3 numbers to watch: Italian bond yields, US PPI & UoM Confidence

The day started on a high note as Chinese GDP came in slightly below expectations at 7.6% y/y as reported by Andrew Robinson. Industrial Production and Retail Sales from the Middle Kingdom also came out more or less in line (9.5% and 13.7%, respectively). Later today we turn our attention to PPI and Consumer Confidence from the US, but before that Italy has to succesfully negotiate a bond auction.

• Italy (09:00 GMT) to auction off several maturities: Though focus has been mainly on Spain in recent weeks and its yields have climbed back to around 6.5-7% for the 10-year bond (6.699% currently) and the country submitted a request for a EUR 100 billion bailout, Italy is not far behind. Its 10-year yield is back above 6% after a temporary bottom back in March of 4.68%. Italy will auction off 3.5 bln. in 3-year bonds with a 4.5% coupon, but will also sell 7-, 10- and 11-year bonds.
• Jun. US Producer Price Index( 12:30) nears deflationary territory: Yesterday's worse than expected Import Price Index report saw prices fall further into deflation of -2.6% y/y from -0.5% previously due to the impact from weak commodity prices. The Producer Price Index (PPI) has a high correlation to the Import Price Index, which we noted yesterday, and as such can be expected to also put in a poor display; likely one worse than the expected -0.5% m/m (0.2% y/y). The less volatile Core PPI is expected to climb 0.2%, which will mean a slight deceleration in annual price growth of 0.1pp to 2.6%.
• Jul. US University of Michigan Consumer Confidence (13:55): The preliminary picture of July's confidence is expected to show that not much has changed with consensus forecasting a 0.3 point increase to 73.5 despite prices at the pump being close to their lowest in more than six months, improvement in Initial Jobless Claims (seasonality at play?) and some progress in the Eurozone. On the other hand, a weaker US outlook and poor job numbers will weigh negatively on sentiment.