Greece situation remain on front burner

Notes/Observations

- RBA cuts key rate by 25bps but hints of moving towards a neutral bias

- Shanghai Composite slumps on possible steps to cool recent rise; Some China brokers said to have raised margin trading requirements

- Optimism on Greece negotiation stalls in session

- UK election likely to present a chaotic coalition negotiations process

- UK Construction PMI hits a 22 month low (54.2 v 57.4e)

- EU Commission spring economic forecasts raised its overall view for the Euro Zone for 2015 but more cautious on its 2016 outlook.

Economic data

- (AU) RBA cut Cash Rate Target by 25bps to 2.00% (as expected)

- (RU) Russia Apr Manufacturing PMI (beat): 48.9 v 48.3e (5th month of contraction)

- (FR) France Mar YTD Budget Balance: -€26.3B v -€23.4B prior

- (ES) Spain Apr Net Unemployment M/M (beat): -118.9K v -65.1Ke

- (SE) Sweden Mar Industrial Production M/M (beat): 0.8% v 0.2%e; Y/Y: +0.3% v -0.4%e

- (SE) Sweden Mar Industrial Orders M/M: +3.7% v -2.6% prior; Y/Y: +1.4% v -3.2% prior

- (SE) Sweden Mar Service Production M/M: -0.1% v +0.2%e; Y/Y: 2.9% v 3.4% prior

- (BR) Brazil Apr FIPE CPI Monthly: 1.1% v 1.2%e

- (TW) Taiwan Apr Foreign Reserves: $418.2B v $414.7B prior

- (UK) Apr Construction PMI: 54.2 v 57.4e (26th month of expansion but a 22-month low)

- (HK) Hong Kong Mar Retail Sales Value Y/Y: -2.9% v +5.0%e; Retail Sales Volume Y/Y: 0.8% v 4.8%e

- (EU) Euro Zone Mar PPI M/M: 0.2% v 0.3%e; Y/Y: -2.3% v -2.3%e

Fixed Income:

- (ZA) South Africa sold total ZAR2.35B in 2030, 2037 2048 Bonds

- (AT) Austria Debt Agency (AFFA) sold total €1.1B in 2021 and 2023 RAGB Bonds

- Sold €605M in 3.5% Sept 2021 RAGB; Avg Yield 0.189% v 0.055% prior; Bid-to-cover: 2.50x v 2.56x prior

- Sold €495M in 1.75% Oct 2023 RAGB Bonds; Avg Yield: 0.414% v 1.769% prior; Bid-to-cover: 2.78x v 2.42x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.4%, FTSE 100 +0.6% at 7,032, DAX +0.6% at 11,688, CAC-40 +0.6% at 5,110, IBEX-35 +0.1% at 11,438, FTSE MIB +0.1% at 23,234, SMI +1% at 9,184, Athens Stock Exchange -2%, S&P 500 Futures -0.1% at 2,107]

- Market Focal Points/Key Themes: Equity markets open mixed following prior session's gains; Greek assets sell off; UBS results supported by trading business; HSBC beats ests; Lufthansa lower after Q1 results; Infineon raises outlook; US April ISM Non-Manufacturing data in focus; Shanghai Composite sees largest decline since late Jan amid speculated margin curbs and IPO concerns

By Sector:

- Financials [UBS UBSN.CH +4% (Q1 results above ests)]

- Technology [Infineon IFX.DE +2% (raised outlook), Capgemini CAP.FR +1% (buyback)]

- Industrials [Symrise SY1.DE +3.5% (Q1 profits above ests)]

- Consumer Discretionary [Metro MEO.DE +1.5% (Q2 results above ests); Lufthansa LHA.DE -1% (Q1 results in line)]

- Basic Materials/Resources [Glencore GLEN.UK -1% (Q1 copper production -9%)]

- Stoxx50 Sectors [Consumer Cyclical +1.7%, Technology +1.1%, Industrials +1%, Utilities +0.8%, Basic Materials +0.8%, Telecom +0.8%, Consumer Non-Cyclical +0.8%, Financials +0.6%, Energy flat]

Speakers

- ECB's Noyer (France): Oil and euro to add half pct to France growth in 2015 and 2016 but pace of growth is not enough to lower unemployment. He had no concerns about recent fluctuations in market interest rates; Recent rise in bond yields were normal fluctuations. He also reiterated that Greek bank funding needs could not last indefinitely; Greek banks need return of confidence. Collateral problems would eventually constrain ELA

- EU Commission spring economic forecasts raised its overall view for the Euro Zone for 2015 but more cautious on its 2016 outlook.

- Greece Econ Min Stathakis: To set up non-performing loan (NPL) management body over the next six months. Says NPL reached €100B at end of 2014

- Austria Fin Min Schelling reiterated view that could not say if there would be a deal on Greek debt on May 11th (next Eurogroup meeting) but noted Greece had changed positions in some areas, no movement in other areas

- Portugal Fin Min Albuquerque: No plan "B" for Greece

- Spain PM Adviser Nadal reiterated view that low inflation was supporting competitiveness

- India Chief Economic Adviser Subramanian: RBI to significantly undercut its 6% inflation target

- Philippines Central Bank dep gov Guinigundo stated that monetary policy appeared to be broadly appropriate and saw nothing in view to upset inflation target. Had monetary and fiscal space to manage volatilities

- China Commerce Ministry (MOFCOM) saw limited downside room for commodity prices, saw moderate rebound in H2. China might have stable trade growth in 2015 provided that the external environment does not experience any major changes. Trade might growth at medium and low pace in future

Currencies

- The EUR/USD continued to probe the lower end of its weekly trading range with 1.1070 still seen as support.

- The GBP was little changed but still vulnerable to the upcoming UK election results which currently likely to present a chaotic coalition negotiations process. The 10-year Gilt yield was higher by over 4bps to approach 1.90% in the session. GBP/USD steady at 1.5125 area in the session.

- Dealers cite that no mention of further rate cuts in RBA statement, perhaps the central bank is moving towards a neutral bias. AUD/USD initially fell about 54pips testing $0.7790 before bouncing back towards $0.7910

**Political/In the Papers:

- IMF reportedly threatens to cut off funding for Greece unless creditors agree to write off substantial portion of its sovereign debt. IMF has issued a warning to Greece's creditors that IMF could hold back a portion of its €7.2B tranche that Greece is attempting to secure. IMF officials told eurozone finance ministers in Riga last month that Athens is trending toward a primary budget deficit of as much as 1.5/GDP, worse than primary surplus that it was supposed to achieve this year.

- (CN) China insurers may limit stock purchase due to new solvency rules

Looking Ahead

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

- EU Working Group (EWG) Wieser speaks at Conference in New York City

- (GR) Greece Deputy PM Dragasakis said to meet with ECB's Draghi

- (MX) Mexico Banamex Survey of Economists

- (BR) Brazil Mar CNI Capacity Utilization: No est v 79.7% prior

- (EU) ECB allotment in 7-Day Main Refinancing Tender

- 05:30 (DE) German Fin Min Schaeuble in Berlin

- 05:30 (ZA) South Africa Apr SACCI Business Confidence: No est v 89.1 prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

- 05:30 (BE) Belgium Debt Agency to sell €2.0-2.0B in in 3-month and 6-month Bills

- 06:30 (EU) ESM to sell €1.5B in 3-month Bills

- 06:45 (US) Daily Libor Fixing

- 07:30 (CL) Chile Mar Economic Activity Index (Monthly GDP) M/M: -0.6%e v -0.6% prior; Y/Y: 1.1%e v 2.0% prior

- 07:45 (US) Weekly Chain Store Sales

- 08:00 (BR) Brazil Mar PPI Manufacturing M/M: No est v 0.3% prior; Y/Y: No est v 2.7% prior

- 08:15 (US) Baltic Dry Bulk

- 08:30 (US) Mar Trade Balance: -$41.7Be v -$35.4B prior

- 08:30 (CA) Canada Mar Int'l Merchandise Trade: -C$0.8Be v -C$1.0B prior

- 08:55 (US) Weekly Redbook Sales

- 09:00 (EU) EU's Vestager in Parliament in Brussels

- 09:00 (EU) Weekly ECB Forex Reserve data

- 09:45 (US) Apr Final Markit Services PMI: 57.8e v 57.8 prelim; Composite PMI: No est v 57.4 prelim

- 10:00 (US) Apr ISM Non-Manufacturing: 56.2e v 56.5 prior

- 10:00 (US) May IBD/TIPP Economic Optimism: 50.0e v 51.3 prior

- 10:00 (MX) Mexico Central Bank Economist Survey

- 10:00 (MX) Mexico Weekly International Reserves

- 10:00 (DK) Denmark Apr Foreign Reserves (DKK): 712.0Be v 737.1B prior

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills

- 10:30 (UK) DMO announces size of upcoming 2% 2020 Gilt auctions

- 11:30 (US) Treasury to sell 4-Week Bills

- 12:30 (CA) Bank of Canada (BOC) Dep Gov Wilkins in Quebec

- 12:40 (US) Fed's Lockhart speaks on Monetary Policy in Louisiana

- 13:00 (UR) Ukraine Apr CPI M/M: No est v 0.7% prior; Y/Y: No est v 7.6% prior

- 17:00 (CO) Colombia Mar Exports FOB: $3.2Be v $3.2B prior

- 17:00 (CO) Colombia Feb Economic Activity Index (Monthly GDP) Y/Y: 2.8%e v 3.0% prior

- 19:01 (UK) Apr BRC Shop Price Index Y/Y: -1.7%e v -2.1% prior

- 20:00 (US) Fed's Kocherlakota holds Open Forum in Marshall, Minnesota

- 20:00 (CO) Colombia Apr CPI M/M: 0.4%e v 0.6% prior; Y/Y: 4.4%e v 4.6% prior

- 20:00 (CO) Colombia Apr CPI Core M/M: No est v 0.4% prior; Y/Y: No est v 3.5% prior

- 21:30 (AU) Australia Mar Retail Sales M/M: 0.4%e v 0.7% prior

- 21:45 (CN) China Apr HSBC Services PMI: No est v 52.3 prior; Composite PMI: No est v 51.8 prior

- 22:30 (HK) Hong Kong Apr HSBC Services PMI: No est v 49.6 prior

- 23:00 (CN) China to sell 10-year bonds

- 23:00 (TH) Thailand to sell THB13B in 15-Year Bonds

- 23:30 (HK) Hong Kong to sell HKD1.5B in 10-Year Bond