Grexit remains a concern

EU Mid-Market Update: Greece remains a concern; German ZEW Survey mixed coupled with cautious remarks

Notes/Observations

- RBA April Minutes keeps door open for more rate cuts but saw advantage to awaiting more data

- Elevated Greek uncertainty persists as the country problems could worsen; focus on upcoming Eurogroup meeting (Friday)

- German April ZEW Survey missed with Current Situation Survey improving for the 6th straight month (highest since July 2011) but its expectation survey falling for the 1st time in 6 months

- The 3-month Euribor fixing turns negative for the first time ever

Economic data

- (JP) Japan Feb Final Leading Index CI: 104.8 v 105.3 prelim; Coincident Index: 110.7 v 110.5 prelim

- (JP) Japan Mar Supermarket Sales Y/Y: -8.6 v -0.8% prior

- (JP) Japan Mar Nationwide Dept Sales Y/Y: -19.7% v +1.1% prior; Tokyo Dept Store Sales Y/Y: -16.5% v 5.3% prior

- (SE) Sweden Mar Unemployment Rate (beat): 8.0% v 8.3%e; Unemployment Rate (Seasonally Adj): 7.6% v 7.8%e; Unemployment Rate Trend: 7.7% v 7.8% prior

- (HK) Hong Kong Mar CPI Composite Y/Y: 4.5% v 4.4%e

- (DE) Germany Apr ZEW Current Situation Survey (beat): 70.2 v 56.5e; Expectations Survey Miss): 53.3 v 55.3e

- (EU) Euro Zone Apr ZEW Expectations Survey: 64.8 v 62.4 prior

- (EU) Euro Zone 2014 Govt Debt/GDP Ratio: 91.9% v 90.9% prior

Fixed Income:

- (EU) EFSF opened its book to sell new 10-year bond; guidance seen -21bps to mid-swaps

- (ES) Spain Debt Agency (Tesoro) sold total €2.57B vs. €2.0-3.0B indicated range in 3-Month and 9-Month Bills

- (ZA) South Africa sold total ZAR2.35B in 2030, 2037 and 2048 Bonds

- (EU) ECB allotted €95.7B in 7-Day Main Refinancing Tender at fixed 0.05% vs. €98.0Be

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.6%, FTSE 100 +0.3% at 7,074, DAX +1.2% at 12,033, CAC-40 +0.5% 5,210, IBEX-35 +0.6% at 11,461, FTSE MIB -0.3% at 23,268, SMI +1% at 9,337, Athens Stock Exchange -2.7%, S&P 500 Futures +0.5% at 2,101]

- Market Focal Points/Key Themes: Equity markets open higher amid earnings from Credit Suisse, ARM Holdings and SAP; Greek equities decline and yields continue to rise as ECB said to consider new haircuts related to collateral; Credit Suisse Q1 profits above ests on trading results; SAP results have positive fx impact; Swiss Biotech Actelion raises outlook; Equities in China and Hong Kong close higher; US morning earnings (Baker Hughes, Dupont, Harley Davidson, Lockheed Martin, UTX, Verizon, Under Amour); Germany ZEW data mixed

By Sector

- Consumer Discretionary [Carpetright CPR.UK +7% (raised outlook), Publicis PUB.FR +4% (Q1 sales above ests), Sky SKY.UK +3% (9-month Op profit +20%), L'Oreal OR.FR +1% (Q1 sales above ests); Associated British Foods ABF.UK -3% (H1 sales below ests)]

- Basic Materials/Resources [Akzo Nobel AKZA.NL +2% (Q1 op profit above ests); Rio Tinto RIO.UK -1% (Q1 iron ore production below ests)]

- Healthcare [Actelion ATLN.CH +5% (raised outlook)]

- Industrials [Peugeot UG.FR +2% (production increase), Schneider Electric SU.FR +1% (reaffirmed outlook)]

- Technology [ARM Holdings ARM.UK +5% (Q1 Rev +22%, above ests), SAP SAP.DE +2% (reaffirmed outlook)]

- Stoxx50 Sectors [Technology +2%, Basic Materials +1.9% Industrial +1.4%, Consumer Non-Cyclical +1%, Consumer Cyclical +0.8%, Utilities +0.5%, Financials +0.3%, Energy flat; Telecom -0.5%]

**Speakers**

- ECB said to study curbs on Greek bank support, amid rising unease. Studying measures to increase haircuts for Greek banks accessing Emergency Liquidity Assistance (ELA) if Greece reform progress is absent. Growing minority of ECB gov said to oppose Greek ELA. To lay out 3 options to reduce central bank risks

- ZEW Economists reiterated its view that domestic economy remained in good shape but added that the global economy was dampening export prospects and thus reducing scope for further improvement in German economy

- Russia PM Medvedev: Q1 GDP seen -2.0%

- Turkey Deputy PM Babacan said to be unsatisfied with USD exchange rate and could act

- Japan PM Abe Adviser Hamada stated that it saw the need more BOJ easing if could not hit 2% core-core CPI target

- Thailand Commerce Ministry to cut 2015 export growth target from 4.0% to 'above 1.0%'

- Bank of Korea (BOK) Parliament Report saw the domestic economy remaining on a recovery trend but was still fragile

- South Korea Fin Min Choi: Looking to minimize any shortfall in tax revenues and would consider measures to boost the economy in H2 if needed

- Bank of Korea (BOK) Gov Lee: FX rate determined by market forces (**Note: Standard G7 rhetoric)

- Fed's Rosengren (dovish, FOMC-non voter) suggested the Fed may need to set higher inflation targets in the future in order to support growth

- Abu Dhabi to invest over $25B over the next 5 years to increase its crude oil production from offshore fields

- Iran Dep Foreign Min Abdollahian: Optimistic for ceasefire in Yemen in coming hours

Currencies

- Elevated Greek uncertainty persists as the country problems could worsen. The focus remained on the upcoming Eurogroup meeting (Friday) to see if Greece delivers any of its promised reforms. The EUR/USD was moderately lower in the session to approach 1.0650 area.

- The USD/JPY edged towards the 120 area after Japan PM Abe Adviser Hamada: stated that the BOJ should enact more easing if it could not hit 2% core-core CPI target

- RBA minutes weighed upon the AUD currency during the Asian session. Dealers noted that RBA could delay any potential rate cut but would let its easing bias linger in order to keep the AUD currency under pressure

- Safe haven flows continue to support core European bonds

Political/In the Papers:

- (GR) Greece Central Bank issues decree instructing local government entities to deposit cash balances at the central bank

- (SA) Reportedly two US Navy vessels moves into Yemen waters to intercept weapons shipments from Iran bound for Houthi rebels

Looking Ahead

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

- (EU) EU General Affairs Ministers hold meeting in Luxembourg

- (ID) Indonesia to sell 6-month Islamic Bills;2-year; 5-year and 25-year Project Sukuk

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

- 05:30 (UK) DMO to sell £1.75B in Jan 3.50% 2045 Gilts

- 06:00 (IL) Israel Mar Trade Balance: No est v -$0.8B prior

- 06:30 (EU) ESM to sell €1.5B in 6-month Bills

- 06:45 (US) Daily Libor Fixing

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

- 07:00 (SE) Sweden Central bank (Riksbank) Dep Gov Ohlsson speaks at Seminar

- 07:45 (US) Goldman Economist Chain Store Sales

- 08:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to cut Base Rate by 15bps to 1.80%

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CA) Canada Feb Wholesale Trade Sales M/M: +0.5%e v -3.1% prior

- 08:55 (US) Weekly Redbook Sales

- 09:00 (EU) Weekly ECB Forex Reserves

- 10:00 (HU) Hungary Central Bank (NBH) Gov Matolcsy post Rate Decision statement

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills

- 10:30 (UK) DMO announces size of upcoming 2.0% 2025 Gilt auction next week

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

- 12:30 (EU) ECB's Nouy (head on SSM) in Geneva

- 15:00 (AR) Argentina Mar Trade Balance: $50Me v $53M prior

- 16:00 (CA) Canada Fin Min Oliver presents budget

- 16:30 (US) Weekly API Oil Inventories

- 19:50 (JP) Japan Mar Trade Balance: ¥44.6Be v -¥425.0B prior; Trade Balance Adjusted: -¥0.4Te v -¥0.6T prior; Exports Y/Y: 8.5%e v 2.5% prior (revised from 2.4%); Imports Y/Y: -12.6%e v -3.6% prior

- 20:30 (TW) Taiwan Mar Unemployment Rate: 3.7%e v 3.7% prior

- 21:30 (AU) Australia Q1 CPI Q/Q: 0.1%e v 0.2% prior; Y/Y: 1.3%e v 1.7% prior

- 23:00 (CN) China to sell 5-Year Bonds

- (CO) Colombia Mar Retail Confidence: No est v 21.4 prior; Industrial Confidence: No est v 7.3 prior

- (MX) Mexico Banamex Survey of Economists