Growth deceleration

Global bond yields continued to decline, with short term interest rates left unchanged by South Korean and Japanese central banks. Equities continued to trade sideways in the US, Asia and Europe, as a batch of economic data showed a decelerating global economy. Indeed, US industrial production expanded by 0.4% m/m vs 0.6% for the consensus. The Philadelphia manufacturing index in July is also below consensus by 9 pts. The trajectory of the US growth is therefore likely to slow down over the summer. Looking at US labour markets, jobless claims were right on the consensus, at 360k. In China, GDP growth for the second quarter was reported at 7.9% y/y, slightly below the consensus, at 8.1%.

US consumer inflation expectation data is due today, with the expectation that 5y/5y breakeven inflation rates, as a spread between Treasury and TIPS bonds, will eventually converge back toward consumer inflation.