NEWS / Foreign Exchange

European Market Update

• *** ECONOMIC DATA ***
• SP Oct Net Change in Unemployment: 31.2K v ??“10.9K prior
• Spanish jobless claims rose by 31.2K in October compared to a decline of 10.9K in September as the tourist season came to an end, reducing the demand for services in Spain.
• SP Oct Consumer Confidence: 76.2 v 80.2 prior [Lowest since records began in September 2004]
• Component wise, the biggest decline was posted in the expectations component, with the economic situation sub-component declining to 72.2 from 80.4 in September, and the employment sub-component declining to 76.8 from 79.4 in September. In the current situation component the household situation declined to 81.2 from 86.0 in September, while the economic situation declined to 69.4 from 73.1 in September. Notably, the employment sub-components posted declines as the October unemployment data showed that jobless claims rose by 31.2K.
• EU Nov Sentix Investor Confidence: 14.0 v 12.4e
• Despite beating analysts??™ estimates the sentix investor confidence declined to its lowest level since November of 2005 as the overall current situation fell to 42.0 from 44.5 in October, and the expectations fell to ??“10.75 from ??“10.50 for the same periods. Component wise, private investors only posted a small loss in the current situation component, and posted a gain in the expectations component. Institutional investors weighted down the index in November as the current situation component declined to 43.0 from 47.5 in October, and the expectations declined to ??“19.5 from ??“17.5 in October.
• UK Oct Services PMI: 53.1 v 56.0e
• Component wise, the biggest declines were posted in the new business component, which declined to 54.2 from 57.5 in September, and the outstanding business component, which declined from 50.6 from 49.2 in September. Despite the overall decline it wasn??™t all down hill, as the employment component rose to 53.1 from 51.8 in September, and the input prices component rose to 58.6 from 58.0. The number serves as a precursor to the services PMI readings due out in the Euro-Zone tomorrow. The number remained above the key level of 50, but posted a decline just as the manufacturing PMI did, indicating slower growth in the sector.
• UK Sep Industrial Production: M/M ??“0.4% v 0.2%e || Y/Y ??“0.2% v 0.4%e
• The y/y reading declined to ??“0.2% from 0.7% in August as the oil and gas component declined to ??“3.6% from 0.0% in August, and the mining and quarrying component declined to ??“1.8% from 2.0%.
• UK Sep Manufacturing Production: M/M ??“0.6% v 0.1%e || Prior revised from 0.4% to 0.5% |||| Y/Y ??“0.1% v 0.7%e
• Manufacturing production declined to its lowest m/m level in 7 months as the pound rests at 26-year highs, perhaps weighing down on the UK economy.
• *** SPEAKERS/COMMENTS ***
• GE IFO Nerb: Business sentiment is unlikely to fall as much as it did in 2001/02 period
• GE IFO Nerb: The Euro is Germany??™s biggest economic risk followed by oil
• GE IFO Nerb: The job market is seen improving further
• GE IFO Nerb: Weak construction is a worry
• UK Darling: Downgrade in UK economic forecasts is based on slower lending
• UK Darling: UK economy is strong and will get through
• FR Lagarde: Sees Q3 growth exceeding Q2 growth || Confident in reaching 2007 growth targets
• FR Lagarde: Does not see any impact on the French economy from sub-prime
• EU ECB Trichet: Financial economy risks were underestimated in the past but a correction is underway
• Bear Stearns cuts 2007 average earnings estimates for French banks by 4%
• Bear Stearns cuts 2008 average earnings estimates for French banks by 10%
• Bear Stearns cuts 2009 average earnings estimates for French banks by 9%
• GE Construction Association: Cuts 2007 nominal sales forecast to 1.5% from 3.0%
• GE Construction Association: Sees nominal sales stagnating in 2008
• *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
• GBP/USD Pound posts declines following the weaker than expected industrial and manufacturing production data for the month of September, breaking back below 2.08 from the 2.09 seen on Friday.
• USD/CAD The USD continues to lose ground, approaching the 92.50 level where the CAD was fixed back in 1962. The 92.50 level serves as the next key level for the pair.
• Fixed Income futures are trading higher in the session on renewed sub-prime jitters as Citigroup has come out and announced further losses due to the sub-prime sector. The flight to quality also comes on the back of financial sector downgrades, leading market participants to speculate that the worst is not yet over.
• Crude oil prices are trading lower in the session, recently breaking back below the $95 handle after Kurd rebels released Turkish soldiers that had been captured in an earlier ambush over the weekend, slightly easing geo-political tensions.