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Wednesday November 5, 2014 - 11:52:00 GMT
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Wed, 05 Nov 2014 5:20 AM EST

- Republican party reclaimed the US Senate and score its largest majority in House since 1928
- More disappointing PMI data from the Far East; China Oct HSBC Services PMI hits a 3-month low (52.9 v 53.5 prior); Hong Kong Oct HSBC PMI registers its 3rd month of contraction and lowest reading in 37 months following month long protests
- Russia Central Bank scales down interventions aimed at easing pressure on RUB currency (Ruble); Rate to be guided mostly by market factors
- Dis-inflation trends have remained powerful as commodity prices declined further; Iceland unexpectedly cuts its Key rate
- Major European PMI Services come in mixed (Spain, Italy France beat while Germany and Euro Zone miss)

**Economic Data***
- (IN) India Oct Services PMI: 50.0 v 51.6 prior
- (IE) Ireland Oct Services PMI: 61.5 v 62.5 prior
- (TH) Thailand Central Bank (BoT) left its Benchmark Interest Rate unchanged at 2.00%, as expected
- (SE) Sweden Oct PMI Services: 57.7 v 55.6 prior
- (CH) Swiss Oct CPI M/M: 0.0% v -0.1%e; Y/Y: 0.0% v -0.1%e
- (ES) Spain Oct Services PMI: 55.9 v 55.3e (12th month of expansion)
- (SE) Sweden Sept Industrial Production M/M: -1.1% v +0.3%e; Y/Y: -4.3% v -2.0%e
- (IT) Italy Oct PMI Services: 50.8 v 49.4e (1st expansion in three months)
- (FR) France Oct Final Services PMI: 48.3 v 48.1e (confirms second month of contraction and lowest since June)
- (DE) Germany Oct Final Services PMI: 54.4 v 54.8e (confirms 17th straight month of growth)

- (IS) Iceland Central Bank (Sedlabanki) cuts its 7-Day Lending Rate by 25bps to 5.75% (not expected)
- (EU) Euro Oct Final Services PMI: 52.3 v 52.4e ((confirms 15th consecutive month of growth but lowest since March)

- (UK) Oct Services PMI: 56.2 v 58.5e (22nd month of expansion but lowest since May 2013)
- (EU) Euro Zone Sept Retail Sales M/M: -1.3% v -0.8%e; Y/Y:0.6% v 1.4%e

Fixed Income:
- (GR) Greece Debt Agency
(PDMA) steady as it sold 1.14B vs. 875M indicated in 26-week bills; Avg Yield: 2.00% v 2.00% prior; Bid-to-cover: 2.09x v 2.67x prior

Indices [Stoxx50 +1.3%,
FTSE 100 +0.8% at 6,509, DAX +1.1% at 9,282, CAC-40 +1% at 10,236, FTSE MIB +1.5% at 19,241, SMI +1.1% at 8,816, S&P 500 Futures +0.4% at 2,014]

- Market Focal Points/Key Themes: Equity markets open higher following Tuesday's losses amid US midterm election results, Euro Zone services PMI below ests, ING supported by Q3 results, Marks & Spencer raises outlook, Lower precious metals prices weigh on miners

By Sector
- Consumer Discretionary
[Marks & Spencer MKS.UK +6% (raised outlook); JD Wetherspoon JDW.UK -6% (cautious outlook)]
- Financials [Ageas AGS.BE +1.5% (Q3 profits above ests), ING INGA.NL +1% (Q3 profits in line)]
- Utilities [Endesa ELE.ES -3% (share placement)]
- Industrials [Brenntag BNR.DE +7% (Q3 results above ests)]
- Technology [Axel Springer SPR.DE +4% (Q3 sales above ests)]
- Stoxx50 sectors [Utilities +1%, Consumer Non-Cyclical +1%, Industrials +1%, Basic Materials +1%, Technology +0.9%, Financials +0.9%, Consumer Cyclical +0.8%, Telecom +0.7%, Energy +0.6%]

- Russia Central Bank announced measures to increase RUB currency flexibility

And scaled down interventions aimed at easing pressure on RUB currency (Ruble). The FX rate to be guided mostly by market factors. Limits daily interventions to defend the RUB currency to $350M
- Sweden Central Bank (Riksbank) gov Ingves stated that he wanted to send clear signal that its focus was on its inflation target. Sweden was doing well in terms of growth and consumption but low inflation was a global challenge
- Iceland Central Bank post rate decision statement noted that inflation expectations had fallen in recent months and was approaching its inflation target. It also cut its 2014 GDP growth forecast from 3.4% to 2.9%
- Japan Chief Cabinet Sec Suga: Decision on next phase of the planned sales tax hike to be made after Dec 8th
- Thailand Central Bank post rate decision statement noted it was concerned about the growing risks to its economy and would cut its 2014 and 2015 GDP growth outlook (**Note currently 1.5%and 4.8% respectively). It noted that it did have policy space for cuts if necessary and was not worried about capital movements

Currencies/Fixed Income:
- The Republican gains in the US mid-term election gave the USD some additional momentum.
Overall market participants increasingly seemed JPY-bearish with USD/JPY pair hitting fresh 7-year highs above 114.50. BoJ's Kuroda reiterated during the Asian session that he would do doing whatever it takes to overcome deflation
- There seems to be more uncertainty regarding the upcoming ECB meeting on Thursday. Reports circulated on Tuesday that ECB committee members were planning to challenge President Draghi and critique his leadership style. This could lead Draghi to expand QE as a result. The EUR/USD hovering just below the 1.25 level heading into the NY morning.
- The GBP/USD hit a 3-week low below 1.59 area after UK Services PMI data missed expectations
- Russia Central Bank scaled down interventions aimed at easing pressure on RUB currency (Ruble) and stated that FX rate to be guided mostly by market factors. The RUB currency weakened to a record low as a result against the USD and Euro
- Dis-inflation trends remained powerful as commodity prices declined further. Spot gold fell another 1.5% to test below $1,150/oz while Opec oil basket tested below the $80/barrel for the first time in over 4 years

Political/In the Papers:
- Weekly API Petroleum Inventories registers its first draw in 5 weeks (-0.64M vs. +2Me
- (US) Republicans picked up the six Democratic-held Senate seats they needed to take control of the Senate
- (UK) National Institute for Economic and Social Research (NIESR) affirms UK 2014 GDP forecast 3.0%, raises 2015 GDP growth from 2.3% to 2.5%
- (EU) Reportedly ECB committee members are planning to challenge President Draghi and critique his leadership style
-(CN) Several economists in China said to have suggested to Premier Li to undertake broad interest rate cuts and RRR cuts during an internal govt meeting

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- 05:30 (GE) Germany to sell 4.0B in 0.25% 2019 BOBL
- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to cut Base rate by 25bps to 1.75%
- 06:00 (IE) Ireland Oct Monthly Change: No est v -4.7K prior; Unemployment Rate: No est v 11.1% prior; Registry Level: No est v 374.8 prior
- 06:00 (IE) Ireland Sept Industrial Production M/M: No est v -1.6% prior; Y/Y: No est v 19.7% prior
- 06:00 (PT) Portugal Q3 Unemployment Rate: No est v 13.9% prior
- 06:30 (CL) Chile Sept Economic Activity Index M/M: -0.4%e v +0.5% prior; Y/Y: 1.7%e v 0.3% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia weekly OFZ auction (if not cancelled)
- 07:00 (UK) PM Cameron weekly question time in House of Commons
- 07:00 (US) MBA Mortgage Applications w/e Oct 31st: No est v -6.6% prior
- 07:00 (BR) Brazil Oct Services PMI: No est v 51.2 prior; Composite PMI: No est v 50.6 prior
- 08:00 (EU) Eurogroup chif Djsselbloen in Parliament ahead of Eurogroup meeting
- 08:00 (DE) German Finance Ministry in Parliament on ECB stress tests
- 08:15 (US) Oct ADP Employment Change: +220Ke v +213K prior
- 08:15 (US) Baltic Dry Bulk Index
- 09:00 (DE) German Fin Min Schaeuble speaks at ZDB Construction Lobby Convention
- 09:00 (MX) Mexico Oct Consumer Confidence Index: 91.2e v 91.8 prior
- 09:15 (US) Fed's Kocherlakota in MN
- 09:30 (US) Fed's Lacker speaks on Financial Stability in Washington
- 09:30 (BR) Brazil Weekly Currency Flows
- 09:45 (US) Oct Final Markit Services PMI: 57.1e v 57.3 prelim; Composite PMI: No est v 57.4 prelim
- 10:00 (US) Fed's Rosengren at conference in Lima, Peru
- 10:00 (PL) Poland Central Bank Gov Belka holds post rate decision press conference
- 10:00 (US) Oct ISM Non-Manufacturing Composite: 58.0e v 58.6 prior
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 12:00 (CA) Canada to Sell 3-Year Bonds
- 16:00 (CO) Colombia Sept Exports: No est v $4.8B prior
- 18:45 (US) Former Fed Chairman Bernanke speaks at Investor Conference in Denver
- 18:50 (JP) Bank of Japan (BOJ) Oct. 6-7 meeting minutes
- 19:30 (AU) Austria Oct Employment Change: +22.5Ke v -29.7K prior; Unemployment Rate: 6.2%e v 6.2% prior (revised from 6.1%)
- 20:35 (JP) Japan Oct Services PMI: No est v 52.5 prior; Composite PMI: No est v 52.8 prior
- (MX) Mexico Banamex Survey of Economists
- (RU) Russia Oct Sovereign Wealth Fund Balances: Reserve Fund: No est v $90.0B prior; Wellbeing Fund: No est v $83.2B prior


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