ECB's Greek bank test shows 3rd bailout likely to be smaller than planned- ESM

Good morning,

- Asian stocks slid to their lowest level in roughly three weeks on Monday, as profit taking set in after soft Chinese factory surveys and weak U.S. consumer spending data raised concerns over the global economic outlook. Activity in China's manufacturing sector unexpectedly contracted in October for a third straight month, an official survey showed on Sunday, fuelling fears the economy may still be losing momentum in the fourth quarter despite a raft of stimulus measures.

- On Friday, in the United States, data showed consumer spending in September recorded its smallest gain in eight months as personal income barely rose, suggesting some cooling in domestic demand after recent hefty increases.. The Fed did not hike rates last month but caused a stir by leaving the door open for a hike in December, again highlighting the divergence in monetary policies between the Fed and other central banks such as the European Central Bank and the BOJ.

- $GBP was the best performing major versus $USD the previous week with +0.74% spot-returns while $AUD was the worst performing with -1.08% returns.

- Some top event risk this week: RBA rate decision (Tue), New Zealand Unemployment (Tue), BOE rate decision (Thu), US non-farm payrolls (Fri).

- $AUD 1-Week implied volatility vs $USD is at a 1-Month high of 13.30, this may be due to tomorrow’s RBA rate decision.

- Greek FM Tsakalotos: Greek bank recap important part of plan for economy; EBRD wants to participate in Greek bank recap. Greek 2015 GDP contraction will be less than 1.5%.

- Best month for the Tech sector since Sept 2010 and highest close since Nov 2000. Work of MSFT, AMZN, GOOG earnings. This was the best month for the $DAX equity index since April 2009. Nearly half the run came post ECB last week.

- The euro zone's third bailout for Greece is likely to be smaller than the initially envisaged 86 billion euro, because the European Central Bank's stress test of Greek banks showed they need less recapitalization, the euro zone's bailout fund said. The results of the ECB's tests, announced earlier on Saturday, showed that Greece's banks need to raise more than 14 billion euro ($16 billion) of extra capital to cover mounting unpaid loans. The capital hole has emerged chiefly due to the rising number of Greeks unable or unwilling to repay their debt, after a dispute over reforms between the leftist government and international lenders almost saw Greece leave the euro.

- The Turkish lira strengthened against the dollar after Sunday's victory for the ruling Justice and Development Party (AKP). The currency was trading at 2.8714 to the dollar, up 1.5% on Friday's close. Traders had been expecting a coalition government, so the prospect of a potentially more stable administration has boosted the currency. Turkey's political problems and signs of weakening economy had undermined the Turkish lira this year.

- New Zealand dollar may decline this week, weighed down by dovish sentiment from the Reserve Bank of Australia, a decline in dairy auction prices and low US jobs growth. THE kiwi may trade between 65.45 US cents and 69.20 cents this week, according to a Business Desk survey of nine currency analysts.

- Wu Xin says she’s got a sure-fire plan to recoup losses from the $4 trillion selloff in China’s stock market: pile into equities that hurt her the most. The 28-year-old from Hangzhou has been snapping up shares in China’s small-cap ChiNext Index, undeterred by a tumble earlier this year that erased half the measure’s value in three months.

- Oil Prices Could Drive the CAD Lower Before the Recession Ends.

- Major news for today: UK, Spanish Manufacturing PMI, US ISM.

Have a great day!