Markets
US PPI inflation was on tap today. All three gauges stagnated last month, printing flat on a monthly basis and missing a 0.2% estimate. That led to a below-consensus outcome as well with the headline figure rising by 2.3%, PPI ex food and energy by 2.6% and the series additionally stripping trade by 2.5%. A pretty material upward revision to the May readings (from 0.1% to 0.3% or 0.4%) compensated for the overall June miss but that’s not really of markets’ concern, not least because PPI was down in April and even in March. In yesterday’s CPI, services prices (and shelter in particular) weighed down on the headline numbers. PPIs today bring a similar story. Overall services PPI dropped 0.1% m/m with low readings particularly in transport and warehousing (reduced import activity?!). Goods prices ex food and energy rose 0.3%. Anyway, US Treasuries are taking comfort with yields down a few basis points on the day after the release. The curve flattens with net daily changes varying between -0.4 and -3 bps. European yields grinded lower throughout the day, showing losses of 1-3 bps. UK gilts underperform in the wake of this morning’s higher than expected CPI print. It’s tying the hands of the Bank of England (sticking to a quarterly cutting pace) even though the economy is visibly weakening. Offering help from the fiscal side of the equation is out of the question given the precarious state of UK public finances and the markets’ focus on the matter. And yet, this morning’s temporary jump in the 30-yr tenor to above 5.5% suggests some investors are not completely ruling it out. European stock markets opened in the red after president Trump’s new tariff salvo vs pharmaceuticals and semiconductors but are gradually recovering. It’s worth mentioning that according to Bloomberg’s contacts France and a growing number of EU member states is leading a push for the EU to use its anti-coercion instrument against the US if both parties don’t reach an agreement before the 30% tariffs kick in after the August 1 deadline lapses. That, or even just the rumours, could add more fuel to the trade fire. Bumper earnings from a couple of big US financial companies helped Wall Street into a green open.
Most major currencies are treading water. EUR/USD sought to recover after yesterday’s dip towards 1.16 but that lacked strength. 1.16 is still being tested as we write. Sterling only marginally benefits from today’s gilt underperformance, suggesting it is risk premia supporting UK yields (relative to core peers). EUR/GBP copy pasted the EUR/USD intraday moves with the pair currently hovering slightly below opening levels (0.866). JPY is having a minor lead over most G10 peers but it does little to offset the slide over the last few weeks (especially against the euro).
News & Views
Hungarian full-time employees’ average gross earnings were 7.8% higher than a year earlier in May 2025 (HUF 702 800). Average net earnings were up 7.7% Y/Y (HUF 483 000). Corrected for inflation, real earnings were up by 3.2% Y/Y. Median gross earnings were HUF 562 300, and median net earnings were HUF 391 200, surpassing the value for the same period of the previous year by 7.9% and 8.2% respectively. The pace of May wage growth was below the one recorded in April (9.8% Y/Y), below consensus (8.6% Y/Y) and the second slowest since mid-2021. For now, slowing wage growth (and the risk of weaker consumer spending) won’t alter the status quo at the Hungarian national bank which meets next week and is widely expected to keep its policy rate unchanged at 6.5%.
Czech industrial producer prices fell by 0.2% M/M in June (-0.7% Y/Y), mainly due to lower energy and chemical product prices. However, food-related prices showed some increases. Agricultural producer prices slightly declining by 0.1% M/M but rising significantly by 13.4% Y/Y driven by higher prices in both crop and animal production. Construction work prices dropped by 0.3% M/M but increased by 2.9% Y/Y, with a modest rise in material costs. Service producer prices in the business sector also fell slightly by 0.1% M/M but grew by 4.2% Y/Y, particularly in advertising, IT, and security services. In the EU, industrial producer prices decreased by 0.6% M/M in May 2025 but rose by 0.4% Y/Y.
