European Market Update: Russia downplays potential corporate debt restructuring adding that it remains only a concept at this time; UBS CEO vows return to profitability in 2009


ECONOMIC DATA

- (EU) Dec Monster Employment Index:106 v 132 in Dec; Steepest MoM decline on record

- (FR) French Dec Industrial Production M/M: -1.8% v -1.8%e; Y/Y: -11.1% v-10.7%e

- (FR) French Dec Manufacturing Production M/M: -2.8% v-2.2%e ;Y/Y: -14.0% v -12.8%e

- (SZ) Swiss Jan CPI M/M: -0.8% v-0.4%e; Y/Y: 0.1% v 0.6%e

- (DE) Danish Jan CPI M/M: -0.3% v -0.4%e; Y/Y: 1.8% v 1.7%e

- (SW) Swedish Industrial Production M/M: -5.1% v -1.2%e; Y/Y: -20.3% v -12.3%e

- (SW) Swedish Industrial Orders M/M: -8.7% v -4.3 prior; Y/Y: -22.0% v -26.2% prior

- (IT) Italian Dec Industrial Production M/M: -2.5% v -2.0%e; Y/Y: -14.3% v-11.2%

- (NO) Norwegian Jan CPI M/M: % v -0.6%e; Y/Y: % v 1.9%e

- (NO) Norway Jan CPI Underlying M/M: -0.5% v -0.7%e, Y/Y: 2.8% v 2.6%e

- (NO) Norway Jan Producer Prices(including oil) M/M: 0.5% v -5.1% prior; Y/Y: 3.9% v 6.0% prior

- (GE) German VDMA: Dec Machine orders down 40% y/y

- (UK) Dec Visible Trade Balance -£7.4B v -£8.1Be; Trade balance Non EU: -£4.2B v -£4.8Be; Total Trade balance: -£3.6B to -£4.3Be

- (SA) South Africa Manufacturing Production M/M: -4.0% v -1.2%e ; Y/Y: -7.0% v -3.6%e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- In equities: UBS [UBSN.SZ] reported a Q4 net loss of CHF8.1B, well above market expectations for a CHF6.25B loss. Revenue was even more of a surprise, coming in negative at -CHFB4.08B compared to the CHF3.35B consensus. The firm's Q4 Tier 1 ratio was 11.5% compared to 9.5% y/y. It stated that it had an encouraging start to the year as and net new money was positive in January in both the wealth management and asset management businesses. The Q4 net new money outflows for Global Wealth and Banking was CHF58.2B and net new money outflows Global Assets were CHF27.6B. The Swiss Market Regulators allowed the firm to offer CHF1.8B in FY08 bonuses. UBS's CEO insisted the firm would return to profitability in 2009. || Cable & Wireless [CW.UK] provided an interim statement reaffirming its EBITDA guidance of at least £780M for FY09 compared to £783M expected.
The company confirmed that it is trading in line with expectations helped by the weaker GBP currency. || E.ON [EOAN.GE] saw a 7-8% increase in 2008 earnings (reported €70.8B in FY2007) and expected €1.5B in US and €1.8B in European impairment charges to reduce its FY08 Net. || Singapore Airlines [SIAL.SI] reported a Q3 net of S$337M and revenue of S$4.16B, while load factor declined slightly y/y to 78.5% from 81.3% a year ago. The airline expects demand for transportation to remain weak in 2009 and would adjust schedules and capacity to deal with demand shift. || Peugeot's [UG.FP] CEO said the car maker would have cut R&D investments with or without a government bailout plan, noting that he expects a 20% drop in sales this year. He said banks have not been lending to the company for a few weeks now. || Hochschild Mining [HOC.UK] signed a deal to acquire Mai's interest in San Jose for $70M. || Tele2 [TEL2B.SW] reported a Q4 net profit of SEK896M in line with estimates of SEK894M. EBITDA came in at SEK2.17B versus SEK2.13B estimates, while revenues were SEK10.31B which was slightly better than the SEK10.13B expected. The company entered into three-year revolving credit line for SEK12B and noted that it had 10.2M customers in Russia. || Handelsbanken [SHBA.SW] reported a Q4 net profit of SEK4.56B above consensus estimates of SEK2.87B. It operating profit came in at SEK5.22B better than the 3.85B estimates. || Nordea [NDA.SW] reported Q4 Net income of €638M in-line with estimates of €634Me.
Operating profit came in at €781M versus €899.4M estimates. Revenues were €2.25B compared to €2.09B estimates. The firm announced a €2.5B rights issue and a cut in its 2008 dividend. || Qinetiq [QQ.UK] reported 9-month revenues of £1.13B versus £964M a year ago. It noted that trading performance was in line with expectations and that the Board remained confident about the outlook for the Group. || CSR [CSR.UK] reported a Q4 operating profit of $1.7M compared to 49.4M y/y.
Reveunes came in at $140.1M versus $142M expectations. It announced plans to to merge with SIRF. CSR guided Q1 revenues in a range of $65-85M compared to $90.0M estimates. || Chaucer Holdings [CHU.UK] stated that it had received number of approaches which could potentially lead to offers. It board will meet to consider the proposals. || Douglas [DOU.GE] reported a Q1 net of €87.6M v 89.7Me, Rev €1.12B v €1.12B estimates. It reaffirmed its FY09 view of pretax €100M to €150M v €128.6Me and sales growth in range of 3% to 6% || Gas Natural [GAS.SP] Reports Q4 Net €252M v €247Me, EBITA €638M v €645Me, Rev €3.84B v €2.76B y/y || Energie Baden-Wuerttemb [EBK.GE] Reported FY08 Net €872M below consensus of €1.02B. Revenues were €16.3B v 14.93B expected. It guided FY09 earnings in line with FY08 figures.

- In speakers, the chief of Russia's Regional Bank Association said debt restructuring remains only a concept at this time, noting that no plan has been submitted to the government. He said Russian firms' total foreign debt was around $400B through 2013, adding that Russian government reserves and wealth funds have a $600B 'cushion'. || Russian Finance Minister Kudrin stated that Russia was not planning to restructure Russian banks or corporate debt || RBA Governor Stevens insisted that central banks must work with unconventional tools given that rates cuts and monetary policy were not working normally. He said the reluctance of banks to lend was damaging the global financial system. || Ex-BoE Member Wadhwani urged the BoE to move rapidly towards zero interest rates and commence quantitative easing soon. || Ex-BoE member Julius stated that UK GDP growth would resume in 2010. He called for a pause in rate cuts to gauge reaction, saying he would leave rates at 1% level. He noted that asset markets should bottom out at the end of year and that the UK had limited further scope on fiscal policy. || India's Deputy Finance Minister Governor said India would borrow an additional INR460B by the end of March. || India Commerce Minister Nath stated that there was a need to further cut interest rates to free up available cash and shore up economy. || South Africa's Mining Minister said South Africa needs additional an 40K MW to sustain growth.

- In currencies, the euro rebounded ahead of the European morning aided by the Russian denial of an imminent corporate debt restructuring. EUR/USD bounced from the 1.2830 level to test back above the 1.2960 level, where it consolidated throughout the morning. Overall sentiment stemming from the Russian situation should keep EUR/USD under pressure, particularly below the 1.3090 highs seen on Monday. Overall sentiment among dealing desks is whether one believes the Russian denials and continue to watch the 1.27 to 1.31 consolidation range. || Sterling was mildly softer from its opening levels in Asia. Dealers noted that UK imports fell for a fifth consecutive month, saying that the weaker import demand likely impacted by the GBP depreciation. || USD/CAD rallied above the 1.2330 level in the European morning. Dealers noted a 1.23 option expiration at the NY cut acting as a magnet in the session. || Overall currency dealers are noting several themes that dominated the USD rally since Q4 have quietly muted themselves. The Baltic Dry Index has risen for the past 15 straight sessions to hit the 1,815 level, compared to its low of 663 in December while some of the sovereign spreads inside the Euro Zone have narrowed against the German Bund.

- In fixed income, trade has been quiet ahead of formal announcements on the Geithner bank rescue plan. The UK tapped £3.25B of the 4.5% 2019 Gilts with the auction covered 1.75 times, lower than average in previous three auctions of 2.1. Austria sold €1.2B 2012's with better than expected results. In addition to comments from the US Treasury Sec, focus shifts to $32B 3y treasury auction later in the day, the first round in a deluge of supply from the US this week

- In energy, China said it would consider raising oil-price threshold from $40 to $60 in order to help oil industry companies ||Total [FP.FR] Signed an agreement with Libya's NOC to renew EPSAS for blocks C17, C137 || NYMEX Mar crude at $40.40 level, up over 90 cents. Traders cite the Senate passage of a procedural vote in the US stimulus package as a catalyst.

- In credit crisis news, Fortis [FORB.BE] Vice Chairman Hessel reiterated his concern that a no vote on the break up of the bank could lead to insolvency, according to a press interview. The Het Financielle Dagblad noted that that if Fortis was not broken up as planned, it will be short of €2.3B needed to finance current toxic assets. Back on Feb 7 it was reported that the bank was working on plan to guarantee liquidity in the event shareholders oppose the state-engineered splitting of the group.

- Looking Ahead:

- 10:00 (US) Dec Wholesale Inventories : -0.7% expected, prior: -0.6%

- 10:00 (US) IBD/TIPP Economic Optimism: 44.0 expected, prior: 45.4 prior

- 11:00 (US) Treasury Sec Geithner to unveil Financial Rescue Plan

- 1:00 (US) Treasury to sell $32B in new 3y notes