Source: UBS

• China’s industrial production data was stronger than “expected”, but as estimates ranged from 20% to 41%, what was actually “expected” is debatable. In absolute terms the numbers were robust, a reminder that supply is rising to meet stronger global demand for manufactured goods. China is only one link in long and complex supply chains, and broken links elsewhere can cause temporary delays (and occasional price increases). These problems should fade as supply chains resolve and demand shifts to favor services.
• The German CDU party had poor results in two regional elections. For markets this raises questions about the next federal elections, and more immediately may focus attention on pandemic-related policies. There is a view that Germany’s underperformance in vaccination may have influenced political outcomes, and markets would be sensitive to any evidence of vaccine nationalism in response.
• US Treasury Secretary Yellen was emphasising that inflation was a low and manageable risk in comments over the weekend. Most US prices are rising a little over 2%, which is what they have been doing for most of the recent past. There is little evidence of economy wide inflation pressure.
• The data calendar for the rest of the day is quiet, with little to distract markets.