ECONOMIC DATA

- (SZ) Swiss Jan Money Supply: 2.8% v 2.4% prior

- (DE) Jan Wholesale Price Index: -1.0% v -2.7% prior; Y/Y: -5.4% v -3.8% prior

- (IT) Italian Jan Final CPI (NIC inc Tobacco) M/M: -0.1% v -0.1%e; Y/Y: 1.6% v 1.6%e; EU Harmonized: -1.7% v-1.6%e; Y/Y: 1.4% v 1.5%e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- In equities, Bunzl [BNZL.UK] reported a 2008 net £142.2M slightly below estimates of £149.4M. Revenue was £4.18B, just ahead of consensus estimates of £4.1B. The company stated that is has committed funding totaling £1.1B from a US private placement and noted that all four business areas showed increased revenues and operating profits. || French press reporting that European Aeronautic Defence & Space [EAD.FR] has delayed the A400M cargo aircraft, which could be delivered up to five years late. || The German press reported that Daimler [DAI.GE] has abandoned its mid-term target of 5% revenue growth. || AB Foods [ABF.UK] provided an interim statement showing that its operating profit for the first half of 2009 would to be below prior year, while its Primark unit LFL sales woudl grow 5% y/y. || Anheuser-Busch InBev [ABI.BE] said it was selling its Labatt USA Inbev unit to KPS Capital partners. The financial terms of the transaction were not disclosed. || Merck KgAA [MRK.GE] makes NOK13.50/shr offer for Medicullt, in a deal valued at NOK383M. Medicult Board recommended shareholders to accept the offer.

- In speakers, the ECB's Trichet commented that severe EMU financial strains are impacting the real economy, with financial system woes preventing an economic recovery. Trichet noted that problems have not been limited to the financial sector and the decline in credit flows is party driven partly by demand and supply associated with deleveraging. || The EU's Almunia commented that he has not ruled out possible assistance for a non-EMU country, although he doubts any rescue is needed within the union's current membership. || Germany stated that it did not see any reason to revise its 2009 GDP forecast of decline of 2.25% y/y at this time. || The ECB's Orphanides stated that the ECB could use unconventional measures if needed. || The ECB's Bini Smaghi commented that the EU might intervene in countries "in difficulty" and that the economic crisis could accelerate for newest EU members. The central bank would provide assistance with or without help from the IMF. || IMF's Strauss-Kahn said that he supports the idea of a common European bond issue but that it needs to be aimed at combating the economic crisis. || Polish Deputy Fin Min Kotecki stated that Polad would prepare a draft of its detailed euro adoption plan by April, but noted that the road map for euro adoption might be revised. The final decision to be taken by May.

- In currencies, the session was marked by increasing risk appetite on news that the US government might take a larger stake in Citigroup. The European equity markets were up over 1.0% across the board and the JPY-related pairs were higher as a result of the scenario. USD/JPY was nearing the mid-94 level while EUR/JPY was above the 121.20 neighborhood. Note that 95.00 has been a historical pivot point in USD/JPY, namely the former coordinated intervention point back in 1995.
Some dealer chatter pondered whether JPY intervention could be duplicated at this time given the price action below the 90 level in late January/early February. || EUR/USD opened the European session probing the 1.30 area, but saw its Asian session gains erode as the European morning wore on. The pair tested 1.2820 ahead of the NY morning. EUR/GBP fell by 120 pips to test 0.8775.
European dealers were trying to understand the chaotic price action in USD-related pairs on Friday afternoon. The thin trading conditions have removed potential US bullish momentum from the charts, keeping the prior range of 1.2750 to 1.31 intact for the time being. || The CHF continues to be hampered by continued tax haven concerns. The USD/CHF opened the European morning at 1.1470 and the CHF gradually weakened to test 1.16 level. EUR/CHF was moving back above the 1.49 level after testing 1.48 in Asia.

- In fixed income, renewed strength in equity markets have sent government bond prices lower in light volumes this morning. Short end underperformance is leading to compression in the UK yield curve, with the yield on the 2-year Gilt above 1.55% for the first time in almost two weeks, against a backdrop of the BoE's Gilt purchase operation, expected to be finalized in coming weeks. Better selling of longer dated issues in Bunds and UST's has led to bear steepening in those markets. At the time of writing the yield on the 10y Note is 5bps higher in electronic trade at 2.84%, whilst the 10-year Bund is up by the same amount at 3.07%.

- In energy, Petrologistics stated that the OPEC 12's February oil output is expected be be 27.6M versus 28.7M in January. || The IEA's Tanaka reiterated his view that any additional OPEC output reduction to increase prices poses a risk to the global economic recovery. The IEA noted that oil prices must remain at their current levels in order to aid the global recovery. Oil demand is seen growing by 1% in 2010 but it might lower oil demand outlook again on economic outlook

- Credit Crisis: Fitch provided comments on Austria's long term ratings. It saw its most important factor in ratings decision being based on level of crisis in Eastern Europe and noted that the situation could become 'nasty' if Eastern Europe were to experience an Asian-style crisis. || European G20 statement noted that the EU needs common rules to deal with impaired assets and should extend regulation of the financial systems, including all asset classes and participants. It sought to subject rating agencies to mandatory registration and oversight. The members agreed that banks should build extra capital buffers during economic upswings. Hedge funds should be regulated as they pose systematic risk. The group said it would crack down on tax havens, including sanctions. The G20 commented that confidence in financial markets has not yet been restored but that government stimulus measures would tangibly support growth in coming months.


NOTES

- The Monday session lacked enthusiasm but equity markets mildly firmer on more of a technical bounce then any response from the weekend pre-G20 summit in Berlin. The US and global banking system appear to be on the verge of nationalization. European leaders challenged the rest of the world to sign up to tighter market regulation.

- Looking Ahead:

- (GE) German Jan Wholesale Price Index M/M: -2.0% expected v -3.0% prior; Y/Y: -6.3% expected v -3.3% prior

- 8:00 (HU) Hungarian Interest Rate Decision: Consensus expectations are for no change, current Base Rate is 9.50%

- 8:30 (CA) Canadian Dec Retail Sales M/M: -2.7% expected v -2.4% prior; Less Autos M/M: -2.0% expected v -2.3% prior

- 8:00 (EU) ECB's Nowotny and Sramko speak in Vienna

- 10:30 (US) Feb Dallas Fed Manufacturing Activity: -52.5% expected v -50.5% prior

- 10:30 (IS) Israeli Base Rate Announcement: 50bps cut to 0.50% expected, current Base Rate is 1.00%

- 12:40 (US) Fed's Lockhart speaks in Orlando