Friday Watch

Evening Headlines 
Bloomberg:

• Soros Adviser Turned Lawmaker Sees Crisis by 2020: Japan Credit. Takeshi Fujimaki, a former adviser to billionaire George Soros and now a member of Japan’s upper house of parliament, said a fiscal crisis in Asia’s second-biggest economy is inevitable and neither a higher sales tax nor the 2020 Olympics will be able to stop it. “I decided to become a politician because I think financial crisis will come sooner or later,” Fujimaki said in a Sept. 24 interview in Tokyo. “This total debt will continue to increase. I don’t think Japan can survive until 2020.”    

• Japan Inflation Accelerates to Fastest Since 2008 on Energy. Consumer prices excluding fresh food increased 0.8 percent from a year earlier, the statistics bureau said today in Tokyo. The median forecast of 30 economists surveyed by Bloomberg News was for a gain of 0.7 percent. Stripping out energy and perishables, prices fell 0.1 percent.

• Rajan Seen Switching Main India Inflation Gauge at RBI: Economy. Reserve Bank of India Governor Raghuram Rajan is set to use consumer-price inflation as the main guide for monetary policy for the first time, a shift that signals further increases in the benchmark interest rate.

• Asia Stocks Set for Best Monthly Gain Since Sept. 2010. Tokyo Electric Power Co. (9501) gained 7.5 percent as the operator of the crisis-ridden Fukushima Dai-Ichi nuclear station received approval for nuclear safety checks. Australand Property Group gained 1.3 percent in Sydney after JPMorgan Chase & Co. advised buying shares of the developer. Mirabela Nickel Ltd. (MBN) slumped 52 percent after the Australian producer of the metal said it may miss its output forecast. The MSCI Asia Pacific Index rose 0.1 percent to 140.66 as of 9:53 a.m. in Hong Kong.

• Copper Drops, Paring Quarterly Gain, as Data Stoke Stimulus Bets. Copper declined for the first time in three days, paring the biggest quarterly gain since March 2012, as reports showed the U.S. economy improved, boosting the case that the Federal Reserve may reduce its stimulus. The metal for delivery in three months on the London Metal Exchange fell as much as 0.3 percent to $7,227 a metric ton and traded at $7,240.25 by 11:04 a.m. in Tokyo.

• Market Outages Highlight Exchanges’ Conflicts Over Data Streams.

• Accenture(ACN) Forecasts Profit That May Fall Short of Estimates. Accenture Plc (ACN), the world’s second-largest technology-consulting company, forecast earnings that may fall short of analysts’ estimates amid increasing competition from Indian providers.

Wall Street Journal:

• No Clear Path to Avoid Shutdown as House GOP Stands Firm. Congress's rocky path to avoiding a government shutdown became even rougher Thursday, as Speaker John Boehner said the House wouldn't accept the spending plan likely to emerge from the Senate. The Ohio Republican's announcement foreshadows a set of last-minute legislative volleys between the House and Senate to fund federal agencies ahead of a deadline Monday, the final day of the fiscal year. he Senate is expected to pass a bill Friday that would fund the government for the first 1½ months of the new fiscal year. But Senate Democrats plan to restore money for the Affordable Care Act that House Republicans had stripped out, leaving the two chambers in conflict.

• Fed's Stein Was Open to Bond-Buy Cuts.

• Wharton Applications Drop 12% Over Four Years. Business-School Experts and Students Say School Has Lost Its Luster.

• U.N. Members Agree on Syria Disarmament. Security Council's Five Top Powers Draft Resolution That Requires Destruction of Chemical Arsenal but Puts Off Enforcement.

• BATS Prepares to Take On Big Bell Ringers. Shift Reflects Changing Nature of Stock Trading.

• Demand Propels Nike(NKE), but China Is a Drag.

• A Small President on the World Stage. At the U.N., leaders hope for a return of American greatness.

CNBC:

• Why big American businesses fail in China.

• Boom! Corporate debt bonanza sets a new record.

Zero Hedge:

• As US Default Risk Spikes To 5-Month High, Here Is How To Trade The Debt Ceiling Showdown. (graph)

• Spot The Wealth Effect. (graph)

• Greece On The Verge? Military Special Forces Have 15 Demands... Or Else.

• $5.25m For Senate Hair Care & 21 Other Ways Politicians Are Living The High Life At Your Expense.

• Goldman's Analyst Index Plunges Most In A Year. (graph)

• Cyprus-Style Wealth Confiscation Is Starting All Over The World.

• JCPenney Throws CNBC Under The Bus, Says CEO Was "Misquoted".

Business Insider:

• Investors: Get Ready For Two ~$100 Million Enterprise Tech IPOs On Friday. 

• K.C. FED PRESIDENT: Delaying The Taper Threatens The Fed's Credibility.

• The First Cracks Appear In The Insane LBO Craze.

• Senior Obama Adviser Compares House Republicans To Terrorists, Kidnappers, And Arsonists.

• Ford(F) CEO Alan Mulally Is Now In The Lead To Be Microsoft's CEO — REPORT.

• New Images Show Huge Scale Of Destruction At Nairobi Mall.

New York Times:

• Report Warns of Chinese Municipal Debt Risks. A report by Nomura said Thursday that Chinese municipal debt, a focal point of major concern about the country’s economy, had grown at an alarming 39 percent clip in recent years. The report by Nomura estimated that the financing vehicles used by local governments to raise cash had created debts totaling at least 19 trillion renminbi, or $3.1 trillion, by the end of last year and posed a “major risk to the economy.”

Mish's Global Economic Trend Analysis:

• Italy on Verge of Downgrade to Junk; Silvio Berlusconi's Supporters Threaten Mass Resignation from Parliament.

Reuters:

• Some U.S. brokers not policing 'hold' recommendations: regulator. Some securities brokerages are struggling with an industry rule requiring, among other things, policies to make sure that recommendations to hold securities are appropriate for their investors, according to findings this week by Wall Street's industry-funded watchdog. The Financial Industry Regulatory Authority (FINRA) rule, which took effect in July 2012, required that investments recommended by brokerage firms be suitable for investors at all times, and not just when investors buy them. In the past, brokers mainly had to worry only that their "buy" and "sell" recommendations were suitable at the time of sale.

• Japan's Aso: not thinking of lowering effective corp tax rate now. Japanese Finance Minister Taro Aso said on Friday that he is not thinking of lowering the effective corporate tax rate right now, but that the government would need to figure out how to make up for lost tax revenue if it did.

Economic Information Daily:

• China's Local Debt May Have Doubled From End-2010. New audit of local government debt shows size of debt may have almost doubled from 2011 results, citing a person involved in the audit. China found outstanding local government debt of 10.7t yuan at end-2010, according to audit results released in 2011, the report said.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 149.50 +.5 basis point.

• Asia Pacific Sovereign CDS Index 116.25 -1.25 basis points. 

• FTSE-100 futures +.22%.

• S&P 500 futures -.01%.

• NASDAQ 100 futures +.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AZZ)/.66

• (BBRY)/-0.47

• (FINL)/.46

Economic Releases 
8:30 am EST

• Personal Income for August is estimated to rise +.4% versus a +.1% gain in July.

• Personal Spending for August is estimated to rise +.3% versus a +.1% gain in July.

• The PCE Core for August is estimated to rise +.1% versus a +.1% gain in July.

 9:55 am EST

• Final Univ. of Mich. Consumer Confidence for September is estimated to rise to 78.0 versus a prior estimate of 76.8.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Dudley speaking, Fed's Evans speaking, Fed's Rosengren speaking, Fed's Evans speaking, Eurozone CPI Report, Eurozone Consumer Confidence Report and the Eurozone Industrial Production Report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.