European Market Update

Greece PM appears to lose his majority ahead of Friday's confidence vote; holds emergency Cabinet meeting

European shares fluctuated between gains and losses ahead of the G20 meeting in Cannes this weekend. European leaders have withheld the sixth tranche of Greek aid due to the impending referendum with an increasingly hostile tone against Papandreou's decision. Fed's minutes noted that the policymakers are increasingly worried about economic recovery, predicted to be frustratingly slow. Fed affirmed the prior pledges of supportive monetary policy but as expected did not announce new expansionary measures. In corporate earnings, BNP Paribas [BNP.FR] reported disastrous results impacted by the Greek exposure. Investment bank revenue had also declined significantly over the year. Bank noted that a Greek default while 'unpleasant' would be manageable. ArcelorMittal [MT.NV] missed on net expecting price and volume pressure in Q4. Stock is trading down over 2%

Greek gov't said to be losing its majority ahead of Friday's confidence vote; Greece PM Papandreou to chair emergency cabinet meeting ahead of the NY morning. Greek ruling party lawmakers were calling for PM Papandreou to resign. The PM expected to tell cabinet that elections were inevitable but was looking at a possible national unity government

Greece Fin Min Venizelos commented that the participation in Euro could not depend on the upcoming referendum and that the sixth aid trance must be dispersed with no delays.

Greece ruling party minister Panariti stated that she takes back earlier remark on not support the confidence vote and only, says she only meant that she would not support referendum

Greece said to have enough cash to last through mid-December even if 6th tranche payment is delayed - financial press

China Commerce Ministry (MOFCOM) reiterated view that it supported China's efforts to combat its debt crisis and would increase shipping cooperation and imports with Greece. China targeted €8.0B in trade with Greece by 2015

BRIC leaders said to agree to maintain close contact to work out a common position on the European debt crisis

G20 draft said to include new language on moving "more rapidly" toward market determined forex rates and reducing "excessive reserve accumulation"

EU's Barroso commented that sought to push for more fx rate flexibility at the G20 summit

Japan PM Noda: Stabilizing currency markets is important for global economy

Mexico President Calderon commented ahead of the G20 Summit that protectionism was the most severe impediment to global economic growth with a lot of currency manipulation impacting trade. Must address currency levels in some Asian economies.

US President Obama stated that pre-G20 discussion with French President Sarkozy focused on the global economy

British think-tank NIESR commented that UK faced 50% change of recession if Euro Zone crisis was resolved and a 70% chance if EU policymakers 'muddle through' things.

BoE's Bean commented that economic surveys indicated growth would be moderate at best in Q4. Without QE, CPI would most likely come in under rather than over the 2% target in the medium term. Credit availability will weaken unless conditions improve.

German VCI reiterates 2011 German chemical production and prices to rise 5%, revenue growth seen at 10%. VCI noted that the decline in both Q3 production and sales were expected

Currencies:

The Euro recovered from its initial losses in the session with the focus continuing to be on Greece. Harsh rhetoric from key European leaders ahead of the G20 Summit appeared to have various Greek ministers reflect on the situation. Greek gov't was said to be losing majority ahead of Friday's confidence vote with Greek ruling party lawmakers said to call for PM Papandreou to resign. FX dealers expressed doubt there would be a vote of no confidence tomorrow with possible Papandreou just resigning and not face the possible humiliation of losing the confidence vote. This could remove the threat of the December 4th referendum. Dealers suspected that perhaps the best outcome for Greece would be the formation of some sort of unity government rather then stage new elections. The EUR/USD rebounded from session lows on some optimism on Greece. The EUR/USD tested 1.3650 before rebounding over 150 pips higher to test near 1.38 area.

Political/ In the Papers:

The Chancellor of the Exchequer Osborne is seeking to slash billions of pounds from the 2012 benefits bill by cutting inflation-linked rises. The FT reported that he is concerned with the political and economic difficulties if benefits and pensions were to rise by 5.2%. The Treasury is maintaining that the policy is that benefits are up rated according to September inflation data. Officials did not comment on possible policy changes.

Ahead of the release of the International Atomic Energy Agency (IAEA) report, initial details released in the Telegraph found Iran nuclear weapons testing and engineering at banned sites. The article noted that Dir-Gen Yukiya Amano is unlikely to draw a definitive conclusion in the report, although according to diplomats the facts will make any other conclusion implausible. The IAEA report is expected to be released next week. The report is likely to provide more support for Israeli Prime Minister Netanyahu's case for pre-emptive military action.

Following the revised pension offer from the government, British unions continued to stick to their strike plans for November 30th. Various union officials stated that although ministers made improvements on some issues, either the changes were not enough or were too late to justify calling off strike plans. Several unions (including Unite, GMB) will announce the result of strike ballots in the coming weeks, with Unison reporting results on Thursday.