Dealers Hope Rational Behavior Prevails Ahead Of Greek Elections

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Economic Data
(FR) France May Consumer Price Index M/M: -0.1% v 0.0%e; Y/Y: 2.0% v 2.0%e; CPI Ex Tobacco Index: 124.73 v 124.80e

(FR) France May CPI EU Harmonized M/M: -0.1% v -0.1%e; Y/Y: 2.3% v 2.3%e

(FI) Finland Apr Final Retail Sales Volume Y/Y: -2.2% v -2.0% prelim

(DE) Germany May Final Consumer Price Index M/M: -0.2% v -0.2%e; Y/Y: 1.9% v 1.9%e

(DE) Germany May Final CPI EU Harmonized Index M/M: -0.2% v -0.3%e; Y/Y: 2.2% v 2.1%e

(FR) France Apr Current Account: -€4.2B v -€4.4B prior

(ES) Spain May Consumer Price Index M/M: -0.1% v -0.2%e; Y/Y: 1.9% v 1.9%e

(ES) Spain May CPI EU Harmonized M/M: -0.2% v -0.2%e; Y/Y: 1.9% v 1.9%e

(ES) Spain May Core CPI M/M: 0.2% v 0.0%e; Y/Y: 1.1% v 1.1%e

(CH) Swiss May Producer & Import Prices M/M: -0.2% v -0.1%e; Y/Y: -2.3% v -2.0%e

(TH) Thailand Central Bank left its Benchmark Interest Rate unchanged at 3.00%, as expected

(IT) Italy May Final CPI (NIC incl. tobacco) M/M: 0.0% v 0.0%e; Y/Y: 3.% v 3.2%e

(IT) Italy May Final CPI EU Harmonized M/M: 0.0% v 0.0%e; Y/Y: 3.5% v 3.5%e

(IC) Iceland Central Bank (Sedlabanki) raises 7-Day Lending Rate by 25bps to 5.75%

(EU) Euro Zone Apr Industrial Production M/M: -0.8% v -1.1%e; Y/Y: -2.3% v -2.7%e

Fixed Income
(IT) Italy Debt Agency (Tesoro)sold €6.5B vs. €6.5B indicated in 12-month Bills; Avg Yield 3.872% (highest since Dec 2011) vs. 2.340% prior; Bid-to-cover: 1.73x v 1.79x prior.

(EU) ECB allotted $2.5B in 7-day USD Liquidity Operation at fixed 0.67% vs. $1.5B prior.

(IN) India sold INR150B v INR150B targeted in 3-month and 12-month bills.

(SE) Sweden sold total SEK2.5B in 2022 and 2039 bonds.

(DE) Germany sold €4.042B in 1.75% July 2022 Bunds; Avg Yield 1.52% v 1.47% prior; Bid-to-cover: 1.4x v 1.5x prior.

Notes/Observations
Risk aversion sentiment pauses for the time being as rational behavior likely to should prevail; peripheral yield steady but remain elevated.

German poised to reject the redemption fund concept ahead of any fiscal union.

China Q2 GDP might come in around 7.0%.

Italy 12-month Bill yield at highest level since Dec 2011.

German 10-year auction results seen as "solid" but bid-cover a toch softer from a month ago.

Brazil might reduce its proposed IMF funding increase unless emerging markets get a larger voice.

Equities
Indices: FTSE 100 flat at 5473, DAX -0.20% at 6150, CAC-40 -0.20% at 3041, IBEX-35 +1.3% at 6591, FTSE MIB -0.70% at 12,891.

European equity indices opened the session slightly higher, as some dealers noted that the recent moves to the downside may have become extended. Also, prior reports related to ECB officials expressing support for bank deposit guarantees were recirculated, while a German Press report said that Greek and EU officials are prepared to negotiate new austerity terms, irrespective of the results of this weekend's elections (amid concerns about the impact that third elections in Greece could have). Additionally, it was reported in the German press that the Germany's Finance Minister Schaeuble was said to have given a cool reception to the idea of a redemption fund. The €2.3T redemption fund was proposed by German government advisers back in late 2011. According to the original proposal, it was envisioned that the redemption fund would have the ability to issue joint bonds, which are not euro bonds.

UK grocer Sainsbury [SBRY.UK] is lower by over 2% after issuing its Q1 sales figures. Oil producer Nautical Petroleum [NPE.UK] is higher by over 50%, after receiving a takeover bid from Cairn Energy [CNE.UK].

In Germany utilities names have traded higher (both E.ON [EOAN.DE and RWE [RWE.DE] are higher by ~1%) following reports that German utilities could seek up to €15B as compensation for exiting the nuclear business. German polysilicon firm Wacker Chemie [WCH.DE] has gained more than 1%, as First Solar announced plans to increase production at its Germany plants due to a sharp rise in demand. Heidelberger Druck [HDD.DE] is higher by over 2% after disclosing that it was awarded a new order. Spanish retailer Inditex [ITX.ES] is higher by more than 7%, after reporting better than expected Q1 results.

In France, Maurel Et Prom [MAU.FR] has moved sharply higher on speculation that Royal Dutch Shell could be interested in the company. In Italy, banks opened the session mostly higher. Following yesterday's close, S&P said that although Italian banks are dealing with the impact of the sovereign debt crisis, they are in a different situation to banks in Spain. According to S&P, Italian banks have less property market exposure, but non-performing loans present risks for these financial institutions. In other news related to banks, Barclays lowered its price targets for various EU banks (including SocGen, BNP, Commerzbank and UBS).