Italy Unemployment at fresh record high

EU Market Update: European data not impressive in session; Italy Unemployment at fresh record high

Notes/Observations

- (NZ) New Zealand Central Bank (RBNZ) left Official Cash Rate unchanged at 2.50%

- (JP) Bank of Japan (BOJ) left Interest Rates and Monetary base unchanged at 0.10% and ¥270T respectively

- Japan Oct Manufacturing PMI registers highest reading since May 2010 (54.2 v 52.5 prior)

- China PBoC injected CNY 16B via reverse repos (second consecutive liquidity injection) overall injected net CNY 29B on week ((first net injection in 3 weeks); China Mony Market rates dropped by over 5bps; 7 day repo fix -50bps at 5.05%

- US Treasury semi-annual currency report did not designate China or any nation as FX manipulator; German nominal current account surplus larger than China in 2012. Reiterated that CNY currency was significantly undervalued

- Rethinking taper timing after Fed did not downgrade its economic assessment

- European data not impressive in session. German Retail Sales and Consumer Confidence data come in below expectations. France consumer spending falls both MoM and YoY

- Italy Sept Unemployment Rate climbs to fresh record high of 12.5%

- Euro Zone Unemployment Rate climbs while inflation comes in below expectations

Economic Data

- (JP) Japan Sept Annualized Housing Starts: 1.044M v 983Ke; Housing Starts Y/Y: 19.4% v 12.1%e (13th straight monthly rise); Construction Orders Y/Y: 89.8% v 21.4% prior

- (UK) Oct Nationwide House Prices M/M: 1.0% v 0.7%e; Y/Y: 5.8% v 5.1%e

- (FI) Finland Aug Final Trade Balance: -€224M v -€190M prior

- (DE) Germany Sept Retail Sales M/M: -0.4% v +0.4%e; Y/Y: 0.2% v 1.1%e

- (DE) Germany Sept Import Price Index M/M: 0.0% v 0.1%e; Y/Y: -2.8% v -2.8%e

- (DE) Germany Nov GfK Consumer Confidence: 7.0 v 7.2e

- (TH) Thailand Sept Current Account Balance: -0.5B v +$1.1Be; Trade Account Balance: $2.6B v $2.2B prior; Overall Trade Balance: -$ v -$3.4B prior; Exports Y/Y: -6.3% v 2.5% prior; Imports Y/Y: -6.1% v -2.4% prior

- (TH) Thailand Sept Business Sentiment Index: 47.5 v 47.5 prior

- (FR) France Sept PPI M/M: 0.3 v 0.1% prior; Y/Y: -0.8% v 0.0%e

- (FR) France Sept Consumer Spending M/M: -0.1% v +0.3%e; Y/Y: -0.1% v +0.2%e

- (HU) Hungary Aug Final Trade Balance: €613.1M v €621.2M prelim

- (HU) Hungary Sept PPI M/M: 0.0% v 0.7% prior; Y/Y: 1.61.8%e

- (TR) Turkey Sept Trade Balance: -$7.5B v -$7.3Be

- (DK) Denmark Sept Unemployment Rate: 4.4% v 4.4%e; Gross Unemployment Rate: 5.7% v 5.6%e

- (EU) ECB €45.0M borrowed in overnight loan facility vs. €1.0M prior; €45.1B parked in deposit facility vs. €50.5B prior - Daily Eurosystem Liquidity Conditions

- (HK) Hong Kong Sept Budget Balance (HKD): -16.1BB v -16.9B prior

- (HK) Hong Kong Sept Retail Sales Value Y/Y: 5.1% v 7.7%e; Retail Sales Volume Y/Y: 4.9% v 8.3%e

- (IT) Italy Sept Preliminary Unemployment Rate: 12.5% v 12.3%e; fresh record high

- (CZ) Czech Sept M2 Money Supply Y/Y: 5.1% v 4.9% prior

- (IS) Iceland Sept Final Trade Balance (ISK): 8.7B v 8.8B prelim

- (ES) Spain Aug Current Account Balance: €2.5B v 1.6B prior

- (HK) Hong Kong Sept M2 Money Y/Y: 9.6% v 8.1% prior; M3 Money Supply Y/Y: 9.6% v 8.1% prior; M1 Money Supply Y/Y: 14.5% v 14.7% prior

- (ZA) South Africa Sept PPI M/M: 0.4% v 0.4%e; Y/Y: 6.7% v 6.8%e

- (EU) Euro Zone Sept Unemployment Rate: 12.2% v 12.0%e

- (EU) Euro Zone Oct CPI Estimate Y/Y: 0.7% v 1.1%e; CPI Core Y/Y: 0.8% v 1.0%e

- (IT) Italy Oct Preliminary CPI NIC incl. tobacco M/M: -0.3% v +0.3%e; Y/Y: 0.7% v 1.2%e

- (IT) Italy Oct Preliminary CPI EU Harmonized M/M: 0.0% v 0.5%e; Y/Y: 0.7% v 1.2%e

- (GR) Greece Aug Retail Sales Volume Y/Y: -7.8% v -14.0% prior; Retail Sales Value Y/Y: -8.9% v -14.2%

- (BE) Belgium Sept Unemployment Rate: 8.9% v 8.8% prior

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities**

Indices [Stoxx50 -0.20%, FTSE 100 -0.40% at 6,748, DAX -0.25% at 8,987, CAC-40 flat at 4,275, IBEX-35 +0.3% at 9,808, FTSE MIB +0.60% at 19,274, SMI -0.10% at 8222, S&P 500 Futures -0.25% at 1,756)*

- Market Focal Points: Markets open lower on negative leads from Asia, Big European earnings (Anheuser-Busch, Air France, Lufthansa, BNP, Danske Bank, Alcatel-Lucent, Bayer, BT, AstraZeneca, Novo Nordisk, Shell, Total, BG), Recent Fed statement in focus, Shell and Total weigh on energy sector, Alcatel-Lucent +15% after loss narrows, Financials outperform on BNP and Banco Popular, Consumer cyclical sector supported by automakers, Energy services firm Technip cuts outlook

By Sector

- Industrials [Technip TEC.FR -7% (cut outlook), Croda CRDA.UK -6.5% (cautious outlook), Draegerwerk DRW3.DE -3% (Q3 sales below ests); GEA Group G1A.DE +4% (Q3 profits rose y/y), Geberit GEBN.CH +4% (Q3 results above ests)

- Consumer Discretionary [Premier Foods PFD.UK -8% (Q3 sales declined), Rentokil RTO.UK -6% (share placement speculation), L'Oreal OR.FR -1.5% (Q3 sales below ests), Lufthansa LHA.DE -1% (Q3 profits declined y/y); Anheuser-Busch +1.5% (Q3 profits above ests)]

- Financials [Commerzbank CBK.DE -1.5% (broker commentary); Banco Popular POP.ES +3% (Q3 results above ests), BNP BNP.FR +2.5% (Q3 profits above ests), Credit Agricole ACA.FR +2% (broker commentary)]

- Basic Materials/Resources [Wacker Chemie WCH.DE -5% (Q3 results below ests), Antofagasta ANTO.UK -1.5% (lower copper prices), Glencore Xstrata GLEN.UK -0.50% (issued 9-month production); Avocet Mining AVM.UK +6.5% (reported decline in Q3 cash costs)]

- Technology [Alcatel-Lucent ALU.FR +15% (Q3 loss narrowed)

- Telecom [BT BT.UK -0.30% (Q3 results in line)]

- Healthcare [Novo Nordisk NOVOB.DK -4% (cut FY outlook), AstraZeneca AZN.UK -2% (Q3 profits below ests, new CFO), Bayer BAYN.DE flat (Q3 profits above ests, Rev below)]

- Energy [Shell RDSA.UK -4.5% (Q3 profits below ests), Total FP.FR -1.5% (Q3 profits declined y/y); BG BG.UK +1% (reported Q2 results)]

- Stoxx50 sectors [Utilities -1.4%, Energy -1%, Telecom -0.7%, Industrials -0.5%, Basic Materials -0.4%, Consumer Non-Cyclical -0.2%, Technology -0.1%; Consumer Cyclical +1%, Financials +0.3%]

Speakers:

- ECB's Costa (Portugal): Critical to ensure that savings are safe

- ECB's Liikanen (Finland): Reiterates view that it is crucial to implement reforms

- Norway Central Bank (Norges) Gov Olsen stated that he had no further conclusions on rate path until Dec policy meeting but recent data had been in line. Still observing the NOK currency (krona) as it had been weaker than its Sept forecasts

- China Foreign Ministry responds to US currency report: Problem of obvious undervaluation of yuan did not exist

- Reports that UK considering capital gains tax on foreign real estate investors

- Bank of Korea (BOK) Gov Kim: Warns of excessive risk-taking due to monetary easing in advanced countries

- BOJ Gov Kuroda post rate decision press conference noted that overseas economies were weaker than forecasted in July; reiterated ready to adjust policy if there were risks to price goal. Domestic banks were not facing funding problems in foreign currencies

- BOJ released its outlook for Economic Activity and Prices: To maintain QE program until needed to stable achieve inflation target. It did raise its FY14/15 GDP target

- US asked China to enter into agreement to coordinate strategic oil reserve releases

- Chemical Weapons Monitor: All of Syria's declared chemical weapons production, mixing and filling equipment has been destroyed

Currencies/Fixed Income:

- A less dovish FOMC statement late Thursday aided the USD into month end as US bond yields edged higher. Dealers noted that the greenback was stronger after the Fed did not downgrade its economic assessment (suggesting the economy was expanding at a 'moderate pace') and that it implied current market rates were appropriate. Thus the greenback benefitted from rethinking of taper timing.

- The European currencies tried have held some key support levels in the session

- The EUR/USD made several attempts to break below the 1.37 handle before breaking below fter EU unemployment data ticked higher while inflation numbers continue to come in below expectations. This was the breakout area back in Sept when the Fed delayed its taper announcement.

- The GBP/USD tested 1.6000 and seemed to be supported by dips for the time being

- The BoJ left policy unchanged as expected with USD/JOY holding above 98.25 throughout the session

Political/In the Papers:

- (EU) ECB's Weidmann: Minimum wages could hurt new employment; strong Germany economy is not guaranteed in the future, European treaties need to be tightened

- (EU) ECB converts existing temporary bilateral liquidity swap arrangements into standing arrangements with Bank of Canada, BOJ, BOE, Fed, SNB

- (EU) ECBs Nowotny (Austria): Sees further liquidity provision - CNBC interview; Must avoid falling off a cliff as LTRO ends

-(DE) SPD Party member indicates a consensus has been reached with Merkel's CSU/CDU party on a coalition - press

-(US) FOMC maintained Fed Funds at target of 0.25% (as expected): No taper announced and would wait for more signs of growth before making adjustment. Removed the line which said the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market.

- (US) US Treasury semi-annual currency report: did not designate China or any nation as FX manipulator; German surplus is causing Euro deflation pressures.

- Fed watcher Hilsenrath: Fed has taper on table at Dec FOMC meeting. Overall little change in economic assessment but financial conditions improving; Fed still looking at tapering but no sign of taking

Looking Ahead

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

- (ES) Spain Aug Housing Permits M/M: No est v 26.1% prior; Y/Y: No est v -1.2% prior

- (EU) Eurogroup chief Dijsselbloem

- (PT) Portugal Parliament debate on 2014 budget

- (CA) Canadian Conservative Party's begins 3-day National Convention

- 06:30 (IN) India Sept Fiscal Deficit (INR) Crore: No est v 64.0B prior

- 06:30 (HU) Hungary Debt Agency (AKK) to sell Bonds

- 07:00 (CZ) Czech Republic to sell Bills

- 07:00 (IE) Ireland Oct Live Register Monthly Change: No est v -1.8K prior; Unemployment Rate: No est v 13.3% prior

- 07:00 (IL) Israel Sept Unemployment Rate: No est v 6.1% prior

- 07:00 (RU) Russia Gold and Forex Reserve w/e Oct 25th: No est v $511.1B prior

- 07:00 (IT) Italy Sept PPI M/M: 0.2%e v 0.2% prior; Y/Y: -2.0%e v -2.3% prior

- 07:30 (US) Nov RBC Consumer Outlook Index: No est v 50.7 prior

- 07:30 (BR) Brazil Sept Central Govt Budget Balance (BRL): -0.5Be v +0.1B prior

- 07:45 (US) Daily Libor Fixing

- 08:00 (ZA) South Africa Sept Trade Balance (ZAR): -16.4Be v -19.1B prior

- 08:30 (US) Initial Jobless Claims: 338Ke v 350K prior; Continuing Claims: 2.870Me v 2.874M prior

- 08:30 (CA) Canada Aug GDP M/M: 0.1%e v 0.6% prior; Y/Y: 1.7%e v 1.4% prior

- 08:30 (CA) Canada Aug Average Weekly Earnings Y/Y: No est v 1.3% prior

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

- 09:00 (BR) Brazil Sept Nominal Budget Balance (BRL): -19.3Be v -22.3B prior; Primary Budget Balance: +0.5Be v -0.4B prior; Net Debt to GDP ratio: 34.5%e v 33.8% prior

- 09:00 (PL) Poland Central Bank (NBP) Oct Inflation Expectations Survey: 1.1%e v 1.0% prior

- 09:00 (US) Oct ISM Milwaukee: 53.0e v 55.0 prior

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

- 09:45 (US) Oct Chicago Purchasing Manager: 55.0e v 55.7 prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (MX) Mexico Sept Net Outstanding Loans (IXG): No est v 2.416T prior

- 11:00 (US) Fed to purchase $0.75-1.00B in Notes

- 12:00 (CO) Colombia Sept National Unemployment Rate: No est v 9.3% prior; Urban Unemployment Rate: 10.0%e v 10.3% prior

- 12:00 (CA) Bank of Canada Chief Murchison speaks at CABE

- 14:30 (DE) IMF Deputy Head Lipton speaks on Germany in Berlin

- 15:00 (AR) Argentina Sept Construction Activity M/M: No est v 0.0% prior; Y/Y: No est v 10.7% prior

- 21:00 (CN) China Oct Manufacturing PMI: 51.2e v 51.1 prior

- 21:45 (CN) China Oct HSBC/Markit Manufacturing PMI: 50.7e v 50.2 prior