Monday Watch

Weekend Headlines 
Bloomberg:  

• Japan’s Export Growth Slows in Challenge for Abe: Economy. Japan’s export growth slowed in September and the nation extended a record run of trade deficits, underscoring the challenge for Prime Minister Shinzo Abe in sustaining momentum in the world’s third-biggest economy. Shipments increased 11.5 percent from a year earlier, the weakest pace in three months, a finance ministry report showed in Tokyo. That compared with a 14.6 percent gain in August and the 15.6 percent median forecast of 24 economists surveyed by Bloomberg News.

• China Solar Energy Says Directors Detained Amid Fraud Probe. China Solar Energy Holdings Ltd. (155), a Hong Kong-based solar panel maker, said its chairman and two directors have been detained by Chinese authorities on allegations of fraud involving the assets of a mainland unit. 

• Asia Stocks Advance on Outlook for Federal Stumulus. Asian stocks rose, with the regional benchmark index extending its advance from a five-month high, amid speculation the Federal Reserve will delay stimulus cuts. Canon Inc., the world’s biggest camera maker, gained 1.1 percent as a weaker yen boosted the earnings outlook for Japanese exporters. Naver Corp. advanced 5 percent to a record in Seoul after KB Investment & Securities Co. raised its price target for the Internet company. Qantas Airways Ltd. slipped 4.6 percent, extending losses for a second day, after Australia’s largest carrier said last week it expects the lowest yields in more than a decade for passenger flights. The MSCI Asia Pacific Index added 0.2 percent to 143.76 as of 12:10 p.m. in Tokyo, with about five shares rising for every three that fell.

• Rubber Declines to One-Week Low as Stockpiles in Shanghai Swell. Rubber fell for a fourth day to the lowest level in almost a week after data showed stockpiles in Shanghai swelled to the highest level since January 2010. The contract for March delivery lost as much as 1.6 percent to 263.1 yen a kilogram ($2,685 a metric ton) on the Tokyo Commodity Exchange, the lowest level since Oct. 15. Futures traded at 265.2 yen at 10:27 a.m., expanding losses for a most-active contract to 12 percent this year. 

• Rebar Extends Weekly Drop as China Fixed Asset Investment Slows. Steel reinforcement-bar futures in Shanghai extended a weekly drop as China’s fixed asset investment dipped and industrial production slowed. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.5 percent to 3,551 yuan ($582) a metric ton and was at 3,559 yuan at 10:44 a.m. local time. The most-active contract lost 0.9 percent last week, the first such drop in three weeks.

• Draghi Says Bank-Aid Rules Must Be Flexible on Forced Losses. European Central Bank President Mario Draghi said banks should be able to access public aid without wiping out junior bondholders if regulators decide a lender needs more capital and isn’t on the brink of failure. Draghi urged the European Union to make clear when it will allow exceptions to state-aid rules that require private-sector creditors to take losses before government backstops can step in.

• CN Train Carrying Crude Derails in Alberta, Sparking Fire. A Canadian National Railway Co. (CNR) train carrying crude oil and liquefied petroleum gas derailed west of Edmonton early today, causing an explosion and fire. One car containing LPG, or propane, exploded and set two other cars leaking the flammable substance on fire, said Carson Mills, a spokesman for Parkland County, in a telephone interview. Thirteen cars derailed, he said.

Wall Street Journal: 

• Budget Discord Simmers Among Democrats. Some Liberal Groups, Lawmakers Worry About Cuts to Social Security, Other Entitlements. Cracks are showing in the Democratic coalition as the next round of budget talks gets under way, hurting the chances for progress toward a broad deal that changes the tax code and significantly narrows future deficits.

• Sending a Bad Message to Big Banks. The feds' hypocrisy about J.P. Morgan's takeover of Bear Stearns will make other banks wary in the next crisis. The FDIC chairman said "little thought was given" to resolving the big-bank crisis, and now equally little thought seems to have been given to the pursuit of J.P. Morgan Chase over Bear Stearns. Once the government proves itself to be an unreliable "partner" in resolving failed institutions, it will find fewer banks willing to step in next time there is systemic risk to the banking system.

• Top Bear’s Bullish Tilt Has Followers Growling. David Rosenberg, one of Wall Street's leading bears, has turned more bullish, riling some longtime clients.

• The Morgan Shakedown. A landmark that shows how much politicians now control U.S. finance. 

Fox News: 

• With new budget deadlines, top Hill lawmakers appear as far apart as ever. Top Washington lawmakers appeared no closer Sunday to reaching deals on upcoming budget negotiations than they were on the recent ones -- disagreeing over an entire range of issues including taxes, spending and ObamaCare.

CNBC: 

• Crown Castle(CCI) to buy rights to AT&T(T) towers for $4.85 billion.

• Some furloughed federal workers may double dip. Some fortunate federal employees will likely get paid twice for not working this month. Several states are expected to allow federal workers who collected unemployment insurance during the government shutdown to keep both those benefits and the back pay they're set to receive, according to the Labor Department. 

Zero Hedge:

• Total US Debt Soars Over $17 Trillion.

• Things That Make You Go Hmmm... Like The Freaking Fed. The Fed has painted itself into an almighty corner with QE, and it looks as though we are finally getting to the point in the process where that fact begins to (a) occur to people and (b) matter. 

• Lacy Hunt Warns Federal Reserve Policy Failures Are Mounting.

• European Macro Fundamentals Slump To 3-Month Lows; Stocks At Record Highs. (graph)

• 9 Signs That China Is Making A Move Against The U.S. Dollar.

• BANNED: Italian Court Bars Berlusconi From Public Office For Two Years.

• 4 Things To Ponder This Weekend.

• JPMorgan(JPM) To Pay Record $13 Billion Mortgage Settlement But Criminal Case Remains.

• The JPMorgan Problem Writ Large.

• When Hyman Minsky Runs For The Hills: Japan Central Bank To "Own" 100% Of GDP In 5 Years.

• Weekend Humor: Obamacare's "Success" In Context.

• Caxton: Goodbye To The Self-Sustaining Recovery.

• How Europe's "Benefits" Stack Up To The US Entitlement Society.

• JPY Drops, Nikkei Pops On Japan's Worst Trade Deficit On Record. (graph)

• Druckenmiller Blasts Obama: "Show Me When You Initiated Budget Discussions Without A Gun At Your Head".

Business Insider:

• US To Fine JPMorgan $4 Billion For Selling 'Junk Mortgages'.

• 5 Surprising Ways The American Shale Boom Is Changing The World.

• Farmland Price Growth Slows: Index Hits 3-Year Low.

Wall Street All-Stars:

• Indicator Update: Will Weak Earnings Choke Off the Stock Rally?

USA Today:

• U.S. quietly releasing $1.6B in Pakistan assistance. The U.S. has quietly decided to release more than $1.6 billion in military and economic aid to Pakistan that was suspended when relations between the two countries disintegrated over the covert raid that killed Osama bin Laden and deadly U.S. airstrikes against Pakistani soldiers.

Financial Times: 

• US housing regulators seek over $6B from Bank of America. U.S. housing regulators are looking to fine Bank of America more than $6 billion for its role in misleading mortgage agencies during the housing boom, compared with the $4 billion to be paid by JPMorgan Chase & Co , the Financial Times reported on its website, citing people familiar with the matter.

Telegraph:

• It’s not yet the end of the world as we know it, but watch Japan’s debt grow. Japan has managed to muddle through, but it now looks as though it is close to a tipping point.

Focus:

• Spain, Italy, Greece Don't Spend EU Money Well. Countries, especially Spain, aren't using money according to plan, citing a study by the EU Commission. Reasons are mistakes in tender procedures and applying the wrong criteria for determining who is eligible for aid.

China Securities Journal:

• China Needs Market-Oriented Property Industry. China needs to further promote market reform of the real estate market to solve fundamental problems, according to a commentary by Xu Nuojin. China's housing prices continue to rise after the country announced more than 40 measures to control the prices since 2003, Xu said. China should cancel home buying restrictions for medium- and high-income earners and impose taxes to cut demand, according to Xu. China should levy a property vacancy tax for idle properties including unsold properties built by developers, according to Xu.

Weekend Recommendations

Barron's:

• Bullish commentary on (OUTR), (ACN), (AET), (RTN), (WU), (MOS), (VLO), (MPC), (HFC), (WNR) and (T).

• Bearish commentary on (QCOR). 

Night Trading

• Asian indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 132.50 -.25 basis point.

• Asia Pacific Sovereign CDS Index 103.0 +1.75 basis points.

• FTSE-100 futures +.45%.

• S&P 500 futures +.15%.

• NASDAQ 100 futures +.18%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (HAS)/1.28

• (HAL)/.82

• (GCI)/.41

• (AOS)/.43

• (VFC)/3.78

• (MAN)/1.08

• (MCD)/1.51

• (NFLX)/.47

• (TXN)/.53

• (BXS)/.27

• (ILMN)/.40

• (DFS)/1.21

• (VMW)/.82

Economic Releases
10:00 am EST

• Existing Home Sales for September are estimated to fall to 5.3M versus 5.48M in August.

Upcoming Splits

• (HEI) 5-for-4

Other Potential Market Movers

• The Fed's Evans speaking and German inflation data could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.