European Market Update: India's Central Bank begins exit from stimulus measures; Financial sector concerns continue to hamper equity sentiment


ECONOMIC DATA 

- (SZ) Swiss UBS Consumption Index: 0.632 v 0.623 prior

- (FI) Finland Oct Business Confidence: -15 v -13e; Consumer confidence: 12.3 v 12.0e

- (FR) France Oct Business Survey Overall Demand: -15v -41

- (FR) France Oct Consumer Confidence Indicator: -35 v -35e

- (TT) Taiwan Sept leading Indicator M/M: 1.7% v 1.9% prior; Coincident Indicator M/M: 1/7% v 0.6% prior

- (SP) Spain Aug Mortgages on Houses Y/Y: -6.6% v -19.1% prior; Mortgages on Capital Loaned Y/Y: -14.9% v -26.2% prior

- (TU) Turkey Aug Industrial Production M/M: -0.1% v 0.9% prior, Y/Y: -8.9% v -9.2% prior

- (IT) Italian Oct Consumer Confidence 111.7 v 113.7e

- (SW) Swedish Sept PPI M/M: -0.9% v -0.5%e; Y/Y: -1.6% v -1.5%e

- (SW) Swedish Sept Household Lending Y/Y: 8.2% v 8.0% prior

- (NV) Netherlands Oct Producer Confidence: -7.8 v -9.0e

- (HK) Hong Kong Sept Trade Balance (HKD): -29.1B v -19.9Be

- (EU) Euro-zone Sept M3 Y/Y: 1.8% v 2.2%e; 3-Month Average 2.5% v 2.5%e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

-In equities: European markets have traded erratically through the first 90 minutes of action. The pre-market session was dominated by corporate earnings highlighted by a smashing BP [BP.UK] that beat on all metrics and maintained its y/y quarterly dividend. BP's earnings rallied the broader major integrated names. Other earnings included Bayer [BAYN.GE] that reiterated FY09 Rev guidance, but missed on some first call Q3 figures. Vestas [VWS.DC], BBVA [BBVA.SP] and Akzo Nobel [AKZO.NV] also reported figures broadly in line with targets. Earnings sentiment mixed with yesterday's sharp equity sell off that initiated at 11:00EST. Following positive opening levels, markets have traded lower in linear fashion, moving through the unchanged mark before 5:00EST. Weight in markets has been heavily focused in financial names with ING [INGA.NV] under intense pressure for the second straight session, Commerzbank [CBK.GE] trading lower following rumors of revised guidance and RBS [RBS.UK] and Lloyds [LLOY.UK] moving lower due to capital raise, APS and the effects of the ING split up weighing the names.

-In individual equities: BP [BP.UK]: Reports Q3 $1.60 v $1.04e, Net $5.3B v $3.2Be, Rev $66.2B v $63.7Be; To pay quarterly dividend of $0.84/ADS (flat y/y). || Bayer [BAYN.GE] Reports Q3 Net €249M v €305Me, Rev €7.4B v €7.5Be; Reiterates FY09 Rev target €31-32B v €31.5Be). || Akzo Nobel [AKZA.NV] Reports Q3 Net €197M v €149Me, Rev €3.6B v €3.7Be; Remain on track to meet all FY11 targets. || KPN [KPN.NV] Reports Q3 Net €395M v €398Me, Rev €3.3B v €3.4Be; Reiterates FY Rev, EBITDA and cash flow guidance. || Renewable Energy [REC.NO] Reports Q3 EBITDA NOK429M v NOK492Me, Rev NOK2.2B v NOK2.1B. || BBVA Bank [BBVA.SP] Reports Q3 Net €1.4B v €1.3Be || Vestas VWS.DC: Reports Q3 Net €165M v €120Me, Rev €1.8B v €1.8Be; Reaffirms FY09 rev guidance, provides FY10, FY15 outlook. ||

3B

- Speakers: Chinese Government Official commented that a stable Yuan currency policy to remain in effect until export sector recovers. The stable currency was important for China's global market share ||Japan Fin Min Fujii reiterated his view that it is too early to discuss exit strategies from special measures. He was mindful of long term fiscal consolidation. On the currency front, he noted that Japan's FX reserves policy might be supporting USD. He conceded that it was a fact that a weak JPY was good for exporters and reiterated that he has never endorsed a stronger yen. He noted that Japan sought to reallocate resources to increase domestic demand and that it was not right for exports to drive policymaking. Stated that G7 agreed that JPY was not rising but that USD was weaker. He believed that USD remains the world's strongest currency || Chinese MOFCOM's Jiang stated that the Yuan currency faced appreciation pressures but that the current policy was to remain in place until exports recovered. He noted that a stable Yuan was important for China's global market share. Trade would take 2-3 years to recover toward pre-crisis levels || South Korea Fin Min commented that it would reshuffle forex rules to reflect all possibilities and saw the USD on track to move back to pre-crisis levels. Exit strategies might begin when private sector recovers || Polish Econ Min Piatkowska forecasted Q3 GDP in range of 1.5% to 1.7%; Q4 growth "will be the best". Believed 2009 GDP growth of 1.5% was achievable || India Farm Sec commented that there were no plans to import rice || India Fin Min Mukherjee forecasted FY2010/11 GDP growth between 6.5% to 6.7%. Fiscal stimulus to continue until economic recovery is sustainable and would address inflationary concerns || Turkish Central Banker Yilmaz commented that he continued to have doubts regarding the strength of the economic recovery. He noted that Turkey had limited ability to lower its benchmark interest rate. He saw end-2009 inflation rate of 5.5% and at 5.4% by end-2010 || Indian Central Banker Subbarao stated that the RBI's monetary policy remained accommodative and did have the scope to further reduce rates further its lending rates if necessary

- In Currencies: the USD was mixed against the major pairs and commodity-related pairs as the NY morning approached but well off its prior 14-month low achieved last week and holding a somewhat supportive footing. EUR/USD was unable to regain a foothold above the 1.4950 hourly pivot point and was below the 1.4870 level during the mid-European morning.
The GBP/USD tested the 1.64 level on chatter that Mid-East names were again buying the currency.

- The USD/CAD tested above the 1.07 handle but remained below a key chart point of 1.0730

- In Fixed Income: Bunds and Gilt futures are modestly bid with European equity indices oscillating around the unchanged mark. The short end of the German yield curve has been subject to good buying following the lowest reading in Euro-zone M3 since time immemorial. The 1.8% print undershot consensus expectations of 2.2% and represented the 11th successive sequential decline in the figure. The 2 year Schatz yield as at its lowest level in over a week below 1.34%. All the action is in the short end today and ahead of the Treasury's $42B 2-year note auction the short dated treasuries are surprisingly outperformed the rest of the curve and the new 2-year notes are implying a 7bps roll in the when issued market. In the only supply of the session, the Netherlands sold €1.1B in 3 off the run DSL's.

- In Energy: China Ministry of Industry and Information expected annual growth of domestic industrial production to speed up to about 16% y/y in Q4 compared to 12.4% seen in Q3 || British petroleum [BP.UK] Reported Q3 $1.60 versus $1.04 expected, Net profit of $5.3B beat the $3.2B estimate. Revenues were $66.2B versus estimates of $63.7B. To pay quarterly dividend of $0.84/ADS (flat y/y) ||


NOTES 

- Financial jitters simmer in session. ING rights offer cause rumors to spread to Lloyds & RBS breakup talk. Commerzbank lower guidance chatter circulating. The long awaited Dollar and equity market corrections upon us???

- India leaves key interest rates unchanged; but begins exit from stimulus measures as it orders banks to buy govt bonds.

- USD maintains a stable tone after Monday's gains. G20 next week in Scotland


Looking Ahead:

- Key US earnings expected before the bell: AKS, AMTD, CP, IACI, JCI, TXT, VLO, WYNN, X

- 7:00 (UK) CBI Oct Distributive Trades: No estimates +3 prior

- 7:45 (US) ICSC/UBSW Chain Store Sales: No est versus +0.2% prior.

- 8:45 (SW) Riksbank's Gov Ingves spech

- 8:55 (US) Redbook Retail Sales: No est versus +0.5% prior

- 9:00 (US) Aug S&P /CaseShiller Home Price Index: No estimates v 144.23 prior, Composite-20 Y/Y: -119.%e v -13.3% prior

- 10:00 (US) Oct Consumer Confidence: 53.5e v 53.1 prior

- 10:00 (US) Richmond Fed Manufacturing Index: 14 e v 14 prior

- 10:00 (UK) BoE reverse auction

- 11:00 (CA) BoC's Carney speech

- 13:00 (US) US to sell $42B in 2 year notes

- 16:00 (US) Treasury's Geithner speech

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