Rates as of 0500 GMT

Market Recap

Its riskon again although Im puzzled as to what exactly has caused the change in heart. Sometimes the markets act like a school of fish everyone swimming in one direction and then wham! For whatever reason, they all shift direction.

Some people are pointing to the improvement in Chinas COVID19 situation as being behind the rebound. The country is down to 3,555 cases a day from a recent peak of 68,706 7day average. This improvement should allow Chinese manufacturing and shipping to get back to normal, alleviating many of the supply chain problems and helping to dampen inflation while also increasing global activity.

On the other hand, one might have thought that yesterdays German consumer price index CPI, soaring much more than was expected see table above, wouldve caused a shift in the opposite direction, at least in the EU, but no, the Euro Stoxx 600 was up 0.6 Euro Stoxx 50 0.9. The figure, the highest since the 1950s, exceeded every estimate on Bloomberg. Spain too saw its harmonized index of consumer prices rise further to 8.5 yoy from 8.3.

The inflation overshoot sets the stage for a change in policy at next Thursdays European Central Bank ECB meeting. The Governing Council will almost certainly vote to end its quantitative easing QT program followed by a rate hike at the next meeting in July. Will the hike be 25 bps or 50 bps? ECB President Lagarde has been saying rate hikes will be gradual, meaning 25 bps, but numbers…