German IFO Survey hits a 10-month high

EU Mid-Market Update: Little progress likely at today's Eurogroup meeting on Greece but optimism prevails; German IFO Survey hits a 10-month high

Notes/Observations

- Expectations low at today's Eurogroup meeting on Greece; but optimism prevails of an agreement by end of June

- German April IFO Business Climate hits a 10-month high while expectations are scaled back

Economic data

- (JP) Japan Feb All Industry Activity Index M/M: +0.1% v -1.0%e

- (SG) Singapore Mar Industrial Production M/M: 1.2% v 0.8%e; Y/Y: -5.5% v -5.8%e

- (CZ) Czech Apr Business Confidence: 11.9 v 11.6 prior; Consumer Confidence Index: 2.0 v 3.3 prior; Composite: 10 v 10 prior

- (ES) Spain Mar PPI M/M: 0.5% v 0.2% prior; Y/Y: -1.2% v -1.6% prior

- (NL) Netherlands Apr Producer Confidence Index: 3.3 v 1.4 prior

- (DE) Germany Apr IFO Business Climate Survey (beat): 108.6 (10-month high) v 108.4e; Current Assessment (beat): 113.9 v 112.4e; Expectations Survey (miss): 103.5 v 104.5e

- (PL) Poland Mar Unemployment Rate (inline): 11.7% v 11.7%e

Fixed Income:

- (IN) India sold total INR160B vs.INR160B indicated in 2023, 2026, 2033 and 2044 bonds

- (ZA) South Africa sold total ZAR650M in I/L 2038, 2046 and 2050 Bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.9%, FTSE 100 +0.6% at 7,094, DAX +1% at 11,842, CAC-40 +0.8% at 11,836, IBEX-35 +1.4% at 11,588, FTSE MIB +1.4% at 23,515, SMI +0.5% at 9,383, Athens Stock Exchange +3%, S&P 500 Futures +0.2% at 2,111]

- Market Focal Points/Key Themes: European equity markets open higher, tracking gains in US equities; Greek equities open higher ahead of euro group meeting; AstraZeneca, Banco Sabadell, Suez Environmental and Electrolux report better than expected earnings; Renault supported by Q1 sales report; Pearson reaffirmed FY15 earnings forecast; German IFO generally above ests

By Sector

- Industrials [Renault RNO.FR +4% (raised forecast for European car market), Electrolux ELUXB.SE +4% (Q1 results above ests), BAE Systems BA.UK +1.5% (strategic options for US units)Ballast Nedam BALNE.NL -5% (funding concerns)

- Consumer Discretionary [French Connection FCCN.UK -21% (profit warning), Air Liquide AI.FR -1% (Q1 sales in line)

- Healthcare [Innate Pharma IPH.FR +50% (agreement with Astrazeneca), Orion ORNBV.FI +13% (raised outlook), Reckitt Benckiser RB.UK +1% (Q1 sales above ests); Biotest BIO.DE -20% (Phase II data presentation)

- Financials [Sabadell SAB.ES +2% (Q1 results above ests), HSBA HSBA.UK +1.5% (speculation related to headquarters)]

- Energy [Neste Oil NES1V.FI +3% (Q1 profits above ests)] Stoxx50 Sectors [Energy +1%, Telecom +0.9%, Consumer Cyclical +0.7%, Consumer Non-Cyclical +0.5%, Industrials +0.5% ;Utilities -1.4%, Financials -1.1%, Basic Materials -0.7%, Technology -0.2%]

**Speakers**

- Greece Fin Min Varofakis stated in his blog that international lenders must drop its current approach that has failed in Greek talks. Rejected calls for additional wage and pension cuts as it would undermine calls for reforms within the country. Greece wanted reasonable assumptions about its primary surplus being linked to growth. Creditors must find way to restructure or re-profile debt if Greek Debt to GDP ratio is above 120% in 2020

- Greece Govt Spokesman: Not examining scenarios of referendum or elections as current govt has fresh and popular mandate Euro-Area Finance Ministers and Central Bankers comments ahead of 2-day meeting in Riga

- Eurogroup chief Dijsselbloem expected no decision on Greece today; time was running out for the country. Hard to gauge how much money Greece has left; expected country to manage its cash position. Reiterated view that the Spanish economy was picking up well; country had enacted many reforms but could do more

- German Fin Min Schaeuble expected no decision on Greece at today's Eurogroup meeting as he did not see any decisive progress taking place

- France Fin Min Sapin reiterated there was room for maneuver on targets for Greece's primary surplus as long as there was a surplus. International lenders must avoid an accident in the funding talks

- SNB Jordan stated that negative interest rates won't become the 'New Normal'. The global climate was challenging for Swiss economy. He reiterated CHF currency (Swiss franc) remains overvalued but to weaken over time and would intervene in FX market if necessary. Currency might strengthen temporarily due to current increased Greek uncertainty

- IFO Economists: stated that the German economic upswing continued but expectations were scaled backed; data supported its spring economist forecasts. It reiterated view that low EUR exchange rate was a positive factor; compensated for sluggish growth in other parts of the world

- Japan LDP Yamamoto reiterated call that BoJ should increase asset purchases at its April 30th policy meeting as CPI moved below zero. He warned that JPY currency (Yen) might strengthen without additional stimulus

- PBoC Gov Zhou: China ready to respond to external impact

Currencies

- EUR/USD probed the upper end of its five big figure 6-week trading range as the Eurogroup meeting in Riga got underway. Although expectations were quite low of any agreement on Greece's bailout extension and reform plans, there was optimism that one could be hammered out by end of June. Greece said to have secured €450M from local authorities making it unlikely of any near-term default in May.

Political/In the Papers:

- (UK) Survation poll has conservatives with 33% support, Labour at 29% - press

- (CN) China Securities Regulatory Commission (CSRC) denying press speculation that govt officials are looking to raise stamp tax, resume capital gains tax, and control equity market leverage

Looking Ahead

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

- (PT) Portugal Year-to-Date Budget Report

- 06:00 (UK) DMO to sell £3.0B in 1-month, 3-month and 6-month Bills (£0.5B, £1.0B and £1.5B respectively)

- 06:45 (US) Daily Libor Fixing

- 07:30 (TR) Turkey Apr Real Sector Confidence SA: No est v 100.9 prior; Real Sector Confidence NSA (unadj): No est v 103.5 prior

- 07:30 (TR) Turkey Apr Capacity Utilization: 73.6%e v 72.4% prior

- 07:30 (IN) India Weekly Forex Reserves

- 08:00 (CL) Chile Mar PPI M/M: No est v -1.1% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Mar Durable Goods Orders: +0.6%e v -1.4% prior; Durables Ex Transportation: +0.3%e v -0.4% prior; Capital Goods Orders (Non-defense/ex-aircraft): +0.3%e v -1.4% prior; Capital Goods Shipments (Non-defense/ex-aircraft): 0.3%e v 0.2% prior; Durables Ex-Defense: No est v -1.0% prior

- 09:00 (BE) Belgium Apr Business Confidence: -5.7e v -6.3 prior

- 09:00 (MX) Mexico Feb Retail Sales M/M: 0.0%e v 2.1% prior; Y/Y: 4.5%e v 4.7% prior

- 09:30 (BR) Brazil Mar Total Outstanding Loans (BRL): No est v 3.026T prior; M/M: No est v 0.5% prior; Personal Loan Default Rate: 5.4%e v 5.4% prior

- 11:00 (EU) Potential Rating Agency commentary on European sovereigns (Fitch: Cyprus, Cyprus, Italy and Spain; S&P: Norway; Moody's Romania)

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

- 15:00 (AR) Argentina Mar Industrial Production M/M: No est v -0.4% prior; Y/Y: -1.8%e v -2.2% prior

- 15:00 (AR) Argentina Feb Economic Activity Index (Monthly GDP) M/M: No est v -0.1% prior; Y/Y: 0.7%e v 0.0% prior

- 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 4.50%