Thanksgiving Turkey giving trouble to global equities

Good morning,

- Oil prices jumped and government debt prices edged up on Tuesday as concern about global tensions rose after Turkey shot down a Russian warplane near the Syrian border. The dollar fell against the traditionally safe-haven Japanese yen, helping to push gold up. Travel stocks fell after the U.S. State Department late on Monday warned U.S. citizens of the risk to worldwide travel posed by what it called increased terrorist threats. United Continental, American Airlines and Delta Air Lines each fell at least 2 percent.

- Russian Fighter Jet Shot Down by Turkey; Risk Trade is No More: Once upon a time, if a world super power on the brink of war had a fighter jet shot down after entering the airspace of another sovereign nation for barely a few seconds, all hell would break loose in markets and risk-off would reign supreme sending stocks tumbling. Not any more. The news of the Russian fighter jet being spectacularly grounded in a ball of flames saw only a mild spike down in the SP500 during early trade, but that was only a short lived move and quickly erased losses to actually close well in the green for the session.

- While the dispute between Turkey and Russia is unlikely to escalate into a “hot” conflict, it does underline the unresolved tensions over how to put an end to the unrest in Syria and Iraq. This uncertainty around a further escalation of the conflict in the Middle East has hung heavily over Asian markets with all indices in the region seeing red. Strong US Q3 GDP numbers and Case-Shiller House Prices served to push the WIRP bond market probability of a December Fed rate hike up to 74%. Despite this, the US dollar has been seeing a pullback. During the Asian session almost all Asia-Pacific currencies have gained during the session with the Malaysian ringgit, Korean won and Taiwanese dollar seeing the strongest performances.

- Copper and metals head for first gains in 6 weeks on the back of oil surge.

- Aussie Dollar Little Changed After China Consumer Sentiment.

- According to the BoJ minutes, one member said the effects of QE are fading. True of most unorthodox policy globally.

- BOC's Patterson: Interest rates in Canada remain stimulative, Canada's economy is rebounding. Oil and gas investment expected to remain negative in 2016, Says Canada is adjusting to lower commodity price. BOC reviewing 2% inflation target, Core Canada inflation measures remain near target.

- US Equities Close: DJIA 17814.93 (+0.13%); S&P500 2089.34 (+0.13%); NASDAQ 5102.808 (+0.01%).

- The Reserve Bank boss is still open to cutting the cash rate again but will “chill out” until the bank’s first board meeting in 2016. “I’m more than content to lower it if that actually helps, but is that the best thing to do at a particular time?” Glenn Stevens told an Australian Business Economists (ABE) dinner in Sydney. “As for February, that’s three months away, we’ve got Christmas, we should just chill out and see what the (economic) data says.” Recent good economic data, including the unemployment rate falling to a six-month low, has caused the chances of another interest rate cut to plummet. The cash rate is at a record low of two per cent, the most recent cut being in May. Mr Stevens admits the impact of an interest rate cut on the economy is shrinking as the cash rate gets lower. He said recent interest rate cuts didn’t make as much impact as the ones made in the early 1990s, when, in a series of moves, it went from 17 per cent to 4.75 per cent three year later in 1993. A survey of the ABE executive committee, coinciding with the group’s annual conference, found that economic growth is expected to pick up and the cash rate to stay unchanged in 2016. The bulk of the ABE committee attached a probability of 20 per cent that Australia would enter recession in the next two years. The risks were centered on China.

- The following are the latest technical setups for EUR/USD, USD/JPY, USD/CHF, GBP/USD, and USD/CAD as provided by the technical strategy team at Barclays Capital. EUR/USD: We are bearish and would use upticks towards 1.0765 as an opportunity to sell at better levels. Our targets are near 1.0520 and then the 1.0460 year-to-date lows. USD/JPY: Monday’s small topping candle signals a breather within the context of the overall rising trend. We would look to buy dips towards 122.20 for a move higher through 123.75 towards our targets near the 125.30/125.85 highs. GBP/USD: Our bearish view was encouraged by the close below 1.5155. Our was encouraged by the close below 1.5155. Our initial targets are near the 1.5025 November lows. Below 1.5025 would open our next targets in the 1.4860 area. USD/CAD: A small topping candle on Monday points to an interim pause within the overall bullish trend. We would look for signs of a base near 1.3245 and return to the 1.3460 highs. Above opens our next targets in the 1.3535 area. Our greater targets are near 1.4000.

- Nowhere will today's Autumn Statement and spending review be more closely watched than at the Bank of England. In the post-Great Recession period, monetary policy in the shape of record low interest rates and quantitative easing has been used to offset the downward pressure on output exerted by the Government's efforts to tame borrowing. 'We base our forecasts on the overall envelope for the Government deficit,' says Ben Broadbent. The former Goldman Sachs and Treasury economic guru is, as deputy governor for monetary policy, largely responsible for the Inflation Report, which each quarter sets the direction of interest rates. As he looks forward to this week's statement by the Chancellor, Broadbent notes: 'The implied pace of deficit reduction is picking up, relative to the last two years, over the next two to three, and that is in our forecasts. 'Have we got it right? I don't know,' he admits. The way in which budgetary policy works is in his view 'not precise'. It could be even less precise in the Autumn Statement with lead accountants PricewaterhouseCoopers forecasting that borrowing between now and 2020 will be £30billion higher than Chancellor George Osborne projected just four months ago in his post-election Budget. Even though fiscal policy is a key part of the Bank's projections for the economy, it is by no means the only factor that the Old Lady looks at.

- The U.S. economy expanded at a faster pace in the third quarter than previously reported, reflecting a smaller hit from efforts to rein in bloated inventories. Gross domestic product, the value of all goods and services produced, rose at a 2.1 percent annualized rate, up from an initial estimate of 1.5 percent, Commerce Department figures showed Tuesday in Washington. The report also showed corporate profits slumped while worker incomes jumped. The consumer continues to power the U.S. economy, with cheap gasoline giving households the means and greater job security giving them the confidence to spend.

- The 0.04 point rise in the UBS Consumption Indicator in October stems from a slight improvement in consumer confidence and expected business activity in the retail sector. Despite consumers' gloomy labor market expectations, this was outweighed slightly by the prospect of an economic upturn. At the same time, business activity in the retail sector seems to have improved recently. Turnover in September rose slightly by 0.1% in real terms and adjusted for holidays, according to the Federal Statistical Office. The index for business conditions in the retail trade, compiled by the KOF Swiss Economic Institute at the ETH Zurich, remains well below the long-term average. Although import prices have fallen considerably due to the strong franc, most expenses are incurred in local currency. Shopping tourism remains a source of concern for the retail sector. As shopping tourism shows up as imports, it is driving out a portion of domestic consumer spending, which accounts for more than half of Switzerland's GDP. -$NZD, $AUD, and $EUR are expected to be the most active majors vs $USD with 1W implied volatility at 11.23, 10.08, and 9.43 respectively.

- Major news for today: US Durable Goods, US Personal Income and Spending, US Initial Jobless Claims.

Have a great day!