ECONOMIC DATA

- (FI) Finland Jul Prelim Trade Balance: €145M v €280M prior

- (JP) Japan Aug Preliminary Machine Tool Orders Y/Y: -71.3% v -72.3% prior

- (GE) German Aug Final CPI M/M: 0.2% v 0.2%e; Y/Y: 0.0% v 0.0%e

- (GE) German Aug Final CPI EU Harmonized M/M: 0.3% v 0.4%e; Y/Y: -0.1% v 0.0%e

- (HU) Hungarian Jul Prelim Trade Balance: €548M v €15Me

- (CZ) Czech Aug CPI M/M: -0.2% v -0.1%e ; Y/Y: 0.2% v 0.3%e

- (SW) Swedish July Industrial Production M/M: -0.5% v -0.5%e; Y/Y: -19.9% v -21.1%e

- (SW) Swedish July Industrial Orders M/M: 8.3% v -2.4% prior, Y/Y: -16.5% v-21.5% prior

- (SW) Swedish July Activity Index Level: 101.5 v 102.0 prior

- (UK) July Visible Trade Balance: -£6.5B v -£6.3Be; Total Trade Balance: -£2.4B v -£2.0Be; Trade Balance Non EU: -£3.9B v -£3.5Be


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- In equities news overnight: European markets opened to the downside, snapping a three-session positive open trend on the back of a weak Asian trading session. Asia closed with mixed results, Japan, Korea and Australia in the red, but the later closing Chinese bourses rallying to finish positive. Reversing strong trends, in first trades the basic resource and telecom sector provided the majority of weight seen on Euro bourses. French operator Vivendi [VIV.FR], continuing its strategy of expanding in emerging markets launched a €2B bid for a Brazilian mobile operator while comments out of BoA the Xstrata [XTA.UK] is not certain to bid for Lonmin [LMI.UK] provided the catalyst for this movement. Despite choppy trending, markets progressed lower through 4:30EST. Following this time, additional positive revisions for German 2009 GDP out of the BDB and IfW and a successful Schatz offer provoked a rally in equity markets. Trading volumes in today's session continue to read well off their averages and are a pull back from the strong levels seen on Monday and Tuesday.
Sector outperforms at 5:30EST include technology (following a reaffirmation out of Siemens [SIE.GE]) and oil and gas (ahead of OPEC and on the back of BG [BG.UK] comments).

-In individual equities: BG Group [BG.UK] Santos Basin Guara contains 1.1 to 2.0B recoverable barrels. BG Group (30%) and partners Petrobras (45%, operator) and Repsol (25%) have today announced that the Guara discovery in the Santos Basin pre-salt, offshore Brazil is now estimated to contain recoverable volumes of 1.1 to 2.0B barrels of oil equivalent.
Targeting first production from 2012. || Vivendi [VIV.FR] Signed an agreement to launch a tender offer for 100% of Brazil's GVTs share capital at BRL42/share. Today signed an agreement with Swarth Group and Global Village Telecom (Holland) BV, the founding and controlling shareholders of GVT (Holding) SA, a publicly traded company on the Brazilian stock exchange. This agreement enables Vivendi to launch an amicable tender offer for 100% of GVTs share capital at BRL42 per GVT share. || Siemens [SIE.GE] Reiterates FY09 targets; Total unit profit to exceed €6.6B (as first given April 29). CAPEX spending has been held below targeted range since Q1 of 2009. || Artio Global Investors ART: Julius Baers to spinoff U.S.
Asset Management Business through 23.4M share IPO of Artio unit. Proposed offering is expected to price and be completed by 30 September, 2009. || Merck [MRK.GE] Acquires Leading Manufacturer of Effect Pigments in China for €28M. || Daimler [DAI.GE] CEO: May build US based engine facility in cooperation with rival BMW -Sueddeutsche Zeitung. Group continues to oppose state aid to auto makers. || ThyssenKrupp [TKA.GE] Group may post FY09 pretax loss of as much as €2B (-€1.3Be) -Die Welt. Loss will account for nearly €1.5B in restructuring costs. || CGG Varitas [GA.FR] Announces $465M Marine Seismic Contract. Has been awarded a contract by Pemex to acquire and process 75,000 km2 of 3D seismic data offshore Gulf of Mexico. ||

- Speakers: ECB's Noyer commented that there were signs of positive economic developments but the recovery remained fragile. He stressed that stimulus plans must fully carried out and banks must be generous with credit to support business. He noted that currencies must remain calm to support recovery. Lastly the upcoming G20 summit should agree on economic support and financial regulation ||BoJ's Suda stated to keep supporting corporate financing, downward pressure on prices to continue globally. Watching closely to see whether price pressure will fade after recovery. Concerned by higher resource prices. Easy polices may stoke inlfation in the long run ||Polish Central Banker Hockuba commented that the Zloty currency should maintain its current stability. Forecasts 2010 GDP growth higher than 2009 level (Current Gov't view is up around 1.0%). Good chance of Q3 GDP growth || India PM Singh stated that recent rains have been good for summer sown crops . The PM also noted that food stocks were adequate and there are no concerns of shortages. || Spanish PM Zapatero stated tha Spain continued to remain immersed in an intense crisis || Italian employers' federation Confindustria tweaked its 2009 and 2010 GDP view slight better. It now forecasts 2009 GDP -4.8% versus -4.9% prior, 2010 growth at +0.8% versus 0.7% prior. The federation saw 2009 exports declining by 17.3% but rising by 4.1% in 2010. It expected 2009 Household spending (which accounts for 2/3 of its economy) to decline by 1.7% and rise by 0.7% next year.

- In Currencies: The USD consolidated its recent losses against the major currency pairs. Dealers were eyeing support at 1.4450 level in pair with early talk among the dealing desks that perhaps the 1.4450 level would hold a similar manner that 1.4200 area did last week. Likely some Euro sell stops building below 1.4450 area

- Cad currency was softer during the European morning with its weakness being attributed to hedge fund unwinding trades and CAD/GBP flows due to Thomson Reuters UK listing termination (announced back in june)

- In Fixed Income: Governments and corporations alike are finding debt capital raising increasingly strightforward and this morning's European session is no exception. Germany sold €5.8B in the new September 2011 Schatz at a yield of 1.22%, with a much stronger than average cover ratio of 2.3 times. The healthy results sent Dec Schatz futures into fresh contract highs at 107.17 ½ . Italy's syndicated 30y BTP, priced at a 6bps discount to the existing issue, also attracted good bidding, with the €6B offering oversubscribed 1.6 times - good for Italy, particularly in the long end,. 10y BTP's subsequently firmed up against Bunds, with the yield spread below 85bps in current trade. Finally, a 3 USD denominated offering from Spain is said to have attracted $3B in orders, with price talk at 18bps over midswaps (or about 70pbs over the 3 Note at current levels). Investment grade corporate issuance continues unabated with the likes of Alstom. Enel, and the finaning arm of Honda all coming to market with debt offerings this morning. Bunds, Gilts and Treasuries are all pretty much unchanged on the session at the time of writing with a slight steepening bias in Europe. Three month Euribor improved by a basis point to fix at another all time low of 1.05%

- In Energy: Saudi Arabia Oil Min Al-Naimi commented in a press interview that OPEC would maintain its output quotas. He noted that oil prices between $63-73 did not warrant the need for any change. Markets remained well supplied and Saudi Arabia was producing around 8.1M bpd. He expected inventories to start to decline shortly and noted that the global outlook pointed towards higher demand for oil || New York Times reported that Russia increased oil output as OPEC cut back .
Article noted that Russia's Q2 Exports were 7.40M bpd compared to 7.25M bpd q/q while Saudi Arabia Q2 Exports were 7.0M bpd versus 7.39M bpd q/q || China sovereign fund China Investment Corp (CIC) noted it was eyeing opportunities in infrastructure, green energy and innovative energy. CIC added that the Buy/Sell price gap in global infrastructure assets was narrowing and it would be a very small player in global infrastructure. It saw interesting opportunities in India, Mongolia and Pakistan. || Algerian OPEC Official commented that it might not need to expand 2010 oil output as demand increases likely to be met by non-OPEC suppliers

- In commodities: Gold was off its prior 1-1/2 year highs and lingering just below the $1,000 an ounce. || National Australia Bank analyst stated that China's commodities restocking nears maturity. The analyst noted that steel capacity was being idled due to the build in domestic supplies, weighing on demand for nickel and zinc. Lastly economic activity would moderate as stimulus policies dissipate || Barrick Gold [ABX] Announced plan to eliminate gold hedges.


NOTES

- Optimism on China's outlook. Alcoa stated that it saw demand rebound in China;

GM the biggest car maker in China, says vehicle sales will surpass US, making China the world's number one market

- European traders taking a notice of the US consumer borrowing data, which dropped 10% y/y. Drop was five time larger than economists had forecasted and marked the 6th consecutive month of declines.

- European officials continue to stress caution over excessive optimism on economic outlook

- OPEC expected to keeps its output production steady when it meets after sundown today in Vienna


Looking Ahead

- (RU) Russian Q2 Final Real Annual GDP: -10.9%e v -10.9% prior

- 7:00 (US) MBA Mortgage Applications w/e Sep 4th: No estimates v -2.2% prior

- 8:00 (US) Fed's Evans to speak on inflation in Dallas

- 8:15 (CA) Canadian Aug Housing Starts: 139.5Ke v 134.2K prior

- 9:00 (BE) Belgian Q2 Final GDP: No estimates v -0.4% prior, Y/Y: No estimates v -3.8% prior

- 10:00 (MX) Mexican Aug CPI M/M: 0.3%e v 0.3% prior, Y/Y: 5.1%e v 5.4% prior, Core M/M: 0.3%e v 0.3% prior

- (US) 10:00am TAF results

- 10:00 (EU) ECB's Gonzalez-Paramo to speak in Switzerland

- 10:30 (US) Treasury's Geithner and VP Biden speak in Syracuse

- 13:00 (US) Treasury to reopen $20B in 10y Notes

- 14:00 (US) Fed's Beige Book