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European Market Update: Euro-Zone PPI Beats Expectations
Â· *** ECONOMIC DATA ***
Â· SP Nov Net Unemployment: 45.9K v 31.2K prior
Â· SP Nov Consumer Confidence: 76.1 v 76.2 prior
Â· UK Nov Construction PMI: 54.3 v 57. 0e
Â· EU Oct PPI: M/M 0.6% v 0.4%e || Y/Y 3.3% v 3.0%e
Â· *** SPEAKERS/COMMENTS ***
Â· ECB Noyer: Subprime crisis cost estimated
Â· ECB Noyer: $250B; Bank losses are not a risk to financial system health
Â· ECB Noyer: Crisis shows misunderstanding investors-ratings agencies
Â· ECB Noyer: Financial turmoil has a negative impact on confidence
Â· Austrian Finance Minister: Sees a strong Euro-zone economy in 2008
Â· Treasury's Ryan: Likely to encounter unforeseen challenges ahead
Â· Treasury's Ryan: We are witnessing a resurgence of risk aversion
Â· Treasury's Ryan: Credit market conditions are a formidable challenge
Â· Treasury's Ryan: The global economy is quite strong; The US remains sound
Â· Norwegian Central Bank: The risk of financial instability has increased
Â· Norwegian Central Bank: Bank's profits are pressured
Â· Norwegian Central Bank: Bank's loan losses are expected to rise somewhat
Â· AFT Director: Expects credit market improvement starting in January
Â· *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Â· Ahead of tomorrow's OPEC summit front month crude oil futures are trading lower in the session on continued concerns that credit conditions will cause a broad worsening of the market environment and overall market sentiment. Oil also came under pressure after an OPEC delegate mentioned overnight that OPEC may consider to either raise output by another 500K bpd or leave output unchanged at tomorrow's meeting.
Â· On the FX front the US Dollar continues to consolidate from multi-decade lows. Focus has been on the yen and Franc as credit concerns remain on the front burner resulting in a drop in the equity markets, and a continued unwinding of the carry trades. The commodity currencies are trading lower on the back of lower oil prices. The Canadian Dollar is also trading lower as traders price in the possibility of an interest rate cut at the Bank of Canada policy setting meeting today. According to a wire report released overnight the final GCC communiquÃ© does not include any mention of currency revaluation.
Â· Fixed income futures are trading higher in the session led by long-gilts, which are trading higher on the prospects of a possible BOE interest rate cut at Thursday's policy setting meeting. European fixed income futures are also higher, but lag behind those in the UK as an ECB cut is highly unlikely this week. The UK DMO sold Â£2.5B in 5.25% June 2012 gilts with an average yield of 4.587% ad a bid-to-cover of 2.53x overnight. The auction had a yield tail of 0.2bps, and the bid-to-cover compared to 1.98x at the previous auction. Austria sold â‚¬550M in 4.30% July 2014 RAGB with an average yield of 3.989% and a bid-to-cover of 2.96x overnight. The auction brought the amount outstanding for the issue up to â‚¬10.1B. The bid-to-cover compares to 2.65x at the previous auction.
Â· Looking ahead, with no economic numbers schedule in the US today focus is likely to fall on the Bank of Canada's rate decision due out at 9:00 ET. The Bank of Canada expected to keep rates on hold at 4.50%, however a recent survey of 27 economist showed that 12 of the economists (approximately 44%) anticipate a 25bps interest rate cut to 4.25%.
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