European Market Update: Euro strength failed to dent German export market; USD weaker after weekend IMF report and G20 summit failed to mention any concern over dollar's trend


ECONOMIC DATA

- (CH) China Officials: October Passenger Car Sales at 946.4K, +75.8% y/y

- (FI) Finland Sept preliminary Trade Balance: -€240M v -€95M prior

- (GE) Sept Trade Balance: €10.6B v €11.3Be; Current Account: €9.4B v €9.3Be

- (FR) France Oct Business Sentiment: 95 v 93e

- (CZ) Czech Oct Unemployment rate: 8.5% v 8.6%e

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

- (TU) Turkey Sept Industrial Production Y/Y: -8.6% v -7.5%e

- (TA) Taiwan Total Trade Balance: $3.2B v $3.1Be; Total Exports YoY: -4.7% v -7.2%e; Total Imports: -6.7% v -6.3%e

- (DE) Denmark Sept Trade Balance (ex shipping): DKK4.6B v DKK4.6B prior; Current Account: DKK8.4B v DKK6.6B prior

- (HK) Hong Kong Oct currency reserves $240.1B v $226.9B prior

- (EU) Euro-Zone Nov Sentix Investor Confidence: -7.0 v -12.0e; bets reading since Jun 2007

- (BR) Brazil Oct FGV Inflation IGP-DI: 0.0% v 0.1%e

- (GE) German Sept Industrial Production M/M: 2.7% v 1.0%e; YoY: -12.9% v -14.4%e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- Equities: European equity markets opened bid and despite initial undulation have pushed higher through the morning session. Expectations for continued stimulus being supported by the G-20, Asian trading ranges rolled into the European session. Solid earnings from German insurance name Allianz [ALV.GE] and UK communications firm Inmarast [ISAT.UK] boosted the equity rotation. With today at 17:00BST (12:00EST) being the date set by the UK Takeover Panel regarding Kraft's [KFT] bid for Cadbury [CBRY.UK], a vast amount of expectation and coverage is being given to the name and food sector. In other M&A news, Axa [CS.FR] and AMP offered an A$11B package for Axa Asia Pacific that was promptly rejected as low ball by that firm. Into the NY morning, equities have continued to trend higher on volumes that were well off their prior weeks (earnings boosted) highs. Leading sectors of the EuroStoxx50 were Healthcare and Financials with Telecom's at the bottom (but still trading in positive territory).

- In individual equities: Allianz [ALV.GE] Reports Q3 Net €1.3B v €1.2Be, Rev €22B v €22Be; P/C combined ratio at 96.9%. || Axa CS.FR: Planning a €2B rights issue (about 6% of market cap). Follow up: Axa Asia Pacific has rejected bid from parent company and AMP Ltd valued at A$11B. || Puma [PUM.GE] Reports Q3 Net € 68Mv €90M, EBIT €98M v €125M y/y, Rev €673M v €673Me. || Gazprom [GAZP.RU] Reports Q2 Net RUB193B v RUB170Be, Rev RUB708B v RUB661Be. || Inmarsat [ISAT.UK] Reports Q3 Net $50M v $38M, $177M v $163m y/y; Announces $650M senior note offering. || Air France [AF.FR] Reports Oct Load Factor 82.5% v 81.9 q/q; (+1.3%) y/y. ||Vieolia [VIE.FR] Reports 9 Month Rev €25.4B v €26.1B y/y; Have yet to see a recover in waste services. ||

- Speakers: Asian Development Bank (ADB) Official: Premature for Asian central banks to exit easy monetary policies. The USD to remain key reserve currency but others to gain prominence over long term. The official did note that the dollar could lose reserve status in 20-30 years || Russian Central Bank commented that it had purchased over $1B in the currency markets thus far in Nov and also added that it could purchase gold from the State Depository. The CBR reiterated that further interest rate cuts could still take place before end of 2009. last the CBR stated that it had no plans to buy Fannie Mae or Freddie Mac bonds || Russian Central Banker Ulyukayev commented that banks did not register a significant increase in October lending || France Fin Min Lagarde commented in a radio interview that French unemployment to decline by 2011 at the latest but conceded that she did not expect job creation in early part of 2010 || Sweden sells state pharmacies for SEK5.9B. Country to sell 466 of the current 946 state owned pharmacies to four companies, with both domestic and foreign investors. A government spokesperson said the price achieved was higher than expected. ||

- In Currencies: The USD maintained a softer tone in the aftermath of the G20 weekend meeting in Scotland which failed to mention any concern about the USD weakness. IMF commented that pressure from carry trades had moved the dollar "closer to medium-run equilibrium, but added that it was still on the strong side". Asian Development Bank (ADB) Official commented that the USD to remain key reserve currency but other to gain prominence over long term but conceded that the dollar could lose reserve status in 20-30 years. The German trade data also implied that the recent Euro strength did not seem to have dented its export demand. the EUR/USD tested the 1.50 handle as the NY morning approached.

- the GBP was broadly firmer against the majors. The pound was aided by chatter that Kraft would proceed with a hostile bid for Cadbury. GBP/USD up over 200 pips to test above 1.68.

- Fixed income: Group of 20 nations agreed to maintain stimulus helped the bond yields move lower in the session. The yield curve steepened in both Europe and the US as risk appetite continued to rise. The UK 2-year gilt tested a record low of 0.75%. Overall the Gilt futures were outperforming sharply compared to the German Bunds

- In Energy: (US) National Hurricane Center (NHC): Hurricane Ida downgraded to Category 1 storm; located 340M S/SW from Mississippi River || Reportedly China to increase retail gas and diesel prices later in near future

- Commodities: Gold continues to hit fresh all-time highs as it approaches the $1,110 level in the session. || . German Steel Federation commented that the Chinese stimulus package being is a temporary phenomenon


NOTES

- IMF said that pressure from carry trades has moved the dollar "closer to medium-run equilibrium, but it is still on the strong side".

- The G-20 agreed to keep interest rates low and maintain record budget deficits until recoveries take hold (as expected)


Looking Ahead:

- Last major day of US Corporate earnings with DISH, SATS, TSO, WCRX expected to report ahead of the bell

- 6:30 (CL) Chile Oct Trade balance: $925M expected versus $1.5B prior

- 7:30 (BR) Brazil Oct vehicle Sales: No estimate versus 308.7K prior

- 8:15 (CA) Canada Oct Housing Starts: 159.3K expected versus 149.3K prior

- (UK) BOE reverse £1.7B Gilt auction with maturities in the 2020-32 range

- 10:00 (MX) Mexico Oct Consumer prices MoM: 0.4% expected versus 0.5% prior; YoY: 4.6% expected versus 4.9% prior; CPI Core MoM: 0.3% expected versus 0.4% prior

- 13:00 (US) Treasury's 3-year note auction