European Market Update

China PBoC cuts aggressively by 108 bps; EU to unveil €200B stimulus plan

ECONOMIC DATA

(CH) China Central Bank cuts key rates by 108bps; Lowers reserve requirements (PBoC was not scheduled to meet)

(SI) Singapore Oct Industrial Production MoM: -12.7% v -5.2%e; YoY: -12.6% v -8.1%e

(CH) China's Oct Consumer Confidence M/M: 92.4 v 93.4 prior (lowest reading since Jan and 3rd consecutive drop)

(GE) German Oct Import Price Index M/M: -3.6% v -1.4%e; Y/Y: 2.9% v 5.0%e ; Largest M/M decline since records began

(FR) French Nov Consumer Confidence: -43 v -49e

(GE) Nov CPI - Saxony M/M: -0.5% v -0.1% prior; Y/Y: 1.7% v 2.7% prior

(SP) Spanish Sept House Transactions Y/Y: -27.1% v -36.8% prior; Mortgages On Houses Y/Y: -37.2% v -37.2% prior; Mortgages on Capital loaned Y/Y: -35.4% v -38.1% prior

(SW) Swedish Nov Economic Tendency Survey: 71.6 v 77.7e; Consumer Confidence: -24.5 v -25.5e; Manufacturing Confidence: -29 v -21e

(IT) Italian Nov Business Confidence: v 76.0e

(GE) Nov CPI - Hesse M/M: % v -0.7% prior Y/Y: % v 2.0% prior

(PD) Polish Oct Retail Sales M/M: 3.8% v 5.3%e; Y/Y: 7.9% v 8.5%e; Unemployment Rate: 8.8% v 8.8%e

(NO) Norway Sept Unemployment Rate (AKU): 2.5% v 2.5%

(GE) Nov CPI - Brandenburg : M/M: -0.5% v -0.2% prior ; Y/Y: 1.2% v 2.2% prior
(GE) Nov CPI - Hesse M/M : -0.5% v -0.7% prior ; Y/Y: 1.0% v 2.0% prior
(GE) Nov CPI - North Rhine West M/M: -0.6% v -0.2% prior; Y/Y: 1.1% v 2.3% prior

(UK) Q3 Preliminary GDP Q/Q: -0.5% v -0.5%; Y/Y: 0.3% v 0.3%e
(UK) Q3 Preliminary Private Consumption: -0.2% v -0.3%e; Government Spending: 1.0% v 0.6%e; Gross Fixed Capital Formation: -2.4% v -1.5%e; Exports: -0.3% v -0.3%e; Imports: 0.1% v -0.9%e

(UK) Sept Index of Services 3m/3m: -0.4% v -0.4%e

(SA) S. Africa Oct CPI M/M: 0.0% v 0.3%e; Y/Y: 12.1% v 12.4%e; Core CPI Y/Y: 13.1% v 13.5%e

6:00 (GE) Nov CPI - Bavaria M/M: -0.5% v -0.1% prior; Y/Y: 1.5% v 2.7%prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

In equities: GDF Suez [GSZ.FR] Confirmed its medium term financial targets its investment plans for 2008-2010 period. Company plans a €30B investment program through 2010. . Will pay exceptional dividend of €0.80/share in May 2009 and dividend payouts wouldbe more than 50% of Net with an annual average dividend growth of 10-15%|| Volkswagen [VOW.GE] Porsche CEO: Not interested in purchasing free ordinary shares at economically unreasonable prices. Still interested in raising VW stake to 75% in 2009 but noted that it may not raise stake over 50% in 2008

|| Swiss Life [SLHN.SZ] Announces a CHF90M cost reduction plan. To cut 200 jobs (2.4% of workforce) in Switzerland in next few years. It planed to streamlines head office in an effort to cut costs with 2/3 of 200 jobs to be cut in 2009 || Teleperformance [RCF.FR] Guided 2009 revenues in a range of €1.88-€1.90B versus estimates of €1.85B and its net in a range of €118M - €120M compared to €116.9M estimates. || Melexis [MELE.BE] Guided its Q4 Revenues 25-30% lower versus year-ago levels. It sees FY09 Revenue stable compared to 2008 levels. The company cited reduced sales of automakers and inventory reductions. || Credit Agricole [ACA.FR] Acquired an additional 24% stake in Credit Du Maroc from Wafa Insurance for €144M. Credit Agricole will hold 77% following the completion on stake purchase. || Mitchells & Butler [MAB.UK] Reported FY rvenues of £1.91B versus £1.90B estimates but its Net loss £176M was below consensus expectations of a £122.8M gain. The company will suspend dividend payments until medium term loan is reduced. It will reduces capital spending and noted it would not sell assets below fair value. Additionally its 8-week like-for-like sales +1.0% || Continental [CON.GE] Holder Schaeffler CEO stated that was in discussions with many parties to sell stakes in company and preferred long-term investors. || Woolworth [WLW.UK] Confirmed that it remained in discussions relating to the potential sale of its retail business, suspended trading in shares on LSE . || Compass [Reported FY08 Net of £443M versus £428.3M estimates. Revenues were £11.4B below estimates of £12.07B. || WS Atkins [ATK.UK] Reported H1 Net £38.8M versus £44M estimates with revenues at £710.8M compared to a single estimate of £670M. Company noted that slowdown has no impact on UK operations and raised dividend by 17% to 8.75p/shr|| United Utilities [UU.UK] Reported H1 Op Prof of £362.1M versus £370.0M estimate. Revenues came in at £1.21B compared to year-ago levels of £1.15B. || De La Rue [DLAR.UK] Reported H1 Net £33M v £28.9M y/y; Rev £244.7m v £213.9M y/y; CEO resigns || Johnson Matthey [JMAT.UK] ReportedH1 Net £98.6M v £88M y/y, Rev £4.4B v £5.3M y/y || Vestas Wind Systms [VWS.DC] Reached settlement pact with Enercon over patent infringement. Agreement settles all current disputes with Wobben and that the settlement does not impact FY08 or 09 expectations || Telenor [TEL.NO] To evaluate alternative ways of funding, including previously announced NOK12B rights issue, to fund India investment || Alcatel-Lucent [ALU.FR] Appointe Paul Tufano as new CFO, effective Dec 1, 2008 || Morphosys [MOR.GE] Entered alliance with Galapagos to co-develop novel therapeutic antibodies in bone and joint disease || || Corus Group [CS.UK] Sold its 50% stake in GrantRail Group to JV partner VolkerWessels. || Telecom Italia [TIT.IT] Reportedly weighing sale of Brazil unit, TIM Participacoes SA according to Italian press reports

Speakers: ECB's Trichet stated in a press interview that negative figures would appear in Euro-zone in 2009. He noted that the ECB is prepared to take any measures necessary to improve short term liquidity. Reiterates that ECB primary aim to keep inflation below 2% target and would maintain price stability within Euro zone. Lastly he saw a pickup in Euro Zone growth in 2010. Emerging marketes economies have shown resilence, but are being impacted by current crisis. Reiterates position that ECB could lower interest rates if inflationary pressure subside || EU President proposed a stimulus plan of 1.5% of Euro area GDP, and sources indicated this would be around EUR200B || ECB's Stark stated that stimulus package could unanchored solid gov't finances and that more Gov't debt would hit consumer and investor spending. He expressed doubts that fiscal measures would help improve economy || French Fin Min Lagared stated that she expected to see bad unemployment figures over the course of the next months || Poland's Fin Min Rostowski stated that interest rate cuts are the best anti-crisis policy || Germany's Merkel noted that State finances remained strong despite current crisis and that public budgets will remain solid despite higher deficits in 2009. She noted that Gov't would not give automaker Opel any subsidies, but was prepared to help company survive current parents economic woes and was ready to extend temporary guarantees for Opel || Swedish Central Bank: Banks have strong resilience to macro shocks, remain strong. Liquidity risks to banks have increased and that the financial market crisis has worsened over the last 6-months || Russian Fin Min Kudrin stated that it would need to use more than RUB1.0T from reserve fund in 2009 || (JP) BoJ Gov Shirakawa stated that the USD to remain key global currency for some time || Reportedly, Thai govt dissolved parliament and has called for new elections || - In Currencies: The USD recovered some ground after Tuesday's losses. Dealers noted that Eastern European and Middle Eastern names were seen selling Euros and taken advantage of EUR/USD levels above 1.3000 area. ECB's Trichet again noted that there was a change of a additional interest rate cut at the Dec policy meeting and the German State CPI data is confirming such possibility. Now it all depends on how aggressive the ECB could move. China Central Bank cut by 108 bps points in its largest rate move in 11 years to counter its slowing economic trends. Dealer chatter that the EUR/USD has managed to register its first 3-day consecutive winning streak since Jul 11th when it closed above the 1.5900 level. Merrill Lynch Analyst: Russia could devalue Rouble by 20% in H1 of 2009 but added that the that RUB could move back towards current levels by early 2010

Commodity currencies firmer in the aftermath of the Chinese rate cut. USD/CAD at 1.2230 and AUD/USD at 0.6490. Oil also firmer by a $1/barrel at $51.75.

In Energy: Chevron [CVX] Announced its first oil production From Indonesia's North Duri Field and saw production rising to 34K/bbl per day by 2012. || Spain noted it would not like to see repsol [REP.SP] fall into foreign ownership

NOTES

China PBoC surprised the market with an aggressive interest rate cut, its steepest since Oct 1997. Equity markets failed to hold onto gains in the aftermath of the Chinese rate cut. Oil firmer above $51.50. Global consumer demand continues to weigh its concern. TM debt rating cut hurts Far East sentiment while Goldman Sachs cut its US auto sales estimates for years 2008-through 2010 and noted that 2009 sales could fall by 18%.

The- UK Telegraph published an article noting that fears grow that Governments could default on their sovereign debt. Overall Bond CDS are around 100 bps above libor compared to levels of 2bps a year ago. The CDS on US 5-year and 10-year notes rose to all-time high levels of over 52bps.

Looking Ahead:

(GE) Nov CPI - Brandenburg : M/M there are no consensus expectations for this number; The prior number was -0.2%. Y/Y there are no consensus expectations for this number; The prior number was 2.2%.
7:00 (US) MBA Mortgage Applications w/e Nov 21. There are no consensus expectations for this number; The prior number was -6.2%.
(GE) Nov CPI - Baden Wuerttemberg : M/M there are no consensus expectations for this number; The prior number was -0.2%. Y/Y there are no consensus expectations for this number; The prior number was 2.7%.
(PD) Polish Interest rate announcement: Expected to hold interest rates steady at 6.00%
8:30 (US) Oct Durable Goods Orders : Consensus expectations are -3.0%; The prior number was 0.9% . Durables Ex Transportation : Consensus expectations are -1.6%; The prior number was -1.0%.
8:30 (US) Oct Personal Income : Consensus expectations are 0.1%; The prior number was 0.2%.
8:30 (US) Oct Personal Spending : Consensus expectations are -1.0%; The prior number was -0.3%.
8:30 (US) Oct PCE Deflator : Y/Y consensus expectations are 3.3% ; The prior number was 4.2%.
8:30 (US) PCE Core : M/M consensus expectations are 0.0%; The prior number was 0.2%; Y/Y consensus expectations are 2.2%; The prior number was 2.4%
8:30 (US) Initial Jobless Claims w/e Nov 22 : Consensus expectations are 535k; The prior number was 542k.
8:30 (US) Continuing Claims w/e Nov 15: Consensus expectations are 4.08M; The prior umber was 4.012M
9:45 (US) Nov Chicago Purchasing Manager : Consensus expectations are37.0; the prior number was 37.8.
10:00 (US) Nov Final University of Michigan Confidence: consensus expectations are 5.5; The prior number was 57.9
10:00 (US) Oct New Home Sales: Consensus expectations are 441k; The prior number was 464k. New home Sales M/M : consensus expectations are -5.0%; The prior number was 2.7%
(GE) German Nov Preliminary CPI: M/M consensus expectations are -0.3%; The prior number was -0.2%. Y/Y Consensus expectations are 1.6% ; The prior number was 2.4%.
(GE) German Nov Preliminary CPI EU Harmonized : M/M consensus expectations are -0.3%; The prior number was -0.3%. Y/Y Consensus expectations are 1.7%; The prior number was 2.5%.

Speakers:

7:00 (UK) Prime Minister's Questions
10:45 (US) President Eclect Obama to hold press conference in Chicago
11:00 (EU) ECB's Weber to speak in Berlin

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