European markets weather more hawkish Fed stance relatively well in session

Notes/Observations

- Fed Chair Yellen dovish reputation flouts hawkish feathers at her debut press conference; estimated the "considerable period" of low rates at the end of QE as a mere 6 months. Interest rate risk is front and center after Fed guidance caught the markets offguard: (FX chat comment: "This is what it sounds like when doves Yell; The Artist formerly known as Ben"

- Fed also removed its 6.5% unemployment threshold in favor of more "qualitative" guidance that would include outlook for inflation among other factors (dropped its numerical thresholds in favor of more qualitative guidance)

- EU lawmakers reach provisional deal on SRM

- EU Leader Summit to be dominated by events in Ukraine/Crimea

Economic Data

- (CH) Swiss Feb Trade Balance (CHF): 2.6B v 2.6B prior; Real Exports M/M: 0.4% v 2.7% prior; Real Imports M/M: 0.8% v -1.4% prior

- (JP) Japan Feb Convenience Store Sales Y/Y: +1.0% v -0.1% prior

- (DE) Germany Feb PPI M/M: 0.0% v 0.1%e; Y/Y: -0.9% v -0.9%e

- (TW) Taiwan Feb Export Orders Y/Y: 5.7% v 9.5%e

- (DK) Denmark Feb Retail Sales M/M: +0.6 v -0.3% prior; Y/Y: 0.7% v 0.0% prior

- (EU) ECB €245M borrowed in overnight loan facility vs. €80.0M prior; €30.7B parked in deposit facility vs. €27.5B prior - Daily Eurosystem Liquidity Conditions

- (CH) Swiss National Bank (SNB) left its 3-Month Libor Target Rate unchanged at 0.00% and maintain EUR/CHF Floor at 1.2000, both as expected

- (NL) Netherlands Feb Unemployment Rate: 8.8% v 8.7%e

- (NL) Netherlands Mar Consumer Confidence: -7 v -7e

- (HK) Hong Kong Feb CPI Composite Y/Y: 3.9% v 3.8%e

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities**

Indices [Stoxx50 -0.5%, FTSE 100 -0.7% at 6,530, DAX -0.5% at 9,231, CAC-40 -0.5% at 4,286, IBEX-35 -0.5% at 10,045, FTSE MIB -0.1% at 20,952, SMI -0.2% at 8,211, S&P 500 Futures -0.1% at 1,850]

- Market Focal Points: European equity markets open lower following comments from Fed's Yellen, UK budget proposals weigh on most bookmaking firms and pubs, Share placements hurt shares of Ipen and Meyer Burger

By Sector

- Consumer Discretionary [Majestic Wine MJW.UK -17% (cautious outlook), Mulberry MUL.UK -1.5% (CEO change), Hermes RMS.FR -0.5% (FY profits in line); Next NXT.UK +1% (FY profits above ests)]

- Industrials [Meyer Burger MBTN.CH -10% (share placement), Intu Properties INTU.UK -4% (acquisition, rights offering), Finmeccanica FNC.IT +2% (reported FY13 results), MunichRe MUV2.DE +1% (buyback)]

- Healthcare [Ipsen IPN.FR -4% (share placement), Glaxo GSK.UK -1% (data presentation)]

- Stoxx50 sectors [Consumer Non-Cyclical -0.8%, Energy -0.8%, Utilities -0.6%, Consumer Cyclical -0.5%, Technology -0.4%, - Telecom -0.3%, Basic Materials -0.3%, Industrials -0.1%,; Financials +0.3%]

Speakers:

- German Chancellor Merkel addressed the German Parliament ahead of today's EU Leader summit and stated that it would be dominated by the events in Ukraine and Crimea. Russia faced economic sanctions if it does not reverse its stance. Thus a determined response needed to Russia from its Crimea move and that current tension with Russia meant that G8 did not exist. EU economic recovery has yet to be assured

- SNB Rate Decision statement reiterated its view that CHF currency (franc) remained high in value and would intervene and buy unlimited quantities of foreign currency to defend the minimum exchange rate or take other measures if needed. Continue to monitor mortgage and real estate markets closely; regularly reassess any need for adjustment of capital buffers. In its forecast the SNB again cuts its inflation view for both 2014 and 2015 period.

- Eurogroup chief Dijsselbloem stated that there was a possible compromise on SRM but details needed to be studied

- EU's Giegol stated that EU lawmakers had concluded single resolution mechanism (SRM) talks but the results would not be made public yet.

- Additional reports circulated that negotiators from the Eurogroup of finance ministers as well as EU Parliament legislators reached a provisional agreement after 16 hours of talks. According to an EU document, countries reached a final agreement to set up a banking union and fund to shut down banks in difficulty; Under the agreement, the ECB would have a primary role in triggering any bank closure; Also, there was an agreement that the fund to cover the cost of bank closures should be built up over 8 years.

- Spain's PM Rajoy may have scope to extend and accelerate certain tax cuts before EU elections

- Russia Fin Min Siluanov commented that its domestic economy was not developing as forecasted. Weaker RUB currency might start to feed into inflation in Q2 but should stabilize in H2. Russia faces inflation between 5.0-6.0% in 2014 with no changes (**Note target is 5.0%). He expected the Russia central bank to cut rates later in 2014

- Russia Econ Min Ulyukayev: Russian companies must repay over $80B by end of 2014

- BoJ Gov Kuroda reiterated view that Japan was moving towards the 2% inflation target and would likely to reach it in late FY14 or FY15.

Currencies/Fixed Income:

- The USD consolidated its gains exhibited from Wednesday after the Fed signaled possible interest rate hikes from Q2 of next year. The timeline suggested by Fed Chair Yellen hinted that a rate hike could come in Q2 2015 while the market had expected it to occur in the H2 of 2015. The EUR/USD had faced psychological resistance at the 1.40 handle and the Fed more hawkish stance provided the greenback with some needed support. The pair was at 1.3830 just ahead of the NY morning. Dealers pondered whether there would be any 'damage control' but the initial reaction couldn't have gone better for Yellen.

Political/In the Papers:

- (DE) Germany Fin Min Schaeuble: Do not see deflation danger in Europe - tv interview

- (GR) Troika reaches staff-level agreement with Greece on review of loan package; IMF and Eurogroup to consider Greece review in the coming weeks

-(GR) There is renewed speculation that the Greek Finance Ministry said to be looking to return to bond markets in first half of 2014, would offer €1.5-2.0B of five-year bonds as a test issue ahead of full return - press

- (PT) Portugal PM Coelho: There are no indications that Portugal banks require state assistance with capital

Looking Ahead

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

- (EU) EU Leaders begin 2-day Summit in Brussels

- (RU) Russia Lower House to vote on Crimea Treaty ratification

- (IL) Israel Feb Leading 'S' Indicator M/M: No est v 0.3% prior

- (AR) Argentina Mar Consumer Confidence Index: No est v 33.5 prior

- 05:30 (ES) Spain Debt Agency (Tesoro) to sell combined €4.0-5.0B in 2017, 2019 and 2028 bonds

- 05:50 (FR) France Debt Agency (AFT) to sell €7.0-8.0B in 2016 and 2017 notes and 2019 bonds

- 06:00 (PL) Poland Mar Central/Eastern European ZEW Indicator

- 06:00 (IT) Italy Current Account Balance: No est v €1.9B prior

- 06:00 (EU) Daily Euribor Fixing

- 06:00 (IE) Ireland Debt Agency (NTMA) to sell €500M in 3-month Bills

- 06:00 (PL) Poland switch auction

- 06:00 (SE) Sweden to sell I/L Bonds

- 06:50 (FR) France Debt Agency (AFT) to sell €1.0-1.5B in I/L 2018, 2021 and 2024 bonds

- 07:00 (UK) Mar CBI Industrial Trends Total Orders: 5e v 3 prior; Selling Prices: No est v 17 prior

- 07:00 (IL) Israel Jan Manufacturing Production M/M: No est v 2.3% prior

- 07:00 (IE) Ireland Feb PPI M/M: No est v 0.4% prior; Y/Y: no est v -1.5% prior

- 07:00 (RU) Russia Gold and Forex Reserve w/e Mar 14th: No est v $494.6B prior

- 07:45 (US) Daily Libor Fixing

- 08:00 (RO) Romania to sell €200M in Bonds

- 08:00 (RU) Russia Feb Unemployment Rate: 5.7%e v 5.6% prior

- 08:00 (RU) Russia Feb Real Retail Sales M/M: -1.5%e v -27.4% prior; Y/Y: 2.6%e v 2.4% prior

- 08:00 (RU) Russia Feb Real Disposable Income: -1.0%e v -1.5% prior

- 08:00 (RU) Russia Feb Real Wages Y/Y: 2.6%e v 2.5% prior

- 08:00 (RU) Russia Feb Investment in Productive Capacity: -4.5%e v -7.0% prior

- 08:30 (US) Initial Jobless Claims: 322Ke v 315K prior; Continuing Claims: 2.88Me v 2.855M prior

- 09:00 (PL) Poland Central Bank (NBP) March Minutes

- 08:30 (US) Weekly USDA Net Export Sales

- 09:15 (US) Baltic Dry Bulk Index

- 10:00 (US) Mar Philadelphia Fed Business Outlook: +3.2e v -6.3 prior

- 10:00 (US) Feb Existing Home Sales: 4.60Me v 4.62M prior

- 10:00 (US) Feb Leading Index: 0.2%e v 0.3% prior

- 10:00 (BE) Belgium Mar Consumer Confidence Index: No est v -4 prior

- 10:00 (MX) Mexico Q4 Aggregate Supply and Demand: 0.5%e v 1.5% prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (EU) ECB's Lautenschlaeger on panel in Dusseldorf

- 11:00 (US) Fed to purchase $2.25-2.75B in Notes

- 11:00 (US) Treasury Note Announcement

- 12:00 (CO) Colombia Q4 GDP Q/Q: No est v 1.1% prior; Y/Y: 4.5%e v 5.1% prior; Full year 2013 GDP: 4.0%e v 4.2% prior (revised from 4.2%)

- 12:00 (UK) BOE announcement on nest week APF operations

- 12:30 (UK) BOE's Weale

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

- 13:00 (BR) Brazil to sell 2014, 2016, 2018 Bills

- 13:00 (BR) Brazil to sell Fixed-rate 2021 and 2025 bonds

- 13:30 (SE) Sweden Central bank (Riksbank) Dep Gov Skingley

- 15:00 (US) API Monthly Statistical Report

- 16:00 (US) Fed releases Dodd-Frank Act Supervisory Stress Test Results