German State CPI turns more negative

EU Mid-Market Update: German State CPI turns more negative; more global central banks sporting dovish feathers

Notes/Observations

- New Zealand Central Bank (RBNZ) left its Official Cash Rate unchanged at 3.50% (as expected); replaces tightening bias with a neutral one

- Japan Dec Retail Sales falls for the 3rd straight month (MoM: -0.3% v +0.3%e)

- The Fed has stayed 'patient' but its reference to "international developments" has provided an additional angle to its outlook

- German State CPI data turning more negative

- German Net Unemployment Change improves for the 4th straight month; unemployment at record low

Economic data

- (UK) Jan Nationwide House Prices M/M: 0.3% v 0.3%e; Y/Y: 6.8% v 6.6%e

- (SE) Sweden Jan Consumer Confidence (miss): 98.6 v 100.0e; Manufacturing Confidence (beat): 107.3 v 106.5e; Economic Tendency Survey: 105.6 v 105.8 prior

- (DE) German Jan CPI Saxony M/M: -1.2% v +0.2% prior; Y/Y: -0.3% v +0.5% prior

- (ES) Spain Dec Adjusted Retail Sales (beat) Y/Y: 6.5% v 2.5%e; Retail Sales (unadj) Y/Y: 5.4% v 0.5% prior

- (DK) Denmark Dec Unemployment Rate (Seasonally Adj): 4.0% v 3.9%e; Gross Unemployment Rate 5.0% v 5.0%e

- (SE) Sweden Dec Retail Sales (miss) M/M: -0.6% v -0.2%e; Y/Y: 3.7% v 4.2%e

- (SE) Sweden Dec Household Lending Y/Y: 6.1% v 5.9% prior

- (DE) Germany Jan Net Unemployment Change (inline): -9K v -10Ke; Unemployment Rate: 6.5% v 6.5%e (record low)

- (EU) Euro Zone Dec M3 Money Supply (beat) Y/Y: 3.6% v 3.5%e; -- (DE) German Jan CPI Hesse M/M: %-1.0 v -0.1% prior; Y/Y: -0.6% v 0.0% prior

- (DE) German Jan CPI Bavaria M/M: -1.0% v 0.0% prior; Y/Y: -0.2% v +0.3% prior

- (IS) Iceland Jan CPI M/M: 09,7% v +0.3% prior; Y/Y: 0.8% v 0.8% prior

- (DE) Germany Jan CPI North Rhine Westphalia M/M: -1.0% v -0.1% prior; Y/Y: -0.4 v +0.1% prior

- (ZA) South Africa Dec PPI M/M: -0.2% v -0.1%e; Y/Y: 5.8% v 6.0%e

- (PT) Portugal Jan Consumer Confidence Index: -21.9 v -22.3 prior; Economic Climate Indicator: 0.3 v 0.2 prior

- (BR) Brazil Jan FGV Inflation IGPM (miss) M/M: 0.8% v 0.6%e; Y/Y: 4.0% v 3.8%e

- (IT) Italy Jan Consumer Confidence Index (beat): 104.0 v 100.0e; Business Confidence (miss): 97.1 v 98.0e; Economic Sentiment: 91.6 v 87.6 prior

- (EU) Euro Zone Jan Business Climate Indicator (beat): 0.16 v 0.12e; Consumer Confidence: -8.5 v -8.5e; Industrial Confidence: -5.0 v -4.5e; Economic Confidence: 101.2 v 101.6e; Services Confidence: 4.8 v 6.0e

Fixed income:

- (IT) Italy Debt Agency (Tesoro) auction solid; sold total €6.5B vs. €5.5-6.5B indicated range 5-year & 10-year BTP Bonds

- Sold € v €2.5-3.0B indicated range in 1.05% 2019 BTP Bond; Avg Yield: 0.89% (record low) v 0.98% prior; Bid-to-cover: 1.40x v 1.37x prior

- Sold €3.5B v €3.0-3.5B indicated range in 2.50% 2024 BTP Bonds; avg yield 1.62% (record low) v 1.89% prior; bid-to-cover: 1.38x v 1.28x prior

- (IT) Italy Debt Agency (Tesoro) sold €1.75B vs. €1.25-1.75B indicated range in Dec 2020 CCTeu (Floating Rate Bond); Avg Yield: 0.87% v 0.96% prior; Bid-to-cover: 1.43x v 1.67x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.4%, FTSE 100 -0.7% at 6,778, DAX -0.3% at 4,603, CAC-40 -0.2% at 4,603, IBEX-35 -0.9% at 10,363, FTSE MIB -0.6% at 20,359, SMI +0.9% at 8,387, Athens Stock Exchange +2%, S&P 500 Futures +0.2% at 1,996]

- Market Focal Points/Key Themes: Equity markets open lower following negative leads from the US, as dealers assess recent Fed statement and German CPI data; Greek equities open slightly higher following sharp losses seen earlier in the week, sovereign yields continue to move higher; Deutsche Bank reports higher than expected Q4 profits amid better revenues and lower than expected expenses; Nokia misses ests; Energy names trade lower after cautious outlooks (Shell, OMV); Infineon Q1 results above ests; Swedish firms continue to beat ests amid positive currency impacts (Sandvik)

By Sector

- Energy [Shell RDSA.UK -4% (Q4 results below ests), OMV OMV.AT -2% (cautious outlook) ]

- Technology [Nokia NOK1V.FI -2% (Q4 results below ests)]

- Industrials [Vallourec VK.FR -7% (impairment charge), Wartsila WRT1V.FI -4% (Q4 profits below ests); Sandvik SAND.SE +5% (Q4 results above ests)]

- Basic Materials/Resources [Wacker Chemie WCH.DE +1% (Q4 results above ests) ]

- Financials [Raiffeisen RBI.AT +12% (to cut risk weighted assets), Sabadell SAB.ES +2.5% (FY results above ests), Deutsche Bank DBK.DE +1.5% (Q4 results above ests)]

- Stoxx50 Sectors [Energy -2%, Industrials -0.9%, Telecom -0.8%, Consumer Cyclical -0.5%, Technology -0.3%, Financials -0.3%; Consumer Non-Cyclical +0.1%, Utilities flat, Basic Materials flat]

Speakers

- ECB's Coeure (France): Monetary policy is now sufficiently expansionary. Reiterated view that ECB QE program would not be as effective unless EU govt implemented reforms. QE program to end when there was a strong sense that inflation would move towards the 2% target

- ECB's Praet (Belgium) reiterated EMU would see negative inflation for large part of 2015 but a turning point might be around Q3. Reiterated view that monetary policy alone cannot solve all EMU problems. He noted that he saw 'encouraging' signs in money and credit as well as signs of positive momentum building in economy.

- German Vice Chancellor/Econ Min Gabriel: Nobody is interest in more sanctions against Russia. Germany was in good economic shape aided by lower oil prices and weaker EUR currency

- Sweden's NIER think tank noted that the likelihood of a Sweden Central Bank (Riksbank) rate cut had increased since December

- BOJ Gov Kuroda reiterated view that easing is having the intended effects; no change to factors that determine price trend. Too early to discuss exit strategy on easing measures as it was only half-way to the 2% inflation target. Premature exit would cause confusion

Currencies

- The USD price action was largely muted as participant continued to analyze the FOMC statement. Fed for the first time highlighted international risks in its statement but seemed on course for its 1st rate hike mid-year.

- High-yielding currencies are on the retreat due to the continuing fall of commodity prices coming on the back of increasing Asian growth concerns and rising US oil inventories

- Kiwi at a 4-year low after RBNZ switched from a tightening bias towards a neutral rate projection

- AUD remains at 4 year lows on rising bets that the RBA will cut interest rates next week. The AUD/USD traded at 0.7820

**Political/In the Papers:

- (GR) S&P revises Greece sovereign outlook to Ratings Watch Negative from Stable; currently has 'B' rating

- (DE) Germany Christian Democrat party spokesperson Barthle: Some ECB Decisions could end up before the Germany high court

- (US) Fed watcher Hilsenrath (WSJ): FOMC statement suggests it remains open to rate liftoff in June; Taken rate increase in Mar and April off the table by retaining reference to patience

- (US) IMF's Vinals: Fed should not rush to raise interest rates as inflation is not a concern in the US

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)

- (RU) Russia President Putin speaks on economy

- (DE) German Jan CPI Brandenburg M/M: % v 0.0% prior; Y/Y: % v 0.3% prior

- (DE) German Jan CPI Baden Wuerttemberg M/M: No est v -0.1% prior; Y/Y: No est v 0.1% prior

- (BE) Belgium Jan CPI M/M: No est v -0.1% prior; Y/.Y: No est v -0.4% prior

- (BR) Brazil Dec Central Govt Budget Balance (BRL): No est v -6.7B prior

- 05:30 (BR) Brazil Central Bank (BCB) COPOM Monetary Policy Meeting Minutes

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills

- 05:30 (HU) Hungary Debt Agency (AKK) Floating Rate Bond

- 05:30 (IE) Ireland Debt Agency (NTMA) to sell €0.5B in 6-month bills

- 06:00 (IL) Israel Dec Unemployment Rate: No est v 5.6% prior

- 06:00 (BR) Brazil Dec Unemployment Rate: 4.7%e v 4.8% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia Gold and Forex Reserve w/e Jan 23rd: No est v $379.4B prior

- 07:00 (CL) Chile Dec Manufacturing Index Y/Y: No est v -1.1% prior

- 07:00 (CL) Chile Dec Retail Sales Y/Y: No est v 0.4% prior

- 07:00 (CL) Chile Dec Total Copper Production: No est v 477.4K tons

- 08:00 (DE) Germany Jan Preliminary CPI M/M: -0.8%e v 0.0% prior; Y/Y: -0.1%e v +0.2% prior

- 08:00 (DE) Germany Jan Preliminary CPI EU Harmonized M/M: -1.0%e v +0.1% prior; Y/Y: -0.2%e v +0.1% prior

- 08:00 (ZA) South Africa Central Bank (SARB) pre-rate decision press conference

- 08:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave Interest Rates unchanged at 5.75% (chance of a dovish surprise)

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Initial Jobless Claims: 300Ke v 307K prior; Continuing Claims: 2.405Me v 2.443M prior

- 08:30 (US) Weekly USDA Net Export Sales

- 09:00 (EU) EU calls emergency of European foreign ministers to discuss Ukraine

- 10:00 (US) Dec Pending Home Sales M/M: 0.5%e v 0.8% prior; Y/Y: 10.8%e v 1.7% prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:30 (FR) ECB's Coeure (France) on panel in Milan

- 11:30 (US) Treasury to sell $35B in 5-Year Notes

- 13:00 (US) Treasury to sell $29B in 7-Year Notes

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 3.00%

- 16:00 (KR) South Korea Feb Business Survey Manufacturing: No est v 77 prior; Non-Manufacturing: No est v 68 prior

- 16:00 (CO) Colombia Nov Trade Balance: -$1.5Be v -$1.4B prior; Total Imports: $5.3Be v $5.9B prior

- 16:45 (NZ) New Zealand Dec Building Permits M/M: No est v % prior

- 16:45 (NZ) New Zealand Dec Net Migration: No est v 5.0K prior

- 18:00 (KR) South Korea Dec Industrial Production M/M: 0.4%e v 1.3% prior; Y/Y: -1.6%e v -3.4% prior

- 18:30 (JP) Japan Dec Jobless Rate: 3.5%e v 3.5% prior

- 18:30 (JP) Japan Dec National CPI Y/Y: 2.3%e v 2.4% prior; CPI Ex Fresh Food Y/Y: 2.6%e v 2.7% prior; CPI Ex Food, Energy Y/Y: 2.1%e v 2.1% prior

- 18:30 (JP) Japan Jan Tokyo CPI Y/Y: 2.2%e v 2.1% prior; CPI Ex Fresh Food Y/Y: 2.2%e v 2.3% prior; CPI Ex Food, Energy Y/Y: 1.8%e v 1.8% prior

-18:50 (JP) Japan Dec Preliminary Industrial Production M/M: +1.2%e v -0.5% prior; Y/Y: +0.3%e v -3.7% prior ; Capacity Utilization M/M: No est v -0.8% prior

- 19:05 (UK) Jan GKF Consumer Confidence: -2e v -4 prior

- 19:30 (TW) Taiwan Q4 Preliminary GDP Y/Y: 3.3%e v 3.6% prior; GDP Annual 2014 Y/Y: 3.5%e v % prior