Economic Data

- (FI) Finland Apr Preliminary Trade Balance: -€185M v -€655M prior

- (SA) South Africa May Net Reserves: $45.9B v $46.3Be; Gross Reserves: $50.1B v $50.6Be

- (UK) May Halifax House Price M/M: 0.1% v 0.2%e; 3Mths/Year: -4.1% v -4.0%e

- (HU) Hungary Apr Preliminary Industrial Production M/M: +0.5% v -3.6% prior; Y/Y: 9.5% v 8.8%e

- (NO) Norway May Unemployment Rate: 2.5% v 2.6%e

- (SZ) Swiss May CPI M/M: 0.0% v -0.1%e; Y/Y: 0.4% v 0.3%e

- (SZ) Swiss May CPI EU Harmonized M/M: -0.1% v 0.0% prior; Y/Y: 0.3% v 0.1% prior

- (AS) Austria May Wholesale Price Index M/M: -0.9% v +0.2% prior; Y/Y: 8.1% v 9.5% prior

- (CZ) Czech May International Reserves: $43.2B v $43.9B prior

- (TT) Taiwan May CPI Y/Y: 1.7% v 1.6%e; WPI Y/Y: 3.3% v 4.4%e

- (IC) Iceland April Final Trade Balance (ISK): 6.0B v 7.6B prelim

- (EU) Euro Zone Apr Retail Sales M/M: 0.9% v 0.3%e; Y/Y: 1.1% v 0.0%e

- (SI) Singapore May Foreign Reserves: $239.4B v $242.52B prior

Fixed income

- (AS) Austria Debt Agency (AFFA) sells total €1.6B vs. €1.7B indicated in 2022 and 2037 bonds

- Sold €800M in 3.65% 2022 RAGB; Avg Yield 3.477% v 3.812% prior; Bid-to-cover: 1.99x v 3.06x prior

- Sold €800M in 4.15% 2037 RAGB; Avg Yield 4.011% v 4.027% prior; Bid-to-cover:1.93x v 2.43x prior

- (DE) Denmark sold approx DKK7.0B in 2014 and 2016 Bonds

- (SA) South Africa sold total ZAR2.1B vs. ZAR2.1B Indicated in 2020 and 2026 Bonds

- (EU) ECB allots €102b in 7-Day Main Refinancing VS. €107bE

- (HU) Hungary debt Agency (AKK) sells HUF 50bin 3-Month Bills; Avg Yield 5.88% v 5.89% prior

(UK) DMO sold £1.0B in 0.625% I/L 2040 Gilts; Real Yield 0.587% v 0.713% prior; Bid-to-cover: 2.33x v 2.80x prior



- China FX regulator official Guan Ho: Risks in excessive holdings of dollar assets, adding that the dollar would continue to weaken against other major currencies

- ECB Trichet signaled for the first time yesterday that considering a rollover of bonds was an option

- Australia RBA leaves interest rates unchanged at 4.75%; as expected

- Fed Chairman Bernanke to give remarks after last week's disappointing jobs report


FTSE 100 +0.10% at 5890, DAX +0.30% at 7107, CAC 40 +0.30% at 3875, IBEX 35 -0.20% at 10139, FTSE MIB +0.10% at 20546, SMI -0.20% at 6358

- European shares traded higher today after a 4-day losing streak. Despite Fed's apparent split over a potential QE3, investors remain optimistic that Fed's Bernanke will reaffirm his commitment to an expansionary monetary policy. Apart from EU retail sales which came higher than expected, macroeconomic data was sparse. In M&A news, ING [INGA.NV] rallied over 1% after financial press reported that GE and Capital One were interested in bidding for its US online unit which has about $82B. Out of the UK, Resolution [RSL.UK] also rallied after stating that it would keep increasing dividend £500M cash return and will not decrease dividend capacity


- China State Administration of Foreign Exchange (SAFE) official Guan Ho reiterated that there were risks in holding excessive positions in USD assets and believed that the USD would continued to weaken against other major currencies. The regulator urged capital control easing and widening of CNY currency trading band. He noted that market conditions were ripe for two-way CNY price movement. In a follow up the SAFE official added that the views on the USD were personal ones

- Greece govt official commented that there were no plans for any austerity referendum and expected its Parliament to vote on medium-term austerity plan by the end of June. Greece planned to cut corporate tax and VAT from 2012 with the measures being fiscally neutral. The Finance Ministry reiterated that its forecasted FY11 deficit 7.5% of GDP and targeted 2015 level at 1% of GDP.

- ECB May financing to Portuguese banks at €47B v €48B prior month - Bank of Portugal

- IMF Traa commented that Greece was at a critical crossroad and country must reinvigorate its reform policies. He noted that Greece's reform to date had been significant but since the end of 2010 the implementation of reform process seemed to have lost momentum. Greek banking sector has been resilient and maintained an adequate level of capitalization but did face a liquidity challenge and should further increase capital cushions

- German ruling political parties demand private involvement in additional Greek assistance

- Netherland Fin Min de Jager commented that it had yet to decide whether to give Greece additional support

- Philippines Central Bank reiterated view to keep close watch on price pressures; To promptly adjust policy as needed

- UN Food Agricultural Organization (FAO): May global food price index: 232 v 235 prior

- S&P commented on Japan and noted that the failure to signal spending cuts was significant problem. S&P stated that Japan doubling its sales tax might not amend its finances while its tax plan might not be neither comprehensive or effective. The pending departure by PM Kan was seen as positive as it may help in the passage of the Bond Bill but cautioned that the country's split parliament would impede the formation of a new govt. lastly the effects of the March earthquake to delay efforts to repair the country's finances

- Saudi Arabia reportedly planning to pump 9.5-9.7M bpd in June; the highest amount since July of 2008

Currencies/Fixed income:

- Comments out of China on the USD deflected the focus away from the Greek debt crisis for the time being. Guan Ho, who is head of the international payment department for China, warned of risks in excessive holdings of dollar assets, adding that the dollar would continue to weaken against other major currencies. The EUR/USD took notice of the remarks and climbed above the 1.4670 level for fresh one-month highs. Despite Ho trying to clarify that his remarks represented his personal view the greenback continued to move lower in the session. The USD/CHF continued to probe fresh post WWII lows around the 0.8325 area. Precious metals took advantage of the USD weakness to move higher in the session.

Political/In the Papers:

- The chief of the German financial regulator BaFin criticized the European bank stress tests due to the lack of coverage of certain types of hybrid capital, which German banks rely on. The test ignored the phase-out period for hybrid capital under the Basel III capital rules.

- The US financial press reported that Chinese companies are increasing investments in European firms. For 2003-05, Investment in European companies was about $853 million. This amount increased to $43.9 billion for 2008-10. Some are expecting Chinese takeovers of European companies to rise sharply over the next ten years.

- The Financial Times reported that the European Central Bank is in danger of significant losses from the bailouts. Citing British think tank Open Europe, in a report entitled 'A House Built on Sand', the central bank has a total exposure of approximately €444 billion to the troubled Euro zone countries, and levered 23 to 24 times due to the bailout provided for Greece, Ireland, Portugal and Spain. The think tank stated that if the assets of the central bank declined by 4.23% in value, the entire capital base would be wiped out. Hefty losses for the ECB are now no longer a remote risk.

- Nearly half of British councils have no plans to carry out the government budget cuts according to the Telegraph. In a survey conducted by Interserve, 40% of local authorities are slow to address spending cuts, either having no strategy or simply waiting on a draft plan with no political approval. With councils expected to make reductions of 20% by 2014 on average, approximately half of the councils do not know how to achieve the savings goals. A small percentage expects to achieve approximately 30% or more of the efficiency targets by 2014.

- A Recent FT feature discussed the signs of a bubble in the China property market. If the real estate bubble were to burst, then the economy would fall towards the low single-digits. The political repercussions would also be substantial, as the rising middle class will not want to accept an authoritarian one-party rule. There is a disagreement in the market, as those who do not believe there is a bubble point to the absence of a rapid increase in leverage - ratio of household debt to disposable income was only 45% in 2010 against 130% at the height of US bubble.

Looking Ahead

- (BE) Belgium new 15-year syndicated bond deal

- 6:00 (GE) Germany Apr Factory Orders M/M: +2.0%e v -4.0% prior; Y/Y: 9.0%e v 9.7% prior

- 6:00 (SA) South Africa Q2 BER Business Confidence: No est v 55 prior

- 6:00 (TU) Turkey to sell Zero Coupon 2013 Bonds and new 2014 Fixed Rate Lira Bonds

- 6:00 (RU) Russia's EU Ambassador holds Pre-Summit Press Conference

- 7:00 (EU) ECB to drain €75.0B in 7-day Term Deposit Tender

- 7:00 (EU) EU Commission assesses Euro-Area Budget Plans

- 7:00 (BR) Brazil May FGV Inflation IGP-DI: M/M: 0.3%e v 0.5% prior

- 7:45 (US) ICSC Weekly Chain Store Sales

- 8:00 (BR) Brazil May IBGE Inflation IPCA M/M: 0.5%e v 0.8% prior; Y/Y: 6.6%e v 6.5% prior

- 8:00 (PD) Poland May Total Official Reserves (PLN): No est v 112.0B prior

- 8:30 (CL) Chile May Trade Balance: $1.8Be v $1.6B prior

- 8:30 (CL) Chile May Copper Exports: No est v $3.7B prior

- 8:55 (US) Redbook Weekly Retail sale

- 9:00 (BR) Brazil Apr CNI Capacity Utilization: 82.2%e v 82.4% prior

- 9:00 (EU) EU's Barroso speaks about G-8 Summit to European Parliament

- 10:00 (US) World Bank holds an event for the half-year update

- 10:00 (US) Jun IBD/TIPP Economic Optimism: 42.0e v 42.8 prior

- 10:00 (US) Apr JOLTs Job Openings: No est v 3.1K prior

- 11:00 (US) Fed to purchase $1-2B in TIPS

- 11:30 (US) Treasury to sell 4-Week Bills

- 12:00 (EU) EU President Van Rompuy meets Finland's Halonen

- 12:30 (US) Fed's Lockhart speaks on Economy in North Carolina

- 13:00 (US) Treasury to sell $32B in 3-Year Notes

- 13:30 (GE) German Deputy Foreign Minister Hoyer briefs Foreign Reporters

- 15:00 (US) Apr Consumer Credit: $5.0Be v $6.0B prior

- 15:45 (US) Fed Chairman Bernanke speaks to Bankers in Atlanta

- 16:30 (US) API Weekly Energy Inventories