No surprises from central banks over the past 24 hours

EU Market Update: No surprises from central banks over the past 24 hours; SNB reiterates that negative rates remain an option

Notes/Observations

- Australia Dec Consumer Inflation Expectation hit 4-month high (2.1% v 1.9% prior)

- Australia Nov Employment Change rises to 7-month high (+21.0K vs. +10.0Ke); Unemployment Rate rises to 5.8% (as expected)

- No surprises in a plethora of central bank rate decision over the past 24 hours (NZRB, Bank of Korea, Indonesia, Philippines and SNB all holding policy steady)

- (IT) Italy PM Letta won confidence votes in the Senate and lower house (as expected)

- Euro Zone Oct Industrial Production misses expectations (MoM -1.1% vs. +0.3%e)

- EU Peripheral yields were higher on press reports that ECB might put in place stricter regulations on sovereign bonds

Economic Data

- (IL) Israel Nov Trade Balance: -$1.1B v -$1.1B prior

- (ID) Indonesia Central Bank (BI) left its the Reference Rate unchanged at 7.50%, as expected

- (FR) France Nov CPI M/M: 0.0% v 0.0%e; Y/Y: 0.7% v 0.7%e; CPI Ex-Tobacco Index: 125.38 v 125.45e

- (FR) France Nov CPI EU Harmonized M/M: 0.0% v 0.0%e; Y/Y: 0.8% v 0.8%e

- (ES) Spain Oct House transactions Y/Y: -10.0 v -8.6% prior

- (PH) Philippines Central Bank (BSP) leaves Overnight Borrowing Rate unchanged at 3.50%, as expected

- (EU) ECB €409M borrowed in overnight loan facility vs. €256M prior; €36.9B parked in deposit facility vs. €54.4B prior - Daily Eurosystem Liquidity Conditions

- (CH) Swiss National Bank (SNB) left both 3-Month Libor Target Rate and its EUR/CHF Cross floor at 0.00% and 1.2000 respectively (as expected)

- (NL) Netherlands Oct Retail Sales Y/Y: -1.5% v -5.9% prior

- (SE) Sweden Nov CPI M/M: -0.1% v 0.0%e; Y/Y: 0.1% v 0.2%e; CPI Level: 314.20 v 314.28e

- (SE) Sweden Nov CPI Underlying (CPIF) M/M: -0.1% v 0.0%e; Y/Y: 0.7% v 0.8%e

- (SE) Sweden Nov Unemployment Rate: 7.5% v 7.3%e; Unemployment Rate Seasonally Adj: 8.0% v 7.9%e

- (HK) Hong Kong Q3 Industrial Production Y/Y: -0.9% v +0.3% prior

- (HK) Hong Kong Q3 PPI Y/Y: -5.2% v -2.4% prior

- (IT) Italy Nov Final CPI M/M: -0.3% v -0.4% prelim; Y/Y: 0.7% v 0.6% prelim; CPI Ex Tobacco: 106.8 v 107.1 prior

- (IT) Italy Nov Final CPI EU Harmonized M/M: -0.3% v -0.4% prelim; Y/Y: 0.7% v 0.6% prelim

- (ZA) South Africa Nov PPI M/M: 0.2% v 0.5%e; Y/Y: 5.8% v 6.1%e

- (EU) Euro Zone Oct Industrial Production M/M: -1.1% v +0.3%e; Y/Y: 0.2% v 1.1% prior

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities**

Indices [Stoxx50 -0.2%, FTSE 100 -0.6% at 6,470, DAX -0.4% at 9,037, CAC-40 flat at 4,086, IBEX-35 -0.1% at 9,347, FTSE MIB -0.4% at 17,910, SMI -0.5% at 7,917, S&P 500 Futures +0.1% at 1,782]

- Market Focal Points: Equity markets open lower on continued Fed speculation, FTSE 100 underperforms on declines in the banking and mining sectors, Germany's largest retailer Metro gains on earnings reports, Peugeot declines on continued capital raise speculation, Energy services firm John Wood group declines on cautious outlook, Banks decline amid renewed speculation related to capital rules for sovereign bond holdings, Utilities gain on Fortum, EADS leads industrials higher, Continued rise in Euro money market rates, Upcoming US retail sales and weekly jobless claims

By Sector

- Consumer Discretionary [Peugeot UG.FR -7.5% (capital raise concerns, impairment charge), Heineken HEIA.NL -1% (speculation related to United Breweries); Metro MEO.DE +2.5% (Q3 profits above ests)]

- Industrials [Wood Group WG.UK -10.5% (cautious outlook); Balda BAF.DE +17% (special dividend)

- Utilities [Fortum FUM1V.FI +5% (asset sale)]

- Basic Materials/Resources [London Mining LOND.UK -7% (cut production forecast)]

- Telecom [Ziggo ZIGGO.NL +7.5% (merger talks with Liberty Global)]

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

Speakers:

- ECB chief Draghi addressed EU Parliament that the Euro Area recovery had been weak and reiterated that it anticipates protracted inflation weakness. Swift agreement on SRM is of paramount importance. He later noted that different risk weights for sovereign debt was not a task for now and needed global agreement. Sovereign debt to be assessed like any item on banks' balance sheets

- ECB Monthly Report reiterated that monetary policy to remain accommodative as necessary (in line with Draghi post rate decision press conference)

- SNB Statement at its rate decision noted that it was ready to buy foreign currency to defend EUR/CHF floor. There was a danger of a further build-up of imbalances in the mortgage and real estate markets. It noted that there were signs economic growth might weaken temporarily in Q4. Weak EU inflation and the fall in oil prices was helping to dampen the inflation outlook

- SNB's Jordan post rate decision press conference also reiterated the view that CHF currency (Swiss Franc) level remained too high and that its minimum FX target was still essential for the country as monetary policy exit in major currencies could spark tension. Situation in domestic real estate market was a concern. He also reiterated that view that it was not excluding any monetary policy options - including negative interest rates

- Slovenia Govt presented its banking sector stress test results and would need total of €4.7B for bank recap with €3.12B needed to recap the top three banks

- Deutsche Bank chief Economist Folkerts-Landau: ECB faces enormous pressure to engage in QE unless growth rises above 2.0%

- Israel Fin Min Lapid urges Central bank gov Flug to expand USD purchases to counter ILS currency strength

- Japan cabinet formally approved ¥5.5T extra budget for stimulus to ease impact of consumption tax hike (as expected), reiterates view of no need to sell additional new bonds to fund budget

- Japan Fin Min Aso: Looking to approve FY14 budget at the Dec 24th meeting

- Indonesia Central Bank stated after its rate decision that Reference Rate level of 7.50% was consistent in directing inflation towards range of 3.5-5.5 in 2014 and to help narrow current account deficit

- Philippines Central Bank stated after its rate decision that inflation risks weighed towards the upside due to food and utility prices. Inflation path still within target for over policy horizon, as inflation uptick seen to be largely transitory

Currencies/Fixed Income:

- The EUR/USD probe the 1.38 handle in early European trade as dealers tried to hunt the large stops building above the 1.3830 area. There is talk of a 1.3850 option that expires at the NY cut today (10:00 ET/15:00 GMT). One keen dealer noted that the Euro was looking to make its 8th consecutive 'up day' which has been historically been the limit as far as unbeaten streaks go. Some concern in the market ECB's Draghi felt misunderstood by markets in the last ECB communique given the subsequent rise in the EUR currency and short term rates

- The SEK hit an 18-month low against the Euro after disappointing data. The CPI readings continued to be negative while unemployment rose. The EUR/SEK tested above the 9.05 level as markets now see growing probability of a Riksbank rate cut

- The AUD hit a six-day low of 0.9010 against the USD, despite forecast-beating jobs data, with the Australian currency instead correlating with broader stock market losses.

- Peripheral yields were higher in the session with dealers attributing the move to press reports that ECB might put in place stricter regulations on sovereign bonds

Political/In the Papers:

-(EU) ECB may put in place stricter regulations on sovereign bonds - FT citing ECB's Praet; ECB's Praet hinted he will attempt to force euro region banks to hold capital against sovereign bonds, to prevent weak lenders using cash to remove debts of crisis-hit nations.

-(EU) ECB's Asmussen (Germany): There are some concerns about the decision-making process planned for bank resolution system - Handelsblatt interview

-(EU) EU negotiators said to have reached provisional agreement to impose possible losses on shareholders, bondholders, savers on failing banks form Jan 2016

-(US) Fed sees reverse repos as an important tool for raising rates, could transform how the Fed sets rates - financial press

- (US) Israel's Fischer reportedly the leading candidate for the Fed Vice Chairman job - press

-(US) Fitch comments on US budget deal; reflects improved function of budget policymaking; expect to resolve the Rating Watch Negative on the US 'AAA' sovereign rating by end-1Q14

- (US) S&P Chambers: Budget deal is small but positive in that it is paid for by revenue increases down the road

- (CN) PBoC won't conduct open market operations (OMO) in today's session (3rd consecutive session of halted operations); Drains CNY37B this week v drained CNY47B prior (2nd week of net drain)

Looking Ahead

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

- (EU) EU's Almunia in Parliament

- (FI) Finland Oct Current Account Balance: No est v -€190M prior

- (RU) Russia Oct Trade Balance: $14.2Be v $15.7B prior; Exports: $44.4Be v $44.5B prior; Imports: $30.6Be v $28.8B prior

- 05:30 (PT) Troika official in Portugal Parliament

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds in Switch Auction

- 05:30 (UK) DMO to sell £4.5B in 1.75% 2019 Gilts

- 06:00 (IE) Ireland Nov CPI M/M: No est v -0.2% prior; Y/Y: No est v 0.1% prior

- 06:00 (IE) Ireland Nov CPI EU Harmonized M/M: No est v -0.2% prior; Y/Y: No est v -0.1% prior

- 06:00 (RU) Russia Gold and Forex Reserve w/e Dec 6th: No est v $514.9B prior

- 06:00 (BR) Brazil Oct Retail Sales M/M: 0.5%e v 0.5% prior; Y/Y: 5.8%e v 4.1% prior; Broad Retail Sales Y/Y: 2.3%e v 7.5% prior

- 06:00 (G20) OECD G20 Q3 GDP: No est v 0.9% prior

- 06:00 (IS) Iceland to sell Bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India Nov CPI Y/Y: 10.0%e v 10.1% prior

- 07:00 (IN) India Nov Industrial Production Y/Y: -1.2%e v +2.0% prior; Manufacturing Production: No est v +0.6% prior

- 07:30 (IN) India Central Bank (RBI) Gov Rajan

- 08:00 (SE) Swedn PM Reindeldt in Parliament

- 08:00 (IT) ECB's Visco (Italy) in Italian Parliament

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

- 08:00 (RO) Romania to sell 2015 Bonds

- 08:30 (US) Nov Advance Retail Sales M/M: 0.6%e v 0.4% prior; Retail Sales Ex Auto M/M: 0.2%e v 0.2% prior; Retail Sales Ex Auto and Gas: 0.3%e v 0.3% prior; Retail Sales Control Group: 0.3%e v 0.4% prior

- 08:30 (US) Initial Jobless Claims: 320Ke v 298K prior; Continuing Claims: 2.76Me v 2.744M prior

- 08:30 (US) Nov Import Price Index M/M: -0.7%e v -0.7% prior; Y/Y: No est v -2.0% prior

- 08:30 (CA) Canada Q3 Capacity Utilization Rate: 81.0%e v 80.6% prior

- 08:30 (CA) Canada Oct New Housing Price Index M/M: 0.1%e v 0.0% prior; Y/Y: 1.5%e v 1.6% prior

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

- 09:00 (MX) Mexico Oct Industrial Production M/M: +0.3%e v -1.2% prior; Y/Y: +0.1%e v -1.6% prior; Manufacturing Production Y/Y: 2.4%e v 1.2% prior

- 09:00 (CA) Canada Nov Teranet/National Bank House Price Index M/M: -0.1%e v +0.1% prior; Y/Y: 3.3%e v 3.1% prior; HPI Index: No est v 159.34 prior

- 09:15 (DE) ECB's Asmussen (Germany) speaks in Belgrade

- 09:30 (US) Treasury Sec Lew

- 10:00 (US) Oct Business Inventories: 0.3%e v 0.6% prior

- 10:00 (DE) German Chancellor Merkel with State leaders in Berlin

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

- 11:00 (IS) Iceland Nov International Reserves (ISK): No est v 484B prior

- 11:00 (US) Treasury 5-year TIPS refunding announcement

- 11:00 (BR) Brazil to sell Floating-rate 2019 Notes

- 11:00 (US) Fed to purchase USD3.00-4.00B in Notes

- 12:00 (ES) EU President Van Rompuy with PM Rajoy

- 12:50 (CA) Bank of Canada (BOC) Gov Poloz speaks at Canadian Club

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

- 16:00 (CL) Chile Central Bank Interest Rate Decision: Expected to leave the Overnight Rate Target unchanged at 4.50%

- 18:00 (PE) Peru Central Bank Interest Rate Decision: Expected to leave the Reference Rate unchanged at 4.00%

- 23:30 (JP) Japan Oct Final Industrial Production M/M: No est v 0.5% prelim; Y/Y: No est v 4.7% prelim; Capacity Utilization M/M: No est v 1.2% prelim