Morning Call For December 2, 2015

OVERNIGHT MARKETS AND NEWS

December E-mini S&Ps (ESZ15 unch) are up +0.08% at a 4-week high and European stocks are up +0.28% ahead of speeches today and tomorrow from Fed Chair Yellen. European stocks and government bonds also rose after weaker-than-expected Eurozone Nov CPI reinforced the argument for the ECB to expand stimulus when it meets tomorrow. Gains in European stocks were muted as ArcelorMittal tumbled over 6% and pulled other mining companies lower after Vale SA predicted steel prices will slump more next year. Asian stocks settled mixed: Japan -0.37%, Hong Kong +0.44%, China +2.33%, Taiwan -0.07%, Australia -0.15%, Singapore +0.47%, South Korea -0.84%, India -0.20%. China’s Shanghai Composite closed up over 2% as financial companies and property stocks rallied on prospects for additional monetary stimulus from the PBOC.

The dollar index (DXY00 +0.30%) is up +0.28%. EUR/USD (^EURUSD) is down -0.36% after the slower-than-expected Eurozone Nov consumer prices bolstered the outlook for additional ECB easing. USD/JPY (^USDJPY) is up +0.20%.

Mar T-note prices (ZNH16 -0.06%) are unchanged.

Comments Tuesday night from Fed Governor Brainard suggest she sees the federal funds rate topping out at a lower level than in previous expansions. She said “a broad deterioration in foreign growth prospects, together with greater risk sensitivity in the wake of the crisis and changes in the rate of potential output growth, may be contributing to a ‘new normal.'” This new normal “implies a delay in the date of liftoff and a shallower path for the federal funds rate over several years.”

The Eurozone Nov CPI estimate rose +0.1% y/y, less than expectations of +0.2% y/y. The Nov core CPI rose +0.9% y/y, less than expectations of +1.1% y/y.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -3.2% with purchase sub-index -0.5% and refi sub-index -4.8%), (2) Atlanta Fed President Dennis Lockhart speech on the U.S. economy to the Broward Workshop in Fort Lauderdale, FL, (3) Nov ADP employment change (expected +190,000, Oct +182,000), (4) Fed Chair Janet Yellen’s welcoming remarks at the National College Fed Challenge Finals, (5) revised Q3 non-farm productivity (expected +2.2% vs last +1.6%) and revised Q3 unit labor costs (expected +1.0% vs last +1.4%), (6) Fed Governor Danial Tarullo’s opening remarks at an Economic Growth and Regulatory Paperwork Reduction Act Outreach meeting, (7) Nov New York ISM (Oct +21.3 to 65.8), (8) Fed Chair Janet Yellen speech to the Economic Club of Washington, (9) the Fed’s Beige Book, (10) San Francisco Fed President John Williams’ speech on the economic outlook to community leaders in Portland, Oregon.