European Market Update: Markets brace for a possible six-digit loss in US payroll report; ECB Lending Survey says banks to tighten credit less aggressively in Q1


ECONOMIC DATA

- (SZ) Swiss Jan Unemployment Rate: 3.3% v 3.2%e prior; Unemployment Rate sa : 2.9% v 2.9%e

- (FR) France Dec Trade Balance -€2.5B v -€5.7Be

- (HU) Hungarian Dec Preliminary Industrial Output Y/Y:-23.2% v -13.8%e

- (SW) Swedish Jan Budget Balance: -SEK6.1B v -SEK132.6Be

- (CZ) Czech Jan International Reserves: $34.9B v $37.0B prior

- (NO) Norwegian Dec Industrial Production M/M: 0.5% v -0.1% prior; Y/Y: 3.7% v 0.1% prior

- (EU) ECB Bank Lending Survey: Credit tightened in Q4; Banks sees significant decline in Q1 tightening

- (NO) Industrial Production Manufacturing M/M: -2.4% v -1.5%e; Y/Y: -1.3% v 1.6%e

- (RU) Russian Official Reserve Assets w/e Feb 2nd: $386.9B v $427.1B prior

- (UK) Jan PPI Input M/M: 1.5% v 0.5%e; Y/Y: 2.3% v 2.0%e

- (UK) Jan PPI Output M/M: 0.1% v -0.1%e; Y/Y: 3.5% v3.4%e

- (UK) PPI Output Core M/M: 0.4% v 0.1%e; Y/Y: 4.1% 3.8%e

- (UK) Dec Industrial Production M/M: -1.7% v-1.2%e; Y/Y:-9.4% v -7.8%e;

- (UK) Dec Manufacturing Production M/M: -2.2% v-1.4%e; Y/Y: -10.2% v-8.5%e; YoY reading was the lowest reading since March, 1981

- (GE) German Dec Industrial Production: M/M: -4.6% v-2.5%e; Y/Y:-12.0% v -9.6%e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- In equities, Toyota [TM] reported a Q3 net loss of ¥164.6B, less than consensus expectations for a loss of ¥195B, although its operating loss of ¥360.5B was more than three times the consensus number. Revenues came in at ¥4.80T versus ¥6.71T y/y. Toyota widened its full-year loss forecasts for the third time. The company guided a FY08/09 net loss of ¥350B, a big change from its prior forecast for a profit of ¥50B. It tripled its FY operating loss to ¥450B and lowered its FY08/09 global vehicle sales target to 7.32M units from 7.54M units. Both Moody's and S&P downgraded Toyota's corporate bond ratings a notch. || Syngenta [SYNN.SZ] reported a 2008 net profit of $1.39B, slightly below analyst estimates. Revenues were in line at $11.6B. For 2009, the company expects adverse currency effects and tight risk management could limit growth in emerging markets. || Volvo [VOLVB.SW] reported a Q4 net loss of SEK1.36B that bore no resemblance to expectations for a SEK65M loss. Its operating loss was SEK999M, versus consensus expectations for a loss of SEK765M. Revenues were a bit above par at SEK77B. It proposed a dividend of SEK2/shr and noted that its liquidity position remained strong. || BMW [BMW.GE] reported 2008 revenues of €53.2B in line with consensus estimates, noting that its 2008 net profit would be "clearly positive." BMW's January sales were 70.4K units, down 24% y/y. || Julius Baer [BAER.SZ] reported a FY net profit of CHF852M in line with consensus views, noting assets under management (AUM) were at CHF275B versus CHF405B a year ago. The firm said half of the CHF27B outflows came from its asset management unit. || Infineon [IFX.GE] did not reiterate its 2009 outlook, commenting that visibility was much too low. It it continuing discussions with lenders over refinancing possibilities. || Hermes [RMS.FR] reported Q4 revenues were up 1.7% y/y at €1.77B. It expected 2008 results to be near its internal targets. Hermes' chairman noted that 2008 profits could fall due to fixed costs and was not expecting a fantastic 2009. It did note that its global presence has helped it deal with downturns.

- In speakers, the ECB's Trichet repeated most of his comments from Thursday's post rate-decision press conference, noting once again that zero interest rates would be inappropriate and held distinct drawbacks. But not all of his comments were warmed over from yesterday, as Trichet remarked for the first time that if interest rates did hit zero, there were "a number of other instruments" that could be used by the central bank. || The ECB's Liikanen reiterated that the ECB would be able to cut interest rates at its March policy meeting. He commented that the ECB is naturally afraid of the situation of banks but added the financial market crisis can't weaken the euro. He stressed both price stability and financial stability are vital but that different countries have different situations. || The ECB's Wellink reiterated that uncertainty in financial markets is still "unusually elevated." || The French Trade Minister commented that a weaker euro and lower oil prices will to help the country's 2009 trade outlook.

- In currencies, the greenback was mixed in the European session ahead of the US payrolls data.
Sterling was broadly firmer at its tested 1.4770 level against the USD at 0.8662 versus the euro.
Dealers noted some good buying from a UK clearer as well as far east names. Chatter of GBP buy stops building above the 1.4815 level. EUR/USD consolidated abve the 1.28 level. Dealers are waiting to see whether the 1.2720 level holds in the aftermath of the US data and move toward that alleged 1.23 option barrier. The JPY maintaining a softer tone against the majors with USD/JPY holding above the 91 level through out the European morning. Commodity currencies are mixed as oil and gold move in different gears between demand destruction and safe-haven flows. Spot gold has critical resistance at the $930/oz level. || An ABN Amro analyst commented on euro-pound, saying the ECB's stance is net bearish for EUR/GBP with 0.85 as a reasonable price target. The analyst believes that the euro is in danger of "broad underperformance."

- In fixed income, trading has been relatively muted this morning ahead of the US January non-farm payrolls and unemployment reports. Bunds, gilts and US treasuries have all made gains, with no discernible change to the shapes of yield curves. In an interesting development for corporates, BNP Paribas announced plans to tap markets with a €15B covered bond issue in the works.

- Looking Ahead:

- 7:00 (CA) Canadian Jan Unemployment Rate: 6.8% expected v 6.6% prior

- 7:00 (CA) Net Change in Employment: -40.0k expected v -20.4k prior

- 8:30 (US) Change in Non-Farm Payrolls: -540k expected v -524k prior

- 8:30 (US) Jan Unemployment Rate: 7.5% expected v 7.2% prior

- 8:30 (US) Jan Change in Manufacturing Payrolls: -145k expected v -149k prior

- 8:30 (US) Jan Average Hourly Earnings M/M: 0.2% expected v 0.3% prior; Y/Y: 3.6% expected v 3.7% prior

- 8:30 (US) Average Weekly hours: 33.3 expected v 33.3 prior