European Market Update: March 27, 2013

Notes/Observations

Moody's: EU's awkward handling of Cyprus's bailout had put extra pressure on the bloc's sovereign ratings.

Fresh round of Italy sovereign downgrade rumors circulate as Besani tried to formulate a govermment.

Luxembourg Government defends its financial sector size.

(CY) Cyprus Fin Min Sarris: Uninsured Laiki (Popular) Bank depositors could see haircuts of up to 80%; Uninsured depositors may not get payouts for as much as 7 years; Reiterates banks to reopen on Thursday.

(CY) Fitch places Cyprus sovereign rating on watch negative.

EUR/USD hits 4-mont lows below 1.28.

Italy has soft cover ratios in 5-year and 10-year auction; 2018 BTP ratio was lowest since 2002

Economic Data

(DE) Germany Apr GfK Consumer Confidence Survey: 5.9 v 5.9e

(DE) Germany Feb Import Price Index M/M: 0.3% v 0.2%e; Y/Y: -1.6% v -1.6%e

(CH) Swiss Feb UBS Consumption Indicator: 1.26 v 1.15 prior.

(FI) Finland Mar Consumer Confidence: 10.2 v 9.6 prior; Business Confidence: -9 v -9 prior

(FR) France Q4 Final Gross Domestic Product Q/Q: -0.3% v -0.3%e; Y/Y: -0.3% v -0.3%e

(TW) Taiwan Feb Leading Index M/M: 1.1 v 1.1% prior; Coincident Index M/M: 0.3% v 0.3% prior

(ES) Spain Feb Adjusted Real Retail Sales Y/Y: -8.0% v -10.0%e; Real Retail Sales Y/Y: -10.6% v -8.8% prior

(ES) Spain Mar Preliminary Consumer Price Index Y/Y: 2.4% v 2.7%e; CPI EU Harmonized Y/Y: 2.6% v 2.7%e

(CH) Swiss Mar KOF Swiss Leading Indicator: 0.99v 1.04e

(SE) Sweden Mar Consumer Confidence: 2.8 v 1.0e; Manufacturing Confidence: -10 v -8e; Economic Tendency Survey: 95.4 97.0e

(TR) Turkey Mar Consumer Confidence: 74.9 v 76.7 prior.

(EU) ECB: €1.8B borrowed in overnight loan facility vs. €1.05B prior; €118.2B parked in deposit facility vs. €128.9B prior.

(AT) Austria Jan Industrial Production M/M: -0.5% v +0.6% prior; Y/Y: 2.2 v 2.5% prior.

(SE) Sweden Feb Trade Balance (SEK): 7.1B v 2.6Be

(SE) Sweden Feb Household Lending Y/Y: 4.6% v 4.5%e

(SE) Sweden Feb Retail Sales M/M: 1.0% v 0.2%e; Y/Y: 3.5% v 2.1%e

(IT) Italy Jan Industrial Orders M/M: -1.4% v +0.6%e; Y/Y: -3.3% v -5.0%e

(IT) Italy Jan Industrial Sales M/M: -1.3% v +0.4% prior; Y/Y: -3.4% v -6.1% prior

(ES) Spain Jan Current Account: -€2.7B v +€4.9B prior.

(UK) Q4 Current Account: -£14.0B v -£12.5Be

(UK) Q4 Final GDP Q/Q: -0.3% v -0.3%e; Y/Y: 0.2% v 0.3%e

(UK) Q4 Final Total Business Investment Q/Q: -0.8% v -1.2%e; Y/Y: 0.8% v 0.4% prelim.

(IT) Italy Jan Retail Sales M/M: -0.5% v 0.0%e; Y/Y: -3.0% v -3.0%e

(PT) Portugal Mar Consumer Confidence: -55.3 v -56.3 prior; Economic Climate Indicator: -3.9 v -4.2 prior.

(EU) Euro Zone Mar Business Climate Indicator: -0.86v -0.79e; Euro-Zone Consumer Confidence: -23.5 v -23.5e; Economic Confidence: 90.0 v 90.5e; Industrial Confidence: -12.5 v -12.0e ; Services Confidence: -6.7 v -6.5e

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Fixed Income:

(RU) Russia sold RUB9.9B vs. RUB9.9B indicated in 2027 OFZ bond; Yield: 7.4% vs. guidance of 7.38-7.43%

(SE) Sweden sold total SEK10B in 3-month and 6-month Bills.

(EU) ECB allotted $505M in 7-Day USD Liquidity Tender at fixed 0.64% vs.$300M prior.

(EU) ECB allotted $451Min 3-month USD Liquidity Tender at fixed 0.64% vs. $6.8B prior.

(EU) ECB allotted €9.1B 3-Month Refinancing Tender at fixed 0.75% vs. €8.3B

(IT) Italy Debt Agency (Tesoro) sold total €6.91B vs. €5.0-7.0B indicated in 2017 and 2023 BTP Bonds

Sold €3.91B vs. €3.0-4.0BB indicated range in 3.5% Nov 2017 BTP Bond; Avg Yield 3.65% v 3.59% prior; Bid-to-cover:1.22 x v 1.61x prior

Sold €3.0B v €2.0-3.0B indicated range 4.50% Nov 2023 BTP bonds, Avg yield 4.66% v 4.83% prior; bid to cover 1.33x v 1.65x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

FTSE 100 -0.10% at 6,396, DAX -0.60% at 7,833, CAC-40 -0.70% at 3,722, IBEX-35 -1.2% at 7,893, FTSE MIB -0.90% at 15,348, SMI -0.20% at 7,786, S&P 500 Futures -0.20% at 1,554

European equities are broadly lower, amid continued concerns on the political situation in Italy. Cyprus is also in focus, as banks are due to reopen on theThursday session. Uncertainty remains with regards to the size of the haircuts which may be applied to certain bank deposits in Cyprus. Spain's IBEX-35 and Italy's FTSE MIB have continued to underperform, tracking the rise in peripheral yields. Banks are broadly lower, led by BNP, Deutsche Bank and UniCredit. UK banks have outperformed, as the BoE suggested that the capital requirement for the sector was below some estimates in the market. Resource related firms are trading mixed amid the decline in commodity prices.

UK movers [May Gurney +27% (takeover offer), Rockhopper Exploration +4% (considering cash return to shareholders), Tui Travel +4% (guided FY results at top end of range), Tullow Oil +1% (takeover chatter), Tesco +1% (broker commentary) ; ICAP -6.5% (guided FY results at lower end of range), Topps Tiles -5.5% (reported decline in H1 LFL sales), Costain Group -2.5% (offer for May Gurney)]

Germany movers [Sky Deutschland +2% (broker commentary); IVG -30% (examining financing measures), SMA Solar -11% (FY profits declined y/y), Telefonica Deutschland -2% (broker commentary), Deutsche Bank -2% (concerns related to Libor probe, S&P placed rating on watch negative), Prosieben SAT -1.5% (broker commentary), Salzgitter -1.5% (broker commentary), Allianz -1% (acquisition)]

France movers [LVMH +2% (broker commentary); Safran -3% (share placement), BNP -2% (speculation that Belgium's government could lower stake), EADS -1.3% (Spain's to lower stake)]

Italy movers [Mediaset +8% (FY results above ests)]

Switzerland movers [Syngenta -0.50% (broker commentary)]