Focus on UK budget speech

Notes/Observations

- Focus on Chancellor of Exchequer Hammond Autumn Budget Speech; Brexit uncertainty will sway any hope of a bazooka to aid spending

Overnight

Asia:

- Bank of Japan (BOJ) said to be hinting that it could move away from crisis mode stimulus earlier than expect through a future hike in its yield target. Saw no immediate need to withdraw stimulus with weak price growth being its most pressing challenge

- China PBOC Gov Zhou: Will reduce currency intervention to advance yuan internationalization; to strengthen policy coordination between central and local financial regulators

- UN Command: North Korea violated Korean War armistice last week when it fired on defecting soldier at demilitarized zone

Europe:

- ECB's Coeure (France): Expects change guidance on monetary policy outlook in 2018 with more of a focus on interest rates rather than bond purchases. Expected the central bank to soon delink its inflation target of close to 2% from its bond-buying stimulus in the euro-zone between now and September 2018

- Supporters of Chancellor Merkel reportedly anticipate grand coalition with SPD to end political impasse (**Note: Berlin insiders said to have selected April 22nd, 2018 as the date for new elections with experts believing it's a realistic date)

- British and EU negotiators reportedly are targeting Brexit divorce deal within three weeks. Negotiators drawing up plans that seek to overcome the biggest unresolved issues like a financial settlement and Northern Ireland. PM May's movement on divorce bill had allowed negotiators to tentatively schedule deal for week of Dec 4th

Americas:

- Fed Chair Yellen: Must keep an open mind and not be trapped by forecast; Some hint inflation expectations may be drifting down; Don't think expectations have drifted down very much

- Senate Banking Committee schedules hearing on nomination of Fed Gov Powell for Fed chairmanship on Nov 28th

Energy:

- Weekly API Oil Inventories: Crude: -6.4M v +6.5M prior

Economic Data:

- (NL) Netherlands Nov Consumer Confidence Index23 v 23 prior

- (NL) Netherlands Sept Consumer Spending Y/Y: 3.1 v 2.2% prior

- (DK) Denmark Nov Consumer Confidence: 7.6 v 6.5e

- (NO) Norway Sept AKU Unemployment Rate: 4.0%e v 4.1%e

- (TR) Turkey Nov Consumer Confidence: 65.2 v 67.3 prior

- (TW) Taiwan Oct Unemployment Rate: 3.7% v 3.7%e

- (ZA) South Africa Oct CPI M/M: 0.3% v 0.3%e; Y/Y: 4.8% v 4.8%e (**Note: 7th straight reading within the SARB target range of 3.0-6.0%)

- (ZA) South Africa Oct CPI Core M/M: 0.1% v 0.2%e; Y/Y: 4.5% v 4.6%e

**Fixed Income Issuance:

- (IN) India sold total INR110B vs. INR110B indicated in 3-month, 6-month and 12-month Bills

- (NO) Norway sold NOK3.0B vs. NOK3.0B in 1.75% Feb 2027 bonds; Avg Yield: 1.52% v 1.60% prior; Bid-to-cover: 2.00x v 3.69x prior

- (SE) Sweden sold SEK10B vs. SEK10B indicated in 3-month Bills; Avg Yield: -0.8586% v -0.8304%prior; Bid-to-cover: 2.13x v 1.79x

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 +0.1% at 388.4, FTSE +0.3% at 7432, DAX -0.2% at 13141, CAC-40 -0.1% at 5362, IBEX-35 +0.5% at 10038, FTSE MIB +0.3% at 22389, SMI +0.2% at XXX, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European indices trade mostly higher in relatively quite trade, with the exception of the DAX which trades slightly lower, ahead of Thanks Giving Holiday in the US. The FTSE trades higher ahead of the UK budget layer today. On the corporate front Thomas Cook Group trades sharply lower after Full year results and margin pressure. Elsewhere Sage Group and SSP Group trade higher after earnings. in the M&A space Akza Nobel trades higher after confirming termination of talks with Axalta, with Nippon Paint confirming an offer for Axalta. Looking ahead notable earnings include Deere & Co.

Equities

- Consumer discretionary [Thomas Cook [TCG.UK] -9% (Earnings, Margins), SSP Group [SSPG.UK] +7.3% (Earnings), Euromoney Inv [ERM.UK] -1.8% (Earnings, disposal)]

- Materials: [ Akzo Nobel [AKZA.NL] +1.8% (Terminates discussions with Axalta)]

- Technology: [Telecolumbus [TC1.DE] -4.5% (Earnings)] - Utilities: [Endesa [ELE.ES] -2.8% (Strategy update)]

Speakers

- ECB's Villeroy (France): Banks must be prepared for extreme situations. Sector was in better shape compared to a few years ago

- EU's Dombrovskis: Still not at a stage to discuss future after Brexit. Reiterated that UK banks would lose their EU passports. Financial institutions based in the U to lose EU passports, so they would need to rely on other forms to continue to provide business in the EU. On budget matters he noted UK was correcting its excessive deficit. Italy risked non-compliance with EU budget rules regarding Stability and Growth Pact. Expected Spain to timely address its excessive deficit while France would have to correct its excessive deficit this year

- Sweden Central Bank (Riksbank) Financial Stability Report noted that high and rising household indebtedness currently posed the greatest risk to the Swedish economy. Riksbank assessment that FSA mortgage proposal would have limited effect on housing market and total household consumption. Banking sector exposure to property makes it vulnerable and added that leverage ratio requirement of 5% was appropriate. Households were sensitive to shocks and saw housing prices to continue to rise in coming years but at a slower pace. Important to implement measures within housing

- Sweden Central Bank (Riksbank) Gov Ingves press conference on financial stability reiterated that the biggest risk was rising household debt

- Hungary Econ Min Varga saw 2017 GDP growth over 4% and that the Stats office would likely to upgrade growth forecasts

- Turkey Dep PM Simsek: Inflationary pressures remained but CPI to fall to single digits sooner or later

- Russia Central Bank (CBR) Gov Nabiullina: GDP close to potential; 2017 growth seen at 1.8%. Q4 GDP growth seen similar to Q3 pace. CPI was at 2.6% and close to central bank goal while household inflationary expectations were high. Reiterated view that had the potential to ease policy but rate cuts to be gradual

- North Korea Foreign Ministry: US designation deemed a severe provocation

- OPEC said to have invited 20 non-member to the upcoming bi-annual OPEC meeting in Vienna on Thursday, Nov 30th

- Norway Oil Min said to have declined an invitation to join the OPEC/non-Opec meeting later this month

Currencies

- Combination of factors working against the USD in the session. Comments by outgoing Fed Chair Yellen late on Monday that there might be some hint inflation expectations could drift lower was one catalyst.

- EUR/USD after ECB's Coeure (France) observed a possible change in guidance on monetary policy outlook in 2018 with more of a focus on interest rates rather than bond purchases. Expected the central bank to soon delink its inflation target of close to 2% from its bond-buying stimulus in the euro-zone between now and September 2018

- GBP/USD was holding onto gains for a 7th straight session for its best winning streak since June. Focus will be on Chancellor Hammond autumn budget to be presented later today. Overall any revisions to forecasts were unlikely to be so severe to threaten the UK govt target of bringing the budget deficit to under 2% of national income by 2021. Nonetheless Brexit uncertainty would probably eat away at how much room Hammond had to finance any extra spending or cut taxes

- USD/JPY tested below the 112 level after UN Command official stated that North Korea violated Korean War armistice last week when it fired on defecting soldier at demilitarized zone

Fixed Income

- Bund futures trade 162.89 down 30 ticks, as a squeeze continues amid light supply and the ECB looking likely to make only small adjustments to its guidance on monetary policy next year. Continued upside sees 163.40 then 163.63. A reversal targets 162.50 then 162.38.

- Gilt futures trade at 124.93 down 7 ticks as UK bonds outperform ahead of Chancellor Philip Hammond ' s budget. Continued upside eyeing 125.675 then 126.47. Downside targets include 124.90 then 124.24.

- Wednesday's liquidity report showed Tuesday's excess liquidity fell to €1.832T from €1.841T. Use of the marginal lending facility climbed to €284M from €273M prior.

- Corporate issuance expected to be quiet until after Thanksgiving

Looking Ahead

- (PT) Portugal Sept Current Account: No est v €1.0B prior - 05:30 (CL) Chile Central Bank's Traders Survey

- 05:30 (DE) Germany to sell €1.0B in 1.25% Aug 2048 Bunds

- 06:00 (IE) Ireland Oct PPI M/M: No est v -0.5% prior; Y/Y: No est v -2.7% prior

- 06:00 (CZ) Czech Republic to sell 2020, 2026 and 2030 Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia weekly OFZ bond auction; to sell combined RUB24.4B in 2024 and 2027 OFZ bonds

- 07:00 (US) MBA Mortgage Applications w/e Nov 17th: No est v 3.1% prior

- 07:00 (UK) Weekly PM May question time in House of Commons

- 07:30 (FR) ECB's Villeroy (France)

- 07:30 (UK) Treasury's Autumn Budget Statement

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Oct Preliminary Durable Goods Orders: 0.3%e v 2.0% prior; Durables Ex Transportation: 0.5%e v 0.7% prior, Capital Goods Orders (Non-defense/ex-aircraft): 0.5%e v 1.7% prior, Goods Shipment (Non-defense/ex-aircraft): 0.3%e v 0.9% prior; Durables Ex-Defense: No est v 2.0% prior

- 08:30 (US) Initial Jobless Claims: 240Ke v 249K prior; Continuing Claims: 1.88Me v 1.860M prior

- 10:00 (US) Nov Final University of Michigan Confidence: 98.0e v 97.8 prelim

- 10:00 (EU) Euro Zone Nov Advance Consumer Confidence: -0.8e v 1.0 prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 11:00 (US) Weekly EIA Natural Gas Inventories

- 11:00 (US) Treasury announcement for upcoming 2-year, 5-year and 7-year notes (Nov 27th and 28th)

- 12:00 (CA) Canada to sell 2-Year Bonds

- (IT) Italy Debt Agency (Tesoro) announcement for BTPei and CTZ auction scheduled for Nov 27th

- 14:00 (US) FOMC Meeting Minutes from Nov 1st meeting