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Reports Europe

European stock market, economy and companies update (June 03, 2014)

June 3, 2014, Tuesday, 09:32 GMT | 04:32 EST | 13:02 IST | 15:32 SGT
Contributed by Trade The News

- China PMI at multi-month highs May Non-Manufacturing PMI at a 4-month high (55.5 vs. 54.8 prior); May HSBC PMI Manufacturing at a 5-month high (49.4 vs 49.7e)
- RBA leaves Cash Target Rate steady at 2.50% (as expected)
- India RBI leaves key rates steady (as expected) but cuts Banks' Statutory Liquidity Ratio (SLR) from 23.0% of deposits to 22.5%
- Preliminary Eurozone inflation matches a 4-year low at 0.5% but not a bad as feared
- Apr EMU unemployment numbers continued its improvement trend; best level since Oct 2012

Indices [Stoxx50 flat, FTSE 100 -0.4% at 6,840, DAX -0.2% at 9,930, CAC-40 -0.1% at 4,511. IBEX-35 flat at 10,822, FTSE MIB -0.3% at 21,733, SMI -0.1% at 8,678, S&P 500 Futures -0.1% at 1,919]

- Market Focal Points/Key Themes: Equity markets open mixed amid cautious trading ahead of Thursday's ECB meeting, Banks continue to trade mixed, UK homebuilders trade lower amid speculation that the government will seek to slow property market

By Sector
- Consumer Discretionary [Punch Taverns PUB.UK +4% (asset sales), Wolseley WOS.UK +2.5% (Q3 LFL sales +5.1%), DIA DIA.ES +1.5% (interest related to French unit); Heineken HEIA.NL -1% (broker commentary)]
- Consumer Staples [Danone BN.FR -0.5% (broker commentary)]
- Basic Materials/Resources [London Mining LOND.UK -8% (Ebola concerns in Sierra Leone), Kloeckner KCO.DE -2% (broker commentary)]
- Healthcare [Epigenomics ECX.DE -38% (FDA commentary)]
- Energy [Bowleven BLVN.UK +11% (production milestone in Cameroon)]
- Stoxx50 Sectors [Utilities +1%, Energy +0.1%, Telecom flat, Consumer Cyclical flat, technology flat; Industrials flat; Consumer Non-Cyclical -0.4%, Financials -0.3%, Basic Materials -0.3%]

- Spain PM Rajoy stated that the Cabinet to approve pro-growth plan this week and it would not impact the budget. He also noted that tax reform to be passed in June. Spain banking system is solvent; lending continued to recover. Economy was creating jobs at a moderate pace
- Spain Fin Min de Guindos reiterated the view that recovery continues to strengthen in Q2 (seen similar to Q1). To cut 2014 Net Issuance target to €55.0B
- Italy Business Lobby Confindustria stated that it saw May Industrial Output +0.2% m/m
- Sweden Central Bank (Riksbank) First Deputy Gov Jochnick commented that high domestic Households debt levels made the country sensitive to crisis and unemployment. Household debt was at a high level and must act in time on the issue. Govt needed to create better private debt development as currently it was not sustainable in the long-term. Needed to encourage mortgage amortization
- India Central Bank (RBI) stated in its rate decision that further policy tightening will not be warranted if economy remained on a disinflationary course. Might ease policy should inflation slow faster than forecast
- Australia Central Bank (RBA) stated in its rate decision that monetary policy remained accommodative and most prudent course was likely to be a period of stability in interest rates. The AUD currency remained high by historical standards
- Japan LDP Tax Panel: Cut in corporate tax rate should be revenue neutral
- Gazprom [GAZP.RU] stated that Ukraine had not paid for 9.84B CM of gas supplies. Exec saw European market share staying at 30% to 2020 and at 32% by 2030
- German govt official: G7 Summit could agree to develop an energy strategy
- White House aide: US President Obama ask Congress to support the 'European Reassurance Initiative' by giving up to $1B for increased US military rotations in Europe

Currencies/Fixed Income:
- The EUR/USD could not hit fresh 3-year lows as May CPI flash estimate was not a bad as feared. The pair regained a foothold above the 1.36 level despite the headline CPI reading matching a 4-year low at 0.5%. Dealers had fear that inflation might decelerate even faster given the recent German and peripheral readings.
- The AUD currency was a touch firmer in early European trading after the RBA's decision to leave the official cash unchanged at 2.5%. Markets had factored in a small chance of a rate cut. The currency also benefited from signs that China's economy was stabilizing.

Political/In the Weekend Papers:
-(EU) EU Commission ended disciplinary budget action against Austria, Belgium, Denmark, Netherlands, Slovakia and Czech Republic; Italy needed more cuts to comply with EU budget rules in 2014; France needed to correct its deficit by 2015.
-(UK) UK homebuilders said to meet with officials Cable and Osborne - press; To discuss issues including the bottleneck in the supply of new housing stock.
-(JP) Japan BOJ Gov Kuroda: Expects Japan inflation to reach 2% around FY15; Too early to talk about QQE exit plan - addressing parliament

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (EU) NATO Defense Ministers begin 2-day meeting in Brussels
- (PL) Poland Central Bank Interest Rate Decision: expected to leave Base Rate unchanged at 2.50%
- 05:30 (BE) Belgium Debt Agency to sell up to €2.0B in 3-Month and 6-Month Bills
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
- 05:30 (UK) DMO to sell £4.0B in 1.75% 2019 Gilts
- 06:00 (TR) Turkey to sell 2016 and 2021 bonds
- 06:30 (EU) ESM to sell €1.5B in 3-month Bills
- 06:45 (US) Daily Libor Fixing
- 07:00 (EU) ECB allotment in 7-day Term Deposit Tender to offset govt bond purchases under SMP; expected to drain €
- 07:00 (RU) Russia announces specific bonds to sell in upcoming auction (Wed)
- 07:45 (US) Weekly ICSC Chain Store Sales
- 07:45 (PT) Portugal Fin Min Albuquerque
- 08:15 Baltic Dry Bulk Index
- 08:55 (US) Weekly Redbook Retail Sales
- 09:00 (BE) Belgium Q1 Final GDP Q/Q: No est v 0.4% prelim; Y/Y: No est v 1.2% prelim
- 09:00 (EU) Weekly ECB Forex Reserves:
- 09:00 (IT) Italy Fin Min Padoan
- 09:30 (SG) Singapore May Purchasing Managers Index: 51.3e v 51.1 prior; Electronics Sector Index: 50.8e v 50.4 prior
- 09:45 (US) May ISM New York: No est v 50.6 prior
- 10:00 (US) Apr Factory Orders: 0.5%e v 0.9% prior (revised from 1.1%)
- 10:00 (US) Durable goods revisions
- 10:00 (US) Jun IBD/TIPP Economic Optimism: 46.8e v 45.8 prior
- 10:00 (DK) Denmark May Foreign Reserves (DKK): No est v 438.3 prior
- 10:00 (BR) Brazil Apr CNI Capacity Utilization: No est v 80.9% prior
- 10:00 (MX) Mexico Central Bank Economist Survey
- 10:00 (MX) Mexico Weekly International Reserves
- 10:00 (PL) Poland Central Bank Gov Belka post rate decision press conference
- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills
- 10:30 (UK) DMO to announce size of upcoming 2.75% in 2024 and 0.125% I/L 2019 Gilt
- 11:00 (BR) Brazil to sell I/L 2019, 2023, 2030, 2040 and 2050 bonds
- 11:30 (US) Treasury to sell 4-Week Bills
- 11:30 (US) Treasury to sell 14-Day Cash Management Bills
- 11:30 (NO) Norway Central Bank Gov Olsen in Oslo
- 12:00 (IT) Italy May New Car Registration Y/Y: No est v 1.9% prior
- 12:00 (IS) Iceland Q1 Current Account Balance: No est v 11B prior
- 13:50 (US) Fed's George in CO
- 16:30 (US) API Weekly Oil Inventories
- 21:30 (AU) Australia Q1 GDP Q/Q: 0.9%e v 0.8% prior; Y/Y: 3.1%e v 2.8% prior
- 21:35 (JP) Japan May Services PMI: No est v 46.4 prior
- (US) May Domestic Vehicle Sales: 12.60Me v 12.65M prior; Total Vehicle Sales: 16.00Me v 15.98Mprior
- (US) Alabama holds Primary Elections
- (US) California holds Primary Elections
- (US) Iowa holds Primary Elections
- (US) Mississippi holds Primary Elections
- (US) Montana holds Primary Elections
- (US) New Jersey holds Primary Elections
- (US) New Mexico holds Primary Elections
- (US) South Dakota holds Primary Elections

***Economic Data***
- (AU) Australia Central Bank (RBA) left Cash Rate Target unchanged at 2.50%, as expected
- (IE) Ireland May Manufacturing PMI: 55.0 v 56.1 prior; 12th straight month of expansion
- (IN) India Central Bank (RBI) left all Key Rates unchanged (as expected) Repurchase Rate unchanged at 8.00 but cut Banks' Statutory Liquidity Ratio (SLR) by 50bps to 22.5%
- (UK) May Nationwide House Prices M/M: 0.7% v 0.6%e; Y/Y: 11.1% v 10.9%e
- (ES) Spain May Net Unemployment M/M: -111.9K v -112.5Me
- (TR) Turkey May CPI M/M: 0.4% v 0.7%e; Y/Y: 9.7% v 9.9%e; CPI Core Index Y/Y: 9.8% v 9.8%e
- (TR) Turkey May PPI M/M: -0.5% v +0.1% prior; Y/Y: 11.3% v 13.0% prior
- (EU) ECB €2.0M borrowed in overnight loan facility vs. €64.0M prior; €30.7B parked in deposit facility vs. €39.9B prior - Daily Eurosystem Liquidity Conditions
- (SE) Sweden Q1 Current Account Balance (SEK): 61.4B v 55.1B prior
- (IT) Italy Apr Preliminary Unemployment Rate: 12.6% v 12.8%e
- (IT) Italy Q1 Quarterly Unemployment Rate: 12.7% v 12.7%e
- (NO) Norway May Unemployment Rate: 2.7% v 2.6%e
- (BR) Brazil May Monthly FIPE CPI: 0.3% v 0.3%e
- (HK) Hong Kong Apr Retail Sales Value Y/Y: -9.8% v -4.4%e; Retail Sales Volume Y/Y: -9.5% v -4.1%e
- (UK) May Construction PMI: 60.0 v 61.0e; lowest since Oct 2013
- (EU) Euro Zone Apr Unemployment Rate: 11.7% v 11.8%e; lowest since Oct 2012
- (EU) Euro Zone May Advance CPI Estimate Y/Y: 0.5% v 0.6%e (matches 4-year low); CPI Core Y/Y: 0.8% v0.9%e
- (BE) Belgium Apr Unemployment Rate: 8.5% v 8.5% prior

Fixed Income:
- (DK) Denmark sold total DKK6.6B in 2023 and 2025 Bonds
- (ZA) South Africa sold total ZAR2.35B in 2023, 2030 and 2048 bonds
- (EU) ECB allotted €149.4B in 7-Day Main Refinancing Tender at fixed 0.25% vs. €145.0Be