Quiet session as Germany confirms it avoided recession

Notes/Observations

- BoJ minutes detail need for pre-emptive action...The twin culprits pulling inflation lower were April's consumption tax increase

- German Q3 Final GDP data confirmed it narrowly missed a technical recession

Economic Data

- (DE) Germany Q3 Final GDP reading in line; Q/Q: 0.1% v 0.1%e; Y/Y: 1.2% v 1.2%e; GDP WDA Y/Y: 1.2% v 1.2%e

- (FI) Finland Oct Unemployment Rate: 8.3% v 8.0%e

- (FR) France Nov Confidence data beats; Business Confidence: 94 v 92e; Manufacturing Confidence: 99 v 97e;

- (HK) Hong Kong Oct Trade Balance (HKD): -49.8B v -45.3Be; Exports Y/Y: 2.7% v 3.4%e; Imports Y/Y: 5.6% v 4.3%e

- (ZA) South Africa Q3 GDP data roughly in line; Annualized Q/Q: 1.4% v 1.5%e; Y/Y: 1.4% v 1.4%e

- (UK) Oct BBA Loans for House Purchase missed; 37.1K v 38.5Ke (lowest since May 2013)

Fixed Income:

- (ES) Spain Debt Agency (Tesoro) auction results steady; sold total €4.1B vs. €3.0-4.0B indicated range in 3-Month and 9-Month Bills

- Sold €845M in 3-month Bills; Avg Yield: 0.073% v 0.130% prior; Bid-to-cover: 3.14x v 3.3x prior

- Sold €3.26B in 9-month Bills; Avg Yield: 0.296% v 0.359% prior; Bid-to-cover: 1.77x v 2.08x prior

- (NL) Netherlands Debt Agency (DSTA) sold €1.8B vs. €1.0-2.5B indicated range in 2% July 2024 Bonds; Avg Yield: 0.895% v 1.137% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +0.7%, FTSE 100 +0.1% at 6,737, DAX +1.0% at 9,880, CAC-40 +0.5% at 4,388, IBEX-35 1.0% at 10,745, FTSE MIB +0.7% at 20,062, SMI +0.2% at 9,071, S&P 500 Futures +0.1% at 2,069]

- Market Focal Points/Key Themes: Equity markets are trading higher after opening slightly in the red with the markets being relieved after German Q3 GDP came in as expected avoiding a technical recession.

- Earnings Recap (Topps Tile: raises dividend, Chemring: rev lower on delays, De La Rue: rev falls, Severn Trent: cost cuts, Quintain estates: increases housebuilding, Kingfisher: rev below est, Zoopla: rev increase, Greencore: good outlook, Mitchells & Butlers: rev rises)

By Sector

- Industrials [Volvo VOLVA.SE +0.6% (makes €400M provision for antitrust)

- Healthcare [Bayer BAYN.DE +0.6% (may sell diabetes unit), Sinclair Pharma SPH.UK +10% (to pursue strategic options)

- Financials [ING Group INGA.NL +1.2% (to expand digital banking, cut jobs), Santander SAN.ES +1.4% (appoints new top mgmt)

- Telecom [TeleKom Austria TKA.AT -0.4% (prices €1B capital raise)

- Technology [Advanced Computer Software ASW.UK +15% (to be acquired)

- Consumer Discretionary [Steinhoff International SHF.ZA +1.4% (to acquire Pepkor)

Speakers

- Eurogroup spokesperson planned meeting for Dec 1st to draft 2015 budgets was being delayed again (**Note: This is the second delay in the European Finance Minister meeting on 2015 budgets. Was delayed from Nov 21st)

- ECB's Coeure (France) stated that ECB wants to have asset-buying discussion at Dec meeting and should be a serious, principle-based discussion. It would not rush on decision and must discuss all options on buying new assets and need to look at impact of existing programs

- RBA's Lowe reiterated view that AUD exchange rate was unusually high and noted that the currency should fall when terms of trade and investment decline. Economy has challenges but was strong BOE Treasury Select Committee hearing comments

- Gov Carney: Spare capacity has fallen marginally over the past three months but total hours worked have been weaker than expected. Wage growth risks broadly as expected

- Member Cunliffee stated that that more worried about risk of inflation surprising again on the downside than unexpected emergence of inflationary pressure. Weak pay and inflation key reasons no change vote

- Member McCafferty (dissenter) Full capacity could be reached before forecast and saw upside inflation risk if slack was absorb earlier

- Member: Forbes: Future rate increases were likely to be gradual but added there could be less slack than expected. She put more weight on stronger global economy

- (DE) German Bundesbank Financial Stability Report noted that house prices in top 7 cities were overvalued by 25%. Longer period of low interest rates increased risk of market exaggerations

- Japan GPIF pension fund post July-Sept results: Overall return rate at 2.87%; earning ¥3.6T with Total assets at ¥130.9T

- Japan Ruling LDP party unveils its platform for the upcoming Dec 14th snap elections; To continue with bold monetary easing

- Iran and Russia Presidents recently spoke by phone to discuss oil markets and agreed to cooperate

***Currencies***

- The USD/JPY was off its Asian session lows of 117.80. the pair moved lower after the meeting minutes from the controversial Oct 31st BOJ decision had some members express concerns of a weak yen against small businesses.

- AUD/USD currency pair was at 4-year low at 0.8530 after RBA's Lowe reiterated the view that the AUD exchange rate was unusually high

**Political/In the Papers:

- (CN) PBoC to drain CNY5B in 14-day repos (33rd consecutive drain, smallest drain since May 2013); Offer yield at 3.2% v 3.4% prior (4th yield cut, prior offer yield cut by 10bps to 3.4% from 3.5% on Oct 13th)

**Looking Ahead***

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

- (GR) Greece and Troika official to meet in Paris

- (EU) European budget reviews

- (BR) Brazil Oct Total Federal Debt (BRL): No est v 2.183T prior

- (PT) Portugal Year-to-Date Budget Report

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announces weekly OFZ bond auction

- 07:45 (US) ICSC Chain Store Sales

- 08:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to leave Base Rate Decision unchanged at 2.10%

- 08:00 (ES) Spain Oct YTD Budget Balance: No est v -€33.1B prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Q3 Preliminary GDP Annualized Q/Q: 3.3%e v 3.5% advance; Personal Consumption: 1.9%e v 1.8% advance

- 08:30 (US) Q3 Preliminary GDP Price Index: 1.3%e v 1.3% advance ; Core PCE Q/Q: 1.4%e v 1.4% advance

- 08:30 (CA) Canada Sept Retail Sales M/M: +0.5%e v -0.3% prior; Retail Sales Ex Auto M/M: +0.3%e v -0.3% prior

- 08:55 (US) Weekly Redbook Sales

- 09:00 (US) Sept FHFA House Price Index M/M: 0.4%e v 0.5% prior; Q/Q: 1.0%e v 0.8% prior

- 09:00 (US) Sept S&P/CaseShiller 20 City M/M: +0.30%e v -0.15% prior; Y/Y: 4.60%e v 5.57% prior; House Price index: 173.28e v 173.66 prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 10:00 (US) Nov Richmond Fed Manufacturing Index: 16e v 20 prior

- 10:00 (US) Nov Consumer Confidence Index: 95.8e v 94.5 prior

- 10:00 (MX) Mexico Q3 Current Account Balance: No est v -$7.0B prior

- 10:00 (MX) Mexico Weekly International Reserves

- 10:00 Hungary Central Bank Gov Matolcsy post rate decision statement

- 10:30 (UK) DMO announces size of upcoming 2% 2020 Gilt auction

- 11:30 (US) Treasury to sell $13B in 2-Year Notes Reopening

- 11:30 (US) Treasury to sell 4-Week Bills

- 13:00 (US) Treasury to sell $35B in 5-Year Notes

- 13:00 (DE) German Chancellor Merkel delivers Speech at European Family-Business Conference

- 14:00 (AR) Argentina Oct Trade Balance: No est v $404M prior

- 16:00 (KR) South Korea Nov Consumer Confidence: No est v 105 prior

- 16:30 (US) Weekly API Crude Oil Inventories

- 19:30 (JP) BOJ's Shirai in Hiroshina