Today's Key Points

* Quiet markets overnight. Equities slightly higher. Oil price up to USD39.

* Bond yields are sideways while USD and SEK are slightly weaker.

* Fed members push for more money to prop up financial institutions.

* Focus today will be on US retail sales and more Fed speeches. Other releases include French CPI, Euroland industrial production and US mortgage applications

Markets Overnight

Equity markets went mostly sideways yesterday after two days of decline as there was no major news to rock the market. S&P500 finished up 0.2%. Asian stocks are creeping higher breaking a five-day sell-off. Bond yields are fairly unchanged with the US 10-year yield around 2.3% and the two-year yield at 0.75%. Oil prices rose USD1.5 to USD39 after OPEC leaders suggested more output cuts might be needed. In FX markets EUR/USD is slightly higher reversing some of the decline yesterday. USD/JPY is unchanged at around 89.5. In Scandi EUR/SEK is up to 10.95 while EUR/NOK is unchanged at 99.4.

The markets are waiting for the upcoming earnings season where investors brace themselves for heavy losses. JPMorgan yesterday said it would report on Thursday - one week ahead of schedule. Markets are also waiting for news on how big the US stimulus plan will be and what the second release of the USD700bn TARP money will be used for. In several speeches yesterday, Fed members pushed the case that more help was needed for the US banks even though this is not popular. Fed chairman Bernanke argued that bad assets con-tinue to clog balance sheets of banks and that fixing the problem is paramount to ease the credit squeeze cur-rently pulling down the US economy. Interestingly, he also redubbed the 'quantitative easing' calling it instead 'credit easing' because the Fed sees it as a wider approach to ease credit markets rather than just purely ex-panding the money base.

Global Daily

Today industrial production data out of Euroland released at 12:00 may attract some attention. We look for the numbers to confirm an intensifying slowdown during November posting a 2.0% m/m decline (consensus -2.1% m/m).

In the US, retail sales for December, released at 14:30, will set the agenda. We expect the headline to decline by 0.9% m/m, which would be slightly better than the consensus estimate of a 1.2% m/m decline. Note that the decline will be driven by lower prices (primarily gasoline prices) not lower real sales. Hence, in real terms, consumer spending is set to increase again in December. We are not sure how much the market will read into this, but if anything we believe that the risk for US bond yields is skewed slightly towards the upside with this release.

There are several Fed members due to speak today. Philadelphia Fed president Plosser (hawk, non-voter) will speak on the economic outlook at 14:30. Minneapolis Fed president Stern (hawk, non-voter) will speak on monetary policy at 19:00. And at 20:00 the Fed releases the Beige Book.

The downward momentum in Euroland bond yields continued yesterday, but has become somewhat weaker now, as markets await the ECB meeting on Thursday. With slightly better risk appetite and the ECB meeting approaching, we believe this means range trading for Euroland bond yields today.

While the dominant trend in the EUR this year has been south versus all other major currencies, the market is looking towards Thursday's interest rate announcement and subsequent press conference to gauge the extent of ECB dovishness. We remain bearish on the single currency, with the eurozone lagging the US monetary and economic cycle. This should be underlined by today's numbers for eurozone industrial production. In contrast, today's US retail sales are expected to surprise slightly on the upside relative to market consensus, which could fuel some further USD strength. We thus feel confident about our forecast where we have pencilled in EUR/USD at 1.25 on a three-month horizon.