FTSE100 -51.87 DAX30 -53.02 CAC40 -38.91

- Equity markets opened on a higher note in Europe, boosted by strength in aerospace and defense contractors following announcements from the US DoD on Monday. Opening gains were pared within half an hour of trading as continental bourses touched negative territory on the back of weight in the tier 1 financial names. Equity markets accelerated their moves to the downside as UK Manufacturing and Industrial Production, despite beating expectations both registered their 12th consecutive monthly declines. Added to this, slight downward revisions in Euro Zone Q4 GDP figures further exacerbated the risk averse sentiment amongst investors.

- Rio Tinto [RIO.UK] is slowing the construction of its Yarwun alumina refinery and cutting 100 jobs (less than 1% of workforce). The Yarwun plant is now expected to be completed in H2 of 2012. The miner will cut bauxite output at Weipa to 15M tons from 19.4M y/y and plans to cut about 570 jobs at Gladstone (less than 1% of workforce). Rio noted that approx 70% of the aluminum industry is operating at a loss. || Thales [HO.FR] may sign a $533M contract in Saudi Arabia today with Saudi Binladin group for work on Saudi North South Railway. The two companies have been chosen to build signaling and security systems for the main 1,800-kilometer section of the $2.8B railroad, they said. || Air France [AF.FR] reported its March load factor at 75.5% v 81% y/y, March passenger traffic -9.4% y/y and March Cargo volumes -19.2%. || For Hypo Real Estate [HRX.GE], German state nationalization may take place as early as Thursday, reported Handelsblatt. The article mentions a price target of €1.26/share and notes that Germany will seek support at the company's AGM to bring its stake in the troubled lender to 95%. || UK media broadcaster ITV [ITV.UK] is considering a £500M rights issue. According to an article in the Times, the firm feels that it can raise the funds without support from BSkyB. It currently has approx £730M in debts and may face liquidity concerns if it does not raise capital. First debt repayments on £335M facility is not set until March of 2011. || For the Royal Bank of Scotland [RBS.UK], HM Treasury to own 70.3% of enlarged ordinary share capital; Only 0.7% of new placement was accepted by private holders. Bank received bids for 118.7M shares from private (non-gov sources), this figure represents about 0.7% of total new share placement. UK Treasury to subscribe to remaining shares in 3 for 7 placement (16.79B new shares; approx 42% of existing float). Total stake held by UK to rise to 70.3%, this was widely expected. || Russian UK listed oil firm Sibir Energy [SBE.UK] provided a trading update: Commences High Court proceedings against two former directors; CEO Henry Cameron dismissed, effective immediately. Group stated the proceedings are against former directors, Chalva Tchigirinski and Henry Cameron, Gradison Consultants Inc (a company owned by Mr Tchigirinski) and Derbent Management Limited. Mr Cameron has, as a result of his conduct, been dismissed by the Company with immediate effect. || Vallourec [VK.FR] proposed a final FY08 div of €6/shr v €7/shr prior (€5/share estimate). || For Party Gaming [PRTY.UK], its CEO made comments regarding settlement of on going legal issue with US state of NY. Settling of US legal issues will allow firm to raise cash and make acquisitions in the US market. States that group is not currently in purchase talks. Have received favorable responses to concepts of fundraising plans. Firm has accepted statement of facts regarding its business activity prior to enactment of UIGEA, agreeing to pay $105M. || D. Logistics [LOI.GE] reported its FY08 Net at €11.5M v €9Me, EBITA €14.6M v €14.4Me, and Rev €336.8M v €340Me. Logistics proposed its FY Div at €0.07/shr whilst guiding FY09 EBITA above €10M, Rev above €305M v €334.5Me. The firm noted that its FY09 outlook is subject to uncertainty. || Cewe Color [CWC.GE] provided some FY09 guidance, putting rev at €425-429M v €418Me, CAPEX at €22M (1/3 of 2008 figure). The firm will propose a final dividend of €1/share v €1.20/share y/y and sees profit levels rising post 2010 due to the positive effects of restructuring operations. || For Finmeccanica [FNC.IT], US Defense Sec Gates disclosed (US Monday trading session) details of Pentagon budget proposals, LMT's Presidential Helicopter program to be ended, F-22 program to be halted at 187 jets.

- The ECB's Stark made some typically hawkish comments early in the session, representing the first cracks in the political consensus emerging after the G-20 meeting last week in London. Stark stated that in his view the IMF's new drawing rights represent “pure cash creation” and “helicopter money”, noting that prior to the decision to expand SDR's there had been no examination of any need for extra global liquidity.

- Speaking in the Diet after the BoJ left rates on hold at 0.10%, the Bank of Japan's Shirakawa noted that he did not believe Japan would enter a deflationary spiral, and that the BoJ shared the Government's view that the Japanese economy was likely to face severe conditions for the foreseeable future. He added that did not see any reason to remove the cap on purchases of JGB, citing the possibility of higher yields

- In fixed income, in another weak auction the UK sold £3B in 10y Gilts with a bid-to-cover of 1.82 times lower than the previous 2.07 times, and a larger than average yield tail of 3.3bps . Auction results sent Gilt futures into session lows of 120.55. US Treasuries have benefited from risk aversion throughout the European morning , with T Note and Long Bond futures firmly in positive territory and a slightly flatter cash yield curve on better buying of the 10y Note. Some significant European names announced plans to tap debt markets with Zurich planning 3 and 6.5y Euro denominated bonds and Finmeccanica planning a 10y offering in Sterling. Having successfully sold the largest supra national offering earlier this year the World Bank's IFC unit revealed plans to sell a USD 5y bond in benchmark size.

- In currencies, risk aversion has unsurprisingly translated into broad based USD and JPY strength. After firming up in against the greenback in Asian hours the swiss franc has notably suffered, with USD/CHF stronger by almost a big figure at 1.1460. GBP/USD moved sharply lower in response to the weak Gilt auction, with session lows below the 1.4600 handle, whilst EUR/USD is also lower by around 150 pips at 1.3265

- In commodities, Goldman Sachs analysts noted that IMF sales of gold proposed in the G20 communiqué could send spot prices lower by as much as 11%, but the impact felt in ETF's would be more limited. After moving higher on technical buying in Asia, spot gold has traded within at tight range in European hours, currently at $879.40. Front month crude has suffered from reduced risk appetite and a stronger dollar, to trade at $50.36 at the time of writing.

Looking ahead:

- 7:00 (BE) Belgian March Unemployment Rate: No expectations v 7.2% prior

- 10:00 (MX) Mexican March CPI M/M: 0.50% expected v 0.22% prior; Y/Y: 5.96% expected v 6.20% prior; Core M/M: 0.50% expected v 0.49% prior

- 10:00 (EU) ECB's

- 1:00 (US) $6B 10y TIPS Auction

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