ECONOMIC DATA

- (UK) Sep Nationwide House Prices M/M: 0.9% v 0.7%e; Y/Y: 0.0% v -0.3%e

- (SP) Spanish Sept Unemployment Rate: 80.4K v 44.0Ke

- (IT) Italian Q2 Deficit to GDP (year to date): 6.3% v 9.3% prior

- (UK) Sep PMI Construction: 46.7 v 48.1e

- (UK) BoE Q2 Housing Equity Withdrawal: -£7.0B v -£8.1B prior

- (EU) Euro-zone PPI M/M: 0.4% v 0.4%e; Y/Y: -7.5% v -7.6%e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- In equities news overnight: Equities in Europe opened sharply lower today, this move following the broad declines in Asia, specifically in the Chinese Hong Kong markets. With mainland PRC markets closed through the first half of next week on continued Golden Week celebrations, Hong Kong served as the perceived sentiment indicator. That sentiment was profoundly negative; financials and most explicitly mainland-based firms led the H share decline. Following three straight negative sessions in Europe, markets opened heavy with losses primarily in Financials and Technology sectors. Losses were not however, constrained to these sectors with declines seen across the board ex pharma names. Airlines, despite PT upgrades at Nomura fared poorly along with utilities and miners. Auto's proved a mixed bag following yesterday's US sales announcements and commentary out of Italy regarding the extension of scrappage schemes into 2010. Volumes have remained high throughout the European morning with the DAX and FTSE significantly outperforming moving averages. Into 5:30EST equities remain to the downsides as traders position themselves ahead of the 8:30EST US non-farm payroll release.

-In individual equities: Renewable Energy [REC.NO] Announces €300M (8% of market cap) convertible bond offer, bonds to have conversion date of 2014. Prices continue to remain under pressure; sees FY09 prices -35% y/y. || OCE [OCE.NV] Reports Q3 Net loss €25M v loss €20Me, Rev €631M v €649Me. Have seen a continued deterioration in European markets v H1, have seen early signs of a bottoming in US markets. || SAB Miller [SAB.UK] Femsa Beer operations could be acquired by SABMiller or Heineken - WSJ. Deal could be valued at approx. $9B || Diageo [DGE.UK] Downgraded one notch at Fitch to A- from A (one notch), outlook negative. || Anglo American [AAL.UK] UK Takeover Panel sets Oct 20th as deadline on Xstrata bid . || British Airways [BAY.UK] Reportedly merger between firm and Iberia could trigger forced offer for Spanish carrier Vueling [VLG.SP]. || British Airlines [BAY.UK] Notes EU regulators have delivered objections to proposed alliance with British Air/American Airlines. || Aberdeen Asset Management [ADN.UK] Toscafund, run by Martin Hughes has further lowered its stake, position now at 9% -Telegraph || Deutsche Post Bank [DPB.GE] CEO: Sees steady improvement in Q3 pre-tax profit over Q2; cites less 'burden' from the financial crisis. ||

- Speakers: The EU's ECOFIN Draft Document noted that the key issue at this time was whether recent data supported a sustainable economic recovery> the EU believed that states must avoid competitive currency devaluations. Markets continued to show signs of stabilization but was important to await additional data to analyze the current phase of recovery. Fiscal stimulus must remain until the recovery was assured and stressed that it was important to focus on already agreed upon fiscal stimulus measures. The planned exit from such measures needed to be gradual and coordinated by the central banks and respect regional circles. The EU noted that the labor market developments were a concern. It saw no significant risk of deflation and inflationary expectations are anchored || Reportedly ECB considering a possible interest rate hike but the allege source noted that nothing was planned in the immediate future. Academic talks are being held amongst central banks regarding a coordinated exit plan. Price stability remained mandate for exit timing of stimulus but no timetable decided on possible withdrawal || IMF's Strauss Kahn noted that the global economy has turned a corner, but cautioned that rising unemployment picture was clouding the recovery picture. It was too early to speak of exit strategies and noted that any premature withdrawal of stimulus could risk recovery || IMF's Lipsky stated that he did not see a problem with levels of main currency exchange rates ||World Bank's Zoellick: Complacency is a danger for global economies || Bundesbank's Sarrazin commented that he did not see adverse inflationary impact from high gov't debt || Spain Fin Min Salgado: noted that he was not concerned about inflation rising in Euro-Zone nor implementing its exiting stimulus measures in 2011. He did add that results of stress tests on banks were 'good' || France's Lagarde commented that a strong USD was in everyone's interest ||

- In Currencies: Initial the softer tone equity markets weighed upon the energy sector and in turned kept the CAD and AUD pairs on the defensive. The USD was softer against the European pairs ahead of the US non-farm payroll data. The EUR/USD moved above the 1.4550 area aided by speculation that the ECB was discussing a move towards tightening bias but with no timeframe in place for any interest rate hike. Traders were noting that a 'better' US job picture data could paint a better scenario that such a rate hike might come sooner than markets expect. France's Lagarde noted that a strong USD was in everyone's interest

- In Fixed Income: European Government Bonds are surging ahead of the pivotal September US employment numbers and after US Treasury prices knocked out some key technical levels in yesterday's session. In shades of last week's NY Fed/ reverse repo story, A vague report stating that the ECB had held academic discussion on the topic of raising rates did induce some selling, particularly in the short end. But the move was short-lived, and Bund and Gilt futures are testing contract highs with cash yields probing their lowest levels in months. The 10-year Bund touched 3.12%, and the 10y Gilt hit a low yield of 3.43%, both 5 month lows. European Peripheral debt is under-performing against Bunds as Irish voters go to polls with a critical vote on the Lisbon Treaty. The Irish 10 has widened almost 10bps on the session to Bunds +168bps. In corporates, Arcelor Mittal priced its USD 30 year at 7.40% or roughly 350bps over the 30 year T-Bond.

- In Energy: Russian September Oil Output 10M bpd, up 0.4% m/m while its Gas Output came in at at 45.5B Cubic Meters for the month. On a daily basis Natural gas output was 1.52 BCM/day compared to 1.40 BCM/day prior month || CNOOC [CEO] Held talks with Uganda govt about joining $5B project led by Tullow Oil ( Reminder: Tullow has been seeking JV partners to fund its discoveries in Eastern Uganda)


NOTES

- Lots of key questions to be answered this Friday/weekend. From where the Olympics would be held (Chicago or Rio?); to Ireland's vote on the Lisbon treaty (Yes or No) and whether the G7 remains a viable entity now that G20 has been deemed the main group. However, The main focus will be on US payrolls and the question of a sustainable recovery, as consumer's spending would likely remain a headwind.

- Japan's Fin Min Fujii reiterated that the yen rise would not be discussed at the G7 this weekend

- ECB moving towards tightening bias, the question is when?


Looking Ahead: All about the payrolls

- 8:00 (BR) Brazil Aug Industrial M/M: 1.1%e v 2.2% prior, Y/Y: -7.3%e v -9.9% prior

- 8:15 (US) Fed's Rosengren

- 8:30 (US) Sept Change in non farm Payrolls: -175Ke v -216K prior, Change in Manufacturing Payrolls: -52Ke v -63K prior

- 8:30 (US) Sept Unemployment Rate: 9.8%e v 9.7% prior

- 8:30 (US) Average Hourly Earnings M/M: 0.2%e v 0.3%e, Y/Y: 2.6%e v 2.6% prior, Average Weekly Hours: 33.1e v 33.1 prior

-10:00 (US) Aug Factory Orders: 0.0%e v 1.3% prior