• *** ECONOMIC DATA ***
  • GE Q3 Preliminary GDP: Q/Q 0.7% v 0.7%e || Y/Y 2.5% v 2.5%e || Y/Y nsa 2.4% v 2.6%e
  • German economic growth appears to have been driven by domestic demand along with increased investment in equipment and construction.
  • FR Q3 Preliminary GDP: Q/Q 0.7% v 0.7%e || Y/Y 2.1% v 2.0%e
  • FR Sep Current Account: -€2.3B v -€1.7B
  • French GDP was roughly in line with expectations. The stronger-than-expected y/y rise was led by an increase in domestic demand, as well as increased household consumption
  • SP Oct CPI: M/M 1.3% v 1.3%e || Y/Y 3.6% v 3.65e
  • SP Oct CPI Harmonized: M/M 1.3% v 1.3%e || Y/Y 3.6% v 3.6%e
  • The rise in Spanish consumer prices during the month of October was in line with expectations, largely the result of an increase in food and drink prices, which rose by 5.5% m/m compared to 2.4% in September.
  • IT Oct Final CPI: M/M 0.3% v 0.4%e || Y/Y 2.1% v 2.1%e
  • IT Oct Final CPI Harmonized: M/M 0.8% v 0.8%e || 2.3% v 2.3%e
  • UK Oct Claimant Count Rate: 2.6% v 2.6%e
  • UK Oct Jobless Claims Change: -9.9K v –6.0Ke || Prior revised from –12.8K to –13.9K
  • UK Sep Avg. Earnings ex-Bonus: 4.1% v 4.0%e
  • UK Sep Avg. Earnings inc. Bonus: 3.7% v 3.7%e
  • UK Sep ILO Unemployment Rate 5.4% v 5.4%e
  • Average earnings excluding bonus rose by more than expected to its highest level since March, led by the services sector, which rose to 4.3% from 3.9% in August, and the private services sector, which rose to 4.7% from 4.1% in August. The excluding bonus reading, which was expected to rise, remained unchanged from August as a small gain in public sector wages was neutralized by a small loss in manufacturing wages.
  • EU Q3 Advanced GDP: Q/Q 0.7% v 0.6%e || Y/Y 2.6% v 2.6%e
  • Advanced GDP figures show a recovery from the second-quarter decline. The q/q exceeded estimates with the aid of strong readings in Germany, and the Netherlands.
  • *** COMMENTS/SPEAKERS ***
  • GE Economic Minister: The German economy is still on a robust growth path
  • GE Deputy Economic Minister: China’s planned shift of FX reserves into Euros could further hurt German exporters
  • RBC: Forecasts gold prices dropping to $725-$750 by the end of the year
  • BOE Quarterly Inflation Report: Sees CPI at 2.0% assuming at least one rate cut in 2008
  • BOE Quarterly Inflation Report: CPI to pick-up before slowing to its target in the mid-term
  • BOE Quarterly Inflation Report: Inflation risks are balanced
  • BOE Quarterly Inflation Report: There are signs that economic growth has started to ease
  • BOE Quarterly Inflation Report: Global commodity prices continue to present upside inflation pressures
  • BOE Quarterly Inflation Report: Weak wage data suggests growing wage pressures
  • BOE King: Sees difficult decisions in the months ahead
  • BOE King: The near-term inflation outlook is less benign
  • BOE King: House price inflation is easing
  • *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
  • Germany sold €5.98B in new 4.00% January 2018 bunds with an average yield of 4.19% and a bid-to-cover of 2.0x. The bid-to-cover compares to 1.9x on the previous auction, which was for the old issue.
  • Italy sold €2.5B in 4.25% October 2012 BTPs with an average yield of 4.14% and a bid-to-cover of 1.53x. The bid-to-cover compares to 1.38x at the previous auction.
  • On the currency front, the rise in global markets helped to keep carry trades in tact. The Yen has been softer throughout the session, giving back gains made since last Friday. The $/¥ tested its prior August sub-prime lows overnight. There was increased commentary regarding the effects of the weak Dollar overnight, with Germany’s Infineon and India’s Tata Motors acknowledging that the Dollar’s decline has weighed down on business. Also on the currency front overnight, the €/£ rose to new 3-year highs.
  • European fixed-income futures are trading lower in the session on the back of higher equity markets. Bund futures were largely unaffected by data overnight, but did gain some upside momentum following the 10-year auction, as well as the 5-year auction in Italy. Over in the UK gilts were also trading lower in the session, but gained upside momentum following the BOE’s quarterly inflation report. The BOE noted that inflation will return to its 2.0% target assuming at least once interest rate cut in 2008, a departure from its previous report in August, where the BOE saw the need for one more interest rate hike.
  • Front month crude oil futures are trading higher in the session after the OPEC secretary general reiterated overnight that he does not see the need for an output hike. The secretary general also said that he does not agree with the IEA’s lower demand forecast, and indicated that inventories are at acceptable levels. Gold is trading higher in the session supported by the stronger Euro, which has in turn lent upside momentum to silver and copper prices as well.
  • Thus far the session can be summarized by tight, strong equity market trading, slightly higher commodity prices, and a softer Yen. The bond auctions in the Euro-Zone were relatively favorable. Economic data in the Euro-Zone was roughly in line with consensus expectations, and was boring overall. The session has been void of comments from European officials. Over in the UK the economic data was slightly more interesting, with the focus falling on the higher average earnings data (including bonus). The BOE’s quarterly report was had a dovish tone overall, and was a departure from the August quarterly report.

By: John J. Phillips IV