Wednesday Watch

Evening Headlines 
Bloomberg: 

• Iran Failure to Evade Sanctions Offers Russia Little Hope. Russian companies from OAO Rosneft (ROSN) to OAO Sberbank (SBER) appealing to European courts to circumvent sanctions on the country might want to take their cue from Iran’s failed efforts and save on the legal bills. That’s because a series of hollow victories by Iranian companies over sanctions for the Islamic nation’s nuclear program have mostly failed to dislodge the European Union’s economic reprisals, according to lawyers. 

• Shanghai Stock Link Flows Plunge as CLSA Sees Ghost Train. The flood of buy orders for Shanghai shares through the Hong Kong exchange link has slowed to a trickle two days after the program’s debut. Net purchases of mainland equities by global investors totaled 1.1 billion yuan ($180 million) at the midday break, down from 2.7 billion yuan at the same time yesterday and 10.6 billion yuan on Nov. 17. Hong Kong stock buying slowed 66 percent from yesterday to 117 million yuan. The Shanghai Composite Index (SHCOMP) slipped 0.2 percent and shares of Hong Kong Exchanges & Clearing Ltd. (388) headed for the biggest three-day drop since 2012.

• Europe Must Pay Heed to Japan's New Slide.

• NHTSA Calls for Nationwide Recall of Takata Air Bags. The U.S. government demanded a nationwide recall of vehicles with faulty Takata Corp. (7312) air bags after a recent incident showed the problem may not be confined to high-humidity areas.

• Dollar Rises to 7-Year High Versus Yen; Oil, Gold Retreat. The dollar climbed, reaching a seven-year high against Japan’s yen after Prime Minister Shinzo Abe called an early election and postponed a sales-tax increase. Asian equity gauges were mixed, while gold retreated and oil extended its slump. The Bloomberg Dollar Spot Index added 0.1 percent by 10:56 a.m. in Tokyo, with the greenback climbing as high as 117.22 yen. Japan’s Topix index rose 0.4 percent while Hong Kong’s Hang Seng Index was little changed after two days of losses.

• Mining’s $120 Billion Ore Bet Sours as Peak Steel Looms in China. Chinese President Xi Jinping obviously wasn’t speaking for the world’s iron-ore producers when he pronounced this month that the risks from his country’s slowing growth “aren’t that scary.” The world’s mining giants have wagered $120 billion that steel production in China won’t peak until as late as 2030. Increasingly, it looks like they got that wrong, a miscalculation that could have huge consequences for companies led by BHP Billiton Ltd. (BHP) and Rio Tinto Group. “I’ve always taken the view that the miners had the best intelligence on this as large investment decisions are based on it,” Richard Knights, a mining analyst at Liberum Capital Ltd. said by phone. “But if they get it wrong by a just a small margin, that has major implications for profitability and the share price for years to come.” 

Wall Street Journal: 

• U.S. Seeks Nationwide Recall of Takata Air Bags. Acting NHTSA Director Urges Action Over Faulty Air Bags Linked to Several Deaths.

• Future Presents: A Tech Gift Guide From the Cutting Edge. The Innovative Gadgets and Electronic Toys to Buy This Holiday Season. 

• Goldman(GS) Hits Mother Lode on Deals. Bank’s Roles on Actavis and Halliburton Takeovers Will Result in Big Chunk of the Fees.

• ECB’s Knot Sees No Reason Now to Pursue Quantitative Easing. ‘We’re Not Categorically Ruling It Out, but I’m Skeptical’.

• Congress Will Fight Obama’s Power Grab. The president’s amnesty plan for millions of unlawful immigrants clearly violates the Constitution. President Obama seems poised to announce one of the biggest executive power grabs in American history. He is expected to declare unilaterally that millions of unlawful immigrants can stay in the U.S. without facing the consequences of violating immigration laws. Congress has not agreed on how to reform the immigration system, but the president has decided to ignore the Constitution and alter the law without new statutes.

Fox News:

• Keystone pipeline bill fails in Senate. (video) A bill to approve the Keystone XL oil pipeline failed in the Senate on Tuesday by just one vote, in a setback not only for the energy project but the politically imperiled Democratic senator who pushed the legislation. The bill failed on a 59-41 vote. It needed 60 to pass. 

CNBC:

• Why is Putin buying gold? (video)

Zero Hedge:

• Why, Despite Its Failure, Abenomics Is "Still Working" For These People, In Quotes.

• Goldman(GS) FX Trader Fired For Participating In Currency-Rigging Cartel Even As Goldman Avoids Any Charges.

• 60% Of Households Get More Benefits Than They Pay In Taxes. (graph)

• Japan Is Dying And We Still Don't Get It?!

• We Go Again: Demand For Subprime Debt Is "Out Of Control".

• Despite Record Highs, These 5 'People' Are Still Flipping Out. (graph)

• One Reader's Shocked Response Upon Learning His Health Insurance Cost Just Doubled.

• Goldman's(GS) "Best Ideas" Hedge Fund Is Down 2.6% In 2014.

• China Home Price Slump Sends Iron Ore Plunging To 2009 Lows (-50% In 2014). (graph)

Business Insider:

• Powerful Photographs Show Everyday Life In Ukraine Before And During Wartime.

Liquidity crunch a catalyst for big China slowdown – analysts The mini liquidity crunch is the early warning sign of a substantial economic correction long overdue, amid rising leverage and a broken growth model, say bearish analysts.


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Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 105.50 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 63.5 -.25 basis point.

• FTSE-100 futures n/a.

• S&P 500 futures -.13%.

• NASDAQ 100 futures  -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SPLS)/.36

• (SJM)/1.53

• (TGT)/.47

• (LOW)/.58

• (LB)/.40 

• (GMCR)/.77

• (CRM)/.13

• (WSM)/.63

• (SD)/.04

Economic Releases
8:30 am EST

• Housing Starts for October are estimated to rise to 1025K versus 1017K in September.

• Building Permits for October are estimated to rise to 1040K versus 1018K in September.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -872,730 barrels versus a -1,735,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +590,910 barrels versus a +1,805,000 barrel increase the prior week. Distillate inventories are estimated to fall by -1,636,630 barrels versus a -2,803,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise +.64% versus a +1.7% gain the prior week.

2:00 pm EST

• Fed Minutes from Oct. 28-29 Meeting.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The weekly MBA mortgage applications report, Jefferies Healthcare Conference, Goldman Sachs Metals/Mining/Steel Conference, (JBLU) investor day, (QCOM) analyst meeting, (ROK) investor meeting and the (BSX) investor event could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and real estate shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.