French Sept Industrial production data beats expectations

Notes/Observations

- Market participants re-evaluate risk appetite

- Further slowdown in Chinese inflation keeps door open for more PBoC measures

- French Sept Industrial production data beats expectations

- European inflation data continues its improving trend (Hungary and Norway beat expectations)

Economic data

- (JP) Japan Oct Eco Watchers Current Survey: 48.2 v 48.0e; Outlook Survey: 49.1 v 49.3e

- (CH) Swiss Oct Unemployment Rate: 3.3% v 3.3%e; Unemployment Rate (Seasonally Adj): 3.4% v 3.4%e

- (FR) France Sept Industrial Production (beat) M/M: +0.1% v -0.4%e; Y/Y: 1.8% v 1.8%e

- (FR) France Sept Manufacturing Production (beat) M/M: +0.1% v -0.5%e; Y/Y:1 .6% v 1.9%e

- (HU) Hungary Oct CPI (beat) M/M: 0.2% v 0.1%e; Y/Y: 0.1% v 0.0%e

- (NO) Norway Oct CPI (beat) M/M: 0.4% v 0.3%e; Y/Y: 2.5% v 2.3%e

- (NO) Norway Oct CPI Underlying M/M: 0.2% v 0.2%e; Y/Y: 3.0% v 3.1%e

- (IT) Italy Sept Industrial Production (mixed) M/M: 0.2% v 0.6%e; Y/Y: 1.7% v 4.1% prior; Industrial Production WDA Y/Y: 1.7% v 1.4%e

**Fixed Income Issuance:

- (EU) ESM open books to sell EUR-denominated 2036 bond via syndicate; guidance at +10bps to mid-swaps

- (FI) Finland to sell GAP-denominated Dec 2020 bond via syndicate; guidance seen +29bps to UK Treasuries

- (ID) Indonesia sold total IDR9.0T in 3-month, 12-month Bills and 5-year and 15-year Govt Bonds

- (NL) Netherlands Debt Agency (DSTA ) sold €2.58B vs. €2.0-3.0B indicated range in 0% 2018 DSL bonds; Avg Yield: -0.271% (record low)v-0.156% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.3% at 13,407, FTSE -0.4% at 6,270, DAX -0.5% at 10,763, CAC-40 -0.3% at 4,897, IBEX-35 -0.5% at 10,276, FTSE MIB +0.3% at 22,189, SMI -0.2% at 8,854, S&P 500 Futures -0.2%]

- Market focal points/key themes: European stocks moved down in early trading, lead by material stocks; further signs of slowdown in China depressed risk sentiment, impacted luxury stocks; Singapore markets closed for holiday; Italy stocks bucking trend ahead of major banks reporting after close; Telefonica Deutschland opened lower after Royal KPN sold stake in the company; Dialog Semiconductor supported after Elliott opposes Atmel acquisition; Portugal index continued to slide after leftist coalition prepares to vote out PM Coelho's government; upcoming US earnings include DR Horton, Lionsgate Entertainment and Beazer Homes

**Sectors

- Consumer discretionary [Pandora PNDORA.DK -0.2% (results), ITV ITV.UK +1.6% (trading update), Premier Foods PFD.UK +16.1% (results), Wolseley WOS.UK -4.5% (trading update)]

- Financials [Experian EXPN.UK +5.8% (results, buyback), Land Securities LAND.UK -2.3% (results), Julius Baer BAER.CH -2.6% (outlook), Aareal ARL.DE -4.3% (raises guidance), Prudential PRU.UK -1.1% (trading statement)]

- Healthcare [Nicox COX.FR +10% (licence deal)]

- Industrials [Vallourec VK.FR -9.0% (results), Alfa Laval ALFA.SE -1.2% (New CEO), Eiffage FGR.FR -3.6% (results)]

- Materials [Arkema AKE.FR -3.3% (raises guidance)]

- Technology [Opera Software OPERA.NO -8.8% (results), Dialog Semiconductor DLG.DE +5.6% (bid opoosition)]

- Telecom [Ericsson ERICB.SE -2.9% (trading update), Vodafone VOD.UK +4.0% (results beat, outlook), Avanquest AVQ.FR +11.1% (calles EGM), Deutsche Telecom O2D.DE -3.5% (stake sale)]

- Utilities [CEZ CEZ.CZ -2.3% (results, outlook), E.on EOAN.DE -2.3% (press speculation will post loss), National Grid NG.UK +2.1% (results)]

Speakers

- PM Cameron: Promise for EU referendum to be honored; EU reform negotiations now entering its formal stage. Confident that can reach an agreement with EU and was asking European leaders for a clear, legally binding and irreversible agreement on ending Britain s obligation to ever-closer union

- ECB's Weidmann (Germany) reiterated view of having concerns that monetary policy being too loose for too long

- ECB's Liikanen (Finland): Inflation is clearly slower than the 2% target; willing to act with all instruments within the mandate. Reiterated view that monetary policy alone cannot sustain economic growth; structural reform are needed

- China President Xi reiterated would continue a prudent monetary policy and pro-active fiscal policy. Reiterated view to expand overall demand. To accelerate State-Own Enterprises (SOE) reform and financial and fiscal reforms

- IMF's Lagarde: China is clearly moving towards a floating rate currency mechanism

- OPEC Sec Gen al-Badri: OPEC would not accept less than 40% of global oil market and needed an oil price where which could benefit both producers and consumer. Reiterated view that 2016 would see positive results in oil market and believed that reduction of 1.5M bpd is NOT enough to balance the market

- IEA World Energy Outlook: OPEC market share seen steady at 41% for 2014-20 period and rising to 49% by 2040 Forecasted oil prices at $113/barrel by 2030 and at $128/barrel by 2040. Iran and Iraq oil production seen at 4.4M bdp respectively in 2020

Currencies

- The USD continued its consolidation after last week with little price action seen in session. The EUR/USD continue to hover around the 1.0740 level after losing over 6.5% in the weeks since the ECB left the door open for more measures. Dealers noted that price action seemed likely to test the 1.0450 lows registered back in spring with more analysts jumping on the band wagon calling for parity by end 2015.

- The USD/JPY pair moved off its 3-month highs from Monday at 123.60 and was around 123.15 just ahead of the NY morning.

**Fixed Income:

- Bund futures trade at 155.97 up 55 ticks retracing the bulk of Mondays move lower on talks of a possible deposit rate cut in December. Immediate support moves to 155.35 followed by 155.14. A break tests the recent low at 154.81, with continuation to 154.64 followed by 154.09. Analysts eye resistance at156.26 followed by 156.39. Continuation sees a test of 157.08 followed 157.76.
Today the Netherlands sold €2.58B in 3 year DSL the equivalent of 36K Schatz or 6K bund futures.

- Gilt futures trade at 116.75 up 32 ticks on risk off buying. Below analysts target 116.36 followed by 116.07, with continuation seeing 115.53 then 115.07, Resistance stands at 116.92 followed by 117.20 with a break seeing 117.92.

- Tuesday's liquidity report showed Monday's excess liquidity rose to €568.0B a rise of €2.1B from €565.9B prior. This was primarily due to AFs and MonPol portfolios falling to record negative €156.8B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €79M from €21M prior.

- Corporate issuance saw a very busy Monday with around $17B worth of deals to be priced, with the highlight being Chevron's $5B multi tranche offering and a $3.25B offering from ANZ. The increase in activity was due to Veterans holiday on Wednesday. In the high yield space European funds saw €809M in inflow for the week ending Nov 4th, with October ending the month with €1.5B in inflows, bringing to an end 4 consecutive months of outflows. For the year inflows stand at €7.5B v €4.15B y/y. Analysts estimate some $25B worth of issuance to come to market this week.

**Political/In the Papers:

- (EU) ECB said to face three lawsuits over QE in German courts. The suits are directed against the ECB plan and target the German parliament and government for failing to stop it (**Reminder: On Jun 16th European Court of Justice (ECJ) issued a ruling on its OMT bond buying scheme in which the ECB won the ruling and was permitted to operate the program( in line with Jan opinion)

- (IN) India govt said to relax foreign direct investment (FDI) norms for 14 sectors

Looking Ahead

- (PT) ECB's Constancio (Portugal) participates in Ecofin Meeting in Brussels

- (SE) Sweden PM, Nordic Defence Ministers meet Nato Sec Gen Stoltenberg

- (PT) Bank of Portugal data on banks

- (MX) Mexico Oct Nominal Wages: No est v 4.1% prior

- (RU) Russia Oct Light Vehicle Car Sales Y/Y: -33%e v -29% prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

- 05:30 (DE) Germany to sell €1.0B in 0.50% Apr I/L 2030 Bond (Bundei)

- 05:30 (BE) Belgium Debt Agency to sell €1.6-2.0B in 3-month and 12-month Bills

- 05:30 (UK) DMO to sell £700M in 0.125% I/L 2058 Gilts

- 06:00 (US) Oct NFIB Small Business Optimism: 96.4e v 96.1prior

- 06:00 (ZA) South Africa Sept Manufacturing Production M/M: -0.7%e v +0.4% prior; Y/Y: -2.5%e v 0.2% prior

- 06:15 (FR) ECB's Coeure (France) speaks in Berlin

- 06:30 (CL) Chile Central Bank's Economist Survey

- 06:45 (US) Daily Libor Fixing

- 07:45 (US) Weekly Chain Store Sales data

- 07:45 (US) Treasury Sec Lew

- 08:15 Baltic Dry Bulk Index

- 08:30 (US) Oct Import Price Index M/M: -0.1%e v -0.1% prior; Y/Y: -9.4%e v 10.7% prior

- 08:55 (US) Weekly Redbook Sales

- 09:00 (EU) Weekly ECB Forex Reserves

- 10:00 (US) Sept Wholesale Inventories M/M: 0.1%e v 0.1% prior; Wholesale Trade Sales M/M: +0.1%e v -1.0% prior

- 10:00 (MX) Mexico Weekly International Reserves

- 11:00 (EU) Eurogroup Chief Dijsselbloem in Brussels

- 11:30 (US) Treasury to sell 4-Week and 52-week Bills

- 12:00 (CA) Bank of Canada (BOC) Wilkins makes introductory remarks in Toronto

- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report

- 12:30 (UK) BOEs Cunliffe in Geneva

- 13:00 (US) Treasury to sell 10-Year Notes

- 15:00 (NZ) New Zealand Central Bank (RBNZ) Financial Stability Report

- 15:05 (NZ) RBNZ Gov Wheeler press conferece on Financial Stability Report

- 16:30 (US) Weekly API Oil Inventories

- 17:15 (US) Fed's Evans (dove, FOMC voter) on panel on debt management

- 18:00 (KR) South Korea Oct Unemployment Rate: 3.6%e v 3.5% prior

- 20:30 (JP) BOJ Harada speech in Utsunomiya

- 22:00 (CN) China to sell 5-Year Bonds

- 22:00 (TH) Thailand to sell THB13B in 2025 Bonds