IFO Business Climate Survey registers its 1st MoM improvement in 7 months

Notes/Observations

- Asia equities rally after Friday China PBoC rate cut (**Note: Japan closed for holiday); speculation that China has shifted its focus to broad-based stimulus and are open to more rate cuts

- Low-liquidity conditions seen in Asia, Europe

- Draghi (on Friday) rekindled hopes of additional ECB measures in Dec by re-affirming the message that the ECB must do what it can to boost inflation

- German data showing some signs of stabilization as IFO Business Climate Survey registers its 1st MoM improvement in 7 months

Economic Data

- (SG) Singapore Oct CPI lower; M/M: -0.4% v +0.2%e; Y/Y: 0.1% v 0.6%e; CPI Core Y/Y: 1.7% v 1.8% ; (**Note: CPI YoY reading eased for the fifth straight month to a near 5-year low)

- (CZ) Czech Nov Confidence data beats; Business Confidence: 12.3 v 11.5 prior; Consumer Confidence Index: +1.2 (turns positive for 1st time since 2008) v -2.0 prior

- (TW) Taiwan Oct Industrial Production beats; Y/Y: 9.0% v 7.6%e; Commercial Sales Y/Y: 1.5% v 2.6%e

- (NL) Netherlands Nov Producer Confidence Index beats: 2.4 v 2.0e (highest since Jun 2011)

- (DE) Germany Nov IFO Survey beats; Business Climate Survey: 104.7 v 103.0e; Current Assessment Survey: 110.0 v 108.0e; Expectations Survey: 99.7 v 98.5e

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.9%, FTSE 100 0% at 6,747, DAX +0.6% at 9,792, CAC-40 +0.9% at 4,386, IBEX-35 +1.3% at 10,652, FTSE MIB +0.3% at 20,010, SMI 0% at 9,081, S&P 500 Futures 0.2% at 2,066]

- Market Focal Points/Key Themes: Equity markets are trading higher after a better than expected German IFO survey. The business climate registered its first improvement in 7 months. M&A also boosted shares with Aviva making a big bid for Friend's Life.

By Sector

- Industrials [FCC FCC.ES -4.1% (talks with Soros end without deal)

- Energy [Petrofac PFC.UK -24% (lowers guidance on weak oil), Rec Solar RECSOL.NO +13.0% (receives NOK108.5/shr offer), Salamander Energy SMDR.UK +1.9% (agrees to purchase by Ophir), Bashneft BANE.RU

-0.6% (earnings rise)

- Healthcare [Lundbeck LUN.DK -0.9% (CEO resigns)

- Financials [Friends Life FLG.UK +5.6% (suspends buyback on €5.6B Aviva deal), Aviva AV.UK -4.4%, Intesa Sanpaolo ISP.IT +2.1% (interested buying RBS unit Coutts)

- Materials [Phosagaro PHOR.RU -1.8% (earnings affected by RUB)

Speakers

- ECB's Nowotny (Austria): ECB needs steady hand on additional policy measures; General ECB view is that inflation is not high enough. EU investment package should provide short-term stimulus and improve potential growth in long term

- ECB's Constancio (Portugal) reiterated view that Europe was not at risk of full-blown deflation and would assess in Q1 whether current measures were contributing to expected pace of balance sheet expansion. If not it could consider other options including sovereign QE but no decision yet

- IFO Economist commented that it was too early to talk about a turnaround but if confirmed it would have a positive effect on H1 2015 GDP growth. Lower EUR currency exchange rate and falling oil prices were positively reflected in Business Climate survey

- EU Commission said to delay its decision on whether to accept France 2015 budget deficit in excess of 3% until March. France could secure a delay until 2017 depending on budget trajectory and extent of reforms. Various reports that the EU would approve Italy's 2015 budget

- Russia Central Bank 1st Dep Gov Simanovsky: Not forgetting about the economy in targeting inflation as it is not aiming to curb inflation at any price

- Sweden Central Bank (Riksbank) Dep Gov Skingsley: Recent data has been in line with forecasts and reiterated view that additional steps include delaying 1st potential rate hike. Saw SEK currency as reasonably valued

- Greece and Troika official set to meet in Paris on Tuesday, Nov 25th to discuss the stalled review

- Additional China PBoC interest rate cuts could be forthcoming as the recent rate cut showed govt frustration with banks directing credit

- S&P comments on China: Country was unlikely to launch aggressive stimulus

- Russia may agree to reduce output by 15M tons (110M bbl) in 2015 to support prices if OPEC cuts by 70M tons

- Iran nuclear P5+1 talks to end today and resume in mid-Dec, possibly in Oman

- Saudi Aramco CEO: Oil price drop decline won't deter company from strategy and believes Gulf oil producers can withstand low oil prices

Currencies

- Low-liquidity conditions and dearth of data kept FX markets subdued.

- The EUR/USD hovered near the 1.24 level in quiet trading on Monday after German IFO Business Climate Survey registered its 1st MoM improvement in 7 months. Peripheral and other European yields continued to hit record lows. - Spanish 10-year gov't yield below 2.00% level in early European trading for record lows. Italy, Austria and France all saw their respective 10-year yield hits record lows in the session

- ECB chief Draghi rekindled hopes of additional ECB measures in December by re-affirming the message that the ECB must do what it can to boost inflation. Goldman analyst stated that he saw 1 in 3 chance of QE in H1 2015 from ECB

**Political/In the Papers:

- (IR) Russia and China could reach a compromise position on Iran - Russian press

- (CH) SNB's Jordan repeated his opposition to gold initiative, arguing once again that it would impede the central bank's ability to defend the 1.2000 franc cap

**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 Weekly Economists Survey

- 06:00 (IT) Italy PM Renzi with Austria Chancellor Faymann

- 06:00 (ES) Bank of Spain de Molina

- 06:00 (IL) Israel Oct Unemployment Rate: No est v 6.5% prior

- 06:00 (RO) Romania to sell 2020 Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (CL) Chile Oct PPI M/M: No est v -0.7% prior

- 07:30 (BR) Brazil Oct Current Account Balance: -$7.5Be v -$7.9B prior; Foreign Direct Investment (FDI): $4.2Be v $4.2B prior

- 07:30 (TR) Turkey Nov Real Sector Confidence (Seasonally Adj): No est v 110.1 prior; Real Sector Confidence (unadj): No est v 106.9 prior

- 07:30 (TR) Turkey Nov Capacity Utilization: No est v 74.9% prior

- 07:35 (FI) Finland Econ Min

- 08:00 (DE) ECB's Weidmann (Germany) in Madrid

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Oct Chicago Fed National Activity Index: No est v 0.47 prior

- 08:50 (FR) France to sell €6.3-7.5B in 3-month, 6-month and 12-month bills

- 09:00 (IL) Israel Central Bank Interest Rate Decision: Expected to leave Base Rate unchanged at 0.25%

- 09:00 (BE) Belgium Nov Business Confidence: -6.9e v -6.8 prior

- 09:00 (MX) Mexico Oct Unemployment Rate (unadj): 4.9%e v 5.1% prior; Unemployment Rate (Seasonally Adj): 4.7%e v 4.9% prior (revised from 4.8%)

- 09:30 (EU) ECB announces weekly purchases under its covered bond program 3 (CBPP3)

- 09:35 (EU) ECB calls for bids in 7-day main Refi at fox

- 09:45 (US) Nov Preliminary Markit Services PMI: 57.3e v 57.1 prior; Composite PMI: No est v 57.2 prior

- 10:30 (US) Nov Dallas Fed Manufacturing Activity: 9.0e v 10.5 prior

- 11:30 (BR) Brazil Oct Tax Collections (BRL): 104.6Be v 90.7B prior

- 11:30 (US) Treasury to sell combined $52B in 3-Month and 6-month Bills

- 13:00 (US) Treasury to sell $28B in 2-Year Notes

- 18:50 (JP) Bank of Japan (BOJ) Oct. 31 meeting minutes

- 20:00 (JP) BOJ Gov Kuroda speaks in Nagoya

- 23:00 (JP) BOJ's Nakaso in Tokyo