International Headlines · Eurozone 2Q GDP – European sovereign risks – Ireland; ECB + European debt $IRE

International Headlines

· Eurozone 2Q GDP – The Euro-zone economy grew at 1.7% YoY, higher than the estimate of 1.4%. Much of the beat was due to a huge rise in Germany’s GDP. The Euro-Zone economy also grew by 1% QoQ, higher than the estimate of 0.7%. DJ

· Eurozone trade balance – The Euro zone’s trade balance moved back to a surplus in June thanks to rising exports and imports to near their strongest level in 18 months. The surplus rose to 2.4B euros, better than estimates of 1B euros. The seasonally adjusted trade balance missed expectations, coming in at a deficit of 1.6B euros while estimates were at a deficit of 700M euros. DJ

· Germany – big Q2 GDP report - surged 9% at an annual rate (2.2%q/q). Admittedly, with significant assistance from the weather, this was the largest quarterly gain ever recorded since reunification. There were also upward revisions to 1Q10 from 0.6%q/q saar to 1.9%q/q saar and to a lesser extent also to 4Q09.  Fuzesi 

· Other European GDP #s - French GDP rose 2.5%q/q saar, in line with our expectation. Italy had already reported a 1.5%q/q saar gain last week. Spanish GDP rose around 0.8%q/q saar (0.2% not annualised), a tick softer than our assumption, but still slightly better than 1Q. Dutch GDP rose around 3.6%q/q saar (0.9% not annualised). Austrian GDP increased around 3.6%q/q saar (0.9% not annualised). Of course, Greek GDP was already reported to have declined 5.8%q/q saar yesterday. Portuguese results will be available later today, while Irish GDP will only be published much later.  Fuzesi 

· UK Q GDP may wind up being higher - The initial 1.1% q/q sa estimate for 2Q GDP growth assumed that construction output (which accounts for 6.3% of the total) would show a 6.6% q/q sa gain. With data for the full quarter now in hand, the ONS this morning have reported that construction output rose 8.6% q/q sa. That is the largest quarterly gain in output since 1963. There are some slight coverage and methodological differences between these reports which mean the numbers between the GDP and construction output releases are not identical. But making the reasonable assumption that the numbers remain close to each other, the strength in construction output should see the GDP estimate revised up by a tenth to 1.2% q/q.  Barr

· European sovereign risks – Ireland – Irish banks rattle investor nerves – WSJ article – CDS costs on the country’s debt have risen to the highest levels since early June; earlier this week, the Irish gov’t received EC approval to inject an additional EU10B into Anglo Irish Bank – WSJ  http://online.wsj.com/article/SB10001424052748703723504575425562473257080.html?mod=WSJ_hps_LEFTWhatsNews

· European sovereign risks – Ireland – ECB has been in the market buying Irish gov’t debt in order to calm markets – the WSJ says the ECB had to buy Ireland gov’t bonds in the last couple days to prevent the market from deteriorating further.  WSJ   http://online.wsj.com/article/SB10001424052748704407804575425171479759244.html?mod=ITP_moneyandinvesting_1

· ECB + European debt – the ECB will release the size of its bond purchases this Monday; amid all the talk of it being in the market buying Ireland gov’t debt, the amount of aggregate purchases may show an increase over the prior week – WSJ 

· Credit Suisse, Barclays may be start of bank hiring freeze – Barclays, Credit Suisse, and RBS may lead a slowdown in hiring as trading begins to fizzle. Analysts say that now that trading revenues are dropping they wouldn’t be surprised to see people shedding traders again. Bloomberg

· Spanish bank lending - Spain's banks borrowed EU130B from the ECB in Jul, up ~3% from June (Bloomberg)

· UK House prices little changed, will struggle to gain – UK house prices rose 0.1% from June with home buying is likely to be constrained due to weak consumer confidence as the gov’t looks to reduce its record deficit. Bloomberg

· Hong Kong property – the HK gov’t is expected to unveil new initiatives as soon as Fri to cool the country’s property market – DJ

· China shares end up on hopes of no near-term property tightening – China’s shares rose Friday on hopes that Beijing would hold off on further tightening measures in the property market for the near-term. DJ

· Hong Kong 2Q GDP up 6.5% YoY, up 1.4% QoQ – Hong Kong’s economy grew by 6.5% in 2Q, down a bit from its previous 8% rise. The growth rate was well above the 5.7% estimate by economists. DJ

· Japan + yen - A Japanese newspaper report said Japan PM Kan and BOJ gov Shirakawa may meet as early next week; there continues to be a ton of jawboning in the press re the yen (an editorial in the Nikkei called on the BOJ to intervene and weaken the yen and the BOJ minutes have revealed that members are more concerned about the yen) – Reuters

· Japan - The manufacturing DI in the Reuters Tankan large firm survey unexpectedly jumped in August. It showed the largest m/m rise in 14 months (10 points) and reached the highest level since November 2007 (22), against anticipation that the stronger yen dampened corporate sentiment.  Nakamura  https://mm.jpmorgan.com/servlet/UserDocsHelperServlet?action=openpdf&docId=GPS-458512-0

· Iran - AFP reports that Iran's first nuclear plant to launch by August 21. The plant is being built by Russia in the southern city of Bushehr (Time)