China RRR cut fails to inspire lasting gains for Shanghai Composite

EU Mid-Market Update: Quiet start to week with Friday's Eurogroup meeting on Greece in focus; China RRR cut fails to inspire lasting gains for Shanghai Composite

Notes/Observations

- China PBOC cuts its Reserve Requirement Ratio (RRR) system-wide by 100bps (largest cut since Nov 2008) from 19.50% to 18.50%; Shanghai Composite falls by over 1.6% as Chinese regulators focus on illegal high-leverage margin trades

- US Corporate earnings pace picks up this week

Economic data

- (DE) Germany Mar PPI (miss) M/M: 0.1% v 0.2%e; Y/Y: -1.7% v -1.6%e

- (JP) Japan Mar Convenience Store Sales Y/Y: -2.8% v -1.4% prior (12 straight decline)

- (TW) Taiwan Mar Export Orders (beat) Y/Y: 1.2% v 0.9%e

- (NO) Norway Q1 Existing Homes Q/Q: % v -0.5% prior

- (GR) Greece Feb Current Account Balance: -€0.9B v -€0.9B prior

- (ES) Spain Feb Trade Balance: -€2.0B v -€2.6B prior

- (EU) Euro Zone Feb Construction Output M/M: -1.8% v +1.6% prior; Y/Y: -3.7% v +0.6% prior

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.9%, FTSE 100 +0.8% at 7,052, DAX +1.4% at 11,848, CAC-40 +0.7% at 5,179, IBEX-35 +0.3% at 11,391, FTSE MIB +0.7% at 23,213, SMI flat at 9,245, Athens Stock Exchange +1.7%, S&P 500 Futures +0.5% at 2,086]

- Market Focal Points/Key Themes: European equity markets open higher following sharp losses on Friday; Greek equities open higher with April 24th Eurogroup meeting in focus; Chinese equities decline despite RRR cut; Various European automakers comment at China auto show; Upcoming US earnings (Haliburton, Morgan Stanley, Suntrust)

By Sector

- Healthcare [SHL Telemedicine SHLTN.CH +20% (strategic alternatives)]

- Telecom [KPN KPN.NL +2.5% (sale of BASE unit)]

- Financials [HSBC HSBA.UK +1% (broker commentary)]

- Energy [Petrofac PFC.UK -10% (cut FY outlook)]

- Consumer Discretionary [InterContinental Hotel IHG.UK +2.5% (renewed M&A speculation)]

- Stoxx50 Sectors [Financials +1%, Basic Materials +0.9%, Telecom +0.9%, Consumer Cyclical +0.8%, Technology +0.9%, Industrials +0.7%, Consumer Non-Cyclical +0.6%, Energy +0.4%, Utilities +0.1%]

Speakers

- ECB's Constancio (Portugal): No council 'controversy' on QE at this stage; financial and economic variables moving in right direction

- Eurogroup Head Dijsselbloem reiterated view that Greece situation both economic and political could be isolated (no contagion). Remained far apart on content as the process was difficult. He noted there was a deadline as at a certain point Greece would run out of cash. He stressed that in the long run Greece would not benefit from support from outside Europe; its future is within Europe

- EU's Juncker wants plan to avoid pre-June Greek default . EU Commission believes no credit event in May

- IMF's Thomsen saw 'some' progress in talks with Greece, still far from agreement on reforms

- Poland Central Bank Chojna-Duch reiterated that recent data confirmed that its monetary easing cycle was done

- Poland Central Bank Glapinsky reiterated nothing justified speculation related to interest rate change

- PBoC's Li Bo: Monetary policy cannot solve structural problems

- China Fin Min Lou Jiwei: China could achieve its 2015 GDP target of 7%

- Japan Cabinet Office (GOVT) Monthly Report maintained its overall economic assessment

- Saudi Interior Ministry official: Security Forces on high alert for possible terrorist attack. Potential targets include shopping malls and oil infrastructure

- Saudi Oil Min Al-Naimi confirmed producing around 10M bpd in April. Not concerned about Chinese oil demand and very positive about Asian demand outlook. Supplying 1M bpd of crude to China

Currencies

- The USD was mixed in quiet trading as the week began. The EUR/USD was roughly in the middle of its 6-week trading range between 1.05-1.10 against the greenback. The Euro was trending lower as the session progressed and off approx. 0.75% as the NY morning approached. Greece remains in the spotlight, especially with the upcoming Eurogroup meeting the Friday (Apr 24th) -The USD/JPY pair was slightly lower testing 118.80 just ahead of the NY morning.

**Political/In the Papers:

- (FI) Finland's Centre Party (opposition) claims victory in national elections. Sees several possible coalitions but would not change Finland's stance on Greece

- (GR) Greece Fin Min Varoufakis: There would be inevitable contagion effect if Greece leaves euro zone

- (GR) ECB's Draghi: Reiterates the euro cannot be reversed; Greece needs to do more work to achieve acceptable reform for further EU financing; Reiterates do not even want to contemplate a Greece default scenario

- (JP) BOJ Gov Kuroda: Markets may be surprised by higher interest rates if Japan's 2% inflation target is achieved in 2016 - financial press ; there was not much discussion of forex at the G20

- (CN) PBoC to recapitalize government banks using fx reserves. As part of the plan, the PBoC make acquire stakes in China Development Bank and Exim Bank. To inject $32B of fx reserves in China Development Bank, $30B of fx reserves in EXIM Bank

Looking Ahead

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

- (UR) Ukraine Mar Industrial Production M/M: 1.8%e v -1.6% prior; Y/Y: -20.5%e v -22.5% prior

- (EU) EU Foreign Ministers hold meeting in Luxembourg

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

- 06:00 (PT) Portugal Mar PPI M/M: No est v 0.8% prior; Y/Y: No est v -3.4% prior

- 06:00 (BE) Belgium Debt Agency to sell €2.0-2.8B in 2020 and 2025 OLO Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (RO) Romania to sell RON200M in 5.95% Feb 2025 bond

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

- 08:00 (PL) Poland Mar Sold Industrial Output M/M: 11.8%e v 1.3% prior; Y/Y: 7.2%e v 4.9% prior; Construction Output Y/Y: +2.1%e v -0.3% prior

- 08:00 (PL) Poland Mar PPI M/M: 0.1%e v 0.0% prior; Y/Y: -2.5%e v -2.7% prior

- 08:00 (PL) Poland Mar Retail Sales M/M: 15.7%e v -2.0% prior; Y/Y: +1.6%e v -1.3% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Mar Chicago Fed National Activity Index: +0.10e v -0.11 prior

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

- 09:00 (DE) German Chancellor Merkel on G7 goals in Berlin

- 09:00 (BE) Belgium Apr Consumer Confidence Index: No est v -6 prior

- 09:30 (EU) ECB announces Covered-Bond Purchases

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

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

- 12:30 (AU) RBA Governor Stevens speech in New York

- 21:30 (AU) RBA April Minutes

- 23:00 (TH) Thailand Central bank (Bot) to sell 3-month and 6-month Bills