Inflation is the US focus in the morning and FOMC Powell in the afternoon. Markets have had another miserable overnight as risk-off continues with weaker China retail sales blamed on the November Singles Day waiting for discounts, weaker Japan GDP, weaker German GDP, mostly as expected CPI everywhere and a grim outlook for ongoing talks with China and Brexit. UK PM May has a 2pm cabinet meeting to sell the EU/UK Brexit deal. The larger effort will be to sell it to her party and to the public. No one is happy and the path to financial stability seems riddled with the need for better US/China relations and growth mixed with a more dovish FOMC. Neither of these preconditions looks easy unless there is a data surprise. The lower oil prices maybe a 4Q help for consumer but hit to the US oil patch and to some in EM. The divergence of outcomes isn’t what investors want for a year-end risk rally. There is a clear distrust in the risk-on and risk-off mood swings of late and the barometers in FX – USD, JPY, CHF are all telling us to expect a modest bounce back today. The key maybe back in Copper where $2.60 is the breakdown cut out of everything against $2.80 return to normal and Goldilocks. Today is about reckoning –  paying for Brexit 2 year talks, paying for 10-years of QE and waiting for more about US/China talks.

What Happened?

• Australia November Westpac/MI consumer confidence rises 2.8% to 104.3 from 101.5 –better than the 103 expected. Gains were led by economic conditions over the next 5 years (+9.7 points to 104.1) and the time to buy a dwelling subindex (+11.8 points to 114.8). Family finances versus a year ago (+4.9 points to 91.7) and over the next 12 months (+3.2 points to 106.1) also improved. In contrast, the unemployment expectations index edged down 1.9 to 120.4.
• Australia 3Q wage price index up 0.6% q/q, 2.3% y/y after 0.6% q/q, 2.1% y/y – as expected. 

• Japan 3Q preliminary GDP -0.3% q/q, -1.3% y/y after 0.8% q/q, 3% y/y – weaker than the -0.2% q/q, -1% y/y expected.  Amid a decline in private consumption and a negative contribution from net exports, business spending fell unexpectedly.
• Japan September final industrial production -0.4% m/m, -2.5% y/y after 0.3% m/m, 0.2% y/y – better than the -1.1% m/m, -2.9% y/y expected.
• China October retail sales rose 8.6% y/y after 9.2% y/y – weaker than 9.1% y/y expected. The slower growth of retail sales is partly due to the delayed consumption demand fueled for the Singles' Day sales festival on Nov. 11, according to the NBS. In the breakdown, the catering sector reported an 8.8% y/y rise in revenue in October, while sales of other consumer products increased by 8.5%. Online spending remained robust, with sales surging 25.5% to reach 7 trillion yuan in the first 10 months, NBS data showed. 
• China October industrial production up 0.1% m/m, 5.9% y/y after 5.8% y/y – better than 5.7% expected. Manufacturing rose 0.4% m/m, 6.1% y/y while electricity, gas, water rose 6.8% y/y. "The industrial production continued to move up to medium and high ends," said Liu Aihua, an NBS spokesperson, at a press conference. High-tech manufacturing output grew 12.4% y/y in October, up 1.2% m/m, while the output of strategic emerging industries increased 10.1 percent, up 1.7 percentage points, she said.
• China Fixed Asset Investment Jan-Oct 5.7% y/y after 5.4% y/y - better than 5.5% ytd expected. Investment in property development rose 9.7 percent year on year for Jan.-Oct. period, slightly down from 9.9 percent during the first nine months. In the breakdown, investment in infrastructure increased 3.7 percent in the first 10 months, slightly up from 3.3 percent for Jan.-Sept. period. FAI in high-tech manufacturing and equipment manufacturing jumped 16.1 percent and 11.1 percent during the period, respectively.
• India October WPI inflation 5.28% y/y after 5.13% y/y – more than 5% y/y – expected. Food was off 1.49% y/y after -0.21% y/y, Fuel rose 18.44% after 16.65% y/y, Manufacturing up 4.49% after 4.22%. 
• French October final HICP 0.1% m/m, 2.5% y/y after -0.2% m/m, 2.5% y/y – as expected.
• Spanish October final HICP up 0.7% m/m, 2.3% y/y after 0.6% m/m, 2.3% y/y- as expected.
• Sweden Oct CPIF -0.1% m/m, 2.4% y/y after 0.5% m/m, 2.5% y/y – less than the 0.4%e m/m, 2.5% y/y expected. The headline inflation was 2.3% y/y unchanged – also less than the 2.4% y/y expected. 
• UK Oct PPI output 0.3% m/m, 3.3% y/y after 0.4% m/m, 3.1% y/y – more than the 0.2% m/m, 3.1% y/y expected but with core output up 2.4% y/y unchanged in line to forecasts. The input PPI rose 0.8% m/m, 10% y/y after 1.3% m/m, 10.3% y/y – also more than the 0.6% m/m, 9.6% y/y expected. 
• UK Oct CPI 0.1% m/m, 2.4% y/y after 0.1% m/m, 2.4% y/y – less than the 0.2% m/m, 2.5% y/y expected. The core CPI also unchanged at 1.9% y/y – less than the 2.0% y/y expected. RPI rose 0.1% m/m, 3.3% y/y after 3.3% y/y. 

• German 3Q preliminary GDP -0.2% q/q, 1.1% y/y after +0.5% q/q, 2% y/y – weaker than the -0.1% q/q, 1.3% y/y expected. While gross fixed capital formation both in machinery and equipment and in construction was higher than in the previous quarter, final consumption expenditure of households declined. Government final consumption expenditure was slightly higher than in the previous quarter.

• Eurozone 3Q unrevised GDP 0.2% q/q, 1.7% y/y after 0.4% q/q, 2.2% y/y – as expected. 
• Eurozone 3Q employment change 0.2% q/q, 1.3% y/y after 0.4% m/m, 1.5% y/y – weaker than the 0.3% m/m, 1.4% y/y expected.  
• Eurozone September industrial production up -0.3% m/m, 0.9% y/y after 1% m/m, 1% y/y – better than 0.3% y/y expected. 

Market Recap:

Equities: The S&P500 futures are off 0.1% after losing 0.15% yesterday. The Stoxx Europe 600 is off 0.9% - worst in 2 week. Notable rebound in FTSE (was off 0.6%) as it reflects GBP reversal. The MSCI Asia Pacific Index fell 0.2% - also worst in 2-weeks with focus on China. The MSCI EM fell 0.2% - 5th consecutive drop.

• Japan Nikkei up 0.16% to 21,846.48
• Korea Kospi off 0.15% to 2,068.05
• Hong Kong Hang Seng off 0.54% to 25,654.43
• China Shanghai Composite off 0.85% to 2,632.24
• Australia ASX off 1.69% to 5,822.30
• India NSE50 off 0.06% to 10,576.30
• UK FTSE so far up 0.1% to 7,060
• German DAX so far off 0.25% to 11,442
• French CAC40 so far off 0.4% to 5,083
• Italian FTSE so far off 0.85% to 19,066

Fixed Income: Lower equities and more on EU/Italy, EU/UK battles dominate bonds. German 10-year Bund yields are off 1.5bps to 0.395%, UK Gilts off 2.5bps to 1.495%, French OATs off 0.5bps to 0.775%. Italy is up 4.5bps to 3.485%, Spain up 0.5bps to 1.607%, Portugal up 0.5bps to 1.945% and Greece up 6bpso to 4.46%.

• Germany sold E1.185bn of 30Y 1.25% Bunds at 1.04% with 1.16 cover
• Portugal sold E0.498bn of 5Y 4.95% 2023 bonds at 0.702% with 2.33 cover. 
• US Bonds are flat waiting for CPI and Powell – 2Y flat at 2.891%, 5Y up 0.2bps to 2.986%, 10Y flat at 3.14%, 30Y off 0.2bps to 3.357%. 
• Japan JGBs rally with risk moods and weaker GDP – 2Y off 0.1bps to -0.148%, 5Y off 0.3bpso to -0.096%, 10Y off 0.5bps to 0.099%, 30Y off 0.6bps to 0.857%. 
• Australian bonds sold despite stable wages, good consumer mood as equities reverse– 3Y off 1bps to 2.075%, 10Y off 3bps to 2.697%. 
• China PBOC skips open market operations again, leaves liquidity neutral. The MOF sold 2Y bonds at 2.7265% with 2.56 cover and 5Y bonds at 3.0737% with 2.98 cover. The bond market continues to rally with 2Y off 10.5bps to 2.8%, 5Y off 9bps to 3.16% and 10Y off 7bps to 3.405%. 

Foreign Exchange: The US dollar index is off 0.1% to 97.20 with 97.01-97.40 range – focus is on 97 base against 98 target. 

• EUR: 1.1285 flat. Range 1.1263-1.1320 with focus on US rates and 1.12 against 1.1350.
• JPY: 113.90 up 0.1% Range 113.76-113.99 with EUR/JPY 128.55 flat. – focus is on US rates, equities with 113-115 consolidation. 
• GBP: 1.2965 off 0.1%. Range 1.2886-1.3036 with 1.2880 base against 1.3050 and Brexit the driver – CPI/PPI ignored. 
• AUD: .7210 off 0.1%. Range .7188-.7238 with China/US key driver. NZD up 0.3% to .6785 – all about crosses.
• CAD: 1.3230 off 0.1%. Range 1.3219-1.3249 with focus on rates, oil, and 1.33 target. 
• CHF: 1.0090 up 0.2%. Range 1.0058-1.0104 with EUR/CHF 1.1385 up 0.15% - even with Italy, Brexit deal helping. 
• CNY: 6.9520 flat. Range 6.9445-6.9581 holding pattern – data weak enough to worry still. 

Commodities: Oil up, Gold down, Copper up 0.1% to $2.7710.

• Oil: $56.15 up 0.85%. Range $55.13-$56.45 – with UAE comments on OPEC helping, $55 in WTI now important with US inventories/global demand key. Brent up 1.3% to $66.32 with focus on $65 base. 
• Gold: $1201.40 off 0.1%. Range $1199-$1204 – focus is on USD and $1200 as support. Silver off 0.15% to $13.98 with $13.80 next. Platinum off 0.6% to $834.15, Palladium off 0.3% to $1110.30. 

Economic Calendar:

• 0830 am US Oct CPI (m/m) 0.1%p 0.3%e / core 0.1%p 0.2%e
• 1000 am Fed VC Quarles testimony
• 0430 pm US weekly API crude oil stocks 7.83mb p 2.9mb e
• 0600 pm Fed Chair Powell speech