European Market Update: April 16, 2012

(JP) Japan Mar Nationwide Dept. Sales Y/Y: +14.1% v -0.4% prior; Tokyo Dept. Store Sales Y/Y: 26.7% v -1.8% prior

(IN) India Mar Wholesale Prices (WPI) Y/Y: 6.9% v 6.7%e

(PH) Philippines Feb Overseas Remittances: $1.6B v $1.6B prior; Y/Y: 5.8% v 5.4% prior

(CZ) Czech Feb Export Price Index Y/Y: 4.2% v 5.4% prior; Import Price Index Y/Y: 5.8 v 7.0% prior

(CZ) Czech Mar PPI (Industrial) M/M: 0.3% v 0.2%e; Y/Y: 3.0% v 2.9%e

(DK) Demark Mar Wholesale Prices M/M: 0.8% v 1.0% prior; Y/Y: 2.7 v 3.3% prior

(TR) Turkey Mar Consumer Confidence: 93.7 v 93.2 prior

(TR) Turkey Jan Unemployment Rate: 10.2% v 9.8% prior

(CH) Swiss Mar Producer & Import Prices M/M: 0.3% v 0.5%e; Y/Y: -2.0% v -1.8%e

(IT) Italy Feb Total Trade Balance: -€1.1B v -€1.3Be; Trade Balance EU: €439M v €760M prior

(NO) Norway Mar Trade Balance (SEK): 46.4B v 45.3B prior

(IT) Italy Feb General Government Debt: €1.928T v €1.9358T prior

(EU) Euro Zone Feb Trade Balance seasonally adjusted: €3.7B v €5.0Be; Trade Balance: €2.8B v €3.0Be

Fixed Income

(SL) Slovakia Debt Agency (ARDAL) sold €196.5M in Oct 2025 Bonds; Yield 4.6316%; bid-to-cover: 2.52x

(NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 12-month Bills; yield 1.63%

(NL) Netherlands Debt Agency (DSTA) sold total approx €2.1B vs. €4.0B indicated in 3-month and 6-month Bills

Sold €1.0B vs. €e in 3.5-month Bills; Yield 0.017% v 0.013% prior

Sold €1.1B vs. €e in 6.5-month Bills; Yield 0.041% v 0.066% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Notes/Observations

China widens the CNY currency trading band.

South Korea and Sweden cuts their respective GDP forecasts

IMF to release the World Economic Outlook (WEO) on Tuesday

G7 leaders to meet on Thursday and G20 on Friday.

Spain yield remain elevated ahead of key bill auction on Tuesday and bond auction on Thursday

Equities

Following the sharp losses seen on Friday's session, European equity indices opened the week broadly lower and are currently trading mixed. Although most indices are currently higher, Spanish equities have underperformed , amid weakness in the banking sector, as the country's 10-year government bond yields and credit default swaps have been elevated on the session. Overall, European banks are mostly lower, with the weakness being led by French banks.

According to some dealers, the weakness in French bank's has been partially attributed to uncertainty related to the country's presidential elections due to be held in April and May. Additionally, it was reported in the financial press that Moody's is considering downgrading the ratings of more than 100 European banks in early May, after the ratings agency originally announced the review back in February. Resource- related companies are trading slightly higher following Friday's losses, supported by analysts commentary.

In London, shares of International Power [IPR.UK] have gained by approx. 3%, after GDF Suez [GSZ.FR] raised its offer for the stake not already owned in the company to 418p/share from 390p. The new offer values, the entire International Power at approximately £23B. Shares of digital receiver manufacturer Pace Plc [PIC.UK] have gained over 5%, after the company reaffirmed its 2012 forecast.

Lloyds [LLOY.UK] has underperformed the UK banking sector, amid concerns about the firm's planned branch sale. German name Lufthansa [LHA.DE] is lower by over 1%, amid reports that Virgin Atlantic is seeking to have the EU block the planned merger between BMI and IAG [IAG.UK]. Fraport [FRA.DE] has declined by over 1.5%, after issuing its monthly traffic figures.

Switzerland-based transportation firm Kuehne & Nagel is lower by more than 6%, after reporting weaker than expected Q1 EBITDA figures. In Denmark, Vestas Wind [VWS.DK] has gained over 10% on speculation that Chinese companies could be interested in the company.

Speakers

EU said to have delayed ECB vacancy decision until French vote; finance chiefs not to hold ECB call this week.

EU's Rehn commented that the ECB must carefully monitoring impact of LTRO but he noted the initial impact was positive.

(ES) EU's Barroso reiterates that he was fully confident on Spain's determination to meet economic challenges.

Poland Central Bank Zielinska-Glebocka commented that interest rates might depend on data due out this week and that the prior rate hikes had not shown its full effect yet. She noted that the March CPI wouldl not affect rate decision and the Central Bank would not need to wait for Q1 GDP.

Poland Central Bank's Rzonca: Current interest rate level is too low to fight inflation.

Sweden released its spring budget which cut both 2012 and 2013 GDP forecasts> Swede Govt now saw 2012 GDP growth at 0.4% from 1.3% Sept view and 2013 GDP growth was now seen at 3.3% from 3.5% Sept view.

Sweden Fin Min Borg commented that weaker economic growth meant that safety margins were needed in budget. Downside economic risks dominated the global outlook and the situation in Europe was uncertain. He noted that there was no need for spending cuts or higher taxes at this time but might need to address the unemployment situation.

BoJ Gov Shirakawa reiterated view that Japan's economic activity was flat though indicating signs of improvement. BOJ was making the utmost effort to defeat deflation and must watch the impact of European financial markets. He stressed that Japan's financial system was stable.

Japan Vice Fin Min Igarashi commented that the country was in last stages of discussions with IMF(Note:press reports circulated that Japan would likely contribute $60B (¥4.8T) to the effort to boost IMF resources).

New Zealand PM Key commented that the country was considering way to resist currency appreciation.

Former PBOC advisor Yu Yongding commented that the CNY widening was not strictly a symbolic gesture and that the move would not mean China abandoned its gradual approach to opening capital account. He noted that China was much less now worried about appreciation of its currency.

Currencies

Risk aversion sentiment dominated the European morning and aided the USD and JPY currency pairs. It is a key week in terms of meetings with G7, G20 countries holding finance minister and central banker meetings. Both the IMF and World Bank will hold their spring meetings. Peripheral stress in Europe was highly evident. Spanish 10-year gov't yield over 6.00% for its highest level since Dec 1st 2011 while the country's 5-year CDS was at a record reading above 510bps. Flight to quality pulls Bund yields to record lows.

The EUR/USD began the session testing below the 1.30 handle for two-month lows before stabilizing. The pair had some stiff resisistnqce at the 1.3050-70 arae

The Japanese FX policy was now in focus as the key support at 80.30 was in sight. The 80.30 level corresponded to the high after the Aug 3rd 2011 BoJ solo FX intervention and was deemed to be key support.