Divergent monetary policy paths for G3 remains the focus

Notes/Observations

- Shanghai Composite falls by over 5% in session (largest decline in 3 months) after China October industrial profits fall for fifth straight month; China security regulator CSRC to probe CITIC and Guosen Securities for violations

- Japan unemployment hits 20-year low but household spending shows consumers lack confidence

- Spain Nov Preliminary CPI better-than-expected but not derailing expectations of aggressive ECB action next week

- Thanksgiving shopping crowds 'good not great'; online sales strong

Economic data

- (DE) Germany Oct Import Price Index M/M: -0.3% v -0.2%e; Y/Y: -4.1% v -3.9%e

- (UK) Nationwide House Prices M/M: 0.1% v 0.5%e; Y/Y: 3.7% v 4.2%e

- (FI) Finland Nov Consumer Confidence Index: 4.7 v 2.0e; Business Confidence: -10 v 7 prior

- (FR) France Oct Consumer Spending (miss) M/M: -0.7% v -0.1%e; Y/Y: 2.1% v 2.8%e

- (TW) Taiwan Q3 Final GDP Y/Y: -0.6% v -1.0%e

- (ES) Spain Nov Preliminary CPI (beat) M/M: 0.3% v 0.2%e; Y/Y: -0.3% v -0.5%e

- (ES) Spain Nov Preliminary CPI EU Harmonized M/M: 0.2% v 0.0%e; Y/Y: -0.4% v -0.7%e

- (SE) Sweden Oct Retail Sales M/M: 0.3% v 0.6%e; Y/Y: 5.0% v 3.8%e

- (IT) Italy Nov Consumer Confidence Index (beat): 118.4 v 116.5e; Business Confidence (miss): 104.6 v 106.0e; Economic Sentiment: 107.1 v 107.0 prior

- (NO) Norway Nov Unemployment Rate: 2.9% v 2.9%e

- (NO) Norway Oct Retail Sales W/Auto Fuel M/M: 0.9% v 0.7%e

- (UK) Q3 Preliminary GDP (in-line) Q/Q: 0.5% v 0.5%e; Y/Y: 2.3% v 2.3%e

- (UK) Q3 Preliminary Private Consumption Q/Q: 0.8% v 0.7%e; Government Spending Q/Q: 1.3% v 0.1%e; Gross Fixed Capital Formation Q/Q: 1.3% v 0.9%e; Exports Q/Q: 0.9% v 0.9%e; Imports Q/Q: 5.5% v 3.5%e

- (UK) Q3 Preliminary Total Business Investment Q/Q: 2.2% v 0.8%e; Y/Y: 6.6% v 3.1% prior

- (PT) Portugal Nov Consumer Confidence Index: -13.7 v -11.2 prior; Economic Climate Indicator: 0.9 v 1.2 prior

- (EU) Euro Zone Nov Business Climate Indicator (miss): 0.36 v 0.45e; Consumer Confidence (Final): -5.9 v -6.0e; Economic Confidence: 106.1 v 105.9e; Industrial Confidence: -3.2 v -2.1e; Services Confidence: 12.8 v 12.0e

- (GR) Greece Q3 Final GDP (miss) Q/Q: -0.9% v -0.5% prelim; Y/Y: -0.9% v -0.1% prelim

**Fixed Income Issuance:

- (IN) India sold total INR150B vs.INR150B indicated in 2023, 2025, 2034, 2044 and 2055 bonds** **

- (DK) Denmark sold total DKK1.32B in 3-month and 6-month Bills

- (ZA) South Africa sold total ZAR650M vs. ZAR650M indicated in I/L 2033, 2046 and 2050 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.03% at 3498, FTSE -0.3% at 6373, DAX +0.1% at 11329, CAC-40 +0.03% at 4948, IBEX-35 +0.1% at 10342, FTSE MIB +0.2% at +0.2, SMI +0.03% at 8970, S&P 500 Futures -0.06% at 2087]

- Market focal points/key themes: European indices are a mixed bag this morning with Infineon leading the German Dax once again after yesterday's stellar bottom line results; Orco leading the losses in the French CAC-40 after reporting much lower revenues on a y/y basis; Anglo American falling to record lows following the slide in commodity prices and on the back of other Asian indices falling lower overnight.

Equities

- Consumer discretionary: Stockmann OYJ ABP [STCBV.FI] +15.6% (Sale of department store in Russia), Patisserie [CAKE.UK] -5% (FY15 results, broker upgrade)

- Financials: Orco Property Group [ORC.FR] -7.7% (9M earnings)

- Industrials: Anglo American [AAL.UK] -5% (lower commodity prices)

- Healthcare: Kiadis Pharma [KDS.NL] -4% (9M earnings)

- Utilities: Pennon Group [PNN.UK] +3% (H1 results)

Speakers

- EU Draft Document on Greece noted that the country must implement 13 economic overhauls to receive €1.0B in financial Aid and overhauls Included financial-sector reform and design of privatization fund

- ECB Financial Stability Directorate Angeloni: ECB transparency on Supervisory Review and Evaluation Process (SREP) might enhance confidence

- EU Parliament's Ferber: Reader to accept one year delay of Markets in Financial Instruments Directive (MIFID)

- South Africa Central Bank (SARB) Dep Gov Groepe: Slow normalization by Fed need not be negative

- Russia Central Bank might add CNY currency (Yuan) to its reserves (**Note: The CBR had been vocal in its FX reserves diversification throughout the financial crisis)

- IEA Chief Economist Birol expected OPEC to take a responsible decision at its Dec 4th meeting in Vienna

- China security regulator CSRC stated that it had begun feasibility study for UK-Shanghai stock link

- PBoC said to conduct 6-month Medium-term Lending Facility (MLF) and inject liquidity at 3.25%

- India RBI gov Rajan: Need to fine-tune the gold monetization scheme

Currencies

- The FX markets remains quiet as the divergent policy path theme continued to percolate. Dealers noted some light safe-haven flows (into EUR and JPY currencies) in Asia after sharp losses were experienced in Chinese stocks. The overall theme remained that market participants were betting that ECB would be more aggressive in cutting its Deposit Rate next week and the Fed remained on course to begin rate lift off in Dec.

- The EUR/USD continued to consolidate from its 7-month low of 1.0565 hit earlier in the week and was fractionally softer just above the 1.06 level as the NY morning approached

- The USD/CHF hit fresh 2015 highs above 1.0270 level as the session saw broad-based weakness in the currency.

- Mixed data out of Japan. CPI numbers were slightly rosier but still nowhere near the 2% inflation target set out for H2 of next year. USD/JPY hovered around 122.50 in the session.

**Fixed Income:

- Bund futures trade at 158.46 up 16 ticks on the back of weaker markets in Asia. Futures made a new short term high at 158.52 within touching distance of 158.59 high. Support moves to 157.89 followed by 157.51, with further downside seeing 156.99. Resistance stands 158.59 October high with a break seeing 158.98, then 159.46, with an eventual target of 160.62.

- Mar 16 Gilt futures trade at 117.70 up 4 ticks as UK GDP 2nd reading came in line with estimates. Gilt futures will be rolling into Mar16 futures with the Dec contract due to expire. Analysts eye support for Mar16 Gilts at 117.35 followed by 117.08. Resistance lies just above at 117.71 high.

Today saw Italy tap its 5 and 10 year BTPs along with its 7 year CCTeu for a combined total of €5.2B the equivalent of 27K Bund futures or 27K BTP futures.

-Friday's liquidity report showed Thursday's excess liquidity fell to €538.1B a fall of €8.1B from €546.2B prior. This was primarily due to AFs and MonPol portfolios rising to negative €126.0B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €38M from €54M prior.

**Political/In the Papers:

- (PT) New Portugal govt led by Socialists sworn in by the President but warned not to stray from budget consolidation path agreed with the EU

- (UK) PM Cameron urged his Parliament to back ISIS airstrikes which meant taking action in Syria

- (DE) German Chancellor Merkel said to request deployment of Tornado aircraft for reconnaissance role in Syria

- (GR) Eurogroup said to have given Greece a Dec 11th deadline to agree on measures for disbursement of next €1.0B tranc. It Target payment by Dec 18th but measures must be legislated before this

Looking Ahead

- OPEC Economic Commission meets in Vienna

- (IT) Italy Debt Agency (Tesoro) to sell combined €3.25-4.25B in 5-year and 10-year Bonds

- (IT) Italy Debt Agency (Tesoro) to sell€0.75-1.0B in 0.75% Dec 2022 CCTeu (Floating Rate Bond)

- 06:00 (IE) Ireland Oct Retail Sales Volume M/M: No est v 0.3% prior; Y/Y: No est v 8.6% prior

- 06:00 (UK) DMO to sell combined £5.5B in 1-month, 3-month and 6-month Bills (£1.0B, 2.5B and £2.0B respectively)

- 06:30 (IN) India Weekly Forex Reserves

- 06:30 (CL) Chile Central Bank Meeting Minutes

- 06:45 (US) Daily Libor Fixing

- 07:00 (DE) Germany Dec GfK Consumer Confidence: 9.2e v 9.4 prior

- 07:00 (NL) ECBs Knot (Netherlands)

- 07:30 (BR) Brazil Oct Total Outstanding Loans (BRL): No est v 3.160B prior; M/M: No est v 0.8% prior; Personal Loan Default Rate: 5.9%e v 5.7% prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bonds to be issued

- 08:15 (US) Baltic Dry Bulk Index

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

- 08:30 (CA) Canada Oct Industrial Product Price M/M: -0.1%e v -0.3% prior; Raw Materials Price Index M/M: 0.3%e v 3.0% prior

- 09:00 (MX) Mexico Oct Trade Balance: -$1.8Be v -$1.4B prior

- 09:00 (MX) Mexico Oct Unemployment Rate: 4.3%e v 4.5% prior; Unemployment Rate (Seasonally Adj): 4.2%e v 4.2% prior

- 11:00 (EU) Potential EU sovereign ratings after European close

- (LV) Latvia Sovereign Debt to Be Rated by S&P

- 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to raise Overnight Lending Rate by 50bps to 5.75%