Euro Zone deflation eases since the implementation of ECB QE

EU Mid-Market Update: Euro Zone deflation eases since the implementation of ECB QE; German unemployment improves for the 6th straight month

Notes/Observations

- Month-end/quarter-end (and some cases fiscal-year end) causing choppy and erratic price action

- Greek drama continues with no sign of an agreement between Greece and its creditors

- Euro Zone inflation trends continue to improve since the implementation of ECB QE

- German unemployment hits fresh record low at 6.4%

- UK Q4 GDP revised higher in final reading

- USD poised to end Q1 with best quarter performance since late 2008

Economic data

- (JP) Japan Feb Vehicle Production Y/Y: -5.3% v -9.7% prior (8th month of declines)

- (JP) Japan Feb Annualized Housing Starts: 905K v 877Ke; Housing Starts Y/Y: -3.1% v -6.8%e; Construction Orders Y/Y: 1.0% v 27.5% prior

- (DE) Germany Feb Retail Sales (beat) M/M: -0.5% v -0.7%e; Y/Y: 3.6% v 3.4%e

- (DE) Germany Feb ILO Employment: 42.827M v 42.799M prior; Unemployment Rate: 4.8% v 4.8% prior

- (FI) Finland Jan Final Trade Balance: -€0.3B v -€0.3B prelim

- (FR) France Feb PPI M/M: +0.7%v -1.0% prior; Y/Y: -2.6% v -3.4% prior

- (FR) France Feb Consumer Spending (beat) M/M: +0.1% v -0.1%e; Y/Y: 3.0% v 2.6%e

- (TR) Turkey Q4 GDP Q/Q: 0.7% v 0.3%e; Y/Y: 2.6% v 1.7% prior; GDP WDA Y/Y: 2.6% v 1.7%e

- (TR) Turkey Feb Trade Balance: -$4.7B v -$4.3Be

- (DE) Germany Mar Unemployment Change (beat): -15K v -12Ke; Unemployment Rate: 6.4% (record low) v 6.5%e

- (IT) Italy Feb Preliminary Unemployment Rate (miss): 12.7% v 12.6%e

- (UK) Q4 Final GDP (beat) Q/Q: 0.6% v 0.5%e; Y/Y: 3.0% v 2.7%e

- (UK) Q4 Current Account Balance: -£25.3B v -£22.0Be

- (EU) Euro Zone Feb Unemployment Rate: 11.3% v 11.2%e

- (EU) Euro Zone Mar Advance CPI Estimate Y/Y: -0.1% v -0.1%e; CPI Core Y/Y: 0.6% v 0.7%e

- (BE) Belgium Feb Unemployment Rate: 8.5% v 8.5% prior

- (IT) Italy Mar Preliminary CPI NIC incl. tobacco M/M: 0.1% v 0.2%e; Y/Y: -0.1% v -0.1%e

Fixed Income:

- (EU) ECB allotted €103.6B in 7-Day Main Refinancing Tender at fixed 0.05%

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.1%, FTSE 100 -0.5% at 6,857, DAX -0.3% at 12,055, CAC-40 -0.1% at 5,079, IBEX-35 +0.2% at 11,546, FTSE MIB -0.3% at 23,201, Athens Stock Exchange +2.5%]

- Market Focal Points/Key Themes: Equity markets open mixed following the gains seen on Monday's session, with the focus remaining on US payrolls data due for release on Friday and Thursday's ECB meeting; Lower oil prices weigh on energy firms

By Sector

- Consumer Discretionary [Kingfisher KGF.UK +3.5% (cash return plan); Mitie Group MTO.UK -5% (cautious outlook)]

- Stoxx50 Sectors [Utilities -0.3%, Telecom -0.2%, Energy -0.2%, Consumer Cyclical -0.1%; Industrials +0.6%, Technology +0.4%, Consumer Non-Cyclical +0.4%, Basic Materials +0.3%, Financials +0.1%]

Speakers

- Greece PM Tsiperas said to oppose Russia sanctions as they were a road to nowhere (**Note: PM will visit Russia visit on April 8th)

- Sweden Fin Min Andersson stated that the govt was not planning any austerity measures and that reforms have to be fully financed. Various factor to support domestic economy, including ECB measures, US recovery and lower oil prices

- Fitch reaffirms China sovereign rating at A+ with stable outlook

- BOJ Gov Kuroda reiterated that core CPI might fall below zero in coming months as crude oil outlook remained most uncertain factor. Reiterated to anchor 2% inflation around FY15

- Bank of Korea (BOK) March Minutes: Governor Lee Ju-yeo stated that move to cut Repo Rate was made after data early in the year had shown signs of weakness. A dissenter noted that rate cut could delay corporate restructuring and was not magic wand for growth

- Thailand PM Prayuth said to have asked King Bhumibol Adulyadej's permission to lift martial law

- China govt confirmed that Deposit Insurance scheme to begin in May and be managed by PBoC

- Taiwan to expand daily limit of individual stock movement from 7% to 10%; effective Jun 1st

- Colombia Fin Min Cardenas stated that the COP currency (peso) decline was welcome outcome and natural for it to decline with recent oil price action. Colombia was not considering fx intervention at this time.

- Russia foreign Min Lavrov to return to Switzerland later today to attend Iran nuclear talks and believes prospects of Iran talks were good

Currencies

- The USD was poised to end Q1 on a firm note with its best quarterly performance since late 2008 aided by diverging monetary policy between the Fed and other G7 central banks. Over two dozen global rate cuts were performed in Q1 while the Fed edged closer to raising rates this year

- The EUR/USD was testing 1.0720 while USD/JPY held above the 120 handle.

- The GBP could not sustain gains after Q4 final GDP was revised higher. GBP/USD was off 0.2% just ahead of the NY morning at 1.4774

**Political/In the Papers:

- ECB bond-buying program could hinge on German debt supply. Article noted that ECB might have to tweak the rules of its massive bond-buying program because German debt was in short supply. Yields on many German bonds were already lower than that. The ECBs own rules prevent it from buying 42% of already-issued German government bonds, compared with 28% shortly before March 9 when the stimulus program began. Analyst noted that ECB might have to implement a policy change such as lowering its deposit rate further, or lifting its self-imposed limit of owning only 25% of any one bond

Looking Ahead

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

- (ZA) South Africa to sell 2030, 2032 and 2048 Bonds

- 05:30 (RO) Romania Central Bank (NBR) Interest Rate Decision:

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

- 05:30 (BE) Belgium Debt Agency to sell €2.5B in 3-month and 6-month Bills

- 06:00 (EU) EU Panel vote on benchmark rules affecting key financial rates

- 06:00 (IT) Italy Feb PPI M/M: No est v -1.6% prior; Y/Y: No est v -3.7% prior

- 06:00 (MY) Malaysia Feb M3 Money Supply Y/Y: No est v 6.1% prior

- 06:00 (IS) Iceland to sell Bonds

- 06:30 (IN) India Feb Fiscal Deficit INR Crore: No est v 3.6B prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (EU) ECB's Makuch (Slovakia)

- 07:00 (RU) Russia to announce weekly OFZ bond auction

- 07:30 (IN) India Q4 Current Account Balance: No est v -$10.1B prior

- 07:30 (BR) Brazil Feb Central Govt Budget Balance (BRL): -2.0Be v +10.4B prior

- 07:45 (US) Chain Store Sales

- 08:00 (ZA) South Africa Feb Trade Balance (ZAR): -5.7Be v -24.2B prior

- 08:00 (PL) Poland Central Bank (NBP) Mar Inflation Expectations Survey: 0.2%e v 0.2% prior

- 08:00 (PL) Poland Q4 Current Account Balance: -€1.3Be v -€1.8B prior

- 08:00 (BR) Brazil Feb PPI Manufacturing M/M: No est v -0.1% prior; Y/Y: No est v 2.9% prior

- 08:00 (CL) Chile Feb Unemployment Rate: 6.3%e v 6.2% prior

- 08:00 (ES) Spain Feb YTD Budget Balance: No est v -€35.6B prior

- 08:00 (US) Fed's Lacker (hawk, FOMC voter) on economic outlook in Richmond

- 08:15 (DE) German, French Cabinets hold joint meeting in Berlin

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CA) Canada Jan GDP M/M: -0.2%e v +0.3% prior; Y/Y: 2.4%e v 2.8% prior

- 08:30 (CA) Canada Jan Average Weekly Earnings Y/Y: No est v % prior

- 08:50 (US) Fed's Lockhart (moderate, FOMC voter) gives welcoming remarks at conference in Georgia

- 08:55 (US) Weekly Redbook Sales

- 09:00 (US) Mar ISM Milwaukee: 51.5e v 50.32 prior

- 09:00 (US) Jan S&P/ CaseShiller 20 City M/M: 0.70%e v 0.87% prior; Y/Y: 4.60%e v 4.46% prior; 20-City HPI: 172.90e v 173.02 prior

- 09:00 (US) Jan S&P/ CaseShiller M/M: No est v 0.73% prior; Y/Y: No est v 4.62% prior; HPI: No est v 166.82 prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:00 (US) Fed's Mester (non voter, hawk) moderates panel at Georgia conference

- 09:00 (EU) ECB SSM report

- 09:00 ECB's Nouy (head of SSM) in EU Parliament

- 09:30 (BR) Brazil Feb Nominal Budget Balance (BRL): -28.0Be v +3.0B prior; Primary Budget Balance (BRL): 2.0Be v 21.1B prior; Net Debt to GDP Ratio: 35.6%e v 36.6% prior

- 09:45 (US) Mar Chicago Purchasing Manager: 51.8e v 45.8 prior

- 09:45 (EU) EU Foreign Min Mogherini with EU's Tusk in Tunis

- 10:00 (US) Mar Consumer Confidence Index: 96.4e v 96.4 prior

- 10:30 (NZ) New Zealand Apr Dairy Auction

- 11:00 (MX) Mexico Feb Net Outstanding Loans (MXN): No est v 2.728T prior

- 11:00 (MX) Mexico Weekly International Reserves

- 11:30 (US) Treasury to sell 4-week and 52-Week Bills

- 12:00 (CO) Colombia Feb Urban Unemployment Rate: 10.9%e v 11.8% prior; National Unemployment Rate: No est v 10.8% prior

- 12:00 (US) USDA Quarterly Report

- 15:00 (US) Fed's George (non-voter, hawk)in NY

- 15:00 (AR) Argentina Feb Construction Activity Index M/M: No est v 2.0% prior; Y/Y: No est v 0.1% prior

- (CO) Colombia Q4 Current Account Balance: No est v -$5.0B prior

- 16:30 (US) Weekly API Oil Inventories

- 19:00 (KR) South Korea Mar CPI M/M: 0.1%e v 0.0% prior; Y/Y: 0.4%e v 0.5% prior; CPI Core Y/Y: 2.0%e v 2.3% prior

- 19:50 (JP) Japan Q1 Tankan Large Manufacturers Index: 14e v 12 prior; Large Non-Manufacturers Index: 17e v 16 prior; Large All Industry Capex: 0.4%e v 8.9% prior

- 19:50 (JP) Japan Q1 Tankan Small Manufacturers Index: 4e v 1 prior; Small Non-Manufacturers Index: 4 v -5 prior

- 20:00 (KR) South Korea Mar Trade Balance: $8.0Be v $7.7B prior; Exports Y/Y: -1.9%e v -3.4% prior; Imports Y/Y: -12.1%e v -19.6% prior

- 20:00 (KR) South Korea Manufacturing PMI: No est v 51.1 prior

- 21:00 (CN) China Mar Manufacturing PMI (Official govt): 49.7e v 49.9 prior

- 21:00 (CN) China Mar Non-manufacturing PMI: No est v 53.9 prior

- 21:35 (JP) Japan Mar Final Manufacturing PMI: No est v 50.4 prelim

- 21:45 (CN) China Mar Final HSBC Manufacturing PMI: 49.3e v 49.2 prelim