ECB bulletin declares victory in curbing decline in inflation expectations

EU Mid-Market Update: ECB bulletin declares victory in curbing decline in inflation expectations; Euro Zone Apr CPI registers its 1st non-negative reading in 6 months

Notes/Observations

- BOJ maintain its Monetary Base unchanged at Annual Pace of ¥80T (as expected) but pushed back timing to achieve the 2% inflation target until H1 of fiscal year 2016

- ECB Economic Bulletin noted that the decline in longer-term inflation expectations had ended (aka QE helping Europe)

- Euro Zone Apr Headline CPI YoY data registers it 1st non-negative reading since Nov

- Spain Q1 GDP beats the hyped expectations (YoY: 2.6% v 2.5%e)

- German employment continues its improving trend for the 7th straight month

Economic data

- (JP) Japan Mar Annualized Housing Starts: 920K v 892Ke; Y/Y: +0.7% v -1.9%e; Construction Orders Y/Y: 10.8% v 1.0% prior

- (DE) Germany Mar Retail Sales (mixed) M/M: -2.3% v +0.5%e; Y/Y: 3.5% v 3.1%e

- (DE) Germany Mar ILO Employment: 42.730M v 42.827M prior; Unemployment Rate: 6.7% v 4.8% prior

- (FR) France Mar PPI M/M: 0.1% v 0.7% prior; Y/Y: -2.2% v -2.6% prior

- (FR) France Mar Consumer Spending (mixed) M/M: -0.6% v -0.5%e; Y/Y: 2.1% v 1.8%e

- (ES) Spain Q1 Preliminary GDP (beat) Q/Q: 0.9% v 0.8%e; Y/Y: 2.6% v 2.5%e

- (CH) Swiss Apr KOF Leading Indicator (miss): 89.5 v 91.5e

- (TR) Turkey Mar Trade Balance (inline): -$6.2B v -$6.2Be

- (AT) Austria Q1 GDP Q/Q: 0.1% v 0.0% prior; Y/Y: 0.1% v 0.0% prior

- (DE) Germany Apr Net Unemployment Change (miss): -8K v -15Ke; Unemployment Rate: 6.4% v 6.4%e

- (IT) Italy Mar Preliminary Unemployment Rate (miss): 13.0% v 12.6%e

- (NO) Norway Mar Credit Indicator Growth Y/Y: 5.8% v 5.4%e

- (EU) Euro Zone Mar Unemployment Rate (miss): 11.3% v 11.2%e

- (EU) Euro Zone Apr Advance CPI Estimate (inline) Y/Y: 0.0% v 0.0%e; CPI Core Y/Y: 0.6% v 0.6%e

- (IT) Italy Apr Preliminary CPI NIC incl. tobacco M/M: 0.3% v 0.2%e; Y/Y: 0.0% v -0.1%e

Fixed Income:

- (IN) India sold INR160B vs. INR160B indicated in 2020, 2024, 2032 and 2044 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.1%, FTSE 100 flat at 6,948, DAX flat at 11,435, CAC-40 -0.2% at 5,033, IBEX-35 +0.2% at 11,394, FTSE MIB +0.1% at 23,029, SMI -0.4% at 9,070, Athens Stock Exchange -0.2%, S&P 500 Futures -0.3% at 2,093]

- Market Focal Point/Key Themes: Equity markets open mixed following sharp declines on Wed, amid heavy day for corporate earnings; European yield curves continue to steepen amid better Spanish data; Dealers assess FOMC statement; Greek Equities open lower; Upcoming US March core PCE, March Personal Spending and April Chicago PMI data;
Airbus profits beat ests, sales miss, reaffirmed outlook; Large oil companies beat ests (Statoil, Shell); German earnings (Bayer Q1 mixed and raised FY sales forecast; BASF mixed, reaffirmed outlook; Wacker Chemie raises outlook; Fresenius SE Q1 above ests; Continental mixed); France's BNP beats estimates

By Sector

- Industrials [Vallourec VK.FR -15% (Q1 profits declined, job cuts), Airbus AIR.FR -0.5% (Q1 sales below ests)]

- Financials [RBS RBS.UK -1.5% (Q1 revenues declined); Deutsche Boerse DB1.DE +2% (Q1 profits rose, raised outlook)]

- Consumer Discretionary [Air France AF.FR -3% (Q1 results below ests), Metro MEO.DE -2% (broker commentary)]

- Energy [Statoil STL.NO +1% (Q1 op profit above ests), Shell RDSA.UK +1% (Q1 profits above ests)]

- Basic Materials/Resources [Lafarge LG.FR +3% (Q1 EBITDA +17%) ]

- Technology [Nokia NOK1V.FI -11% (Q1 EPS inline, Op profit declined), STMicroelectronics STM.FR -11% (Q1 sales below ests, cautious outlook); Kaba KABN.CH +8% (merger agreement)]

- Telecom [KPN KPN.NL +1.5% (Q1 EBITDA above ests)]

- Healthcare [Fresenius FRE.DE +3.5% (Q1 results above ests)]

- Stoxx50 Sectors [Utilities -1%, Consumer Cyclical -0.6%, Telecom -0.5%, Technology -0.4%, Industrials -0.4%, Financials -0.2%; Energy +0.4%, Consumer Non-Cyclical +0.1%, Basic Materials flat ]

Speakers

- ECB Economic Bulletin noted that the decline in longer-term expectations has ended after hitting low level in mid-January

- Greek press noted that potential Plan B for Greece could be a situation in which Greece defaulted on its debt but remain within the EMU under a technocrat govt

- Turkey Central Bank Gov Basci on inflation report that it would maintain tight monetary policy stance. Q1 inflation was above January assumptions as oil prices rose from Feb which limited positive inflation impact. Food prices created upside risk to inflation; reiterated view that food prices had considerable room to decline

- Bank of Japan (BOJ) Semi Annual Outlook Report changed the wording on achieving its 2% inflation target to H1 FY16. The BOJ pushed back timing to achieve the 2% inflation target until H1 of fiscal year 2016. BOJ cuts its FY15 Core CPI from 1.0% to 0.8% and cut the FY16 Core CPI from 2.2% to 2.0%. The BOJ also cut FY15/16 Real GDP from 2.1% to 2.0% and cut FY16/17 Real GDP from 1.6% to 1.5%

- Bank of Japan (BOJ) Gov Kuroda post rate decision press conference reiterated that domestic economy was continuing a moderate recovery. He reiterated there was no need to change policy at this time but would not hesitate to amend it if price trend changed. He stressed that there was no change in BOJ commitment to achieve the 2% price target. BOJ now saw CPI hitting the 2% inflation target in H1 in fiscal year 2016 (**Note: inflation was just pushed back in the BOJ semi-annual report)

- China State Council reiterated view to continue State-owned Enterprise (SOE) reform

Currencies

- The USD maintained its recent soft tone following the FOMC statement that removed expectations of any hike by June or even in 2015. The Fed reiterated that rate hike would occur when it felt reasonably confident inflation to move back to 2% objective

- EUR/USD tested and held the prior 1.1070 resistance level and attained 2-month highs towards the 1.1250 area during the session aided by continued rising bond yields in Europe.

- The USD/JPY hit 1-month lows of 118.49 after the BoJ lowered both its inflation and growth forecasts for both the current and next fiscal years. Dealers noted that the revised forecasts would keep open the possibility of the BoJ making further stimulus later in the year

- The NZD currency (Kiwi) was softer in Asia after RBNZ held rates steady at 3.50%, but took a dovish shift in guidance as it noted it would cut interest rates if demand weakened and inflation slowed.

**Political/In the Papers:

- New Zealand Central Bank (RBNZ) left Official Cash Rate unchanged at 3.50% (as expected)

- Apr GfK Consumer Confidence matched 12-year high ahead of elections (4 v 4e)

- Japan Mar Preliminary Industrial Production (Beats) M/M: -0.3% v -2.3%e; Y/Y: -1.2% v -3.4%e)

Looking Ahead

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

- 05:30 (ZA) South Africa Mar PPI M/M: % v 1.3%e; Y/Y: % v 2.7%e

- 06:00 (PT) Portugal Mar Retail Sales M/M: No est v -1.2% prior; Y/Y: No est v 2.2% prior

- 06:00 (PT) Portugal Mar Industrial Production M/M: No est v -0.4% prior; Y/Y: No est v -1.0% prior

- 06:00 (IL) Israel Mar Unemployment Rate: No est v 5.3% prior

- 06:00 (IT) Italy Mar PPI M/M: No est v 0.5% prior; Y/Y: No est v -3.3% prior

- 06:00 (MY) Malaysia Mar M3 Money Supply Y/Y: No est v 6.9% prior

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to cut 1-week Auction Rate by 100bps to 13.00%

- 06:45 (US) Daily Libor Fixing

- 08:00 (ZA) South Africa Mar Trade Balance (ZAR): -6.5Be v -8.5B prior

- 08:00 (ZA) South Africa Mar Budget Balance (ZAR): -15.0Be v +14.0B prior

- 08:00 (PL) Poland Central Bank (NBP) Apr Inflation Expectations Survey: 0.2%e v 0.2% prior

- 08:00 (RU) Russia Gold and Forex Reserve w/e Apr 24th: No est v $350.5B prior

- 08:00 (CL) Chile Mar Unemployment Rate: 6.2%e v 6.1% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Mar Personal Income: 0.2%e v 0.4% prior; Personal Spending: 0.5%e v 0.1% prior; Inflation Adjusted Personal Spending: +0.3%e v -0.1% prior

- 08:30 (US) Mar PCE Deflator M/M: 0.2%e v 0.2% prior; Y/Y: 0.4%e v 0.3% prior

- 08:30 (US) Mar PCE Core M/M: 0.1%e v 0.1% prior; Y/Y: 1.4%e v 1.4% prior

- 08:30 (US) Initial Jobless Claims: 290Ke v 295K prior; Continuing Claims: 2.30Me v 2.325M prior

- 08:30 (US) Q1 Employment Cost Index: 0.6%e v 0.6% prior

- 08:30 (CA) Canada Feb GDP M/M: -0.1%e v -0.1% prior; Y/Y: 1.9%e v 2.4% prior

- 08:30 (US) Weekly USDA Net Export Sales

- 08:30 (US) Fed's Tarullo speaks to Community Bankers in Washington

- 09:00 (US) Apr ISM Milwaukee: 53.0e v 53.25 prior

- 09:30 (BR) Brazil Mar Primary Budget Balance (BRL): No est v-2.3B prior; Nominal Budget Balance (BRL): No est v -58.6B prior; Net Debt to GDP Ratio: No est v 36.3% prior

- 09:45 (US) Apr Chicago Purchasing Manager: 50.0e v 46.3 prior

- 10:00 (MX) Mexico Mar Net Outstanding Loans (MXN): No est v 2.718T prior

- 10:00 (US) Revisions: Retail Sales

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 12:00 (CO) Colombia Mar Urban Unemployment Rate: No est v 10.0% prior; National Unemployment Rate: No est v 9.9% prior

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Interest Rate unchanged at 3.00%

- 15:00 (AR) Argentina Mar Construction Activity M/M: No est v 1.9% prior; Y/Y: No est v 7.9% prior

- 17:30 (UK) PM Cameron, Clegg, Miliband in BBC Pre-Election `Question Time'

- 19:00 (KR) South Korea Apr CPI M/M: No est v 0.0% prior; Y/Y: No est v 0.45 prior; CPI Core Y/Y: No est v 2.1% prior

- 19:30 (JP) Japan Mar National CPI Y/Y: No est v 2.2% prior; CPI Ex Fresh Food Y/Y: No est v 2.0% prior; CPI Ex Food, Energy Y/Y: No est v 2.0% prior

- 19:30 (JP) Japan Apr Tokyo CPI Y/Y: No est v 2.3% prior; CPI Ex Fresh Food Y/Y: No est v 2.2% prior; CPI Ex Food, Energy Y/Y: No est v 1.7% prior

- 19:30 (JP) Japan Mar Jobless Rate: No est v 3.5% prior

- 20:00 (KR) South Korea Apr Trade Balance: No est v $8.4B prior; Exports Y/Y: No est v -4.3% prior; Imports Y/Y: No est v -15.3% prior

- 20:00 (NZ)) Finance Minister English to Speak in Wellington

- 21:00 (CN) China Apr Manufacturing PMI: No est v 50.1 prior

- 21:00 (CN) China Apr Non-manufacturing PMI: No est v 53.7 prior

- 21:30 (JP) Japan Mar Real Cash Earnings Y/Y: No est v -2.3% prior (revised from -2.0%); Labor Cash Earnings Y/Y: No est v 0.1% prior (revised from 0.5%)

- 21:35 (JP) Japan Apr Final Manufacturing PMI: No est v 49.7 prelim

- 23:00 (MX) Mexico Mar YTD Budget Balance (MXN): No est v -150.7B prior