European Market Update

Saudi Arabia Oil Min notes that its Nov near OPEC quota

ECONOMIC DATA

(SZ) Swiss National Bank (SNB) cut interest rates by 50bps to 0.50%, as expected

(TT) Taiwan Central Bank cut by 75bps to 2.00%, more than the 50bps expected

IEA: Global oil demand to fall in 2008 for the first time in 25 years; cannot assume protracted downward cycle on oil market

(US) Nov seasonally adjusted core retail sales -1.3% vs -1.6% in Oct ; Ex-auto retail sales -3.8% vs -1.5% in Oct - SpendingPulse

(US) According to RealtyTrack, in Nov foreclosure activity rose by 28% y/y

(HU) Hungarian Nov Consumer Prices M/M: -0.2% v 0.3%e; Y/Y: 4.2% v 4.7%e;

(NV) Dutch Oct Industrial Production M/M: -2.3% v -0.5%e; Y/Y: -2.5% v -0.8%
(NV) Dutch Oct Industrial Sales Y/Y: 0.9% v 12.2% prior
(NV) Dutch Oct Retail Sales Y/Y: 5.0% v 1.4% prior

(SW) Swedish Nov Unemployment Rate:6.2 % v 5.8%e

(EC) ECB Dec Monthly Report mirrors ECB press conference from Dec 4th; notes that inflationary pressures have diminished; Sluggish domestic demand for the next few quarters

(UK) BOE Quarterly Inflation Survey: 1-year CPI expectations at 2.8% v 4.4% prior; largest Q/Q drop since 1999
(UK) CBI Dec industrial Trends: -35 v -38 prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

In equities: BCE [BCE] In a formal Release it confirmed press speculation that it the potential purchaser had terminated agreement to acquire them citing that the solvency Condition was not satisfied || Club Med [CU.FR] Reported FY08 Net €2.0M below the €9.5M expected. Revenues came in at €1.49B below consensus expectations of €1.56B. The company stated that its top priority next year was to increase market share || L'Oreal [OR.FR] French press noting that the company would eliminate 500 US positions (approximately 4.8% of workforce) and that the cuts would take place in the first half of 2009.

|| Santhera Pharmaceuticals [SANN.SZ] Enrolled Last Patient In European Phase III Trial Evaluating SNT-MC17/Idebenone In Friedreich's Ataxia || Industria de Diseno Textil [ITX.SP] Reported 9-month Net €843M below the €871M estimates. , EBITDA €1.55B v €1.57Be, while revenues were €7.35B roughly in line with the consensus of €7.36B. The company noted that sales in Q4 have so far trended similar to Q3 || UPM-Kymmene Oyj [UPM1V.FH]Stated that it was unlikely to hit Q4 targets citing market conditions || Outokumpu [OUT1V.FH] To cut 450 positions in Sweden (5% of total workforce); and saw its Q4 operating profit lower than expected. Company noted that the stainless steel demand had weakened further and that the market situation had deteriorated faster than expected

|| Bouygues [EN.FR] In a French newspaper interview, the CEO reported stated that its 2008 orders were "very satisfactory" || Anheuser-Busch InBev [ABI.BE] Launched accelerated institutional placement for rump and noted that 99.58% of new shares subscribed in rights offering at €6.45/shr. The new shares to begin trading on Dec 16 in Brussels || Morphosys [MOR.GE] Announced second clinical milestone in Therapeutic antibody program and added that the firm had derived a fully human antibody || Heritage Oil [HOIL.UK] Announced discovery of oil at the Kingfisher-3 well, Block 3A, Uganda. Encountered oil in all three reservoir intervals with a gross hydrocarbon bearing interval of 110 metres and net oil pay of up to 40 metres. || Tullow Oil [TLW.UK] Provides Drilling Update

and also announced successful drilling results from the Hyedua-2 appraisal well offshore Ghana and the Kingfisher-3 appraisal well in Uganda. || Bunzl [BNZL.UK] Stated that revenue growth remained in line with prior expectations and that the group revenue growth was consistent with the recent Interim Management Statement and overall performance was in line with expectations despite increasingly difficult economic conditions || HMV [HMV.UK] Reported H1 Net loss of £19.8M compared to a year-ago loss of £25.9M. Revenues were £754.5M versus £729M y/y, while its SSS were flat compared to year-ago levels. Company noted that in particular, the book market had seen a marked deterioration in the five-week period to 29 November. || EVN [EVN.AS] Reported FY08 Net €186.9M (-18% y/y), EBITDA €362.3M (+3.3% y/y), Rev €2.4B inline with the €2.45B expected || Premier Farnell [PFL.UK] Reported Q3 Pretax £17.7M below the £18.9M estimates. However, revenues were £209.1M slightly above the £207M consensus. It noted that recent trading conditions had been variable, but the board believes that it has taken the actions necessary to position the company well in the challenging and unpredictable global economy || Serco [SRP.UK] Acquired InfoVision Group for £977M in friendly all cash offer || Deutsche Boerse [DB1.GE] CEO commented that that its goal was organic growth compared to consolidation || Unilever [UNA.NV] Named Paul Polman new CEO, effective January 1, 2009

Speakers: SNB stated that it noted that the Economies in US and Europe economies were declining and that Asia was slowing considerably. SNB stated it would continue to monitor its economy and currency markets and would act if necessary. The Status of financial markets had worsened since that of Sept and would take all necessary steps to bring 3month libor rates to mid range . The Bank would continue to implement further measures if they are required . || ECB's Trichet commented that the increased in bond spreads were due to increased liquidity risk as well as other factors. He reiterates that the Euro Zone economy was not yet out of financial storm just yet and that the ECB would continue to support sound banks. Lastly he added that there is no room for complacency| SNB's Roth stated that the inflation outlook had improved significantly, giving Central Bank more room to maneuver. He added that the rate cut was appropriate given the determination of the economy and reduced risk of prolonged downturn || ECB's Noyer Stated that the condition of EU zone interbank lending was far from normalized and added that Q4 would be a difficult quarter for European banks. He commented that he did not see deflation in Q4 || ECB's Tumpel-Gugerell stated that the ECB gave no signal on future interest rates. She added that the central bank was monitoring developments and was neither promising nor excluding anything in the future. Lastly she noted that there was no dissent in last weeks 75bps cut || Germany's IFO revised its assessment of German growth lower. It now sees German economy shrinking in 2009 by -2.2% vs +1.0% prior view. It lowered its 2008 GDP view to 1.5% from 2.45 prior. 2010 GDP shrinking by -0.2%. It saw German jobless rate increasing to 8.0% in 2009 from 7.5% in 2008 could could reach 9.2% in 2010 || India Central Bank stated that the economic situation remained uncertain and that the current global financial crisis was significant || Irish govt official sought legal guarantees from EU on tax neutrality as condition of second referendum to Lisbon treaty || SNB Jordan noted that tensions in CHF made directing LIBOR more difficult. He noted that the SNB could extend money markets maturities to steer LIBOR and that the central bank could intervene in markets other than money markets. Monetary conditions are not only determined by interest rates but that currency also has input. He expressed that the Swiss Franc still had elements of safe haven but the recent weakening of CHF was intended

In Currencies: The USD was under pressure as the European morning approached. EUR/USD elected the rumored stops above the 1.3050/70 level to test 1.3159 before retreating. The USD was off its worst levels against the European pairs, but comments from the Saudi Oil Minister that its was near compliance helped oil rebound from negative territory to probe towards the $46 neighborhood. Some dealers adding that doubts are beginning to creep in as to whether projected pent-up demand for the U.S. currency would materialize over the year-end period. ECB's Stark noted that on Wed that the bank did not have a lot of room for maneuver after its cut last week || Russian Central bank widens Rouble band against basket || According to a Chinese Regulator: Yuan should stay stable and not depreciate||

In Fixed Income: The UK sold £3B of the 4.5% 2013 Gilts with a weaker than expected bid-to-cover of 1.96. Yields were lower across the curve in Germany, which, combined with a volatile political situation in Greece, pushed the spread on 10y GGB's to a record 185bps over Bunds, noteworthy ahead of Italian supply on Friday .

In Energy: Saudi Arabia Oil Min Al-Naimi stated that its Nov oil output was 8.49M BPD (near OPEC quota) ||IEA noted that 2008 oil demand to fall for the first time since 1983 by 200K BPD from 2007 levels; noted that global oil demand to fall citing the economic crisis. The IEA noted that global oil demand would likely rise in 2009 by 0.5% || Lukoil [LKOH.RU] Reported Q3 Net $3.47B v $3.16Be, Pretax $4.74B, Rev $32.56B v $31.4Be

Credit Crisis: SNB Hildebrand: Bank credit risks to rise as economy slows. He noted that UBS [UBSN.SZ] liquidity position had stabilized, but remained 'serious' and that credit risk provisions needed to increase. Big banks have risks from trading portfolio || FT reported that US banks level 3 assets increased in Q3 by 15.5% to $610B || Commerzbank [CBK.GE] CEO noted that Credit volumes in Germany were growing and that no 'credit crunch' was taking hold in Germany. He did cautiously add that there could be a decline in credit in near term ||

NOTES

Oil gets its groove back as Saudi Arabia Oil Min Al-Naimi noted that that its Nov oil output was 8.49M BPD, which was near OPEC quota. NYMEX Jan crude futures were moving higher towards $46 as a result. OPEC to meet on Dec 17th and recall that Russia stated it would comply on the group's oil output reduction. || U.S. House of Representatives approved the auto bailout plan late Wednesday but traders noting it will be a much closer call in the Senate (vote could be held on Friday) ||

Looking Ahead

weekly jobless claims are the focus in US to guage to extend of the economic slowdown

8:30 (CA) Canadian Oct Int'l Wholesale Trade: Consensus expectations are 3.3B ; The prior number was 4.5B.
8:30 (CA) Canadian Oct New Housing Price Index M/M: Consensus expectations are -0.1%; The prior number was 0.1%.
8:30 (US) Oct Trade Balance: Consensus expectations are -$53.5B; The prior number was -$56.6B
8:30 (US) Nov Import Price Index : M/M consensus expectations are -4.9% ; The prior number was -4.7%. Y/Y Consensus expectations are -2.0%; The prior number was 6.7%.
8:30 (US) Initial Jobless Claims w/e Dec 6th : Consensus expectations are for 525k; the prior number was 509k. Continuing Claims: Consensus expectations are 4.1M; The prior number was 4.087M.
South African Interest Rate Decision: Consensus expectations are for a 50bps cut to 11.50%, Current base rate is 12.00%
13:00 (US) Treasury Dept to sell $16B 3.75% 10y Notes due Nov 2018

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