Data Releases: The Week Ahead

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1 10 April 2012 ECB s Asmussen suggests that ECB is on hold. In an interview with Rheinische Post, ECB Executive Board Member Jörg Asmussen said that the ECB exceptional measures were limited in time and regarding the 3Y LTRO, he tried to bring down expectations of additional operations. Regarding Greece, Mr. Asmussen said that he expects that the Greek programme will help to generate positive growth in In his view, the aim of the Greek programme is to keep Greece in the euro area. A Greek exit would lead to incalculable costs. Citi analysts comment that the statements of Mr. Asmussen support their view that the ECB is on hold for the time being. Greek government works on bank recapitalization plans. PM Lucas Papademos said that by April 20, the government will announce plans regarding the recapitalization of the Greek banks. Furthermore, the PM said that his cabinet will work on a proposal for the budgets for , which should form the basis of the decision of the new government. According to a poll from GPO, the current coalition parties New Democracy and Pasok would only receive 32.4% of votes. The new elections are likely to be held on May 6. The leader of one of the left-wing parties, asked to amend the programme in order to support employment and social progress. Past performance is no guarantee of future results. Investment products are (i) not insured by any government agency; (ii) not a deposit or other obligation of, or guaranteed by, the depository institution; and (iii) subject to investment risks, including possible loss of the principal amount invested. For more important information see end page.

2 Italy s Senate will debate the proposed labor market reforms of the Monti Government this week. Even the watered- own initial proposal of the law will seek a change in the law of dismissal and the reduction in unemployment benefits. It is likely that there will be amendment from parliament to the law proposal. Data from the Bank of Italy showed that Italian banks tapped the first 3Y LTRO with 116bn out of a total 489bn and the second 3Y LTRO with 139bn out of the total 530bn. The data highlight the strong use of Italian banks in the ECB s operations. Overall funding of Italian banks from the Eurossystem increased from 194.1bn in February to 270.4bn in March. The Spanish PM announces reduction in health sector expenditure and sale of banks. After meetings with the health and education ministers, PM Mariano Rajoy announced that the government wants to cut expenditures in both areas by around 10bn, mainly due to efficiency gains. Furthermore, the PM said that the government plans to put several nationalized banks up for sale. Sarkozy Manifesto Unveiled - President Nicolas Sarkozy unveiled his manifesto last Thursday afternoon. The document contained few new proposals after weeks of daily announcements. Sarkozy aims to achieve a budget surplus of 0.5% of GDP in 2017, with the debt-to-gdp ratio peaking at 89.4% in 2013 before gradually falling to 80.2% in The exercise requires 125bn in savings to be found by 2016 including 45.5bn of new revenues, of which 13.5bn still have to be earmarked, and 79bn in spending cuts achieved primarily by limiting public expenditure growth to 0.4% per year. Sarkozy also indicated that he would present a bill to parliament committing France to balanced budget balances as early as this summer. The President s main economic proposals include i) a reform of the welfare system to get the longterm unemployed back to work. Jobless claimants will have to retrain or risk losing benefits. Those on minimum benefits will have to do seven hours paid work a week; ii) apprenticeships for 14-year olds and at least 5% of job posts at larger companies to be internships in order to tackle chronic youth unemployment; iii) taxing dividend income, applying a minimum 15% tax on major French corporations and introduce a levy for tax exiles who seek refuge abroad from France's high rates. The manifesto is based on targets of economic growth of 0.7% in 2012, 1.75% in 2013 and 2.0% per year in Sarkozy warned in an interview with Le Journal du Dimanche that Hollande's tax and spend policies would push France the way of Spain and Greece. He urged voters to make the "historic choice of competitiveness, innovation and reducing public spending," Citi analysts comment that the two main candidates are using very similar GDP growth forecasts for the 5-year Presidential term. Citi analysts have been arguing for some time that these baseline scenarios appear too optimistic to us. Sarkozy who needs to close the gap with Hollande in terms of second round voting intentions has been arguing that any deviation from France's European fiscal commitments would immediately trigger a crisis of confidence.

3 FX Forecasts

4 Data Releases: The Week Ahead USD: Apr 9, Fed Chairman Bernanke to speak at Atlanta Fed Conference, as will regional Fed Presidents Lockhart and Rosengren. Apr 10, Atlanta Fed President Lockhart to speak at Atlanta Fed conference in Stone Mountain, GA. Apr 10, Boston Fed President Rosengren to speak at Atlanta Fed conference. Apr 10, Dallas Fed President Fisher to speak to Price College of Business. Apr 10, Minneapolis Fed President Kocherlakota to speak to the Southern Minnesota Initiative Foundation. Apr 11, Kansas City Fed President George to speak at the Hyman P. Minsky Conference on Debt, Deficits and Financial Instability. Apr 11, Boston Fed President to speak at Atlanta Fed conference in Stone Mountain, GA. Apr 11, St. Louis Fed President Bullard to deliver opening remarks at the Homer Jones Memorial Lecture. Apr 11, Fed Vice Chairman Yellen to speak to the New York University Money Marketeers. Apr 12, Philadelphia Fed President Plosser to speak to the National Economists Club in Washington on the Economic Outlook. Apr 12, Minneapolis Fed President Kocherlakota to speak to the White Bear Lake Area Chamber of Commerce. Apr 12, Feb. International Trade Balance (Billions of Dollars): Citi , Jan , Dec , Nov , Oct , Sept We look for another widening of the trade balance in February. Although exports are likely to have increased in the month, the oil bill probably continued to expand. Note: Our expected increase would add to an already greatly expanded deficit in the first quarter. The average deficit in January and February would be $6 billion higher than the fourth quarter average. When these figures are annualized, it indicates a massive widening of the deficit. However, most of the increase reflects oil price changes, and therefore does not affect real growth. Our first quarter real GDP projection includes a modest 0.2 percentage point drag from trade. Apr 12, March Producer Price Index (Percent Change): Total Citi %, Feb. 0.4 %, Jan. 0.1 %, Dec %; Ex. Food & Energy Citi. 0.2, Feb. 0.2, Jan. 0.4, Dec Producer prices probably edged down in March on a reversal in energy prices. Wholesale energy prices (gasoline, fuel oil and electricity) actually rose in the month, but the increases were much smaller than normal for this time of year. Thus, seasonal factors pushed down the adjusted figures. Note: Natural gas prices have fallen in each of the previous five months, reflecting increased supply. We expect the declines to continue, dampening overall energy costs. Apr 13, Consumer Price Index (Percent Change): Total Citi. 0.3 %, Feb. 0.4 %, Jan. 0.2 %, Dec. 0.0 %; Excl. Food & Energy Citi. 0.2, Feb. 0.1, Jan. 0.2, Dec Consumer prices likely will post another outsized increase in March, led by energy cost increases. Gasoline prices actually rose beyond the spike in February. As for core CPI, we expect another modest increase, keeping the year-to year inflation rate at 2.2%. Note 1: Like the PPI, seasonal factors should dampen the adjusted energy price rise in March, but the seasonal offset is not so extreme at the retail level. Note 2: Core CPI inflation has picked up sharply from the October 2010 low of 0.6%, but most of the acceleration occurred in the early part of For the past half year, core inflation has been quite tame, rising at less than a 2% rate. Apr 13, April (Prelim.) Reuters/Michigan Sentiment Index: Citi. 76.5, Mar 76.2, Feb. 75.3, Jan The first pass at consumer sentiment in April likely will show little change,

5 JPY: remaining in the same range as the previous three months. Note: We caution that the preliminary sentiment report has been erratic lately, with the last two months showing declines that were transformed into increases in the second pass. April 9 10, BoJ Board Meeting: BoJ likely to leave policy unchanged for a second consecutive meeting: We expect no change in monetary policy next week We expect the BoJ to leave monetary policy unchanged after its meeting on April 9 and 10th. While the key confidence DI in the BoJ Tankan survey surprised to the downside, other data generally point to a cyclical pick-up in economic activity in recent months. Moreover, the yendollar rate remains relatively stable. Meanwhile, it is uncertain whether policymakers will decide on additional easing at a policy meeting on April 27th, when a semiannual economic outlook report will be published. However, we see a continuation of the status quo as slightly more likely. Apr. 9, Balance of Payments, Current Account (Feb) Forecast: bn NSA; 722.6bn SA, Previous: bn NSA; 115.6bn SA - We expect the current account to generate a trn surplus before seasonal adjustment ( trn in Feb 2011) and a 722.6bn surplus after the adjustment ( bn in Jan 2012) in February. Seasonal weakness and the adverse impact of the Chinese New Year sent the trade balance to an over 1trn deficit (before adjustment) in January, which dragged the current account into the red. In February, the trade balance before seasonal adjustment probably turned up as these unfavorable factors dropped off, taking the current account back to a surplus of around 1trn. Apr. 11, Machinery Orders, Private Excl. Ships and Elec. Power (Feb) Forecast: -2.4% MoM; 1.5% YoY., Previous: 3.4% MoM; 5.7% YoY - Private machinery orders excluding ships and power plants (private core orders) are expected to have decreased 2.4% MoM (+1.5% YoY) in February after a 3.4% MoM gain in January and a 7.1% MoM drop in December. This would leave orders in the prevailing range since mid Based on our forecast, the January- February average of private core orders stood 1.7% higher than the fourth quarter average (+5.6% QoQ in 1Q, +2.5% QoQ in 2Q, +1.5% QoQ in 3Q and -2.6% QoQ in 4Q).

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