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TradeTheNews.com European Market Update: UK Current Account Deficit is widest on record

***Economic Data***
- (IN) India Primary Articles WPI w/e Dec 10th Y/Y: 3.8% v 5.5% prior; Food Articles Y/Y: 1.8% v 4.4% prior
- (HU) Hungary Oct Retail Trade Y/Y: +0.6% v -0.2%e
- (ES) Spain Oct Total Housing Permits M/M: -22.0% v 72.9% prior; Y/Y: -2.9% v 0.0% prior
- (TT) Taiwan Nov Unemployment Rate: 4.3% v 4.3%e
- (DK) Denmark Q3 Final GDP Q/Q: -0.5% v -0.8%e; Y/Y: +0.1% v -0.2%e
- (NL) Netherlands Q3 Final GDP Q/Q: -0.2% v -0.3%e; Y/Y: 1.1% v 1.1%e
- (NL) Netherlands Oct Consumer Spending Y/Y: -1.4% v -1.8%e
- (SE) Sweden Nov PPI M/M: 0.8% v 0.5%e; Y/Y: 0.3% v 0.1%e
- (HK) Hong Kong Q3 Current Balance of Payment: $33.7B v $4.6B prior; Overall Balance of Payments: $23.6B v $19.6B prior
- (IT) Italy Oct Retail Sales M/M: +0.1% v -0.2%e; Y/Y: -1.5% v -1.5%e
- (NO) Norway Dec Unemployment Rate: 2.4% v 2.4%e
- (PO) Poland Nov Retail Sales M/M: -5.5% v -7.1%e; Y/Y: 12.6% v 10.5%e
- (PO) Poland Nov Unemployment Rate: 12.1% v 12.1%e
- (UK) Q3 Final GDP Q/Q: 0.6% v 0.5%e; Y/Y: 0.5% v 0.5%e
- (UK) Q3 Current Account: -£15.2 v -£6.1Be (widest on record)
- (UK) Q3 Final Total Business Investment Q/Q: +0.3% v -1.4%e; Y/Y: 4.3% v 0.3%e
- (RU) Russia Gold & Forex Reserve w/e Dec 16th: $501.3B v $513.0B prior
- (IT) Italy Nov Non-EU Trade Balance -€1.2B v -€808M prior
- (BE) Belgium Dec CPI M/M: 0.0% v 0.4% prior; Y/Y: 3.5% v 3.9% prior
- (IE) Ireland Nov Retail Sales Volume M/M: 1.6 v 0.4% prior; Y/Y: -0.8% v -3.4% prior
- (BR) Brazil Nov Unemployment Rate: 5.2 v 5.7%e

Fixed income:
- (HU) Hungary Debt Agency (AKK) sold HUF30B vs. HUF40B targeted in 12-Month Bills; Avg Yield 7.91% v 7.07% prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***

Equities:
FTSE 100 +1% at 5446, DAX +1.2% at 5858. CAC 40 +1.3% at 3068, IBEX-35 +0.90% at 8451, FTSE MIB +1.3% at 15,006, SMI +0.50% at 5835

- European shares continued their Santa rally for the third straight session following the nearly half a trillion euros in three year funds that banks borrowed from the ECB will soothe current funding strains. The three-year tender saw the ECB lending €489B above expectations of €310B.
- In M&A news, Lufthansa [LHA.GE] announced it signed an agreement to acquire British Midland for £172.5M in cash. The competing company, Virgin Atlantic requested authorities to halt the BMI deal.

Speakers:
- Bank of Italy (BOI) was said to have pressed local banks to tap ECB funds for more than they needed
- Hungary Econ Min Matolcsy commented that the country remained vulnerable and government continued to prepare for IMF/EU talks to begin in January
- Iran was said to hold naval exercises for 10 days from Dec 24th and to be held east of the Strait of the Hormuz
- Japan govt formally cut its 2011/12 and 2012/13 GDP growth outlooks (in line with recent press speculation). The Govt now saw FY2011/12 GDP at -0.1% compared to prior+0.5% view. It also cut its FY2012/13 GDP forecast to +2.2% from +2.7% prior
- German wiseman Bofinger stated that the future of the Euro would be decided in the next six months and the joint currency had no future unless Germany changed its stand
- India Central Bank (RBI) Gov Subbarao reiterated his concerns about external macroeconomic factors and high inflation. RBI inflation projection of 7.0% by end of FY12 (March) faced uncertainty due to weaker INR currency, oil prices and Euro Zone crisis. He cautioned that current central bank's FY12 GDP growth forecast to be lower than 7.6% projection and would be revise lower in January. Current account deficit to come under pressure due to INR currency depreciation. RBI to contain sharp volatility in foreign exchange markets and closely watch FX developments
- German Finance Ministry releases monthly report which noted that Nov tax revenues rose by 7.6% y/y and was upbeat consumers to provide basis for economic growth. It also commented that Government's new 2011 debt was likely around €20B
- Brazil Central Bank published its Q4 inflation Report which noted that global growth outlook had deteriorated substantially since Q3 and it cut its 2011 GDP growth to 3.0% from 3.5% prior. More restrictive global environment was likely to be more prolonged than anticipated and it reiterated to make 'moderate adjustments' in interest rates
- World Bank Economist Piontkivskyi commented that the Ukrainian economic situation was worsening due to the European crisis and forecasted its 2012 GDP growth to slow to 2.5%. It was unlikely to maintain deficit to GDP ratio of 3.5% in 2011
- Moodys comments on South Korea: Ratings Outlook not currently affected by the geo-political risks
- Aide to Russia President Medvedev: Europe has not asked Russia for help through the IMF

Currencies:
- The FX markets were subdued during the European morning but the USD was softer on some sovereign names dealings. The EUR/USD climbed above the 1.31 handle led by buying by Middle Eastern names but remains well contained within the highs established following the ECB 3-year LTRO operation on Wednesday. Market conditions were thinning and the continued concerns that France might face a sovereign downgrade helped the green back off its worst levels. EUR/USD was little changed from its Far East opening levels as the NY morning approached and was at 1.3050 area.

Political/ In the Papers:
- At yesterday's ECB 3-year loan operation, it is believed that Spanish banks were allotted up to €100 billion in funds. According to one source, nearly all Spanish banks participated in the operation. Ahead of yesterday's operation, there was speculation that banks in Spain and Italy were buying government bonds issued by their home countries to be used as collateral at the ECB operation.
- The Irish leading state economic development agency, Enterprise Ireland, reported record exports, and employment from export companies stabilizing. The Irish Independent article added that Irish firms have had record exports, returning to pre-recession levels. The group's 2011 statement showed new export sales are expected to reach beyond €1B within weeks.
- UBS economic adviser George Magnus, in an FT article, stated that he believes the EU's fundamental problems have still not been solved. The article is critical of the EU's use of austerity measures to deal with the crisis. The EU is trapped in a circle of weak growth, retreating fiscal targets and austerity measures which hurt growth. He expects EU GDP to contract at about a 2% rate over the coming quarters.

***Looking Ahead***
- (ES) Spain's PP Ministers Sworn in
- 7:00 (TU) Turkey Central Bank Interest Rate Decision: Expected to leave the Benchmark Repo Rate unchanged at 5.75%
- 8:00 (RO) Romania to sell 2021 Bonds
- 8:15 (IT) Italy Senate holds confidence vote on austerity measures
- 8:30 (US) Nov Chicago Fed National Activity Index: -0.17e v -0.13 prior
- 8:30 (US) Q3 Final GDP Q/Q Annualized: 2.0%e v 2.0% prelim; Personal Consumption: 2.3%e v 2.3% prelim
- 8:30 (US) Q3 Final GDP Price Index: 2.5%e v 2.5% prelim; Core PCE Q/Q: 2.0%e v 2.0% prelim
- 8:30 (US) Initial Jobless Claims w/e Dec 16th: 380Ke v 366K prior; Continuing Claims: 3.60Me v 3.603M prior
- 9:00 (MX) Mexico Nov Unemployment Rate: No est v 5.0% prior
- 9:55 (US) Dec Final University of Michigan Confidence: 68.0e v 67.7 prelim
- 10:00 (US) Nov Leading Indicators: 0.3%e v 0.9% prior
- 10:00 (US) Oct House Price Index M/M: 0.2%e v 0.9% prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (CO) Colombia Q3 GDP Y/Y: 6.0%e v 5.2% prior
- 11:00 (EU) ECB Draghi and BOE King at European Systemic Risk Board briefing
- 11:00 (US) Fed to purchase $4.25-5.00B in Notes
- 14:00 (AR) Argentina Oct Economic Activity Index M/M: No est v 0.3% prior; Y/Y: 7.5%e v 7.7% prior
- 20:35 (CH) China Dec MNI December Flash Business Sentiment Survey
- 23:00 (IN) India Fin Min Mukherjee to address PHD Chamber of Commerce

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