Economic Data

- (FR) France Mar Consumer Price Index M/M: 0.8% v 06%e; Y/Y: 2.0% v 1.8%e; CPI Ex Tobacco: 121.90 v 120.9 prior

- (FR) France Mar CPI EU Harmonized M/M: 0.9% v 0.7%e; Y/Y: 2.2% v 2.0%e

- (GE) Germany Mar Wholesale Price Index M/M: 1.3% v 1.2%e; Y/Y: 10.9% v 10.7%e

- (SP) Spain Feb House transactions Y/Y: 10.5% v 19.6% prior

- (SZ) Swiss Mar Producer & Import Prices M/M: 0.4% v 0.4%e; Y/Y: % v 0.4%e

- (CZ) Czech Feb Current Account (CZK): 16.0B v 3.8Be

- (UK) Mar Jobless Claims Change: +0.7K v -3.0Ke; Claimant Count Rate: 4.5% v 4.5%e

- (UK) Feb Average Weekly Earnings 3M/Y: 2.0% v 2.6%e; Weekly Earnings ex-Bonus 3M/Y: 2.2% v 2.2%e

- (UK) Feb ILO Unemployment Rate: 7.8% v 8.0%e

- (EU) Euro Zone Feb Industrial Production M/M: 0.4% v 0.8%e; Y/Y: 7.3% v 8.0%e

Fixed Income

- (GE) Germany sold €1.67B in 3.25% July 2042 Bunds ; avg yield 3.93% v 3.58% prior; Bid-to-cover: 1.5x v 1.2x prior

- (EU) ECB allotted $0.0 (nil) in 7-day USD liquidity operation

- (UK) BOE allotted $0.0 (nil) in 7-day USD liquidity operation

- (RU) Russia sold RUB17.2B vs. RUB20.0B Indicated in 2021 OFZ Bonds; Yield 7.99%

- (SW) Sweden sold SEK10B vs. SEK10.0B Indicated in 3-month Bills; avg yield 1.788%

- (UK) DMO sold £5.0B in 2% 2016 Gilts; avg yield 2.598% v 2.658% prior; Bid-to-cover:1.80 x v 1.79x prior; Tail bps


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Notes/Observations:

- Japan Gov't lowers its economic assessment due to effects of March earthquake & Tsunami

- US President Obama to give budget speech later today (1pm ET)

- Debate about the rescheduling of Greek debt continues

- No pressure for BOE to hike interest rates after recent data

Equities:

FTSE 100 +0.75% at 6009, DAX +0.60% at 7148, CAC-40 +0.40% at 3993, IBEX 35 +0.30% at 10,815, FTSE MIB +0.40% at 22,100, SMI +0.40% at 6375

- European shares bounced off yesterday's losses and are trading in positive territory primarily due to strength in individual stocks. Alcatel-Lucent [ALU.FR] rose about 6% following an upgraded at JPMorgan yesterday. Schneider Electric [SU.FR] also rallied about 2% after denying that it was in talks with Tyco. Press had reported that Schneider Electric had made a bid for the company worth approx $30B representing a 21% premium to the closing price.

- Chipmaker ASML [ASML.NV] was lower by 1.5% after reporting its Q1 earnings. Net income was higher than expectations and revenue was in line but the booking valued had fallen due to a delay in delivery following Japanese earthquake. Analysts deem the Q2 outlook to be weak and the company said it was being cautious in assessing the impact of the Japanese earthquake on supply chains.

Speakers:

- China's PBoC Gov Zhou commented in the Chinese press that the global saving imbalances were likely to persist for some time. He did noted that global surplus savings should be channeled more towards advanced nations but added that the US and other advanced nations did not seek excess saving inflows. The Gov stated that it was not reasonable for developing countries savings to flow into advanced nations and that East Asian countries could not quickly adjust their savings rate. Savings rate of oil-producing countries are likely to stay high

- Greece Fin Min Papaconstantinou commented in a newspaper interview that Greece was fully financed for 2011 and needed to issue between in bonds during 2012. He noted that a sovereign debt restructuring would shut the country out of debt market for a long period of time. Such a scenario would also allow for possible contagion effects and impact the real economy. Lastly he added that higher interest rates are problematic for the country's finances but believed that peripheral bond spreads would normalize after the June elections in Portugal

- S&P analyst commented in the German press that it saw 1-in-3 chance of debt restructuring in Greece that would require a restructuring haircut between 50-70%

- ECB member Praet commented on a CNBC interview that a 'looser' policy could not aid Europe and that the central bank needed to maintain price expectations anchored

- Philippine Sugar Agency commented that it might raise 2010/11 Sugar Production forecast from current 1.97M tons. It saw no need to import sugar due to plentiful supply

- South Africa Trade Min commented that it sought a more competitive and less volatile ZAR currency and was watching Brazil's FX problems closely. BRICS nations likely to take concerns about currency and economic instability to upcoming G20 meeting

- China state researcher Fan JianPing commented that H1 CPI seen around 5.1% with inflation to slow in March and April period, but rebound in June. He added that measures taken to slow inflation might take effect in H2.

- China govt economist commented that the PBoC might increase interest rates twice in Q2 (Note: China PBoC raised its key 1-year Deposit and Lending rates back on April 5th by 25bps each)

- Austria Fin Min Proell confirms resignation, citing health reasons

- China Cabinet reiterated its view that it would use all means to manage inflation and maintain economic growth

Currencies/Fixed income:

- Interest rate differentials continued to be the driving force in FX. Germany's March Wholesale Price data reiterated the view that inflationary pressures were the driving sentiment. Inflation data reinforced hawkish views that the ECB continued to favor even since last week's 25 bps hike. Euro-related crosses were also firmer as EUR/GBP moved above the 0.89 level for fresh 5 month highs.

- The GBP was softer against the USD and Euro after the March UK claimant count unexpectedly rose. The recent inflation data and climb in unemployment suggests that the BOE is under no pressure to raise interest rates in the first half of 2011.

Geo-Political/ In the Papers:

- The European Banking Authority (EBA) said that calculations done by banks for losses related to sovereign debt held to maturity will be examined in the stress tests. They will also examine if banks are being conservative when valuing sovereign debt. Publications of the results are expected during June 2011.

- The Financial Times reported that ECB's Bini-Smaghi stated that the Euro-Zone tax payers have rights and responsibilities, additionally adding that there should be tax payer involvement only in extreme circumstances.

- Following the recent inflation data, many economists said that the Bank of England would wait until at least August before raising rates according to the London Telegraph. Before the release of data, economists had expected rates to be raised in May.

- The Austrian Finance Minister and Vice Chancellor Proell confirmed his resignation following earlier press reports earlier in the session. He is resigning from his post due to health reasons. The People's Party is to meet and discuss the successor.

- In an unconfirmed report, the Italian Treasury cut the 2011 and 2012 GDP growth forecasts to 1.1% from 1.3% prior, and 1.3% from 2.0% prior, respectively. The treasury will also confirm the 2011 Deficit-to-GDP forecast at 3.9%, and 2012 at 2.7%.


Looking Ahead

- 6:00 (CZ) Czech Republic to sell up to CZK8.0B in Bonds

- 6:00 (PD) Poland to sell up to PLN5.5B in Bonds

- 6:00 (EU) EU President Van Rompuy meets Malta's Gonzi in Valletta

- 8:00 (EU) ECB's Mersch speaks at Event in Berlin

- 7:00 (US) MBA Mortgage Applications w/e Apr 8th: No est v -2.0% prior

- 7:00 (IR) Ireland Mar Consumer Confidence: No est v 50.3 prior

- 8:00 (PD) Poland Mar CPI M/M: 0.5%e v 0.2% prior; Y/Y: 3.9%e v 3.6% prior

- 8:00 (PD) Poland Feb Current Account: -€308Me v -€930M prior; Trade Balance: -€184Me v €275M prior

- 8:30 (US) Mar Advance Retail Sales: 0.5%e v 1.0% prior; Less Autos: 0.7%e v 0.7% prior ; Retail Sales Ex Auto & Gas: 0.5%e v 0.6% prior

- 10:00 (US) Feb Business Inventories: 0.8%e v 0.9% prior

- 10:00 (MX) Mexico Mar Vehicle Production: No est v 193.5K prior; Vehicle Domestic Sales: No est v 66.9K prior; Vehicle Exports: No est v 155.8K prior

- 10:30 (CA) Bank of Canada Monetary Policy Report

- 10:30 (US) DOE Weekly Energy Inventories: Crude: +1Me; Gasoline: -1Me; Distillate: Unchanged est. (0.0E); Utilization: 84.7%e

- 10:30 (CA) Bank of Canada publishes its Monetary Policy Report

- 13:00 (EU) EU President Van Rompuy meets Cypriot President in Nicosia

- 14:00 (US) Mar Monthly Budget Statement: -$189.0Be v -$222.5B prior

- 11:30 (BR) Brazil Feb Economic Activity Index M/M: No est v 0.7% prior; Y/Y: No est v 5.1% prior

- 13:00 (AU) RBA's Stevens speaks in New York to American-Australian Group

- 13:00 (EU) ECB's Stark speaks in Stuttgart, Germany

- 13:05 (US) President Obama budget speech

- 14:00 (US) Fed's Beige Book

- 13:00 (US) Treasury to sell $21B in 10-Year Notes Reopening

- 17:00 (GE) Bundesbank's Axel Weber, Fed's Bullard to speak at St Louis