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BRAZIL: Real Remains Unchanged As Local Holiday Drains Market Liquidity

A local holiday in S?o Paulo, the main financial center in Brazil, kept the country's stock market closed Monday and drained liquidity from the foreign exchange trading, leading the real to end the session unchanged at R$ 3.2640 per dollar.

According to Correparti's analyst Ricardo da Silva Filho, there were dollar trades in cities where there was no holiday, but the smaller trading volume resulted in an increased bid/ask spread.

"There was no market benchmark to the dollar price. Only those who really needed were trading," he added.

On Tuesday, when the market volume is set to rise again, traders will focus on the developments regarding the pension reform bill, said analysts from H. Commcor.

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Yellen to Retire from Fed Board after Powell is Sworn In

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Federal Reserve Chair Janet Yellen said that she will step down from her seat on the Fed's Board of Governors once Jerome Powell is confirmed and takes oath as the new chairman of the U.S. central bank.

Yellen, in a letter to President Donald Trump, also pledged to do everything in her capacity to ensure a seamless transition of power to Powell, who was nominated by Trump to succeed her earlier this November.

It is widely anticipated that Powell will take her place when Yellen's term ends in February. Despite Yellen being able to stay on as Fed governor until 2024 given that board terms run for 14 years, it has been a tradition for departing Fed leaders to depart the board and at the same time as a courtesy to give the next chairman clear leadership of the FOMC.

Yellen has been credited with stabilizing the economy and steering the monetary policy from the defensive mode that came after the 2007-2009 recession and financial crisis. She served as the Fed vice chair before being nominated as Fed chief in 2014 by Democratic President Barack Obama and was the first woman to head the U.S. central bank.

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BRAZIL: Ibovespa Rises With Expectation For Discussion Of Pension Reform

Ibovespa, the benchmark stock market index in Brazil, closed up 1.57% at 74,594.61 points on Tuesday amid a better external scene and investors' view that president Michel Temer is closer to get the pension reform bill voted in the House of Representatives later this year.

"In the external scenario, it was a very positive day for risky assets. There was news that led to a positive expectation on the pension reform bill, which could be voted at the beginning of December, giving the market a boost," said Rafael Passos, an analyst at Guide Investimentos.

According to H. Commcor's chief operating officer, Ari Santos, the cabinet reform promoted by Temer leads the market to believe that he would have the political strength to pass the pension reform bill.

According to Santos, the expiry of stock options brought selling pressure at the end of the trading session.

For Wednesday, Passos sees Ibovespa keeping the upward trend, once the political scene continues to corroborate the purchase. Santos foresees space for profit-taking and expects a fall for Wednesday.

Meanwhile, the locally traded U.S. dollar closed down for the third consecutive trading session (-0.36%), at R$ 3.252, reflecting an increase in the expectation of the pension reform bill's approval and a quieter external scenario, with a drop in the greenback against emerging currencies.

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UK Government Borrowing Increased in October

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The UK government borrowed more than expected in October, following a six month period to September during which public sector borrowing had came in sharply below expectations. The figure comes ahead of the Budget, and the monthly deficit was larger than economists had predicted.

According to the Office for National Statistics, the public sector, excluding state-backed banks, borrowed a net £8 billion in October, which is £0.5 billion higher than the same period in 2016. The figure implies that borrowing is poised to come in below the Office for Budget Responsibility's forecast of £58.3 billion for the financial year as a whole.

The rise in October came after a six-month period during which public sector borrowing dropped to its lowest level in a decade and came in below the short-term outlook predicted by the Office for Budget Responsibility.

In the financial year-to-date, the public sector had to borrow £38.5 billion, £4.1 billion lower than in the same period in 2016. September's borrowing figures, which already came in £0.6 billion below expectations, were revised downwards, from £5.9 billion to £5 billion.

Chancellor Philip Hammond will present the latest Budget on Wednesday. Hammond has to balance calls for more government spending against the prospect of softer future economic growth, which could affect tax revenues.

A deterioration in the long-term outlook and an expected downgrade to productivity growth forecasts is likely to raise projected public borrowing.

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LATAM: Bradesco Points To General Slowdown In Inflation During 2017

Brazilian bank Bradesco said that throughout 2017 there was a general reduction in inflation in Latin America - except in Mexico, where inflation accelerated. By 2018, Bradesco's analysts expect inflation in the region to continue at healthy levels, leading central banks to keep interest rates at the current patterns.

In Colombia, according to Bradesco, the slowdown in food prices was the main factor for the decline in inflation. Such prices reached a year-on-year increase of 15.7% in mid-2016 and fell to 2.5% in October, which contributed to a 3.8 percentage point decrease in general inflation. Thus, annual consumer prices receded to 4.0% in 2017, after recording a peak of 9.0%.

In Peru, the rise in food prices caused by heavy rains in the first months of the year was quickly reversed, Bradesco noted. The prices returned to the previous level in the following months.

In Argentina, the dynamics of inflation have been different from those of other countries. After a rise of 41.0% in 2016, driven by the withdrawal of subsidies for electricity tariffs, inflation declined this year, reflecting mainly the lower impact of these measures. However, the speed of this fall has frustrated expectations, since from January to October inflation already accumulates high of 19.4%, exceeding the ceiling of the central bank target, of 17.0% for 2017.

For 2018, however, Bradesco indicates that it would be necessary to monitor oil prices and the possibility of the climate phenomenon La Ni?a hits with greater intensity.

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U.S. Yields Slide as Fed’s Concerns About Subdued Inflation Persist

Prices on U.S. government bonds advanced, causing yields to retreat, after the minutes of the Oct. 31-Nov. 1 meeting of the Federal Reserve showed policymakers are worried about the weak inflation, affecting the prospects for rate hikes in 2018.

The 10-year Treasury note yield edged down by 4.1 basis points to 2.320 percent. Meanwhile, the yield on the two-year note declined by 3.8 basis points to 1.735 percent. The yield on the long bond or the 30-year Treasury note fell by 2.1 basis points to 2.741 percent.

On Thursday, financial markets will be closed for the Thanksgiving Day holiday, while stock and bond markets are slated for an early close on Friday.

The readout from the November meeting of the Federal Reserve OPen Market Committee indicated a December rate hike continues to be on its planned track, a move that is highly expected by markets. Before the release of the minutes, traders in the fed fund futures market placed a 97 percent probability of a rate hike in December.

However, the overall perception of the meeting's talks were mostly dovish as some officials voiced their concern regarding inflation remaining below 2 percent for longer than their current expectations.

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Japan Manufacturing Growth Strongest Since March 2014

Japan's manufacturing activity expanded at the steepest pace in more than three-and-a-half years in November, survey figures from IHS Markit showed Friday.

The Nikkei flash Manufacturing Purchasing Managers' Index, or PMI, climbed to a 44-month high of 53.8 in November from 52.8 in October.

Any reading above 50 indicates expansion in the sector.

Among components, output, new orders, employment all increased at faster rates in November.

"A cheaper yen and higher material prices have intensified cost pressures, as input price inflation increased to a 35-month high in November," Joe Hayes, Economist at IHS Markit, said.

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U.K. Consumer Spending Powers Economic Growth

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Consumers fueled the British economy's growth in the third quarter as spending on vehicles regained footing but Brexit appears to be taking a toll on business investment.

According to a report by the Office for National Statistics, household spending increased 0.6 percent, the fastest pace in a year. However, business investment slowed down and net trade weighed on growth. Total GDP grew at an unrevised rate of 0.4 percent, higher compared to the 0.3 percent expansion in the last quarter.

Business investment increased 0.2 percent, its worst performance since the end of 2016 and net trade shaved 0.5 percentage points from growth as exports declined and imports increased.

Despite consumer spending strengthening from growth of just 0.2 percent in the previous three months, recent reports have underlined the risk of a slowdown before a crucial holiday shopping period as the squeeze on incomes from inflation begins to bite.

The economic data comes a day after Chancellor of Exchequer Philip Hammond issued a downgraded economic outlook due to the weak productivity and headwinds presented by Brexit.

The Office for Budget Responsibility estimated the economy will grow 1.5 percent this year, down from the 2 percent growth projected in March and estimated growth will remain below 2 percent through 2022.

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Businesses Remain Optimistic Heading into 2018

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Businesses appear bullish heading into 2018, surveys will likely show in the coming week, which indicates a possible boost for strong growth in the world's largest economies.

Preliminary readings of plans being made by purchasing managers, the executives who buy what their companies need, have implied a bullish outlook for the euro zone, particularly for its two largest economies, Germany and France.

IHS Markit's flash Purchase Managers' Index for euro zone manufacturers increased to 60.0 this month, ahead of 58.3 in Reuters poll, marking the second-highest reading since the index was first collected in 1997. Anything above 50 indicates growth.

November PMI's for many other major economies are set to be released next Friday.

In the United States, which is ahead of Europe in the growth cycle, the Institute for Supply Management's measure of factory activity is seen to come in at 58.5, marginally lower from October's 58.7.

In China, the Caixin/Markit Manufacturing PMI was flat at 51.0 in October, which reflects slowing GDP growth and indicating further modest improvement ahead.

In Japan, the Markit/Nikkei Manufacturing PMI held up above the 50 threshold for 14 months in a row, while British factories also reported good activity through the autumn.

Some policymakers have argued that globalization and technological changes have made value chains more international, making low inflation a global phenomenon and limiting central banks' ability to control prices in their own jurisdiction.

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China's Industrial Profits Continue To Grow Sharply In October

China's industrial profit growth remained strong in October despite easing slightly from a month earlier, figures from the National Bureau of Statistics showed Monday.

Industrial profits surged 25.1 percent year-over-year in October, slower than the 27.7 percent spike in September, which was the sharpest growth since 2011.

During the first ten months of the year, total profits of industrial enterprises grew 23.3 percent annually, up from 22.8 percent rise in the January to September period.

Earnings at state-owned firms jumped 48.7 percent and private firm's profits climbed by 14.2 percent in the January to October period.

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ARGENTINA: Merval Gives Up On Profits And Falls 1.21%

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Merval, the main index of the Buenos Aires Stock Exchange, gave up its early gains to fall 1.21%, closing at 27,131.89 points Monday amid high volatility in the local financial market.

Analysts said that investors are closely following the progress of the tax, pension and labor reform bills in Congress to gauge how broad the changes will be.

"The local market had no volume to sustain the initial rise and ended with a decline of 1.21%," said analysts at Bull Market Brokers.

PGR posted a significant rebound that led it to rise 8.21%, while Banco Macro earned 0.98% on the day that its chairman - now on leave - Jorge Brito testified in a corruption case.

The sharpest falls of the day were Comercial del Plata (-5.22%), Edenor (-2.91%), TGS (-2.80%), and Petrobras (-2.57%).

The locally traded U.S. dollar closed down 0.15%, at 17.32 Argentinean pesos, while the local currency continues to appreciate against the greenback.

"With the drop today, the U.S. dollar returned to levels at the end of last September and moved away again from its annual peak," said Gustavo Quintana, an analyst at PR Corredores.

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Treasury Prices Rally as Senate GOP Starts Push for Tax Bill

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U.S. government prices increased, causing yields to fall as Senate Republicans launch this week's push to pass their version of the tax bill.

The benchmark 10-year Treasury note declined by 1.4 basis points to 2.382 percent. Meanwhile, the two-year note yield fell 0.7 basis points to 1.777 percent. The 30-year bond yield was steady at 2.765 percent.

With the House pushing for its own version of the tax plan, the Senate Republicans have kicked off their efforts to put their own bill to vote by the end of the week. However, with only a narrow majority in the Senate, there are worries that defections from the GOP could dash the bill have raised skepticism.

According to a source on Monday, Montana Republican Senator Steve Daines was against the current terms of the tax legislation.

A deficit-funded tax cut is seen to drive a rally in Treasury yields, as the federal government will need to bolster the size of U.S. government debt auctions.

The U.S. bond market can be affected by big sales of government paper.

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Treasury Prices Fall after Poor Reception to Latest Auction

U.S. government bond prices declined on Tuesday, driving up yields, with the weakness mostly faulted to a poorly received auction of seven-year notes and worries over federal budget negotiations.

The ten-year Treasury note increased 1.1 basis points to 2.338 percent, meanwhile, the two-year note edged up 1.4 basis points to 1.758 percent. The yield on the 30-year Treasury bond rose 0.2 basis points to 2.767 percent.

There are several factors affecting the bond market. A sale of $28 billion in seven year Treasury notes received weak demand.

Meanwhile, top congressional Democrats boycotted a meeting with President Donald Trump after he tweeted that he did not perceive prospects for an agreement on government spending. The Trump administration faces a December 8 budget deadline.

Federal Governor Jerome Powell, Trump's nominee to take Federal Reserve Chairwoman Janet Yellen's place at the central bank when her term ends in February, made no waves in a Senate confirmation hearing. Powell sent a message of continuity to follow a path of gradual rate hikes and a slow tapering of central bank's balance sheet that was outlined by Yellen.

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European Economics Preview: Eurozone Economic Sentiment Data Due

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Economic confidence data from euro area is due on Wednesday, headlining a light day for the European economic news.

At 2.00 am ET, Swiss UBS consumption indicator for October is due. The consumption indicator stood at 1.56 points in September compared to 1.50 in August.

At 2.45 am ET, revised quarterly national accounts and consumer spending from France are due.

At 3.00 am ET, the National Institute of Economic Research releases Sweden's economic tendency survey data. The economic tendency survey index is forecast to fall to 111.9 in November from 113.3 a month ago.

In the meantime, flash consumer prices from Spain and unemployment from Hungary are due. Inflation is forecast to rise slightly to 1.7 percent in November from 1.6 percent in October.

At 3.30 am ET, Sweden's GDP data is due. The economy is forecast to grow 3.5 percent annually in the third quarter following second quarter's 3.1 percent increase.

At 4.30 am ET, the Bank of England releases UK mortgage approvals for October. The number of mortgages approved in October is seen at 65,000 compared to 66,200 in September.

At 5.00 am ET, European Commission is scheduled to issue euro area economic sentiment data. The confidence index is seen rising to 114.6 in November from 114 in October.

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Australia Manufacturing PMI Spikes In November - AiG

The manufacturing sector in Australia continued to expand in November, and at an accelerated rate, the latest survey from the Australian Industry Group showed on Friday with a PMI score of 57.3.

That's up sharply from 51.1 in October, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.

It also marks the 14th straight month of expansion.

Individually, new orders, exports, deliveries, production, sales, employment and stocks all expanded.

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European Markets Under Pressure as Oil Shares Dip

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European equities fell on Thursday, as market sentiment in the region failed to be lifted by upbeat trade in the US and in oil.

The pan-European Stoxx 600 declined 0.33 percent provisionally by the finish, with the majority of the sectors ending in the red. The index was supported by broad-based gains in the banking sector.

The U.K.'s FTSE 100 dropped 0.9 percent as sterling posted solid gains against the U.S. dollar. France's CAC 40 and Germany's DAX were 0.47 and 0.29 percent lower respectively.

Telecoms outperformed fellow industries, with most of its stocks closing in the black. Construction & material and basic resources were the worst performers. Mining stocks, in particular, was under pressure, as nickel prices dropped around 2.5 percent.

Oil companies lost ground as oil prices turned mixed as OPEC agreed to extend output reductions. Among energy firms, shares of BP PLC and Royal Dutch Shell PLC each fell 1.1 percent, while Total SA lost 0.6 percent.

Banks were again among the biggest advancers, continuing Wednesday's push higher. That advance came after U.S. Federal Reserve Chairman-nominee Jerome Powell said he hopes to ease financial regulations.

Swiss lender Credit Suisse Group advanced two percent, after it provided a strong outlook and pledged to return a large amount of profits to investors.

Mediclinic closed 4.7 percent higher, after Jefferies improved its rating on the stock from "underperform" to "buy".

Euronext jumped 4.2 percent after it announced it would acquire 100 percent of the Irish Stock Exchange's shares, for 137 million euros ($162 million).

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Australia Q3 Company Operating Profits Ease 0.2%

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Company gross operating profits dipped a seasonally adjusted 0.2 percent on quarter in the third quarter of 2017, the Australian Bureau of Statistics said on Monday.

That missed forecasts for an increase of 0.1 percent following the 3.3 percent decline in the three months prior.

Inventories were up 0.2 percent on quarter, beating forecasts for a flat reading after sinking 0.5 percent in Q2.

On a yearly basis, company profits jumped 20.0 percent, while inventories added 1.1 percent.

Wages and salaries were up 1.1 percent on quarter and 2.5 percent on year.

Sales of manufacturing goods and services were up 2.0 percent on quarter and 1.5 percent on year, while wholesale trade added 0.7 percent on quarter and 2.3 percent on year.

Also on Monday, the latest forecast from TD Securities and the Melbourne Institute showed that consumer prices in Australia are predicted to rise 0.2 percent on month in November. That follows the 0.3 percent increase predicted for October.

On a yearly basis, consumer prices are called higher by 2.7 percent in November - up slightly from 2.6 percent in October.

Also, ANZ Bank noted that job ads were up 1.5 percent on month in November, unchanged from the October reading.

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UK and EU on the Verge of Sealing Brexit Divorce Deal

Britain and the European Union are on the edge of finalizing a Brexit separation deal on Monday, as UK Prime Minister Theresa May travels to Brussels to open trade talks.

Northern Ireland and the future role of European courts in Britain are the most delicate issues that remain to be endorsed in a draft joint text that May hopes to sign-off over the meeting with European Commission President Jean Claude Juncker.

According to diplomats involved in the negotiations, objections from Northern Irish unionist politicians are currently the main potential deal-breaker. A senior Irish official said that they await signs of a definitive breakthrough, leaving the agreement hanging in the balance.

The largest risk is the consent of the British cabinet and Northern Ireland's Democratic Unionist party, May's parliamentary ally, to the wording of a proposed compromise on the Northern Ireland border.

The EU side calls for May to endorse draft language that would, in effect, acknowledge the need for a unique fallback option for Northern Ireland if EU-UK trade relations make a hard border impossible to avoid.

A group of 30 Eurosceptic figures from a campaign group known as Leave Means Leave said that Britain should pull out from talks unless certain demands were met.

May gave in to EU demands on the UK paying a financial settlement of €40 billion-€60 billion net and the rights of EU citizens in Britain.

EU leaders have cautioned May that today's meeting is a deadline for resolving outstanding issues if she hopes to guarantee a “sufficient progress” EU summit on December 14-15.

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China Services PMI Strengthens To 51.9 In November

The services sector in China continued to expand in November, and at a faster rate, the latest survey from the National Bureau of Statistics said on Tuesday.

That's up from 51.2 in October, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.

The bureau also said that its composite index climbed to 51.6 in November, up from 51.0 in the previous month.

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Australia Retail Sales Jump in October

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Australian retail sale jumped in October following months of weak demand, which is a positive indication for spending in the upcoming holiday season.

According to the Australian Bureau of Statistics, retail sales increased 0.5 percent in October from September, the highest since May. Sales in September only rose by a revised 0.1 percent.

Sales grew across every sector with clothing and eating out particularly strong.

The country's brick-and-mortar retailers have been struggling amid cutthroat competition and as fierce price discounts fail to attract customers facing meager wage growth and mountains of debt.

However, the ABS does not yet include online data in its headline retail series despite it accounting for over seven percent of overall sales.

Figures for gross domestic product, set to be released on Wednesday, are expected to show Australia's economy growing by 0.7 percent in the third quarter from the quarter earlier.

This would see annual expansion picking up to three percent, with a rare contraction from the third quarter of 2016 falling out of the calculation.

The acceleration is a major reason the Reserve Bank of Australia is considered certain to keep interest rates at 1.5 percent at its last policy meeting of the year on Tuesday.

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