EMU Unemployment highlights job creation remains a challenge even

EU Market Update: EMU Unemployment highlights job creation remains a challenge even as the economy stabilizes

Notes/Observations

- Focus will be on the release of Fed minutes and the release of the US ADP report

- German trade data registers another healthy surplus

- Euro Zone Retail sales comes in better-than-expected (M/M: +1.4% v +0.1%e)

- Italy Nov Unemployment Rate hits record level of 12.7%; Youth Unemployment at 41.6%; highlighting job creation remains a challenge even as the economy stabilizes

- Euro Zone Nov Unemployment hold steady at 12.1%

Economic Data

- (AU) Australia Dec Foreign Reserves: A$59.5B v A$59.9B prior

- (ZA) South Africa Dec Gross Reserves: $49.6B v $49.4B prior; Net Reserves: $45.5B v $45.4B prior

- (DE) Germany Nov Current Account Balance: €21.6B v €19.3Be; Trade Balance: €18.1B v €18.9Be; Exports M/M: 0.3% v 0.8%e; Imports M/M: -1.1% v +0.7%e

- (UK) Dec Halifax House Prices M/M: -0.6% v +0.9%e; 3M/Y: 7.5% v 8.2%e

- (HU) Hungary Nov Preliminary Industrial Production M/M: -0.5% v -0.5% prior; Y/Y: 5.8% v 6.9%e

- (TR) Turkey Nov Industrial Production M/M: +2.9% v -3.0% prior; Y/Y: 4.7% v 4.1%e

- (EU) ECB €293M borrowed in overnight loan facility vs. €243M prior; €95.1B parked in deposit facility vs. €91.4B prior - Daily Eurosystem Liquidity Condition

- (NO) Norway Nov Industrial Production M/M: +1.1% v -2.8% prior; Y/Y: -2.2% v -7.6% prior

- (NO) Norway Nov Manufacturing Production M/M: -0.2%% v +0.5%e; Y/Y: 2.1% v 2.6% prior

- (IS) Iceland Dec Preliminary Trade Balance (ISK): 4.8B v 12.3B prior

- (IT) Italy Nov Preliminary Unemployment Rate: 12.7% v 12.6%e; fresh record high

- (EU) Euro Zone Nov Retail Sales M/M: 1.4% v 0.1%e; Y/Y: 1.6% v +0.3%e

- (EU) Euro Zone Nov Unemployment Rate: 12.1% v 12.1%e

- (BE) Belgium Dec Unemployment Rate: 8.4% v 98.4% prior

- (CY) Cyprus Dec CPI Harmonized M/M: -0.6% v -0.8% prior; Y/Y: 0.7% v -0.8%e

- (BR) Brazil Dec FGV Inflation IGP-DI M/M: 0.7% v 0.7%e

Fixed Income:

- (IN) India sold total INR70B vs. INR70B in 3-month and 12-month Bills

- (EU) ECB allotted $0.0M in 7-Day USD Liquidity Tender at fixed 0.58% vs. $0.0M prior

- (SE) Sweden soldSEK5.0B in 6-month Bills; Yield: 0.7106 v 0.7288% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities**

Indices [Stoxx 50 flat, FTSE 100 -0.4% at 6,727, DAX -0.2% at 9,487 , CAC-40 -0.2% at 4,252, IBEX-35 +0.1% at 10,189, FTSE MIB +0.6% at 19,577, SMI flat at 8,317, S&P 500 Futures -0.1% at1,829]

- Market Focal Points: Equity markets trade mixed, Peripheral indices outperform, UK retailers in focus: Sainsbury issues cautious outlook while Mothercare warns, Currency headwinds persist for European companies (France's Sodexo), UK homebuilder Persimmon trades only slightly higher despite record FY sales amid weakness in UK Halifax housing data, Euro Zone peripheral banks outperform on narrowing sovereign debt spreads, Upcoming US ADP employment report and Fed minutes

By Sector

- Financials [Royal Sun RSA.UK +1.5% (update on probe of Irish unit)]

- Industrials [Akzo Nobel AKZA.NL -1.5% (reaffirmed cautious outlook), Kion Group KGX.DE -1.5% (share placement)]

- Basic Materials/Resources [K+S SDF.DE +3% (broker commentary), Wacker Chemie WCH.DE +1% (broker commentary); Salzgitter SZG.DE -3.5% (broker commentary)]

- Consumer Discretionary [Air France AF.FR +5% (Dec traffic +3.7%); Mothercare MTC.UK -30% (profit warning), Sainsbury SBRY.UK -1.5% (cautious outlook)]

- Technology [SAP SAP.DE +1% (broker commentary); Dialight DIA.UK -25% (profit warning), Xing 01BC.DE -1.5% (broker commentary)]

- Stoxx50 Sectors [Technology +0.5%, Financials +0.1%, Consumer Cyclical flat; Utilities -0.8%, Energy -0.6%, Consumer Non-Cyclical -0.4%, Industrials -0.4% Telecom -0.2%, Basic Materials -0.1%]

Speakers:

- Spain Debt Agency (Tesoro) provides 2014 strategy and saw net issuance at €65B vs. €72B y/y, gross issuance seen at €242.4B vs. €236.7B y/y

- Sweden Central Bank (Riksbank) Dec Minutes noted that domestic Household debt to remained too high and made the economy vulnerable to shocks

- Riksbank Gov Ingves: Inflation had been lower than expected and the economy to show more tangible improvement over next year. Board did discuss impact of global rates on Sweden

- Riksbank's Jansson: - Household debt suggested unchanged rates in Dec and should consider household debt level in decisions

- BOE Q4 Credit Conditions Survey noted that lenders saw a significant rise in Q1 mortgage availability

- Greece at odds with Troika over plans it wants to tap bank rescue funds to plug funding gap for 2014-15 period. Greece will be financed by bailout loans until the second half of 2014, when it hopes to tap bond markets again. The country faces a funding gap of nearly 11 billion euros for 2014-15- Greece's international creditors, led by the European Central Bank, oppose the idea of tapping HFSF funds to plug the gap and want to keep the buffer as a safety cushion for banks

- Japan PM Abe's advisor Takenaka commented that the Yen currency could weaken further on economic fundamentals. Correction of the excessive Yen increase not done yet. Nikkei could top 18K with bedrock deregulation. BoJ should keep a free hand to ease further and key Japan wages rise to spur virtuous circle

- Thailand Central Bank Dep Gov Pongpen: Thai politics is affecting the baht currency; closely watching situation

- Japan ruling LDP Party to scarp 'no war' pledge in its 2014 draft

Currencies/Fixed Income:

- Market participants awaited the ADP employment report

- The Euro had little reaction to the Italian Unemployment Rate which hit a fresh record high at 12.7%.

- Overall the theme in Asia was Yen currency weakness as the Nikkei225 Index rebound by 2% in the session.

Political/In the Papers:

- IMF's Lagarde: IMF Intends to upwardly revise its forecasts for Global growth - press

- (FR) France Fin Min Moscovici: France govt needs to commit to step of recovery - Comments with US Treasury Sec Lew in Paris

- (IT) The head of Italy's PD party Renzi favors an increase in the financial gains taxes - financial press

-(US) Fed's Williams: Decision to taper in December was easy; A large economic surprise would be required to change the outlook for taper

- (US) Fed's Rosengren: Warns against dramatic cuts in bond buying, Fed should stick to reducing bond buying size by $10B increments at each meeting

Looking Ahead

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

- (RO) Romania Central Bank Interest Rate Decision: Expected to cut Interest Rate by 25bps to 3.75%

- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 2.50%

- 06:00 (BR) Brazil Nov Industrial Production M/M: -1.1%e v +0.6% prior; Y/Y: -0.8%e v +0.9% prior

- 06:00 (DE) Germany Nov Factory Orders M/M: 1.5%e v -2.1% prior (revised from -2.2%); Y/Y: 5.6%e v 1.9% prior

- 06:00 (IE) Ireland Dec Live Register Monthly Change: No est v -3.4K prior; Unemployment Rate: No est v 12.5% prior; Live Register Level: No est v 406.2 prior

- 06:00 (IE) Ireland Nov Retail Sales Volume M/M: No est v -0.2% prior; Y/Y: No est v -0.9% prior

- 06:00 (CL) Chile Dec CPI M/M: 0.5%e v 0.4% prior; Y/Y: 2.9%e v 2.4% prior; Core CPI M/M: 0.3%e v 0.2% prior

- 06:45 (US) Daily Libor Fixing

- 06:45 (DE) German Fin Min Schaeuble with Treasury Sec Lew

- 07:00 (UK) Prime Minister's Question Time in House of Commons

- 07:00 (US) MBA Mortgage Applications w/e Jan 3rd: No est v -6.3% prior

- 08:15 (US) Dec ADP Employment Change: +200Ke v +215K prior

- 09:00 (MX) Mexico Dec Consumer Confidence Index: 92.0e v 88.7 prior

- 09:30 (BR) Brazil weekly Currency Flows

- (MX) Mexico Dec Vehicle Production: No est v 255.7K prior; Vehicle Domestic Sales: No est v 100.4K prior;Vehicle Exports: No est v 224.9K prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

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

- 11:00 (US. Fed to purchase $1.0-1.5B in Notes

- 12:00 (CA) Canada to sell 3-Year Bonds

- 13:00 (US) Treasury to sell $21B in 10-Year Notes Reopening

- 13:00 (EU) EU's Van Rompuy at EU Greek Presidency Launch in Athens

- 14:00 (US) Fed Releases Minutes from Dec 17-18 FOMC Meeting

- 14:30 (US) US Secretary of Commerce Pritzker Speaks in Las Vegas

- 15:00 (US) Nov Consumer Credit: $13.5Be v $18.2B prior

- 19:30 (AU) Australia Nov Retail Sales M/M: 0.4%e v 0.5% prior

- 20:00 (KR) Bank of Korea (BoK) Interest Rate Decision: Expected to leave 7-Day Repo Rate unchanged at 2.50%