Economic Data

- (IN) India July Wholesale Prices Y/Y: 10.0% v 10.4%e

- (CZ) Czech July PPI M/M: 0.0% v 0.2%e; Y/Y: 2.3% v 2.6%e

- (CZ) Czech Jun Export Price Index Y/Y: 2.0% v 0.3% prior; Import Price Index Y/Y: 4.9% v 3.1% prior

- (TU) Turkey July Consumer Confidence: 87.5 v 86.5e

- (TU) Turkey May Unemployment Rate: 11.0% v 11.4%e

- (DE) Denmark July Wholesale Prices M/M: 0.3% v 0.4% prior; Y/Y: 5.7% v 4.8% prior

- (IS) Israel Aug Inflation Survey: 3.2% v 2.7% prior

- (NO) Norway July Trade Balance (NOK): 28.4B v 25.4B prior

- (AS) Austria July Consumer Price Index M/M: -0.4% v 0.0% prior; Y/Y: 1.9% v 2.0% prior

- (EU) Euro-Zone July CPI M/M: -0.3% v -0.4%e; Y/Y: 1.7% v 1.7%e ; CPI Core Y/Y: 1.0% v 1.0%e

- (IT) Italy Jun Current Account: -€2.7B v -€4.4B prior

Fixed Income:

- (GE) Germany soldadditional €1.97B v €2.0B indicated in 9-month BuBills; avg yield 0.4968% v 0.5500% prior; Bid-to-cover: 3.1x v 3.0x prior


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM


Notes/Observations

- China surpassed Japan as the world's second-largest economy

Equities:

- As of 5:30am ET Euro Stoxx 50 Index -0.5% at 2,696; DAX Index +0.1% at 6,116; CAC-40 Index -0.4% at 3,595 and FTSE 100 Index -0.1% at 5,268 .

- Hochtief [HOT.GE] helped lift construction and materials sector as company was trading at +6.1% following strong results. Net profit increased 13% on a yearly basis to €54.1M and beat consensus. Orders increased as well and company reaffirmed outlook for FY10. It expected new orders to raise further from last year's levels. GfK [GFK.GE] also reported better than expected earnings and raised its revenue outlook to 6% from 3% prior.

- UK deals helped limit some losses during the session. Vedanta Resources [VED.UK] confirmed it would acquire 51-60% of Cairn's Energy India [CAIR.IN] unit for $8.5-9.6B in cash (32% premium). Firm saw the acquisition as immediately accretive. Cairn Energy [CNE.UK] shares opened up 4% and Vedanta up by 2.5% following the news. Aviva [AV.UK] confirmed press speculations that it received an offer from RSA [RSA.UK] for its general insurance unit in the UK, Ireland and Canada worth £5B. It also confirmed that it had rejected the offer. Shares opened higher by 2.5%

- Michael Page [MPI.UK]reported stronger than expected results but its EMEA revenue had decreased by 2.3%. CEO spoke in a conference call and anticipated slow conditions for the month of August which should be compensated by a rebound in September. Shares opened up by 0.2% following the interim results.

Speakers:

-Japan PM Kan commented that it must monitor both GDP data and movements in currency closely and he reiterated the official view to continue to watch yen "carefully". The PM<

- Has asked the Finance Ministry and Economic Ministry to report on the economic situation.

- ECB member Honohan stated that renewed weakness in some EU government debt markets might delay the ECB's exit measures

- ECB member Stark commented in a FT newspaper interview that fiscal reform could reduce deficits and increase growth and revenue as he disputed the notion of 'Euro-paralysis'

- India Plan Panel Deputy member commented that he expected food inflation to ease significantly by September and reiterated the view that Wholesale Price Inflation (WPI) would decline to 6% by December.

- Libya Oil Chief: OPEC is not expected to take action on quotas at Oct meeting; supply/demand conditions are well balanced

- Iran President Ahmadinejad enacts law protect measures against inspections of its cargo vessels, mandates reactor-grade uranium production

Currencies/Fixed Income: The USD was softer against the major pairs as the European session began with reserve currency issue an issue. Markets participants were encouraged by remarks from former PBOC adviser Yong comments that China had been buying European bonds and this helped the EUR/USD to test above the 1.2830 level. However, some risk aversion entered the market shortly after trading began with comments from ECB's Honohan cited as a catalyst. As a result German Bund futures tested record highs (German 10-year yield is at record low). Dealers noted that both Bunds and Gilt futures recovered earlier losses and moved higher as equities decline. On the peripheral front, the spread between 10-year Gov Irish/German bonds at 310bps, wider by 5 bps (6-week highs). The USD tried to muster some strength on risk aversion flows but approached the NY morning still in negative territory compared to its Asian opening levels. EUR/USD at 1.2813, USD/CHF lower by over 100 pips testing 1.04 while GBP/USD hovering around the 1.56 area.

- The CHF outperformed the major pairs on risk aversion flows with safe-haven being aided after Iranian President Ahmadinejad enacted a law protect measures against inspections of its cargo vessels and mandated the country's reactor-grade uranium production. EUR?CHF tested below 1.3300 while spot gold held above the $1,120/oz level.

In the Papers-Geopolitical:

- The Telegraph reported that BDO Stoy Hayward believed the country may be moving toward a double-dip recession. Citing BDO's business trends report, the Optimism Index sees GDP declining through 2010. In addition, the survey indicates a downtrend for growth in 2011. Note previous comments made by BDO Stoy Hayward on 2nd of August where it was expected that the UK recession was to end within three months.

- The Telegraph's business editor Evans-Pritchard says Ireland might fare better than the southern European economies during the slowdown, citing the country's exports (mostly in the areas of IT, drugs and chemicals) may offset the declines in domestic demand. He also states that Ireland is more exposed to global trade than its southern European counterparts.

- The Wall Street Journal commented on large section of German manufacturing workers not benefitting despite the stronger than expected second quarter GDP results. According to the article, approximately 20% of work in low-wage sector, defined as below €9/hr, and about a third of job openings are on a temporary basis. Also, the strong export orders were not matched by recovery in domestic demand, prompting accusations from other EU nations that Germany is exploiting global recovery.


Looking Ahead

- (IS) Israel Q2 Advanced GDP Annualized: 2.9%e v 3.4% prior

- (PE) Peru Jun GDP Y/Y : 10.8%e v 9.2% prior

- (PE) Peru July Unemployment: 7.0%e v 7.6% prior

- (PD) Poland July Budget Level (PLN): No est v -4.8Be; Budget Level YTD: No est v -36.8B prior; Budget Performance (YTD): % v 70.5% prior

- 7:00 (BR) Brazil Aug FGV CPI: No ets v -0.2% prior

- 8:30 (CL) Chile July Copper Exports: No est v $2.8B prior

- 8:30 (US) Aug Empire Manufacturing: 8.30e v 5.08 prior

- 9:00 (US) Jun Total Net TIC Flows: 40.0Be v $17.5B prior; Net Long-term TIC Flows: 45.7Be v $35.4B prior

- 9:20 (BE)May Trade Balance: No est v €992.6M

- 9:00 (FR) France Debt Agency (ATF) to sell €8.5B in Bills

- 9:30 (EU)ECB calls for bids in 7-day main refi operation

- 10:00 (US) Aug NAHB Housing Market Index: 15e v 14 prior