Trade cautious ahead of BOE

EU Market Update: Trade cautious ahead of BOE, ECB rate decision; Norway Central Bank pushes out view for next potential rate hike by a year to mid-2015

Notes/Observations

- South Korea Q3 Final GDP comes in unrevised and at 2-year high (QoQ: 1.1% v 1.1% prelim)

- Australia Oct Trade Balance registers its 4th consecutive deficit (-A$529M vs. -A$350Me

- China drained net CNY47B this week (first net drain in three weeks, biggest drain in 7-weeks)

- Moody's raised sovereign outlook on Spain govt bond rating to Stable from Negative; Affirmed Baa3 rating

- Norway Central Bank pushes back view on potential rate hike by one year to mid-2015

- UK Chancellor Osborne to presents its autumn budget. Likely to project lower Gilt issuance as growth improved the fiscal outlook

- Spain 4-year and 5-year bond auction result was solid (sells upper end of range at lowering borrowing costs). The 2018 yield the lowest since mid-2005

Economic Data

- (FR) France Q3 ILO Unemployment Rate: 10.9% v 11.0%e; Mainland Unemployment Rate: 10.5% v 10.6%e; Mainland Unemployment Change: +31K v +15Ke

- (FI) Finland Q3 GDP Q/Q: 0.0% v 0.4%e ; Y/Y: -1.0% v -0.2%e

- (CZ) Czech Oct Retail Sales Y/Y: -0.6% v +0.2%e

- (ES) Spain Oct Industrial Output WDA Y/Y: -0.7% v -0.1%e; Industrial Output NSA Y/Y: 1.8% v 3.7% prior

- (EU) ECB €483M borrowed in overnight loan facility vs. €243M prior; €48.1B parked in deposit facility vs. €56.1B prior - Daily Eurosystem Liquidity Conditions

- (TW) Taiwan Nov Foreign Reserves: $415.6B v $415.6B prior

- (SE) Sweden Oct Service Production M/M: 0.2% v 0.5%e; Y/Y: 1.2% v 1.7%e

- (NL) Netherlands Nov CPI M/M: -0.5% v -0.3%e; Y/Y: 1.5% v 1.7%e

- (NL) Netherlands Nov CPI EU Harmonized M/M: -0.6% v -0.3%e; Y/Y: 1.2% v 1.4%e

- (NO) Norway Central Bank (Norges) left Deposit Rates unchanged at 1.50%, as expected and lowered its Rate Path Outlook

- (IS) Iceland Nov Preliminary Trade Balance (ISK): 12.3BB v 7.1B prior

- (UK) Nov New Car Registrations Y/Y: 7.0% v 4.0% prior

- (UK) Nov Lloyds Employment Confidence: -14 v -11 prior

- (ZA) South Africa Nov SACCI Business Confidence: 90.8 v 91.1 prior

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

Fixed Income:

- (ES) Spain Debt Agency (Tesoro) sold total €3.52 €2.5-3.5B in 2017 and 2018 bonds

- Sold €1.27B in 2.1% Apr 2017 bono; Avg Yield: 2.182% v 2.101% prior; Maximum Yield: 2.203% v 2.119% prior; Bid-to-cover: 3.62x v 2.51x prior

- Sold €2.25B in 3.75% Oct 2018 Bono; Avg yield 2.722% (lowest since Jul 2005) v 2.871% prior; Bid-to-cover: 2.2x v 1.9x prior; Maximum Yield 2.740% v 2.889% prior

- (FR) France Debt Agency (AFT) sold total €3.99B vs. €3.0-4.0B indicated range in 2018, 2021 and 2027 Oats

- Sold €1.32B in 4.0% Apr 2018 OATs; Avg Yield 0.83% v 2.19% prior; Bid-to-cover:2.73 x v 2.69x prior

- Sold €1.335B in 3.25% Oct 2021 OAT, Avg Yield 1.77% v 2.17% prior; Bid-to-cover: 2.38x v 2.04x prior

- Sold €1.335B in 2.75% Oct 2027 Oats; Avg Yield 2.81% v 2.84% prior; Bid-to-cover: 2.57x v 2.75x prior- 05:00 (CY) Cyprus Nov CPI M/M: -0.7% v 0.1% prior; Y/Y: -2.1% v -1.6% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [FTSE 100 flat at 6,511, DAX +0.1% 9,151, CAC-40 +0.1% at 4,152, IBEX-35 +0.30% at 9,570, FTSE MIB flat at 18,321, SMI +0.2% at 8,060, S&P 500 Futures flat at 1,792]

- Market Focal Points: European equity markets open lower amid continuing Fed tapering concerns ahead of Friday's US payrolls report, Mixed trading in the banking sector, ECB and BoE decisions later today,

By Sector

- Consumer Discretionary [Metro MEO.DE -4% (broker commentary); TUI AG TUI1.DE (Merger talks related to Hapag-Lloyd unit)]

- Financials [Vienna Insurance VIG.AT -4% (share placement)]

- Industrials [DS Smith SMDS.UK +4% (H1 profits rose y/y); Fomento FCC.ES -1% (share placement speculation)]

- Telecom [Telecom Italia TIT.IT -2% (anti-trust ruling in Brazil)] - Healthcare [Merck KGaA MRK.DE +3% (acquisition)]

- Technology [AZ Electronic Materials AZEM.UK +52% (takeover offer)]

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

Speakers:

- Norway Central Bank (Norges) adjusted its rate outlook and now saw rates staying at current level until summer of 2015 (prior view was until summer of 2014)

- Norway Central Bank Dep Gov Qvigstad post rate decision press conference noted that it did not consider other alternatives on rates

- Eurogroup decision on next loan tranche for Greece was unlikely at the Monday Dec 9th meeting. The delays in Greece program was not due to Troika and reiterated the view that view that Greece must stick to its commitments. The article noted that it was unlikely to discuss 3rd loan before European elections, decision on Greek debt unlikely before the end of 2014

- IMF's Lagarde stated that South Korea needed more imports and consumption

- China's PBoC commented on Bitcoin and decared it as not a currency with real meaning. It would allow public to participate in bitcoin given they bear the risk. It did ban financial institutional from transactions. The PBoC stated that it needed to protect CNY currency (yuan) legal status.

- Japan Cabinet approved ¥18.6T economic stimulus package which included ¥5.5T in gov't spending (as speculated)

- Japan Fin Min Aso: Will draw up extra budget for stimulus package next week and reiterated that no new bonds would be issued to pay for the stimulus package

- BOJ Gov Kuroda stated that the domestic economy was on track as forecasted and that inflation expectation to rise gradually. He expected Japan to achieve its 2% price target towards the start of FY15 and would maintain current QE policy until the target was sustainably achieved

- Japan Econ Min Amari : Have been diagnosed with early stage of tongue cancer; will remain in position

Currencies/Fixed Income:

- The focus was on key European rate decisions (BOE and ECB) and UK budget. Overall caution was evident ahead of today's major central bank events. The USD was on softer footing in a stop-hunt as the session began but recovered the bulk of its losses as the session progressed.

- The NOK currency slumped after following its rate decision with the catalyst being the push back in the central bank's view of the next potential rate hike by a year. The EUR/NOK tested above 8.40 after Norges stated that it now saw interest rates staying at current level until summer of 2015 (prior summer of 2014)

Political/In the Papers:

- S&P's Kraemer: Sees more sovereign downgrades than upgrades in 2014 with Emerging markets dominating

-(DE) German Fin Min Schaeuble: plans to ease spending curbs (German press citing draft for Stability Council) and suggested Germany was targeting spending for next year (2014) of about €296B and sees 2017 spending at €318B (€10B more than under the current financing program)

- (IT) Italian Constitutional Court rules election law unconstitutional; ruling does not impact the status of the current parliament - financial press

- (UK) UK Fin Min Osborne: Govt will cut £1.0B in spending from UK Govt departments

- (UK) UK expected to raise the retirement age for certain workers - London Telegraph

Looking Ahead

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

- 05:30 (BR) Brazil Central Bank (COPOM) Monetary Policy Meeting Minutes

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

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

- 06:00 (RU) Russia Gold and Forex Reserve w/e Nov 29th: No est v $505.9B prior

- 06:00 (PL) Poland to sell Bonds

- 06:15 (UK) Chancellor Osborne to present Autumn Statement

- 06:30 (CL) Chile Oct Economic Activity M/M: +0.3%e v -0.8% prior; Y/Y: 4.0%e v 3.9% prior

- 06:45 (US) Daily Libor Fixing

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

- 07:00 (ES) Spain Dep Econ Min Latorre in Madrid

- 07:15 (EU) EU's Almunia in Dublin

- 07:30 (US) Nov Challenger Job Cuts K v 45.7K prior; Y/Y: No est v -4.2% prior

- 07:30 (US) Dec RBC Consumer Outlook Index: no est v 47.0 prior

- 07:30 (BR) Brazil Nov Vehicle Production: No est v 323.8K prior; Vehicle Sales: No est v 330.2K prior; Vehicle Exports: No est v 51.8K prior

- 07:45 (EU) ECB Interest Rate Decision: Expected to leave Key Rates unchanged: To Leave Main Refi Rate unchanged at 0.25%; To leave Deposit Facility Rate unchanged at 0.00%

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

- 08:15 (US) Fed's Lockhart in Fla

- 08:30 (US) Q3 Preliminary GDP Annualized Q/Q: 3.1%e v 2.8% advance; Personal Consumption: 1.5%e v 1.5% advance

- 08:30 (US) Q3 Preliminary GDP Price Index: 1.9%e v 1.9% advance; Core PCE Q/Q: 1.4%e v 1.4% advance

- 08:30 (US) Initial Jobless Claims: 321Ke v 316K prior; Continuing Claims: 2.80Me v 2.776M prior

- 08:30 (CA) Canada Oct Building Permits M/M: 1.0%e v 1.7% prior - 08:30 (US) Weekly USDA Net Export Sales

- 08:30 (EU) ECB chief Draghi post rate decision press conference

- 08:30 (DE) German Fin Min Schaeuble on Federal Stability Council

- 08:30 (US) Treasury Sec Lew on financial reform

- 09:00 (MX) Mexico Oct Leading Indicators M/M: No est v 0.07 prior

- 09:00 (RO) Romania to sell Bonds

- 10:00 (CA) Canada Nov Ivey Purchasing Managers Index (Seasonally Adj): 59.5e v 62.8 prior; PMI Unadj: No est v 64.2 prior

- 10:00 (US) Oct Factory Orders: -1.0%e v +1.7% prior

- 10:00 (US) Durable Goods Order possible revisions

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

- 11:00 (US) Treasury 3-year, 10-year and 30-year Refunding Announcement

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

- 11:00 (BR) Brazil to sell Fixed-rate 2019 and 2023 bonds - 12:15 (US) Fed's Fisher in TX

- 12:30 (EU) EU President Van Rompuy in Brussels

- 19:00 (CO) Colombia Nov CPI M/M: +0.1%e v -0.3% prior; Y/Y: 2.1%e v 1.8% prior