GBP approaches 5-year lows while Gilt yields rise on election jitters

Notes/Observations

- China disinflation eases; CPI comes in a touch better YoY: 1.4% v 1.3%e); PPI registers its 1st sequential rise in 8 months YoY: -4.6% v -4.8%e).

- Nikkei touched above the 20,000 level for fresh 15-year highs; Shanghai Composite closes above 4,000 for 7-year highs

- Foreign investors said to be reducing Gilt holdings at record pace amid election gridlock concerns; UK yields up 4bps in session to test above 1.60%; GBP/USD approaching 5-year low

- UK Feb Industrial Production data misses expectations

Economic data

- (CH) Swiss Mar Unemployment Rate (inline): 3.4% v 3.4%e; Unemployment Rate (Seasonally Adj): 3.2% v 3.2%e

- (FI) Finland Feb Industrial Production (miss) M/M: -0.4% v +1.0%e; Y/Y: -5.1% v -1.2%e

- (FR) France Feb YTD Budget Balance: -€23.4B v -€9.4B prior

- (FR) France Feb Industrial Production (beat) M/M: 0.0% v -0.1%e; Y/Y: 0.6% v 0.5%e

- (FR) France Feb Manufacturing Production (miss) M/M: 0.0% v 0.6%e; Y/Y: -0.8% v -0.3%e

- (ES) Spain Feb Industrial Output NSA Y/Y: +1.1% v -2.5% prior; Industrial Output SA Y/Y: 0.6% v 0.1%e

- (DK) Denmark Feb Industrial Production M/M: +0.8% v -2.6% prior

- (DK) Denmark Mar CPI M/M: 0.5% v 1.0% prior; Y/Y: 0.6% v 0.2% prior

- (CZ) Czech Feb Industrial Output Y/Y: 4.5% v 4.4%e

- (TR) Turkey Feb Current Account Balance: -$3.2B v -$2.8Be

- (SE) Sweden Mar Average House Prices (SEK): 2.554M v 2.578M prior

- (NO) Norway Feb Industrial Production M/M: +2.6% v -2.9% prior; Y/Y: +1.9% v -0.4% prior

- (NO) Norway Feb Manufacturing Production M/M: 1.2% v 1.3%e ; Y/Y: 0.8% v 0.1% prior

- (NO) Norway CPI (miss) M/M: 0.3% v 0.4%e; Y/Y: 2.0% v 2.1%e

- (RU) Russia Money Supply Narrow w/e Apr 3rd (RUB): 7,86T v 7.93T prior

- (UK) Feb Industrial Production (miss) M/M: 0.1% v 0.3%e; Y/Y: 0.1% v 0.3%e

- (UK) Feb Manufacturing Production (miss) M/M: 0.4% v 0.4%e ; Y/Y: 1.1% v 1.3%e

- (UK) Feb Construction Output M/M: -0.9% v +2.2%e; Y/Y: -1.3% v +1.9%e

- (RU) Russia Q1 Preliminary Current Account: $23.5B v $25.4Be

- (RU) Russia Feb Trade Balance: $13.6B v $13.2Be

Fixed Income

- (IN) India sold total INR160B in 2020, 2026, 2033 and 2044 bonds

- (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 12-month Bills; Avg Yield: 0.013% (record low)v 0.079% prior; Bid-to-cover: 1.77x v 1.77x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.2%, FTSE 100 +0.3% at 7,034, DAX +0.7% at 12,255, CAC-40 +0.2% at 5,218, IBEX-35 flat at 11,728, FTSE MIB +0.2% at 23,848, SMI +0.5% at 9,440, Athens Stock Exchange +1%, S&P 500 Futures -0.1% at 2,083]

- Market Focal Points/Key Themes: Equity markets open generally higher following Thursday's gains; DAX trades at fresh record high amid weaker euro; FTSE 100 pares gains amid weaker UK industrial production; Carrefour Q1 sales above ests; Cautious outlook weighs on shares of sugar firm Suedzucker;

By Sector:

- Consumer Discretionary [Carrefour CA.FR +3% (Q1 sales above ests); Hays HAS.UK -4% (Q3 net fees below ests), Givaudan GIVN.CH -2% (Q1 sales flat)]

- Consumer Staples [Suezdzucker SZU.DE -10% (profit warning), CropEnergies CE2.DE -3% (cautious outlook)]

- Utilities [A2A A2A.IT +2% (issued medium term targets) ]

- Healthcare [Shire SHP.UK +4% (FDA priority review)]

Speakers

- German Bundesbank member Dombret reiterated further assistance to Greece can only be granted if it applies to sound public finances

- Turkey Econ Min Zeybekci: Turkey needs annual GDP growth above 5% for stable unemployment rate. Reiterated view that a weaker TRY currency (Lira) was not a risk for the domestic economy; could have short-term inflation impact. Central bank should act in line with govt decisions to support growth

- Indonesia Fin Min Brodjonegoro: 2015 GDP growth target remains 5.3-5.7% range

- BoJ's Nakaso reiterated Board view that additional easing was unnecessary as long as there was no change in underlying inflation trend. He also reiterated any cut in inflation forecast would not trigger monetary easing if underlying trend of inflation was improving. Had no intention of changing BOJ commitment to achieving the 2% inflation target in forecast horizon (2-years' time). Would not hesitate to adjust policy if needed if any sign of change in inflation trend

Currencies

- The USD Index was at 3-week highs as the greenback continued to build momentum following the FOMC minute's release from mid-week. European bond yields continue to move lower as the ECB continued its QE buying.

- EUR/USD hit fresh April lows testing below the 1.06 level

- The UK Gilt yields were higher in the session attributed to foreign investors cutting Gilt holdings at record pace amid election gridlock concerns. The GBP/USD approached 5-year lows to test 1.4622 after missing expectations in Feb production data coupled by the upcoming elections jitters

**Political/In the Papers:

- US Semi-annual Currency Report: No major partner named as a currency manipulator; Urges Korea to stop intervening in FX markets; should only intervene in disorderly market cases. China has made real progress, but CNY remains significant undervalued. Warned Europe, Japan against overreliance on monetary policy and should use fiscal stimulus to complement monetary policy

- (RU) Russia govt believes that EU with neither strengthen nor lift sanctions early

- (UK) Foreign investors are cutting Gilt holdings at record pace amid election gridlock concerns, According to Nomura, investors in Japan may be shifting out of Gilts and into US Treasures and Australian bonds.

Looking Ahead

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

- (MX) Mexico Mar Nominal Wages: No est v 4.3% prior

- 05:30 (ZA) South Africa to sell I/L 2025, 2038 and 2050 bonds

- 06:00 (ES) ECB's Linde (Spain) in Grenda

- 06:00 (UK) DMO to sell combined €3.5B in 1-month, 3-month and 6-month Bills (0.5B, 1.5B and 1.5B respectively)

- 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil Apr IGP-M Inflation (1st Preview): 0.7%e v 0.7% prior

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

- 07:30 (IN) India Weekly Forex Reserves w/e Apr 3rd: No est v $341.4B prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces specific bonds to be issued in next week auction

- 08:15 (CA) Canada Mar Annualized Housing Starts: 175.0Ke v 156.3K prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Mar Import Price Index M/M: -0.4%e v +0.4% prior; Y/Y: -10.2%e v -9.4% prior

- 08:30 (CA) Canada Mar Net Change in Employment: 0.0Ke v -1.0K prior; Unemployment Rate: 6.9%e v 6.8% prior; Full Time Employment Change: No est v +34.0K prior; Part Time Employment Change: No est v -34.9K prior; Participation Rate: No est v 65.8%

- 08:30 (US) Fed's Lacker speaks on Economic Outlook in Sarasota, Florida

- 09:00 (MX) Mexico Feb Industrial Production M/M: +0.4%e v -0.4% prior; Y/Y: 1.6%e v 0.3% prior; Manufacturing Production Y/Y: 3.5%e v 1.2% prior

- 10:00 (UK) Mar NIESR GDP Estimate: No est v 0.6% prior

- 11:30 (EU) Potential Rating Agency commentary on European sovereigns on Friday

- 12:20 (US) Fed's Kocherlakota speaks in Bloomington, Minnesota

- 13:00 (US) Weekly Baker Hughes Rig Count

- 14:00 (US) Mar Monthly Budget Statement: -$43.4Be v -$36.9B prior

- 14:00 (IT) Italy's Cabinet to meet to approve budget plan

- (PE) Peru Feb Trade Balance: -$0.3Be v -$0.5B prior