TOP
China to withhold aid until EU meets certain conditions: Yao Yang (director of the China Centre for Economic Research at Peking University) {http://xrl.us/bmkumz}
Fitch commenting on the Euro crisis: Predicts a significant downturn in EU in the short term; there is a lack of a comprehensive solution; too early to judge on how effective the agreement is due to uncertainty over implementation. {http://xrl.us/bmkuqr}
Moody’s Puts 8 Spanish Banks on review for possible cut. {http://xrl.us/bmkuqa}
Japanese FinMin Azumi: Japan will consider support for Europe only after Europe comes up with a concrete scheme and amount of funds needed to resolve the crisis.
The Fed will probably revise its pledge to keep interest rates close to zero through mid-2013 as the need for large scale asset purchases diminishes, according to a Bloomberg survey. {http://xrl.us/bmkuk8}
China may use tax cuts to shore up expansion in the second-largest economy next year as export growth weakens and the threat of bad loans from stimulus spending narrows the govt’s options – Bloomberg. {http://xrl.us/bmkuk6}
EUROPE
The EFSF will auction as much as 2 billion euros ($2.6 billion) of 91-day bills today, while Greece will sell 1.25 billion euros of 182-day bills. Belgium will offer 1.2 billion euros of short-term debt and Spain will auction 364-day and 553-day bills.
The Swiss Govt cuts its 2012 GDP growth forecast to 0.5% from 0.9% – DJ. {http://www.cnbc.com/id/45649974}
Sarkozy told Le Monde that France losing triple A rating would be one more difficulty but not insurmountable and that France would face such a situation coolly and calmly
HSBCs Stephen King in the FT yesterday: Why the eurozone deal will fail.{http://xrl.us/bmkuqg}
European banks seeking to meet capital targets by selling contingent convertible bonds may struggle to attract investors after regulators imposed limits on the form the instruments must take – Bloomberg. {http://xrl.us/bmkuk2}
Political and legal challenges have mounted against the much-trumpeted deal struck in Brussels to save the euro, especially from Europe’s center-left, the WSJ reports.
UK RICS house price balance rose to -17 (beating expectations) in November from -24 in October
David Cameron defended his use of the British veto at last week’s EU summit as in the “national interest”, but the strains placed on his coalition government were laid bare when his deputy, Nick Clegg, refused to sit alongside him in Commons – FT. {http://xrl.us/bmkumv}
The quarterly survey by Manpower, a recruitment firm, showed that the UK’s employment outlook balance (seasonally adjusted) declined to zero for Q1 2012, compared with +1 for Q42011
Hostile bank takeovers should be outlawed as part of a package of reforms needed to avoid a repeat of the catastrophic failings at RBS, the chairman of the FSA has urged after releasing a long-delayed report into the bank’s collapse – FT. {http://xrl.us/bmkump}
Greece Government plays down need for austerity {http://xrl.us/bmkuqk}
Europe’s Banks Retreat From the East – WSJ {http://xrl.us/bmkuqn}
Billionaire Mikhail Prokhorov is seeking to tap the dissent that sparked Russia’s biggest anti-govt demonstrations in a decade, pledging to run against Putin for the presidency next March – Bloomberg. {http://xrl.us/bmkuma}
The OECD called for Russia to contain spending to limit the budget’s dependence on oil and introduce pension reforms to ensure fiscal sustainability.
Czech PM Necas says he would ask the CB to release reserve funds for an IMF loan only if all other non-Euro countries take part in the loan-paper.
US & CANADA
Lawmakers moved closer to a deal on Monday to fund the govt through next year, potentially avoiding a shutdown that would have further damaged Congress’ tattered reputation ahead of the 2012 election – Reuters. {http://xrl.us/bmkup8}
Bernanke is increasing Fed transparency at a faster pace than any predecessor – Bloomberg. {http://xrl.us/bmkuku}
The BoC’s Carney says the EU summit made some progress in addressing problems; fiscal and structural reforms are best options for decreasing debt; Canadian economy must not rely too much on debt-fuelled households; and Canadian businesses must invest to improve productivity.
Canada is to withdraw from the Kyoto accord on global warming in order to save billions of dollars in potential non-compliance penalties. {http://xrl.us/bmkum9}
ASIA
The IMF’s top banking official, assessing the strength of China’s financial system, said Chinese regulators need to improve the data they use to assess whether their banks could withstand a sudden economic downturn, and also should better explain what level of capital banks need to hold. – WSJ.
China’s trade restrictions and “interventionist policies” in areas such as intellectual property rights remain a concern for American companies doing business in the Asian nation, the US said – Bloomberg. {http://xrl.us/bmkukw}
USDCNY fixed at 6.3359
India may set up 10bn Rupee Credit Risk Guarantee Fund – PTI.
India’s industrial output fell in October for the first time in more than two years as capital goods investment slumped, ramping up pressure on the central bank to ease monetary or liquidity conditions, possibly as soon as Friday
Japan’s Tertiary Industry Index: +0.6% in October.
Australia’s NAB business conditions index improved to 1 in Nov from –1 the previous month. The NAB business confidence index remained unchanged at 2 in Nov from the previous month.
Fonterra, NZ’s largest dairy exporter said that it would increase its forecast on the milk payout to farmers till May 2012 as commodity prices picked up slightly. This move would put an additional NZD 300mio in the domestic economy according to the company. Demand remained strong in emerging countries, in particular ASEAN countries
LATAM
Mexico will seek more flexible exchange rates and budget discipline as it takes the leadership of the Group of 20 nations, the country’s finance ministry said
Fernandez spurns Argentine inflation targets to focus on employment growth as she starts her 2nd term in office – Bloomberg. {http://xrl.us/bmkuky}
CORPORATE
Intel has cut its revenue forecast by $1bn, because of a shortage of hard disk drives created by Thailand’s devastating floods – FT. {http://xrl.us/bmkum3}
The LSE has agreed to buy the remaining 50% of the FTSE International index business that it does not already own from Pearson, the education and information group that owns the Financial Times, for ?450m. {http://xrl.us/bmkum7}
Sino-Forest the timber producer fending off fraud allegations, said it will default on its bonds and miss a self-imposed deadline to report earnings as it considers putting itself up for sale – Bloomberg. {http://xrl.us/bmkuk4}
Sinopec and ENN Energy offered HK$15.3 billion ($2 billion) cash for China Gas to gain control of a fuel distribution network covering 20 provinces – Bloomberg. {http://xrl.us/bmkumc}
OTHER MARKETS
Equities: Asian stocks dropped, sending the benchmark regional gauge to a two-week low on speculation that credit-ratings may be cut for European countries – Bloomberg. {http://xrl.us/bmkuks}
Nikkei – down 1.17%. TOPIX – down 0.80%. Shanghai – down 1.33%. Hang Seng down 0.87%. Dow Jones – down 1.34%. Nasdaq – down 1.31%.
Treasuries: USTs are trading largely lower in Asian trade Tuesday, with the longer-end of the curve underperforming ahead of the 10 and 30-yr auctions.
Commodities: Crude futures are trading flat in Asian trade, with the front-month WTI contract ahead by just 3 cents at $97.80, having traded a narrow $97.64 to $98.05 range.
In a rare and deep split of views, investors and traders are pricing in unusually large “fat tail” risks – low-probability events that have an outsize impact on prices – for next year that could boost oil prices to $150 a barrel or push them to $50 a barrel – FT. {http://xrl.us/bmkund}
The Shanghai Stock Exchange Composite Index fell for a fourth day, losing 1.3 percent. China Resources Land Ltd. and Hang Lung Properties Ltd. slid more than 2.1 percent in Hong Kong. Housing transactions declined in 27 out of 35 cities in China tracked by Soufun between Dec. 5 and Dec. 11. Transactions fell more than 60 percent in at least four cities, including Tianjin and Hangzhou.
CALENDAR
0630/0130 France Nov-11 HICP
0900/0400 IEA monthly oil market report
0900/0400 UK BOE’s Spencer Dale speaks
0930/0430 UK Nov-11 Consumer Prices
1000/0500 Germany Dec-11 ZEW survey
1100/0600 Brazil Oct-11 IBGE retail sales ex-auto SA
1245/0745 US 10-Dec ICSC-Goldman Store Sales
1330/0830 US Nov-12 Retail & Food Sales
1355/0855 US 10-Dec Redbook Average
1500/1000 US Oct-12 Business Inventories
1500/1000 US Dec-11 IBD/TIPP Econ Optimism Index
1730/1230 FOMC monetary policy announcement
2130/1630 US 03-Dec Money Supply (M2)
Eastern Europe
BUDAPEST – Parliament in three-day session, Day 2
BUDAPEST – IMF/EU team to arrive in Budapest for informal talks
BUDAPEST – November inflation data <HUCPIY=ECI><HUCPIC=ECI> (0800)
BUDAPEST – 3-month Treasury bill sale <HUAUCTION01> (1030)
CZECH REPUBLIC – Parliament session
ROMANIA – October current account data (0700)
SLOVAKIA – Inflation data, Nov (0900)
CZECH REPUBLIC – Current account 10/11 (1000)
BULGARIA – November CPI data (1000)
POLAND – Current account, CPI data (1400)
HSBC Global Research