Today's Headlines

Bloomberg: 

• Possible U.S. Budget Deal Would Extend Tax Cuts. The White House and congressional negotiators agreed to contours of a budget deal including tax cut extensions, with the remaining sticking point being how to avert automatic federal spending cuts, said an official familiar with the talks. The official described the proposed framework as the White House announced President Barack Obama’s plans to deliver remarks at 1:30 p.m. Washington time on the status of the talks. Under the proposed deal, income tax cuts would be extended for annual income up to $450,000, the official said, with rates rising to 39.6 percent on income above that. Expanded unemployment insurance would be continued through 2013.
• Dollar Weakens as Reid Cites Deficit-Deal Optimism. The dollar fell against most of its biggest peers as Senate Majority Leader Harry Reid said he’s hopeful a last-minute U.S. deficit-reduction deal will be reached to protect all but top earners from a tax increase. The yen weakened after Finance Minister Taro Aso told reporters at a Dec. 28 briefing that the U.S. should have a stronger dollar. The 17-nation euro fell against most of its 16 major peers as German Chancellor Angela Merkel said the region’s debt crisis was “far from over.” 
• U.S. Gasoline at Pump Averaged Record High in 2012, AAA Says. Motorists in the U.S. paid record high prices for gasoline in 2012, as severe weather and political tensions drove up the cost of fuel. The national average price of gasoline in 2012 was $3.60 a gallon, nine cents more than the previous annual record set last year, said Heathrow, Florida-based AAA, the nation’s largest motoring group.
• Gold Extends Longest Streak Since 1920 on Central-Bank Stimulus. Gold rose, poised for a 12th consecutive annual gain, as central banks from Europe to China pledge more steps to spur economic growth and U.S. lawmakers near a deadline for budget talks. Gold for immediate delivery added 0.3 percent to $1,661.38 an ounce by 12:44 p.m. in London, extending this year’s climb to 6.2 percent. Prices rebounded from a five-week slump as the deadline for the so-called U.S. fiscal cliff of automatic tax increases and spending cuts due to take effect tomorrow loomed with no accord in sight among lawmakers. Investors from John Paulson to George Soros have a $140.6 billion bet via near-record holdings in gold-backed exchange- traded products after the Federal Reserve said Dec. 12 it would buy $45 billion of Treasury securities a month as of January, adding to $40 billion a month of mortgage-debt purchases.
• Lumber Prices May Tumble 25% After Leading Commodities in 2012.
• Crude Futures Set for Annual Drop in New York. Oil headed for its first annual decline since 2008 in New York as U.S. lawmakers sought an agreement on averting automatic tax increases and spending cuts that threaten the economy of the world’s largest crude consumer. West Texas Intermediate fell as much as 0.9 percent, dropping for a third day. U.S. Senate Majority Leader Harry Reid said there are “still significant differences” between Democrats and Republicans with one day remaining to avoid the budget measures known as the fiscal cliff. The volume for WTI contracts was down 56 percent on the 100-day average.
• LodgeNet(LNET) to File for Bankruptcy as Colony Capital Takes Control.
• Cal-Maine(CALM) fiscal 2nd quarter profit sinks 39 pct.
• ‘Grievous’ U.S. Mistake to Have Kept Open Libya Outpost. The State Department failed to fill a “security gap” at the U.S. mission in Benghazi before the Sept. 11 attack even though it knew the Libyan government was incapable of protecting the compound, a Senate report said today. The report by the Senate Homeland Security and Governmental Affairs Committee said the State Department failed to meet staffing requests from its own security personnel and made the “grievous mistake” of not closing the Benghazi compound at least temporarily because of growing threats.

Wall Street Journal:

• Cliff's Edge Draws Close. Talks between Senate Minority Leader Mitch McConnell (R., Ky.) and Vice President Joe Biden continued through the night and into Monday morning, as Washington tried to do what it has promised for months: engineer an alternative to the so-called fiscal cliff.
• Fiscal Cliff: Live Stream.
• China Warns Local Governments on Financing. China has issued a fresh warning to its local governments to control risk and stop using unauthorized fundraising methods to pay for the building of infrastructure and other projects. The finance ministry, in a statement jointly issued with other government agencies and published on its website Monday, said there has been an increase of unauthorized funds by local governments and reiterated existing restrictions on the use of leasing, trust, and build-and-transfer arrangements to pay for public works. The statement—issued with the People's Bank of China, the China Banking Regulatory Commission and the top planning agency the National Development and Reform Commission—is the latest sign of mounting concern over local government debt, particularly as the property market remains sluggish. Local governments are heavily reliant on land sales for revenue, and slowing land sales may jeopardize their ability to repay loans.

CNBC:

• More Than 400 New Laws Take Effect Tuesday. In 2013 in Illinois, motorcyclists will be able to "proceed through a red light if the light fails to change." In Kentucky, releasing feral or wild hogs into the wild will be prohibited. And inFlorida, swamp buggies will not legally be considered motor vehicles. On Jan. 1, as crowds of people toast to a new year, more than 400 news laws across the country will take effect — and possibly improve life for some.

Zero Hedge:

• Chinese Think Tank: "Conflict With Japan Inevitable".

Business Insider:

• China's Newest And Deadly Warship Has Entered The South China Sea.
• Nomura's Negative Take On The Fiscal Cliff Situation.

CNN:

• Portugal braced for 'fiscal earthquake'. "A fiscal earthquake", "armed robbery", "tax napalm". Descriptions of the income tax increases facing Portuguese families from January 1 make the fiscal cliff looming in the US sound tame by comparison. Lisbon plans to lift income tax revenue by more than 30 per cent, raising the effective average rate by more than a third from 9.8 to 13.2 per cent. Anyone receiving more than the minimum wage of €485 a month, including pensioners, will also pay an extraordinary tax of 3.5 per cent on their income.

The Blaze: 

• This Prediction From the CBO Shows How Wrong They Were About The U.S.’ Economic Future.

Reuters:

• Japan PM Abe wants to replace landmark war apology - paper. Japanese Prime Minister Shinzo Abe wants to replace a landmark 1995 apology for suffering caused in Asia during World War Two with an unspecified "forward-looking statement", a newspaper reported on Monday. 
• Bombs kill 16 across Iraq as sectarian strife grows. Explosions killed at least 16 people and wounded 76 across Iraq on Monday, police said, underlining sectarian and ethnic divisions that threaten to further destabilise the country a year after U.S. troops left. 
• Economists see Brazil economy growing less than 1 pct in 2012. Economists cut their estimates for economic growth in Brazil to 0.98 percent this year, a central bank survey showed on Monday, highlighting the sharp slowdown of an economy that just a couple of years ago was an emerging market star. The world's No. 6 economy was expected to grow 1.0 percent this year in a poll released last week, a far cry from the 3.30 percent expansion predicted by economists surveyed by the central bank at the start of the year.

Telegraph:

• Greek retail sales slump as austerity-hit consumers rein in spending. Greek retail sales fell 18.1pc year-on-year in October, recording the steepest drop in almost two years, as the deep recession and record-high unemployment took a toll on consumer spending.