European Market Update: European Zone Manufacturing PMIs at 'pre-Lehman' levels; Risk appetite continues to rise aiding equities, commodities; weakening USD and JPY currencies


ECONOMIC DATA

- (ID) Indonesia Jun Total Trade Balance: $1.40B v $1.60Be

- (IN) India June Trade Balance: -6.2B v -$5.2B prior; Exports Y/Y: -27.7% v-29.9% prior; Imports Y/Y: -29.3% v -39.2% prior

- (IN) India Jul PMI manufacturing: 55.3 v 55.3 prior

- (FI) Finland May Final Trade Balance: €92M v €90M prior

- (GE) German Jun Retail Sales M/M: -1.8% v 0.5%e; Y/Y: -1.6% v 0.9%e

- (SW) Sweden Jul Swedbank PMI Survey: 54.3 v 51.5e

- (IR) Irish July Manufacturing PMI 43.7 v 42.5; 10 month high

- (TU) Turkey July Manufacturing PMI: 54.0 v 53.9 prior

- (PD) Polish July Manufacturing PMI: 46.5 v 43.0 prior; Highest reading sine Jun 2008

- (SP) Spain July manufacturing PMI: 47.3 v 42.8 prior; highest level since Jan 2008

- (CZ) Czech July manufacturing PMI: 43.5 v 43.6prior

- (DE) Denmark Jun Retail Sales M/M: -0.7% v -0.2% prior; Y/Y: -4.0% v -7.1% prior

- (SZ) Swiss SVME Purchasing Manager Index: 44.3 v 41.8 prior

- (IT) Italy Jul Manufacturing PMI: 45.4 v 44.3e, 11 month high

- (HU) Hungary July PMI: 49.2 v 46.0 prior

- (FR) French July Final Manufacturing PMI:48.1 v 47.9e

- (GE) German July Final Manufacturing PMI: 45.7 v 45.2e

- (EU) Euro-Zone July Final Manufacturing PMI: 46.3v 46.0e

- (SP) Spain July Consumer Confidence: 76.1 v 66.4 prior

- (HK) Hong Kong Jun Retail Sales Value Y/Y: -4.8% v -5.4%e; Retail Sales Volume: Y/Y: -4.2% v-4.9%e

- (UK) July PMI Manufacturing: 50.8v 47.8e; highest level since Apr 2008

- (SP) Spanish July car registrations Y/Y: -10.9% v -15.9% prior

- (DE) Danish PMI Survey: 47.8 v 42.4 prior

- (SA) South Africa kagiso PMI: 37.3 v 38.6e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- In equities news overnight: European equity markets opened to the downside as some mixed earnings releases mixed with a disappointing German June retail sales figures. This negative pressure was soon relieved in conjunction with a turnaround in shares of Barclays [BARC.UK]. Barclays, which had been trading negative following Q2 earnings resumed in bullish course on the back of comments from the groups President regarding FT090 total impairment charges and the renewed hope that dividend payments could be restored by the end of 2009. Sector rotations out of ING rallied Financial service, Basic resource, Chemical, Auto and Construction names to the positive side. European July PMI data, coming out ahead of expectation furthered the equity lightness through 4:00EST. HSBC [HSBA.UK] released its interim results [H1] at 4:15EST with a Net and adj Pretax that surprised estimates to the positive side. HSBC shares rallied sharply dragging first the financial and soon the broader markets higher on the back of comments that US loss impairment growth had been less than expected and that a market bottom had either been reached or was very close. Equity bourses at this time accelerated their gains to over the +1% hurdle. In sector performance, basic materials led the uptrend followed by financials and utilities. Defensive sectors and German listed/exposed retailers fair less well (demonstrated by Metro Ag [MEO.GE]). Large cap earnings out of FTSE100 listed companies pushed volumes in London ahead of their averages while the CAC and DAX displayed sub-average trading volumes.

-In individual equities: HSBC [HSBA.UK] Reports H1 Net $3.35B v loss $600Me, Adj Pretax $7.5B v $4.1Be, Rev $34.7B v $38.4Be. Tier 1 ratio 10.1% v 8.3% h/h, total capital ratio at 13.4% v 11.9% y/y. - ROE 6.4% v 12.1% y/y. Chairman: Operating conditions in the financial sector have continued to improve as the effects of government and central bank policies work through the system and it may be that we have passed, or are about to pass, the bottom of the cycle in the financial markets. || Barclays [BARC.UK] Reports H1 Net £1.9B v €2.2Be, Pretax £2.98B v £3.1Be, Rev £16.3B v £17Be, does not declare interim dividend. H1 Tier 1 Ratio 11.7% v 10.5% y/y. H1 impairment charges and credit provisions £4.6B. || Shire [SHP.UK] Reports positive phase III results for VELAGLUCERASE ALFA. || AstraZeneca [AZN.UK] FDA approves Onglyza For Type 2 Diabetes. || RBS [RBS.UK] ANZ reportedly may be close to an agreement to buy the firm's operations in 6 Asian countries this week in a total deal worth A$930M. || Metro [MEO.GE] Reports Q2 Adj EBIT €307M v €297Me, Rev €15.3B v €15.4Be. || Linde Ag [LIN.GE] Reports Q2 Op Profit €566M v €551Me, Rev €2.78B v €2.9Be. Outlook for 2009: Further recovery in business trends expected compared with the first half of the year; however, 2008 record level no longer attainable. ||

- Speakers: Iran Supreme Leader officially approves Ahmadinejad's second term as president || Polish Fin Min: Sees July inflation rate at 3.5%, unchanged from its June reading

- In Currencies: Continued gains in global equity markets highlighted the persistent increase in risk appetite continued to set a negative backdrop for the USD, which begins the new week and month making fresh trend lows against the major European and commodity-related currency pairs. Pre-Lehman PMI reading throughout most of Europe feed into the stock markets. The GBP currency led the pack as the UK PMI manufacturing moved above the pivotal 50 level for the first time since April 2008. GBP/USD probing towards the 1.68 handle while EUR/USD tested back above the 1.43 neighborhood before retreating. The AUD/USD tested fresh new handles with 0.84 dealing during the European morning while USD/CAD made an attempt to test below the 1.07 area.

- The USD/CHF probing a pivotal support line at the 1.0600, in which a break add new fuel to the USD downward path. The pair entering the NY morning at the 1.0675 level.

- In Energy/commodities: NYMEX crude briefly tested

- In Fixed Income: Bunds have lost earlier gains and Gilts extended losses after stronger than expected Euro-zone PMI data. Sept Gilt off 25 ticks at 117.17 while the Sept Bunds were 18 ticks softer at 121.86. The European yield curves were flatter with the German 2-10 spread at 2.03 and the UK 2-10 spread at 2.59


NOTES

- Markets mostly at pre-Lehman levels

- China PMI at 1-year high aided by record lending and a 4 trillion yuan stimulus package

- Former Fed Chairman Greenspan: have seen "very significant" improvements in the economy, an economic collapse "is now off the table"

- Nouriel Roubini: Commodity prices may extend their rally in 2010


Looking Ahead

- (RU) Russia Reserve Fund: No estimate versus $94.5B prior; Wellbeing Fund; No estimate versus $89.9B prior

- 8:00 (BR) Brazil Jun Industrial Production M/M: 0.4% expected versus 1.3% prior; Y/Y: -11.0% expected versus -11.3% prior

- 9:30 (BR) Brazil Jul PMI Manufacturing: No estimate versus 48.1 prior

- 10:00 US) July ISM Manufacturing: 46.5 expected versus 44.8 prior; Prices Paid: 51.5 expected versus 50.0 prior

- 10:00 (US) Jun Construction Spending M/M: -0.5% expected versus -0.9% prior

- 10:00 (BR) Brazil July Trade Balance: 3.6B expected versus 4.6B prior

- 12:00 (IT) Italy July New car registrations: No estimate versus 12.4% prior

- 13:00 (IT) Italy July Budget balance: No estimate versus €6.6B prior

- 13:00 (MX) Mexico July Non-manufacturing index: No estimate versus 47.4 prior