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Market Update – European Session: UK Mar CPI Remains Above BOE Target For The 2nd Straight Month


Continental European inflation data moving off recent 4-year highs (Hungary, Sweden miss expectations) adding support to policy makers’ calls to maintain loose monetary conditions

UK Mar CPI inflation remained above BOE target for 2nd straight month (2.3% v 2.3%e)



BOJ Gov Kuroda express confidence that BOJ would be able to manage its exit smoothly from its monetary policy easing cycle including reducing the size of its balance sheet.

PBoC skipped its open market operations for 12th straight session citing liquidity remained relatively high level


UK MAR BRC LFL SALES VALUE registered its biggest decline since Aug 2015 (Y/Y: -1.0% v -0.3%e)


Fed Chair Yellen: Appropriate to gradually raise Fed Funds rate as US economy was now pretty healthy. Our estimate of neutral rate was really not that high; Could not wait too long to tighten.

President Trump held separate talks with UK PM May and German Chancellor Merkel on Syria. Both leaders expressed support for US action in Syria

White House official: Trump administration is open to additional strikes on Syria


Kuwaiti Oil Min Ahmed: sees signs global crude stocks dropping, expects further declines in coming months; expects OPEC/Non OPEC compliance to be higher in March

Economic Data

(JP) Japan Mar Preliminary Machine Tool Orders Y/Y: 22.6% v 9.1% prior

(RO) Romania CPI M/M: 0.1% v 0.1%e; Y/Y: 0.2% v 0.3%e

(HU) Hungary Mar CPI (miss) M/M: 0.0% v 0.3%e; Y/Y: 2.6% v 3.1%e

(TR) Turkey Feb Current Account: -$2.5B v -$2.5Be

(SE) Sweden Mar CPI (miss) M/M: 0.0% v 0.2%e; Y/Y: 1.3% v 1.5%e; CPI Level: # v 320.26e

(SE) Sweden Mar CPI CPIF M/M: 0.0% v 0.1%e; Y/Y: 1.5% v 1.6%e

(UK) Mar CPI M/M: 0.4% v 0.3%e; Y/Y: 2.3% v 2.3%e; CPI Core Y/Y: 1.8% v 1.9%e;

(UK) Mar RPI M/M: 0.3% v 0.4%e; Y/Y: 3.2% v 3.2%e; RPI Ex Mortgage Interest Payments (RPIX) Y/Y: 3.4% v 3.5%e

(UK) Mar PPI Input M/M: +0.4% v -0.1%e; Y/Y: 17.9% v 17.0%e

(UK) Mar PPI Output M/M: 0.4% v 0.1%e; Y/Y: 3.6% v 3.4%e

(UK) Mar PPI Output Core M/M: 0.3% v 0.2%e; Y/Y: 2.5% v 2.5%e

(DE) Germany Apr Zew Current Situation Survey (beat): 80.1 v 77.5e ; Expectations Survey: 19.5 v 14.8e

(EU) Euro Zone Apr Zew Expectations Survey: 26.3 v 25.6 prior

(EU) Euro Zone Feb Industrial Production (miss) M/M: -0.3% v +0.1%e; Y/Y: 1.2% v 1.9%e

Fixed Income Issuance:

(AT) Austria Debt Agency (AFFA) opened its book to sell EUR-denominated 10-year RAGB bond; guidance seen -17bps to mid-swaps

(NL) Netherlands Debt Agency (DSTA) sold €950M vs. €1.25B indicated in 2.5% 2033 DSL bonds; Avg Yield: 0.680% v1.279% prior

(IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 12-month Bills; Avg Yield: -0.239% v -0.226% prior; Bid-to-cover: 1.76x v 1.58x prior


Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.4% at 3,471, FTSE +0.4% at 7,375, DAX -0.2% at 12,181, CAC-40 -0.1% at 5,105, IBEX-35 -0.4% at 10,400, FTSE MIB -0.4% at 20,121, SMI flat at 8,617, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European equity indices are trading generally lower despite the FTSE 100 outperforming and trading positive; Banking stocks weight heavily in the major indices with the peripheral lender weighted FTSE MIB and the IBEX underperforming; shares of BNP Paribas, Deutsche Bank, and Intesa Sanpaolo the notable sector laggards in the Eurostoxx; shares of LVMH the notable gainer in the index after releasing higher than expected results; Asian equity indices ending mixed overnight. Just the one notable scheduled US earning pre-market, Bank of the Ozarks.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Accell Group ACCEL.NL +19.5% (receives non-binding offer of €32.72/shr cash), JD Sports JD.UK +7.9% (FY16 results), LVMH MC.FR +1.3% (Q1 sales)]

Financials: [Publity PBY.DE +0.5% (Receives a further mandate in a low billion euro range from a South American investor), Valartis VLRT.CH +0.7% (FY16 results, div)]

Industrials: [Vedanta Resources VED.UK +0.1% (Q4 production)]

Technology: [De La Rue DLAR.UK +6.9% (trading update, COO to step down)]


German ZEW Economists noted that the domestic economic situation was fairly robust in Q1 and expected the positive momentum to continue

German Leading Economic Institutes (Advisors): Raises both 2017 and 2018 GDP growth forecasts. Raised 2017 GDP growth forecast from 1.4% to 1.5% and 2018 GDP growth forecast from 1.6% to 1.8%

Italy Fin Min Padoan: Domestic economy was on a gradual recovery path

Turkey Econ Min Zeybekci: Lack of supply is behind the root of the inflation issues

Russia Central Bank Dep Gov Yudaeva: End-2017 CPI could be under 4%

Russia Fin Min Siluanov: Inflation might fall below 4% by end 2017

Russia Energy Min Novak: To meet with oil companies to discuss extension of OPEC/Non-Opec oil production cut agreement. Russia to reach 250K bpd cut level by mid-April

Saudi Arabia Mar oil production reportedly poised to fall towards 9.9M bpd


Several bits of Continental European inflation data came in below expectations and moved off multi-year highs thus adding support to policy makers’ calls to maintain loose monetary conditions. EUR cross selling also emerging as a prevalent theme as markets assessed the upcoming French election and EMU political stability risks. Dealers noted that recent French election polls taking a risk bearish turn. EUR/JPY was softer and below its 200-day moving average as dealers cited that Japan-based entities hold around 12% of all outstanding French sovereign bonds

GBP/USD edged higher towards the 1.2450 area after UK Mar CPI inflation remained above BOE target for 2nd straight month (2.3% v 2.3%e).

Fixed Income

Bund futures trade at 163.15 up 15 ticks consolidating above the 163 level, although off the session highs as European Indices claw back earlier losses. Futures traded a high of 163.39 which marked a new contract high, with a break back above targeting 163.57 then 163.99. A reversal looks to 162.84 initially followed by 162.25.

Gilt futures trade at 128.09 up 4 ticks retracing the bulk of the gain seen this morning after slightly stronger UK inflation data put pressure on futures. Support remains at 127.75 then 127.34 followed by 127.05. A move above 128.45 high sees resistance at 128.63 followed by 128.96. Short Sterling futures trade flat to up 1bp with Jun17Jun18 flattening 10.5/11bp

Tuesday’s liquidity report showed Monday’s excess liquidity rose to €1.620T a rise of €20B from €1.600T prior. Use of the marginal lending facility rose to €185M from €131M prior.

Corporate issuance saw $4.4B come to market via 4 issuers headlined by General Motors 3 part $3B issuance. Issuance for the week is expected to be front loaded ahead of the Easter Holidays and estimated to be in the $10B region.

Looking Ahead

(US) Sec of State Tillerson travels to Italy and Russia

05.30 (UK) Weekly John Lewis LFL sales data

05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender

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

05:30 (BE) Belgium Debt Agency (BDA) to sell €2.1-2.5B in 3-Month and 12-Month Bills

06:00 (US) Mar NFIB Small Business Optimism: 104.7e v 105.3 prior

06:30 (IS) Iceland to sell 6-month Bills

06:45 (US) Daily Libor Fixing

07:00 (ZA) South Africa Feb Manufacturing Production M/M: No est v -0.4% prior; Y/Y: 0.2%e v 0.8% prior

07:30 (CL) Chile Central Bank Economist Survey

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

08:00 (PL) Poland Mar Final CPI M/M: No est v -0.1% prelim; Y/Y: No est v 2.0% prelim

08:00 (RU) Russia announces weekly OFZ bond auction

08:15 (UK) Baltic Dry Bulk Index

08:55 (US) Weekly Redbook Sales

09:00 (MX) Mexico Feb Industrial Production M/M: -0.1%e v +0.1% prior; Y/Y: -1/5%e v -0.1% prior; Manufacturing Production Y/Y: 1.2%e v 4.3% prior

09:00 (RU) Russia Q1 Preliminary Current Account: $18.8Be v $10.1B prior

09:00 (RU) Russia Feb Trade Balance: $10.3Be v $11.4B prior; Exports: $26.7Be v $25.1B prior; Imports: $15.2Be v 13.7B prior

09:00 (EU) Weekly ECB Forex Reserves: € v € prior

10:00 (US) Feb Jolts Job Openings: 5.650Me v 5.626M prior

11:00 (EU) ECB’s Visco (Italy) speaks EP Committee in Brussels

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

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

13:45 (US) Fed’s Kashkari (dove, dissenting vote) Q&A in Minneapolis

15:00 (AR) Argentina Mar National CPI M/M: 2.0%e v 2.5% prior

16:30 (US) Weekly API Oil Inventories

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