European Market Update: Risk appetite theme remains intact; Lack of non-conciliatory FX-rhetoric from the U.S.-China discussion


ECONOMIC DATA

- (EU) EU Oct 25 Car Registrations: 11.6% v 6.3% prior

- (SP) Spain Sept House Transactions Y/Y: -17.2% v -9.9% prior

- (CZ) Czech Oct PPI Industrial M/M: -0.2% v 0.0%e; Y/Y: -4.6% v -4.5%e

- (CZ) Czech Sept Export Price Index Y/Y: -4.3% v -2.7% prior; Import Price Index Y/Y: -9.3% v -7.2% prior

- (TU) Turkey Oct Consumer Confidence: 80.5 v 81.9 prior

- (TU) Turkey Aug Unemployment rate: 13.4% v 13.0%e

- (SW) Swedish Oct Avg House Prices (SEK): 1.78M v 1.78M prior

- (DE) Denmark Oct Wholesale Prices M/M: -0.3% v -0.1% prior; Y/Y: -5.3% v -7.6% prior

- (RU) Russia Oct Producer Prices M/M: -0.9% v 1.3%e; Y/Y: -1.8% v 1.6%e

- (IT) Italian Oct Final CPI NIC incl tobacco M/M: 0.1% v 0.1%e; Y/Y: 0.3% v 0.3%e

- (IT) Italian Oct Final CPI-EU Harmonized M//M: 0.4% v 0.5%e, Y/Y: 0.3% v 0.4%e

- (NO) Norway Oct Trade Balance (NOK): 27.4B v 22.6B prior

- (EU) Euro-Zone Oct CPI M/M: 0.2% v 0.3%e; Y/Y: -0.1% v -0.1%e; CPI-Core Y/Y: 1.2% v 1.1%e

- (IT) Sept Current Account: -€4.2B v -€3.2B prior


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

-In equities: European equity markets have traded broadly positive through the morning session. Gains on the FTSE100 above 5344 set new 2009 highs. Equities have been trading positive on the back of sentiment that rolled out of Asia following Japan's prelim Q3 GDP read, solid EU new auto registrations for October and gains in commodity prices that have bid the mining and mineral names. The risk appetite theme remains intact after a better Q3 GDP data from Japan. EU new car registrations, showing an increase of 11.1% v 6.35% m/m supported Renault [RNO.FR], Fiat [F.IT] and PSA Group [UG.FR]. In earnings related movements, EADS [EAD.FR] shook off disappointing numbers while maintaining its order expectations and traded higher, UK listed Lonmin [LMI.UK] and Amlin [AML.UK] also moved higher following earnings related releases. As the Dubai Air Show unfolds, key orders have been engines and weapons systems contract. Into 4:30EST Cisco [CSCO] announced its intention to raise its offer for Tandberg to NOK170/share bringing excitement into the tech and M&A vulnerable names. In other M&A news, Japanese based Cannon [7751.JP] launched a €1.5B offer for OCE [OCE.NV]. Volumes in trading have remained light with the FTSE nearly 40% off its moving averages.

-Individual equities: Tandberg [TAA.NO] Cisco increased offer for company to NOK170/shr (NOK153.5/shr prior) and extends acceptance period to Dec 1st. Lonmin LMI.UK: reported FY09 Pretax loss $272M v loss $140Me, Rev $1.1B v $1.0Be, declares no final dividend. Amlin [AML.UK] provided Interim Management Statement: 10 month premiums £1.4B v £904M y/y; positive on FY10 goals. EADS EAD.FR: reported Q3 Net loss €87M v gain €67Me, EBIT €210M v €250Me, Rev €9.5B v €9.6Be; FY09 order income maintained at 300. OCE [OCE.NV] Canon to launch tender offer to buy shares of company for up to €730M at €8.60/share (€5.15 last). H&M [HMB.SW] reports October SSS -3% v +5%e.

- Speakers: ECB's Ordonez commented in an FT interview that any interest rate increase was out of the question for the time being and noted that markets were not expecting a change until 2Q 2010. ECB's Nowotny commented that diverging government bond credit default swaps was a major concern but financial market strains have eased greatly. The economic crisis had put the Euro to the test and the currency has acted as an anchor of stability during the recent turbulence. BOE's Tucker stated that risks taken by banks might require higher deposit levy to support costs for future crises. Fed's Hoenig commented that there were significant weaknesses to work though in the US economy. All institutions must be allowed to fail, regardless of size or influence EU Almunia. Deterioration in employment prospects was a huge concern and reiterated that there are uncertainties about strength of economic recovery. Euro adoption is not an immediate fix to economic crisis.
Almunia reiterated the G20 view that it was too early to commence in exit strategies. Japan's Fin Min Fujii commented that the topic of currencies was discussed in meeting with ECB Noyer. Both agreed to remain cautious on the 2010 economic outlook, as the recovery remained fragile. ECB's Sramko noted that the ECB growth projections could be revised upwards and that central bank members have discussed interest rate on 12-month refi operation. He also noted that the topic of currency rates needed more global coordination.

- Currencies: The USD started the European morning on a soft tone aided by a continued backdrop of improved risk appetite but overall the greenback maintaining its recent ranges despite spot gold again hitting fresh all-time highs of $1,133/oz. EUR/USD probed towards the 1.50 area after OPEC Pres Vasconcelos commented that the organization would need to reflect on pricing of oil in USDs. The comment followed a weekend of non-conciliatory currency rhetoric from the U.S. China discussions. Chinese Vice Commerce Minister (MOFCOM) Chen Jian Yuan added that the exchange rate was not related to trade imbalances and stated that China and Asian exports were not to blame. The dealer chatter continues to focus on the alleged option barrier at the 1.48 and 1.51 strikes. Interestingly the EUR/CHF cross continues to hover at its March uptrend line seen at the 1.5070 area.

- Fixed Income: Government bonds are trading well in Europe despite strong equities. Bunds and T-Bond futures both moved sharply higher in early European trade - a combination of thin volumes and perceived dovish statements from the ECB's Weber and the EU's Almunia. Weber noted that recent stabilization in markets does not imply a recovery, while Almunia noted that unemployment remains a major concern. Yield curves have flattened on both sides of the Atlantic thanks to better buying in the long end with 2s10s -4bps in Treasuries at 256bps, -2.5bps in Europe at 214bps and -3bps in Gilts at 243bps. European peripheral markets are uniformly weaker versus Bunds, with Greece the worst performer. With rumors swirling though the market the Greek 10y is 14bps wider versus the European benchmark to hit its widest level since mid July. China's chief banking regulator: Combination of a weak dollar and low interest rates had encouraged a huge carry trade that was having a massive impact on asset prices.

- In Energy\commodities: OPEC Pres Vasconcelos noted that current oil prices are at a good level. WSJ reported that Nigeria's main militant group MEND said to have restarted talks with Nigeria Govt over the weekend. MEND emissaries formally meeting with the president on Saturday are said to have boosted hopes that improvement in Nigeria's oil production could be sustained. ArcelorMittal [MT.NV] CEO Wurth: Overall steel demand in 2010 seen down 25% versus 2008 peak.

- Geopolitical: Iran Pres Ahmadinejad: Reiterates that Iran's nuclear rights are not negotiable


Looking Ahead:

- (BE) Belgium Sept Trade Balance: No estimate versus €37.3M prior

- 6:30 (CL) Chile Oct Copper Exports: No est versus $2.6B prior

- 8:00 (BR) Brazil Oct Formal Job Creation: 200K expected versus 252.6K prior

- 8:30 (CA) Canada Sept Manufacturing Sales: 1.7% expected versus -2.1% prior

- 8:30 (US) Nov Empire Manufacturing: 30.0 expected versus 34.57 prior

- 8:30 (US) Oct Advance Retail Sales: 0.9% expected versus -1.5% prior; Ex Auto: 0.4% expected versus 0.5% prior

- (PD) Poland Oct Budget level: No estimates versus -5.8B prior

- 10:00 (US) Sept Business Inventories: -0.7% expected versus -1.5% prior

- 10:00 (US) TAF auction

- 10:00 (EU) ECB's Liikanen

- 11:00 (EU) ECB's Quaden

- 12:15 (US) Fed's Bernanke speaks on the US economic outlook.

- 13:15 (US) Fed's Fisher speaks on the US economy.

- 16:15 (US) Fed's Kohn speaks on policy changes