• *** ECONOMIC DATA ***
  • UK Nov Nationwide House Prices: M/M –0.8% v 0.1%e || Y/Y 6.9% v 8.4%e
  • UK Oct Final M4 Money Supply: M/M 0.2% v 0.1% prior || Y/Y 11.8% v 11.8% prior
  • UK Oct Final Sterling Lending £19.5B v £19.8B prior
  • UK Oct Net Consumer Credit: £1.4B v £1.1Be || Prior revised from £1.4B to £1.3B
  • UK Oct Net Lending: £7.3B v £9.0Be || Prior revised from £9.8B to £9.5B
  • UK Oct Mortgage Approvals: 88K v 95Ke || Prior revised from 102K to 100K
  • GE Oct ILO Unemployment Rate: 8.1% v 8.0%e || Prior revised from 8.1% to 8.2%
  • GE Nov Unemployment Change: -53K v –30Ke
  • GE Nov Unemployment Rate: 8.6% v 8.7%e
  • SP Nov Preliminary CPI Harmonized Y/Y: 4.1% v 3.9%e
  • SW Q3 GDP: Q/Q 0.6% v 0.8%e || Prior revised from 0.9% to 0.7% |||| Y/Y 2.5% v 3.4%e || Prior revised from 3.5% to 3.1%
  • IT Oct PPI: M/M 0.4% v 0.4%e || Y/Y 3.6% v 3.6%e
  • NO Oct Retail Sales M/M –0.3% v 0.5%e || Y/Y 6.6% v 7.6%e
  • NO Nov Unemployment Rate: 1.6% v 1.6%e
  • *** SPEAKERS/COMMENTS ***
  • BOE Blanchflower: Believes rates should come down to get ahead of the curve
  • BOE Blanchflower: Sees evidence that people are taking on mortgages that they cannot afford
  • BOE Blanchflower: Setting rates will be a delicate balancing act
  • EU Juncker: Says wants CNY to  rise quickly, says message to Chinese has been understood
  • EU Juncker: China doe not know how fast it will move on CNY
  • EU Juncker: Trade gap with China  cannot remain un-rectified
  • Bundesbank: Reduced imbalances has not lowered risk of abrupt forex moves
  • Bundesbank: Risk of disorderly USD depreciation if portfolio shifts
  • Bundesbank: High oil prices appreciably risk to global growth
  • Bundesbank: No serious threat to German economy unless a US recession occurs
  • Bundesbank: 2008 GDP only moderately dampened
  • Bundesbank: Risks to the German financial system from the economy have risen
  • Bundesbank: The risk of US slowdown has risen substantially
  • BOE King: Outlook for inflation growth is less benign
  • BOE King: Survey suggests that economy is starting to slow
  • BOE King: Output growth likely to slow and CPI to rise in short term
  • BOE King: Market turmoil has tightened has tightened credit conditions, first sign of crunch likely in housing market
  • BOE King: Ready to take further measures on overnight rate
  • BOE King: Sees potential for more tightening in credit markets given fragility of banking system
  • BOE King: Earnings has been growth data less benign
  • *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
  • On the data front overnight German unemployment continued its decline, with the unemployment rate dropping to its lowest level since April of 1993. Swedish GDP was slightly weaker than expected during the third-quarter; the results weighed down on the Krona. The weaker than expected Nowegian retail sales did not weigh down on the Krone. Norwegian unemployment declined to its lowest level since the late 1980’s. Following the data releases in Norway, the government boosted its 2007 non-oil GDP forecast to 5.7% from 5.1%. Over in the UK nationwide house prices were below estimates, with the m/m reading at its lowest level since mid-1995, while mortgage approvals were at their lowest level since February 2005.
  • On the commodity front crude oil is trading higher on the back of an explosion at one of Enbridge’s facilities. The company announced that four Canada-US pipelines were shutdown overnight, affecting 1.5M bpd of output. There was no indication as to when all units would return to their normal state. The IEA Head said of the incident that the disruption is not that substantial, while the Qatari oil minister noted that, if the situation drags on, OPEC may have to discuss it.
  • In financial markets the Wall Street Journal reported that E-Trade Financial has received a $2.5B cash infusion from Citadel. German bank KFW announced the inception of a banking pool to cover all of IKB’s remaining risks.  Coverage is for the Havenrock structure and amounts to €350M. Elsewhere in Europe there were rumors circulating about a possible writedown at the Royal Bank of Scotland, however the rumors were denied.
  • Fixed income futures are trading higher in the session on the back of earlier rumors about a possible writedown at RBS. Fixed income futures also gaing some momentum following comments from the Bundesbank overnight, which noted that the risk of a slowdown in the US has risen substantially. According to one report overnight there was a strong bid across the Spanish yield curve. Note on a technical level that the 50 and 200 day moving averages on the 10-year benchmark touched this week after converging since early 2007.  Elsewhere, according to wire reports, Portugal plans to sell €10-€12B in bonds during 2008. The Telegraph in the UK ran a story overnight noting that companies in Britain and Europe have failed to place a single high-yield bond since the credit crunch kicked off in August, and may now have to wait until next year before the credit market reopens for business.
  • In the currency markets the Dollar is stronger against the European currencies, reversing yesterday’s losses following the beige book and comments from the Fed’s Kohn. While the Dollar remains within its recent ranges against the major currencies, volatility appears to be on the rise. Commodity currencies are relatively unchanged despite higher oil prices following the Enbridge explosion.

By: John J. Phillips IV