European Market Update

[TradetheNews]

France looking to lower it GDP view; European manufacturing PMI linger near record lows; Risk aversion returns as equities slump

*** ECONOMIC DATA **

- (SW) Jan Swedbank PMI Survey: 33.8 v 32.5e

- (SP) Spain Jan Manufacturing PMI: 31.5 v 28.5 prior

- (HK) Dec Retail Sales Value Y/Y:0.8 % v -3.7%e; Volume Y/Y: -0.7% v -6.5%e

- (CZ) Czech Jan Manufacturing PMI: 31.5 v 32.7 prior; lowest reading on record

- (SZ) Swiss Jan SVME PMI: 35.0 v 36.0e

- (IT) Italian Jan PMI Manufacturing: 36.1 v 35.3e

- (FR) French Jan Final Manufacturing PMI: 37.9 v 38.1e

- (GE) German Jan Final Manufacturing PMI: 32.0 v 32.0e; lowest reading on record

- (IT) Italian Dec Hourly Wages M/M: 0.3% v 0.2%e; Y/Y: 3.8% v 3.5%e

- (NO) Norway Dec Credt Indicator growth 9.9% v 10.4%e

- (SA) S. Africa Jan Investec PMI: 40.7 v 41.0e

- (EU) Jan Final PMI Manufacturing: 34.5 expected v 34.5 prior

- (UK) Jan PMI Manufacturing: 35.8 v 34.5e

- (IN) India Dec Trade Deficit $7.7B v $5.7B y/y; Exports Y/Y: -1. 1% v -10.0% prior; Imports Y/Y: 8.8% v 6.1% prior

- (UK) UK Q4 Commercial Property values -14% q/q, -26.6% y/y

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***

- Equities: Ryan Air [RYA.UK] Reported Q3 Net loss €101.5M v loss €106.8Me. Quarter revenues were €604.5M compared to estimates of €581.4M. Company doubts it will make another offer for Aer Lingus. It guided FY pre-exceptional net profit in range of €50-80M and saw smaller than previously expected Q4 loss. It noted that average fares down 20%. Lastly, it saw significant profit next fiscal year but cannot give precise guidance || VoestAlpin [VOE.AS] Lowers FY outlook and noted that its EBIT to fall 10% y/y. The company stated that it saw earnings remaining substantially positive || GDF Suez: [GSZ.FR] Reported 2008 revenues of €83.05B versus consensus of €81.47B. it reaffirmed its EBITDA growth target of 10% || Sthree [STHR.UK] Announced preliminary results with FY Profit before taxation £56.0M compared to £50. 3M y/y. Its revenues were £631.5M versus £522.7M y/y || Tecnip [TEC.FR] TEC. FR: Technip Subsea 7 Asia Pacific jv to be dissolved. Companies have agreed to dissolve their joint venture, Technip Subsea 7 Asia Pacific (TS7), once all its existing projects and tendered work have been completed || Icap [IAP.UK] Confirmed press speculation that was looking at a bid for LCH Clearnet || Nordic tankers [NORDIC.DC} Says unable to pay wages and suppliers; CEO & CFO resigned. || Peugeot [UG.FR] Reportedly French Gov't seeks co to cooperate with Germany's BMW - French press || SGL [SGL.GE] Benteler-SGL jv acquired Austria's Fischer composite

- Speakers: French Fin Min Lagarde noted that Dec unemployment figures up by about 45K. She also noted that both Q4 and Q1 economic growth was negative || EU's Almunia stated that European banks will need more recapitalizing. He commented that a Bad Bank strategy has previously showed good results. Monetary policy must get ready to return to 'normality'and saw limits to public borrowing in Eurozone

|| Polish Central Banker Czekaj commented that there was no need to delay Euro adoption. He stated that interest rate falling around 3.00-3.50% was a possibility from the current level of 4.25$. he expected inflation to decline below 2.5% by H2 of 2009 || PM Fillon commented that France would lower 2009 GDP forecast from 0.2% to 0.5% level - French press || UK PM Brown noted that the global economic slowdown was mpacting every corner of the world He commented that some $7 Trillion has been pledged to support global banking system and the upcoming G20 summit in Roma would discuss curbing protectionism || Chinese PM Wen Jiabao replied that 'Shoring up' economic confidence was main priority during his European trip. 'Confidence' was the theme of his visit to Europe. He noted that Chinese firms would initiate procurement missions in the UK. Stresses the need for a successful G-20 summit which results in 'concrete actions.' He called for opposition to protectionism || || Polish Central Banker Czekaj commented that there was no need to delay Euro adoption. He stated that interest rate falling around 3.00-3.50% was a possibility from the current level of 4.25$. he expected inflation to decline below 2.5% by H2 of 2009

- In Currencies: The GBP was broadly weaker in the session with its weakness attributed to weekend comments from PM Brown that currency intervention to support the pound was a 'recipe for failure'. Moody's downgrade of Barclays long term debt by two notches to Aa3 from Aa1 also impacting UK sentiment. Overall the risk aversion theme returned and both the USD and JPY related pairs benefited. GBP/USD tested below the 1. 4200, off 70 pips|| The euro was also softer speculation that a report tomorrow would show European producer prices fell a fifth month, giving the region's central bank more room to cut interest rates. EUR/USD tested the 1. 2710 level before consolidating|| Dealers note that USD/RUB is beyond the Russian central bank's implied target exchange rate of 36.



- Fixed income: The heaviest snowfall in London for over 18 years and resulting transport chaos had led to extraordinarily light volumes in fixed income this morning, with risk aversion the underlying theme in thin trade. At the time of writing, just over 6k contracts have traded in March Gilts (31 ticks higher at 117.73) and around 120k contracts in March Bunds (45 ticks higher at 122.82) More details emerged on the upcoming Spanish 10y new issue, with size expected around €8B, and pricing of 90 -95bps over swaps implying a yield of around 4.65% or 140bps over Bunds. Slovakia sold €215M 2017's with an average yield of 4.74% or 166pbs over the comparable German issue. ||China's Premier Wen believes it is important to stabilize the US Treasuries market

- In Energy: Russian Energy Min stated that the country's Jan Oil production came in at 9.70M bpd versus 9.66M bpd back in December. He noted that the exports declined to 4.25M bpd compared with 4.36M bpd in Dec ||

- Credit Crisis: German Fin Min spokesman says no decision made yet regarding banking law but German Gov't spokesperson Steg noted that intense discussions were taking place regarding bank takeovers || Irish govt plans a guarantee scheme for banks' bad debts and reportedly would inject €4B in each of Bank of Ireland, Allied Irish Bank ||

*** NOTES ***

- Risk aversion and continued concerns over the health of the global financial; sector returned in the session. Moody's lowered Barclays long term debt by two notches. ECB moves towards laying out bad bank rules this week, while US warns of possible delays in bad bank plans. Sovereign concerns also linger as Fitch place Malaysia on outlook negative.

- French warned of higher unemployment and the Government is considering lowering its 2009 GDP view up to -2% from the prior +0.2% to 0.5% range and the US will reports its Jan payroll data on Friday.

- Looking Ahead:

- 8:00 (BR) Brazil Jan Trade data: deficit of $843M expected versus $2.3B surplus prior

- 8:30 (US) Dec Personal Income: -0.4% expected v -0.2% prior

- 8:30 (US) Dec Personal Spending: -0.9% expected v -0.6% prior

- 8:30 (US) PCE Deflator Y/Y: 1.0% expected v 1.4% prior

- 8:30 (US) PCE Core M/M: 0. 0% expected v 0.0% prior; Y/Y: 1.7% expected v 1.9% prior

- 8:30 (US) Jan ISM Manufacturing: 32.5 expected v 32.9 prior

- 8:30 (US) ISM Prices Paid: 18.0 expected v 18.0 prior

-10:00 (US) Dec Construction Spending: -1.2% expected v -0.6% prior

Speakers:

- 7:00 (EC) ECB's Gonzales- Paramo speaks in Barcelona