After yesterday’s furious Powell-inspired rally, the overnight kneejerk reaction has been muted, with US equity futures giving up some of yesterday’s gains while Europe’s Stoxx 600 Index faded earlier gains following a mostly upbeat Asia session.

After 10Y Treasuries surprisingly barely moved following yesterday’s Powell speech, the benchmark yield finally saw a more pronounced move on Thursday morning, extending its decline after the Fed Chairman fueled speculation the central bank may pause interest rate increases next year…

… while the greenback drifted in a tight range following Wednesday’s drop, it rebounded from session lows and was roughly unchanged.

In the wake of Powell’s “dovish” comments that Fed Funds are  “just below” estimates of the neutral rate (vs. “a long way” in October), hinting at a potential slowdown in the hiking cycle, the DXY gave up the 97.000 level and witnessed its steepest one-day percentage decline this month so far, to 96.622 at one stage. However, the USD has pared some losses with month-end and SOMA demand still in play, while some rival currencies also suffer further weakness. Looking ahead, FOMC Minutes are due to be published later todayalthough with the market now pricing in just one rate hike in 2019 (from more than less than two months ago), it is unlikely that any further dovish news is possible.

At the same time, European bonds rose, and even though demand for five-year Italian debt at an auction fell to the lowest since June. Italy’s five-year bond yield dipped 4 bps to 2.36 percent and the closely-watched spread over Germany was at 294 bps. Italian debt has rallied this week as the government said it was ready to compromise with the European Union on its budget deficit target. German bonds extended gains after inflation data from the German state of Saxony and Treasury.

European shares gave up early gains of as much as 0.7%, with the Stoxx 600 Europe Index trading up just 0.2% as of 1:02pm CET, dragged lower by the real estate shares which remains the worst performer sector in the index, while tech shares trim gains of as much as 2%. Deutsche Bank dropped more than 3% after prosecutors said its headquarters were being searched in a money laundering probe.

Material names are also seeing support this morning, in-fitting with price action in the metals scope with gains seen in Antofagasta (+4.9%), Glencore (+1.8%), Rio Tinto (+1.1%); upside in mining names and a softer GBP has pushed the FTSE 100 (+0.8%) towards the top of the leaderboard.

Earlier in the session Asian stocks were broadly higher, with MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6 percent, although the Shanghai Composite Index dropped 1 percent. Gains were tempered by investor jitters before trade talks between U.S. President Donald Trump and Chinese President Xi Jinping on Saturday, during the G20 summit in Argentina.

The euro erased an earlier advance after a raft of weak economic data, while emerging-market equities rose to the highest level since early October and developing-nation currencies strengthened. The dollar held steady even as the U.S. 10-year note yield fell below 3% for the first time in two months. The euro failed to sustain early gains amid mixed regional German inflation prints, while the pound led losses in G-10 as PM Theresa May said the U.K. should be ready for no deal if Dec. 11 Parliament vote rejects her Brexit plan. Fed’s hike path stays in focus with several speeches by policy makers and minutes from latest meeting due Thursday.

With Powell now out of the way, the market is looking for any signals on trade from a meeting between the U.S. and Chinese presidents that will take place at the Group of 20 summit in Buenos Aires this weekend.

“The next catalyst will be the G-20 meeting between Trump and Xi; we believe risk assets will tactically trade in the green following a tariff cease-fire,” said Eleanor Creagh, a strategist at Saxo Capital Markets in Sydney. “A tradable risk bounce on a paper deal at G-20 will be unlikely to reverse sentiment structurally as the underlying U.S.-China relationship is still deteriorating.”

Elsewhere, West Texas oil tumbled below $50 a barrel for the first time in more than a year as Russia signaled little urgency to commit to supply cuts and traders fretted that OPEC won’t act decisively to clear a resurgent surplus in the global crude market while U.S. crude stockpiles continue to grow.

Oil futures tumbled as much as 1.8% in New York to $49.41 a barrel, the lowest since early October 2017. Brent for January settlement, which expires Friday, fell as much as 2.1% to $57.50 a barrel on London’s ICE Futures Europe exchange. The global benchmark traded at an $8.23 premium to WTI. The more-active February contract lost as much as 2.2 percent.

While Putin praised Saudi Crown Prince Mohammed Bin Salman and said Moscow is ready to cooperate further, he said crude around $60 a barrel is “balanced and fair” and well above the level needed to to keep his government’s budget in surplus. “Putin is fine with $60, but this time next week we will be well below that if there is no deal,” said Warren Patterson, commodity strategist at ING. “I think we are going to have to see the Saudis actively reduce flows to the U.S.”

As noted yesterday, US crude stockpiles rose by 3.58 million barrels last week in the longest run of gains since November 2015, according to the Energy information Administration. The build was higher than the 1-million-barrel gain predicted in a Bloomberg survey, overshadowing a surprise draw in gasoline inventories.

“Oil has moved into our bear case scenario,” Norbert Ruecker, head of macro and commodity research at Julius Baer Group told Bloomberg. “Today’s price levels imply that the petro-nations will maintain their output hikes or that the world economy is about to slow down significantly.”

Gold has rebounded from two-week lows, as the dollar fell following comments from Fed Chairman Powell saying that the policy rate is just below the estimated neutral range. China’s steel prices have dropped following a two day gain largely due to ample supply and lean demand in markets, with iron ore now rising following Monday’s sell off. Additionally, spot Palladium has hit a record high of USD 1186.30/oz.

In geopolitical news, US Secretary of State Pompeo said he is very hopeful for a new meeting with North Korean officials to discuss denuclearization, while there were separate reports that US requested that North Korea change its chief negotiator. The US Senate voted 63-37 to advance a bill that would end US participation in Saudi Arabia-backed war in Yemen which paves way for additional vote next week, although White House has previously noted it would veto the bill if passed. Russia are to construct a missile early-warning radar station in Crimea in 2019, according to Interfax.

Expected data include personal income and jobless claims. Dollar Tree, TD Bank, HP Inc., VMware, and Workday are among companies reporting earnings.

Market Snapshot

• S&P 500 futures down 0.3% to 2,732.00
• STOXX Europe 600 up 0.7% to 359.89
• MXAP up 0.7% to 153.87
• MXAPJ up 0.6% to 493.83
• Nikkei up 0.4% to 22,262.60
• Topix up 0.4% to 1,659.47
• Hang Seng Index down 0.9% to 26,451.03
• Shanghai Composite down 1.3% to 2,567.44
• Sensex up 1.3% to 36,186.13
• Australia S&P/ASX 200 up 0.6% to 5,758.42
• Kospi up 0.3% to 2,114.10
• German 10Y yield fell 2.4 bps to 0.325%
• Euro up 0.07% to $1.1374
• Italian 10Y yield fell 3.2 bps to 2.888%
• Spanish 10Y yield fell 2.4 bps to 1.519%
• Brent futures down 1.3% to $58/bbl
• Gold spot up 0.4% to $1,226.36
• U.S. Dollar Index up 0.1% to 96.86

Top Overnight News

• Deutsche Bank AG’s premises including its headquarters in Frankfurt were being searched by prosecutors on Thursday in a money laundering probe, prosecutors said in a statement. In an emailed statement, Deutsche Bank confirmed that police are investigating at several German locations in relation to Panama Papers, and said it is fully cooperating with authorities.
• President Vladimir Putin said crude around $60 a barrel is “absolutely fine” just days before talks on oil policy with Saudi Arabia
• The Swiss economy unexpectedly shrank in the third quarter by 0.2%, blighted by a drop in exports and weak domestic demand.
• Benchmark Treasury yields fell below 3% for the first time since September and stocks climbed in Europe and Asia after a dovish tone from the Federal Reserve chairman boosted markets ahead of this weekend’s G-20 gathering.
• U.K. Prime Minister warned the country to prepare for a no-deal Brexit if her deal fails to be approved by the House of Commons on Dec. 11. Sterling fell sharply following the comment, down as much as 0.5% to day’s low of 1.2758.
• Federal Reserve Chairman Jerome Powell opened the door for a potential pullback in projected interest-rate hikes for 2019 following a widely expected increase in December. In what was seen as a shift in tone from remarks last month, Powell said Wednesday that the Fed’s series of rate increases had brought policy to “just below” the range of estimates of neutral
• U.K. consumer confidence slumped to the lowest in a year as the country copes with the economic uncertainty of Brexit. The index compiled by YouGov and the Centre for Economics and Business Research fell in November and remains “notably below” where it was before the 2016 referendum to leave the European Union
• Chinese President Xi Jinping said the global economy is at a turning point as he prepares for a critical meeting with Donald Trump this weekend. Xi said the world has to decide whether to continue working to support the global trading system. Failure to do so will lead to new barriers emerging between nations
• President Donald Trump raised the prospect of slapping a 25 percent tariff on imported cars and ordered a review of China’s retaliatory auto tariffs against the U.S

Asian stocks traded mostly positive after risk appetite was ignited by Fed Chair Powell’s dovish comments which spurred hopes the Fed may begin to slow down on its hiking cycle and helped US stocks notch their biggest daily gain since March. ASX 200 (+0.6%) and Nikkei 225 (+0.4%) were underpinned from the open but with gains capped amid lingering trade uncertainty and inconclusive capex data for Australia, as well as mixed Japanese retail sales and a decline in USD/JPY. Hang Seng (-0.8%) and Shanghai Comp. (-1.3%) both initially conformed to the positive tone but then stalled amid tariff threats with Chinese President Xi’s offer of an olive branch to the US somewhat falling on deaf ears, as USTR Lighthizer said China has yet to offer meaningful proposals and suggested that the US are seeking to match China’s tariffs on autos. Finally, 10yr JGBs were marginally higher as they nursed the prior day’s losses after having found support around the 151.00 level and although today’s mixed 2yr auction results failed to spur a reaction, prices continued to gain as the strength in the regional stock markets moderated.

Top Asian News

• China Is Said to Plan Major Purge of $176 Billion Loan Market
• HNA Is Said to Widen Sales Push, Marketing More Than 90 Assets
• Singaporean Regulators Widen Noble Group Probe to Auditor EY
• South Korea-Japan Spat Deepens Over Mitsubishi Forced Labor Case
• China Bond Defaults Surpass 100 Billion Yuan for 1st Time

European equities (Eurostoxx 50 +0.3%) piggybacked on the optimism seen on Wall St and during the Asia-Pac session as perceived dovish rhetoric by Fed Chair Powell continues to guide markets. Initial reports via WiWo that European Commissioner Oettinger expected US auto tariffs before Christmas resulted in downside to European equities, especially German autos, though DAX (+0.2%) saw a rebound after these comments were denied by the European Commission. Sectors are mixed with IT names the outperformer following gains seen yesterday during US hours which has prompted upside in chip-makers such as Wirecard (+3.3%), STMicrolectronics (+2.5%) and Infineon (+2.2%). Material names are also seeing support this morning, in-fitting with price action in the metals scope with gains seen in Antofagasta (+4.9%), Glencore (+1.8%), Rio Tinto (+1.1%); upside in mining names and a softer GBP has pushed the FTSE 100 (+0.8%) towards the top of the leaderboard. To the downside, energy names lag their peers with WTI and Brent crude unable to halt recent declines. In terms of stock specifics, once again, Deutsche Bank (-3.3%) have found themselves in the centre of further controversy with their offices raided earlier this morning in a money laundering probe involving two members of staff. Elsewhere, Intu Properties’ (-35%) shares have slumped to a record low this morning after reports that a consortium led by their Deputy Chairman has abandoned their plans to buy the Co.

Top European News

• Euro-Area Economic Confidence Falls, Complicating ECB’s Mission
• Swiss, Swedish Economies Shrink as Trade Slump Hits Europe
• Mother and Son Lose $16 Billion in 2018 as Continental Sinks
• Eurofins Finance Chief Says Company Has No Liquidity Problem

In FX, in the wake of Powell’s “dovish” comments that Fed Funds are “just below” estimates of the neutral rate (vs. “a long way” in October), hinting at a potential slowdown in the hiking cycle, the DXY gave up the 97.000 level and witnessed its steepest one-day percentage decline this month so far, to 96.622 at one stage. However, the USD has pared some losses with month-end  and SOMA demand still in play, while some rival currencies also suffer further weakness. Looking aheadd, FOMC Minutes are due to be published later today. GBP,EUR – Major G10 underperformer with ongoing Brexit bickering and meaningful vote concerns driving Cable below 1.2800 with a low print of 1.2759 (vs. highs of 1.2850, with offers seen between 1.2855-65) , while Sterling also fell victim to cross positioning for month end as EUR/GBP climbed above the key psychological 0.8900 level, before the single currency came under renewed pressure on latest auto tariff headlines as  press reported that EU Commissioner Oettinger expects US auto tariffs before Christmas. This pushed EUR/USD to fresh session lows of 1.1350 and bringing into play options around 1.1340-50 (3.2bln) and 1.1360-65 (1.35bln). Note, the EUR did not really react to mixed German state CPIs but did respect a key fib just ahead of 1.1400 (1.1394). Looking ahead German national CPIs are due at 13.00GMT. AUD – In contrast the AUD has showed some resilience despite lower than expected capital expenditures with the antipodean staying afloat above 0.7300. JPY – The major beneficiary of the post-Powell Dollar weakness as USD/JPY fell through 114.00, 113.50 and currently rests around 113.40. In terms of technicals, the next level to the downside is at 113.17 (tenkan line), looking ahead, Tokyo CPIs are due to be released later today. TRY – The clear EM outperformer with the currency breaching 5.1500 (and temporarily rallying through a key fib at 5.1562) vs. the buck as the move was exacerbated by the drop below 5.2000 in the wake of a significan improvement in Turkish economic confidence index and falling oil prices (as Turkey is a large net importer).

In commodities, Brent (-1.3%) and WTI (-1.0%) have moved lower recently, which may have been exacerbated by reports that 7k WTI contracts were dropped at the same time. Overnight oil prices had moved higher, despite a greater than expected build shown in EIA weekly crude stocks of 3.577mln vs. Exp. 0.769mln, with prices boosted by a stronger dollar in addition markets are looking optimistically to this weeks G20 meeting to improve global demand. Gold has rebounded from two-week lows, as the dollar fell following comments from Fed Chairman Powell saying that the policy rate is just below the estimated neutral range. China’s steel prices have dropped following a two day gain largely due to ample supply and lean demand in markets, with iron ore now rising following Monday’s sell off. Additionally, spot Palladium has hit a record high of USD 1186.30/oz.

Looking at the day ahead, much of the focus should be on the various inflation reports. In Germany we’ll get the preliminary November CPI report this afternoon where the consensus expects a small one-tenth decline to +2.3% yoy. Shortly following that we get the October PCE report in the US where the expectation is also for a modest one-tenth decline to +1.9% yoy. Alongside that data we’ll also get October personal income and spending reports in the US, followed later on by the latest weekly initial jobless claims reading, October pending home sales and the November FOMC minutes. Also due out in Europe is Q3 GDP in France, October money and credit aggregates data in the UK and November confidence indicators for the Euro Area. A busy week for central bank speak rolls on with Guindos and Angeloni speaking on behalf of the ECB, while over at the Fed Mester, Evans, Harker, Kashkari, Kaplan and Rosengren are all participating in a Boston Fed Conference on “Collaboration for Inclusive Economic Development”. Also due today is a 5y and 10y BTP auction which will be worth watching in light of recent weak retail BTP demand. Finally, G-20 finance ministers will attend a working dinner in Buenos Aires tonight before the main event kicks off tomorrow

US Event Calendar

• 8:30am: Powell Greets Students at 15th Annual College Fed Challenge
• 8:30am: Personal Income, est. 0.4%, prior 0.2%
• 8:30am: Personal Spending, est. 0.4%, prior 0.4%; Real Personal Spending, est. 0.2%, prior 0.3%
• 8:30am: PCE Deflator MoM, est. 0.2%, prior 0.1%; PCE Deflator YoY, est. 2.07%, prior 2.0%
• 8:30am: PCE Core MoM, est. 0.2%, prior 0.2%; PCE Core YoY, est. 1.9%, prior 2.0%
• 8:30am: Initial Jobless Claims, est. 220,000, prior 224,000; Continuing Claims, est. 1.66m, prior 1.67m
• 9:45am: Bloomberg Consumer Comfort, prior 61.3
• 10am: Pending Home Sales MoM, est. 0.5%, prior 0.5%; NSA YoY, est. -2.8%, prior -3.4%
• 2pm: FOMC Meeting Minutes
• 2pm: Five Fed Presidents Participate in Conference at Boston Fed
• 3:05pm: Fed’s Kaplan Speaks at Boston Fed Conference

DB’s Jim Reid concludes the overnight wrap

As an analyst the one main currency you have is credibility. If your analysis is found suspect or biased then it’s likely the damage to your reputation will be permanent and career in ruins. I fear that after the deluge of criticism I received after yesterday’s EMR I may have crossed that line. So today I offer an unconditional apology and ask that readers give me a second chance. Maybe I was wrong when I said that “Last Christmas” by Wham is the best ever festive song.

We did also wonder yesterday whether the Santa Claus rally was underway, and in response Fed Chair Powell donned his best Father Christmas outfit and gave the market a mighty “ho, ho, ho.” His speech released at 12 EST / 5pm London time was the game changer as the S&P 500 jumped +0.79% (from only just about up on the day) immediately after he mentioned that rates now were “just below” neutral, and the index ultimately carried on the rally and closed +2.30% the best day since March and the second best this year. This comment was a notable shift from his language on October 3, when he said “we’re a long way  from neutral at this point.” Obviously this is very important as the closer that Powell thinks rates are to neutral, the sooner he may be comfortable pausing the hiking cycle. He also noted that the impacts of policy “may take a year or more to be fully realized.” While that’s pretty typical language from a Fed Chair, it is notable in the current context, since it could portend a pause once rates reach neutral. Finally, he also said that “we will be paying very close attention to what incoming economic and financial data are telling us,” committing more forcefully to data dependency than the Fed have for a while. Given recent softness in inflation data and the tightening in financial conditions, this would also argue in favour of a less hawkish rate path.

All markets reacted to Powell’s comments and in rates we immediately priced a more dovish Fed, removing 4bps of hikes from the 2019 rate path. The market continues to expect a hike at this December’s FOMC meeting, but now prices in only 31.5bps of additional hikes over the course of next year, compared to the Fed’s median expectation for 75bps at last count. Two-year Treasury yields fell -2.0bps, and while 10-year yields closed close to flat (+0.4bps), real yields fell -2.7bps (inflation breakevens rose +3.1bps). Elsewhere the dollar depreciated -0.55%, as emerging market currencies gained +0.71% and EM equities advanced +2.39%. Other US equities also rallied, with the DOW, NASDAQ, and NYFANG indexes up +2.50%, +2.95%, and +2.90% respectively. That caps the third session in a row of US equity gains, with the DOW gaining +4.45% over that period, the best such streak since June 2016.

This morning in Asia, markets are largely trading higher with the Nikkei (+0.69%), Shanghai Comp (+0.28%) and Kospi (+0.47%) all up while Hang Seng (-0.04%) is trading flattish. However, most markets are trading off their highs as the overnight rhetoric between the US and China seems to be weighing on sentiment (more on this below). Elsewhere, futures on the S&P 500 (-0.19%) are pointing towards a slightly softer start and Crude oil prices (WTI +1.01% and Brent +0.75%) are up this morning.

Ahead of the meeting between the US President Trump and China’s President Xi Jingping on the sidelines of the G20 summit, the South China Morning Post reported that the Chinese President is likely to offer the US a deal comprising of an offer to provide greater market access to US companies and fewer subsidies to the state enterprises along with better protection for intellectual property. However, the source said that the Chinese offer could be a oneshot deal and that if the US refuses to accept the deal at the meeting then there is a possibility that there will be no deal and “we have to see who can bear the economic pain longer.” In the meantime, President Trump raised the prospect of slapping a 25% tariff on imported cars and ordered a review of China’s retaliatory auto tariffs against the US, likely in response to the General Motors announcement of plant closures in the US. The US Trade Representative Robert Lighthizer also said that China has not offered any meaningful proposals yet ahead of the G20 meeting while adding that China’s policies on auto tariffs are ‘egregious’ and the US will examine tools to equalize tariffs on autos as instructed by President Trump. So the stakes are getting higher ahead of the weekend.

Back to yesterday and prior to Powell, markets in Europe largely limped to the finish following a mostly unspectacular session. The STOXX 600 and the CAC both closed flat, while the DAX fell -0.09%. An index of euro-denominated HY bond spreads widened +1.8bps to match its recent high – the widest level since June 2016. The euro had been trading flat versus the dollar until Powell, after which it rallied +0.70%.

A busy week for the Fed continues with the November FOMC minutes this evening. Some of the interest level has probably been taken out of them given we’ve had Clarida and Powell speak in the last two days however we should still learn a good deal more about the Committee’s discussion of its operating framework and potential for another technical adjustment to the IOER at the December 19 meeting.

Here in the UK, both the BoE and the government yesterday published their various Brexit scenarios with the former also releasing the latest annual bank stress tests – which all banks passed. For the hard Brexit scenarios, look away now if you’re a recent UK homeowner. The BoE warned that at the bearish end with a “disorderly” scenario, GDP would contract -8% within a year, while house prices would fall by -30%, commercial property prices fall -48% and Sterling fall -25% to below parity with the dollar. So we UK homeowners will see our property down over 50% in dollar terms!! Inflation would also accelerate to 6.5% and the base rate to rise to 5.5%. In a scenario in which the UK retains a “Close Economic Partnership” with the EU, including comprehensive arrangements for free trade in goods and some trade in business and financial services, then GDP would be between 1.25% and 3.75% lower over a 5 year forecast relative to where it would have been without the vote. Note a lot of these forecasts assume notable BoE rate hikes to combat higher inflation. Such a hawkish policy response is a bit hard to envision, given the BoE responded to the initial Brexit vote by easing policy aggressively, nevermind the weaker pound and higher inflation outlook. So these forecasts are highly, highly uncertain.

As for the government report, at the most bearish end, assuming no deal and zero EEA migration, UK GDP would be as much as 10.7% lower over 15 years. While there wasn’t an exact modelled representation of the deal agreed with the EU, a halfway point between May’s ideal plan and a regular free-trade arrangement would see GDP as much as 3.9% lower than it would have been assuming no migration and 2.1% lower with migration. When it was all said and done Sterling was trading close to flat on the releases, but it was subsequently caught in the Powell-driven dollar selloff and ultimately rallied +0.64% versus the greenback.

Staying with Europe, there were a few interesting headlines out of the ECB worth noting yesterday. Quoting Euro Area officials, Bloomberg reported that the ECB expects to confirm the end of net asset purchases next month, and also that the central bank sees no need to announce a replacement for TLTRO2 at present. The story also hinted at the possibility of clarifying what the “extended period” means with regards to fully reinvesting maturing bonds after the end of net purchases. So this would suggest that next month’s meeting is likely to be squarely focused on the QE and reinvestment decisions. Our European economists’ baseline view is that it is highly unlikely that the ECB extends QE, the Governing Council reiterates the broad narrative of above-trend growth and confidence in inflation normalisation, and that there is eventually a replacement for TLTRO2 to avoid a disorderly deleveraging. Indeed, the team don’t rule out a hint in that direction from Draghi in next month’s press conference.

Later in the day, the expected new Chief Economist of the ECB, Philip Lane, confirmed that a rate increase will be data dependent in the second half of 2019, and also that the ECB is starting to see more heat in the labour market. These weren’t particularly ground-breaking comments, but Lane’s rhetoric will be important to watch going forward given his expected new position within the ECB. As for markets, after yields bottomed out early in the session, bonds mostly weakened with the improved sentiment. Bunds retraced gains of -1.7bps to close flat.

The BTP curve was a lot more mixed by comparison with the short end selling off (two-year +3.4bps) with the belly stronger (10-year -3.3bps). There wasn’t a great deal of new information to feed off however with headlines remaining fairly contradictory. Finance Minister Tria told the Senate that “we need to clarify to our partners in Europe that the aim of the budget is to tackle concrete problems, and certainly not to organise an affront to Europe or organise an exit from the euro.” Meanwhile, Italian PM Conte was reported as saying that the Government had not decided on a new deficit target for 2019, but also that the Government would do anything necessary to find an agreement with the EU.

In other markets, oil prices were sharply lower once more with WTI and Brent ending the day -2.39% and -2.44% respectively. Despite headlines that both Saudi Arabia and Nigeria were confident about OPEC succeeding in stabilizing prices, Russian President Putin poured cold water on the prospects for a deal.

He said that Brent prices around $60 per barrel are “absolutely fine” for his country, suggesting limited motivation to make an output cap deal at December 6’s OPEC meeting. Later in the session, US crude oil inventories rose more than expected, increasing by 3.6 million barrels. That’s the 10th consecutive weekly inventory build, the longest such streak in three years.

As for the economic data that was out yesterday, there weren’t any great surprises from the releases in the US. There was no change to the second estimate of Q3 GDP in the US at 3.5% qoq saar with downward revisions to consumer spending offset by upward revisions to fixed investment and inventories. Notably, the details showed that corporate profits during the quarter grew at 10.3% yoy which is the strongest pace since Q2 2012 while the core PCE was downgraded by 10bps to 1.49% annualized – enough to move the year over year rate down slightly to 1.96% albeit still close enough to target. Meanwhile the October advance goods trade deficit was confirmed as widening to $77.2bn from $76.3bn, and a bit more than expected. Wholesale inventories rose a greater than expected +0.7% mom (vs. +0.4% expected) during October, new home sales fell unexpectedly (-8.9% mom vs. +4.0% expected) and the Richmond Fed manufacturing index slipped 1pt this month to +14.

Looking at the day ahead, much of the focus should be on the various inflation reports. In Germany we’ll get the preliminary November CPI report this afternoon where the consensus expects a small one-tenth decline to +2.3% yoy. Shortly following that we get the October PCE report in the US where the expectation is also for a modest one-tenth decline to +1.9% yoy. Alongside that data we’ll also get October personal income and spending reports in the US, followed later on by the latest weekly initial jobless claims reading, October pending home sales and the November FOMC minutes. Also due out in Europe is Q3 GDP in France, October money and credit aggregates data in the UK and November confidence indicators for the Euro Area. A busy week for central bank speak rolls on with Guindos and Angeloni speaking on behalf of the ECB, while over at the Fed Mester, Evans, Harker, Kashkari, Kaplan and Rosengren are all participating in a Boston Fed Conference on “Collaboration for Inclusive Economic Development”. Also due today is a 5y and 10y BTP auction which will be worth watching in light of recent weak retail BTP demand. Finally, G-20 finance ministers will attend a working dinner in Buenos Aires tonight before the main event kicks off tomorrow