European Market Update: European Unemployment data in line with expectations and contains the aversion flows for the time being


Economic Data

- (IN) India Q2 GDP Y/Y: 8.8%e v 8.6% prior; faster rate since Q4 2007

- (RU) Russian Central Bank (CBR) Leave Refi Rate unchanged at 7.75%; As Expected

- (SZ) Swiss July UBS Consumption Indicator: 1.860 v 1.795 prior

- (SA) South Africa July M3Money Supply Y/Y: 3.7% v 2.5%e; Private Sector Credit Y/Y: 2.0% v 1.5%e

- (FI) Finland Jun Final Trade Balance: €365M v €385M prelim

- (HU) Hungary July Producer Prices M/M: 0.2% v 1.4% prior; Y/Y: 8.7% v 9.6%e

- (SP) Spain Jun Mortgages on Houses Y/Y: -10.8% v -2.9% prior; Mortgages-capital loaned Y/Y: -25.3% v -15.2% prior

- (SP) Spain Jun Current Account: -€3.6B v -€4.8B prior

- (TU) Turkey July Trade Balance (TRY): -6.4B v -5.8Be

- (IT) Italy Aug Business Confidence: 100.5 v 98.5e

- (TH) Thailand July Current Account: -$1.1B v -$950Me; Total Trade Balance: -$791M v $2.5B prior; Overall Trade Balance: $1.4B v $2.2B prior

- (TH) Thailand Aug Business Sentiment: 50.4 v 52.1 prior

- (TH) Thailand July Manufacturing Production Y/Y: 16.3% v 15.3%e; Total Capacity Utilization: 67.0% v 67.9% prior

- (GE) Germany Aug Unemployment Change: -17K v -20Ke; Unemployment Rate: 7.6% v 7.6%e

- (CZ) Czech July Money Supply Y/Y: 4.8% v 5.2% prior

- (IT) Italy Jun Retail Sales M/M: 0.3% v 0.1%e; Y/Y: +0.5% v -0.5%e

- (UK) Aug Year Ahead CPI Expectations: 2.9% v 2.7% prior - YouGov

- (UK) July Net Consumer Credit: £0.2B v £0.0Be; Net Lending: £0.1B v £0.7Be

- (UK) July Mortgage Approvals: 48.7K v 46.5Ke

- (UK) July Final M4 Money Supply M/M: 0.4% v 0.4% prelim; Y/Y: 2.3% v 2.3% prelim; M4 (Ex OFCs) 3M Annualized: 5.6% v 6.8% prior

- (HK) Hong Kong July Retail Sales Value Y/Y: 18.9% v 14.1%e; Retail Sales Volume Y/Y: 16.0% v 11.2%e

- (HK) Hong Kong July Gov't Budget (HKD): 800M v -900M prior

- (HK) JulyM3 Money Supply M3: 4.3% v 3.1% prior

- (EU) Euro Zone July Unemployment Rate: 10.0% v 10.0%e

- (EU) Euro Zone Aug CPI Estimate: Y/Y: 1.6% v 1.6%e

- (IC) Iceland July Final Trade Balance (ISK): 4.6B v 4.5B prior

- (IT) Italy Aug Preliminary CPI (NIC incl. tobacco) M/M: 0.2% v 0.2%e; Y/Y: 1.6% v 1.6%e

- (IT) Italy Aug Preliminary CPI EU Harmonized M/M: +0.2% v -0.1%e; Y/Y: 1.8% v 1.7%e

- (IT) Italy July Unemployment Rate: 8.4% v 8.5% prior

- (BE) Belgium July Unemployment Rate 8.9% v 8.8% prior

- (GR) Greece Jun Retail Sales Y/Y: +1.2%% v -4.5%e

- (IR) ECB borrowing of Irish banks €89.5B in July v €94.8B m/m

Fixed Income:

- (SA) South Africa Bond auction results

- Sold ZAR1.1B in R208 (2021) Bonds; avg yield 7.97%; Bid-to-cover: 2.19x

- Sold ZAR1.0B in R214 (2041) Bonds; avg yield 7.99%; Bid-to-cover: 2.00x

- (EU) ECB allots €153.1B in 7-day main refi operation at fixed 1%

- (HU) Hungary Debt Agency sold HUF60B v HUF50B target; Avg yield 5.47% v 5.38% prior; Bid-to-cover: 2.7x v 2.6x prior

- (BE) Belgium sold total €2.51B in 3-month and 6-month Bills vs. €2.4B indicated

- Sold €712M in 3-month Bills, avg yield 0.405% v 0.416%; Bid-to-cover: 6.6x v 3.0x prior

- Sold €1. in 6-month Bills avg yield 0.449% v 0.516%; Bid-to-cover 2.5x v 2.9x prior


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM


Notes/Observations

- US Consumer Confidence in focus as risk aversion concerns continue to swell

- European Unemployment data in line with expectations and contains the aversion flow

- Nikkei ends session down over 3.5% while JPY currency remains firm

Equities:

- As of 5:45am ET Euro Stoxx 50 Index -0.9% at 2,594; DAX Index -0.7% at 5,873; CAC-40 Index -0.9% at 3,456 and FTSE 100 Index -0.9% at 5,153

- Austrian bank Raiffeisen [RIBH.AS] reported disappointed expectations with its second quarter net despite a significant improvement in loan loss provisions. Net interest income was above expectations and had risen slightly from the year-ago figure but trading income decreased by almost 50% on a yearly basis. The decrease in net was mostly due to a rise in administrative expenses which rose by 6% and adverse currency effects. Bank reiterated that 2 010 lending to remain subdued, but saw slight rise of lending to its customers.

- French supermarket operator Carrefour [CA.FR] reported a net profit this quarter in contrast with a net loss a year ago but the figure was below expectations. Net income was impacted by a one-time charges related to closure of 16 Belgian stores and inventory write offs in Brazil. Company, however, confirmed its objectives for 2010 of an activity contribution of approx €3.1B

- Irish Life and Permanent [IPM.UK] managed to narrow its loss to €10M compared to a year-ago loss of €51M but company saw further bank losses in H2. In other UK names, Bunzl [BNZL.UK] improved both its profit and revenues and increased its interim dividend.

- Lukoil [LKOH.RU] reported a decrease in net profit but an increase in revenues. The decrease in net was due to higher taxes and export duties, stronger ruble and rising transportation costs. Company increased its throughputs at its refineries by 8.1%

Speakers:

- South Korea commented that it would drop its call for currency swap arrangement from G-20 agenda. It noted that members sought discussions with the IMF to find an alternative facility. Institutionalizing multilateral currency swap arrangements was proposed as one of the policy options under the proposed safety nets. Majority views among G-20 members was that such an idea could infringe upon the sovereignty of central banks. G-20 members in discussions with IMF to find alternatives in which the IMF can play a key role in creating a new "precautionary credit line

- Poland Central Bank Gilowska commented that she favored a 'dynamic and flexible' monetary policy and cautioned that policy should not be static for too long . She stated that the central bank must consider the delay in impact of rate changes and added that the Central Bank had been discussing flexible policy for two months.

- Czech Central Banker Tomsik commented that he saw no need to rush interest rate hikes and noted that the Government's progress in fiscal reform plans iwa an anti-inflationary risk. He believes the central bank can wait until the second half of 2011 to begin rate increases.

- China's PBoC Hu commented that there were signs of a slowdown in the slow global recovery but no double dip recession was foreseen. He reiterated that yuan exchange rate was not key in rebalancing US-China trade and that the US borrowing-based consumption model must change. He again stressed that China remained a responsible investor of forex reserves

- Japan MoF's Ikeda: Believes BoJ should adopt an inflation target

- Japan ruling party Ozawa: To challenge PM Kan in party leadership race

- Japan's FY11 budget requests hit more than ¥96T - Japanese Press

Currencies/Fixed Income:

- The steep decline in the Nikkei 225 Index brought the risk aversion sentiment into the European session as the CHF, USD and JPY all maintained a firm tone against other European pairs as uncertainty continued to reign over the sustainability of the global economic recovery. Month-end flows continued to aid Safe-haven themes as key government bond yield to fresh all-time lows in Europe. EUR/CHF cross tested the 1.2900 for fresh all-time lows. The USD/JPY looked to end August below the pivotal 85 handle for its fourth consecutive monthly decline. USD/CNY ended the month higher (weaker Yuan) by 0.5% to 6.8060 level. This the largest monthly decline for the Yuan currency since the July 2005 revaluation. The EUR/USD managed to reclaim some ground ahead of the NY morning and was slightly positive against the green back at 1.2680 after testing 1.2626 in late Asia. USD/CHF holding below the 1.02 level with the CHF firmer by 60 pips against the dollar since the Tokyo open.

In the Papers-Geopolitical:

In press news, on the area of austerity measures, the London Times reported that the UK government is reconsidering its plan to purchase £10.5B in air refueling tankers for the Royal Air Force, while, the FT reported that UK Chancellor Osborne is planning to cut the Treasury department's workforce by 25% over the next 4 years. In other UK press news, the FT reported that thousands of homeowners could face negative equity levels for at least the next 4 years.

- In Japanese news, PM Kan agreed to work with DPJ member Ozawa, as Ozawa confirmed plans to challenge Kan for the leadership of the DPJ party.


Looking Ahead

- (UK) DMO Gilt issuance calendar

- (IS) Israel Q2 Unemployment Rate: No est v 7.2% prior

- (BE) Belgium July Budget Balance (YTD): No est v -€10.0B prior

- 7:00 (EU) ECB 7-day Term Deposit Tender: Expects to drain €61.0B

- 7:45 (US) Weekly ICSC Chain Store Sales

- 8:00 Baltic Dry Bulk

- 8:00 (SA) South Africa July Trade Balance (ZAR): 0.0Be v 5.6B prior

- 8:00 (BR) Brazil July Industrial Production M/M: 0.7%e v -1.0% prior; Y/Y: 9.3%e v 11.1% prior

- 8:15 (BE) Belgium July Unemployment Rate: No est v 8.6% prior

- 8:30 (CA) Canada Jun Gross Domestic Product M/M: 0.2%e v 0.1% prior; Q2 GDP Annualized: 2.5%e v 6.1% prior

- 8:55 (US) Weekly Redbook Retail, Sales

- 9:00 (CL) Chile July Unemployment Rate: 8.6%e v 8.5% prior

- 9:00 (US) Jun S&P/CaseShiller Composite-20 Y/Y: 3.6%e v 4.6% prior ; Home Price Index: No est v 146.43 prior;

- 9:00 (US) Q2 Home Price Index: No est v 131.8 prior; HPI Y/Y: No est v 2.0% prior

- 9:00 (EU) Weekly ECB Forex Reserves

- 9:45 (US) Aug Chicago Purchasing Manager: 57.0e v 62.3 prior

- 10:00 (US) Aug Consumer Confidence: 50.9e v 50.4 prior

- 10:00 (US) Aug NAPM-Milwaukee: 62.0e v 66 prior

- 12:00 (CO) Colombia July Unemployment Rate: 12.6%e v 12.8% prior - 14:00 (US) Minutes of FOMC Meeting

- 15:00 (AR) Argentina July Construction Activity Y/Y: No est v 10.1% prior

- 16:30 (US) API weekly energy inventories

- 17:00 (US) ABC Consumer Confidence w/e Aug 29th: No est v -44 prior

- 21:00 (CH) China Aug PMI Manufacturing: 51.1e v 51.2 prior

- 23:00 (CH) China Government to Sell CNY28B in 20-Year Bonds