European markets return after holiday to strength

EU Market Update: European markets return after holiday to strength; Pharma industry consolidates

Notes/Observations

- China PBoC performs its 19th straight draining operation; Shanghai manages to close in positive territory

- (CN) China PBoC provides details on previously announced RRR cut for banks in rural areas: Cut will be between 50 to 200bps and effective Apr 25th

- (GR) Greece PM Samaras: Do not need more money from EU or IMF; yields will continue to move lower Eli Lilly to Acquire Novartis Animal Health for $5.4B GSK to sell oncology products business to Novartis for $14.5B in addition to up to $1.5B in milestone payments; Novartis to sell vaccines unit to Glaxo for $7.1B

- (DE) Germany Q1 tax revenue +3.7% y/y - Handelsbatt

- (FR) France govt raises 2014 GDP growth outlook to 1.0% from 0.9% prior - French press Philips reports Q1 Net profit €137M v €114Me, EBIT €305M v €279Me, EBITA €314M v €336Me, Rev €5.02B v €5.2Be

- Deals running rampant in Pharma sector

Equities

- Market Focal Points/Key Themes: Equity markets open mostly higher in first trading session since Thursday April 17th, Pharmaceutical sector supported by M&A, Currency effects weigh on Philips Q1 results

- Indices [Stoxx50 +0.4%, FTSE 100 +0.8% at 6,677, DAX +0.9% at 9,496, CAC-40 +0.5% at 4,454, IBEX-35 +0.3% at 10,315, FTSE MIB -0.2% at 21,570, SMI +0.8% at 8,443, S&P 500 Futures -0.1% at 1,863]

By Sector

- Health Care [AstraZeneca AZN.UK +7% (takeover speculation), Glaxo GSK.UK +4% (sold oncology products unit to Novartis)]

- Consumer Discretionary [PubliGroupe PUBN.CH +23% (takeover offer), Villeroy & Boch VIB3.DE +4% (Q1 results rose y/y); Hermes RMS.FR -1.5% (broker commentary)]

- Technology [Atos ATO.FR +1.5% (broker commentary)]

- Telecom [Colt Telecom COLT.UK -10% (profit warning)]

- Industrials [Philips PHIA.NL -6% (Q1 results below ests)]

- Energy [Eni ENI.IT -0.6% (broker commentary)]

- Stoxx50 Sectors [Consumer Non-Cyclical +1%, Basic Materials +0.9%, Financials +0.7%, Telecom +0.6%, Consumer Cyclical +0.6%, Utilities +0.2%, Technology +0.2%, Energy +0.1%; Industrials -0.1%]

Currencies/Fixed Income:

- The FX market remained quiet despite the return of European traders. Dealers still debated the probability of unsterilized large scale QE by the ECB during the course of 2014, especially if the EUR remained at elevated levels.

- Verbal intervention had no effect on the Aussy during the Asian session. Treasurer Hockey stated that the govt was not happy with RBA neutral policy bias and that upward pressure in AUD made it harder to manage economy

- China CNY currency (Yuan) falls to Weakest Level in More Than a Year towards 6.24 area (*Note: CNY is -3% ytd) - Spot gold was little changed in the session. Dealers noted that near-term path of least resistance appeared for the metal to move lower

Economic Data

- - (JP) Japan Feb Final Leading Index CI: 108.9 v 108.5 prelim; Coincident Index: 113.0 v 113.4 prelim

- (DK) Denmark Apr Consumer Confidence: 5.5 v 5.0 prior

- (CH) Swiss Mar M3 Money Supply Y/Y: 9.0 v 8.7% prior

- (ES) Spain Feb Service Sector Sales Y/Y: +1.5% v +1.3% prior

- (ES) Spain Feb Service Sector Employment Y/Y: -0.3% v -0.6% prior

- (ES) Spain Feb Industrial Orders Y/Y: -1.0% v 0.0% prior; Industrial Orders WDA Y/Y: -1.0% v -1.6% prior

- (CH) SNB: Swiss sight deposits for week ended Apr 18th: 314.3B v CHF316.8B

- (EU) ECB €301M borrowed (first rise in 5 sessions) in overnight loan facility vs. €0.0M prior; €30.1B parked in deposit facility vs. €29.1B prior

- Daily Eurosystem Liquidity Conditions

- (SE) Sweden Mar Unemployment Rate: 8.6% v 8.5%e; Unemployment Rate (Seasonally Adj): 8.1% v 8.0%e

- (NL) Netherlands Mar House Price Index M/M: -0.3% v 0.0% prior; Y/Y: -2.1% v -1.7% prior

- (HK) Hong Kong Mar CPI Composite Y/Y: 3.9% v 4.2%e

- (HK) Hong Kong Mar Unemployment Rate: 3.1% v 3.1%e

- (EU) Euro Zone Feb Construction Output M/M: 0.1% v 1.5% prior; Y/Y: 6.7% v 8.0% prior

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- (PT) Portugal Feb Current Account: No est v -€185.3M prior

- 06:00 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-Month and 6-Month Bills

- 06:00 (IL) Israel to sell 2019, 2021, 2023, 2024 and 2041 bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (EU) ECB allotment in 7-day Term Deposit Tender

- 07:30 (BR) Brazil Central Bank Weekly Economists Survey

- 07:45 (US) Weekly ICSC Chain Store Sales

- 08:15 (US) Baltic Dry Bulk

- 08:30 (CA) Canada Feb Wholesale Trade Sales M/M: 0.7%e v 0.8% prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined €7.8B in 3-month, 6-month and 12-month Bills

- 08:55 (US) Weekly Redbook Retail Sales

- 09:00 (US) Feb FHFA House Price Index: 0.5%e v 0.5% prior

- 09:00 (MX) Mexico Mar Unemployment Rate (unadj): 4.7%e v 4.7% prior; Unemployment Rate (Seasonally Adj): 4.5%e v 4.7% prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 10:00 (US) Apr Richmond Fed Manufacturing: +2e v -7 prior

- 10:00 (US) Mar Existing Home Sales: 4.56Me v 4.60M prior

- 10:00 (EU) Euro Zone Apr Advance Consumer Confidence: -9.3e v -9.3 prior

- 10:00 (MX) Mexico weekly International Reserves

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills

- 11:00 (US) Fed to purchase $0.90-1.15B in Notes

- 11:00 (BR) Brazil to sell I/L 2019, 2023, 2030, 2040 and 2050 Bonds

- 11:30 (US) Treasury to sell $25B in 4-Week Bills

- 11:45 (US) Former Fed Chairmen Bernanke speaks at Economic Club

- 12:00 (RU) Russian Ambassador to Canada Mamedov speaks at Empire Club

- 13:00 (US) Treasury to sell 2-Year Notes

- 15:00 (AR) Argentina Feb Economic Activity Index M/M: No est v -0.4% prior; Y/Y: No est v 1.2% prior

- 15:00 (AR) Argentina Mar Trade Balance: No est v $44M prior

- 16:30 (US) Weekly API Oil Inventories

- 20:25 (JP) Japan BOJ Dep Gov Nakaso speech in Kyoto

- 21:30 (AU) Australia Q1 CPI Q/Q: 0.8%e v 0.8% prior; Y/Y: 3.2%e v 2.7% prior

- 21:45 (CN) China Apr Preliminary HSBC China Manufacturing PMI: 48.3e v 48.0 prior

- (AR) Argentina Apr Consumer Confidence Index: No est v 36.21 prior

- (MX) Mexico Banamex Survey of Economists