Economic Data

- ECB: €1.7B borrowed in overnight loan facility v €1.7B prior; €256.2B parked in deposit facility €237.4B prior

- (FI) Finland Nov Consumer Confidence: 1.5 v 1.0e; Business Confidence: -10.0 v -6 prior

- (GE) Germany Nov CPI Saxony M/M: -0.1% v +0.2% prior; Y/Y: 2.6% v 2.7% prior

- (HU) Hungary Oct Unemployment Rate: 10.8% v 10.7%e

- (TT) Taiwan Oct Leading Index M/M: -0.2% v -2.3% prior; Coincident Index M/M: -0.6% v -0.6% prior

- (SW) Sweden Oct Retail Sales M/M: 0.4% v 0.1%e; Y/Y: -0.5% v -1.2%e

- (SW) Sweden Oct Trade Balance (SEK): 7.8BB v 6.3Be

- (EU) Euro Zone Oct M3 Money Supply Y/Y: 2.6% v 3.4%e; M3 3-Month Avg Y/Y:2.8% v 3.1%e

- (GE) Germany Nov CPI Brandenburg M/M: 0.2 v 0.1% prior; Y/Y: 2.6 v 2.4% prior

- (GE) Germany Nov CPI Hesse M/M: 0.0% v 0.0% prior; Y/Y: 2.3 v 2.4% prior

- (GE) Germany Nov CPI North Rhine Westphalia M/M: -0.1 v -0.3% prior; Y/Y: 2.1% v 2.3% prior

- (IT) Italy Nov Business Confidence: 94.4 v 93.0e

Fixed Income:

- (IT) Italy Debt Agency (Tesoro) sold €567M vs. €500-750M indicated range in 2.6% I/L 2023 BTPi Bonds; Real Yield 7.30%; Bid-to-cover: 2.16x

- (SL) Slovakia Debt Agency (ARDAL) sold €28M in 2014; avg yield 3.4642%; Bid-to-cover: 1.07x

-(HU) Hungary Debt Agency (AKK) sells HUF35B in 6-Week Bills; Avg yield 7.24% v 6.63% prior; bid-to-cover 1.49x


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Notes/Observations:

- Reports of IMF package for Italy not credible

- EU Ecofin meeting this week; Euro Zone weighs plan to accelerate fiscal integration

- Large amount of EU debt supply over the course of the week

- ECB's Noyer: EFSF increase unrealistic

- US. Black Friday sales hit record levels

Equities:

Eurostoxx at 2186, +3.56%, FTSE100 at 5272.93, +2.10%, CAC40 at 2962., +3.70%, DAX at 5659, +3.04%

- European shares rallied extending last week's rebound as investors anticipate positive developments over the debt situation in Europe ahead of the EU summit on December 9th. New rules draft for EFSF circulated in the financial press noting that the enhanced package would offer partial protection of as much as 30% to investors. Banking stocks benefitted from the news. Italian banks also soared after speculation that IMF was in talks with Italy for a financing package of €600B with a rate in the range of 4-5% which would give the country breathing room as it implements its austerity measures. Although the reports were denied by the IMF and other official sources, the article from La Stampa continued to sustain European markets, in the hope that maybe where there's smoke, there's fire. On the other hand, a worrying report from Moody's warned that the probability of multiple defaults by the euro zone countries is no longer negligible.

- Corporate news was sparse during the session given that Q3 earnings season is over. Among notable movers, BNP Paribas [BNP.FR] rose over 3% following a financial report in which it was speculated that the bank was considering a sale of its private equity company portfolio for approx. $700M. The embattled Thomas Cook [TCG.UK] also reported that it had accepted a £200M emergency facility after successfully renegotiating its debt. Meanwhile, Randgold Resources [RRS.UK] declined after revising lower its FY11 production following setbacks at Tongon Mine.

Speakers:

- IMF stated that it had NOT had any discussion with Italy regading financing (confirms earlier press speculation)

- Germany Finance Ministry (MOF) confirmed press speculations that there were no plans to issue joint bonds among AAA-rated euro zone countries

- OECD issued its semi-annual Economic Outlook which stated that policy makers must act on debt to avert global economic slump. ECB should cut rates and continue non-standard measures while the Fed still has room to support economy.

- OECD Chief economist stated that the numbers circulating on EFSF facility's firepower was currently not enough

- Germany Gov't spokesperson reiterated the view that Germany did not have unlimited financial strength. Chancellor Merkel to give speech on debt crisis on Friday, Dec 2nd and stressed that Germany was skeptical about any 'bazooka' to solve the current crisis (in line with Merkel's views on one-off solutions)

- Austria Debt Agency (AFFA) canceled its plan auction for Tuesday Dec 6th citing better budget developments and noted that it had completed its 2011 bond funding program

- UK Chief Treasury Sec Alexander commented ahead of Tuesday OBR release that the Govt to stick to its budget plans

- India PM's econ adviser Rangarajan reiterated view that Inflation would start to decline as of Nov and be at 7% by end of FY12 (March). He expected India's inflation rate to be at 6.0% in FY13 (begins in April 2012) with a medium term objective is to have inflation at 5%

- Singapore central bank signed MOU with Malaysia's central bank for collateral agreement for enhancing liquidity to banks in both countries

Currencies:

- The USD was softer as risk appetite found some traction as European bourses rebounded from their biggest selloff in two months amid speculation policy makers were intensifying efforts to contain the debt crisis. The German Finance Ministry added to the optimism as it urged fast-track treaty changes to tighten budget discipline. There was also speculation that policy makers were planning to provide more aid for Italy but the IMF stated that it had NO discussions with Italy. The ECB took advantage of the climate to continue its efforts in stabilizing the Gov't bond market and was said to be buying peripheral bonds via their SMP program. EU growth rate of loans to the private sector accelerated to 2.7% y/y from 2.5% y/y, which suggests that there is no credit crunch, at least in the euro zone as a whole.

- The EUR/USD climbed to probe the 1.34 neighborhood, higher by almost 150 pips from the Tokyo open. Dealers noted sovereign names among the active buyers

- The EUR/CHF cross was off its Friday's session highs and back below the 1.23 handle after the SNB had yet to adjust the floor in the cross from the current 1.20 level

Political/ In the Papers:

- The British Chambers of Commerce cuts its guidance for 2011 GDP to 0.9% from 1.1%; 2012 at 0.8% v 2.1% prior; and 2013 at 1.8% v 2.5% prior. The risk of another recession cannot be ignored. The BCC also anticipates the Bank of England to expand its stimulus program by £50 billion to £325 billion. BCC's chief economist Kern said: The worsening euro zone debt crisis and the fiscal austerity will have a more serious impact on the UK economy than previously predicted. UK growth is likely to be minimal in the next 2-3 quarters; euro zone likely to record negative growth in the near future. We expect the Monetary Policy Committee to increase the QE program further early in 2012.

- According to the FT, European banks experienced a funding freeze. Its Dealogic data revealed that banks in Europe sold $413 billion in bonds this year, approximately two thirds of the $654 billion expected to be returned next year due to maturity. This places the 2011 funding deficit at $241 billion. This is the first time European lenders, as a whole, have unable to replace maturing debt with new ones for at least the past five years. Reasons cited by investors to not repurchase bank bonds include uncertainty over financial health of banks, the future of the euro zone, and the affects of new financial regulation. Banks are expected to encounter ever greater redemption hump in 2011, when $720 billion in debt are to mature.

- The largest electronic foreign currency trading platform, Icap, is testing its EBS platform to trade the Greek drachma against both the EUR and USD, in preparation for a possible euro zone collapse. The tests, which have been going on for a few months, involve only the mechanics of trading currencies on its platform. It does not include valuations dummy trades on EBS involving banks. The Icap did, however, stress that the preparations were not a prediction, but a protection against system problems in the event of further market disruption due to a member exiting the euro. In addition, Icap has only tested the drachma against the EUR and USD, and noted that its system was standardized enough that testing one of the legacy EUR currencies would make it easier to roll out others.

- The financial press reported that there is no discussion within the G7 for a large IMF package for Italy. Earlier during the session, the Italian press noted that the IMF was preparing a €400-600 billion rescue plan for Italy that would loan the funds for 12-18 months. This would have given Italy room to implement austerity measures without having to refinance.


Looking Ahead

- (EU) EU President Van Rompuy and EU's Barroso meet US President Obama in Washington DC

- (PE) Peru Q3 GDP Y/Y: No est v 6.6% prior

- (GE) Germany Nov CPI Baden Wuerttemberg M/M: No est v 0.3% prior; Y/Y: No est v 2.8% prior

- (GE) Germany Nov Preliminary Consumer Price Index M/M: %e v 0.0% prior; Y/Y: % v 2.5% prior

- (GE) Germany Nov Preliminary CPI EU Harmonized M/M: %e v 0.1% prior; Y/Y: % v 2.9% prior

- 6:00 (UK) Nov CBI Industrial Reported Sales: -9e v -11 prior

- 6:00 (GE) Germany Nov CPI Barvaria M/M: No est v 0.5% prior; Y/Y: No est v 2.3% prior

- 6:00 (IR) Ireland Oct Retail Sales Volume M/M: No est v -0.8% prior; Y/Y: No est v -3.9% prior

- 6:00 (BE) Belgium Debt Agency to sell €1.0-2.0B in 2018, 2021, 2035 and 2041 Bonds

- 6:30 (LI) Lithuania to sell Euro-denominated Bonds

-7:00 (GE) Germany Dec GfK Consumer Confidence: 5.1e v 5.3 prior

- 9:00 (FR) France Debt Agency (AFT) to Sell Bills (BTF)

- 9:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 9:30 (EU) ECB announces settlements in its Gov't Bond Buying Priogram (SMP)

- 9:45 (UK) BOE to buy £1.7B in 2015-2020 Gilts in reverse auction

- 10:00 (US) Oct New Home Sales: 310Ke v 313K prior

- 10:30 (US) Nov Dallas Fed Manufacturing: Activity: 5.0e v 2.3 prior

- 10:30 (IS) Israel Central Bank Interest Rate Decision: Expected to cut the Base Rate by 25bps to 2.75%

- 11:00 (US) Fed to purchase $4.25-5.00B in Notes/Bonds

- 11:30 (US) Treasury to sell 3-Month and 6-month Bills

- 12:00 (FR) France Oct Net Change Jobseekers: +13.0Ke v +26K prior; Total Jobseekers: 2.797Me v 2.781M prior