Markets poised for eventful session ahead with BOE

EU Market Update: Markets poised for eventful session ahead with BOE, ECB rate decision and US advance GDP data

Notes/Observations

- Eventful morning in store with BOE and ECB rate decisions coupled with key US data (advanced Q3 GDP and weekly jobless claims) ahead of Friday's Non-Farm Payroll report.

- No rate cut seen by ECB today but Draghi could lay the groundwork for a move in December when fresh staff projections are presented

-China PBoC did not inject any further liquidity today and drained a net CNY5 B for the week

-China money mkt rates tick higher; 7 day repo fixes +7bp

-Australia Oct Employment disappoints (+1.1K vs. +10Ke cons; unemployment Rate in-line at 5.7%; back month revised worse; Oct Construction Index did register its first expansion in 2 years

Economic Data

- (JP) Japan Sept Preliminary Leading Index CI: 109.5 v 109.4e; Coincident Index: 108,2 v 108.3e

- (AU) Australia Oct Foreign Reserves: A$57.2B v A$53.0B prior

- (ZA) South Africa Oct Gross Reserves: $45.8B v $50.0Be; Net Reserves: $49.7B v $48.5Be

- (CH) Swiss Oct SECO Consumer Confidence: -5 v -4e

- (CH) Swiss Q3 UBS Real Estate Bubble Index: 1.2 v 1.1 prior

- (FI) Finland Sept Preliminary Trade Balance: -€430M v -€230M prior

- (HU) Hungary Oct Foreign Currency Reserves €32.8B v €30.8B prior

- (CH) Swiss Oct Foreign Currency Reserves (CHF): B v 434.0Be

- (ES) Spain Sept Industrial Output WDA Y/Y: +1.4% v -1.4%e; Industrial Output NSA Y/Y: +3.5% v -4.0% prior

- (TW) Taiwan Oct Trade Balance: $3.5B v $3.2Be; Exports Y/Y: -1.5% v -0.9%e; Imports Y/Y: -2.8% v +0.2%e

- (DK) Denmark Sept Industrial Production M/M: +1.6% v -2.3% prior

- (EU) ECB €195M borrowed in overnight loan facility vs. €315.0M prior; €49.5B parked in deposit facility vs. €57.9B prior - Daily Eurosystem Liquidity Conditions

- (SE) Sweden Oct Average House Prices (SEK): 2.085M v 2.079M prior

- (SE) Sweden Oct Budget Balance (SEK): -7.4B v +28.3B prior

- (AT) Austria Oct Wholesale Price Index M/M: -0.9% v +0.4% prior; Y/Y: -3.0% v -2.6% prior

- (NL) Netherlands Oct CPI M/M: -0.3% v +0.1% prior; Y/Y: 1.6% v 2.4% prior

- (NL) Netherlands Oct CPI EU Harmonized M/M: -0.3% v 0.0%e; Y/Y: 1.3% v 1.6%e

- (SG) Singapore Oct Foreign Reserves: $271.8B v $268.1B prior

- (CZ) Czech Oct International Reserves: $47.2B v $45.8B prior

- (NO) Norway Sept Industrial Production M/M: +0.7 v -4.0% prior; Y/Y: -1.4 v -4.4% prior

- (NO) Norway Sept Manufacturing Production M/M: -0.2% v +0.7%e; Y/Y: 3.2% v 3.1% prior

- UN Foods and Agricultural Organization (FAO) Oct Food Price Index: 205.8 v 199.1 m/m

- (UK) Oct Lloyds Employment Confidence: -11 v -13 prior

- (ZA) South Africa Sept Mining Production M/M: -4.1% v +2.0%e; Y/Y: 0.6% v 6.8%e; Gold Production Y/Y: -3.1 v 0.9% prior

- (CY) Cyprus Oct CPI M/M: 0.1% v 0.6% prior; Y/Y: -1.6% v -1.0% prior

Fixed Income:

- (ES) Spain Debt Agency (Tesoro) sold total €4.04B vs.€3.0-4.0B indicated range in 2018, 2023 and 2026 bonds

- Sold €2.38B in 3.75% Oct 2018 Bono; Avg yield 2.871% v 3.059% prior; Bid-to-cover: 1.9x v 2.47x prior; Maximum Yield 2.889% v 3.078% prior; Tail: 1.8bps v bps prior

- Sold €1.15B in 4.40% Oct 2023 bono; Avg Yield: 4.164% v 4.269% prior; Bid-to-cover: 2.57x v 1.96x prior; Max Yield: 4.176% v 4.290% prior; Tail: 1.2bps v 2.1bps prior

- Sold €507M in 5.9% Jul 2026 Bono; Avg Yield 4.469% v 4.540% prior; Bid-to-cover: 2.41x v 1.55x prior; Max Yield: 4.488% v 4.558% prior; Tail: 1.9bps v 1.8bps prior

- (FR) France Debt Agency (AFT) sold total € 6.49Bvs. €5.5-6.5B indicated range in 2024 and 2045 Oats

- Sold €4.28B in new 2.25% 2024 Oat; Avg Yield: 2.41% v 2.37% prior; Bid-to-cover: 1.98x v 1.88x prior

- Sold €2.21B in 3.25% 2045 Oat; Avg Yield: 3.41% v 3.60% prior; Bid-to-cover: 1.89x v 2.28x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities**

Indices [Stoxx 50 -0.60%, FTSE 100 -0.30% at 6,724, DAX flat at 9,041, CAC-40 -0.20% at 4,280, IBEX-35 -0.60% at 9,781, FTSE MIB -0.80% at 19,101, SMI +0.10% at 8,231, S&P 500 Futures -0.10% at 1,763]

Market Focal Points: European equity markets are mostly lower following negative leads from Asia and amid the release of corporate earnings, SMI outperforms following earnings from SwissRe, Big European Earnings (Capgemini, Credit Agricole, SocGen, Commerzbank, EDF, Deutsche Telecom, Telecom Italia, Siemens, ArcelorMittal), Upcoming US GDP data, Upcoming European Central Bank decisions (ECB, BOE), Twitter IPO priced above raised expected pricing range

- By Sector

- Industrials [Siemens SIE.DE +3.5% (Q4 results above ests, announced €4B buyback)]

- Consumer Discretionary [ProsiebenSAT PSM.DE -4% (Q3 profits in line); Halfords HFD.UK +10% [H1 results rose y/y], Adidas ADS.DE +2.3% (Q3 op profit above ests), Barry Callebaut BARN.CH +3% (reaffirmed outlook)]

- Financials [Commerzbank CBK.DE +9.5% (Q3 results above ests), Credit Agricole ACA.FR +2.5% (issued Q3 results), SocGen GLE.FR +2% (Q3 results above ests), SwissRe SREN.CH +2% (Q3 results above ests), Aegon AGN.NL +2% (Q3 results above ests); Generali G.IT -1.5% (Q3 profits below ests)]

- Telecom [Inmarsat ISAT.UK -5.5% (Q3 sales declined y/y), Telecom Italia TIT.IT -2.5% (ahead of earnings report), Deutsche Telekom DTE.DE -1.5% (Q3 net profit below ests)]

- Basic Materials/Resources [Rangold RRS.UK +6.5% (Q3 production rose y/y), ArcelorMittal MT.NL +4% (Q3 EBITDA above ests); Talvivaara Mining TALV.UK -7% (Q3 loss wider than expected), HeidelbergCement HEI.DE -4% (cautious outlook)]

- Utilities [Veolia Environmental VIE.FR +6% (9-month results above ests), EDF EDF.FR flat (9-month results)]

- Energy [CGG CGG.FR -7.5% (cut outlook), OMV OMV.AT -1.5% (Q3 profits below ests), Repsol REP.ES -1.5% (Q3 production declined q/q)]

- Technology [Cap Gemini CAP.FR +4% (reaffirmed outlook)]

- Stoxx50 sectors [Utilities -1.3%, Energy -0.9%, Financials -0.9%, Telecom -0.7%, Basic Materials -0.7%, Consumer Non-Cyclical -0.6%, Consumer Cyclical -0.5%, Technology -0.1%; Industrials +0.50%]

Speakers:

- Sweden Central Bank (Riksbank) Gov Ingves reiterated view that SEK exchange rate currently reasonable given economic outlook

- Sweden Central Bank (Riksbank) Floden reiterate his call for another Repo Rate cut and was concerned that central bank might have to cut its inflation forecast

- Spain Budget Min Montoro: Spain to approve the 3rd local govt bill plan today

- Canadian ratings agency DBRS analyst commented on Italy. The country was on track to stabilize its debt to GDP ratio but did remain vulnerable as debt was too high. Political risks in Italy remained and added that a sovereign upgrade was unlikely with productivity a key concern. The agency would communicate to market if planning a sovereign downgrade for Italy

- Hungary Central Bank Financial Stability Council Report suggested a solution for FX Mortgage problem noting that it should be tied to Reference Rate. Eliminating FX mortgage exchange rate risk was possible solution

- EU Commission to propose a bank overhaul structure in near future and would address 'too big to fail'

- German HDE retail association increases 2013 retail sales forecast to +1.2% y/y from +1.0% and now forecasted Christmas sales at €80.6B, +1.2% y/y

- Iran Foreign Min Zarif: Reiterates view that a deal in nuclear discussion is possible this week if best efforts are put forward (in line with Nov 5th comments)

Currencies/Fixed Income:

- FX dealers were forming at the mouths in anticipation of volatility/eventful in the session later today with BOE and ECB rate decisions coupled with key US data (advanced Q3 GDP and weekly jobless claims) ahead of Friday's Non-Farm Payroll report. Today's ECB policy decision has discounted the small risk of a rate cut, but Draghi could lay the groundwork for a move in December. Earlier in the week dealers noted of 'good size' buying of 1.3350 Euro 1-week puts as any break below 1.34 opened the momentum for further downside test in the pair. Euro tested (and held) 4-month uptrend line at 1.3440 as well earlier this week. The 1.3410-30 area was once solid resistance back in both mid-June and late Aug before the Fed held off on its tapering in its Sept decision.

- In the USD/JPY pair a sustained break above 99.00 could provide next upward momentum in pair as the level now corresponded to the current resistance line of the 2013 consolidation range since hitting highs of 103.62 back on May 23rd and low of 93.77 on June 14th

- No surprises

Political/In the Papers:

- (EU) ECB rate cut said to be unlikely despite recent decline in inflation; LTROs are not at the top of the agenda for communication - financial press; Unanimous decisions on rates are difficult; inflation alone unlikely to impact ECB policy

- (EU) Canadian ratings agency DBRS still positive on Spain and Italy sovereign ratings; have emerged from the acute portions of the crisis but are in 'wait and see' - financial press

- (EU) German Fin Min Schaeuble presented new proposal for winding up banks

- (PT)Portugal PM Coehlo reiterates expectations to conclude the bailout in June of 2014; too soon to speculate on support for Portugal post bailout; it is a positive sing that the Portugal 10 year yield has moved below 6%

- (US) Treasury: Borrowing costs measurably increased as a result of the debt ceiling showdown; Congress should raise the debt limit well before the deadline at Feb 7th

- (CN) China big four banks Oct new loans said to be CNY182B (lowest amount in 2013

- (CN) China may adjust rare earth quota mechanism

- (JP) BOJ Dep Gov Iwata: Too early to talk about an exit strategy from easing stance

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)

- (IN) World Economic Forum India Retreat

- (EU) South Korean President Park meets EU Officials in Brussels

- (SE) Turkey PM Erdogan visits Reinfeldt in Stockholm

- (RU) Russia Oct Official Reserve Assets: $515.0Be v $522.6B prior

- (IL) Israel Oct Foreign Currency Balance: No est v $79.9B prior

- (US) Retailers report October SSS

- (MY) Malaysia Central Bank (BNM) Interest Rate Decision: Expected to leave Overnight Policy Rate unchanged at 3.00%

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-Month Bills; Avg Yield: % v 3.30% prior; Bid-to-cover: x v 1.98x prior (oct 24th)

- 05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds

- 06:00 (RU) Russia Gold and Forex Reserve w/e Nov 1st: No est v $517.0B prior

- 06:00 (DE) Germany Sept Industrial Production M/M: 0.0%e v 1.4% prior; Y/Y: 0.8%e v 0.3% prior

- 06:00 (ZA) South Africa Sept Manufacturing Production M/M: -1.2%e v -3.6% prior; Y/Y: 0.0%e v 0.2% prior

- 06:00 (IE) Ireland Sept Industrial Production M/M: No est v -0.8% prior; Y/Y: No est v -5.7% prior

- 06:00 (IE) Ireland Oct CPI M/M: 0.0%e v -0.1% prior; Y/Y: 0.3%e v 0.2% prior

- 06:00 (IE) Ireland Oct CPI EU Harmonized M/M: 0.0%e v -0.1% prior; Y/Y: 0.1%e v 0.0% prior

- 06:00 (PT) Portugal Q3 Unemployment Rate: No est v 16.4% prior

- 06:00 (BR) Brazil Oct IBGE Inflation IPCA M/M: 0.6%e v 0.4% prior; Y/Y: 5.9%e v 5.9% prior

- 06:00 (DE) German Chancellor Merkel's CDU/CSU holds Coalition Talks With SPD

- 06:00 (IT) Italy PM Letta with Ireland PM Kenny in Dublin

- 06:00 (PL) Poland to Sell Bonds

- 06:30 (ES) Spain PM Rajoy in Madrid

- 06:30 (CL) Chile Oct Trade Balance: -$116.0Me v -$220.0M prior; Total Exports: No est v $ prior; Total Imports: No est v $ prior

- 06:30 (CL) Chile Oct Copper Exports: No est v $ prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Interest Rates and Asset Purchase`Target unchanged at 0.50% and £375B respectively

- 07:00 (CZ) Czech Central Bank Interest Rate Decision: Expected to leave Repurchase rate unchanged at 0.05%

- 07:45 (EU) ECB Interest Rate Decision: Expected to leave Main Refi Rate unchanged at 0.50% and expected to leave Deposit Facility Rate unchanged at 0.00%

- 08:00 (PL) Poland Oct Official Reserves: no est v $106.9B prior

- 08:00 (BR) Brazil Sept CNI Capacity Utilization: 82.2%e v 82.0% prior

- 08:00 (BR) Brazil to Sell 2014, 2015 and 2017 Bills

- 08:30 (US) Q3 Advance GDP Annualized Q/Q: 2.0%e v 2.5% prior; Personal Consumption: 1.6%e v 1.8% prior

- 08:30 (US) Q3 Advance GDP Price Index: 1.4%e v 0.6% prior; Core PCE Q/Q: 1.5%e v 0.6% prior

- 08:30 (US) Initial Jobless Claims: 335Ke v 340K prior; Continuing Claims: 2.87Me v 2.881M prior

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

- 08:30 (EU) ECB'S Draghi holds port rate decision press conference

- 08:30 (CZ) Czech Central Bank post rate decision press conference

- 08:30 (EU) EU President Van Rompuy speaks at Senior Citizens Conference

- 09:00 (DE) German Fin Min Schaeuble on tax revenues

- 09:00 (MX) Mexico Oct CPI M/M: 0.5%e v 0.4% prior; Y/Y: 3.3%e v 3.4% prior; CPI Core M/M: 0.2%e v 0.3% prior

- 09:00 (RO) Romania to Sell Bonds

- 10:00 (HU) Hungary Oct YTD Budget Balance (HUF): No est v -949.0B prior

- 10:00 (EU) EU Parliament's Bowles speaks at Conference in Brussels

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

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

- 11:00 (BR) Brazil to sell Fixed-rate 2019 and 2023 bonds

- 13:30 (US) Fed's Dudley in NY

- 13:30 (EU) ECB's Draghi with German Fin Min Schaeuble at conference in Hamburg

- 14:00 (US) Fed's Stein in Chicago

- 14:00 (EU) EU President Van Rompuy speaks at Kristallnacht Ceremony in Brussels

- 15:00 (US) Sept Consumer Credit: $12.0Be v $13.6B prior

- 18:00 (PE) Peru Central Bank Interest Rate Decision: Expected to leave Reference Rate unchanged at 4.25%