Euro Zone CPI remain in negative territory but pace of decline eases

EU Mid-Market Update: Euro Zone CPI remain in negative territory but pace of decline eases; unemployment improves to near 3-year lows

Notes/Observations

- China PBOC cuts Key 1-year interest rates by 25bps, effective Mar 1st (2nd rate cut in 3 months)

- China Feb PMI Manufacturing registers its second straight month of contraction (49.9 v 49.7e)

- European PMI Manufacturing data mixed in session (beats: Russia, Italy and Germany; Misses: Sweden, Spain, France and Euro Zone)

- Euro Zone Feb Flash CPI decline eases but remains in negative territory

- Euro Zone Jan Unemployment at lowest level since April 2012

Economic data

- (IN) India Feb Manufacturing PMI: 51.2 v 52.9 prior (16th month of expansion but at 5-month low)

- (JP) Japan Feb Vehicle Sales Y/Y: -14.2% v -18.9% prior (8th straight decline)

- (IE) Ireland Feb Manufacturing PMI: 57.5 v 55.1 prior (21st consecutive month of expansion and highest since 1999)

- (RU) Russia Feb Manufacturing PMI (beat): 49.7 v 47.0e (3rd straight month of contraction)

- (UK) Feb Nationwide House Prices (miss) M/M: -0.1% v +0.3%e; Y/Y: 5.7% v 6.2%e

- (FI) Finland Q4 GDP (miss) Q/Q: -0.2 v +0.1% prior; Y/Y: -0.2 v 0.0% prior

- (SE) Sweden Feb PMI Manufacturing (miss): 53.3 v 55.0e (18th month of expansion)

- (TH) Thailand Feb CPI M/M: 0.1% v 0.2%e; Y/Y: -0.5% v -0.5%e; CPI Core Y/Y: 1.5% v 1.5%e

- (DK) Denmark Jan Gross Unemployment Rate: 4.9% v 5.0%e

- (NL) Netherlands Feb Manufacturing PMI: 52.2 v 54.1 prior (20th month of expansion)

- (NO) Norway Feb Manufacturing PMI: 51.2 v 51.5e (2nd straight month of expansion)

- (PL) Poland Feb Manufacturing PMI: 55.1 v 54.8e (5th month of expansion)

- (TR) Turkey Feb Manufacturing PMI: 49.6 v 49.8 prior (2nd straight contraction)

- (HU) Hungary Feb Manufacturing PMI: 54.9 v 54.2 prior (19th month of expansion)

- (ES) Spain Feb Manufacturing PMI (miss): 54.2 v 55.1e (15th month of expansion)

- (CH) Swiss Feb PMI Manufacturing: 47.3 v 47.3e (matches lowest reading since Oct 2012)

- (CZ) Czech Republic Feb Manufacturing PMI: 55.6 v 55.7e (22nd month of expansion)

- (IT) Italy Feb Manufacturing PMI (beat): 51.9 v 50.1e (first expansion in 5 months and highest since July)

- (FR) France Feb Final Manufacturing PMI (miss): 47.6 v 47.7e (confirms 10th straight month of contraction)

- (DE) Germany Feb Final Manufacturing PMI (beats): 51.1 v 50.9e (confirmed 3rd straight month of expansion)

- (EU) Euro Zone Feb Final Manufacturing PMI (miss): 51.0 v 51.1e (confirms the 20th month of expansion)

- (GR) Greece Feb Manufacturing PMI: 48.4 v 48.3 prior (6th straight month of contraction)

- (IT) Italy Jan Preliminary Unemployment Rate (beats): 12.6% v 12.9%e

- (IT) Italy Q4 Unemployment Rate Quarterly (miss): 13.0% v 12.9%e

- (ZA) South Africa Feb Kagiso Manufacturing PMI: 47.6 v 52.0e

- (UK) Jan Net Consumer Credit: £0.8B v £0.9Be; Net Lending: £1.6B v £1.7Be

- (UK) Jan Mortgage Approvals (beats): 61.0Ke v 60.3K prior

- (UK) Feb PMI Manufacturing (beats) : 54.1 v 53.3e (24th month of expansion)

- (EU) Euro Zone Jan Unemployment Rate (beats): 11.2% v 11.4%e (lowest since 2012)

- (EU) Euro Zone Feb Advance CPI Estimate (beats) Y/Y: -0.3% v -0.5%e; CPI Core Y/Y: 0.6% v 0.6%e

- (IT) Italy 2014 Annual GDP Y/Y: -0.4% v -0.4%e; Deficit to GDP: 3.0% v 2.9% prior

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.2%, FTSE 100 +0.3% at 6,971, DAX +0.3% at 11,435, CAC-40 -0.2% at 4,944, IBEX-35 +0.5% at 11,230, FTSE MIB +0.6% at 22,460, SMI +0.1% at 9,025, Athens Stock Exchange -2.5%, S&P 500 Futures +0.1% at 2,105]

- Market Focal Points/Key Themes: Equity markets open mixed ahead of key event risks for the week (US payrolls, ECB meeting); Markets have subdued reaction to China's rate cut; FTSE 100 and DAX trade at record highs; Greek banks move lower in early trade; FY results weigh on Vivendi; Euro zone manufacturing PMI data mixed

By Sector

- Consumer Discretionary [Vivendi VIV.FR -5% (FY EBITDA below ests)]

- Stoxx50 sectors [Consumer Cyclical +0.9%, Financials +0.7%, Industrials +0.3%, Basic Materials +0.3%, Technology +0.2%, Utilities flat; Telecom -1.4%, Energy -0.4%, Consumer Non-Cyclical -0.1%]

**Speakers**

- ECB could begin QE purchases on March 9th (**reminder ECB meets on Thursday, Mar 5th)

- France Fin Min Sapin: Expects anti tax evasion initiatives to raise another €2B in 2015

- China State Researcher: 2015 GDP target could be set around 7.0%

- Thailand Dep PM Pridiyathorn Devakula: 2nd straight month of falling CPI is not worrisome; local demand remains good as evidenced by higher VAT collection

**Currencies***

- Risk appetite maintained a steady flow aided by another PBoC rate cut over the weekend

- EUR/USD saw a decline below Friday's low at 1.1176 before consolidating but remained approx. a big finure from its Jan lows. The bond yields in Europe continued to test record lows on reports that the ECB could begin its QE purchases on March 9th.

- The USD/JPY approached a 3-week near but was unable to break above the 120 handle in the session.

**Political/In the Papers:

- (RU) Russia might use off of its Reserve Fund in 2015-16 to cover state budget deficits. Russia could use RUB3.7T of the Reserve Fund in 2015 and RUB1.2T in 2016

- (AT) "spectacular developments" in the case of the Hypo Alpe Adria bad bank (aka Heta Asset Resolution). Outside audit of Heta's balance sheet exposed a capital hole of up to €7.6B which the government was not prepared to fill

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)

- (NZ) Fonterra Global Dairy Trade auction:

- (ZA) South Africa Feb Naamsa Vehicle Sales Y/Y: -1.0%e v 1.2% prior

- (RO) Romania Feb International Reserves: No est v $34.3B prior

- (RU) Russia Sovereign Wealth Funds: Reserve Fund: No est v $85.1B prior; Wellbeing Fund: No est v $74.0B prior

- 06:00 (PT) Portugal Jan Retail Sales M/M: No est v -3.8% prior; Y/Y: No est v 1.2% prior

- 06:00 (PT) Portugal Jan Industrial Production M/M: No est v -3.0% prior; Y/Y: No est v -3.5% prior

- 06:00 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills

- 06:30 (BR) Brazil Central Bank Weekly Economists Survey

- 06:45 (US) Daily Libor Fixing

- 07:00 (DE) German Chancellor Merkel wit EU's Juncket at EIB conference in Berlin

- 08:00 (CZ) Czech Feb Budget Balance (CZK): No est v 45.0B prior (revised from 28.6B)

- 08:00 (BR) Brazil Feb Manufacturing PMI: No est v 50.7 prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming bond auction

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Jan Personal Income: 0.4%e v 0.3% prior; Personal Spending: -0.1%e v -0.3% prior

- 08:30 (US) Jan PCE Deflator M/M: -0.5%e v -0.2% prior; Y/Y: 0.1%e v 0.7% prior

- 08:30 (US) Jan PCE Core M/M: 0.1%e v 0.0% prior; Y/Y: 1.3%e v 1.3% prior

- 08:30 (CA) Canada Q4 Current Account Balance: No est v -$8.4B prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined €6.3-7.5B in 3-month, 6-month and 12-month Bills

- 09:00 (BE) Belgium Q4 Final GDP Q/Q: No est v 0.1% prelim; Y/Y: No est v 0.9% prelim

- 09:30 (CA) Canada Feb RBC Manufacturing PMI: No est v 51.0 prior

- 09:35 (EU) ECB calls for bids in 7-day main Refi

- 09:45 (EU) ECB announces weekly purchases under its covered bond program 3 (CBPP3)

- 09:45 (US) Feb Final Markit Manufacturing PMI: 54.2e v 54.3 prior

- 10:00 (US) Jan Construction Spending M/M: 0.4%e v 0.4% prior

- 10:00 (US) Feb ISM Manufacturing: 53.2e v 53.5 prior; ISM Prices Paid: 36.0e v 35.0 prior

- 10:00 (MX) Mexico Jan Total Remittances: No est v $2.2B prior

- 10:00 (US) Former Fed officials Bernanke and Plosser speak in Washington

- 10:30 (MX) Mexico Feb Manufacturing PMI: No est v 56.6 prior

- 11:30 (US) Treasury to sell $52B in 3-month and 6-month Bills

- 12:00 (IT) Italy Feb New Car Registrations Y/Y: No est v 10.9% prior

- 12:00 (IT) Italy Feb Budget Balance: No est v €3.4B prior

- 13:00 (MX) Mexico Feb IMEF Manufacturing Index (Seasonally Adj): No est v 50.9 prior; Non-Manufacturing Index (Seasonally Adj): No est v 49.2 prior

- 13:00 (BR) Brazil Feb Trade Balance: No est v $3.2B prior; Total Exports: No est v $13.7B prior; Total Imports: No est v $16.9B prior

- 15:30 (MX) Mexico Jan YTD Budget Balance (MXN): No est v -545.0B prior

- 18:00 (KR) South Korea Feb CPI M/M: 0.2%e v 0.5% prior; Y/Y: 0.7%e v 0.8% prior; CPI Core Y/Y: 2.4%e v 2.4% prior

- 18:50 (JP) Japan Feb Monetary Base: No est v ¥278.6T prior; Y/Y: No est v 37.4% prior

- 22:00 (TH) Thailand to sell THB10B in 2044 Bonds

- 22:30 (AU) RBA Interest Rate Decisions: Expected to cut Cash Rate Target by 25bps to 2.00%

- 22:30 (HK) Hong Kong to sell in 3-month, 6-month and 12-month Bills

- 22:45 (JP) Japan to sell 10-Year JGB Bonds