European Market Update: EU Commission notes of discerning fiscal developments; Gold continues with its run at record high


ECONOMIC DATA 

- (SZ) Swiss Sept Unemployment Rate: 3.9% v 3.9%e; Unemployment Rate Seasonally Adj: 4.1% v 4.1%e

- (CZ) Czech Aug Trade Balance (CZK): 10.6B v 7.1Be

- (SW) Swedish Sept Budget Balance (SEK): -40.4B v 11.8B prior

- (TT) Taiwan Sept Total Trade Balance: $2.6B v $2.0Be

- (NO) Norwegian Aug Industrial Prod Manufacturing M/M: 0.8% v 0.3%e; Y/Y: -7.9% v -8.9% prior

- (NO) Norwegian Aug Industrial Production M/M: 1.5% v -0.5% prior; Y/Y: 0.0% v -8.0% prior

- (EU) Euro-zone Q2 Final GDP Q/Q: -0.2% v -0.1%e; Y/Y: -4.8% v -4.7%e

- (GE) German Factory Orders M/M: % v 1.1%e; Y/Y: % v -20.0%e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM 

- In equities news overnight: Coming off yesterday's triple figure rally, European equities opened modestly lower with slow, but progressive trending into positive territory. Economic data releases have been light, and in the absence of China, trading direction from Asia has been reduced. In the European pre-market, ING [INGA.NV] confirmed that it would be selling its Swiss based private banking units to Julius Baer [BAER.SZ] and Credit Agricole [ACA.FR] announced a recapitalization plan for its Greek unit. Misery in the Airline sector continued with further September load factor figures out of Air France [AF.FR], SAS [SAS.SW] and Aer Lingus [AERL.IR]. Tech sector names led the EuroStoxx 50 upward trend, analysts at JP Morgan raised their handset sales expectation for 2009 ahead of Q3 earnings seen out of Nokia [NOKV1.FH] (seen next week) and Ericson [ERICB.SW] (seen the week after that). Equities position themselves for the expected 6:00EST release of German August factory order figures. Ahead of expected earnings out of Monsanto [MON] in the NY pre-market, have seen large interest in Euro listed fertilize and seed names with K+S [SDF.GE] and Syngenta [SYNN.SZ] trading higher. Overnight earnings also included UK based grocer Sainsbury [SBRY.UK] and international lot seller Costco [COST}.

-In individual equities: Costco [COST] Reports Q4 $0.85 v $0.77e, R$22.38B v $22.33Be. Q4 US SSS -6% y/y. || Sainsbury [SBRY.UK] Reports Q2 LFL Sales +5.4% (ex vat & fuel) v 5.5%e, Total Sales +6.8% (ex fuel) v 7.3%e. || BMW COST: Reports Q4 $0.85 v $0.77e, R$22.38B v $22.33Be. Q4 US SSS -6% y/y. || Michael Page [MPI.UK] Reports Q3 Gross Profit £82.3M (-45.3% y/y). || BA [BAY.UK] Company may post a "significant loss" for the second consecutive year - FT. || Aer Lingus [AERL.UK] Reports Sept load factor 77.5% v 75.0% y/y; Announces details of restructuring operations. Plan is expected to reduce annual operating costs, excluding fuel, by €97 million before the end of 2011. || Allianz [ALV.GE] Expects €3.8B in commercial insurance premiums in 2009, €4.2B by 2010. || Air France [AF.FR] Reports Sept Passenger Load factor 81.9% v 80.9% y/y. || Credit Agricole [ACA.FR] Plans to restructure Greek banking unit Emporiki; Unit to return to profitability by end of 2011. Seeking to add €1B to units Tier 1. || ING [INGA.NV] Julius Baer confirms intention to acquire groups Swiss based private banking unit for CHF520M i

- Speakers: Japan Fin Min Fujii "quietly' watching FX price movements; would act if abnormal. Recent price action stems from USD weakness and cited low US interest rates as a factor || IMF's Kato reiterates hi earlier view that JPY strength reflected economic fundamentals. He did note that one must watch for impact on Japanese corporate sentiment and overall effect on economy. BOJ should maintain accommodative monetary policy stance until economic recovery is sustainable and assured. Nations agreed that premature exit from stimulus measures were undesirable. Appreciation of China's Yuan (CNY) was in line with fundamentals and would help reduce imbalances || US Treasury Sec Geithner commented about global rebalancing needs and noted that American would have to save more. European and Japanese must change their behavior in increase their domestic spending || EU Commission: Twenty of the twenty-seven countries inside EU countries to violate Maastricht Stability pact in 2009. Issued warnings against Germany, Italy, Netherlands, Czech Republic

- In Currencies: The USD price action continued to follow the precious metal, particularly gold. The European morning saw the dollar consolidated its recent losses against most European and commodity-related pairs while gold held above the $1,030 area. However, as the session wore on, Spot gold hit fresh all-time highs for the second straight session above $1,047.00 level.

- Dealers noted that Russian Central Bank (CBR) was reportedly selling foreign currencies in its basket at 36.10 area. One dealer noted that such activity is usually reported as seeing buying USD to halt RUB appreciation. subtle difference in buying currencies instead of USD and might have implications for rebalancing. Dealers note that this is also the second time the CBR had lowered the bid this week.

- The JPY was firmer across the board during the session with USD/JPY moving to fresh 9 month lows below the 88.22 level. There was dealer chatter of some 'significant USD sell-stops building below the 88.00 level but was untested as the NY morning approached. EUR/JPY lower by 80+ pips to test below the 130 handle in the session with GBP/JPY cross off over a big figure to approach 140.00 area. Recent session would not be complete with a comment from the Japanese Fin Min and Fujii did note that recent currency movements was due to a weak USD (not a strong JPY) and cited the low US interest rates as a factor in the recent trend.

- In Fixed Income: European government bond markets are on pause ahead of the ECB and BoE October rate decisions tomorrow, with modest buying across yield curves in all three major markets throughout the session. Germany sold €1.6B in 30y bunds with reasonable results and the UK's sale of £750M in 2042 was well also received. Ahead of the reopening, 10y notes are sitting right at their former resistance of 3.25%.

- In Energy: Japanese press noted that the International Energy Agency (IEA) might seek to create a forum that included a wide range of emerging countries, including China and India. The plan would be evaluated at the IEA's meeting on energy ministers Oct 14-15. || Exxon [XOM] WSJ commented on company plans to buy $4B stake in Ghana's Jubilee field from Kosmo Energy. The deal is said to be company's first major purchase in a decade and appeared to suggest that Exxon believes oil prices will rise over the long term.

- In commodities: Spot gold hits fresh all-time highs for the second straight session above $1,043.70 level and this was reflected in continued strength in CAD and AUD currency pairs. Perpetual commodity bull Jim Rogers commented that he was not "jumping on board" to buy gold at record prices but conceded that the yellow metal still had upside potential in the long term.


NOTES 

- Spot gold hits fresh all-time highs for the second straight session above $1,043.70 level

- Perpetual commodity bull Jim Rogers: Not "jumping on board" to buy gold at record prices but still has upside potential in the long term.

- Japan foreign reserves hit record highs in Sept at $1.04 trillion

- Fed's Hoenig: Sooner rather than later for raising interest rate

- WSJ column: GBP currency ready to joining the "sick list"

- Japan's Fin Min Fujii: "Quietly' watching FX price movements; would act if abnormal.


Looking Ahead: 

Earnings seasons has arrived; Key European central bank rate decision on Thursday

- 7:00 (US) MBA Mortgage Applications w/e: No estimates v -2.8% prior

- 8:00 (HU) Hungarian Central Bank minutes

- 10:30 (US) Weekly DoE Crude Oil/Gasoline/Distillate Inventories

- 13:00 (US) Treasury to reopen $20B in 10 year notes

- 15:00 (US) Aug Consumer Credit : -$10.0B expected versus -$21.6B prior