***Economic Data***
- (PO) Bank of Portugal survey on credit markets
- (FI) Finland Jun Preliminary Retail Sales Volume Y/Y: 3.0% v 2.6% prior
- (HU) Hungary Jun Unemployment Rate: 11.1% v 11.2%e
- (SP) Spain Jun Real Retail Sales Y/Y: +0.9% v -1.8% prior; Adjusted Real Retail Sales Y/Y:+0.8% v -1.4%
- (GE) Germany Jul Saxony CPI M/M: 0.2% v 0.1% prior; Y/Y: 1.2% v 1.0% prior
- (GE) Germany Jul Hesse CPI M/M: % v 0.0% prior; Y/Y: % v 0.5% prior
- (GE) Germany Jul Brandenburg CPI M/M: % v 0.1% prior; Y/Y: % v 0.8% prior
- (GE) Germany Jul North Rhine-Westphalia CPI M/M: 0.2% v 0.0% prior; Y/Y: 1.1% v 0.7% prior
- (IC) Iceland Jul CPI M/M: -0.7% v -0.3% prior; Y/Y: 4.8% v 5.7% prior
- (SA) South Africa Jun CPI (all items) M/M: % v 0.3%e; Y/Y: % v4.5%e
- (GE) Germany Jul Baden Wuerttemberg CPI M/M: 0.2% v 0.1% prior; Y/Y: 1.3% v 1.0% prior

Fixed Income:
- (IT) Italy Debt Agency (Tesoro) sold Index-Linked bonds
- Sold €1.01B in 2.1% 2021 I/L BTPs; avg yield 2.55%; bid-to-cover: 1.56x
- Sold €490M in 2.55% 2041 I/L BTPs; avg yield 2.78%; bid-to-cover: 1.63x
- (PO) Portugal Debt Agency (IGCP) auction results: Sold total €1.28B in 2014 and 2023 maturities
- Sold €600M in 3.6% Oct 2014; avg yield 3.621% v 2.759% prior; bid-to-cover: 3.1x v 3.4x prior
- Sold €681M in Oct 2023; avg yield 5.337% v 4.416% prior; Bid-to-cover: 1.6x v 2.0x

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM **
***Notes/Observations***
- Japanese govt: Tanker explosion off Oman might have been due to an attack
- North Korea might launch internet attack on its South Korean counterparts
- Australian inflation lower than feared.
- China PBOC: CNY currency has two-way risk; could rise or fall depending on economy, Balance of Payments.

Equities

- As of 5:30am ET Euro Stoxx 50 Index +0.4% at 2,780 ; DAX Index +0.1% at 6,213; CAC-40 Index +0.6% at 3,687 and FTSE 100 Index Flat at 5,365

- Notable European names that reported today involved Infineon, Arcelormittal, Peugeot and Spanish bank BBVA. Infineon shares opened higher 1.8% as company beat analysts estimates on revenues and operating profit. Furthemore, Infineon raised its revenue outlook for 2010 and expected the fourth quarter revenues to increase in the high single digit percentage range. Peugeot also surprised positively both on earnings and outlook. Company reported an increased market share in Europe and a 50% increase in unit sales. Company expects now European markets to decline 7% from 9% prior and it expects double-digit growth in China and high single digit growth in Latin America. Shares opened up by 1.8%. Spanish Bank BBVA's net income came in line with analysts estimates at €2.5B and net interest income slightly beat analysts' estimates at €6.94B. Furthermore, bank noted lower bad loan ratio sequentially and the executives confirmed that non performing loan ratios were now at a peak. Shares opened 2% higher. ArcelorMittal's net and EBITDA were ahead of analysts estimates but revenues disappointed at $21.7B. Furthemore, company provided a slightly disappointing outlook guiding Q3 volumes to decline and Q3 capacity to be down 70%. Furthermore expected a slower demand growth from China although noted that current destocking in the country would be temporary. Shares opened down 1.3%.
Among UK names, Easyjet provided a favorable interim statement with a revenue growth of 5.3% and an increasing load factor at 86.1% despite the volcano disruptions. Company reiterated its expectations for a FY10 profit of £100-150M. Shares opened up by 0.8%. Centrica reported revenues ahead of analysts estimates and a significant increase in operating profit at £2.1B from £509M last year. No upside surprise on the outlook; company expected the full year results for 2010 to be heavily weighted towards the first half of the year, and in line with current market earnings consensus. Shares opened up 0.8%. British American Tobacco reported an increase in operating profit from last year but revenues missed the analysts estimates at £7.3B. Noted that it would be hard to compare second half with 2009. Shares opened down by 1.1% but traded higher during the session.

- Speakers:
- BOE Gov King: MPC has room to use monetary policy in both direction. Could either further ease rates or reduce stimulus in the coming months. He cautioned that one should not read too much into Q2 UK GDP data (came in above expectations). There would be a point where BoE needed to return to a normal policy but says there was "considerable distance to travel" before a return to normal policy
- BOE member Miles commented that events in sovereign debt market and in bank funding highlighted the downside risks to economy . Spare capacity to bear down on inflation in medium term and pushing CPI below the target.
- BOE member Sentance: The current policy setting was extreme (in line with his views). Global economy had turned around, though uneven. Spare capacity less than thought from previous year.
- BoJ member Kamezaki: Yen currency appreciation may harm exporters in the near-term
- ECB Bank Lending Survey: Banks tightened credit to companies more in Q2 versus Q1; Sees more tightening in Q3
- German Bundesbank Q2 Bank Lending Survey: German banks see credit volume rising over the next 12 month; See no credit standard changes in Q3
- Thailand Central Bank: Country now in process to normalize from low interest rates. Recent tightening in policy was not impeding economic recovery. Keeping interest rates too low for too long would create unwanted risks and possible bubbles in economy

- Currencies: Dealers noted that currency price action continued to be correlated by equity prices. The EUR/USD was likely to continue to follow stocks and the EUR/USD tested above 1.3040 in the early part of the session as stocks opened higher. A Japanese tanker explosion off the coast of Oman might have been a result of an attack and seemed to pause some risk appetite sentiment until the exact cause of the incident was verified. The GBP/USD dipped to test 1.550 after the BOE members began their testimony to the Treasury Select Committee. The BOE Gov King comment that the recent strong Q2 GDP data should not be read too much was cited for the initial downward draft in the pair. He added that a "considerable distance to travel" before a return to normal policy. Other BOE members painted a different picture and help to stabilize the pound with member Sentence reiterating his hawkish sentiments.

- Geopolitical:
- In an article in the New York Times, two US economists state that a second Great Depression was avoided through actions of the government, including lending and asset purchases from the Federal Reserve, bank bailouts, and fiscal stimulus programs of the Obama administration. The economists predicted that US GDP would be 6.5% lower, have 8.5 million fewer jobs, and would have experienced deflation instead of low inflation.
- The National Institute of Economic and Social Research (NIESR), a British think tank, forecasted UK economic growth below those seen by the Office of Budget Responsibility (OBR). It noted that guidance released by the OBR for this year and the next were overly stated. The institution goes on to further not that a quarter or two of contraction, either in 2010 or 2011 cannot be ruled out, and that public spending cuts by new government to reduce growth from next year to 2015.
-In Strait of Hormuz, located between Iran and UAE off the Gulf of Oman, the press reported that a Mitsui OSK tanker exploded, though no fatalities have yet been reported. It remains to be seen whether or not the explosion is the result of a possible attack.
- Reportedly China initiated large scale military drill on the east coast, and live fire exercises near the Yellow River. Similarly, there were press reports that North Korea may launch internet attacks on its South Korean counterparts. These incidents follow recent South Korea and US military exercises.

- In The Papers:
- German newspaper Handelsblat noted earlier today that German business lobbies(DIHK, BDI, ZDH, BDA) fear credit squeeze according. Article noted that DIHK chambers of commerce, the BDI industry federation, the ZDH lobby of skilled trades and the BDA employers' federation are drafting a plea to Economy Minister Bruederly to extend aid programs introduced during the financial crisis

***Looking Ahead ***
- (GE) Germany Jul Preliminary Consumer Price Index M/M: 0.3%e v 0.1% prior; Y/Y: 1.2%e v 0.9% prior
- (GE) Germany Jul Preliminary CPI EU harmonized M/M: 0.2%e v 0.0% prior; Y/Y: 1.1%e v 0.8% prior
- 7:00 (US) MBA Mortgage Applications w/e Jul 23rd: % v 7.6% prior
- 8:30 (US) Jun Durable Goods Orders: 1.0e% v -0.6% (revised); Durables Ex Transportation: 0.4%e v 1.6% prior (revised)
- 9:00 (CL) Chile Jun Industrial Production Y/Y: No est v 4.2% prior; Industrial Sales Y/Y: No est v 0.5% prior
- 9:00 (CL) Chile Total Copper Production: No est v $4.3B prior
- 9:00 (CA) Canada Teranet/National Bank House Price Index: No est v 12.9% prior
- 9:30 (BR) Brazil Jun Nominal Budget Balance (BRL): -11.3Be v -14.8B prior; Primary Budget Balance: 3.9Be v 1.4B prior; Net Debt to GDP Ratio: 41.4%e v 41.4% prior
- 10:00 (MX) Jun Remittances: $2.1Be v $2.1B prior
- 10:30 (US) Weekly DOE energy inventories: Crude -1.6Me; Gasoline: +500Ke; Distillate: +2Me; Utilization: 91%e
- 13:00 (US) Treasury to sell $37B in 5-year Notes
- 14:00 (US) July Fed's Beige Book
- 14:00 (US) Fed Beige Book
- 14:30 (US) US Senate votes on Fed nominees
- 14:30 (BR) Brazil Jun Cenral Gov't Budget: $1.0Be v -$510M prior
- 15:00 (AR) Argentina Jun Shop Center Sales Y/Y: No est v 37.4% prior
- 17:00 (NZ) New Zealand Cenntral Bank Interest Rate Decision: Expected to raise the Official Cash Rate by 25bps to 3.00%.


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