Greece concerns continue to simmer ahead of Friday's IMF payment

EU Mid-Market Update: European Manufacturing PMI data reinforces fragile recovery while German CPI continues its improving trend; Greece concerns continue to simmer ahead of Friday's IMF payment

Notes/Observations

- China PMI data mixed and keeps hope alive for more easing measures; Shangahi Composite higher by 4.7% in session

- Continued environment of not seeing any substantive progress in Greece's bailout negotiations ahead of Friday's IMF payment; Self-imposed Greek end of May deadline passed without a deal with creditors'

- Major European PMI Manufacturing data mix (France beats while German and Eurozone miss); overall shows a bumpy and fragile growth environment

- Various German State CPI data for May shows a continued improvement in inflation since ECB QE activated

Economic data

- (ID) Indonesia May CPI (beat) M/M: 0.5% v 0.4%e; Y/Y: 7.2% v 7.0%e; CPI Core Y/Y: 5.0% v 5.1%e

- (IN) India May Manufacturing PMI: 52.6 v 51.3 prior (19th month of expansion and 4 month high)

- (JP) Japan May Vehicle Sales Y/Y: 1.4% v 5.0% prior (2nd straight rise)

- (RU) Russia May Manufacturing PMI (miss): 47.6 v 48.5e (6th straight contraction)

- (SE) Sweden May PMI Manufacturing (miss): 54.8 v 55.3e (21st month of expansion)

- (NO) Norway May Manufacturing PMI (miss): 46.6 v 50.1e (back into contraction)

- (NL) Netherlands May Manufacturing PMI: 55.5 v 54.0 prior (23rd month of expansion)

- (PL) Poland May Manufacturing PMI (miss): 52.4 v 53.5e ((8th month of expansion)

- (TR) Turkey May Manufacturing PMI (beat): 50.2 v 48.0e (1st expansion in 5 months)

- (HU) Hungary May Manufacturing PMI: 55.1 v 51.2 prior (22nd month of expansion)

- (DE) Germany May CPI Saxony M/M: 0.2% v 0.0% prior; Y/Y: 0.8% v 0.6% prior

- (ES) Spain May Manufacturing PMI (beat): 55.8 v 54.5e (18th month of expansion and highest since Apr 2007)

- (CZ) Czech Republic May Manufacturing PMI (beat): 55.5 v 55.2e (24th month of expansion)

- (CH) Swiss May PMI Manufacturing (beat): 49.4 v 47.8e (5th month of contraction)

- (SE) Sweden Apr Retail Sales (miss) M/M: -0.2% v 0.4%e; Y/Y: 3.0% v 3.2%e

- (IT) Italy May Manufacturing PMI (beat): 54.8 v 53.6e (4th month of expansion and highest since Apr 2011)

- (FR) France May Final Manufacturing PMI (beat): 49.4 v 49.3e (confirms 13th straight month of contraction

- (DE) Germany May Final Manufacturing PMI: 51.1 v 51.4e (confirms 6th straight month of expansion)

- (EU) Euro Zone May Final Manufacturing PMI (miss): 52.2 v 52.3e (confirms 23rd straight month of growth)

- (NO) Norway Apr Credit Indicator Growth Y/Y: 5.7% v 5.8%e

- (DE) Germany May CPI Brandenburg M/M: +0.1% v -0.1% prior; Y/Y: 0.6% v 0.3% prior

- (DE) Germany May CPI Hesse M/M: 0.1% v 0.0% prior; Y/Y: 0.8% v 0.5% prior

- (DE) Germany May CPI Bavaria M/M: 0.1% v 0.0% prior; Y/Y: 0.8% v 0.7% prior

- (UK) May PMI Manufacturing: 52.0 v 52.5e (27th month of expansion)

- (DE) Germany May CPI North Rhine Westphalia M/M: 0.3% v 0.0% prior; Y/Y: 0.7% v 0.3% prior

- (DE) Denmark May PMI Survey: 52.5 v 52.8 prior

- (ZA) South Africa May Kagiso Manufacturing PMI: 50.8 v 46.7e (1st growth in 5 months)

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.2%, FTSE 100 -0.1% at 6,980, DAX flat at 11,410, CAC-40 +0.3% at 5,024, IBEX-35 +0.4% at 11,258, FTSE MIB +0.4% at 23,588, SMI +0.8% at 9,308, Athens Stock Exchange closed, S&P 500 Futures +0.2% at 2,109]

- Market Focal Points/Key Themes: European equity markets open higher following sharp declines on Friday; Equity markets later pare gains amid weaker UK and German PMI; Peripheral curves steepen amid better Italy and Spain data; Greece's June 5th IMF payment deadline still in focus, peripheral spreads wider; Shanghai Composite rallies over 4.7% amid PMI data; Key macro events for the week include (OPEC meeting, US payrolls report, EU and UK PMIs, ECB and BoE meetings)

By Sector

- Industrials [Grontmij [GRONT.NL +16% (takeover offer)

- Healthcare [Roche ROG.CH +1.5% (data presentation related to lung cancer)

- Consumer Discretionary [Fraport FRA.DE -1.5% (ex-dividend)

- Basic Materials/Resources [Clariant CLN.CH +1.5% (renewed takeover speculation)

- Financials [Deutsche Annington ANN.DE +5% (raised outlook)]

- Energy [Vestas Wind VWS.DK -3% (broker commentary)]

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

**Speakers**

- EU Commissioner Oettinger reiterated gaps between Greece and creditors related to labor market and pension issues were still large. Greek deal was possible this week but played down chances of break through today when German Chancellor Merkel meets France President Hollande and EU's Juncker in Berlin later today

-Germany Economy Min (Dep Chancellor) Gabriel stated that proposals that could end the Greek crisis were at hand; Greece needed to make decisions

- Fed's Williams (dove, FOMC voter): No concerns that a strong USD would derail economic growth

- South Korea Fin Min Choi: Country to maintain accommodative policies

- PBoC said to have recently provided pledged supply lending (PSL) facility to select banks (targeted move)

**Currencies***

- The EUR/USD was softer in the session as the continued environment in Europe did not see any substantive progress in Greece's bailout negotiations. Focus turns to Friday's IMF payment; Self-imposed Greek end of May deadline passed without a deal. The EUR/USD tested as low as 1.0905 in the session (off 0.7%)

- The GBP/USD moved slightly lower to test fresh 3 week lows below 1.5235 following a miss in the UK PMI manufacturing. Dealers eye the 100-day moving average as support at 1.5167

- Peripheral curves steepen amid better Spain, Italy PMI data in session. (Italy curve +7bps, Portugal +7bps, Spain +5bps)

**Political/In the Papers:

-(GR) Greece and its creditors continued talks this weekend but missed the self-imposed Greek deadline to reach an agreement with creditors

-According to a senior Gulf OPEC delegate, OPEC will maintain its output target at the upcoming June 5th meeting

-(CN) China Govt members see the possibility for a rate, Reserve Ratio Requirement (RRR) cut

Looking Ahead

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

- (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills

- (DE) Germany May CPI Baden Wuerttemberg M/M: No est v 0.0% prior (revised from -0.1%); Y/Y: No est v 0.4% prior (revised from 0.3%)

- 06:45 (US) Daily Libor Fixing

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

- 07:30 (CL) Chile Central Bank May Minutes

- 08:00 (CZ) Czech may Budget Balance(CZK): No est v 26.6B prior (revised from -0.4B)

- 08:00 (DE) Germany May Preliminary CPI M/M: 0.1%e v 0.0% prior; Y/Y: 0.7%e v 0.5% prior

- 08:00 (DE) Germany May Preliminary CPI Harmonized M/M: 0.1%e v -0.1% prior; Y/Y: 0.6%e v 0.3% prior

- 08:00 (IN) India announces specific bonds in upcoming auction on Friday (Jun 5th)

- 08:00 (ZA) South Africa May Naamsa Vehicle Sales Y/Y: No est v -3.3% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Apr Personal Income: 0.3%e v 0.0% prior; Personal Spending: 0.2%e v 0.4% prior; Inflation Adjusted Personal Spending: No est v 0.3% prior

- 08:30 (US) Apr PCE Deflator M/M: 0.1%e v 0.2% prior; Y/Y: 0.2%e v 0.3% prior

- 08:30 (US) Apr PCE Core M/M: 0.2%e v 0.1% prior; Y/Y: 1.3%e v 1.3% prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined €5.0-6.2B in 3-month, 6-month and 12-month Bills

- 09:00 (BE) Belgium Q1 Final GDP Q/Q: No est v 0.3% prelim; Y/Y: No est v 0.9% prelim

- 09:00 (BR) Brazil May Manufacturing PMI: No est v 46.0 prior

- 09:00 (MX) Mexico Apr Leading Indicators M/M: No est v -0.09 prior

- 09:05 (US) Fed's Rosengren (dovish, FOMC-non voter) speaks at Employment Event in Hartford, CT

- 09:30 (CA) Canada May RBC Manufacturing PMI: No est v 49.0 prior

- 09:30 (US) Fed Vice Chair Fischer in Toronto

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 09:45 (EU) ECB announces Covered-Bond Purchases

- 09:45 (US) May Final Markit Manufacturing PMI: 54.1e v 53.8 prelim

- 10:00 (US) Apr Construction Spending M/M: +0.7%e v -0.6% prior

- 10:00 (US) May ISM Manufacturing: 52.0e v 51.5 prior; Prices Paid: 43.0e v 40.5 prior

- 10:00 (MX) Mexico Apr Total Remittances: No est v $2.3B prior

- 10:00 (FI) ECB's Liikanen (Finland) speaks at Bank of Finland History Seminar

- 10:30 (MX) Mexico May Manufacturing PMI: No est v 53.8 prior

- 11:30 (US) Treasury to sell combined $48B in 3-Month and 6-Month Bills

- 12:00 (FR) France Apr Net Change Jobseekers: 0.0Ke v +15.4K prior; Total Jobseekers: 3.51Me v 3.510M prior

- 12:00 (IT) Italy May New Car Registrations Y/Y: No est v 24.2% prior

- 12:00 (IT) Italy May Budget Balance: No est v -€6.0B prior

- 12:30 (DE) German Chancellor Merkel to meet France President Hollande and EU's Juncker in Berlin

- 13:00 (MX) Mexico May IMEF Manufacturing Index: No est v 51.4 prior; Non-Manufacturing Index: No est v 51.3 prior

- 14:00 (BR) Brazil May Trade Balance: No est v $0.5B prior; Total Exports: No est v $15.2B prior; Total Imports: No est v $14.7B prior

- 19:00 (KR) South Korea Apr Current Account Balance: No est v $10.4B prior; Balance of Payment Balance (BOP): No est v $11.2B prior

- 19:00 (KR) South Korea May CPI M/M: No est v 0.1% prior; Y/Y: No est v 0.4% prior; CPI Core Y/Y: No est v 2.0%prior

- 19:50 (JP) Japan May Monetary Base: No est v ¥305.9T prior; Y/Y: No est v 35.2% prior

- 21:30 (JP) Japan Apr Labor Cash Earnings Y/Y: No est v 0.0% prior (revised from 0.1%); Real Cash Earnings Y/Y: No est v -2.7% prior (revised from -2.6%)

- 21:30 (AU) Australia Q1 Current Account Balance: No est v -9.6B prior; Net Exports to GDP Ratio: No est v 0.7% prior

- 22:00 (NZ) Treasury Monthly Economic Indicators

- 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills

- 23:45 (JP) Japan to sell 10-Year JGB Bonds

- (AR) Argentina May Government Tax Revenue (ARS): No est v 112.7B prior

- (RU) Russia May Sovereign Wealth Fund Balances: Reserve Fund: No est v $76.4B prior; Wellbeing Fund: No est v $76.3B prior