European Market Update: USD continues to be vulnerable following FOMC minutes and rising risk appetite; India's central bank reportedly mulling another purchase of 200 metric tons of gold purchases from IMF


ECONOMIC DATA

- (GE) German GFK Consumer Confidence survey: 3.7 v 4.0e

- (CZ) Czech Nov Business Confidence: -4.8 v -7.1% prior, Consumer Confidence: -8.0 v -14.3 prior; Consumer & Business Confidence: -5.4 v -8.5 prior

- (SP) Spain Sept Mortgages on Houses Y/Y: -4.2% v -6.6% prior; Mortgages-capital loaned Y/Y: -14.3% v-14.9% prior

- (TU) Turkey Sept Industrial Production Y/Y: -8.4% v -8.8% prior

- (SW) Swedish Nov Consumer Confidence: 11.4 v 8.5e; Econ Tendency survey: 98.8 v 95.8e; Manuf Confidence: -10 v -12e

- (IT) Italian Nov Consumer Confidence: 112.8 v 111.5e

- (NO) Norway Sept AKU Unemployment Rate: 3.1% v 3.3%e

- (IT) Italian Sep Retail Sales M/M: -0.1% v 0.1%e; Y/Y: -1.6% v - 2.9%e

- (PD) Polish Oct Retail Sales M/M: 3.9% v 4.5%e; Y/Y: 2.1% v 2.3%e

- (PD) Poland Unemployment Rate: 11.1% v 11.0%e

- (UK) Q3 Prelim GDP Q/Q: -0.3% v -0.3%; Y/Y: -5.1% v -5.1%e

- (UK) Q3 Preliminary Exports: 0.5% v 1.4%e; Imports: 1.3% v 2.0%e; Gov't Spending: 0.2% v 0.5%e; Private Consumption: 0.0% v -0.2%e

- (UK) Sept Index of Services Q/Q: -0.1% v -0.1%e

- (SA) South Africa Oct CPI (all items) M/M: 0.0% v 0.0%e; Y/Y: 5.9% v 5.9%e

- (BR) Brazil Nov FGV Consumer Confidence: 115.5 v 114.5 prior

- (SA) South Africa Q4 BER Business Confidence: 28 v 25e


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM 

- Equities: European equity markets opened at their session highs on a rebound from yesterday's trading levels. Continued USD weakens that followed FOMC minutes has led to new highs in commodities and new lows in the USD Index. This action has continued the multi-week trend of pushing minerals, miners and industrials higher. Despite continued speculation of Chinese capital requirement alterations, Asian markets printed a positive session furthering equity appetite in the European morning. The one year memorial of Mumbai's hotel attack and siege was reflected in India with the SENSEX up over 9,000 points in the year period, closing at 17198.95. Final FY09 figures out of Porsche [PAH3.GE] confirmed a second consecutive year of loss making figures and sent shares of VW [VOW.GE] lower. German bank Commerzbank [CBK.GE] held its EGM, confirming 2012 targets and integration operations with Dresdner. Equity markets halted a downward slide at 4:30EST with the UK Q3 prelim release reading that was in line with expectations (though still showing the state in continued recession).
Trading volumes have been depressed through the session ahead of the holiday in the US.

-In equities: LSE [LSE.UK] Reports H1 Net 49M v 52Me, Rev 311M v 312Me. || Compass Group [CPG.UK] Reports FY09 pretax 773M v 768Me, Rev 13.4B v 13.5Be. || Bayer [BAYN.GE]: To increase polycarbonate operations in India; enters into JV with Malibu Plastica. || Remy Cointreau [RCO.FR] Reports H1 Net 39M v 35Me, Rev 362M v 358Me. || France Telecom [FTE.FR] To merge Orange mobile Switzerland operations with Sunrise operated TDC. || Nicox [COX.FR] Announces 70M (19% of market cap) secondary offering; rights issue at placement price of 3.49/share. || Ericsson [ERICB.SW] To Acquire Nortel's North American GSM Business with Kapsch. ||

- Speakers: Russia Central Bank Ulyukayev commented that the CBR needed to continue lowering interest rates to curb carry trade influx. He noted that he was more concerned over currency volatility than actual levels. To increase currency interventions to limit such volatility. Ulyukayev added that the CBR saw no inflationary risks in H1 2010 and the next year's inflation could be much lower than 9% level. || South Korea Fin Min Yoon stated that it forecasted 2010 GDP growthat approx 4% from flat levels seen this year. The Ministry remained optimistic yet cautious on recovery outlook. It was too early to put in place an exit strategy as economy was not on firm footing. Premature exit strategy from special measures might cause prolonged economic slowdown. || German Cabinet approved an extension of short work hours. The extension would offer short-shift work subsidies for as long as 18 months to companies that applies for them next year. Currently, the program offers subsidies for as long as two years for companies that apply before the end of this year. **Note: The extension still needs approval from German parliament. || Indonesian Central Bank's Budi Mulya commented that the Rupiah currency remained in line with fundamentals and would seek to avoid volatility in currency markets . The central bank would not change stance regarding inflows of funds || French Budget Min Woerth commented in a newspaper interview that French 2010 borrowing could exceed 175B as France could borrow an additional 22B without compromising its credibility. H estated that France was against any revision in the Maastrict Stability Pact. Deficit to be reduced by 1.5 percentage points of GDP if economic recovery is confirmed with ongoing deficit cuts of 1 point needed

- Currencies: The USD was modestly softer against the majors and commodity related pairs following the FOMC minutes released late Tuesday which appeared to provide the way for additional weakness. The dollar was testing some key technical levels just as thin holiday conditions set in. On Tuesday, the Fed described the dollar's decline as orderly, which dealers took as a hint for the trend to continue. Press speculation that India's central bank could purchase another 200 metric tons of gold from the IMF helped to re-enforce the higher commodity/weaker dollar trend. Spot gold hit fresh all-time highs above the $1,180/oz level.

- The EUR/USD finally managed to move above the 1.50 handle and was approaching fresh 15-month highs. USD/CHF was attempting the bust below the parity level for the first time since April 2008. USD/JPY moved below the 88 level, which was long suggested to hold 'good bids' from the Japanese post office.

- Lots of dealer commentary on the Chinese yuan and future trends. Trichet, Juncker, and Almunia off to China this weekend to discuss economic and financial issues

- Fixed Income: Gilts have outperformed after UK Q3 GDP was revised slightly upwards, in line with expectations but well short of the whispers ahead of the official release. Subsequent buying in the short end and belly has sent the yield curve steeper but it's a different story on the continent, with Germany in bear flattening mode as speculation mounts over some form of spread on the ECB's Dec 16th 12 month repo operation. With banks generally perceived as chief beneficiaries of the ECB's largesse, yield spreads are wider versus the core, with the Greek 10y hitting fresh 5 month highs above 180bps and Italy 4bps wider at 80bps. Germany sold 4.1B in the second tap of the Oct 2014 5y Bobl with strong results. Ahead of the last leg of the Treasury's mammoth week of supply the question is whether yesterday's stellar performance in 5s can be repeated with liquidity expected to be thing as markets move into holiday mode . Price action in Europe suggests there are some questions. The new 7s are trading at about a 4bps roll over the existing notes in the when issued market and the benchmark 10y note is +1.4bps at 3.32%. In coprorates, Marks and Spencer launched a 10y GBP denominated issue, benchmark size.

- In Energy: Kuwait might seek to switch its benchmark for pricing oil sold in the US to Argus Sour Crude index from the Platt's West Texas Intermediate index. The move would follow a similar action by Saudi Arabia. According to a Kuwait oil official the country does not think the West Texas Intermediate index represents the market. ||Chinese press noting that due to shortages China might import at least 700M cubic meters of gas

-In the papers: India's Central bank (RBI) could consider buying the remains 201.3 metric tons of gold from the IMF according to an article found in the Financial Chronicle. Article noted that India was open to buying more and may purchase the remaining 201.3 metric tons from the fund . Any additional purchase would depend on successful pitching by the central bank . There have been speculation that central banks would increase their gold holdings. In early Nov, the IMF disclosed that the Reserve Bank of India purchased 200 metric tons of gold for $6.7B. Mauritius recently purchased 2 tons for $71.7M || Telegraph: China steps up efforts to halt explosive growth in credit. Orders banks to raise capital or face lending sanctions.


Notes:

- Risk appetite continues in thinning market conditions

- Gold and Silver continue firm tone. India open to buying another 200 tons from IMF. SNB has completed its sale of gold.

- Australia's RBA hawkish and upbeat on economic outlook

- IMF: Half of banks losses might be unknown. Euro "probably a bit too strong".


Looking Ahead:

- (PD) Poland Central Bank interest rate decision: No change expected in the base rate of 3.50%

- 7:00 (US) MBA mortgage applications w/e nov 20th: No est v -2.5% prior

- 7;30 (BR) Brazil Oct Total Outstanding Loans: No est v $1.3B prior; Private bank Lending: No est v $797M prior

- 8:30 (US) Oct Personal Income: 0.1%e v 0.0% prior, Personal Spending: 0.5%e v -0.5% prior

- 8:30 (US) Oct PCE Core M/M: 0.1%e v 0.1% prior, Y/Y: 1.4%e v 1.3% prior, PCE Deflator Y/Y: 0.1%e v -0.5% prior

- 8:30 (US) Oct Durable Goods Orders: 0.5%e v 1.4% prior, Ex transportations: 0.7%e v 1.2% prior

- 8:30 (US) Initial Jobless Claims w/e Nov 21st: 500Ke v 505K prior, Continuing claims: 5.565Me v 5.611M prior

- 10 :00 (US) Nov Final U of Michigan confidence: 67.0e v 66.0 prior

- 10:00 (US) Oct New Home Sales: 404Ke v 402K prior, M/M: 0.4%e v -3.6% prior

- 10:00 (MX) Mexico Q3 Current Account: -$2.4Be v $454M prior

- 15:30 (MX) Mexico Q3 GDP Y/Y: -3.7%e v -7.6% prior