• *** ECONOMIC DATA ***
  • SP Q3 Final GDP: Q/Q 0.7% v 0.7%e || Y/Y 3.8% v 3.8%e
  • IT Nov Consumer Confidence: 107.6 v 106.8e
  • IT Sep Retail Sales: M/M –0.2% v 0.0%e || Prior revised from 0.2% to 0.3% || Y/Y –0.6% v 0.5%e
  • UK BOE Minutes show a vote of 7-2 to hold rates in October
  • Comments from the minutes coupled with the recent economic data, as well as the August quarterly inflation report add to the probability of an interest rate cut in December.
  • *** SPEAKERS/COMMENTS ***
  • BOE Gieve: There may still be bad news to come in the financial markets [newspaper]
  • BOE Gieve: Some markets are still very illiquid; Could see more tightening in money markets by the end of the year [newspaper]
  • GE Eco Advisor Bofinger: ECB should prevent the Euro from strengthening further [press]
  • GE BDB Association: Companies seen coping with the strong Euro; No reason for the ECB to cut rates
  • GE BDB Association: ECB's next move will be a cut; No move seen soon
  • GE BDB Association: Economic growth forecasts remain unchanged
  • French Business Chief: French and German firms are increasingly concerned on the Euro FX rate
  • French Business Chief: G8 needs to address the FX issue in Japan
  • BOE Minutes: Blanchflower, and Gieve voted to cut rates by 25bps
  • BOE Minutes: Difficult to gauge the impact of credit tightening
  • BOE Minutes: Majority: Waiting to analyze future economic data;
  • BOE Minutes: Majority: Early rate cut risks rising inflation, and wages
  • BOE Minutes: Minority: Housing market is slowing; waiting to cut rates risks a sharper slowdown
  • OECD: US mortgage related losses could be as high as $300B
  • OECD: The weaker Dollar is complicating international policy coordination
  • OECD: The credit squeeze may cause a more protracted downturn in equities
  • *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
  • Fixed income futures are trading higher in the session on continued concerns surrounding the subprime situation. Long-gilts also gained support from the BOE minutes, which seemed to add to the probability of a December rate cut.
  • In currencies, carry trades continue to unwind as market participants speculate about the possibility of FX intervention. The Usd fell to new post World War II lows against the Franc, while the Euro made fresh all times highs prior to the European open.
  • On the commodity front, crude oil is off of its best levels of the session, but remains within range of the $100 mark. Spot gold is trading lower after breaking $800 early on.
  • Overall the session can be characterized as quiet. The general sentiment amongst market participants is once of uncertainty. On the speaker front, uncertainty about the extent of subprime, and the war of words over FX levels continue circulate.
By: John J. Phillips IV