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Friday June 6, 2014 - 10:28:58 GMT
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| | Email EU Market Update: Global markets welcome ECB stimulus measures and sends peripheral euro zone bond yields to fresh record lows

Fri, 06 Jun 2014 5:17 AM EST

- Global markets welcoming the ECB stimulus measures and sends peripheral euro zone bond yields to new record lows
- ECB post decision shows united front on measures taken
- Focus now switches to US may Non-Farm Payroll report

***Economic Data***
- (MY) Malaysia Apr Trade Balance (MYR): 8.9B v 6.7Be; Exports Y/Y: 18.9% v 9.6%e; Imports Y/Y: +5.0% v -0.7%
- (JP) Japan Apr Preliminary Leading Index CI: 106.6 v 106.1e; Coincident Index: 111.1 v 110.9e
- (UK) Retailer John Lewis reports weekly LFL Partnership sales for week ending May 31st: +8.5 v +9.0% prior
- (DE) Germany Apr Industrial Production M/M: 0.2% v 0.4%e; Y/Y: 1.8% v 2.7%e
- (DE) Germany Q1 Labor Costs Y/Y: 1.1% v 2.2% prior; Labor Costs Q/Q: 0.4% v 1.1% prior
- (DE) Germany Apr Current Account Balance: 18.4B v 15.6Be; Trade Balance: 17.4B v 15.1Be; Exports M/M: +1.3%e; Imports M/M: 0.1% v 0.8%e
- (ZA) South Africa May Gross Reserves: $49.2B v $49.5Be; Net Reserves: $44.5B v $44.7Be
- (AU) Australia May Foreign Reserves: A$65.1B v A$62.1B prior
- (FR) France Apr YTD Budget Balance: -64.2B v -28.0B prior
- (FR) France Apr Trade Balance: -3.9B v -5.0Be
- (RU) Russia Narrow Money Supply w/e May 30th (RUB): 8.04T v 8.15T prior
- (CH) Swiss May Foreign Currency Reserves (CHF): 444.4B v 438.9B prior
- (ES) Spain Apr Industrial Output NSA Y/Y: -1.9% v +8.1% prior; Industrial Output SA Y/Y: 4.3% v 1.2%e
- (DK) Denmark Apr Current Account Balance (DKK): 9.1B v 9.5Be; Trade Balance (ex-Shipping): 5.3B v 7.8Be
- (HU) Hungary Apr Preliminary Trade Balance: 625.3M v 662.5Me
- (AT) Austria May Wholesale Price Index M/M: 0.1% v 0.3% prior; Y/Y: -1.5% v -1.3% prior
- (AT) Austria Q1 Final WIFO GDP Q/Q: 0.2% v 0.3% prelim
- (CZ) Czech Apr National Trade Balance (CZK): 16.5B v 18.5Be
- (CZ) Czech Apr Industrial Output Y/Y: 7.7% v 7.0%e; Construction Output Y/Y: 8.0% v 11.9% prior
- (EU) ECB 13M borrowed in overnight loan facility vs. 73.0M prior; 35.7B parked in deposit facility vs. 32.7B prior - Daily Eurosystem Liquidity Conditions
- (CH) Swiss May CPI M/M: 0.3% v 0.2%e; Y/Y: 0.2% v 0.1%e
- (CH) Swiss May CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 0.2% v 0.2%e
- (CH) Swiss Q1 Industrial Output Y/Y: 0.5 v 0.3% prior
- (NL) Netherlands Apr Industrial Production M/M: 2.3% v 2.0%e; Y/Y: 2.1% v 1.2% prior; Industrial Sales Y/Y: 6.0% v 2.9% prior
- (PH) Philippines May Foreign Reserves: $80.0B v $79.6B prior
- (NO) Norway Apr Industrial Production M/M: 0.1% v +2.3% prior; Y/Y: 3.2% v 7.1% prior
- (NO) Norway Apr Manufacturing Production M/M: 0.0% v -0.2%e; Y/Y: 1.8% v 3.7% prior
- (CZ) Czech May International Reserves: $57.9B v $58.4B prior
- (CZ) Czech Q1 Current Account Balance (CZK): 2.6B v 2.6Be
- (CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: K v 91.9K prior
- (UK) Apr Visible Trade Balance: -9.6B v -8.7Be; Total Trade Balance: -2.5B v -1.5Be; Trade Balance Non EU: -3.8B v -3.2Be
- (UK) BOE/GFK May Inflation Expectations Next 12-months: 2.6% v 2.8% prior
- (HK) Hong Kong May Foreign Reserves: $320.2B v $317.8B prior
- (GR) Greece Q1 Final GDP Y/Y: -0.9% v -1.1%e
- (IS) Iceland Q1 GDP Q/Q: %-0.7% v +0.3% prior; Y/Y: -0.1% v +3.8% prior
- (CY) Cyprus Q1 Final GDP Y/Y: -4.0% v -4.0% prelim

Fixed Income:
- (IN) India sold total INR160B in 2020, 2023, 2032 and 2042 bonds
- (ZA) South Africa sold total ZAR in I/L 2025, 2038 and 2050 Bonds

Indices [Stoxx50 +0.2%
, FTSE 100 +0.3% at 6,832, DAX +0.2% at 9,963, CAC-40 flat at 4,551, IBEX-35 +0.8% at 10,958, FTSE MIB +0.6% at 22,074, SMI -0.3% at 8,616, S&P 500 Futures +0.1% at 1,940]

- Market Focal Points/Key Themes: European markets open slightly higher as traders assess ECB moves ahead of US monthly payrolls report, DAX remains below 10,000, Equity price action subdued vs bond market, Deutsche Bank and BNP weigh on banking sector, Asian markets end mixed following ECB measures

By Sector
- Financials
[Commerzbank CBK.DE +2% (M&A speculation); Deutsche Bank DBK.DE -3% (trading ex-rights), BNP BNP.FR -1% (ongoing legal concerns), Banca Monte Paschi BMPS.IT -2.5% (priced rights offering)]
- Healthcare [GW Pharmaceuticals GWP.UK +7% (FDA fast track designation)]
- Industrials [Vallourec VK.FR -1.5% (to be removed from CAC-40)]
- Stoxx50 sectors [Technology +0.8%, Financials +0.4%, Industrials +0.3%, Basic Materials +0.3%, Telecom +0.1%; Energy -0.7%, Utilities -0.2%, Consumer Cyclical -0.2%, Consumer Non-Cyclical -0.2%]

- ECB's Hansson
(Estonia) stated that he did not expect Euribor to turn negative. The recently announced ECB measures should help demand and increase inflation and its goal was to incentivize banks to lend. Might take years before inflation begins to rise fast
- ECB's Nowotny (Austria) Euro area was weakest growing region in the world; concerned about Spanish and Italian economies. ECB Jun decision was historic and meant to move money markets and boost credit. Jun Council discussions were not easy but was unanimous in the end. Interest rates had reached bottom for foreseeable future (echoes Draghi post rate comments)
- ECB's Constancio (Portugal): ECB was completing the repair of the banking sector. AQR should dispel any lingering doubts on banks and hoped measures ECB took yesterday can move up interbank lending. Interest rates to stay low and stable for an extended period of time and added that ECB was not necessarily finished and committed to reacting to future contingencies
- US Fed Governor Powell (voter): Forward guidance has been effective at shaping market expectations and damping volatility
- German Econ Min Gabriel reiterated view that spring economic rebound weaker than usual due to mild winter
- Chancellor Osborne reiterates that UK must remain vigilant, particularly to housing market. BoE has been given tools to act if needed.
- German Bundesbank updated 2014-16 outlook. It raises 2014 GDP growth forecast from 1.7% to 1.9% while maintaining 2015 GDP growth at 2.0% and set 2016 GDP at 1.8%. It cut its 2014 inflation from 1.3% to 1.1% while maintaining 2015 inflation at 1.5% and set 2016 inflation at 1.9%
- Denmark Central Bank kept interest rates unchanged (Deposit rate at 0.05% and Lending Rate at 0.20%). It cited the sale of foreign exchange in the market since the beginning of April and the development in the market interest rates. (**Note: The Danish Krone (DKK) is pegged to the euro. The central bank does not hold scheduled meetings and only adjusts its interest rates to maintain its fixed exchange rate)
- Poland Finance Ministry stated that it saw no need to pre-finance for 2015 borrowing needs as it already financed more 2014 fx needs than required.
- Finland Fin Min: Rinne commented that the current economic situation was not good; govt must focus on creating jobs

Currencies/Fixed Income:
- FX price action was both lethargic and featureless ahead of the key US payroll report for May.
The EUR/USD managed to hold above the Jan lows despite the ECB rate cut and its combination of measures to address deflation concerns and revive lending activity. Some dealers express disappointment with the scope of refi and deposit rate cuts along with no QE announcement. Price action also said to be aided by short-covering of Euro positions after the fact.
- Italian, Spanish and Irish bonds all moved lower to fresh record low yields in the session. Dealers citied new ECB's measures would help promote bank lending in the continent's most vulnerable economies

Political/In the Weekend Papers:
-Deutsche Bank [DBK.DE]: Unknown regulators are probing company regarding its hiring practices in Asia
- (UK) Conservatives party wins Newark by-election (as expected) - UK Media; The UKIP party finished in second place, while Labour finished third; In the 2010 general election, UKIP finished in 5th place in Newark.
-(US) Fed's Kocherlakota (dove, FOMC voter): Spending and investment remains too weak and raising rates would only promote savings and not spending
- (CN) China Banking Regulatory Commission (CBRC): Government considers loosening 75% loan/deposit ratio; SME loans could be exempt from the loan deposit ratio.
- (CN) World Bank: China able to meet 2014 GDP growth target of about 7.5%;

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (IE) Ireland Sovereign Debt Rating Published by S&P
- (IT) Italy Sovereign Debt Rating Published by S&P
- (FI) Finland Sovereign Debt Rating May Be Published by Moody's
- (EU) EFSF Sovereign Debt Rating May Be Published by Moody's
- (EU) ESM Sovereign Debt Rating May Be Published by Moody's
- (DE) German Chancellor Merkel attends 70th Anniversary of D-Day in Normandy
- (DE) German Coalition on brief for 2014 budget
- (RU) Russia May Official Reserve Assets: $471.0Be v $472.3B prior
- (CO) Colombia May CPI Core M/M: No est v 0.4% prior; Y/Y: No est v 2.9% prior
- 06:00 (MY) Malaysia End-May Foreign Reserves: No est v $131.1B prior
- 06:00 (IS) Iceland to sell Bonds
- 06:00 (EU) ECB announces weekly 3-Year LTRO Repayment vs. 2.0Be
- 06:10 (UK) DMO to sell 3.0B in 1-month, 3-month and 6-month Bills (1.5B, 0.5B and 1.0B respectively)

- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil May FGV Inflation IGP-DI M/M: -0.2%e v +0.5% prior
- 07:30 (IN) India Forex Reserves w/e May 30th: No est v $312.7B prior
- 08:00 (PL) Poland May Official Reserves: No est v $102.5B prior
- 08:00 (BR) Brazil May IBGE Inflation IPCA M/M: 0.4%e v 0.7% prior; Y/Y: 6.3%e v 6.3% prior
- 08:00 (CL) Chile May CPI M/M: 0.3%e v 0.6% prior; Y/Y: 4.7%e v 4.3% prior; CPI Core M/M: 0.2%e v 0.8% prior
- 08:15 Baltic Dry Bulk Index
- 08:30 (US) May Change in Nonfarm Payrolls: +215Ke v +288Kprior; Change in Private Payrolls: +210Ke v +273K prior; Change in Manufacturing Payrolls: +10Ke v +12Kprior
- 08:30 (US) May Unemployment Rate: 6.4%e v 6.3% prior; Underemployment Rate: No est v 12.3% prior; Labor Force Participation Rate: No est v 62.8% prior; Change in Household Employment: No est v -73K prior
- 08:30 (US) May Average Hourly Earnings M/M: 0.2%e v 0.0% prior; Y/Y: 2.0%e v 1.9% prior; Average Weekly Hours: 34.5e v 34.5 prior
- 08:30 (CA) Canada May Net Change in Employment: +25.0Ke v -28.9K prior; Unemployment Rate: 6.9%e v 6.9% prior; Full Time Employment Change: No est v -30.9K prior; Part Time Employment Change: No est v +2K prior; Participation Rate: No est v 66.1% prior
- 08:30 (CA) Canada Q1 Labor Productivity Q/Q: 0.0%e v 1.0% prior
- 09:00 (MX) Mexico Apr Leading Indicators M/M: No est v -0.04 prior
- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 10:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 3.50%
- 15:00 (US) Apr Consumer Credit: $15.0Be v $17.5B prior




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