UK

BOE’s Sentance says making the next major QE decision in the February inflation report. (BBG/RTRS/Independent) Sentance says Q3 GDP estimate was a shock and may be unreliable, says the UK economy is moving into recovery phase and short-term economic news is very positive and expects UK unemployment may level off at about 2.5mln. Says BOE is to asses if UK doesn’t need more stimulus and BOE forecasts show danger of inflation in 2 years. Sentance says competitive level of GBP likely to provide additional support to recovery and full impact of rate cuts only just feeding through, impact of QE could take longer.

In a Bloomberg interview this morning, Sentance said that BOE isn’t yet in a position to consider tightening and BOE MPC “have to be open minded” on Bond plan. He added that UK will feel recession effects for quite long. The Independent also cites Sentance as saying, QE has not yet improved lending.

Aggressive spending cuts would create “zombie economy”, warns Trade Union Congress (TUC) secretary. (Guardian). Brendan Barber said that sustainable growth is needed to nurse public finances back to health.

Warning over end to housing relief. (FT) The planned withdrawal of stamp duty relief on house purchases at the end of the year could undermine the nascent recovery in house prices in regions that are lagging behind the national average, according to the Royal Institution of Chartered Surveyors.

Christmas shoppers likely to spend less. (Times) The battle for Christmas shoppers is hotting up as the deadline for VAT to return to 17.5% approaches. The amount that shoppers spend this Christmas is set to fall by GBP 535mln this year, the first fall in two decades, according to Verdict, the retail market research company. In addition to falling sales volumes, as Britons keep tighter control of spending because of the recession, Verdict suggests that the lower VAT rate of 15% will have two contrasting effects. The lower rate will keep prices on items down, reducing the amount of money spent for the festive season; but the looming rise in VAT in the New Year could help to boost sales, as shoppers buy big-ticket items before the increase kicks in.

US

T-notes moved higher on Monday after Bernanke reaffirmed that rates would stay low for an extended period as credit remained ‘constrained’ and economic activity ‘weak’. He also signalled that inflation was likely to remain subdued for some time. At the pit close t-notes finished up 24 ticks at 119.22+. At 0641 GMT UST’s were trading just off the highs seen at the US close down 4 ticks to 119.18.

Fed Chairman Bernanke says ’significant economic challenges remain’ and that Fed policy will help ensure ‘USD is strong’ (BBG/RTRS) Bernanke repeats conditions likely to warrant exceptionally low Interest Rates for an extended period and that inflation likely to remain subdued for some time, but inflation outlook faces ‘number of crosscurrents’. Says tight bank lending and weak job market important headwinds, with the latter likely to keep households cautious about spending. Says concerned that unemployment rate might be quite high by the end of next year and also adds that commercial real estate loan quality deteriorated.

Fed’s Kohn said that the Fed’s low interest rate policy was meant to encourage investors to move into riskier assets and there are no signs currently that an asset bubble is building in the US. (RTRS)

Fed’s Fisher says Q3 GDP probably was weaker than 3.5%, closer to 2.5% and that US unemployment likely to remain ‘painfully high’ for much longer than preferred. (BBG/RTRS) Fisher says rising corporation profits based on cost-cuts rather than revenue growth bodes ill for jobs. Says he expects a slow slog in US recovery pace and adds that the USD is returning to a depreciating path. Furthermore, Fisher states that the Fed will have to slowly and deliberately dismantle emergency measures and would expect MBS/Treasury purchases to widen as Fed purchases wind down. Says he is concerned that bigger Treasury issues could mean upward pressure on rates.

US regional banks face greater exposure to losses due to commercial real estate loans, which may increase their chance of future ratings downgrades, Fitch Ratings said. (RTRS)

Meredith Whitney says she hasn’t been this bearish in a year and says banking sector is not adequately capitalised, she expects a double dip recession. (CNBC)

Europe

ECB’s Quaden says short term measures have to be unwound at the right time and pace, adds that too early an exit would entail risk of relapse. (RTRS) Quaden says gradualness will be key aspect of exit strategy and says some non standard measures may change before rate rise, while too-late an exit would sow seeds of inflation risk.

Bundesbank Vice President Zeitler says GDP data give hope for good H2. (BBG) Zeitler says can’t rule out risk of more restrictive credit and that markets must learn to live without emergency liquidity.

Asia

Japanese government Bonds rose, with 10-year futures climbing to a fresh one-month high, buoyed by a stronger JPY and an US Treasuries rallied after Federal Reserve Chairman Ben Bernanke repeated that the Central Bank was likely to keep rates low for an extended period. Weaker Tokyo stocks also supported JGBs with the Nikkei average -0.6%. JGBs were trading at 139.19 (+0.33) at 0613 GMT. (RTRS)

World Economics

The need for greater global currency stability means the world can no longer rely, as it has done since the end of the gold standard, on a currency issued by a single country, the head of the IMF said. (RTRS) Dominique Strauss-Kahn restated his view that a new global currency might evolve out of the Special Drawing Right.

US State Department said that the IAEA report underscores Iran’s non-compliance with nuclear obligations, adding that it will continue to press Iran to meet its International nuclear obligations. (RTRS) In related news, French President Sarkozy told Iran to accept the nuclear offer. (Al-Riyadh)

Forex

Fed’s Bernanke said that the Federal Reserve is monitoring currency markets “closely” and will conduct policy in a way that will “help ensure that the USD is strong”. (FT)

Australia’s Central Bank saw more rate rises as likely after it tightened early this month but emphasised it was open on the pace of future moves. (RTRS)

The AUD eased away from 15-month highs after minutes from the Reserve Bank of Australia’s November suggested a further move in December was not a done deal.

Commodities

Oil fell but clung to most of its previous session gains of 3%, hovering above USD 78 a barrel, as traders took profit ahead of the release of key US indicators and a weekly fuel inventories report. WTI crude futures were trading at USD 78.68, down USD 0.22, at 0610 GMT. (RTRS)

The IEA has not seen much recovery in actual oil demand in OECD countries and the pace of global recovery may not justify OPEC raising output at its next meeting, according to IEA’s Tanaka. (RTRS)

Company News

UK

GlaxoSmithKline – FDA approves co.’s additional vaccine for 2009 H1N1 influenza virus, vaccine to be manufactured by ID Biomedical. (BBG)

RBS – Co.’s three note issues backed by government has ratings corrected by S&P, note issues corrected to AAA from A+ by S&P. (BBG)

Barclays – Lehman Brothers, which last year filed the biggest bankruptcy in US history, sued co. today, alleging the British bank received a USD 5bln “windfall” when it purchased a portion of the bankrupt firm. (BBG)

BHP Billiton – The world’s largest mining  co., could boost earnings by 10% by buying back USD 15bln of its own shares, Southern Cross Equities said. (BBG)

Lloyds – The European Union will rule this week on whether co.’s plan to sell branches and divisions meets EU competition rules, two people familiar with the case said. (BBG)

Standard Chartered – Co. CEO said the FSA’s industry code which bars from paying guaranteed bonuses has meant it lost out to Asia rivals in bids to recruit bankers. (FT)

Royal Bank of Scotland – Co. is merging all of its Asia-Pacific corporate finance and advisory bankers into one unit. (WSJ)

ICAP – Co.’s H1 net income GBP 109mln vs. Prev. loss GBP 17mln; H1 dividend GBP 0.0511 per share vs. Prev. GBP 0.047. Co. says higher market activity levels returned in September. (BBG)

Burberry – Co.’s H1 net GBP 56.8mln vs. Exp. GBP 56.8mln; H1 sales GBP 572mln vs. Exp. GBP 569.7mln; H1 adjusted EPS GBP 0.136 vs. Exp. GBP 0.13. (BBG)

British Land – Co.’s Q2 net income GBP 161mln vs. Prev. net loss GBP 747mln; Q2 NAV/share GBP 3.72. (BBG)

Cable & Wireless – Co. says it aims to complete the de-Merger of Worldwide 31 March 2010. Says both companies will be separately listed on the London Stock Exchange. Co. intends to put in place approximately USD 1bln of new Bonds and bank facilities for CWI to replace existing debt facilities and meet its medium term debt maturities; and GBP 500mln of cash and new facilities for Worldwide. (BBG)

Barratt – Co.’s cancellations fall to 13.4% from 24%. Co. says substantially reduced debt levels. (BBG)

US

Equities finished higher after investor sentiment poured over from Asia as APEC leaders pledged to maintain stimulus spending and also buoyed by encouraging US retail sales figures. Stocks did come under brief pressure as Fed chairman Ben Bernanke revealed the Fed policies should ultimately help to bolster the USD, however stocks shrugged off the slight down tick and rallied to fresh highs after he saw sustained growth into next year and reiterated rates to stay low for an extended period. Late on in the session, stocks came under renewed selling pressure, in particular financials, as Meredith Whitney said that the banking sector is not adequately capitalised and that she is the most bearish she has been in a year. Nevertheless, equities remained resilient and pared back some of the downward move following Whitney’s comments into the cash close. At the closing bell, the S&P 500 closed +1.45% at 1109.29, the DJI closed +1.33% at 10407.11 and the NASDAQ 100 closed +1.06% at 1807.56.  

US banks – Meredith Whitney says banking sector is not adequately capitalised and that she expects a double dip recession. Says she hasn’t been this bearish in a year. (CNBC)

US regional banks – US regional banks face greater exposure to losses due to commercial real estate loans, which may increase their chance of future ratings downgrades, Fitch Ratings said. (RTRS)

Citigroup – Co.’s credit card write-offs 8.79% for Oct. vs. 10.15% for Sep., card delinquencies 5.67% for Oct. vs. 5.5% for Sep. (BBG)

American Express – Co. CFO says spending volumes in Oct. were ‘encouraging’, expects improvements in spending in Q4 vs. Q3 and does not see dividend increases or share buybacks. (RTRS)

Coca-Cola – Co. sees more than double system revenue by 2020 while increasing system margins, long-term growth targets remain appropriate moving into 2010. (RTRS)

Abbott – Co’s spokesman says company has ‘no interest’ in Mead Johnson (BBG)

Dover - Co.’s CFO says given current trends, confident full-year EPS will be slightly above mid-point of USD 1.75-2 forecasted range. Estimates co.’s 2009 EPS to be USD 1.93. (BBG)

Europe

Daimler – Aabar would like to increase its stake in co. to 15% from 9.1% in the next two years. (Handelsblatt)

Deutsche Lufthansa – Europe’s second-largest airline isn’t planning to purchase Scandinavian partner SAS Group. (Boersen-Zeitung)

EADS – Co. is studying possible acquisitions of a “moderate” size in the US. (Les Echos)

Unicredit – Co.’s shareholders approve capital increase of up to EUR 4bln, according to chairman. (RTRS) In other news, Italy’s biggest bank has been authorised by the Italian antitrust authority to postpone the sale of its 3.2% in Generali by a further 6 months. (Sources)

Telecom Italia – Co. is likely to delay a EUR 2bln retail Bond until spring 2010. (Finanza & Mercati)

Repsol – Co. says RIC unit seeks approval for new share issue and Repsol International Finance to fully subscribe to RIC share issue. (RTRS)

Fortis – Co. reports 9M gross inflows of EUR 11.4bln and group net profit of EUR 1.082bln. Co. says continues to expect inflows for FY to be at least in line with last year. (BBG)

UBS – Co. said it targets to achieve annual pre-tax profit of about CHF 15bln in the mid-term. Says cost reductions on track and sees “restrictive” dividend policy for some time to come. (BBG)

Asia

Nikkei edged down 0.6%, with exporters such as Sony Corp weighed by a strong JPY and investors locking in profits in the face of long-term uncertainty about the economy. Bucking the trend, Canon Inc. climbed 3% after it said on Monday it plans to buy Dutch copier and printer maker Oce for EUR 730mln, in a challenge to rivals Ricoh and Xerox. (RTRS)