European Market Update

Daily Forex Fundamentals | Written by Trade The News | Sep 22 08 10:15 GMT |

Market digests the new era unfolding on Wall Street; USD softer on deficit concerns over financial market bailout ECONOMIC DATA (JP) August Supermarket Sales YoY: -1.0% v 0.9% prior. (JP) August Convenience Store Sales YoY: 5.3% v 11.7% prior. (HK) August CPI - Composite Index YoY% v 6.3% prior. (HK) Q2 Overall Bal of Payments: $10.3B v $55.03B prior; Current A/C: $34.40B v $52.94B prior. SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM In equities news overnight: Zentiva [ZEN.CZ] Sanofi lifted its bid for Zentiva to CZK1,150/shr from CZK1,050/shr. || Holcim[HOLN.SZ] HOLN.SZ: EuroCement reported 6.52% stake in the company. Holcim noted that it viewed the stake as 'friendly'. || Natixis [KN.FR] French press noted that Natixis' €3.7B capital increase is close to 90% subscribed. Deutsche bank [DBK.GE] Announced capital increase plan for €2B with a 40M share issue to acquire Germany's Postbank [DPB.GE]. Yell Group [YELL.UK] Reported that its Trading was in line with forecast, however it sought to lower its debt, announced the suspension dividend. || Gas Natural [GAS.SP] Completed its sale of 15% stake in its Mexican unit to Inbursa. || Epcos [EPC.GE] TDK purchased an additional 10% stake from main shareholder for a 44% holding and declared its offer for co. as unconditional. It stated that the takeover has been assured at this time. || Salzgitter [SZG.GE] Increased stake in Norddeutsche Affinerie to 17.6%. it cited the current market conditions for raising stake Speakers: Australia's Treasury Sec Swan noted that the country is susceptible to the impact of the global financial crisis and added that the global economy is going through a difficult time, but confidence remains. || (FR) Fin Min stated that there were no plans for any intervention to back financial industry . EU's Almunia stated that risks remain for a potential global economic downturn and saw divergences in Euro economies. Financial crisis continues to unsettle markets. Euro Zone is not unaffected by global economic slowdown and financial market turmoil. || (CH) China's central bank noted in its quarterly household survey that Bankers notice risk of economic slowdown, Export orders fell 2.6% QoQ || Japan's LDP elected Taro Aso as party leader succeeding PM Fukuda. || Japan Fin Min Sugimoto stated that there was no need for Japan to set up fund like the one in U.S. at this time.. he added that Japan has not heard any US request for Japan to get involved in bailout program. Lastly he expected the US measures to have a positive impact on global economy and markets. || GE) Bundesbank noted that its GDP impacted by real economic pressures, shows signs of visable slowdown It also noted that the earnings situation to most likely to worsen for the remaining business year In Currencies: the USD was mildly softer against the majors as dealers evaluated the details emerging on the US Government bailout of its financial system. The $700B initial price tag has question the possibility that the US's AAA debt rating could come under review. EUR/USD trading at 1.4570 and GBP/USD at 1.8430, firmer by 100 pips from opening levels seen in Asia. ||Malaysia Fin Min Najib: There are no plans to adopt Ringgit currency peg. || The Indian Trade Minister stated that the recent INR decline should help India's export markets , bit noted that the current trade gap was worrisome. India still expects to achieve $200B exports during 2008. In Energy: IEA's Ramsay stated that Oil prices at current levels remained too high, but noted that supply has improved a bit since last May. OECD countries' oil demand has softened more than expected, but unable to determined if overall oil demand might fall. Non-opec oil supply remained relatively stable. IEA notd that it is monitoring the US bailout impact over oil demand closely. Stated that China is facing tough times meeting its electricity demands but it's rapidly building power capacity. Lastly Ramsay believed that the appropriate price of oil is between $20 to $100 per barrel || Reportedly Nigeria's militant group MEND announced a cease-fire agreement until further notice. However, over the weekend the goup claimed responsibility for another Shell pipeline attack. In an emailed statement MEND noted that it intended to attack Nigerian's oil infrastructure until oil exports are reduced to 'zero' || Saudi Arabia reportedly lowered its oil supplies by a marginal amount to US refiners and to oil majors since early Sept. In Fixed Income Supply: The German Finance Agency announced that it would increase Q1 Bubill amount to €7.0B, This is a total increase in the amounts of ?2.3B. || Germany confirmed its Q4 gross capital market borrowings at €30B ||Sweden's Riksbank stated that it would amend its collateral requirements for credit in RIX, effective immediately. The changes permitted the central bank increased the permitted share of covered bonds to 75%. || BoE offered $40B in overnight repos. BOE: it Allotted $26.2B overnight with a bid-to-cover ratio of 0.65 times. || ECB called for bids in $40B 1-day repo, allotted the $40B at 3.25% with a bid-to-cover of 2.05x|| SNB allotted $10 in overnight repos at 2.25% with a bid-to-cover of 1.6x. In the papers: WSJ notes that the the Federal Reserve, in an attempt to prevent the crisis on Wall Street from infecting its two premier institutions, took the extraordinary measure on Sunday night of agreeing to convert investment banks Morgan Stanley and Goldman Sachs Group Inc. into traditional bank holding companies. Article noted that with the move, Wall Street as it has long been known -- a coterie of independent brokerage firms that buy and sell securities, advise clients and are less regulated than old-fashioned banks -- will cease to exist. Wall Street's two most prestigious institutions will come under the close supervision of national bank regulators. NOTES Markets focused on the emerging details in regards to the US financial bailout plan Dealers noting that the their attention is being drawn to the fact that the deficit would likely have to dramatically increase in size. Questions linger at this time ask to the price the US Treasury would pay determined during the auction process. In the end this could still leave banks vulnerable to more write downs and further under capitalization. Furthermore, market players noting that US growth could receive an addition soft spot and force the FED into a round of interest rate cuts. Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. 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