Risk appetite looks for reasons to continue in session

EU Market Update: Risk appetite looks for reasons to continue in session; Greece CPI falls by record amount

Notes/Observations

- Market participants continue to debate the impact of potential Fed tapering following last Friday's non-farm payroll data

- (CN) China Nov Trade Balance register largest surplus since Jan 2009 ($33.8B v $23.3Be) Exports surge while Imports disappoint

- China Nov CPI hits 3-month low at 3.0% (well contained with 3.5% target)

- Japan Oct Current Account registers its second straight deficit; Q3 Final GDP data revised lower (QoQ: 0.3% v 0.4%e)

- Thailand PM to dissolve Parliament and call early elections but protesters want more

- ECB members continue to tout standard forward guidance but northern European members (Weidmann, Mersch) adds usual caveats

- ECB Dec Sentix Confidence slips (8.0 vs. 10.0e) but stays positive for the 4th straight month

- Greece Nov CPI hits lowest level on record at -2.9%

Economic Data

- (CH) Swiss Nov Unemployment Rate: 3.2% v 3.2%e; Unemployment Rate Seasonally Adj: 3.2% v 3.2%e

- (DE) Germany Q3 Labor Costs Q/Q: -0.3% v- 0.3% prior; Y/Y: 1.6% v 2.0% prior

- (FI) Finland Oct Preliminary Trade Balance: -25M v -€480M prior

- (DE) Germany Oct Current Account Balance: €19.1B v €17.1Be; Trade Balance: €17.9B v €18.3Be; Exports M/M: +0.2% v -0.5%e; 1.6%; Imports M/M: 2.9% v +1.1%e

- (FR) Bank of France Nov Business Sentiment: 101 v 98e

- (CH) SNB Sight Deposits for Week Ended Dec 6th (CHF): 317.4B v 319.8B prior

- (TW) Taiwan Nov Trade Balance: $3.5B v $3.5Be; Exports Y/Y: 0.0% v +2.2%e; Imports Y/Y: -0.5% v +1.7%e

- (HUI) Hungary Oct Preliminary Trade Balance: €781.4M v €725.0Me

- (CZ) Czech Oct Industrial Output Y/Y: 3.5% v 1.9%e; Construction Output Y/Y: -1.0% v -8.9% prior

- (CZ) Czech Nov CPI M/M: -0.1% v 0.0%e; Y/Y: 1.1% v 1.1%e

- (CZ) Czech Nov Unemployment Rate: 7.7% v 7.6%e

- (TR) Turkey Oct Industrial Production M/M: -3.1% v+ 5.8% prior; Y/Y: 0.7% v 6.5% prior

- (DK) Denmark Oct Current Account (DKK): 18.4B v 14.0Be; Trade Balance (ex-Shipping): 9.0B v 6.0Be

- (AT) Austria Q3 Final GDP Q/Q: 0.2% v 0.2% prelim; Y/Y: 0.5% v 0.7% prelim

- (EU) ECB €158M borrowed in overnight loan facility vs. €186M prior; €54.1B parked in deposit facility vs. €41.3B prior - Daily Eurosystem Liquidity Conditions

- (CH) Swiss Oct Real Retail Sales Y/Y: 1.2% v 1.0% prior

- (SG) Singapore Nov Reserves: $271.9B v $271.8B prior

- (EU) Euro Zone Dec Sentix Investor Confidence: 8.0 v 10.0e (4th straight month in positive territory)

- (IT) Italy of Italy (BOI) Oct bad loans at banks Y/Y: +22.9% v +22.8% prior

- (GR) Greece Nov CPI Y/Y: -2.9% v -1.8%e (record low); CPI EU Harmonized Y/Y: -2.9% v -1.7%e

- (GR) Greece Q3 Final GDP Y/Y: -3.0% v -3.0% prelim

- (CY) Cyprus Q3 Final GDP Q/Q: -0.8% v -0.8% prior; Y/Y: -5.3% v -5.5% prior

Fixed Income:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities**

Indices [Stoxx50 -0.1%, FTSE 100 flat at 6,549, DAX +0.4% at 9,205, CAC-40 -0.20% at 4,122, IBEX-35 +0.5% at 9,447, FTSE MIB +0.4% at 18,194, SMI -0.2% at 8,049, S&P 500 Futures +0.1% at 1,806]

- Market Focal Points: Equities trade mixed as traders debate possible Fed QE taper in Dec or early 2014, China trade data above ests and CPI below ests, Lower copper prices weigh on miners, Shares of Danone weigh on CAC-40, George Soros rumored to be interested in Greece's Eurobank , Utilities gain ahead of Tuesday's EU carbon fix vote, Upcoming Fed Speakers (Lacker, Bullard, Fisher)

By Sector

- Consumer Discretionary [Tom Tailor TTI.DE -2% (broker commentary); Punch Taverns PUB.UK +12% (updated restructuring plan)]

- Consumer Staples [Danone BN.FR -1% (broker commentary)]

- Technology [Anite AIE.UK +6% (affirmed lowered outlook)]

- Telecom [Sky Deutschland SKYD.DE +4.5% (acquired rights to UEFA Champions League)]

- Financials [Banca Monte Paschi BMPS.IT +4% (speculation capital raise may be delayed)]

- Energy [Tullow Oil TLW.UK -2.5% (unfavorable drilling update)]

- Industrials [Kentz Corp KENZ.UK +9% (acquisition)]

- Stoxx50 sectors [Consumer Non-Cyclical -0.5%, Telecom -0.3%, Basic Materials -0.2%, Industrials -0.1%, Technology -0.1%, Financials flat, Energy flat, Consumer Cyclical flat; Utilities +1.2%]

Speakers:

- ECB's Mersch (Luxembourg) reiterates ECB forward guidance language in which rates to be at or below current levels for prolonged period and that the inflation outlook remained subdued. He noted that the ECB should not act automatically because inflation was below 2%. He also reiterates ECB view that risks between inflation and deflation were balanced and that the Council was flexible and open with tools like negative rates, LTRO and QE all being among policy options. He did caution that negative rates could raise borrowing costs for real economy. Buying private debt instruments could be problematic as it would shift risks to tax payers and raise the central bank risks and posed economic, legal and policy challenges

- Moody's: Portugal's recent bond swap operation Credit Positive

- Japan PM Abe commented that there was no prospect for summits at this time with either China or South Korea. He did call upon on China to start talks on emergency communication mechanism

Currencies/Fixed Income:

- For the most part risk appetite tried to maintain its hold on the markets aiding a soft tome to the USD and JPY currencies against the major European pairs. EUR/USD extended Friday's gains, making a fresh one-month above 1.3735 and within striking distance of its 2013 highs of 1.3830. Dealers noting that large Euro buy-stops are building up there.

- Euro-area finance ministers meet to discuss ongoing aid talks with Greece as well as Cyprus's progress on its bailout. Also on the agenda will be EU efforts to establish a Single Resolution Mechanism for euro area lenders.

Political/In the Papers:

- (EU) ECB's Weidmann: ECB still has policy tools at its disposal; Ready and able to act if needed - Italian press; Also noting that some of the tools available have "undesired

collateral effect that need to be weighed by the council."

-(GR) Greece parliament approved 2014 austerity budget plan based on recovery prediction of +0.6% coupled with primary budget surplus

-(GR) Troika inspectors said to have delayed their return to Greece for talks on unlocking €1B tranche until January - financial press; Some Troika officials to return to Athens for technical discussions on Wednesday, Dec 11, but full talks will not resume until Jan.

- (PT) Portugal debt chief: Planning bond sale for early 2014, size of bond sales in 2014 expected similar to this year; First sale will likely be through the banks; 2014 bond needs expected at €7B

-(ES) Spain PM Rajoy: Comfortable with deficit levels; End of recession will boost Spain's revenues - financial press

- (US) Fed's Evans (dove, FOMC voter): The strong November jobs report was very welcome, there are still some concerns about low labor participation rate; Would prefer to see a few more months of good jobs numbers.

-(US) Fed's Plosser (hawk, non-voter): Positive jobs report for Nov confirms the labor market is moving in the right direction, but should not get too excited over one month's report

- (US) National Association of Business Economists (NABE) Survey: Lowers 2014 real GDP growth to 2.8% v 3.0% prior estimate

-(CN) China leaders to set key economic targets for 2014 during the week of Dec 9th for the annual Central Economic Work Conference - financial press

-(CN) China may set 2014 M2 growth target at 13%, GDP at 7.5% vs 7.5% in 2013 - Chinese press; CPI target may be set at 4% or less vs 3.5% or less for 2013.

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)

- 05:30 (BR) Brazil Central Bank Weekly Economists Survey

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills

- 06:00 (DE) German Chancellor Merkel, CDU National Assembly discuss Coalition Contract

- 06:00 (DE) Germany Oct Industrial Production M/M: +0.7%e v -0.9% prior; Y/Y: 3.1%e v 1.0% prior

- 06:00 (PT) Portugal Q3 Final GDP Q/Q: No est v 0.2% prelim; Y/Y: No est v -1.0% prelim

- 06:00 (EU) OECD Oct Leading Indicator: No est v 100.7 prior

- 06:00 (IL) Israel to sell 2016, 2023 and 2042 bonds

- 06:30 (CL) Chile Nov Trade Balance: No est v $241.0M prior; Total Exports: No est v $7.0B prior; Total Imports: No est v 6.8B prior; Copper Exports: No est v $3.9B prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (NO) Nobel Peace Prize Press Conference

- 08:00 (RO) Romania to sell 2020 Bonds

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of Bill auction

- 08:15 (CA) Canada Nov Housing Starts: 195.0Ke v 198.3K prior

- 08:30 (CH) Swiss Government Question Time in Parliament

- 08:50 (FR) France Debt Agency (AFT) to sell combined €6.5B in 3-month, 6-month and 12-month Bills

- 09:00 (EU) Euro-area Finance Ministers meet in Brussels

- 09:00 (MX) Mexico Nov CPI M/M: No est v 0.5% prior; Y/Y: No est v 3.4% prior; CPI Core M/M: No est v 0.2% prior

- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender at fixed 0.50%

- 09:30 (EU) ECB announces prior settlements in SMP program to offset bond purchases

- 10:00 (HU) Hungary Nov YTD Budget Balance (HUF): No est v -887.7B prior

- 11:00 (US) Fed to purchase $1.25-1.75B in Notes

- 11:30 (US) Treasuries to sell combined €59B in 3-Month and 6-Month Bills

- 12:00 (US) Q3 Household Change in Net Worth: No est v $1.342T prior

- 12:00 (EU) EciFin press conference

- 12:30 (US) Fed's Lacker speaks at Charlotte Chamber Economic Luncheon

- 13:05 (US) Fed's Bullard Speaks on Economy, Monetary Policy in St. Louis

- 14:00 (ES) ECB's Linde (Spain) in Madrid

- 14:00 (US) Fed to purchase $2.75-3.50B in Notes

- 14:15 (US) Fed's Fisher Speaks on Economic and Banking Trends in Chicago

- 18:30 (US) Fed's Fisher Speaks on Economy and Monetary Policy in Chicago