Deflation pressures seems to be easing in Europe; Shell/BG confirm merger plans

Notes/Observations

- Bank of Japan (BOJ) keeps policy steady with Monetary Base maintained at ¥80T (as expected) but dissenter Kiuchi proposed tapering to ¥45T

- Deflation pressures seem to be easing in Europe (Hungary, Swiss data)

- Greece PM Tsipras in Moscow for talks; Will not ask for aid; wants to resolve its debt problems within the European Union

- BG and Shell to merge (first oil super-merger in more than a decade)

Economic data

- (JP) Japan Mar Eco Watchers Current Survey: 52.2 v 50.5e (4th straight month of improvement); Outlook Survey: 53.4 v 53.5e

- (DE) Germany Feb Factory Orders (miss) M/M: -0.9% v +1.5%e; Y/Y: -1.3% v +0.5%e

- (FR) France Feb Trade Balance: -€3.5B v -€3.8Be

- (HU) Hungary Feb Industrial Production M/M: -0.3 v +4.4% prior; Y/Y: 5.8% v 5.7%e

- (HU) Hungary Mar CPI (beat) M/M: 0.6% v 0.5%e; Y/Y: -0.6% v -0.7%e

- (CH) Swiss Mar CPI (beat) M/M: 0.3% v 0.1%e; Y/Y: -0.9% v -1.1%e

- (DE) Germany Mar Construction PMI: 53.3 v 53.1 prior

- (TW) Taiwan Mar Trade Balance (miss): $4.1B v $5.0Be; Exports Y/Y: -8.9% v -2.0%e; Imports Y/Y: -17.8% v -13.6%e

- (EU) Euro Zone Feb Retail Sales M/M: -0.2% v -0.2%e; Y/Y: 3.0% v 2.8%e

Fixed Income:

- (MX) Mexico to sell 100-year EUR-denominated bond; Yield guidance seen at 4.5%

- (IN) India sold total INR140B vs. INR140B indicated in 3-month and 6-month Bills

- (EU) ECB allotted $0.0M in 7-day USD Liquidity Tender at 0.62% vs. $0.0M prior

- (SE) Sweden sold total SEK4.0B vs. SEK4.0B indicated in 2022 and 2025 Bonds

- (GR) Greece Debt Agency (PDMA) sold total €1.14B vs. €875M indicated in 26-Week Bills; Avg Yield: 2.97% (matches 2-year high) v 2.97% prior; Bid-to-cover: 1.30x (mtaches 2-year low) v 1.30x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.1%, FTSE 100 +0.6% at 6,999, DAX -0.1% at 12,115, CAC-40 +0.3% at 5,166, IBEX-35 +0.1% at 11,742, FTSE MIB flat at 23,699, SMI +0.2% at 9,281, Athens Stock Exchange -0.9%, S&P 500 Futures +0.2% at 2,071]

- Market Focal Points/Key Themes: Equity markets open mixed following sharp gains seen on Tuesday, US Fed minutes in focus; Greek equities open lower with today's bill auction and April 9th IMF payment deadline in focus; Shell bids £47B for BG Group, transaction supportive to energy sector; European airlines generally report higher load factors in March (Air France, Aer Lingus, EasyJet); ECB Linde (Spain) noted improvement in core inflation, Mersch (Luxembourg) said ECB could adjust pace of QE if inflation overshoots; Apple downgraded by European broker; Alcoa reports earnings after US close

By Sector

- Energy [BG BG.UK +38% (offer from Shell); Shell RDSA.UK -2.5% (offer for BG)]

- Financials [Experian EXPN.UK +2% (broker commentary)]

- Consumer Discretionary [Sky SKY.UK +3% (takeover speculation)]

- Stoxx50 Sectors [Energy +1%, Utilities +0.9%, Financials +0.5%, Basic Materials +0.5%, Telecom +0.1%; Consumer Cyclical -0.6%, Industrials -0.2%, Consumer Non-Cyclical -0.2%, Technology -0.1%]

Speakers

- ECB's Linde (Spain): Core inflation showing signs of stabilization, deflation risk now further away. Reiterated the importance of anchoring inflation expectations

- BOE Q1 Credit Conditions and Lending Survey: Banks predict increase in demand and availability of mortgage lending in Q2

- IFO/INSEE/ISTAT joint forecasts: Euro zone inflation seen at -0.1% in Q2, rebounding to +0.1% in Q3. The growth outlook for both Q2 and Q3 GDP seen at +0.4%

- Russia Deputy Econ Min Klepach: Russia should review its inflation targeting approach

- Russia Central Bank's Dmitriev: Saw no risks to financial stability from recent RUB currency (Ruble) appreciation. RUB currency gains already contributed to easing inflation. Price growth to peak in Q2

- Turkey PM Davutoglu: Determined to get 2015 GDP growth above 4.0% and above 5% in coming years

- Japan Chief Cabinet Sec Suga: Monetary policy is up to the BOJ

- BOJ Gov Kuroda post rate decision press conference reiterated the view that domestic recovery was moderate and its positive cycle remained in place. He also reiterated view that inflation to hit the 2% target during FY15/16 period and would examine both upside and downside risks to economy and adjust policy as appropriate. BOJ also reiterated that too early to discuss exit from measures. Underlying inflation trend was steadily improving; CPI around 0% (zero) but longer term price trend is up

**Currencies***

- The FX price action in recent session was showing a return of 2-way action rather than the one-sided market that prevailed before US payroll report.

- The EUR/USD was higher and trying to make its way back towards the 1.09 area. The EUR managed to shake off some disappointing German Factory Orders for Feb.

- The JPY was firmer and back below the 120 level after BOJ kept its policy steady. There had been some speculation the central bank might expand its easing. Instead, one BOJ member was calling for tapering

- RUB currency (Ruble) firmed to test below 54 handle against the USD in session; best level for the Russian currency in 2015

**Political/In the Papers:

- (IT) Italy PM Renzi: Govt not planning to raise taxes, budget plan did not include any spending cuts; Could implement tax cuts in 2016 if the conditions were appropriate; Govt forecasting 2015 GDP +0.7%, 2016 GDP +1.4%, and 1.5% in 2017

- (GR) Greece has not asked Russia for aid; wants to resolve its debt problems within the European Union

Looking Ahead

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

- (FI) Finland Parliamentary Elections' Advance Voting (through next Tuesday 14th)

- (GR) Greece Fin Min Varoufakis to meet France Fin Min Sapin in Paris

- (ID) Indonesia Mar Foreign Reserves: No est v 115.5B prior

- 06:00 (GR) Greece PM Tsipras with Russia President Putin in Moscow

- 05:30 (DE) Germany to sell €4.0B in 0% 2017 Schatz

- 05:30 (UK) DMO to sell £4.0B in 2% 2020 Gilts

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia to sell combined RUB25B in OFZ 2017 and 2023 bond

- 07:00 (US) MBA Mortgage Applications w/e Apr 3rd: No est v +4.6% prior

- 07:00 (BR) Brazil Mar FGV Inflation IGP-DI M/M: 1.0%e v 0.5% prior; Y/Y: 3.2%e v 3.7% prior

- 07:00 (CL) Chile Mar CPI M/M: 0.8%e v 0.4% prior; Y/Y: 4.4%e v 4.4% prior; CPI Core M/M: 0.6%e v 0.6% prior

- 07:30 (CL) Chile Central Bank's Traders Survey

- 08:00 (US) Fed's Powell (FOMC voter) on monetary policy in NY

- 08:00 (HU) Hungary Central Bank's Minutes

- 08:00 (BR) Brazil Mar IBGE Inflation IPCA M/M: 1.4%e v 1.2% prior; Y/Y: 8.2%e v 7.7% prior

- 08:15 (US) Baltic Dry Bulk Index

- 09:00 (MX) Mexico Mar Consumer Confidence Index: 92.2e v 90.3 prior

- 09:00 (EU) Weekly ECB Forex Reserves: € vs. €247.2B prior

- 09:30 (US) Fed's Dudley (dove, FOMC voter) speaks on Monetary Policy in New York

- 10:00 (HU) Hungary Mar YTD Budget Balance (HUF): No est v -310.7B prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 11:00 (FR) ECB's Noyer (France) at event

- 11:30 (BR) Brazil Weekly Currency Flows

- 11:45 (CA) Canada Fin Min Oliver on domestic economy

- 13:00 (US) Treasury to sell 10-Year Notes Reopening

- 14:00 (US) Fed Minutes from March 17-18 FOMC Meeting

- 18:00 (NZ) New Zealand Mar ANZ Heavy Truckometer M/M: No est v -1.3% prior

- 19:01 (UK) Mar RICS House Price Balance: No est v 14% prior

- 20:30 (AU) Australia to sell Treasury Bills

- 23:00 (TH) Thailand to sell 1-month, 3-month and 6-month Bills

- 23:35 (JP) Japan to sell 3-Month Bill

- 23:45 (JP) Japan to sell 30-Year Bonds

- (KR) Bank of Korea (BoK) Interest Rate Decision: Expected to leave 7-Day Repo Rate at 1.75%