Equities Enter the Pre-Thanksgiving Doldrums

Economic Data

- (BR) Brazil Sept Economic Activity Index (Monthly GDP) M/M: 0.4% v 0.2%e; Y/Y: 0.9% v 0.5%e
- (US) Nov Empire Manufacturing: 10.16 v 12.00e
- (CA) Canada Sept Int'l Securities Transactions (CAD): 4.4B v 7.0Be
- (CA) Canada Oct Existing Home Sales M/M: +0.7% v -1.4% prior
- (PL) Poland Oct YTD Budget Balance Level (PLN): -27.3B v -22.4B prior; Budget Balance: Performance 57.4B v 47.2% prior
- (US) Oct Industrial Production M/M: -0.1% v +0.2%e; Capacity Utilization: 78.9% v 79.3%e; Manufacturing Production: 0.2% v 0.3%e

The Japan third-quarter GDP report drove the Nikkei down 3% in Monday trading, but the response in European and US markets has been more restrained. Europe opened in the red but major indices rose back into positive territory and closed not too far off their highs, with an assist from ECB President Draghi jawboning about sovereign QE. In the US, the DJIA and the S&P500 have crept back into and then back out of positive territory after two hours of trading. Trading volumes are on the low side. As of writing, the DJIA is down 0.7%, the S&P500 is off 0.25% and the Nasdaq is down 0.54%.

The October US industrial production report missed expectations and the September numbers were revised somewhat lower. The biggest decline was the motor vehicle output component, which fell 1.2% after September's 1.9% drop, making for three consecutive months of contraction in auto manufacturing.

USD/JPY fell hard from seven-year highs just above 117 down as low as 115.50 during the European session, but has gradually crept back up to 116.55. EUR/USD nosed below 1.2450 mid morning. FX traders are talking about a big bid in EUR/CHF around the 1.2010 level, on the order of €10 billion, presumably from the Swiss National Bank. Last Friday, WTI crude futures closed right around $76, while Brent crude was just above $79, and both have moved incrementally lower in trading this morning.

ECB President Draghi provided his quarterly update to the EU Parliament this morning and reiterated many of his familiar monetary policy talking points. Included in the speech were heavy suggestions that sovereign bond buying by the ECB is still in the realm of possibility, implicitly pushing back against comments out of the Bundesbank's Weidmann last week.

Two huge mergers dropped this morning: Actavis for Allergan and Halliburton for Baker Hughes. After a week of rumors, Actavis reached a deal to acquire Allergan for $219/shr in cash and stock, in a total deal valued around $66B. Valeant said it could not justify matching the price, giving up the fight. Baker Hughes agreed to a cash-and-stock deal valued at $78.62 a share, valuing the firm around $34.6 billion. Each Baker Hughes share was valued at 1.12 Halliburton shares plus $19.00 in cash.

Looking Ahead

- 14:00 (AR) Argentina Q3 Unemployment Rate: 7.7%e v 7.5% prior
- 16:00 (US) Crop Progress Report
- 19:30 (AU) RBA Nov Minutes
- 20:30 (CN) China Oct Property Prices
- 21:30 (CA) Partial elections held to fill 2 Canada Parliament vacancies
- Bank of Japan (BOJ) policy meeting (decision on Wednesday)

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