Deflation concerns persist in Europe; OPEC meeting underway

Notes/Observations

- China Oct Industrial Profits register biggest decline since Aug 2012 (YoY: -2.1% vs. +0.4% prior)

- Oil at 4-year lows as participants await OPEC decision on production quota but consensus seems to be resisting supply cuts

- European inflation data released in session fails to alleviate deflation concerns; UK 30-year Gilt and German 10-year Bunds at record lows

- German net unemployment improves for the 2nd straight month with rate at record low

- US market closed for Thanksgiving holiday

Economic Data

- (ES) Spain Q3 Final GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.6% v 1.6%e

- (DE) Germany Nov CPI Saxony M/M: -0.1% v -0.2% prior; Y/Y: 0.7% v 1.0% prior (**Note: lowest MoM reading since Feb 2010)

- (ES) Spain Nov Preliminary CPI Y/Y: -0.4% v -0.3%e; CPI EU Harmonized Y/Y: % v -0.3%e

- (SE) Sweden Oct Household Lending Y/Y: 5.9% V 5.7%e

- (DE) Germany Nov Net Unemployment Change: -14K v -1Ke; Unemployment Rate: 6.6% (record low) v 6.7%e

- (EU) Euro Zone Oct M3 Money Supply Y/Y: 2.5% v 2.6%e; M3 3-month average: 2.3% v 2.4%e

- (IT) Italy Nov Business Confidence: 96.3 v 95.9e; Economic Sentiment: 87.7 v 89.3 prior

- (DE) Germany Nov CPI Brandenburg M/M: 0.0% v -0.3% prior; Y/Y: 0.7% v 0.9% prior

- (DE) Germany Nov CPI Hesse M/M: -0.1% v -0.2% prior; Y/Y: 0.5% v 0.8% prior

- (DE) Germany Nov CPI Bavaria M/M: 0.0% v -0.3% prior; Y/Y: 0.8% v 0.8% prior

- (PT) Portugal Nov Consumer Confidence Index: -22.3 v -24.0 prior; Economic Climate Indicator: 0.5 v 0.7 prior

- (DE) Germany Nov CPI North Rhine Westphalia M/M: -0.1 v -0.2% prior; Y/Y: 0.7 v 1.0% prior (lowest annual reading since June 2010)

- (EU) Euro Zone Nov Business Climate Indicator: 0.18 v 0.02e; Consumer Confidence: -11.6 v -11.6e; Economic Confidence: 100.8 v 100.3e; Industrial Confidence: -4.3 v -5.5e; Services Confidence: 4.4 v 4.0e

Fixed Income:

- (IT) Italy Debt Agency (Tesoro) sold total €5.5B vs. €4.5-5.5B indicated range in 2020 and 2024 BTP Bonds

- Sold €3.5B v €3.0-3.5B new 1.05% 2019 BTP Bond; Avg Yield: 0.94% v 1.23% prior; Bid-to-cover: 1.46x v 1.45x prior

- Sold €2.0B v €1.5-2.0B indicated 2.50% 2024 BTP Bonds; avg yield 2.08% v 2.44% prior; bid-to-cover 1.58x v 1.48x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.5%, FTSE 100 +0.1% at 6,738, DAX +0.6% at 9,984, IBEX-35 +0.5% at 10,704, FTSE MIB +0.5% at 20,050, SMI +0.4% at 9,090, S&P 500 Futures flat at 2,071]

- Market Focal Points/Key Themes: Equity markets open generally higher amid weaker CPI data from Germany and Spain and ahead of possible comments from Draghi, DAX trades higher for 11th straight session, FTSE 100 lags amid ex-dividends, Energy firms decline ahead of OPEC meeting, Remy Cointreau gains on better than expected H1 profits, Infineon weighed down by Q4 profits and outlook

By Sector

- Financials [Barclays BARC.UK +1% (broker commentary); HSBC HSBA.UK -0.5% (broker commentary)]

- Industrials [Stage Coach SGC.UK +7.5% (contract award); Royal Mail RMG.UK -1% (ex-dividend)]

- Technology [Monitise MONI.UK +15% (investment agreement); Infineon IFX.DE -1% (Q4 EBIT below ests)]

- Healthcare [Elekta EKTAB.SE -11% (cut outlook) ]

- Consumer Discretionary [Remy Cointreau RCO.FR +6% (H1 profits above ests), Mulberry MUL.FR +6% (new creative director)]

- Stoxx50 Sectors [Technology +1%, Financials +0.8%, Consumer Non-Cyclical +0.7%, Telecom +0.5%, Basic Materials +0.5%, Consumer Cyclical +0.4%, Utilities +0.3%, Industrials +0.2%; Energy -0.7%]

Speakers

OPEC ministers comment as session begins in meeting in Vienna

- Kuwait Oil Min oil market was over supplied by 1.8M bpd nut unsure it there was support for a cut

- Iraq Oil Min wanted oil market stability, fair prices and targeting 3.2M bpd production in 2015 (3.8M including Kuridstan). Iraq would follow unity of OPEC but saw aprice floor of around $65-70/bbl

- Venezuela Foreign Min and OPEC Rep Ramirex: Oil market is oversupplied by 2.0M bpd and would propose a formal oil output cut at today's OPEC meeting

- Saudi Oil Min: decline to comment

- Angola Oil Min: Oversupply exists in market; budget based on $81/barrel but would remain silent at today's meeting

- Algeria Oil Min: Willing to cut oil output

- Qatar Oil Min: Looking at the interests of consumers and producers in talks

Other commentary:

- ECB's Draghi text of speech to Finland Parliament (in line with recent rhetoric) but did note that time was needed for effects of stimulus to materialize; won't elaborate on further measures

- Greece Dep PM Venizelos: Bailout extension likely for technical reasons

- Russia Central Bank: Money market rates have been elevated due to tax payments (**Note: On Wed, the Russian overnight rate hit the highest level since 2009)

- Turkey Central Bank Financial Stability Report: Banks have enough buffers against potential FX liquidity shocks

- Renewed reports circulating that India govt reiterates its wants the RBI to cut interest rate at its next policy meeting on Dec 2nd

Currencies

- The USD recovered some territory following some retracement on Wed after some disappointing economic data.

- European inflation data released in session failed to alleviate deflation concerns and continued to put some downward pressure on the Euro currency and European bond yield back to record lows. The EUR/USD pair was off approx. 0.25% at 1.2472. The session ignored some better data. German net unemployment improve for the 2nd straight month with rate at record low

Political/In the Papers:

- (CN) PBoC won't conduct open market operations (OMO) in Thursday session (1st halt after 33 consecutive drains); Injecteds net CNY35B this week v injected CNY10B prior (2nd week of injection; Biggest injection in 3 months)

- (SA) Saudi Arabia Oil Min: the Gulf countries had reached a consensus on oil output; OPEC must sit together on its output limits

Looking Ahead

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

- OPEC meeting in Vienna

- (EU) EU Foreign and Interior Ministers hold meeting in Rome

- (DE) Germany Nov CPI Baden Wuerttemberg M/M: No est v -0.2% prior; Y/Y: No est v 0.8% prior

- 05:30 (UK) BOE Financial Stability Report

- 05:30 (EU) EU's Van Rompuy at conference

- 06:00 (BR) Brazil Oct PPI Manufacturing M/M: No est v 0.9% prior; Y/Y: No est v 2.9% prior

- 06:30 (EU) ECB chief Draghi at event in Finland

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia Gold and Forex Reserve w/e Nov 21st: No est v $420.6B prior

- 07:00 (DE) Germany Dec GfK Consumer Confidence: +8.6e v +8.5 prior

- 07:15 (DE) ECB's Weidmann (Germany) in Frankfurt

- 08:00 (DE) Germany Nov Preliminary CPI M/M: 0.0%e v -0.3% prior; Y/Y: 0.6%e v 0.8% prior

- 08:00 (DE) Germany Nov Preliminary CPI EU Harmonized M/M: 0.0%e v -0.3% prior; Y/Y: 0.5%e v 0.7% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (CA) Canada Q3 Current Account Balance: -$11.2Be v -$11.9B prior

- 09:15 (BR) Brazil to sell 2015, 2016 and 2018 Bills

- 09:15 (BR) Brazil to sell Fixed-rate 2021 and 2015 bonds

- 12:00 (FR) France Oct Net Change in Jobseekers: +15.0Ke v +19.2K prior; Total Jobseekers: 3.448Me v 3.433M prior

- (BR) Brazil Oct Central Govt Budget Balance (BRL): No est v -20.4B prior

- (BR) Brazil Nov CNI Consumer Confidence: No est v 112 prior

- 16:00 (KR) South Korea Dec Business Survey Manufacturing: No est v 74 prior; Non-Manufacturing Survey: No est v 67 prior

- 18:30 (JP) Japan Oct Jobless Rate: 3.6%e v 3.6% prior

- 18:30 (JP) Japan Oct National CPI Y/Y: 3.0%e v 3.2% prior; CPI Ex Fresh Food Y/Y: 2.9%e v 3.0% prior; CPI Ex Food, Energy Y/Y: 2.2%e v 2.3% prior

- 18:30 (JP) Japan Nov Tokyo CPI Y/Y: 2.3%e v 2.3% prior; CPI Ex Fresh Food Y/Y: 2.4%e v 2.5% prior; CPI Ex Food, Energy Y/Y: 2.0%e v 2.1% prior

- 18:50 (JP) Japan Oct Retail Sales M/M: -1.1%e v +2.7% prior; Retail Trade Y/Y: 1.5%e v 2.3% prior; Large Retailers' Sales: 0.2%e v 0.5% prior

- 18:50 (JP) Japan Oct Industrial Production M/M: -0.5%e v 2.9% prior; Y/Y: -1.7%e v +0.8% prior

- 19:05 (UK) Nov GfK Consumer Confidence: -1 v -2 prior