (12:30 GMT): Final demand prices are expected to have jumped 0.4%, after falling 0.4% in April. Excluding food and energy, producer prices are seen to have increased by 0.1% in May.
No sign of inflation here

The year-on-year changes tell a much clearer story of what’s going on: Producer prices excluding food and energy are increasing by 2% in a year, while the price index including those items remains in deflationary territory. It is an ongoing debate whether the low price inflation could be disregarded due to food- and energy prices.
Historical data tells us that during periods of economic expansion, annual increases of 4% or more are the norm. As the Fed does not target producer price changes, much more relevant to investors is what this means to consumer prices – and the answer is quite clear – no inflationary pressures.
US June U. Michigan Consumer Sentiment (14:00 GMT): The June mid-month sentiment index is expected to have increased slightly to 91.5 following a deep fall in May. Sentiment still remains at elevated levels near post-crisis highs. The decline in May can be attributed to the lousy April employment report, higher gasoline prices and overall weak economy during the first quarter.
Sentiment at elevated levels, but some recent weakness

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While the economic numbers have been picking up during the second quarter, the gasoline prices worry me a bit – they are at the highest level in six months. The Gallup’s weekly sentiment index has not shown much improvement, so it is plausible that today’s University of Michigan Index could prove disappointing.