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Tuesday October 28, 2014 - 11:22:36 GMT
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| | Email EU Market Update: Sweden cuts interest rates to zero citing low inflation outlook

Tue, 28 Oct 2014 5:25 AM EST

- (JP) Japan Sept Retail Sales hit a 6-month high (M/M: 2.3% v 0.9%e) and could potentially keep the next phase of the planned sales tax increase intact for next year.
- Caution reigns ahead of Wed FOMC decision
- Sweden cuts interest rates to zero citing inflation concerns

***Key Economic Data in session***
- (JP) Japan Oct Small Business Confidence: 47.4 v 48.5e
- (DE) Germany Sept Import Price Index M/M: +0.3% v -0.1%e; Y/Y: -1.6% v -1.9%e

- (TH) Thailand Sept Customs Trade Balance: -$1.8B v +$1.3Be; Customs Exports Y/Y: +3.2% v -0.2%e; Customs Imports Y/Y: +14.4% v -6.9%e
- (SE) Sweden Central Bank (Riksbank) cuts its Repo Rate by 25bps to 0.00%; more than expected
- (SE) Sweden Sept Retail Sales M/M: -0.6% v -0.5%e; Y/Y: 2.8% v 3.2%e
- (SE) Sweden Sept Trade Balance (SEK): +1.4B v +2.6Be
- (IT) Italy Oct Business Confidence: 96.0 v 95.0e; Economic Sentiment: 89.3 v 86.9 prior

Fixed Income:
- (UK) DMO opened its book to sell 2068 conventional Gilt; guidance seen +2.5-3.0bps over the 2060 Gilt
- (SI) Slovenia to sell Euro-denominated 7-year bond; guidance seen +175bps over mid-swaps

Indices [Stoxx50 +1%,
FTSE 100 +0.5% at 6,395, DAX +1.3% at 9,023, CAC-40 +0.5% at 4,119, IBEX-35 +1.5% at 10,327, FTSE MIB +1.5% at 19,315, SMI +1.2% at 8,632, S&P 500 Futures +0.4% at 1,965]

- Market Focal Points/Key Themes: European equity markets open higher following Monday's losses, Earnings recap (Standard Chartered higher impairment charges, UBS adj profits above ests, Novartis profits above ests, Sanofi sales below ests, BP profits above ests, BG below ests, Lloyds results in line), US morning earnings (Aetna, Dupont, Whirlpool, Coach, Pfizer, Corning, Cummins, Freeport McMoran)

By Sector
- Financials
[Mediobanca MB.IT +2% (Q3 profits above ests), UBS UBSN.CH +1% (Q3 adj profit above ests); Standard Chartered STAN.UK -5% (Q3 impairments rose), Lloyds LLOY.UK -1% (Q3 results in line)]
- Healthcare [Novartis NOVN.CH +1% (Q3 profits above ests, reaffirmed outlook); Sanofi SAN.FR -6% (Q3 sales below ests, cautious outlook)]
- Energy [BP BP.UK +1% (Q3 profits above ests)]
- Industrials [UPM UPM1V.FI +5% (Q3 results above ests)]
- Telecom [KPN KPN.NL +3% (Q3 sales above ests)]
- Stoxx50 sectors [Utilities +1.9%, Industrials +1.7%, Energy +1.7% Telecom +1.6%, Basic Materials +1.4%, Consumer Cyclical +1.2%, Financials +1.2%, Consumer Non-Cyclical +0.3%]

- Sweden Central Bank (Riksbank) statement after its aggressive rate had it push back out its view for first rate hike until mid-2016 (from prior end-2015)
. It noted that would not raise interest rates until inflation clearly picked up and stressed that it was even more urgent now that debt risks were managed (refers to households).
- ECB's Praet (Belgium) reiterated Council view that deflation risk was low in EMU; ECB was ready to take other non-conventional measures is necessary . he added that the region's economy had lost momentum but see no recession
- ECB's Nowotny (Austria): Europe should prepare for a Japanese scenario with long-term stagnation
- Italy Fin Min Padoan: Confident that bank shortfalls to be addressed in a short time
- Poland Central Bank's Kazmierczak: Central bank shouldn't be in a hurry for another rate cut
- Norway's Central Bank (Norges) Financial Stability Report noted that the country's banks were profitable and hold more capital than European peers but still need further buffers as financial imbalances were rising and the falling oil prices increase risks
- Vietnam Central Bank: To lower USD Deposit ceiling by 25bps to 0.75%; effective Oct 29th. It cut the Dong Deposit Ceiling by 50bps to 5.50% and cut USD Deposit Ceiling by 25bps to 0.75%

Currencies/Fixed Income:
- Major FX pairs were tame in the session as the market looked ahead to Wed FOMC decision.

- The SEK currency (Kroner) was sharply lower after the Riksbank cuts its Repo Rate by 25bps to zero and pushed back its view of the first potential rate hike until mid-2016. The EUR/SEK surged from 9.27 to test near 9.35 in the aftermath. The SEK was at a 4-year low against the USD.

Political/In the Papers:
- (FR) France Fin Min Sapin updated its 2015 budget for the EU Commission: to cut deficit by an additional 3.7B
- (ES) Spain gov't said to planning to challenge Catalonia's alternative vote - financial press; After Catalonia cancelled plans to hold the referendum for Nov 9, it stated it would still stage a non-binding vote
- BoE's Shafik stated that she saw no significant evidence" of inflationary pressure in the economy and set a high bar for raising rates from their current 0.50% level
-(JP) Japan BOJ Gov Kuroda: No change in BOJ' view that inflation likely to hit target in FY15/16
- (JP) Japan Fin Min Aso: To consider whether fiscal stimulus is needed after examining Q3 (Jul-Sept) data

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (EU) EU Environment Ministers hold Meeting in Luxembourg
- (US) Federal Reserve FOMC begin 2-day meeting (Decision on Wed)
- (EU) OECD Global Forum on Tax Transparency (ends on Wed)
- Nordic PMs meet in Stockholm (ends Thursday)
- (CA) Canada Fin Min Oliver in Toronto
- (ES) Spain Sept YTD Budget Balance: No est v -34.7B prior
- 05:30 (ZA) South Africa to sell combined ZAR2.35B in 2030, 2032, 2048 bonds
- 06:00 (SE) Sweden Central Bank (Riksbank) holds press conference on repo rate decision
- 06:00 (BR) Brazil Oct FGV Construction Costs M/M: 0.2%e v 0.2% prior
- 06:00 (EU) Daily Euribor Fixing
- 06:00 (IT) Italy Debt Agency (Tesoro) to sell combined 2.5B in Zero Coupon 2016 CTZ
- 06:00 (IT) Italy Debt Agency (Tesoro) to sell combined 1.0-2.0B in 2024 and 2026 BTPei bonds (Inflation linked)
- 06:15 (EU) ECB allotment in 7-day Main Refi Tender at fixed 0.05%
- 06:15 (CH) Switzerland to sell 3-month Bills
- 06:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills
- 07:45 (US) Daily Libor Fixing
- 07:45 (US) Weekly ICSC Chain Store Sales
- 08:00 (RO) Romania to sell 3.25% 2018 Bonds
- 08:30 (US) Sept Durable Goods Orders: 0.5%e v -18.4% prior (revised from -18.2%); Durables Ex Transportation: 0.5%e v 0.4% prior (revised from 0.7%); Capital Goods Shipments (Non-defense/ex-aircraft): 0.7%e v 0.1% prior; Capital Goods Orders (Non-defense/ex-aircraft): 0.7%e v 0.4% prior (revised from 0.6%); Durables Ex-Defense: No est v -19.0% prior
- 09:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to leave Base Rate unchanged at 2.10%
- 09:00 (US) S&P/CaseShiller 20 City Composite M/M: +0.18%e v -0.50%; Y/Y: 5.70%e v 6.75% prior; Index NSA: 173.89e v 173.34 prior
- 09:00 (HU) Hungary Central Bank post rate decision statement
- 09:15 (US) Baltic Dry Bulk Index
- 08:55 (US) Weekly Redbook Retail Sales
- 10:00 (US) Oct Consumer Confidence Index: 87.0e v 86.0 prior
- 10:00 (US) Oct Richmond Fed Manufacturing Index: 11e v 14 prior
- 10:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
- 10:00 (EU) Weekly ECB Forex Reserves
- 11:15 (NO) Norway's Nicolaisen speaks in Trondheim
- 11:30 (US) Treasury to sell 4-Week Bills
- 11:30 (UK) DMO announces size in upcoming 0.5% I/L 2050 Gilt
- 13:00 (US) Treasury to sell $29B in 2-Year Notes
- 13:50 (UK) BOE's Cunliffe in Cambridge
- 19:50 (JP) Japan Sept Preliminary Industrial Production M/M: +2.2%e v -1.9% prior; Y/Y: -0.1%e v -3.3% prior


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