ECB Underestimated, Powell Testimony, Chinese Deflation: Eco Day

(Bloomberg) --

Welcome to Wednesday, Europe. Here’s the latest news and analysis from Bloomberg Economics to help get your day started:

• Investors betting the European Central Bank will wait until September before ramping up monetary stimulus may be underestimating the risk of earlier action
• Looking at Italy’s debt market, you’d be forgiven for thinking that the embattled nation’s problems were firmly behind it. That could embolden the populist government to push expansive budget plan
• President Emmanuel Macron has created a government structure called French Fab whose ambassadors are touring the country to inspire young people to work in industrial jobs
• Jerome Powell is likely to leave Fed interest-rate cuts firmly on the table when he appears before Congress, even though the latest jobs report dialed down the urgency. Lurking beyond traders’ apparently unwavering confidence that the Fed will cut this month is a more nebulous outlook on what the central bank does afterward
• The case for Chinese policy makers to ramp up stimulus grew stronger, as tepid domestic demand and falling commodity prices increase the risk of a return to factory deflation. Growth in China’s producer price index slowed to zero in June
• The majority of Switzerland’s high-denomination bills are effectively parked in vaults or stuffed under mattresses, according to a Swiss National Bank working paper
• Officials and investors in Beijing are inured to the probability of an extended economic conflict with the U.S., with concerns that trouble may spill from trade and technology into banking, writes Tom Orlik, as he analyzes the state of the economy
• President Donald Trump’s recent act as the good cop of Turkey’s markets with his hint on sanctions is drowning out the stunning dismissal of the central bank governor.
• Africa’s free-trade pact will help shift the continent away from its over-reliance on volatile commodity exports and boost manufacturing, according to the African Development Bank
• Germany’s blue-collar communities are at risk of falling further behind affluent cities like Munich, widening a gap between haves and have-nots that has already spurred the rise of populist politicians

To contact Bloomberg News staff for this story: Jeffrey Black in Hong Kong at jblack25@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Paul Jackson

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