Bloomberg:
- U.S. Bombers Fly Through China Air Zone in Boost for Ally Japan. Two unarmed American B-52 bombers flew through disputed areas of the East China Sea covered by China’s new air defense zone, a show of support for Japan as Prime Minister Shinzo Abe seeks to expand his nation’s military. China’s creation of the zone on Nov. 23 may spur Abe to take a more hard-line stance as his government studies changing how it interprets the U.S.-imposed pacifist constitution to deploy the country’s armed forces more freely. Abe is undertaking a review for a 10-year defense plan to be announced next month that may see Japan’s government add ballistic missile defense ships and refueling planes.
- Record Spread Blowout Sparks Mini-Crisis Warning: China Credit. Chinese companies’ borrowing costs are climbing at a record pace relative to the government’s, increasing the risk of defaults and prompting state newspapers to warn of a limited debt crisis. The extra yield investors demand to hold three-year AAA corporate bonds instead of government notes surged 35 basis points last week to 182 basis points, the biggest increase since data became available in September 2007, Chinabond indexes show. That exceeds the similar spread in India of 120 basis points. The benchmark seven-day repurchase rate has averaged 4.47 percent in November, the highest since a record cash crunch in June and up from 3.21 percent a year earlier.
- China’s Nanjing, Hangzhou Raise Second Home Down Payment to 70%. China’s eastern cities of Nanjing and Hangzhou raised the minimum down payment required for second homes to 70 percent from 60 percent as more cities tighten property policies because of surging prices. The cities will continue to ban mortgage lending for third homes and will maintain a 30 percent down payment for buyers of first homes, the central bank’s Nanjing and Hangzhou branches said in separate statements on their websites yesterday. Nanjing will increase housing land supply by 10 percent from the average in the past five years, the city’s housing authority said in a statement yesterday.
- Broom-Waving Voters Aim to Sweep Away India’s Elite. By Indian standards, Arvind Kejriwal is an unusual politician: he doesn’t use a police escort, he won’t field candidates who face murder charges and he publishes the names of those who contribute to his party’s funds.
- Asian Stocks Swing Between Losses and Gains; BHP(BHP) Declines. Asia’s benchmark stock index swung between gains and losses after U.S. consumer confidence unexpectedly dropped this month and as an advance among information technology shares was offset by declines at raw-material companies. Industrial Bank of Korea sank 4.2 percent after the South Korea government sold more than 13 million shares in the lender. BHP Billiton Ltd. lost 1.6 percent in Sydney after copper prices fell for the first time in more than a week. Rakuten Inc. surged 7.7 percent in Tokyo, leading IT firms higher, after the website operator said it will increase its dividend. The MSCI Asia Pacific Index was little changed at 141.60 as of 11:33 a.m. in Hong Kong, having swung between a loss of 0.2 percent and a gain of 0.1 percent.
- Rubber Drops as U.S. Confidence Data Weaken Demand Outlook. Rubber fell for a second day after U.S. consumer confidence unexpectedly dropped this month, weakening the demand outlook for the commodity used in tires. Futures for delivery in May on the Tokyo Commodity Exchange dropped as much as 0.6 percent to 256.6 yen a kilogram ($2,531 a metric ton), nearing a two-week low reached yesterday, and traded at 257.3 yen at 11:42 a.m. local time. The most-active contract has lost 15 percent this year.
- Merkel Agrees SPD Coalition to Raise Spending Without New Taxes. Chancellor Angela Merkel clinched a coalition agreement with the Social Democrats that calls for a national minimum wage and pledges to increase spending on pensions and infrastructure without raising taxes. More than two months after Merkel won national elections, the accord reached shortly before 5 a.m. in Berlin today after 17 hours of negotiations, sets Merkel on track for a third term leading Europe’s biggest economy until 2017. The coalition isn’t a done deal yet. “The principle that every member state is liable for its own debt must be maintained,” according to a draft of the agreement. “All forms of collectivizing state debt would endanger the necessary orientation of national policies in every member state.” A note from London-based Teneo Intelligence said “the real risk going forward is an ever-greater unwillingness of the new coalition to mutualize the fallout from Europe’s persistent banking problems.”
- Letta Wins New Majority in Italy Before Berlusconi Ouster Vote. Italian Prime Minister Enrico Letta won a late-night confidence vote, securing a new majority less than 24 hours before the Senate is scheduled to decide whether to expel his ally-turned-rival, Silvio Berlusconi.
- Slump-Watchers Dump Yield Curve for 1970s Tool: Cutting Research. The U.S. Treasury yield curve has lost its forecasting power and investors wanting to divine the possibility of a U.S. recession should turn to a little-known equation from the 1970s. That’s the recommendation of Morgan Stanley economist Ellen Zentner, who told clients in a Nov. 18 report that the Federal Reserve’s near-zero interest rate and asset-buying is holding down U.S. bond rates. That means the yield curve would struggle to invert, crimping its effectiveness as an indicator of business cycles, she wrote.
- Gensler Gives Wall Street Two Months to Meet Cross-Border Policy. The top U.S. derivatives regulator gave Wall Street two months to abide by a new policy imposing Dodd-Frank Act rules on banks when they arrange trades domestically and then book them overseas. The Commodity Futures Trading Commission today postponed a Nov. 14 advisory that undermined a legal interpretation Wall Street had found buried in a footnote, number 513, in an earlier agency document. Banks relied on the footnote to keep swap deals off electronic platforms and away from the agency’s rules that were put in place in the wake of the 2008 financial crisis.
- Health Website Deadline Nears. Administration's Promise That It Would Work for Most by Saturday Is Up for Review. With the clock ticking toward a Saturday deadline, Obama administration officials promise that the HealthCare.gov website will work better. Exactly how much better? That is hard to say. The measure of success, repeated by an array of administration officials, is that the online marketplace intended to be used by millions of Americans to obtain health insurance would be working smoothly for the "vast majority of users" by Saturday, the last day of November.
- Volatile Loan Securities Are Luring Fund Managers Again. Collateralized Loan Obligations Offer High Returns—And Risk. Investment funds aimed at individual investors are barreling into collateralized loan obligations, a complex and volatile type of security that was shaken by the financial crisis. Lured by annual returns of as high as 20%, some mutual-fund managers are buying CLOs through investment funds that purchase stakes in loans to companies with low credit ratings. Another type of loan investment fund, business-development companies, also have begun buying CLOs, according to securities filings.
- Sohrab Ahmari: An Iranian Insider's View of the Geneva Deal. 'If the right to enrich is accepted, which it has been, then everything that we have wanted has been realized.' "In that message," Mr. Fazlinejad says, "the imam made it clear that our military war against the arrogance in the form of Iraq's regime is over. . . . But he advised the youth and the political activists to 'safeguard the revolutionary hatred and grievance in your hearts, look upon your enemies with fury and know that you will be victorious.' " Khomeini's statement, Mr. Fazlinejad says, "was a message of peace, signaling a permanent cease-fire. But at the same time it asserted the vitality of our struggle against the capitalist order. If anyone gets the sense from these negotiations, as [Foreign Minister] Mr. Zarif has, that we are getting closer to the West, he is as mistaken as Mr. Zarif."
- William Galston: An Executive Without Energy. Responsibility for the mismanaged ObamaCare rollout lies in the Oval Office.
- Hewlett-Packard(HPQ) Up 7%: FYQ4 Beats; Year EPS View In-Line. Hewlett-Packard (HPQ) this afternoon reported fiscal Q4 revenue that topped analysts’ estimates by over a billion dollars, and profit per share that beat by a penny, with the outlook for this quarter’s, and the full year’s profit more or less in line with analysts’ estimates.
- Analog Devices(ADI) Off 4%: FYQ4 Rev Misses, Q1 View Misses. Shares of chip maker Analog Devices (ADI) are down $1.82, or almost 4%, at $35.51, in late trading, after the company this afternoon reported fiscal Q4 revenue that missed analysts’ expectations, but beat on the bottom line, and projected this quarter’s revenue to miss consensus substantially.
CNBC:
- Stocks could see new volatility in 2014. With market indexes reaching new heights daily, some strategists say stocks could be heading straight into a buzz saw in 2014.
- Margin Debt Soars To New Record. (graph)
NY Times:
- New Boom in Subprime Loans, for Smaller Businesses. A small, little-known company from Missouri borrows hundreds of millions of dollars from two of the biggest names in Wall Street finance. The loans are rated subprime. What’s more, they carry few of the standard protections seen in ordinary debt, making them particularly risky bets. But investors clamor to buy pieces of the loans, one of which pays annual interest of at least 8.75 percent. Demand is so strong, some buyers have to settle for less than they wanted. A scene from the years leading up to the financial crisis in 2008? No, last month.
- I.M.F. Shifts Its Approach to Bailouts. The International Monetary Fund, convinced that Europe erred in forcing debtor countries like Greece and Portugal to bear nearly all the pain of recovery on their own, is pushing hard for a plan that would impose upfront losses on bondholders the next time a country in the euro area requests a bailout.
- Network gear maker Infoblox(BLOX) warns on 2nd qtr; shares slide. Network equipment maker Infoblox Inc forecast second-quarter results below analysts' expectations, sending its shares down 18 percent in extended trading. Infoblox's shares have almost tripled in the past year, spurred by strong demand for its automation products that help telecom companies manage internet traffic more efficiently.
- U.S., Japan to Cooperate Closely on China Defense Zone. U.S., Japan share the same concern over China's announcement of an air defense zone in East China Sea, citing teleconference between U.S. Secretary of State John Kerry and Japanese Foreign Minister Fumio Kishida.
- China's Changsha Raises Downpayment for 2nd Homes. The Chinese city of Changsha in the southern province of Hunan raised the down payment required for 2nd home purchases, from 60% currently, citing a city gov't statement dated Nov. 25.
- China Says It Has Ability to Control Air-Defense Zone. China Defense Ministry Spokesman Geng Yansheng says that the nation has the ability to effectively manage, control the air-defense identification zone. U.S. planes' flight along the air-defense zone was under Chinese military surveillance, citing Geng.
- None of note
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 131.75 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 106.0 +5.0 basis points.
- FTSE-100 futures -.07%.
- S&P 500 futures +.01%.
- NASDAQ 100 futures +.04%.
Earnings of Note
Company/Estimate
- None of note
8:30 am EST
- Initial Jobless Claims are estimated to rise to 330K versus 323K the prior week.
- Continuing Claims are estimated to fall to 2850K versus 2876K prior.
- Durable Goods Orders for October are estimated to fall -2.0% versus a +3.7% gain in September.
- Durables Ex Transports for October are estimated to rise +.5% versus a -.1% decline in September.
- Cap Goods Orders Non-defense Ex Air for October are estimated to rise +.9% versus a -1.1% decline in September.
- Chicago Fed National Activity Index for October is estimated to fall to .1 versus .14 in September.
- Chicago Purchasing Manager for November is estimated to fall to 60.0 versus 65.9 in October.
- Final Univ. of Michigan Consumer Confidence for November is estimated to rise to 73.1 versus 72.0 in October.
- The Leading Index for October is estimated unch. versus a +.7% gain in September.
- Bloomberg consensus estimates call for a weekly crude oil inventory gain of +423,000 barrels versus a +375,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +383,000 barrels versus a -345,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,194,000 barrels versus a -4,795,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.3% versus a -.1% decline the prior week.
- None of note
- The UK GDP report, Italian Senate to vote on expelling Berlusconi, German Consumer Confidence, $29B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index and the weekly MBA mortgage applications report could also impact trading today.
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