Greece situation remains a drag on sentiment

EU Mid-Market Update: European May CPI data showing more evidence that ECB QE program is showing results; Greece situation remains a drag on sentiment

Notes/Observations

- Japanese data comes in mixed during Asian session (unemployment hits 23-year low while CPI remains positive but hits a 23-month low. Household consumption falls for the 13th consecutive month); Nikkei closed up for 11th straight session and fresh 15-year high

- Shanghai Composite close fractionally lower in volatile session (-4% to +1.75% range)

- ECB's accommodative policy and QE continues to aid the inflation front (Spain bests); confirmation that there are no real deflation risks in region; Euro Zone Apr M3 Money Supply data reinforces view

- Greece negotiations continue to hang over sentiment in Europe

- Germany Apr Retail Sales mixed (MoM did beat: 1.7% v 1.0%e)

Economic data

- (JP) Japan Apr Vehicle Production Y/Y: -7.5% v -6.5% prior (9th straight decline)

- (JP) Japan Apr Annualized Housing Starts: 913K v 910Ke; Y/Y: 0.4% v 0.2%e; Construction Orders Y/Y: -12.1% v +10.8% prior

- (CH) Swiss Q1 GDP (miss) Q/Q: -0.2% v 0.0%e; Y/Y: 1.1% v 1.6%e (1st contraction since Q2 2012)

- (DE) Germany Apr Retail Sales (mixed) M/M: 1.7% v 1.0%e; Y/Y: 1.0% v 2.5%e

- (FR) France Apr PPI M/M: -0.4% v 0.0% prior; Y/Y: -2.0% v -2.2% prior

- (FR) France Apr Consumer Spending (miss) M/M: 0.1% v 0.4%e; Y/Y: 2.0% v 2.4%e

- (ES) Spain May Preliminary CPI (beat) M/M: 0.5% v 0.2%e; Y/Y: -0.2% v -0.5%e

- (ES) Spain May Preliminary CPI EU Harmonized M/M: 0.4% v 0.2%e; Y/Y: -0.3% v -0.6%e

- (CH) Swiss May KOF Leading Indicator: 93.1 v 89.9e

- (DK) Denmark Apr Gross Unemployment Rate: 4.8% v 4.8%e

- (DK) Denmark Q1 Preliminary GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.7% v 1.7%e

- (CZ) Czech Q1 Preliminary GDP Q/Q: 3.1% v 2.8% advance; Y/Y: 4.2% v 3.9% advance

- (AT) Austria Q1 Final WIFO GDP Y/Y: 0.3% v 0.0% prior

- (TR) Turkey Apr Trade Balance: -$5.0B v -$4.8Be

- (HU) Hungary Apr PPI M/M: -0.1% v +0.2% prior; Y/Y: -1.7% v -1.8%e

- (SE) Sweden Q1 GDP (miss) Q/Q: 0.4% v 0.6%e; Y/Y: 2.5% v 2.8%e

- (SE) Sweden Apr Household Lending Y/Y: 6.5% v 6.3% prior

- (TH) Thailand Apr Current Account Balance: $1.1B v $0.0Be; Overall Balance of payments (BOP): $1.8B v $1.1B prior; Trade Account Balance: $1.7B v $3.5B prior; Exports Y/Y: -1.7% v -4.3% prior; Imports Y/Y: -9.1% v -6.2% prior

- (TH) Thailand Apr Business Sentiment Index: 45.2 v 52.4 prior

- (EU) Euro Zone Apr M3 Money Supply Y/Y: 5.3% v 4.9%e; M3 3-month average: 4.7% v 4.5%

- (IT) Italy Q1 Final GDP WDA Q/Q: 0.3% v 0.3% prelim; Y/Y: 0.1% v 0.0%e

- (PL) Poland Q1 Final GDP Q/Q: 1.0% v 1.0% prelim; Y/Y: 3.6% v 3.5% prelim

- (NO) Norway May Unemployment Rate: 2.7% v 2.9%e

- (NO) Norway Apr Retail Sales W/Auto Fuel M/M: 2.0% v 0.3%e

- (GR) Greece Mar Retail Sales Volume Y/Y: +1.2% v -1.7% prior; Retail Sales Value Y/Y: -0.4% v -3.3% prior

- (GR) Greece Q1 Final GDP Q/Q: -0.2% v -0.2% prelim; Y/Y: 0.4% v 0.1% prelim (confirms recession)

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

Fixed Income:

- (IN) India to sell combined INR160B in 2023, 2030, 2032 and 2044 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.9%, FTSE 100 -0.3% at 7,020, DAX -1.1% at 11,554, CAC-40 -0.9% at 5,090, IBEX-35 -0.7% at 11,299, FTSE MIB -0.1% at 23,721, SMI -0.5% at 9,352, Athens Stock Exchange -1.5%, S&P 500 Futures -0.3% at 2,114]

- Market Focal Points/Key Themes: European equity markets open generally higher following losses on Thursday; Markets later decline with Greece's June 5th IMF payment deadline in focus; Additionally markets have declined amid better euro zone data (Italy GDP, Spain CPI, EZ Money supply); Another volatile session in Shanghai; Upcoming US GDP revision and Chicago PMI data

By Sector

- Basic Materials/Resources [Syngenta SYNN.CH +2% (renewed M&A speculation)]

- Energy [Frontline FRO.NO +5% (Q1 results above ests)]

- Healthcare [Cellectis ALCLS.FR +8% (takeover speculation)]

- Consumer Staples [Associated British Foods ABF.UK +3% (broker commentary)]

- Stoxx50 Sectors [Consumer Non-Cyclical -1.3%, Consumer Cyclical -1.2%, Basic Materials -1.2%, Financials -1.2%, Industrials -1.1%, Utilities -1%, Technology -1%, Telecom -0.6%, Energy -0.3%]

**Speakers**

- Greece Fin Min Varoufakis stated that new developments occur every day; have agreed on most issues with creditors

- EU's Moscovici reiterated view that time was running out for Greece to reach an agreement; situation remained a work in progress and needed to speed up. He reiterated that was making good progress on Greece but more needed to be done. G7 mood on growth is good; did not talk about the CNY currency (Yuan) inclusion in the IMF's SDR basket

- France Fin Min Sapin reiterated view that Greece bailout extension talks are not progressing fast enough. A Greek agreement cannot result in a worsening of its budget

- Germany CSU Lawmaker Michelbach sought a Germany parliament vote about Greece aid. He noted that changes to payment rules of the last tranche of the 2nd aid package for Greece were likely.

- PBoC reiterated to continue prudent monetary policy stance

Currencies

- The EUR/USD continued to crawl back from 1-month lows that were registered earlier in the week. The pair was trying to secure its third straight day of gains as the Greek bailout negotiations continued. The session saw a plethora of data. Overall the results seemed to paint a picture that ECB's accommodative policy and QE continued to aid the inflation front as May preliminary CPI readings provided some confirmation that there was no real deflation risks in region. The Euro Zone Apr M3 Money Supply data reinforced that view

- The GBP currency was poised for its longest losing streak in over 6 months with GBP/USD falling for the 6th straight session and at pre-UK elections lows

Political/In the Papers:

- (GR) IMF Lagarde said to feel that a Greece exit from the EMU may be a possibility as the talks have not led to substantial results - Germany press; Following the German press report, a spokesperson for IMF's Lagarde dismissed the report as inaccurate

- (GR) IMF reportedly calling on Greece to reach a credible medium-term budget surplus, reforms must include pension changes - press; IMF believes that debt relief could be a necessity for Greece

- (GR) Germany CSU Lawmaker Michelbach: Wants Germany parliament vote about Greece aid - German Press

Looking Ahead

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

- (LV) S&P to update sovereign rating for Latvia

- (DE) G7 Finance Ministers and Central Bank Chiefs continue meeting in Dresden

- (DE) German Chancellor Merkel with UK PM Cameron in Berlin

- (ZA) South Africa to sell I/L 2025, 2038 and 2046 Bonds

- 06:00 (PT) Portugal Apr Retail Sales M/M: No est v -3.5% prior; Y/Y: No est v 1.7% prior

- 06:00 (PT) Portugal Apr Industrial Production M/M: No est v 1.4% prior; Y/Y: No est v 3.4% prior

- 06:00 (PT) Portugal Q1 Final GDP Q/Q: 0.4%e v 0.4% prelim; Y/Y: 1.4%e v 1.4% prelim

- 06:00 (IT) Italy Apr PPI M/M: No est v -0.1% prior; Y/Y: No est v -3.1% prior

- 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month Bills

- 06:30 (IN) India Apr Fiscal Deficit (INR): No est v -10.1B prior

- 06:45 (US) Daily Libor Fixing

- 07:30 (IN) India Weekly Forex Reserves

- 08:00 (BR) Brazil Q1 GDP Q/Q: -0.5%e v +0.3% prior; Y/Y: -1.8%e v -0.2% prior; GDP 4Qtrs Accumulated: -0.9%e v +0.1% prior

- 08:00 (IN) India Q1 GDP Y/Y: 7.0%e v 7.5% prior; GDP Annual Estimate Y/Y: 7.4%e v 7.4% prior

- 08:00 (ZA) South Africa Apr Trade Balance (ZAR): -4.9Be v 0.5B prior

- 08:00 (ZA) South Africa Apr Budget Balance (ZAR): -35.0Be v -1.2B prior

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

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

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Q1 Preliminary GDP Annualized (2nd reading) Q/Q: -0.8%e v +0.2% advance; Personal Consumption: 2.0%e v 1.9% advance

- 08:30 (US) Q1 Preliminary GDP Price Index: -0.1%e v -0.1% advance; Core PCE Q/Q: 0.9%e v 0.9% advance

- 08:30 (CA) Canada Mar GDP M/M: 0.2%e v 0.0% prior; Y/Y: 2.1%e v 2.1% prior; Quarterly GDP Annualized: No est v 2.4% prior

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

- 09:00 (US) May ISM Milwaukee: No est v 48.08 prior

- 09:30 (BR) Brazil Apr Nominal Budget Balance (BRL): No est v -69.2B prior; Budget Balance (BRL): No est v 0.2B prior; Net Debt to GDP Ratio: 33.4%e v 33.1% prior

- 09:45 (US) May Chicago Purchasing Manager: 53.0e v 52.3 prior

- 10:00 (US) May Final University of Michigan Confidence: 89.5e v 88.6 prior

- 10:00 (MX) Mexico Apr Net Outstanding Loans (MXN): No est v 2.759T prior

- 10:00 (SE) Sweden PM Loefven speaks at Party Congress

- 12:00 (CO) Colombia Apr Urban Unemployment Rate: 9.6%e v 10.1% prior; National Unemployment Rate: No est v 8.9% prior

- 13:00 (US) Weekly Baker Hughes Rig Count

- 15:00 (AR) Argentina Apr Construction Activity M/M: No est v 1.6% prior; Y/Y: No est v 8.1% prior

- 15:30 (MX) Mexico Apr YTD Budget Balance (MXN): No est v -100.4B prior