Judging by the recent action in equity futures, the continuously rangebound US market since the end of QE may be entering its latest downphase, catalyzed to a big extent by the recent strength in the JPY (the EURJPY traded down to 2 year lows overnight), especially following yesterday's not one but two statements by Abe advisor Harada saying a USDJPY at 125 isn't "justified" and a 105 level would be appropriate. A level, incidentally, which would push the Nikkei lower by about 20% and crush Japanese pensions which are now mostly invested in stocks. Not helping matters was the pause in the Chinese and Hang Seng stock bubbles, with the former barely rising 0.3%, while the former actually seeing its first 1.6% decline after many days of torrid, relentless rises. That said, everything can and will change with today's March retail sales update. As a reminder, the past three months have seen the worst stretch since Lehman when it comes to US consumers spending their money at retail outlets or online, which has been mostly blamed on the winter. Of course, now that "bad is good" and vice versa once more, tje much anticipated rebound in retail sales will be very stock negative as it may mean that the Fed's June tightening is back on schedule. A jump in PPI today will also be bad news for momentum chasing "traders." Indeed, Asian stocks traded mixed following a lacklustre Wall Street close, with investors observing caution ahead of the looming earnings season. The Shanghai Comp (0.3%) outperformed led by railway names amid talks that China is to invest CNY 2.8trl in railway infrastructure, while the Hang Seng (-1.6%) paused for breath, following its recent surge. Nikkei 225 (flat) consolidated throughout the session weighed on by continued JPY strength. Bunds have ebbed higher in early trade to print yet another fresh contract high (159.54) with concerns over Greece still lingering, alongside dealers suggesting on-going interest from European real money according to analysts at IFR. Although officially denied by a Greek official, the FT reported last night that the country is preparing to default unless it can come to an agreement with its creditors. As a consequence the GR/GE 10yr spread trades 18bps wider on the day with the ASE down -0.9%. Elsewhere, stocks in Europe opened lower following the negative close on Wall Street and have traded with a downside bias into the North American open on broad based selling with consumer discretionary stocks the worst performing. The big single stock move of the morning came from French firm Alcatel-Lucent who have traded up as much as 16% following news of an approach from Nokia. Yesterday, the head of the NY Fed's PPT, Simon Potter, reiterated the warning by the TMPG noted previously, warning that last autumn's "flash crash" in USTs could happen again due to the changing nature of US government deb". He warning in a speech on Monday that the unintended consequences of regulatory and market changes could mean that “that sharp intra-day price moves become more common” in the future. Looking specifically at UK assets the release of UK CPI saw GBP/USD come under selling pressure as participants focused on the Core Y/Y reading which came in at 1.0% vs Exp.1.2%. According to the ONS, the falls in clothing and gas prices produced the largest downward contributions to change in the inflation rate. Interesting to note that if the headline reading was adjusted to two decimal places then the reading for March was -0.01% Y/Y, which would be the first negative reading on record. Elsewhere, commodity linked currencies are weaker in sympathy with lower metal prices and with WTI and Brent crude futures declining ahead of the North American entrance. Crude futures have drifted lower through the European morning paring back gains seen overnight amid no new fundamental news, however more definitive price action will likely stem from the looming US data in the form of US retail sales and PPI. As a reminder the weekly API inventories are due after market today and the initial estimates for this week’s DoE crude headline stands at a build of 3.5mln. In oil specific news, Iraq are to lift their Basrah light exports by 5.3% to 2.52mln b/d in the month of May 2015. Meanwhile, Iran have set their May light crude to North West Europe at USD 3.90/bbl discount, heavy set at a USD 5.40/discount. (BBG) In latest metal related forecasts, HSBC see 2015 and 2016 average iron price at USD 59/ton, sees iron ore supply rising over the next 2 years and says that one-third of global iron ore supply is to be loss-making. (BBG) In summary: European shares fall with the banks and autos sectors underperforming and basic resources, real estate outperforming. The Spanish and Italian markets are the worst-performing larger bourses, the U.K. the best. The euro is little changed against the dollar. German 10yr bond yields fall; French yields decline. Commodities gain, with copper, zinc underperforming and WTI crude outperforming. U.S. small business optimism, retail sales, business inventories, PPI due later. Market Wrap S&P 500 futures down 0.2% to 2081.9 Stoxx 600 down 0.4% to 412 Euro down 0.01% to $1.0566 Dollar Index up 0.01% to 99.5 US 10Yr yield down 2bps to 1.9% German 10Yr yield down 2bps to 0.14% MSCI Asia Pacific little changed at 152.7 Gold spot down 0.6% to $1191.4/oz Eurostoxx 50 -1.1%, FTSE 100 -0%, CAC 40 -0.7%, DAX -0.6%, IBEX -1.2%, FTSEMIB -1.1%, SMI -0.2% Asian stocks little changed with the Kospi outperforming and the Hang Seng underperforming. MSCI Asia Pacific little changed at 152.7; Nikkei 225 up 0%, Hang Seng down 1.6%, Kospi up 0.6%, Shanghai Composite up 0.3%, ASX down 0.2%, Sensex up 0.6% 6 out of 10 sectors rise with consumer, utilities outperforming and tech, staples underperforming Italian 10Yr yield little changed at 1.28% Spanish 10Yr yield little changed at 1.25% French 10Yr yield down 2bps to 0.41% S&P GSCI Index up 0.5% to 414.8 Brent Futures up 0.4% to $58.1/bbl, WTI Futures up 0.6% to $52.2/bbl LME 3m Copper down 1.1% to $5924.5/MT LME 3m Nickel little changed at $12400/MT Wheat futures down 0.3% to 498.5 USd/bu Bulletin Headline Summary from Bloomberg and RanSquawk US stock futures point to a lower open on Wall Street as European equities trade heavy on no new fundamental news with concerns still lingering over Greece UK Core CPI comes in below expectations for March weakening GBP and lending support to gilt futures Looking ahead attention will turn to US retail sales (Mar) and PPI (Mar) data which will be closely followed given the Fed’s focus on data. Treasuries gain as German and French 10Y yields fall to record lows and before reports forecast to show retail sales rose 1.1% in March, core PPI increased 0.1%. China’s economic growth rate probably slipped in 1Q to the slowest pace since the global recession of 2009, if analysts have called it right; GDP data to be released tonight at 10pm ET Traders are betting that the China Securities Regulatory Commission will shy away from any serious steps to curb an explosion of margin finance, which fueled a 93% one- year surge in Shanghai’s benchmark stock gauge Greek government officials are returning to work on Tuesday after the Orthodox Easter break to face the daily grind of negotiations to unlock financing and keep the country afloat A Greek government official denied a FT report that Greece is preparing for a default U.K. consumer prices stagnated for a second month as restaurants and hotels spared the country from outright deflation; core inflation slowed to the weakest in 9 years The ECB could run out of eligible bonds to buy from some governments around the end of this year, which may prompt the central bank to loosen the rules of the plan and further suppress yields, according to Moody’s Lawmakers skeptical about an Iran nuclear deal said U.S. Secretary of State John Kerry’s plea for more time to complete an agreement did little to dissuade them from insisting that Congress must review any final plan Sovereign bond yields lower. Asian stocks mostly higher. European equities decline, U.S. equity-index futures fall. Crude oil higher, copper and gold decline Germany says divide with Russia persists in latest Ukraine talks U.K. Labour Party turns to private equity firms in tax crackdown U.K. PM Cameron will pin his Conservative Party’s hopes of re-election on offering 1.3m poorer families the chance to buy their own homes Draghi to highlight risks to recovery; may tweak QE, analysts say, ECB preview here Europe’s high-yield market gets EU5b boost as at least 8 issuers roadshowing deals this week European bond buyers find negative doesn’t necessarily mean bad HSBC’s Major gets queasy over European bond levels after rally Prudential chief echoes Dimon saying liquidity is top worry Asian stocks head for 7Y high; Singapore dollar, oil advance Oil gains for 4th day amid speculation U.S. shale boom is ending Peripheral euro-area govt spreads vs Germany expanded yday, halting compression seen on Friday, with 5Y-15Y sectors underperforming on Spanish and Italian curves Bearish catalysts included worries over Greece, Spanish supply on Thursday, Podemos comment that party wants to discuss debt restructuring US Event Calendar 8:30am: Retail Sales Advance, March, est. 1.1% (prior -0.6%) Retail Sales Ex Auto, March, est. 0.7% (prior -0.1%) Retail Sales Ex Auto and Gas, March, est. 0.6% (prior -0.2%) Retail Sales Control Group, March, est. 0.5% (prior 0%) 8:30am: PPI Final Demand m/m, March, est 0.2% (prior -0.5%) PPI Ex Food and Energy m/m, March, est. 0.1% (prior -0.5%) PPI Ex Food, Energy, Trade m/m, March, est. 0.1% (prior 0%) PPI Final Demand y/y, March, est. -0.9% (prior -0.6%) PPI Ex Food and Energy y/y, March, est. 0.9% (prior 1%) PPI Ex Food, Energy, Trade y/y, March, est. 0.8% (prior 0.7%) 9:00am: NFIB Small Business Optimism, March, est. 98 (prior 98) 10:00am: Business Inventories, Feb., est. 0.2% (prior 0%) Central Banks 4:00am: ECB publishes Bank Lending Survey 8:40am: Fed’s Dudley speaks in New York 8:00pm: Fed’s Kocherlakota speaks in Winona, Minn. DB's Jim Reid concludes the overnight event recap It certainly wasn't a day for intrigue, suspense or dragons for markets yesterday as things were fairly quiet after the weak Chinese numbers and some important data and earnings releases today and for the rest of the week. The reporting highlights today are probably JP Morgan and Wells Fargo in the financials space while Johnson & Johnson is due to report in corporate land (all before the bell). Intel is due to report post-market close as well. According to analysts’ expectations (Bloomberg), EPS for the S&P 500 is expected to fall 5.6% yoy this quarter (with subsequent falls in Q2 and Q3 expected before bouncing back in Q4). With the stronger Dollar and energy weakness playing on this reporting period, financials (-0.1% yoy) are expected to outperform the broader corporate universe, while the ex-energy related component of the index is actually forecast to see a modest +2.1% yoy in EPS growth. In terms of data, retail sales in the US will probably be the highlight today after weak reports in recent months. Expectations are for +1.1% mom and +0.6% mom for the headline and core respectively. With the Fed data dependent, these tier one releases are important. Outside of the US, we'll also see UK inflation where the market just expects (0.0% yoy) the UK to again avoid the first annualised deflation print since 1960. We'll preview the rest of the day ahead at the end. Moving on and turning to the early morning trading in Asia, following on from yesterday's strong performance post the weak export numbers out of China, the Shanghai Comp (+0.96%) and CSI 300 (+1.06%) have extended gains this morning. Bourses elsewhere are more mixed. The Hang Seng (-0.48%) and Nikkei (-0.09%) are weaker while the Kospi (+0.47%) is firmer. Yesterday’s trade data reinforced the view of our China Economist Zhiwei Zhang that Q1 growth may have slowed sharply to 6.8% yoy from 7.3% yoy in Q4 last year with the market looking for a slightly higher 7.0% yoy print in tomorrow's release. Zhiwei also maintains his stance of aggressive easing policy to start this quarter, with an RRR cut expected in April and interest rate cut in May. With markets in something of a wait-and-see-mode yesterday, it was a quiet day all round as US equities in particular traded fairly subdued for the most part. The S&P 500 (-0.46%) and Dow (-0.45%) closed lower to bring to an end three consecutive days of gains. With perhaps one eye on earnings this week, financials (+0.28%) were the notable outperformer while energy (-0.84%) and industrials (-1.07%) lagged. Treasuries were a touch firmer yesterday as 5y (-2.8bps), 10y (-2.0bps) and 30y (-0.6bps) yields all closed lower. The Dollar continued to strengthen meanwhile with the DXY finishing +0.15% - its sixth consecutive day of gains. With the slightly damper tone generally, credit markets were a little soft yesterday as CDX IG closed 1.25bps wider. Fedspeak continued yesterday and this time it was the turn of the San Francisco Fed President Williams (voting member) who said that risks are receding that an unexpected setback could derail a recovery in the US once the Fed raises rates. Williams also echoed some other recent Fed commentary, saying that ‘more importantly, we are really thinking about a path, we are talking about moving interest rates from zero to a normal level over several years’ before then going on to reiterate the dependence on data before firming any particular liftoff date. Elsewhere, in a report in the FT, Fed executive vice-president Potter yesterday warned of the possibility that the unintended consequences of regulatory and market changes could result in a similar ‘flash crash’ to that seen back on October 15th last year with ‘sharp intra-day moves becoming more common’. The article said that the move was a 1 in 1.6bn year event mathematically. With headlines and data also few and far between in Europe, markets traded with little obvious direction as the Stoxx 600 (+0.16%) closed higher and the Dax (-0.29%) declined. In bond markets, Bunds finished unchanged while peripheral markets finished weaker as 10y yields in Spain (+2.9bps), Italy (+1.8bps) and Portugal (+7.0bps) all closed wider. Greece was once again the main focus in European markets. Yesterday the FT ran a piece suggesting that the Greek government is preparing to declare a debt default unless it manages to reach a deal with its creditors by the end of the month. Meanwhile, with tensions running high and time running out, the EU Commission President Dombrovskis said yesterday that technical negotiations are ongoing but that talks are ‘very complicated’ and much ground still needs to be covered before the April 24th Eurogroup meeting. Finally German newspaper Bild yesterday suggested that the Greek government is considering early elections, however this has subsequently been downplayed by Greece officials. Another event which will likely increase in attention in the coming weeks is the UK election. DB’s George Buckley noted yesterday that another hung parliament is looking likely with support for both the Conservatives and Labour running neck and neck. George argues that whichever political party is the larger following the election, neither is expected to come close to a majority and that whatever the result, George argues that there are few ‘good’ outcomes for financial markets. In the case of a Labour-led government, SNP support could encourage Labour to move further left in government resulting in increased taxes, less austerity and a likely slower reduction in the deficit. On the other hand, a Conservative-led government could see negative implications for investment and sterling with the promise of an EU referendum by 2017. In terms of today’s calendar, as mentioned the CPI print in the UK will take up most of the attention this morning while the RPI and PPI readings for the region will also be due. Outside of these, Italian CPI and Euro-area industrial production are the other notable readings while the ECB is due to release the results of its latest quarterly Bank Lending Survey. Retail sales and earnings will be the primary focus across the Atlantic this afternoon, however PPI, business inventories and the NFIB small business optimism survey will also be of interest.