Futures are modestly higher in early trading having tracked the USDJPY once again almost tick for tick, with the carry trade of choice rising to 123 shortly after Mario Draghi’s latest speech pushed the dollar strong initially only to see most gains promptly evaporate against both the Yen and the Euro. European shares are likewise little changed, after gaining earlier, while Asian stocks rise; oil also advanced in early trading only to drop to its lowest overnight level moments ago, a few dimes over $40, with aluminum and copper both posting modest increases.

Perhaps it is worth noting that a week which many predicted would be bad for risk assets has been precisely the opposite and nowhere more so than in France, where as Bloomberg reports, after Europe’s worst terror attack in more than a decade hasn’t deterred equity investors this week, with France’s CAC 40 Index rising as much as 2.5 percent. Fewer than 10 stocks have fallen, among them Accor, Europe’s biggest hotel operator, which dropped 4.7 percent on Monday on concern about tourist flows. Since then it’s clawed back more than half of those losses. The CAC 40 Index remains one of Western Europe’s best performing equity indexes this year.Only Denmark, Ireland, Italy and Austria have fared better

As Bloomberg also notes, while global stocks are little changed so today, the MSCI All Country World Index is on track for its best week in six. Investors have a new-found belief the path of U.S. interest rate increases will be gradual even if the Federal Reserve embarks on tighter monetary policy next month for the first time in nine years. The MSCI Asia Pacific Index has risen 1.6 percent this week, while the MSCI Emerging Markets Index has jumped 2.4 percent.

Perhaps more notable is that despite the Fed’s tightening rhetoric, emerging market currencies are set for their first weekly gain in five. The JPMorgan Emerging Market Currency Index has risen 0.5 percent over the past five days, the most since Oct. 9. This week some of the year’s worst-performing emerging market currencies have rallied against the dollar. The Brazilian real has risen 3.5 percent, having dropped 28 percent in 2015. The South African rand has jumped 3 percent after falling 17 percent this year.

This is where we stand currently:

• S&P 500 futures up 0.2% to 2084
• Stoxx 600 down less than 0.1% to 381
• MSCI Asia Pacific up 0.4% to 135
• US 10-yr yield up less than 1bp to 2.26%
• Dollar Index up 0.2% to 99.19
• WTI Crude futures up 0.1% to $40.60
• Brent Futures up 0.9% to $44.58
• Gold spot up 0.3% to $1,085
• Silver spot up 0.6% to $14.36

Among the top overnight news: Obama, Putin Agree on One Thing: Bombing Islamic State’s Oil: French leader to push for consensus in Washington, Moscow; France Scrutinizes EU’s Terror Failings a Week After Attacks: Hollande presses ahead on military cooperation with Russia; Swedish Prosecutor Detains Suspected Terrorist: suspect affiliated with Islamic State in Iraq, Swedish media says; Pfizer Said Near Allergan Deal as U.S. Targets Inversions: U.S. drugmaker may pay as much as $380 per share for Allergan; Draghi Says ECB Will Do What It Must to Raise Inflation Quickly: ECB President spoke in speech in Frankfurt; ABN Amro IPO Raises $3.6b as Government Cuts Stake: IPO values ABN at EU16.7b as bank returns to market; 1MDB Said to Near $2.3b Power Sale to Chinese-Led Group: deal with group may be announced as soon as this weekend; Gap Cuts Annual Profit Forecast as Sales Continue to Slide: Sees FY2016 adj. EPS $2.38-$2.42 vs prior view $2.75-$2.80; Goldman Said to Raise $1.3 Billion to Buy Stakes in Hedge Funds: bank started raising money for Petershill II in 2013, initially aiming to raise $1b, according to person familiar.

A closer look at the markets shows Asian stocks rose, with the regional benchmark index extending its biggest weekly advance in 6 weeks; equities traded mixed in a tepid fashion following the flat lead from US bourses. ASX 200 (+0.1%) extended on gains led higher by financials, subsequently on course for the 2nd best week of 2015, while the Nikkei 225 (+0.1%) initially fell as Japanese exporters continued to feel the squeeze from a stronger JPY before recovering heading into the close. Shanghai Comp. (+0.1 %) traded with mild gains following reports that the PBoC reduced the SLF rates in an attempt to combat deflationary pressures., JGBs fell following a lacklustre enhanced liquidity auction which drew a lower than prior b/c.

Key Asian Data:

• MSCI Asia Pacific up 0.4% to 135
• Nikkei 225 up 0.1% to 19880
• Hang Seng up 1.1% to 22755
• Shanghai Composite up 0.4% to 3631
• S&P/ASX 200 up 0.3% to 5256

In Europe, the reaction to Draghi’s latest “whatever it takes to boost inflation” speech in fixed income was somewhat more muted with Bunds relatively unmoved immediately preceding the speech, however we have seen a leg lower in 2 year yield subsequently touching new record lows of -0.39%, while it is worth noting that the Euribor curve has continued to flatten, with the front strip adding between 1.5 and 2 ticks, while the red and green strips remain in the black. Of interest, Portuguese bonds are underperforming their European counterparts this morning amid continued political uncertainty with the Socialists still unable to form a stable government and subsequently unable to guarantee passing their budget. Greek yields also trade notably wider to the German benchmark amid concerns over the fragility of the Syriza government, following yesterday’s expulsion of several members

Key European Data:

• Stoxx 600 up less than 0.1% to 381
• FTSE 100 up less than 0.1% to 6332
• DAX down less than 0.1% to 11077
• German 10Yr yield up less than 1bp to 0.49%
• Italian 10Yr yield down 1bp to 1.5%
• Spanish 10Yr yield down 2bps to 1.67%
• S&P GSCI Index up 0.4% to 338.7

Equity markets have seen a choppy start to the session (Euro Stoxx: -0.5%), with energy names the session’s laggard given that the stronger USD (USD-index: +0.10%) is keeping commodities near their lows as WTI Jan’15 futures remain below USD 42.00/bbl and spot gold continues to reside around USD 1080.00/oz. Stocks continue to edge lower in Europe, from a technical perspective the CAC (-0.50%) and Dax (0.0%) broke their 200DMA’s to the downside.

In commodites, WTI and Brent trade relatively flat, with a lack of fundamental news driving price action. However, WTI is on course to post its 3rd consecutive week of decline, with US supplies sustaining the glut especially following a drop in the front month contract which has seen a drop of 1.1% to the lows of the session.

Gold traded range bound overnight with the USD-index remaining in a tight range after comments from Fed’s Fischer who reaffirmed December hike expectations. Of note, FFR futures are currently pricing in a 68% chance of hike in December. Elsewhere, most LME metals have fallen to multi year lows this week, however copper and Zinc for 3 month delivery have attempted to claw some ground back in recent trade.

Bulletin Headline Summary from Bloomberg and RanSquawk

• Comments from ECB’s Draghi saw immediate downside in EUR, underlying the significance of the December meeting. However moves in EUR/USD were not overtly pronounced, highlighting the dovishness of the market
• Stocks have sold off with CAC and Dax both breaking 200DMA’s to the downside, with financials and energy underperforming
• Looking ahead, highlights include Canadian Retail Sales and CPI, Coeure and Constancio, Fed’s Bullard and Dudley
• Treasuries little changed, 5/30 extends flattening amid expectations Fed to hike rates in Dec; Fed’s Dudley to speak today; yesterday Vice Chairman Fischer said Fed trying not to surprise markets at liftoff.
• Draghi set the scene for further stimulus at the ECB’s next meeting in two weeks’ time, saying it will do what’s necessary to reach its inflation goal rapidly
• A year of ABS purchases by the ECB has left investors underwhelmed and confused as the purchases have been dwarfed by other stimulus efforts and failed to prevent an issuance slowdown; a shortage of detail has led to complaints about transparency
• Chinese borrowers are taking on record amounts of debt to repay interest on existing obligations, raising the risk of defaults and adding pressure on policy makers to keep financing costs low
• China’s slowdown is already playing out across the world, dragging down commodity prices and weighing on trade partners — and that’s while the economy is still growing at about 7%, according to government data. So imagine what happens in a hard-landing scenario
• Federal regulators have started to intensify their scrutiny of risky company loans extended by Wall Street’s biggest banks, just weeks after completing an annual audit of corporate lending, according to people with knowledge of the matter
• France pressed its European partners to toughen security and intelligence across the continent, saying other countries’ shortcomings were to blame for the failure to prevent last week’s terror attacks
• U.S. and French military forces entered a hotel in the Malian capital of Bamako where gunmen took 170 hostages in an attack on the Radisson Blu Hotel
• Sovereign 10Y bond yields higher. Asian stocks gain, European stocks lower, U.S. equity-index futures decline. Crude oil mixed, gold and copper gain

DB’s Jim Reid completes the overnight wrap

After Wednesday’s rally it felt like a bit of winter-related fatigue crept into US equities yesterday with the S&P 500 failing to break out of a tight 8pt range during the session, crossing between gains and losses multiple times and eventually finishing down -0.11%. That was actually the 4th smallest trading range this year (by points) for the index. The steadiness masked what were some steep falls for healthcare stocks (driven by a profit warning from UnitedHealth) and energy names as WTI – although closing the session down ‘only’ -0.64% – broke below $40 again temporarily for the second consecutive day after more bearish inventory data. Meanwhile, the latest October machine sales numbers from Caterpillar failed to inspire much hope for a near-term rebound in the mining sector after reporting sales down double-digits in all regions, with Asia in particular seeing sharp drop-off.

Prior to this European stocks had previously closed broadly higher (Stoxx 600 +0.43%) although off their earlier intraday highs while the ECB minutes didn’t offer a whole lot of new information but continued to hint towards a possible further easing in December (more on that below). The notable underperformer yesterday was US credit where CDX IG finished +3bps wider with the commentary suggesting that book builds for new issues were slightly underwhelming and suggestive of supply indigestion. Still, weekly volumes for US IG has again topped $30bn, marking the fourth consecutive week above that mark.

Meanwhile, the Atlanta Fed President Lockhart was vocal again yesterday, reiterating his view that the Fed is ready for liftoff but continuing to warn that ‘the pace of increases may be somewhat slow and possibly more halting than historic episodes of rising rates’. While the prospect of a December move is looking more and more likely, the likelihood for a gradual pace of moves thereafter appears to be weighing on the USD slightly with the Dollar index finishing -0.69% lower yesterday with sharp gains across the board for currencies in emerging markets in particular (Brazil +1.3%, Malaysia +1.1%, South Africa +1.0%, Colombia +1.0%). US Treasury yields generally nudged lower at the longer end of the curve for the same reason, the benchmark 10y closed 2.5bps lower at 2.248% and 30y yields closed over 3bps down.

Near the end of the US session we also heard from Fed Vice-Chair Fischer who said that the Fed has ‘done everything we can to avoid surprising the markets and governments when we move, to the extent that several emerging market (and other) central bankers have, for some time, been telling the Fed to just do it’.

It’s a bit of a mixed end to the week for bourses in Asia this morning, with little newsflow in the region. The Nikkei (-0.09%) and Hang Seng (-0.23%) are both lower as we go to print, while there’s been a modest gain for the Shanghai Comp (+0.50%), Kospi (+0.08%) and ASX (+0.26%). Asia credit is unchanged, while credit indices in Australia are wider and US equity futures are near flat. The only data of note has come from China where the Conference Board leading economic index was up +0.6% mom in October.

Yesterday’s US data was generally pretty supportive. Initial jobless claims were down 5k last week to 271k (vs. 270k expected) which is pretty much consistent with the current four-week average. The November Philly Fed manufacturing survey was up 6.4pts this month to 1.9 (vs. -0.5 expected) at the headline and back in positive territory after two successive negative prints. In the details, while still negative, new orders and shipments components were up, while the employment index edged back up into positive territory. Shortly following this, the October Conference Board’s leading index printed a +0.6% mom gain, bettering expectations by a tenth.

Over in Europe the main data of note was out of the UK where we saw retail sales come in slightly below expectations for October (excluding fuel -0.9% mom vs. -0.6% expected), although that was on the back of a strong September reading. Meanwhile, the ECB minutes showed that it was argued that the ‘risk of deflation remained relevant’ and that ‘against this background, the view was put forward that a case could be made for considering reinforcing the ECB’s accommodative monetary policy stance already at the current meeting and, in any case, to act sooner rather than later’. Governing Council members also found it ‘necessary to step up communication and underscore the Governing Council’s determination and readiness to act’. Notably, the accounts also highlighted that ‘reference was made to the experience in other jurisdictions, where negative rates had not appeared to result in major difficulties or widespread substitution into cash’.

One other snippet worth highlighting emerged late last night with the news that the Treasury Department has issued new rules which is set to discourage US corporate inversions. According to the WSJ, the rules will restrain US companies from putting their addresses in foreign countries with the aim of benefiting through lower tax bills. Significantly, one of the aspects of the rules is set to apply retroactively to inversions since September 2014, impacting the likes of big headline M&A deals including Medtronic and Mylan and creating issues for Pfizer’s potential deal with Allergan. An interesting story to keep an eye on.

Wrapping up, yesterday also saw the confirmation in Greek parliament of the passing of the vote for the measures required to disburse the bailout funds from creditors. The pass means €2bn will be disbursed to pay state arrears and a further €10bn for bank recapitalisation. Focus will now turn to the progress for the bank recaps, with the FT reporting that three of the four eligible banks said earlier this week that they have reached the thresholds required.

Looking at the day ahead, the Fed’s Bullard is set to speak on the US economy while Dudley will later speak on the same subject later. Over the weekend the San Francisco Fed’s Williams is due to speak on a panel focused on US monetary policy developments which could be of some interest.