NEWS / Foreign Exchange

European Market Update

• *** ECONOMIC DATA ***
• GE Sep Import Price Index: M/M 0.6% v 0.4%e || Y/Y 1.3% v 1.2%e
• GE Sep Import Prices rise on high energy prices; Excluding energy import prices declined by 0.2% m/m and y/y. The 3-month change in import prices was 0.4%, down from 1.0% in August, and was ??“0.5% excluding energy, down from ??“0.2% in August.
• FR Oct Business Confidence: 108 v 108e || Prior revised from 110 to 109
• FR Oct Production Outlook Indicator: 7 v 5 e || Prior revised from 7 to 6
• FR Oct Own-Company Production Outlook: 20 v 13e [highest since Jan 2001] || Prior revised from 16 to 18
• FR Looking at some of the other components, inventories decline to 16 from 17 in September, while overall order books remained unchanged, and foreign order books decline to 4 from 10. Additionally, the own-company price outlook decline to 4 from 5 in September.
• SP Sep Producer Prices: M/M 0.3% v 0.3%e || Y/Y 3.4% v 3.3%e
• SP the m/m result remain unchanged despite a rise in 3 of the 4 component groups, the largest of which was seen in energy, which rose to 0.5% from ??“0.4% in September. The Y/Y intermediate goods component decline to 5.3% from 5.4% in August, while energy rose to 0.8% from ??“2.9%, and consumer goods rose to 3.2% from 2.4%
• IT Oct Retailers??™ Confidence: 110.2 v 111.6 prior
• IT Oct Services Survey: 23 v 23 prior
• IT Component wise, deterioration in small retailers??™ confidence surpassed that of large retailers??™.  Small retailers??™ current sales decline to ??“13.0 from ??“11.0 in September, while the current stocks and sales outlook posted modest gains. Large retailers??™ current sales rose to 41.0 from 33.0 in September, while the current stocks and sales outlook components posted more significant gains than those seen in the small retailers??™ components.
• SW Sep PPI: M/M 0.6% v 0.4%e || Y/Y5.0% v 4.8%e
• SW Sep Trade Balance [sek]: 8.2B v 7.5Be || Prior revised from 600M to 3.3B
• SW As seen elsewhere, the driving factor in the rise in producer prices was higher energy prices. The trade balance showed signs of recovery beating out estimates, accompanied by an upward revision to the prior month??™s weak reading. The Q3 average surplus still remains below its historical quarterly average over the past few years. The data could lend support to an interest rate hike at Riksbank??™s policy setting meeting next week, however recall that Riksbank boosted rates by 25bps at its last two meetings.
• GE Oct IFO Business Climate: 103.9 v 103.7e
• GE Oct IFO Current Assessment: 109.6 v 109.3
• GE Oct IFO Expectations: 98.6 v 98.3
• GE October IFO data appears to point to a continued upswing with results declining by less than expected to beat out estimates, calming jitters that the number would come in below consensus following a lower-than-expected reading on yesterday??™s Belgian business confidence for the month of October
• GE October IFO Slightly stronger-that-expected results along with hawkish post announcement commentary from IFO economists weighs down on fixed income futures.
• GE October IFO Optimist-Pessimist index 7.1 v 7.5 prior || Components: manufacturing 17.9 v 18.1 prior || Construction ??“20.5 v ??“20.8 prior || Wholesaling .2.3 v 10.7 prior
• UK Sep BBA Loans for Home Purchase: 52,685 v 61,051 prior
• UK Sept BBA Mortgage Lending: ??18.5B v ??21.0B prior
• ***SPEAKERS/COMMENTS ***
• EU Almunia: High oil and commodity prices are hitting the economy
• EU Almunia The financial market turmoil is not yet over
• EU Almunia: The EMU GDP outlook for the next two years has deteriorated
• EU Almunia: Market turmoil has increased the downside risks to the EMU outlook
• EU Almunia: The message on currencies from G7 is very clear
• GE IFO Russ: Interest rate cut from the ECB is not necessary; The wait and see approach is the best approach
• GE IFO Russ: Sees an improvement in private consumption in 2008
• GE IFO Russ: Results point to a continued upswing but at a slower pace
• GE IFO Russ: Euro is not at a threshold of pain for companies
• GE IFO Carstensen: Domestic demand is partly offsetting the strong Euro
• GE IFO Carstensen: Does not see ECB rate cut on the table
• GE IFO Carstensen: The worst of the credit market turmoil is over
• GE Government: Confirms that boosts its 2007 GDP outlook to 2.4% from 2.3% and cuts the 2008 outlook to 2.0% from 2.4% [leaked early yesterday]
• GE Government: Forecasts 2007 export growth of 7.8% || Forecasts 2008 export growth of 6.3% [Had 2006 export growth of 12.5%]
• GE Government: Forecasts 2007 import growth of 6.3% || Forecasts 2008 import growth of 6.8% [Had 2006 import growth of 11.2%]
• GE Economic Minister: German growth is intact despite oil prices, the Euro level, and financial markets
• GE Economic Minister: CPI of 2.1% in 2007 is not alarming || Sees national CPI declining to 1.9% in 2008
• GE Economic Minster: Wage deals will not boost inflation
• *** FIXED INCOME/FX/COMMODITIES ***
• Singapore Dollar rises to new 10-year highs against the US Dollar
• NZD/USD relatively stable following the RBNZ??™s decision to hold rates at 8.25% last night.
• The Swedish Korna gained sharply against the Euro following the release of stronger than expected data in Sweden, but lost momentum following the release of the German IFO data.
• Japan??™s Vice Finance Minister Shinohara said overnight that the Yen carry trade has virtually disappeared
• EUR/USD showed little reaction to the German IFO data, but the Euro went bid after the Government confirmed its revised GDP forecasts, which were leaked yesterday
• Oil prices continue to rise following comments from the Turkish lead reiterating that the country will not tolerate PKK attacks, as well as comments from the OPEC secretary general denying that OPEC is in talks to boost output at the mid-November meeting, adding that worry may set in if price held at $90/barrel for a long time
• Fixed income futures opened on the downside and continued to decline throughout the session with significant declines following the German IFO data, as well as comments from IFO economists and the German government
• Fixed income traders are looking ahead to today??™s 5-year note auction in the US as well as tomorrow??™s CTZ auction in Italy. The US is set to sell $13B in 5-year notes. The previous auction had a coupon of 4.25% and covered 2.86x, while the auction before last had a coupon of 4.125% and then covered 2.74x. Italy is set to sell ?‚¬2.0B in 2-year zero-coupon bonds tomorrow. The previous auction covered 2.20x and had a gross yield of 2.25%, while the previous auction covered 2.24x and had a gross yield of 2.47%.