EU Trade Min De Gutch and EU Rehn at EU-China dialogue in Brussels

Notes/Observations

- China HSBC flash PMI beats expectations and hits 7-month highs (50.9 v 50.4e)

- China money rates remain elevated as PBoC again refrains from liquidity injection

- China city of Beijing announces fresh measures to curb home prices

- South Korea upping its verbal intervention of recent KRW currency strength

- Japan govt cuts its assessment on exports for the second straight month (left overall assessment unchanged)

- Major European Advance PMI readings slightly disappointing; France PMI Survey disappointed with manufacturing staying in contraction for the 20th straight month

- Eurosystem excess liquidity moves below €200B for first time since Nov 2011

Economic Data

- (FI) Finland Sept PPI M/M: -0.2 v +0.3% prior; Y/Y: -1.1 v -0.9% prior

- (FI) Finland Sept Preliminary Retail Sales Volume Y/Y: -1.6 v -0.3% prior

- (CZ) Czech Oct Business Confidence: 7.0 v 5.1 prior; Consumer Confidence Index: -13.5 v -14.3 prior; Composite: 2.9 v +1.2 prior

- (FR) France Oct Preliminary PMI Manufacturing: 49.4 v 50.1e; PMI Services: 50.2 v 51.3e

- (ES) Spain Q3 Unemployment Rate: 26.0% v 26.1%e

- (EU) ECB €0.0M borrowed in overnight loan facility (5th time in 6 sessions) vs. €0.0M prior; €50.2B parked in deposit facility vs. €48.8B prior - Daily Eurosystem Liquidity Conditions

- (DE) Germany Oct Advance PMI Manufacturing: 51.5 v 51.4e; PMI Services: 52.3 v 53.7e

- (SE) Sweden Central Bank (Riksbank) left Repo Rate unchanged at 1.00% and maintained its rate path outlook, as expected

- (SE) Sweden Sept PPI M/M: +0.7% v -0.2%e; Y/Y: -1.1% v -2.0%e

- (EU) Euro Zone Oct Advance PMI Manufacturing: 51.3 v 51.4e; PMI Services: 50.9 v 52.2e; PMI Composite: 51.5 v 52.4e

- (NO) Norway Central Bank (Norges) leaves Deposit Rates unchanged at 1.50%, as expected

- (IT) Italy Oct Consumer Confidence Index: 97.3 v 100.6e

- (PH) Philippines Central Bank (BSP) left its Overnight Borrowing Rate unchanged at 3.50%

- (HK) Hong Kong Sept Trade Balance (HKD): -42.0B v -46.1Be; Exports Y/Y: +1.5% v -3.0%e; Imports Y/Y: +0.4% v -2.0%e

- (IT) Italy Sept Hourly Wages M/M: 0.0% v 0.0% prior; Y/Y: 1.4% v 1.5% prior

Fixed Income:
- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [EuroStoxx50 +0.20%, FTSE 100 +0.30% at 6,691, DAX +0.4% at 8,957, CAC-40 flat 4,261, IBEX-35 flat at 9,824, FTSE MIB +0.10% at 18,929, SMI -0.10% at 8,204, S&P 500 Futures +0.20% at 1,746]

- Market Focal Points: Big European earnings (ABB, Air Liquide, Daimler, Renewable Energy, Santander, Credit Suisse, Unilever, WPP), European banks trade mixed following earnings reports from Santander and Credit Suisse, Trading gains support earnings of smaller Spanish banks, China money market rates continue to rise, China PMI data above ests as Chinese officials reiterate that the economic situation is stabilizing, European PMI data mixed, Big US Earnings (Colgate, Ford, Dow Chemical, Potash, MMM, Raytheon, Xerox),

By Sector

- Industrials [UPM UPM1V.FI +5% (Q3 profits rose y/y), ABB ABBN.CH +3.5% (Q3 results above ests) Daimler DAI.DE +3% (Q3 results above ests); Air Liquide AIFR -2% (Q3 sales below ests), Heidelbergcement -1.5% (broker commentary)]

- Financials [Sabadell SAB.ES +5% (Q3 results above ests), Bankinter BKT.ES +2% (9-month results above ests); Credit Suisse CSGN.CH -2.5% (Q3 results below ests), Santander SAN.ES -0.20% (Q3 results in line)]

- Technology [Dialog Semi DLG.DE +7.5% (supply agreement with Samsung), Logitech LOGN.CH +6.5% (Q3 results above ests), Bull SA BULL.FR +5.5% (reaffirmed forecast), Software AG SOW.DE +4.5% (reaffirmed forecast); Ericsson ERICB.SE -6% (Q3 results below ests), Aixtron AIXA.DE -3.5% (Q3 results, capital raise), Dassault Systems DSY.FR -3% (confirmed Q3 sales declined y/y)]

- Consumer Discretionary [Celesio CLS1.DE +5% (confirmed takeover offer), WPP WPP.UK +2% (Q3 sales above ests); Debenhams DEB.UK (cautious outlook), Autogril AGL.IT -6% (share placement), Essilor EI.FR -3% (cautious outlook), Pernod Ricard -2.5% (Q1 sales below ests), Unilever UNA.NL -0.20% (Q3 sales below ests)]

- Energy [Neste Oil NES1V.FI +4% (Q3 results above ests)]

- Basic Materials/Resources [Kazakhmys KAZ.UK +4% (production forecast)]

- Utilities [Suez Environmental SEV.FR +2% (9-month profits rose y/y)]

- Stoxx 50 Sectors [Industrials +0.9%, Financials +0.7%, Consumer Cyclical +0.5%, Energy +0.1%, Telecom +0.1% ; Basic Materials -1.2%, Consumer Non-Cyclical -0.6%, Technology -0.3%, Utilities -0.10%]

Speakers:

- ECB's Mersch (Luxembourg) stated that a new Long-term LTRO might not be necessary but needed to monitor the situation very closely. He reiterated that the central bank view that all options were open; ECB had extensive tool box (in line with Draghi post rate decision press conference) and would use both unconventional and conventional tools in monetary policy

- Norway Central Bank Gov Olsen at the post rate decision press conference stated that it had no target for house prices and did not presented any new rate forecasts at today's meeting. Did not consider other alternatives at rate meeting.

- Sweden Central Bank (Riksbank) Gov Ingves: Rate hikes would be gradual if the current situation persists but any pick up in US and Europe was faster than expected then that would lead to faster rate hikes.

- Japan Cabinet Officce (Govt) Oct Monthly Report maintained its overall assessment that economy was heading toward gradual recovery but cut its export assessment for the second straight month to 'almost flat'

- Japan PM Abe commented that he would make appropriate decision on second phase of sale tax increase to 10% and would refer to various indices in deciding on move including Q3 GDP growth (**Note: Abe recently confirmed the plan to raise the sales tax to 8% from 5% in the next fiscal year that begins on April 1st, 2014 (FY14/15). Stimulus to be funded by new tax revenues, not more debt and wanted LDP tax panel to discuss effective corporate tax rate

- South Korea Finance Ministry official Choi: Recent upward KRW currency movements are 'excessive' and was concerned that herd behavior in FX markets might worsen. Govt to take steps if excessive behavior persists

Currencies/Fixed Income:

- EUR/USD hit fresh 2-year highs above 1.38 as the session began aided by the China flash manufacturing PMI data. However, the pair drifted off its best level after major European Advance PMI readings were slightly disappointing.
France PMI Survey disappointed with manufacturing staying in contraction for the 20th straight month.

- The session also saw a pickup in JPY-cross demand for the most part. The USD/JPY continued to struggle around its 200-day moving average of 97.32

- There were no surprises in interest rate decisions in the session. Sweden, Norway and the Philippines central banks all kept policy rates steady (as expected).

Political/In the Papers:

-(EU) ECB's Draghi: Bank resolution authority must be separate from the ECB, resolution mechanism (SRM) is essential for banking union - CNBC interview; still targeting SRM to be in place by 2015.

- (GR) EU's Rehn: Greece will need to wait until summer of 2014 before finding out if it will be granted additional debt relief; close monitoring will continue for many years to come - Greek press

- (GR) Greece Govt Spokesperson: The government coalition is committed to serving out its four-year term

-(IT) Italian judge orders former PM Berlusconi to face new charges over allegations he bribed a senator to join his PDL party - press; Trial set for Feb 11, 2014, in Naples.

-(IT) Italy Confindustria (business lobby): Sept industrial output +0.4% y/y, Italy economy to recover in 2H of 2013

-(PT) Fitch affirms Portugal BB+ sovereign rating, outlook negative; political and implementation risks remain high and warrant the maintenance of the Negative Outlook.

-(CN) China 1-yr swap rate rises 7bps to 4.12% (highest since Sept 13th); 7-day repo rate opened at 5%, up about 95bps vs prior close; The move higher comes as the PBoC did not conduct open market operations this week (and for 3 straight sessions).

-(CN) Daily Shibor fixings; O/N: 4.0880% v 3.7800% prior (2nd consecutive rise, highest since June 30th)

-USD/CNY: (CN) China yuan opens trade at 6.0830 vs 6.0835 prior (record high for 2nd straight day)

-(JP) Japan investors bought ¥1.4T in foreign bonds last week (2nd straight week of net purchases) vs bought net ¥380.7B in prior week

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- (EU) EU Leaders begin 2-day Summit

- (EU) EU Trade Min De Gutch and EU Rehn at EU-China dialogue in Brussels

- (BR) Brazil Sept Federal Debt Data

- (AR) Argentina Oct Consumer Confidence Index: No est v 48.65 prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-Month Bills

- 06:00 (UK) Oct CBI Industrial Trends Total Orders: 10e v 9 prior; Selling Prices: 4e v 3 prior; Business Optimism: 17e v 7 prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia Gold and Forex Reserve w/e Oct 18th: No est v $509.8B prior

- 07:00 (BR) Brazil Sept Unemployment Rate: 5.3%e v 5.3% prior

- 08:00 (CL) Chile Sept PPI M/M: No est v 2.4% prior

- 08:30 (US) Weekly USDA Net Export Sales

- 08:30 (US) Initial Jobless Claims: 340Ke v 358K prior; Continuing Claims: 2.87Me v 2.859M prior

- 08:30 (US) Aug Trade Balance: -$39.4Be v -$39.1B prior

- 08:58 (US) Oct Preliminary Markit US PMI Manufacturing: 52.5e v 52.8 prior

- 09:00 (MX) Mexico Aug Economic Activity Y/Y: 1.0%e v 1.7% prior

- 09:00 (BR) Brazil to sell 2014, 2015 and 2017 Bills

- 09:30 (EU) EU President Van Rompuy with Czech Premier

- 10:00 (US) Aug JOLTs Job Openings: 3.765Me v 3.689M prior

- 10:30 (US) Weekly EIA Natural Gas Inventories (week of Oct 18th)

- 11:00 (US) Oct Kansas City Fed Manufacturing Activity: 2e v 2 prior

- 11:00 (EU) EU Leaders begin Two-Day Summit in Brussels

- 11:00 (EU) European Medicines Agency Releases Safety Decisions

- 11:00 (US) Treasury refunding announcement for 2-year, 5-year and 7-year notes

- 11:00 (US) Fed to purchase U$1.25-1.75B in Notes

- 12:00 (FR) France Sept Net Change Jobseekers: No est v -50.0K prior; Total Jobseekers: No est v 3.236M prior

- 12:45 (UK) BOE Gov Carney in London

- 13:00 (US) Treasury to sell $7B in 30-Year TIPS Reopening

- 19:00 (KR) South Korea Q3 Preliminary GDP Q/Q: 0.9%e v 1.1% prior; Y/Y: 3.2%e v 2.3% prior

- 19:30 (JP) Japan Sept National CPI Y/Y: 0.9%e v 0.9% prior; CPI Ex Food, Energy Y/Y: 3.1%e v -0.1% prior