• *** ECONOMIC DATA ***
  • FR Nov Business Confidence: 110 v 107e
  • FR Nov Production Outlook: 3 v 4e
  • FR Nov Own-Company Production Outlook: 21 v 17 [highest since January 2001] || Prior revised from 20 to 19
  • Taking a look at some of the other components, the rise in business confidence was the result of a rise in past production from 12 in October to 16 in November, and a rise in order books from 0 to 3 for the same periods, as well as the rise in own-company production outlook. Despite the rise, unless the Euro weakens the index is likely to decline in the coming months as export strength is at stake.
  • FR Oct Housing Starts: 10.5% v 12.9% prior
  • FR Oct Housing Permits: 3.2% v 3.2% prior
  • SW Nov Manufacturing Confidence: -1 v 1e
  • SW Nov Consumer Confidence: 12.2 v 15.4e
  • SW Nov Economic Tendency Survey: 106.6 v 110.0 prior || Prior revised from 110.0 to 109.6
  • Swedish confidence declined during November. Manufacturing confidence was weighed down by a decline in the construction and private sector services components.
  • SW Oct PPI: M/M –0.4% v 0.5%e || Y/Y 3.9% v 4.7%e
  • SW Oct Household Lending: 11.7% v 11.7% prior
  • SW Q3 Current Account [sek]: 41.2B v 39.7B prior
  • SZ Oct Producer & Import Prices: M/M 0.2% v 0.4%e || Y/Y 2.7% v 2.9%e
  • SZ Oct UBS Consumption Indicator: 2.229 v 1.992 prior || Prior revised from 1.992 to 2.005
  • Swiss producer & import prices rose by less than expected, bolstered by a rise in import prices, by dragged down by flat readings on the producer prices.
  • IT Nov Business Confidence: 92.2 v 92.0e || Prior revised form 92.9 to 92.8
  • Italian business confidence declined to its lowest level since December of 2005, but still managed to beat out consensus expectations. Confidence was dragged down by the total orders component, which declined to –8 from –6 in October, and the domestic orders, and inventory of manufactured goods components, both of which declined by one point. Italian production outlook declined to 15 from 18 in October, and the selling prices outlook decline to 12 from 15 in October.
  • IT Oct Hourly Wages: M/M 0.5% v 0.3%e || Y/Y 2.0% v 1.9%e
  • GE Nov Saxony CPI: M/M 0.4% v 0.3% prior || Y/Y 3.4% v 2.7% prior
  • Consumer prices in the German state of Saxony rose by 3.4% y/y to their highest level since December of 1994. The rise in CPI was led by a rise in energy costs, with the heading oil component rising from 3.8% y/y in October to 24.8% in November; The fuel component rose from 11.6% to 18.9%, and the household energy component rose from 4.9% to 8.3%. While other components posted gains as well, energy remains the main inflationary theme in November, bolstering the y/y reading to multi-year highs.
  • GE Hesse CPI: M/M 0.4% v 0.2% prior || Y/Y 2.9% v 2.3% prior
  • GE Brandenburg CPI: M/M 0.4% v 0.4% prior || Y/Y 3.1% v 2.4% prior
  • GE Baden Wuerttemberg CPI: M/M 0.4% v 0.2% prior || Y/Y 3.0% v 2.4% prior
  • GE North Rhine Westphalia CPI: M/M 0.5% v 0.1% prior || Y/Y 3.2% v 2.6% prior
  • Following the Saxony CPI data, readings in Hesse and Brandenburg maintained the inflationary theme, with the y/y reading in Brandenburg also reaching its highest level since December 1994, while the y/y reading in Hesse reached its highest level on record since records began in 2000. As expected energy and food prices were largely responsible for the rise in German inflation. The states of Baden Wuerttemberg and NRW also kept the spirit alive posting multi-year y/y highs.
  • GE Nov IFO Business Climate: 104.2 v 103.3e
  • GE Nov IFO Current Assessment: 110.4 v 109.2
  • GE Nov IFO Expectations: 98.3 v 98.0e
  • German IFO surprised markets with the headline business climate reading posting a gain in November. The IFO economists indicated that, while the economy is showing signs of gradual cooling, there is grown optimism on exporters’ ability to deal with the strong Euro. IFO economists also noted that they do not see an overall economic crisis on the horizon.
  • *** SPEAKERS/COMMENTS ***
  • Iraqi Oil Minister: OPEC will not discuss dollar weakness at the December meeting
  • S&P Report: Food price inflation will be a key issue for European retailers in 2008
  • ECB Hurley: Market turbulence seen persisting into 2008
  • ECB Hurley: There is some way to go for normal market conditions
  • ECB Hurley: Uncertainty is likely to remain high
  • IFO Economist: Optimism about exports have strengthened despite higher Euro
  • IFO Economist: Does not see overall economic crisis
  • IFO Economist: German growth still seen slowing in the near term
  • *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
  • On the commody front, Bear Stearns raised its 2008 WTI oil price forecast from $60/barrel to $75/barrel. The Iraqi Oil Minister said that OPEC may increase its output by 500K BPD at its December meeting and added that OPEC will not discuss dollar weakness at the meeting. Additionally, the Indonesian Energy Minister said that Indonesia to support OPEC output increase and believes that it is okay if output rises by 500K bpd. The Saudi Arabian Oil Minister said overnight that he does not know the timing of further OPEC output increases.
  • Fixed income futures are trading lower in the session, weighed down by a strong rise in the y/y readings in German state CPI figures, as well as a stronger than expected reading the German IFO survey for the month of November. Over in the UK, minutes from the GEMMs’ meeting with the DMO were released overnight. GEMMS called for a new 5-year gilt, as well as another tap on the 2018 gilt. Investors showed no demand for a new long bond, however most wanted the auction of the 2030 and 2042 issues. GEMMs also supports a the new short-dated issue.
  • The European indices are currently in negative territory. Indices are upward bound, but have little momentum. Barclays announced overnight that it sees its 2007 earnings broadly in line with market estimates. Also overnight, France Telecom forecasted that it would sell 100K iPhones by the end of the year. Also overnight, Citigroup announced plans to sell $7.5B of equity units to the Abu Dhabi Investment Authority. The units have a mandatory conversion into common shares.
  • In the FX market a general tone of consolidation continues to blanket the market. The Yen is inversely following the rise in equity futures price action in the States. Looking ahead, the focus is likely to remain on the credit market. Credit market jitters are still present, however there was some relief following Citigroup’s liquidity injection.

By: John J. Phillips IV