LONDON, Feb 9 (MNI) European credit markets have had a rather subdued session with prices trading not too far away from where they started the week. In the Eurozone peripheral spreads are mildly tighter, but have only retraced the small sell-off seen late yesterday. In the medium term spreads seem to be consolidating close to their widest levels of the year, with little sign of bargain hunting or short covering.

Markets looked to be having a better day early on as the Euro started to regain a little ground against the dollar. As, however, that rally faded the negative tone in credit, stock and commodity sectors returned, capping any hopes of a meaningful bounce today. The currency markets are believed to be key as hedge fund trades related to Greece and other Eurozone peripherals may well be taken back, through the currency market firstly, according to one broker.

Credit indices have seen lacklustre price action. There are, however, pockets of weakness in single names, with financials and high beta cyclicals trading quite a bit wider in places. Xover is 5bps wider at 500bps, HiVol 6bps wider at 142bps and Europe 2bps wider at 96bps.

UBS released Q4 results this morning, reporting a net profit attributable to shareholders of CHF1.21 billion versus analysts estimates of CHF416 million, with all business divisions reporting a pre-tax profit for the period. The bank said the improvement in results, when compared with Q3, was due to lower costs, lower credit charges and a tax credit. The bank said that cost reduction and efficiency programs initiated in early 2009 led to a sharp reduction in fixed costs to CHF20.2 billion in 2009, broadly in-line with the CHF20 billion target set for 2010, with headcount reduced by 16% to 65,233 during the year, in-line with the 2010 target for a headcount of 65,000. The bank had a year-end BIS Tier 1 capital ratio of 15.4% compared with 11% last year, with a reduction in total risk-weighted assets of 32% year-on-year to CHF207 billion as at Dec. 31, 2009.

Net new money outflows in Q4 were CHF33.2 billion for Wealth Management & Swiss Bank, CHF12.0 billion for Wealth Management Americas and CHF11.0 billion for Global Asset Management. The bank's CEO, Oswald Grubel, said the bank is delivering on its plan for a new UBS, as demonstrated by its return to profitability and strengthened capitalization in Q4. He also said that addressing the causes of net new money outflows remains a main priority, with the bank's management confident that reputation will be restored with tangible results. He believes that the effects of the progress made in improving efficiency, reducing risk and rebuilding and refocusing businesses are expected to be felt in the coming quarters. Shares in UBS are currently down CHF0.32 trading at the CHF13.84 level, with CDS spreads basically unchanged at the 108 bps level.

Swedbank released Q4 results this morning, reporting a loss for the period of SEK1.8 billion versus a profit of SEK1.92 billion last year, beating analysts estimates for a loss of around SEK2 billion. Net interest income decreased by 6% to SEK4.7 billion, with profit before impairments, excluding non-recurring items, increasing by 4% to SEK3.74 billion. Credit impairments more than tripled to around SEK5 billion, with provisions for loan losses amounting to SEK3.8 billion. Net write-offs amounted to SEK1.24 billion. The bank's CEO said that its October forecast that growth in new loan losses in the baltics had peaked had been proven right, adding that given that the global macro economy continues to develop positively without substantial divergence, particularly in Latvia and Ukraine, a profit for 2010 is feasible. Shares in Swedbank are currently up SEK0.4 trading at the SEK66.25 level, with subordinated CDS spreads around the 197 bps level, 10 bps tighter on the day.

BSkyB has extricated itself from its controversial investment in ITV when it placed 404m shares with Morgan Stanley at 48.5p per share, for a loss on the deal of Stg349 mln, according to the FT. BSkyB will sell 10.4% of its 18.9% stake, in line with the ruling of the Competition Appeal Tribunal, following the purchase in 2006 which effectively blocked any takeovers of ITV,(which was being eyed by NTL at the time). BSkyB has already made provisions against the stake, so the firm will be able to report a one off gain at its next earnings announcement of approx stg119mil. CDS has seen little impact with the move already largely priced in (although the sale is a little sooner than some analysts had forecast). BSkyB is trading unchanged at 74bps, ITV is 5bps wider and ITV is 5bps wider at 279bps.

The cyclical sector and in particular the consumer sector has seen rather mixed price action, despite the mildly better tone in the wider markets. Autos and retail remain soft, partly weighed on by the article in the FT today highlighting the poor start to the year seen by retailers, showing a marked difference in consumer confidence from December (although bad weather did hit sales also). The FT says that retailers reported the worst January sales growth in 15 years while estate agents saw the first drop in potential buyers in more than a year, according to surveys. On the earnings front data has been mixed also.

Firstly, TUI Travel reported a Q1 operating loss, excluding items, of Stg107 million versus a loss of Stg35 million last year. The results were more or less in line, but confirmed a slowing of bookings in many sectors, although TUI compensated for this with higher prices. The firms CEO said there is a lot of confidence that we are through the worst. CDS was little changed, -5bps tighter at 950bps. Elsewhere, SAS has reported a Q4 net loss of SEK1.3 billion versus a loss of SEK2.77 billion last year. The firm announced further cost cuts on the worse than expected numbers but shares were lower by 20% after the carrier announced a Skr5 billion rights issue. The share sale has helped debt markets though with CDS tightening 58bps to 800bps.

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