US equity markets racked up their fifth consecutive week of gains and the S&P500 closed out Friday at another all-time high. Meanwhile the ECB launched its ABS program as Europe hovers at the very edge of full-blown deflation, Japan entered technical recession as it reported its second consecutive quarter of economic contraction, and the PBoC sprung a surprise rate cut on Friday to reassure China about its own economic problems. Preliminary November European PMI data was not encouraging, while the flash November HSBC China PMI data was just at the edge of contraction. Meanwhile in the US, October housing data was excellent, weekly jobless claims fell to their lowest level since 2000, and the Philly Fed business outlook index rocketed to its highest reading since 1993. For the week, the DJIA rose 1%, the S&P500 added 1.2% and the Nasdaq gained 0.5%.

The unexpected contraction in Japan's preliminary Q3 GDP data (-1.6% y/y, -0.4% q/q) drove the Nikkei down 3% on Monday and gave the excuse Japanese PM Abe needed to delay the planned sales tax hike. Abe said he would call early elections to cement his "three arrows" economic reform program. The yen continues to be a one-way ride, with USD/JPY rising from 115.5 to 119, another seven-year low for the yen.

China's PBoC responded to recent soft economic data by cutting its benchmark lending and deposit rates by 40 basis points and 25 basis points, respectively. Meanwhile, the deposit rate ceiling was increased to 1.2x the benchmark deposit rate. In a note, Goldman Sachs said while the move itself is unlikely to have much of an impact on the economy, it sends a very clear signal that Beijing is willing to loosen its policy stance to support the economy and its willingness to use a broad spectrum of policy tools, much as it did earlier in 2014.

The minutes from the Oct 28-29th FOMC meeting showed that members are looking ahead to next year, continuing discussions about how exit strategy should be communicated. Only one member advocated dropping the key "considerable time" clause on forward guidance, but many said that it would be helpful if the Fed would soon clarify its approach to the pace of interest rate hikes. The committee observed that problems in overseas economies presented only a "limited" impact on the US recovery. The need to watch inflation was highlighted, and the notes observed that market-based measures of inflation had declined somewhat, but survey-based measures of longer-term inflation expectations had remained stable.

On Monday Draghi provided his quarterly update to the EU Parliament, and apart from familiar monetary policy talking points he offered heavy suggestions that sovereign bond buying by the ECB was still in the realm of possibility. Later in the week, Draghi recalled his landmark "whatever it takes" moment by saying the ECB will "do what we must to raise inflation and inflation expectations as fast as possible." Draghi said he fears low inflation could percolate through the economy and worsen the economic situation. His comments were taken as a strong signal that the ECB will forge ahead with quantitative easing in the months ahead. EUR/USD tanked late in the week, testing 1.2400 after the second Draghi speech and the ECB officially launched it ABS assets purchase program.

WTI crude pivoted around $75 this week before breaking out above $77 on Friday while Brent rose back above $81, aided by the implications of the PBoC rate cut. The OPEC guessing game of cut or no cut continued all week, with both analysts and OPEC nations seemingly split on the prospects for lowered quotas at the organization's meeting in Vienna on November 27th. Smaller non-Arab members led by Venezuela want to cut production and halt the slide in prices, while Persian Gulf members want steady policy. Non-OPEC member Russia is deeply distressed by lower oil prices and there was talk that the Russians might preemptively cut production to bolster prices.

Gold and EUR/CHF were whipped around by polls out ahead of Switzerland's "Save Our Gold" referendum, scheduled for November 30th. In recent weeks, polls had suggested more support in favor of the measure than against it, however two polls out this week suggested the no vote at well above 50%. Spot gold traded as low as $1,170 after the release of the new polls, but rebounded late in the week on the Chinese interest rate cuts. EUR/CHF had been testing 1.2010 all week, but backed off after the polls and talk of additional SNB intervention to defend the 1.2000 floor.

President Obama unveiled a sweeping executive order on immigration reform, including measures to let five million undocumented aliens remain in the country, to increase border security, and to provide more visas for high skilled foreign workers. The directive does not provide a pathway to citizenship. The Republicans widely condemned the move.

Retailers reported more third-quarter results this week, with nearly all citing a very highly competitive environment that is crimping margins. Big box retailer Target delivered an upside surprise, although y/y growth in profits and revenues was pretty anemic. BestBuy's margins, profits and revenue all saw healthy growth, while US comps were good and online comps were strong. Gap Inc met expectations but cut its FY guidance, while same store sales were negative. L Brands had a decent quarter with good comp sales gains.

Two gigantic deals took markets by storm on Monday. After a week of rumors, Actavis reached a deal to acquire Allergan for $219/share in cash and stock, in a total deal valued around $66B. Allergan's hostile suitor Valeant said it could not justify matching the price, giving up the fight. Baker Hughes agreed to be acquired by Halliburton in a cash-and-stock valued at around $34.6 billion.

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