European Market Update: Verbal intervention continues as Euro approached the 1.50 level; Barclays slumps as Qatar reduces holdings


ECONOMIC DATA 

- (GE) German Sept Producer Prices M/M: -0.5% v -0.1%e; Y/Y: -7.6% v -7.1%e

- (FI) Finland Sept Unemployment Rate: 7.3% v 7.6% prior

- (JP) Japan Sept Final Machine Tool Orders: -62.1% v -61.9% prior

- (HU) Hungarian Aug Avg Gross Wages Y/Y: 0.6% v 1.5%e

- (JP) Japan Sept Convenience Store Sales: -5.6% v -5.5% prior

- (NV) Netherlands Sept Unemployment Rate: 5.0% v 5.2%e

- (IT) Italian Aug Industrial Orders M/M: -8.6% v 1.0%e; Y/Y: -27,5% v -20.0%

- (IT) Italian Aug Industrial Sales M/M: -1.4% v 0.7% prior, Y/Y: 21.2% v -21.7% prior

- (UK) Sept Public Finances (PSNCR): £19.4 v £19.0Be; Public Sector Net Borrowing: £14.8 v £15.5Be

- (UK) Sept Preliminary M4 Money Supply: 0.7% v 0.5%e; Y/Y: 11.3% v 11.4%e

- (EU) Euro-Zone Aug Construction Output M/M: -0.4% v -1.4% prior, Y/Y: -11.3% v -9.8% prior


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM 

-In equities: European markets quickly slipped out of positive territory and have traded negative throughout much of the European morning. This action has been despite overly optimistic results after the NY close out of Apple [APPL] and solid earnings out of Texas Instruments [TXN.UK]. These earnings had positive spill over into Euro tech names with Infineon [IFX.GE] and STM [STM.FR] well bid. Weight in Euro bourses came from disappointing earnings out of Autonomy [AU.UK] that missed its EPS estimates and from the broader financial sector. Financials traded lower following disappointing earnings out of Swed Bank [SWEDA.SW] that not only missed expectations, but maintained a cautious view on the Baltic's and reiterated its attempts to lower exposure to Ukraine. Qatar Holdings announced that it was selling 50% of its warrants in Barclays [BARC.UK] that were acquired in last October's controversial capital raise program. Shares of Barclays have under performed throughout the session. Trading volumes in Europe have been mixed with the FTSE outperforming its average on the back of interest in shares of Autonomy, Barclays and wider financial sector, while the DAX and CAC under performed their moving averages. Equities have been preparing themselves for a strong list of expect US earnings seen out in the US morning, highlight will include: BLK, BK, CAT, KO, LMT, PFE, and UTX.

-In individual equities: Barclays [BARC.UK] Qatar Holdings to sell certain interests in warrants held in bank; bookbuilding to begin immediately. Qatar looking to sell 379.2M shares at an exercise price of 199.775p/shr. Reminder: On Oct 31 - Qatar Holding has agreed to invest £500M in MCNs and £1.5B in RCIs, and has subscribed for Warrants to purchase up to £1.5B of Ordinary Shares. || Swedbank [SWEDA.SW] Reports Q3 Net Loss SEK3.3B v Loss SEK2.04Be, Rev SEK8.2B v SEK8.2Be. Q3 Loan Losses SEK6.1B v SEK812M y/y. || Xstrata [XTA.UK] Provides Q3 update: performance remained strong and financial position remains robust. || Pearson [PSON.UK] Provides 9-month interim statement: Raises FY EPS guidance above £0.60. || Autonomy [AU.UK] Reports Q3 EPS $0.15 v $0.20e, Rev $192M v $186Me. || BA [BAY.UK] Reportedly CFO sees FY09 rev -£1B y/y (implies £7.99B v £8.05Be). || LVMH [MC.FR] Reports 3Q Rev €4.14B v €4.16B y/y; 9 Month Rev €11.9B, -6% y/y. || Adecco [ADEN.SZ] MPS: To Be Acquired by Adecco for $13.80/shr ($11.14 last) in a cash transaction valued at approximately $1.3B. Launches mandatory CHF900M convertible bonds offer (9% of market cap). || Kuehn & Nagel [KNIN.SZ] Reports Q3 Net CHF129M v CHF121Me, Rev CHF4.3B v CHF4.59Be. ||

- Speakers: Euro Group EcoFin letter to G20 Chair stated that an economic recovery was increasingly apparent and fears of prolong recession were fading . The leter cautioned that it remained to early to remove fiscal and monetary stimulus measures but called for a credible plan for exit strategies ||China PBOC's Deputy Gov Ma noted that the central bank saw increasing challenges for its monetary policy. The Q3 GDP grew greater than prior two quarters yet overcapacity remained a problem for China. China to see near term surplus in Balance of payments (BOP). Future USD weakness might fuel expectations for Yuan appreciation and that China could see large capital inflows. Inflationary pressures might build on extra liquidity measures || China Vice Premier Li commented that its domestic economic growth was rebounding month by month. Chinese economy was moving in a positive direction and it would ensure continuity of economic policies.

|| Russian Fin Min Kudrin commented that weak demand might slow global economic recovery but noted that Russian GDP to improve sequentially in Q3. he saw demand and investment growth limited in the next two years and expected global unemployment to increase over another year and a half || German Export Assoc (BGA) saw Euro rising to $1.60 over the next few months against the dollar, before settling down between $1.45-1.55 area || China to expand the scope of Yuan settlements, currency swaps with ASEAN nations || Japan's Fin Min Fujii reiterated his view that Yen strength was the result of USD weakness and easy monetary policy from the FED.

- In Currencies: The USD tested fresh 14-month lows during Asia as low yielding currencies like the dollar continued to trend under the rising risk appetite scenario following the Apple and Texas instrument earnings. USD has become the preferred carry trade financing currency and this sentiment was further fueled on Monday when the NY Fed noted that the reverse repo tests should not signal any imminent exit policy shift.

The EUR/USD approached the 1.50 mark as dealer chatter circulated that Russia sought to reduce its USD's weighting in its currency basket to 33% from the current 55% level. Central Bank reserve diversification away from the USD has become a constant in the forex landscape. For the time being option barriers keeping the 1.50 level intact. The verbal barrage on the currency situation continued in the session. China's PBoC's Ma noted that USD weakness would trigger its domestic inflation with vague reports thereafter that China sought to curb USD weakness. German Export Assoc (BGA) commented that they saw the potential for the Euro to rise towards $1.60 over the next few months, before settling down between $1.45-1.55 zone. No session would be complete with a currency comment from Japan's Fin Min Fujii. He reiterated in the latter part of the Asian session his view that Yen strength was the result of USD weakness and easy monetary policy from the FED

- GBP/USD was little changed ahead of the NY morning after a choppy Asian/European morning which provides a 100 pips range. Market awaiting BOE Governor King speech later today that could provide fresh insight towards the Quantitative Easing issue.

- In Fixed Income: Ahead of a deluge of US corporate earnings and Sept Housing starts data , government bonds are performing strongly in all three major markets In Europe. The UK yield curve has steepened throughout the session after mixed public finances and M4 data . Nervous anticipation is in the air ahead of a speech from the BoE's King after conflicting signals on QE expansion from fellow MPC members Posen and Fisher in recent times. Meanwhile yield curves have flattened in both Germany and the US, with bids moving into longer parts of the curve as equities decline. Ireland sold €2B in 2012 and 20156 bonds with strong results, while Italy opened books on a new syndicated , benchmark sized 2041 BTP.

- In Energy: OPEC Sec Gen El Badri commented that he was not comfortable with crude climbing to $100 and observed that oil prices were seen as "a little bit high. He attributed the rise in oil driven by weak dollar and financial speculation and added there was no current shortage of oil supply. Was seeking better group quota compliance || IEa's Tanaka: Demand for oil will still rise and noted that it was unlikely to reduce volatility in the market

- In the papers: FT article noted that China's large FX reserves present an opportunity of substantial investment in BRIC economies and other emerging markets. China's FX reserves rose another $318B to $2.27T over the last six months.
Article saw the goal for funds as broader than investment in commodity production, but rather stimulation of a new cycle of trade and development with the emerging world. Article noted that discussions in the Chinese think tanks spearheading their own version of a "Marshall plan", lending money to Africa, Asia and Latin America to boost living standards and create demand for Chinese products


NOTES

- Risk appetite rises following Apple, Texas Instruments and Japan's Komatsu earnings

- Chatter that Russia seeks to reduce USD's weighting to 33% in currency basket from the current 55% level

- Eurogroup discusses currencies "extensively" The Ecofin meeting today is also likely to issue a firm commitment to cut back deficits once growth stabilizes.

- OPEC Gen Sec: Rise in oil driven by weak dollar and financial speculation


Looking Ahead: 

Key Corporate earnings continue: CAT, DD, KO, LMY, PFE, STT, UAUA, UNH, UTX all expected before the NYSE open

- tbc (RU) Russian Sept Unemployment Rate: 8.3%e v 7.8% prior

- tbc (RU) Russian Sept Retail Sales M/M: 1.6%e v 1.8% prior, Y/Y: -9.0%e v -9.8% prior

- 7:45 (US) ICSC/UBSW Chain Store Sales

- 8:30 (US) Sept PPI M/M: 0.0%e v 1.7% prior, Y/Y: -4.3%e v -4.3% prior

- 8:30 (US) Sept PPI (ex food & energy) M/M: 0.1%e v 0.2% prior, Y/Y: 2.0%e v 2.3% prior

- 8:30 (US) Sept Housing Starts: 610Ke v 598K prior, Building Permits: 595Ke v 579K prior

- 8:30 (CA) Canada Aug Wholesale Sales M/M: -0.4% expected versus 2.8% prior

- 8:30 (CA) Canada Sept Leading Indicator M/M: 0.8% expected versus 1.1% prior

- 8:55 (US) Redbook weekly chain store sales

- 9:00 (CA) Bank of Canada (BOC) Interest Rate Decision: No change expected, current Overnight Lending Rate is 0.25%

- 9:00 (BE) Belgium Oct Consumer Confidence: No est versus -11.0 prior

- 11:00 (US) Fed's Warsh

- 13:00 (BR) Brazil Sept Tax Collections (BRL): 53.3B expected versus 52.1B prior

- 14:00 (AR) Argentina Sept trade Balance: $1.2B expected versus $1.2B prior

- 15:15 (UK) BoE's King

- 15:30 (US) Fed's Yellen

- 16:30 (US) API Crude Oil/Gasoline/Distillate Inventories