One Minute Macro Update
US: Futures in positive territory as Retail Sales, PPI, and an FOMC statement are anticipated. FOMC is not expected to feature any dramatic changes, though the statement does give the Fed an opportunity to reiterate policy in the face of a rising yield curve. Since purchases have not been extended above their normal run rate, the Fed may use language to influence the curve. Given the recent moves, we still believe the front end to be cheap as we believe the Fed will be on hold with the policy rate through 2011 given current conditions. Comments on the unemployment situation which has seen the headline rate increase as participants rise seem appropriate here.
Europe: Trichet recommending that governments agree to ramp up the size and scope of the EFSF as cautious optimism continues to hold European spreads in. Belgium placed on outlook neg by S&P, sells €940MM in 3M bills +2bp in yield from prior at 1.5x bid/cover (same as prior) and €1.56B in 12M bills +70bp in yield from prior at 3.8x bid/cover (versus 2.4x prior). Spain sells €2.51B of an expected €2-3B in 12M and 18M bills. €1.99B in 12M bills, yield 3.52% (+115bp v prior), bid/cover 2.2x (v 1.9x prior). €520MM in 18M bills, yield 3.79% (+113bp v prior), bid/cover 4.54x (v 3.7x prior). EC meeting along with the CDS roll has participants a bit on the sidelines today as speculation around how much the ECB can actually do to help the situation continues to pressure the region. We maintain that without a fiscal union, the debt situation there is untenable.
Asia: Chatter of further tightening in China continues as required reserve ratio hikes serve as a temporary method, providing relief ahead of the inevitable policy rate hikes. Japan continues to disappoint economically with a final October Industrial Production of --2.0% v -1.8% prior. AUD 3Q housing starts -13.2% QoQ v. -5.0%E. November NAB Business conditions rose, but confidence fell.
Via Brian Yelvington at Knight Capital