Markets ignore expanded EFSF as banks are downgraded

Despite news that the European Financial Stability Facility has been expanded from the current lending capacity of EUR 440 billion to a still unknown amount (the size of which EFSF CEO Regling would not commit yesterday) markets are more worried about the string of bank downgrades from S&P, which includes Goldman Sachs, BofA and UBS. In addition to all this we have a calendar filled to the brim with notable releases such as Eurozone CPI, US Chicago PMI and ADP Employment, and Canadian GDP.



Eurozone CPI to remain elevated: The flash estimate of Eurozone November inflation at the consumer level is expected to show an unchanged rate of inflation of 3 percent, which would be the third in a row if realised. Inflation has picked up sharply in the Eurozone in recent months having declined over the summer months as temporary factors from the first half of the year subsided. With the Eurozone struggling to produce much economic growth and such a high inflation rate the European Central Bank prefers for now to fulfill its (sole, unlike the Federal Reserve) mandate of price stability and avoid being the designated crisis-solver in Europe. The question is whether it continues down this path or will at some point be a much bigger player in solving the debt crisis.

ADP Employment to show robust gains: As usual the private company ADP will release its estimate of November (private) payrolls today, two days ahead of the monthly US Employment report. Consensus looks for a robust gain of 130,000, up from the 110,000 payrolls added in October. The ADP has regained some accuracy in recent quarters as a predictor of Friday's payrolls and combined with the improving Initial Jobless Claims this Friday's Non-Farm Payroll print may yet again be acceptable, but not what we would term 'good'. More on that in Friday's edition.


Chicago PMI to remain strong? The Chicago PMI has remained quite optimistic throughout the expansion with a low of 56.5 in August and currently stands at 58.4. Consensus looks for another strong print of 58.5 despite the October report showing New Orders at only 50.7. If the 58.5 forecast by consensus materialises it points to an ISM Manufacturing figure around 54.9 - though Chicago PMI has been rather optimistic, as mentioned, in this expansion.