European Market Update: Perceived USD "benign neglect "further aids global risk appetite; Spot gold hits fresh all-time highs above $1,115/oz; BOE quarterly inflation report: Range of views in MPC over medium term prospects


ECONOMIC DATA

- (CZ) Czech Sept Final Industrial Output y/y -11.9% v -11.9%; Construction Output Y/Y: 3.6% v 0.6% prior

- (HU) Hungary Oct Consumer Prices M/M 0.0% v 0.2%e; Y/Y 4.7% v 4.8%e

- (TU) Turkish Oct Capacity Utilization: 71.8% v 69.5%e

- (NV) Netherlands Sept Industrial Production M/M: 1.1% v 0.4%e; Y/Y: -7.6 v -8.2%e; Industrial Sales Y/Y: -21.0 v -21.8% prior

- (SW) Sweden Oct AMV Unemployment Rate 5.4% v 5.3%e

- (CZ) Czech Sept Current Account (CZK): -3.7B v -4.5Be

- (UK) Oct Claimant Count Rate: 5.1% v 5.1e; Jobless Claims Change: 12.9K v 20.0Ke

- (UK) Sept Avg Earnings incl bonus 3M/y/y 1.2% v 1.4%e; Ex bonus 3M/Y: 1.8% v 1.8%e

- (UK) Sept Manufacturing Unit Wage Cost 3M/Y: 3.2% v 3.7% prior

- (GE) German IFO: Euro-Zone Q4 economic sentiment: Q/Q 74.6 v 63.6 prior; Expectations Q/Q: 107.0 v 93.0 prior

- (UK) Bank of England Quarterly Inflation Report: Sees CPI below target around 1.6% in two years assuming market rate path and £200B QE measures. CPI to rise sharply above 2% target in short term but spare capacity to push CPI Back Below 2% from mid-2010 period.


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

- In equities news overnight: European equity markets have seen strong buying since the open of trade. Positive sentiment rolled out of the Asian session following Chinese data that has continued to support a recovery story. China's Oct commodity output figures showed continued y/y builds, sharply rallying the basic resource sector both in Asia and Europe. Equity strength took further bids on the back of solid earnings reported from France's third largest bank Credit Agricole [ACA.FR] after the close on Tuesday and German utility E.on [EOAN.GE] and Italian banking group Unicredit [UCG.IT] in the Euro premarket. Ahead of UK employment data at 4:30EST, equities took a further leg up, this move was supported by UK data that showed the lowest build in jobless claims since April 2008. Leading sectors on the EuroStoxx50 included Financials, Utilities and Basic Resource names. Turnover volumes have been mixed, the CAC40 is printing well ahead of its averages due to interest in Credit Agricole and Axa, while the DAX and FTSE are trading off their moving averages.

--Individual equities: Credit Agricole [ACA.FR] reported Q3 revenues of €4.8B v €4.6Be; Net €290M v €145Me and named Jean-Paul Chifflet as new CEO. E.on [EOAN.GE] reported Q3 revenue €16.7B v €17.9Be; and a 9-month EBIT €7.7B v €7.6Be, and guides 2009 Adjusted Net Profit down 3-5% y/y v prior down 5-10% y/y. Unicredit [UCG.IT] reported Q3 Net €394M v €360Me, and revenues of €6.7B v €6.7Be. National Express [NEX.UK] confirmed a 7 for 3 rights issue to raise £360M (69% of market cap). Sainsbury [SBRY.UK] reported H1 Pretax £307M v £302Me, and revenues of £11.2B v £10.3MBe; LFL +5.7%. Holcim [HOLN.SZ] reported Q3 Net CHF673M v CHF490Me and revenues of CHF5.7B v CHF5.7Be.

- Currencies: The USD was a touch softer against the European and commodity related currencies as the risk appetite theme remained in play after a slew of Chinese data released during the Asian session a rebound in Japan machinery orders. Fed's Fisher benign neglect of the USD helped spot gold to test fresh all-time highs above $1,115/oz. The GBP fell sharply after the BOE quarterly inflation report. The BOE sees CPI below target around 1.6% in two years assuming market rate path and £200B QE measures. The BOE did note that CPI to rise sharply above 2% target in short term but spare capacity to push CPI Back Below 2% from mid-2010 period. The BOE also reiterated that a weaker GBP would aid to solve its imbalances. GBP/USD slumping a big figure to test 1.6650 ahead of the NY morning. EUR/GBP firmner by 70 pips to test 0.9030 area.

- In Energy/commodities: Spot gold hit fresh all-time high aided by rising risk appetite and alleged benign neglect by US officials on the dollar outlook

- In Fixed Income Supply: Government bonds are broadly weaker thanks to elevated risk appetite this morning in the European session. Yield curves subject to a bout of bear steepening on both sides of the channel whilst peripherals are firmer against the core. Borrowing from the ECB's marginal lending facility jumped markedly to €3.4B overnight following yesterday's draining operation and there was some surprise at the allotment at its 3 and 6 month tenders (€10.8B and €782M respectively) Germany sold just under €5B in new 10y Bunds with a weaker than average bid-to-cover of 1.4. Portugal sold €1B in 2014s with a healthy bid-to-cover of 3.4x. Gilts managed to recover lost ground and move into positive territory across the curve after the BoE's quarterly inflation report, which on close inspection appears to be more dovish than initial appearances.


NOTES

- Slew of Chinese data overnight: Retail Sales +16.2% v 15.7%e; Industrial Production: +16.1% v 15.5%e; New loans CNY253B v CNY370Be for 1-year lows

- Fed's Fisher: Watching "carry trade" in USD for disorderly influence and saw "rather orderly depreciation" of dollar now

- Fed hawk Lacker: no hurry to start to remove stimulus yet, let alone start to hike rates

- US Tsy Geithner: Strong dollar 'very important' for US

- US bond markets closed for Veterans Day observance

- APEC finance ministers will call for flexible interest and exchange rates - draft statement


Looking Ahead

- 12:00 (EU) ECB's Weber to speak

- 13:30 (MX) Mexico Aug Gross Fixed Investment: -12.0% expected versus -14.1% prior

- 13:30 (MX) Mexico Sept Industrial Production Y/Y: -6.2% expected versus -7.3% prior