German ZEW Current Situation Survey falls for the 2nd straight month

EU Mid-Market Update: German ZEW Current Situation Survey falls for the 2nd straight month; UK CPI annual reading moves back to positive territory but core misses expectations

Notes/Observations

- Still no credible sign of progress on Greece

- European Court of Justice (ECJ) issues its ruling on ECB OMT bond buying scheme and says it's in line with EU law and within ECB monetary policy mandate

- UK May CPI turns positive and in line with analyst consensus while core misses expectations

- Germany Jun ZEW Survey weighed down by external factors (particularly Greek concerns)

Economic data

- (EU) EU27 May New Car Registrations: 1.3% v 6.9% prior (20th straight month of gains)

- (DE) Germany May Final CPI (in line) M/M: 0.1% v 0.1%e; Y/Y: 0.7% v 0.7%e

- (DE) Germany May Final CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 0.7% v 0.7%e

- (CZ) Czech May PPI Industrial (beat) M/M: 0.4% v 0.2%e; Y/Y: -2.1% v -2.4%e

- (NO) Norway May Trade Balance (NOK): 21.8B v 1.2B prior

- (UK) May CPI (in line) M/M: 0.2% v 0.2%e; Y/Y: +0.1% v +0.1%e; CPI Core (miss) Y/Y: 0.9% v 1.0%e

- (UK) May RPI (miss) M/M: 0.2% v 0.3%e; Y/Y: 1.0% v 1.1%e; RPIX (Ex-Mortgage Interest Payments Y/Y: 1.0% v 1.1%e; Retail Price Index: 258.5 v 258.8e

- (UK) May PPI Input (miss) M/M: -0.9% v +0.6%e; Y/Y: -12.0% v -11.3%e

- (UK) May PPI Output M/M: 0.1% v 0.1%e; Y/Y: -1.6% v -1.6%e

- (UK) May PPI Output Core (in line) M/M: 0.0% v 0.0%e; Y/Y: 0.1% v 0.1%e

- (UK) Apr ONS House Price Y/Y: 5.5% v 9.6% prior

- (EU) Euro Zone Q1 Employment Q/Q: 0.1% v 0.7% prior; Y/Y: 0.8% v 0.9% prior

- (DE) Germany Jun ZEW Current Situation Survey (miss): 62.9 v 63.0e; Expectations Survey: 31.5 v 37.3e

- (EU) Euro Zone Jun ZEW Expectations Survey: 53.7 v 61.2 prior

Fixed Income:

- (ES) Spain Debt Agency (Tesoro) sold total €4.014B vs. €3.5-4.5B indicated in 6 Month and 12-Month Bills

- Sold €0.68B in 6-month Bills; Avg Yield: +0.126% v -0.002% prior; Bid-to-cover: 4.2x v 5.3x prior

- Sold €3.33B in 12-month Bills; Avg Yield: 0.248% v 0.015% prior; Bid-to-cover: 1.4x v 1.76x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.5%, FTSE 100 -0.5% at 6,679, DAX -1.1% at 10,861, CAC-40 -0.8% at 4,775, IBEX-35 -1.1% at 10,719, FTSE MIB -1.2% at 22,059, SMI flat at 8,927, Athens Stock Exchange flat, S&P 500 Futures -0.5% at 2,065]

- Market Focal Points/Key Themes: European equity markets open lower amid US equity declines and ongoing concerns related to Greece; Statoil confirms up to 1,500 job cuts; June 17th FOMC decision still in focus; German ZEW data below expectations

By Sector

- Consumer Discretionary [Lufthansa LHA.DE -1% (cautious outlook)]

- Industrials [Henkel HEN3.DE -1.5% (not expected to bid for P&G beauty unit); Gurit GUR.CH +6% (upbeat outlook)]

- Financials [Do Deutsche Office PMOX.DE +8% (takeover offer)]

- Stoxx50 sectors [Telecom -1.2%, Basic Materials -1.1%, Consumer Cyclical -1%, Industrials -1%, Utilities -0.7%, Consumer Non-Cyclical -0.7%, Financials -0.6%, Energy -0.4%, Technology -0.3%]

Speakers

- European Court of Justice (ECJ) issues its ruling on ECB OMT bond buying scheme and says it's in line with EU law and within ECB monetary policy mandate. Decision was binding and could not be appealed. OMT did not exceed ECB powers nor was it monetary financing of Member States

- Greece PM Tsipras reiterated view that critical that Greece reached a viable deal with creditors but not one which would bring the country back to its current situation within six months

- German CDU's Grosse-Broemer: Greece exit was possible if no agreement reached with creditors. Would have to accept a "Grexit" if no solid reform package is presented

- Austria Chancellor Faymann: To bring a compromise proposal to Greece PM Tsipras. Reports suggested that Austria would float the idea of a 5-year debt moratorium for Greece. Package should include savings and reforms and enable investments

- Austria Fin Min Schelling: Greece current proposal is insufficient to complete the EU bailout program and reach any agreement

- Greece Centrist Potami Party Leader: Will vote in parliament for any agreement that keeps Greece in euro. PM Tsipras stated that there were still steps that can be taken but creditors must also make concessions

- Germany CDU Fuchs: Greece primary surplus is not sufficient to service its debt but reiterated German stance that it did not wish Greece to leave the Euro

- Eurozone officials said to discuss holding emergency summit on Greece on Sunday if not agreement on Greece is reached at the Eurogroup meeting on Jun 18th

- Swiss SECO June 2015 Economic Forecasts cut its 2015 and 2016 GDP growth outlook saying that Swiss Franc currency to weight on exports. It maintained its inflation view

- ZEW Economists stated that external factors were reducing the scope for further improvement in Germany but the overall situation remained good. Ongoing concern over Greece and future of the global economy were factors

- Czech Central Bank Financial Stability Report: Financial sector resilience against possible adverse shocks has grown. Saw potential risks for financial stability in recovery of loans and fall in interest rates. Under adverse scenario 10 banks that represent approx 12% of sector assets would fall below regulatory threshold

- Czech Central Bank Lizal: Would not raise interest rates before ending fx cap for EUR/CZK

Currencies

- No credible sign of progress in Greece continued to weigh upon risk appetite as peripheral yields moved higher again in the session. The EUR/USD did break above the 1.13 handle on a stop-hunt ahead of the European Court of Justice (ECJ) ruling on ECB OMT bond buying scheme. The ruling was inline with its Jan opinion that bond buying plan was in line with EU law and within ECB monetary policy mandate. The pair saw its gains erode ahead of the NY morning and tested 1.1250

- The GBP was softer following the May inflation data. The CPI YoY reading managed to move back into positive territory but other components of the data was softer than expected. The GBP/USD fell from 1.5610 to test below 1.5560 afterwards.

- BoJ Governor Kuroda clarified remarks made last week on the yen currency in which he noted the yen was "unlikely to weaken further in real effective terms". The USD/JPY was fractional higher at 123.55

**Fixed Income:

- Bunds have been active today, trading up around 50 ticks on the back of the ECJ ruling. Bunds moved up 60 ticks to a high of 152.15 in a fast money move on the ruling announcement before retracing slightly currently trading at 151.75.

- Italian BTP futures have been very active in today's session with the future trading as low as 127.25 down almost 180 ticks earlier in the session, after the ECJ ruling announcement. However the future has retraced significantly since then trading at the high of the day at 128.65 up over 140 ticks from the lows.

- UK Gilt futures have reclaimed the 116 level as slightly weaker inflation figures from the UK has helped maintain the bid this morning. Gilts currently trade up 30 ticks for the day trading slightly below the highs of 116.21.

Political/In the Papers:

- (EU) ECB's Draghi: There is no pre-set ceiling for the ELA, major Greece banks are solvent but the situation is evolving, will be monitoring closely; The very short end of the curve remains well anchored; closely monitoring conditions on any unwarranted tightening of our stance to which we would have to react

- (GR) Greece Fin Min Varoufakis won't present a new list of reform proposals at Eurogroup meeting on Thurs - German press; Separate German press (Bild) report citing CDU Federal Board Member Baldauf stating Greece will not repay majority of its debts.

-(GR) Greece govt official reportedly denies earlier Germany press reports that Greece may be subjected to capital controls as part of a plan that results from any failure to come to an agreement in the upcoming weekend

- (CN) Shenzhen-Hong Kong stock connect date announcement to be on hold

Looking Ahead

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

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

- 05:30 (BE) Belgium Debt Agency to sell €2.2-2.7B in 3-month and 12-month Bills

- 06:00 (IL) Israel Q1 Preliminary GDP Annualized: No est v 2.5% advance

- 06:00 (TR) Turkey to sell New 2017 and tap of 2025 Bonds

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

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announces details on upcoming OFZ bond auction for Wed

- 07:00 (BR) Brazil Jun FGV Inflation IGP-10 M/M: 0.5%e v 0.5% prior

- 07:00 (EU) ECB's Mersch (Luxembourg) on OMT in Brussels

- 07:45 (DE) German Chancellor Merkel with Luxembourg PM Bettel in Berlin

- 08:00 (PL) Poland May CPI Core M/M: No est v 0.4% prior; Y/Y: No est v 0.4% prior

- 08:00 (BR) Brazil Apr Retail Sales M/M: +0.7%e v -0.9% prior; Y/Y: -1.8%e v _+0.4% prior

- 08:00 (BR) Brazil Apr Broad Retail Sales M/M: -0.5%e v -1.6% prior; Y/Y: -8.0%e v -0.7% prior

- 08:30 (US) May Housing Starts: 1.090Me v 1.135M prior; Building Permits: 1.100Me v 1.143M prior

- 08:30 (CA) Canada Apr Int'l Securities Transactions: 5.0Be v 22.5B prior

- 9:30 (NZ) Fonterra Global Dairy Trade auction

- 10:00 (SE) Sweden Parliament votes on Spring Adjustment Budget

- 10:30 (NL) ECB's Knot (Netherlands) on macroeconomic risks of financial systems

- 11:00 (AT) ECB's Nowotny (Austria) on panel in Vienna

- 12:00 (EU) EU's Hill at Friends of Europe conference in Brussels

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

- 17:00 (CO) Colombia Apr Retail Sales Y/Y: 3.0%e v 3.4% prior

- 17:00 (CO) Colombia Apr Industrial Production Y/Y: -0.4%e v -0.1% prior

- 18:45 (NZ) New Zealand Q1 Current Account Balance: No est v -3.2B prior; Current Account GDP Ratio YTD : No est v -3.3% prior

- 19:50 (JP) Japan May Trade Balance: No est v ¥-53.4B prior; Adj Trade Balance: No est v -¥208.7B prior; Exports Y/Y: No est v 8.0% prior; Imports Y/Y: No est v -4.2% prior

- 23:00 (CN) China to sell 7-Year Bonds

- 23:35 (JP) Japan to sell 12-month Bills