ECONOMIC DATA

  • ·SZ July CPI: M/M -0.4% v -0.4%e; Y/Y 3.1% v 3.0%e

  • ·GE June ILO Unemployment Rate: 7.3% v 7.4%e

  • ·GE July Unemployment Change -15K v - 20Ke

  • ·GE July Unemployment Rate: 7.8% v 7.8%e

  • ·UK July Nationwide House Prices: M/M -1.7% v -1.2%e; Prior revised from -0.9% to -0. 8% |||| Y/Y -8.1% v -7.3%e

  • ·SP July Preliminary CPI Harmonized Y/Y: 5.3% v 5.2%e

  • ·SW July Consumer Confidence: -18.2 v -12.0e

  • ·SW July Economic Confidence: 89.0 v 93.3 prior || Prior revised from 93.8 to 93.3

  • ·SW Q2 Manufacturing Confidence: -9 v -1e

  • ·IT May Large Company Employment: -0.1% v 0.0% prior

  • ·IT July Preliminary CPI: M/M 0.5% v 0.4%e || Y/Y 4.1% v 3.9%e

  • ·IT July Preliminary CPI Harmonized: M/M -0.5% v -0.4%e || Y/Y 4.1% v 4.2%e

  • ·NO July Unemployment Rate: 1.8% v 1.8%e

  • ·NO June Credit Growth Indicator Y/Y: 13.3% v 13.8%e

  • ·EU July CPI Estimate: 4.1% v 5.1%e

  • ·EU June Unemployment Rate: 7.3% v 7.2%e || Prior revised from 7.2% to 7. 3%

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

  • ·On the earnings front in Europe overnight Deutsche Post [DPW.GE] reported Q2 net income of €254M, below the €278M consensus, EBIT of €862M above the €776M consensus, and revenue of €16.2B, above the €16.0B consensus. The company said that it sees raising its dividend at an average annual pace of 10%. (Shares were -3.8% in early trading). Sanofi Aventis [SAN.FR] reported Q2 Net income of €1.61B, below the €1.79B consensus, and revenue of €6.89B, below estimates of €7.30Be. (Shares were -8.2% in early trading). Deutsche Bank [DBK.GE] reported Q2 net income of €649M, well ahead of estimates of €491M. Pretax of €642M was below estimates of €734Me. Net interest income was €2.95B, above estimates of €2.42B, while writedowns were €2.3B above expectations of €1.8Be. Deutsche Bank's Tier 1 capital ratio rose to 9.3% from 9.2% in Q1. (Shares were +0.6% in early trading). Metro AG [MEO.GE] reported a Q2 net loss of €246M, better than the loss of €431M expected. EBIT of €329M was up from €303M a year ago, while revenue of €16.1B was slightly ahead of the €16.0B consensus. Metro reaffirmed its FY08 revenue guidance for growth of 6%+ implying €68.19B, below the €68.49B consensus. (Shares were +1.0% in early trading). Wacker Chemie [WCH.GE] reported Q2 net income of €152.8M, above the €130M consensus, and EBIT of €225M above the €196M consensus. Revenue of €1.12B was just above estimate of €1.08B. Wacker Chemie reiterated its FY08 revenue growth forecast of 10%+ implying €4.16B+ below estimates of €4.3B. (Shares were +5.1% in early trading). Telefonica [TEF.SP] reported 1H net income of €3.59B, above the €3.33B consensus. OIBDA of €11.12B exceeded estimates of €10.9Be, while reveue of €14.25B was roughly in line with estimates. Telefonica reiterated its FY08 revenue growth forecast of 6%-8% implying guidance of €59.8-60.1B, above the €58.5B consensus. (Shares were +1.0% in early trading). France Telecom [FTE.FR] reported 1H net income of €2.67B, roughly in line with estimates, and revenue of €26.3B, also in line with estimates. France Telecom confirmed that its FY08 dividend will exceed €1.30/share, and also confirmed its like-for-like sales growth target of 2%-3%. (Shares were +2. 2% in early trading). Cap Gemini [CAP.FR] reported 1H net income of €231M, above the €181M consensus, and operating profit of €288M, up from the €228. 5M a year ago. 1H booking were +3.9% y/y at€4.3B +3.9% y/y. Cap Gemini maintained its FY08 operating margin target of 8.5%. (Shares were -3.0% in early trading). Solvay [SOLB.BE] reports 1H net income of €351M, below the €390.0M consensus, and revenue of €4.73B, just below the €4.78B consensus. Solvay forecasted FY08 results below FY07 levels. (Shares were -9.5% in early trading). BASF [BAS.GE] reported Q2 net income of €1.3B, below the €1. 5B consensus. Pretax of €2.3B was ahead of estimates of €2.05Be, while EBIT of €2.36B was below estimates of €2.88Be. Rev was strong at €16.3B, notable ahead of the €15.5B consensus. BASF expects to post a slight y/y rise in FY08 EBIT. (Shares were -0.5% in early trading). SolarWorld [SWV. GE] reported Q2 net income of €51.8M, above the €41.7M consensus, and EBIT of €75.7M, above the €62M consensus. Revenue of €259.2M exceeded the €229M forecast. SloarWorld expects to exceed previously issued sales forecasts for FY08. (Shares were +1.5% in early trading). Unilever [UNA.NV] reported Q2 net income of €909M, just below the €914.5M consensus. Pretax at €1.35B was in line with estimates, while revenue of €10.37B was below estimates of €10.66B. Unilever expects to post FY08 growth in excess of the 3%-5% target, and noted that it lost market share to other brands in France and Spain in Q2. (Shares were -5.2% in early trading). Royal Dutch Shell [RDSA.UK] reported Q2 net income of $11.56B, well above the $8.38B consensus, while revenue of $131.4B, above the$114.3B seen in the prior quarter. (Shares were +1.1% in early trading). British American Tobacco [BATS.UK] reported Q2 net income of £650M, above the £622M consensus and operating profit of £917M, in line with estimates. Pretax of £967M was in line with estimates, while revenue of £2.92B, was above the £2.84B consensus. BATS noted that the company is not immune from the effects of an economic slowdown, but said that it can look ahead with more confidence than most companies. (Shares were +1.1% in early trading). Continental [CON.GE] reported Q2 net income of €194.3M, above the €160M consensus. Revenue of €6.61B was roughly in line with the €6.68B consensus, while EBITDA of €890.8M was up from the €650M a year ago. Continental said that its FY08 goals are firmly in sight but are becoming more difficult to achieve. The company maintained itsFY08 revenue target of €26.4B, whish is below the €26.7B consensus. (Shares were flat in early trading). TDK [6762.JP] offered to acquire Epcos [EPC. GE] for €17.85/share in cash. The total value of the proposed deal is €1.2B. The offer represents a 28.6% premium to yesterday's closing price. (Shares were +27.5% in early trading).

  • ·The USD started off the European session on a soft tone as Wednesday's crude oil rally slowly ebbed away recent bullish momentum. However, the USD steadied itself as both oil and gold retreated from their opening highs. FX dealers noted good Euro demand from Eastern European names in the early part of the European session. In the JPY related pairs, dealers noted that Japanese investors purchased notable amounts of AUD and NZD, yet those crosses were unable to capitalize on the flows.

  • ·On the speaker front the Bank of England's Besley said that once inflation is out of control it is very difficult to bring it back. Besley added that interest rates are mildly restrictive but are justifiable given the inflation outlook. Regarding his decision to vote for a rate hike at the previous policy-setting meeting Besley said that he sought to take pre-emptive action on rates in order to avoid sustained period of above target CPI. Besley said that he is pleased that oil prices have declined but added that we cannot breathe a mighty sigh of relief yet. The ECB's Quaden said overnight that medium-term inflation expectations are anchored around the ECB's targets. Quaden asserted that the Euro protects members against the financial crisis. The ECB's Wellink reiterated that the ECB must ensure that inflation expectations do not change. Wellink added that it must be clear that the ECB is on guard against rising inflation expectations. Swedish think tank NIER said overnight that Swedish GDP growth will be "well below" 2.0% in 2009.

NOTES

  • ·As one might expect the trend in economic data continued overnight. Swiss CPI rose to its highest y/y level since November of 1993. In Spain, preliminary harmonized CPI rose to its highest y/y level since the series began in January of 1997. The Euro-Zone CPI estimate was the highest since records began in November of 2001. Italian CPI rose to its highest Y/Y level since records began in January of 1997. Nationwide house prices in the UK declined to their lowest y/y level since records began in January of 1992. Swedish consumer confidence fell to its lowest level since May of 1995, while manufacturing confidence declined to its lowest level since Q2 of 2005. On a different note, but in similar fashion, ECB speakers maintained the trend guarding as they guarded the ECB's price stability mandate.

  • ·"It is always the same: once you are liberated, you are forced to ask who you are" - Jean Baudrillard