Time to wrap up. Here’s a quick recap

US consumer prices increased by the most in nearly 13 years in May, year-on-year, as rising demand, supply chain bottlenecks, and the ‘base effect’ from last year’s lockdown push up inflation. Energy, used cars, flights and clothes all pushed CPI up by 5.0%, higher than expected.

Core inflation also surged, hitting 3.8% for the first time since 1992. But Wall Street rallied, and bond yields remained calm, as investors showed confidence that the surge would be temporary.

In a boost to the recovery, the number of Americans filing new unemployment claims hit a new pandemic low. Just 376,000 ‘initial claims’ were submitted last week, as firms held onto staff amid the scramble to fill vacancies.

The European Central Bank pressed on with its bond-buying programme, pledging to keep running it at a faster pace than early this year.

It also lifted its growth and inflation forecasts, saying the economic outlook had improved.

The world’s top banking regulators have called for crypto assets such as bitcoin to face the toughest capital regulations, meaning banks would need to hold enough capital to cover losing all their money.

The Basel Committee on Banking Supervision said crypto assets have raised many concerns, from consumer protection and financial stability, to money laundering and terrorist financing, and their carbon footprint.

Their report came after it emerged JBS, the world’s biggest meat processor, has paid an $11m (£7.8m) ransom after a cyber-attack shut down operations, including abattoirs in the US, Australia and Canada.

BT has a new biggest shareholder, with Altice taking a 12.1% stake in the UK telco:

My colleague Nils Pratley thinks Altice’s Patrick Drahi intentions may not be alarming:

Vote of confidence in the company? That’s always a board’s default spin on events when a billionaire buys a large stake, purrs politely about management but is slightly mysterious about his long-term intentions. The pitch is rarely convincing because billionaires are not generally the type to sit back and simply collect a stream of dividends. They tend to want something.

It’s too soon to be confident about the motives behind Patrick Drahi of Altice’s purchase of a 12.1% stake in BT, worth £2bn. But, on this occasion, the non-threatening interpretation may be correct. Or, at least, it looks the most likely line for a while.

The number of workers on furlough has hit a new low, with 7% of the workforce on the Coronavirus Job Retention Scheme last week. Job vacancies are up, including in hospitality.

Supermarket chain Morrisons has been hit by a stinging shareholder revolt, over the award of millions of pounds in bonuses to executives who missed profit targets during the pandemic.

The UK aviation sector has warned that airports are likely to lose at least £2.6bn this summer as the “chaotic” Covid traffic light system halts international travel.

Investors controlling $41tn (£29tn) in assets have called for governments around the world to end support for fossil fuels and set targets for rapid reductions in carbon emissions to limit the damage from global heating

A report has warned that small drugmakers and biotech firms that are developing the bulk of new antibiotics need far more financial support.

The US drugmaker Regeneron, whose Covid treatment was hailed as a “cure” by Donald Trump last year, has come under fire from two influential shareholder advisory groups over “excessive” payouts made to its top executives ahead of its annual meeting on Friday.

Goodnight! GW

After a busy day, Europe’s stock markets have ended the session roughly where they started it!

The FTSE 100 index has closed just 0.1% higher at 7088, up 7 points.

Telecoms group BT led the risers, up 6.55%, after Altice surprised the City by becoming its biggest shareholder with a 12.5% stake, and hailing the opportunity presented by the national rollout of next generation broadband.

Auto Trader was right behind, gaining 6.54% after giving an optimistic outlook this morning. The car marketplace expected to benefit from to shift to online car buying after profits and revenues fell last year.

Thungela (-3.2%) was the top faller, as the South African thermal coal business continues to experience a volatile first week since demerging from Anglo American, amid concerns over its potential cleanup costs.

Hospitality firms also dipped, on concerns over whether the UK will relax Covid-19 restrictions on 21 June, or extend them due to rising cases and hospitalisations.

Catering firm Compass (-3.1%), hotel group Intercontinental (-2.3%) and commercial property companies Land Securities (-2.15%) and British Land (-2.1%) all dropped.

On the FTSE 250 index, budget airline easyJet (-4%) and cruise operator Carnival (-3.6%) weakened.

The pan-European Stoxx 600 index finished flat, with Germany’s DAX very slightly lower and France’s CAC down 0.26%.

Back in the UK, supermarket chain Morrisons has suffered a serious shareholder revolt over pay.

Around 70% of investors opposed its remuneration report today, after Morrison’s decided to pay large bonuses even though profit targets were missed -- by stripping out the costs of the pandemic when calculating the payouts.

My colleague Jasper Jolly reports:

Morrisons shareholders have voted overwhelmingly against the award of millions of pounds in bonuses to executives who missed profit targets during the pandemic, in one of the biggest shareholder rebellions of recent years.

The vote is not binding so the chief executive, David Potts, and his two most senior managers will still be able to receive the £9m in pay and bonuses they were awarded, despite a year in which the company fell out of the FTSE 100 and profits halved because of extra pandemic costs.

Morrisons’ remuneration committee, chaired by Kevin Havelock, decided to use its “discretion” and adjust its bonus calculations to ignore Covid-19 costs of £290m.

Potts can collect his full £1.7m bonus, bringing his total pay packet to £4.2m, a 5% increase compared with the year before. The chief operating officer, Trevor Strain, was awarded total pay of £3.2m – including an annual bonus of £1.3m – up 9% year-on-year, while the grocer’s newly installed chief financial officer, Michael Gleeson, was given £1.7m including a bonus of almost £1m.

Our financial editor Nils Pratley wrote in today’s Guardian that the bonus system has to work both ways. Firms can’t justify lucrative payouts in good years if they then change the rules in the bad ones.

Nobody doubts that the big supermarket chains, including Morrisons, did an excellent job of keeping the shelves stocked in tricky conditions. But a bonus is not meant to be a semi-guaranteed entitlement. If profits have been clobbered, and half the bonus relates to profits, applying “discretion” to imagine what might have been is a nonsense.

Modern bonuses structures grant huge upsides to executives in good years. The system has to be seen to work in reverse in leaner times, whatever the cause.

Clearly many Morrisons investors agreed.

Back in the eurozone, the ECB raised its projections for inflation this year.

The eurozone’s central bank now expects euroarea consumer prices to rise by 1.9% in 2021 -- bang on its target, up from a previous forecast of 1.5%.

But, inflation is then seen back at 1.5% next year, and 1.4% in 2023, as the impact of rising energy prices drops out of the equation.

Core inflation is expected to rise slowly - from 1.1% this year to 1.3% next year, and 1.4% in 2023.

ECB president Christine Lagarde told reporters that there is “some improvement” in the inflation outlook.

But she pointed out that wage growth remained weak:

“We don’t see much by way of service prices going up... and that is because wages have not increased significantly.

We see a little bit more movement possibly, and we hope that we will see more of it.”

Lagarde also said the ECB was more optimistic about growth.

The latest signal that we are getting is a strong rebound in the second quarter and hopefully (that) will be amplified in the third quarter.”

The ECB also raised its forecast for euro area economic growth this year to 4.6%, from 4.0%. and for 2021 to 4.7%, from 4.1%, as it anticipated a faster recovery.

But despite this optimism, the ECB will continue to run its bond-buying PEPP programme at a faster pace than early this year, to try to make sure conditions don’t deteriorate.

The S&P 500 index hit a fresh record high in early trading, before easing back, as Wall Street investors try to decide whether the rise in inflation is transitory or not.

Stocks rose at the open, with the drop in jobless claims reassuring traders that the recovery is on course. But the rally has cooled a little since.

Here’s the current situation:

• Dow Jones industrial average: up 48 points or 0.15% at 34,495 points
• S&P 500: up 6 points or 0.15% at 4,226 points
• Nasdaq Composite: up 18 points or 0.15% at 13,929 points

Top risers on the Dow are pharmaceutical company Merck (+2.5%), health retailer Walgreens Boots (+1.6%), biotech firm Amgen (+1.2%), oil giant Chevron (+1%), fast food chain McDonalds (+0.95%) and aerospace manufacturer Boeing (+0.9%).

Although the CPI came in hotter than expected, at 5.0% year-on-year, Wall Street may be calculating that it won’t jolt the Federal Reserve into changing its plans.

Daniele Antonucci, chief economist & macro strategist at Quintet Private Bank, thinks the Fed will be tolerant of these higher prices, as they are partly due to temporary factors:

“That US consumer prices accelerated the most in almost 13 years surely makes an eye-catching headline. However, rather than a generalised spiral, this looks mostly driven by pent-up demand combined with transitory supply bottlenecks as the US economy reopens – especially for a few categories such as like rental cars, hotels and flights.

Not all of the price increase is about the feed-through of energy prices nor is it just an easy comparison with low prices last year during the worst of the pandemic. And how long the shortages will last remains to be seen. Yet the Fed, so far, looks relatively tolerant about this spike, appearing to see it as temporary. In part, this is because of past undershoots relative to the central bank’s inflation target: consumer prices have been subdued for quite a long time, despite monetary easing.

The number of Americans filing new claims for unemployment support has hit a fresh pandemic low as the labor market recovery continues.

The number of initial claims for jobless benefits fell last week to its lowest since mid-March 2020 (just as the first wave of Covid-19 hit).

There were 376,000 initial claims for state unemployment benefits last week (on a seasonally adjusted basis). That’s a drop of 9,000 from the 385,000 recorded in the prior week, and a near 15-month low.

That continues the steady fall in jobless claims in recent months, since the rapid Covid-19 vaccination program helped the US economy to reopen and rebound strongly.

In addition, 71,292 initial claims were filed for Pandemic Unemployment Assistance (the scheme for freelancers, self-employed people, and others who aren’t eligible for unemployment insurance)

So, rather more new jobless claims are still being filed each week than before the pandemic, when initial claims ran in the low 200,000s.

[On a non-seasonally adjusted basis, initial claims fell to 367,000]

At 3.8% year-on-year in May, core inflation across the US economy has risen at the fastest annual rate since June 1992 (that’s excluding food and energy).

Newflash: US inflation rose to 5% year-on-year in May, the highest since 2008.

That’s a bigger jump than expected, up from 4.2% in April, and will fuel concerns that inflationary pressures are building in America as the economy rebounds strongly from the pandemic.

Core inflation, which strips out volatile items like food and energy, jumped to 3.8% year-on-year.

On a monthly basis, the CPI rose by 0.6% in May compared with April, while core inflation rose by 0.7% month-on-month.

Gurpreet Gill, Macro Strategist, Global Fixed Income, Goldman Sachs Asset Management, says the European Central Bank has remained on the dovish side today:

“Despite a brighter growth outlook, the ECB has chosen to err on the dovish side, keeping the pace of PEPP purchases unchanged at a “significantly higher pace than during the first months of the year” due to weak underlying inflation and to some extent, the longer-term challenges related to pandemic-induced debt levels.

“In the coming months, we expect the European economy to rebound sharply as COVID-19 infection rates fall and the economic reopening across the continent continues to accelerate. That said, the positive picture is not uniform: supply-side issues are challenging manufacturing production, while curtailed tourism presents an ongoing headwind for Europe’s South. Moreover, room for further acceleration in growth from here looks somewhat limited.

“And, with any bottleneck-related price rises alongside re-opening inflation likely to prove transient, our expectation is that inflation will remain anchored below the ECB’s target – an unwelcome setback for the Euro area.

“As is the case elsewhere, the medium-term path remains uncertain, and as such, we think there are limited prospects of ECB rate hikes over the next three years.”

Jesus Cabra Guisasola, Associate at Validus Risk Management, points out there are still uncertainties around the eurozone economy, and an uneven recovery:

“As most market participants expected, the ECB maintained its dovish tone and decided to leave its ultra-loose policy unchanged by keeping the current PEPP purchases at the fastest pace for the third quarter of 2021.

“While there are clear signals of optimism around the European economy, after a pickup in vaccinations and falling coronavirus cases. There are still uncertainties surrounding the euro-area and its recovery.

“The pandemic is leaving a legacy of high debt and weak balance sheets with an uneven recovery between southern and northern European economies. Hence, the ECB prefers to continue with its wait-and-see monetary policy stance and not disrupt the funding market in the short-term.

“An environment where the European economy recovers at different paces with inflation below the 2% target, could lead to a weaker euro. Nevertheless, there is a market consensus for a weaker dollar in the coming months and we could see the euro testing $1.25, a level not seen since early 2018.”

Xian Chan, Chief Investment Officer, Wealth Management, HSBC, says the ECB is keen to keep financial conditions loose while the recovery is still young:

“We fully expected the ECB to retain its current policy positioning, despite continued concerns around short-term inflation and the improving economic outlook.

The gradual re-opening of the services sectors, recent progress around vaccinations and better survey data has indicated the Eurozone economy may be returning to form. However, the recovery remains in its early phases and medium-term inflation is still expected to remain below the ECB’s target of 2%, even if it has trended higher recently, in part thanks to the higher oil price.

Leading up to the ECB meeting, there had been questions on whether the ECB would slow down the pace of purchases under its Pandemic Emergency Purchase Programme (PEPP). However, higher bond yields and a strong Euro have meant that financial conditions have tightened over the past few months, and this likely encouraged the ECB to maintain the high pace of stimulus to keep financial conditions loose. Also, the existing scope of the programme continues to give the ECB room to carry on its current trajectory of purchases.

The ECB has decided to keep running its emergency bond purchases at a “significantly higher pace” than early this year, to spur the eurozone recovery on.

This means no let-up in the pace of the pandemic emergency purchase programme (PEPP), despite the recent pick-up in inflation and encouraging signs that the eurozone economy will exit recession this quarter.

Following today’s meeting, the Governing Council says:

Based on a joint assessment of financing conditions and the inflation outlook, the Governing Council expects net purchases under the PEPP over the coming quarter to continue to be conducted at a significantly higher pace than during the first months of the year.

Bond-buying under PEPP has risen to around €80bn per month, as this tweet from Pictet’s Frederik Dukrozet shows:

The programme has a maximum envelope of €1.85 trillion, and is due to run until March 2022.

By keeping running PEPP at this faster rate, the ECB hopes to keep borrowing costs low across the euro area, and avoid financial conditions tightening, hurting the recovery.

It says:

The Governing Council will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation.

The European Central Bank’s governing council has left interest rates on hold across the eurozone, at their current record lows.

It means the headline interest rate, the main refinancing operations rate, stays at 0.0%.

The marginal lending facility (paid by banks who borrow from the ECB) stays at 0.25%, while the deposit rate (on commercial bank deposits at the ECB) says at -0.5% -- a negative interest rate, to encourage bankers to lend to the real economy.

The ECB’s Governing Council says it decided to confirm its “very accommodative monetary policy stance” at today’s meeting.

And it repeats that it expects to leave them until it sees the inflation outlook ‘robustly’ return near to its target.

The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.

Global banking regulators have proposed that cryptocurrencies to carry the toughest bank capital requirements of any asset.

The move would mean banks having to set aside enough capital to cover potential losses on bitcoin, and similar crypto assets, in full.

The Basel Committee on Banking Supervision, which consists of regulators from the world’s leading financial centres, is proposing a “new conservative prudential treatment” for crypto assets.

The world’s most powerful banking standards-setter says that the growth in crypto assets could increase global financial stability concerns and risks to the banking system, so it is proposing to address those risks .

In its proposal, it says:

Cryptoassets have given rise to a range of concerns including consumer protection, money laundering and terrorist financing, and their carbon footprint. The Committee is of the view that the growth of cryptoassets and related services has the potential to raise financial stability concerns and increase risks faced by banks.

Certain cryptoassets have exhibited a high degree of volatility, and could present risks for banks as exposures increase, including liquidity risk; credit risk; market risk; operational risk (including fraud and cyber risks); money laundering / terrorist financing risk; and legal and reputation risks.

Under the Basel plan, crypto assets would be split into two groups. It says:

• Group 1 cryptoassets - these fulfil a set of classification conditions and as such are eligible for treatment under the existing Basel Framework (with some modifications and additional guidance). These include certain tokenised traditional assets and stablecoins.
  
  
• Group 2 cryptoassets - are those, such as bitcoin, that do not fulfil the classification conditions. Since these pose additional and higher risks, they would be subject to a new conservative prudential treatment.

Group 2 assets would attract a 1250% risk-weight (the level reserved for riskiest investments in Basel’s eyes), and means a 100% capital requirement in practice.

Thus, a $100 exposure would mean holding $100 of capital.

[this will also apply to short positions, which could theoretically lead to unlimited losses. So, a bank shorting bitcoin would need to show those risks and could face an additional capital charge].

Group 1 would face the same capital requirements as traditional assets such as bonds, loans, deposits, equities or commodities, with the possibility of capital add-ons.

To qualify for Group 1, a stablecoin would need to show it was fully reserved at all times (ie, if it was pegged to the dollar, it would need to have enough dollars behind it).

The Basel committee also says these standards would apply to assets created for decentralised finance (DeFi) and non-fungible tokens (NFTs) if they met the definition of cryptoassets.

But they don’t cover central bank digital currencies (such as a digital US dollar, or “Britcoin”, being considered by the Bank of England).

Reuters says Basel’s “conservative” step could prevent widescale use of bitcoin by major lenders, adding:

Few other assets that have such conservative treatment under Basel’s existing rules, and include investments in funds or securitisations where banks do not have sufficient information about their underlying exposures.

The FT points out that global authorities are stepping up plans to regulate the fast-emerging market.

The Basel proposals come as global regulators grapple with the rapid emergence of digital assets and mushrooming interest from investors. US authorities also want to take a more active role in supervising the $1.5tn cryptocurrency market because of concerns that a lack of oversight risks harming investors in the highly volatile and speculative industry.

The number of people on the UK’s furlough scheme has dropped to a new low as the economic recovery continues.

The Office for National Statistics reports that the proportion of the workforce of all UK businesses on the Coronavirus Job Retention Scheme fell to 7% in the last two weeks of May.

That’s the lowest level reported since the series began in June 2020, after the first lockdown was relaxed.

The number of UK online job adverts rose by 2% last week, to 29% above its average in February 2020, another sign that demand is picking up, and firms struggle to hire staff.

Hospitality firms are looking for more workers: UK online job adverts for “catering and hospitality” roles were 40% higher than before the pandemic, up eight percentage points in a week.

The ONS adds:

This continues the recent strong upward trend for this category, having risen by 83 percentage points since 9 April 2021, just before the first easing of hospitality restrictions when pubs and restaurants reopened in England.

The largest weekly increase in the number of online job adverts was for “customer service – support” roles, up 14 percentage points in a week.

“Transport, logistics and warehouse”, “travel and tourism” and “wholesale and retail” all saw increases too ( 12, 9 and 7 percentage points, respectively).

Altice, the telecoms group controlled by billionaire Patrick Drahi, has become BT’s biggest shareholder after taking a 12.1% stake, claiming it wants to capitalise on the UK’s full-fibre broadband rollout plans.

Drahi, who founded Altice in 2001 and still serves as its chairman, said in a statement the investment was a sign of confidence in BT, given the UK government’s plan to expand full-fibre broadband across the country.

More here:

European markets have opened rather cautiously, as investors await the US inflation report and the ECB’s decision.

The FTSE 100 has gained ground, up 28 points or 0.4% to 7109 points.

Auto Trader (still +6% after its results) and BT (now up 2.9% after Altice announced its stake) are pushing the blue-chip index higher, along with multinationals such as medical devices maker Smith & Nephew (+1.7%) and pharmaceuticals giant AstraZeneca (+1.5%).

But European markets have dipped back from their recent record highs, with Germany’s DAX down 0.3%.

Volkswagen and BMW are leading the DAX fallers, both down 1.8%, after VW’s warning that the chip shortage bottlenecks won’t be fully fixed soon.

AJ Bell investment director Russ Mould says the focus is on announcements coming later this afternoon from Washington and Frankfurt.

“US inflation figures could set the tone for the rest of the month, let alone the rest of the day when they are released later. A higher than expected number could put the markets back in panic mode over rising prices, even if the US Federal Reserve has done its best to convince investors the trajectory of interest rates is more closely tied to the employment market.

“The European Central Bank meets later with little expectation of any change in emphasis let alone policy but any sign that the ECB might seek to taper its support for the economy could also provoke a shock.”

German carmaker Volkswagen has predicted that the semiconductor shortage gripping the car industry will ease in the third-quarter of this year.

But, it also sees the bottlenecks - which have already hit car production - continuing in the longer term, given it will take time to build more fabrication plants.

Reuters has the details:

“At the moment we have reached the lowest point. We are facing the toughest six weeks,” Murat Aksel, the head of procurement on the Volkswagen board, told the Handelsblatt newspaper in an interview.

He said he expects around 10% shortage in chips over the long-term as building up production capacities takes up to two years.

Volkswagen will prepare for the bottlenecks by expanding its chips storage and is currently classifying the supply risk of its all models components, he added.

There’s some drama in the UK telecoms world too, with billionaire Patrick Drahi’s Altice Group becoming BT’s largest shareholder.

Altice has taken a 12.1% stake in BT, worth around £2.2bn.

Announcing the move, Altice says BT has “a compelling opportunity” to deliver a substantial expansion of access to a full-fibre, gigabit-capable broadband network throughout the UK.

Patrick Drahi says:

“BT has a significant opportunity to upgrade and extend its full-fibre broadband network to bring substantial benefits to millions of households across the UK. We fully support the management’s strategy to deliver on this opportunity.

We understand that the expansion of the broadband network is one of the UK Government’s most important policy objectives and a core part of its levelling up agenda.

Drahi also points to Altice’s experience in telecoms:

Altice has a long and highly successful record of effectively operating national fibre and mobile networks in a number of countries, serving over 40 million customers.

Our approach is to combine high levels of technical expertise, resilience and operating efficiency with a strong focus on innovation and customer service. Altice has brought an entrepreneurial culture, energy and effectiveness to building its networks and operations.”

Altice also says it does not intend to make a takeover offer for BT and will be bound by that under Rule 2.8 of the UK’s Takeover Code (so it can’t make a bid for six months, unless circumstances change).

Last month, BT pledged to accelerate its multibillion-pound next-generation broadband rollout to reach 25m UK premises by 2026.

This morning, BT says it ‘notes’ Altice’s announcement, adding that it’s making ‘good progress’ delivering its strategy:

BT Group notes the announcement from Altice of their investment in BT and their statement of support for our management and strategy. We welcome all investors who recognize the long-term value of our business and the important role it plays in the UK.

We are making good progress in delivering our strategy and plan.

Shares in BT have risen around 1% in early trading to 185p.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It’s a big day for the markets, with the latest US inflation figures and the European Central Bank releasing its latest monetary policy decision, and giving its view on the eurozone recovery.

Inflation is the issue of the moment, and economists predict a surge in May due to increased US consumer spending, fiscal support from stimulus packages, and the supply bottlenecks that are weighing on companies as the economy recovers.

The US CPI is forecast to rise to a 13-year high of 4.7% from a year earlier, up from 4.2% in April - which was already the fastest rise since 2008.

Jim Reid of Deutsche Bank is certainly excited, telling clients:

Welcome to the day with the most eagerly anticipated data point in recent memory.

If CPI jumps sharply, it will reignite concerns that sticky inflationary pressures are building, forcing central banks to end the money-printing stimulus programmes that have driven the recovery, and pushed up asset prices.

But the other side of the argument is that the rise in inflation will be transitory, and will fade once the impact of the pandemic is behind us.

Today’s figure won’t end the argument, but it will probably stir it up.

Reid adds:

I suspect that neither side will admit defeat if the number goes against them as it’s likely too early to see a definitive trend. There will still be large anomalies all over the place. Nevertheless, so far I would say that the inflationists have overwhelmingly won round one of this bout but that the Fed put up a confident defence in round 2 to draw level. Round 3 starts today.

Economists will be looking at core inflation closely too. This measure, which strips out volatile items such as food and energy, hit 3% in April, and is forecast to rise towards 3.5% for May.

That would be the highest annual reading for core inflation in 28 years, CNBC points out.

The ECB’s governing council will also have inflation on its mind today, after eurozone CPI jumped over its target last month to 2%.

Hawkish policymakers have been pressing their colleagues to prepare to scale back its huge €1.85tn bond-buying programme (PEPP), which is buying up government bonds to keep borrowing costs low across the eurozone.

The ECB is due to release new economic forecasts, which should be more optimistic than than the previous set three months ago. The eurozone economic outlook seems brighter, as Covid-19 vaccination programmes spur the recovery and restrictions are eased.

It may be too early to slow PEPP (which is due to run until March 2022), but not too early to talk about it...

Patrick Barbe, head of European investment grade fixed income at Neuberger Berman, believes the ECB will wait until after the summer to cut its PEPP purchases.

There are still major uncertainties. One is the threat of the new Covid-19 strains and resulting economic impacts. Also, financial conditions have been tighter since the March meeting, and the ECB does not want to give a hawkish signal that could further tighten them. Additionally, although service sectors are reopening, the ECB would like to confirm that an activity rebound recreates jobs.

Finally, the pace of a recovery in inflation rates and the ability of the ECB to support a gradual and sustained rise in inflation rates is uncertain.

So he expects the ECB will announce more flexibility linked to financial conditions, and wait until the autumn to see how events play out.

So it could be a volatile day - which would make a change, given the markets have been rather subdued of late.

European stock markets are on track to open a little higher, ahead of the double whammy of data at lunchtime.

The agenda

• 9.30am BST: Office for National Statistics’ weekly indicators of economic activity
• 12.45pm BST: European Central Bank decision on monetary policy
• 1.30pm BST: ECB press conference
• 1.30pm BST: US inflation report for May
• 1.30pm BST: US weekly jobless figures