Greece hardens its negotiating stance

Notes/Observations

- Japan Q1 Preliminary GDP beats expectations (mostly due to a jump in inventories); Q/Q: 0.6% v 0.4%e; GDP Annualized Q/Q: 2.4% v 1.6%e

- Greece hardens its negotiating stance by threatening to withhold next IMF payment

- BOE unanimous vote to keep policy steady might not last for much longer

Economic data

- (JP) Japan Mar Final Leading Index CI: 106.0 v 105.5 prelim; Coincident Index: 109.2 v 109.5 prelim

- (JP) Japan Apr Supermarket Sales Y/Y: +6.4% v -8.6% prior (1st rise in 13 months)

- (DE) Germany Apr PPI M/M: 0.1% v 0.2%e; Y/Y: -1.5% v -1.4%e

- (JP) Japan Apr Convenience Store Sales Y/Y: +4.0% v -2.8% prior

- (SE) Sweden Apr Unemployment Rate (miss): 8.3% v 8.2%e; Unemployment Rate (Seasonally Adj): 7.8% v 7.7%e; Unemployment Rate Trend: 7.8% v 7.8% prior

- (TW) Taiwan Apr Export Orders (miss) Y/Y: -4.0% v -2.1%e (largest drop in 2 years)

- (NO) Norway Q1 Total GDP (miss) Q/Q: 0.2% v 0.3%e; GDP Mainland (beat) Q/Q: 0.5% v 0.3%e

- (ZA) South Africa Apr CPI (miss) M/M: 0.9% v 1.0%e; Y/Y: 4.5% v 4.6%e

- (TW) Taiwan Q1 Current Account Balance: $22.0B v $19.1B prior

- (UK) Bank of England (BOE) May Minutes: Voted 9-0 to keep both interest rates and asset purchase target unchanged at 0.50% and £375B respectively (5th straight unanimous vote)

- (EU) Euro Zone Mar Construction Output M/M: +0.8% v -1.6% prior; Y/Y: -2.7% v -3.5% prior

- (CH) Swiss May Credit Suisse ZEW Expectations Survey: -0.1 v 23.2 prior

Fixed Income:

- (IN) India sold total INR vs. INR140B indicated in 3-month and 6-month bills

- (SE) Sweden sold SEK4.0B vs. SEK4.0B indicated in 1% 2026 Bonds; Avg Yield: 0.9501% v 0.7168% prior; Bid-to-cover: 1.52x v 2.20x prior

- (EU) ECB allotted $0.0M in 7-day USD Liquidity Tender at fixed 0.63% vs. $0.0M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.4%, FTSE 100 -0.3% at 6,976, DAX -0.5% at 11,795, CAC-40 -0.4% at 5,095, IBEX-35 -0.2% at 11,473, FTSE MIB -0.4% 23,611, SMI +0.1% at 9,301, Athens Stock Exchange -0.6%, S&P 500 Futures -0.1% at 2,123]

- Market Focal Points/Key Themes: Equity markets open mixed following sharp gains on Tuesday; Equities later trade generally lower as bond yields and euro move off of session lows, amid release of BoE minutes; UBS pays less than expected amount in LIBOR and FX settlements; Burberry issues cautious outlook, Marks & Spencer FY profit rises; Altice confirms bid for US cable operator Suddenlink; Upcoming FOMC minutes and ECB decision on ELA for Greek banks in focus

By Sector

- Telecom [Altice ATC.NL +6% (acquisition)]

- Financials [UBS UBSN.CH +2% (LIBOR and fx settlement)]

- Consumer Discretionary [Burberry BRBY.UK -5% (cautious outlook)]

- Stoxx50 Sectors [Financials -0.7%, Basic Materials -0.5%, Consumer Non-Cyclical -0.3%, Energy -0.3%, Telecom -0.2%, - Consumer Cyclical -0.1%; Utilities +0.8%, Technology +0.3%, Industrials +0.3%]

**Speakers**

- Bank of England (BOE) May Minutes: Voted 9-0 (unanimous) to keep both interest rates and asset purchase target unchanged at 0.50% and £375B respectively. It reiterated the decision was 'finely balanced' for two members. Reiterated inflation weakness likely temporary.

- Greece Parliamentary Speaker: Greece will not pay June IMF repayment if no deal with international lenders is reached by then

- Greece Fin Min Varoufakis stated that German Fin Min Schaeuble analysis of Greece was unsound and wrong. Germany emphasizing power over argument

- Greece government said to consider bank transaction fee between 0.1-0.2%. Fee would not include ATM withdrawals or transactions up to €500. Govt projects €300-500M in revenues

- ECB said to consider raising haircut on Greek collateral but also considering widening of eligible Greek assets

- Greece PM Tsipras to present plan for debt restructuring at upcoming EU Summit which would link debt restructuring to the country's growth

- EU's Moscovici reiterated was seeing real progress being made on Greece but still large gaps on pension and labor issues

- Iran Supreme Leader Khamenei: Country reaction to any military aggression will be decisive

- Iran said to rule out opening up military sites to nuclear inspectors

**Currencies***

- EUR hits fresh monthly lows at 1.1062 as Greece hardens its negotiating stance by threatening to withhold next IMF payment. However, the key support area held for now and the pair remained locked in the lower end of its recent weekly range. The focus will turn to the FOMC minutes to see it any mention of USD strength to derail the greenback mini rally seen in the past few sessions.

- The GBP received a slight lift as the BOE May minutes remained unanimous to keep policy steady. However, analyst believe that such an unanimous vote to keep policy steady might not last for much longer as it was again 'finely balanced' for two members

- The Nikkei closed at fresh 15-year highs following better Japanese data. Q1 GDP report was even more impressive, growing by its highest rate in a year on an annualized basis at 2.4% - well above consensus. The JPY currency followed the equity price action with USD/JPY moving above the 121 handle.

**Political/In the Papers:

- (GR) IMF's Lagarde: Can provide flexibility on Greece bailout talks, though any changes must be substituted with equal measures

**Looking Ahead***

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

- (EU) ECB non-monetary policy meeting

- (SW) Sweden FSA Head Andersson speaks at conference

- (ES) Spain Mar Trade Balance: No est v -€2.0B prior

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell 6-Month and 12-month Bills

- 06:00 (IL) Israel Mar Manufacturing Production: No est v 2.5% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia to sell OFZ Bonds

- 07:00 (US) MBA Mortgage Applications w/e May 15th: No est v -3.5% prior

- 07:00 (ZA) South Africa Mar Retail Sales M/M: 0.5%e v 1.9% prior; Y/Y: 4.1%e v 4.2% prior

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave Benchmark Repurchase Rate unchanged at 7.50%; Expected to leave Overnight Lending Rate unchanged at 10.75%; Expected to leave Overnight Borrowing Rate unchanged at 7.25%

- 08:00 (PL) Poland Apr Sold Industrial Output M/M: -4.9%e v +13.4% prior; Y/Y: 5.5%e v 8.8% prior; Construction Output Y/Y: 5.8%e v 2.9% prior

- 08:00 (PL) Poland Apr PPI M/M: 0.0%e v 0.2% prior; Y/Y: -2.2%e v -2.4% prior

- 08:00 (PL) Poland Apr Retail Sales M/M: 0.3%e v 17.4% prior; Y/Y: 1.0%e v 3.0% prior; Real Retail Sales Y/Y: 4.0%e v 6.6% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CA) Canada Mar Wholesale Trade Sales M/M: +0.9%e v -0.4% prior

- 09:00 (RU) Russia Apr Industrial Production Y/Y: No est v -0.6% prior

- 09:30 (FR) France President Hollande at Climate conference in Paris

- 09:45 (DE) German Chancellor Merkel meets business leaders from G7 nations

- 10:00 (PT) Portugal PM Coelho in Parliament

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 12:00 (CA) Canada to sell 30-Year Bonds

- 12:30 (IT) ECB's Visco (Italy) in Munich

- 14:00 (US) FOMC Minutes from April 28-29 Meeting

- 21:00 (AU) Australia May Consumer Inflation Expectation: No est v 3.4% prior

- 21:35 (JP) Japan May Preliminary Manufacturing PMI: No est v ## prior

- 21:45 (CN) China HSBC May Preliminary Manufacturing PMI: No est v 49.9 prior

- 22:00 (NZ) New Zealand Finance Minister English delivers 2015 Budget

- 23:00 (CN) China to sell CNY30B in 7-year bonds

- 23:35 (JP) Japan to sell 3-Month Bill