Morning note, events, data and earnings 1st October 2012

Good Morning

Mixed feeling in the press this weekend. As expected, after the recent run, investors are now looking for clarity in the data... which will take time. Having been burnt by other stimulus packages, running out of steam, fears are that improved liquidity in the interbank market in Spain and Italy, will not be passed on to consumers. Similar to that of the US back in 2009.
The correction in the currency markets, with the US$ firming, was to be expected and with noise of a possible Spanish ratings cut by Moody's, outflows of European debt are expected once again.
Equity market volumes have remained strong, but are destined to ease given sentiment is now turning negative again, as Spain drag their feet, and others follow suit. After watching "To big to fail" at the weekend, it looks and feels very similar to Dick Fuld's position.
US markets outperforming on Friday, which will continue, until we start seeing some of these plans for growth coming out from the European leaders.
France's new wealth tax will not be well received. With Hollande's appointment over Sarkozy, it was not mentioned how he planned to reduce the deficient... now we know. This will certainly raise concerns that manufacturing, industrial and R&D will either be reduced or move overseas.
Spain's budget is targeting cuts rather than tax hikes. Initial cuts will hit the unemployment data, however, with France making it harder to do business and Germany coming up for an election next year, we could see investment move to the South.

Markets. Lots of holidays this week in Asia. Australia, Korea, HK and China off today.
Japan is easier 80bps and volumes look 22% lighter vs avg volumes at this time. We should equity markets continue to ease inline with currencies. Once again, defensive inflows will pick up but to a lesser extent than back in May.
With the European banks now having access to liquidity, the environment has improved. Budget releases are causing quite a stir, with riots in Madrid, but this will come to pass as the easing debt burden will promote reconstruction plans of Southern Spain after some heavy floods.
With some aggressive moves and volumes easing/expected to ease, I would be looking to pick up some of the distressed names. In particular, basic materials which although the firming US$ will hurt spot prices in the near term, a low rate environment, and China's new infrastructure stimulus talks, should help ease over supply.
Like many stimulus packages, the pressure will be put on the banks. Especially in China, where funding will be needed to pursue these government projects. Credit and liquidity both remain tight. Banks do not want to lend at a risk of raising Non Performing Loans(NPL'S). But given the governments control, and nervousness of the housing market, banks will be encouraged. This does not look good for the sector.

Events.Japan to appoint new finance minister
13:30 Philippines 3,6+12 month auction
17:30 Netherlands 3+9 month auction
21:00 France 3,6+12 month auction
23:30 US 3+6 month auction

Data.12:00 Indonesia inflation, trade balance
12:00 Thai CPI
13:00 India PMI
15:15 Spain PMI
15:45 Italy PMI
15:50 France PMI
15:55 German PMI
16:00 Greece PMI
16:00 Italian unemployment
16:00 EU PMI
16:30 UK PMI, mortgage approvals, consumer credit, money supply
17:00 EU unemployment
22:00 US ISM, construction spending

Earnings.Eurobank Ergasias(GR), Shimamura(JP), Neo Group(SG), Central Euro Dist Corp(US), Razgulay(RU), U10(FR), FFP(FR), Weborama(FR)

Stoddart