Tuesday Watch

Evening Headlines 
Bloomberg: 

• Russia Crisis Makes East European Companies Fret Over 1998 Redux. Shedding communism and embracing the European Union was supposed to shield the former eastern bloc from Russia’s economic pains. A quarter of a century later, there are companies that remain vulnerable. The ruble’s decline is reviving memories of the 1998 default. Moscow’s former satellites have tied their economic fortunes to western Europe and the proportion of exports to Russia is less than 5 percent, yet the financial turmoil is aggravating the pain caused by the trade confrontation between the 28-member EU bloc and Russia.

• China Stock Fever Fails to Infect Foreigners Amid 26% Share Jump. Since the day China loosened access to its stocks in November, the Shanghai Composite Index (SHCOMP) has soared 26 percent as the rest of the world’s markets stood still. Rather than attract overseas buyers, it’s repelling them. While individuals in China are opening the most equity trading accounts since 2007, professionals such as Tai Hui, the chief Asia market strategist at JPMorgan Asset Management, warn the advance has gone too far, too fast.

• RBA Frustrated as Weaker Aussie Goal Thwarted: Australia Credit. The Australian dollar is set for its first annual gain versus its major peers in three years as it outperforms the euro and the yen, frustrating central bank efforts to stimulate the economy with a weaker currency. A correlation-weighted gauge against nine developed-nation counterparts has risen 1.2 percent this year, even as an iron-ore glut halved prices of the nation’s key export. The Aussie climbed 3.9 percent versus the yen and 2.4 percent to the euro. Reserve Bank of Australia Governor Glenn Stevens said this month the local dollar “remains above most estimates of its fundamental value” as he kept interest rates at a record low.

• China’s Stocks Fall From Four-Year High as ICBC, PetroChina Drop. China’s benchmark stock index fell from a four-year high amid concern a world-beating rally over the past month was excessive relative to the outlook for the economy. Industrial & Commercial Bank of China Ltd. and PetroChina Co., the nation’s biggest companies, dropped more than 2 percent. Aluminum Corp. of China Ltd. plunged 6.9 percent after rallying 25 percent in three days. Zijin Mining Group Co. plunged 4.7 percent after its controlling stakeholder cut its stake in the company. Leshi Internet Information & Technology (Beijing) Co. climbed 2.9 percent as the ChiNext small-caps gauge rebounded from the biggest drop in a year. The Shanghai Composite Index (SHCOMP) slid 1.8 percent to 3,071 at 10 a.m., heading for the biggest loss in two weeks and paring a rally over the past month to 24 percent.

• Asian Stocks Drop as Dollar Holds Gains While Oil Climbs. Asian stocks fell, with commodity shares driving the regional index lower for the first time in four days. The dollar traded near a two-week high versus the yen before data on the U.S. economy, while crude oil climbed. The MSCI Asia Pacific excluding Japan Index lost 0.3 percent by 10:01 a.m. in Hong Kong, with a gauge of materials shares sliding 1.4 percent.

• Outlook Sours for Europe’s Oil Titans on Crude Slump: S&P. The U.S. shale-oil industry has made another enemy: Europe’s largest crude explorers. Standard & Poor’s Ratings Services revised its outlook to negative for Royal Dutch Shell Plc (RDSA), Total SA (FP) and BP Plc (BP/) as the oil-market rout driven by weakening demand and a flood of supply from American shale fields threatens cash flow into 2016.

Wall Street Journal:

• De Blasio, Police Unions Postpone Debate Until After NYPD Funerals. Law-Enforcement Agencies Nationwide Assess the Safety of Their Members. Mayor Bill de Blasio and police unions on Monday agreed to end a war of words until two officers fatally shot this past weekend are laid to rest, as law-enforcement agencies nationwide assessed the safety of their members.

• Startup Founders Leverage Hot Market for Early Paydays. Creators of Secret App Cashed in $6 Million in Early Funding Round. 

• Vermont’s Single Payer Washout. The left’s health-care ideal implodes over punishing tax rates.

Fox News:

• GOP report: Top IRS official considered admitting targeting before 2012 election -- but didn’t.

MarketWatch.com:

• Steelcase(SCS) shares slide as revenue comes in light.

Zero Hedge:

• How Japan Bankrupted Itself - Lessons For Europe.

• NYC Mayor de Blasio Slams Reporters For "Enabling" Racial Hatred.

• This Is For You Steve Liesman... Welcome To Economics. (graph)

• It Has Never Been More Expensive For 'Average Joe' To Buy Stocks. (graph)

• Don't Tell Germany Draghi Is About To Monetize 90% Of Bund Issuance.

• US Box Office Spend Plunges To Lowest Since 2000.

Business Insider:

• Here's North Korea's Over-The-Top Official Statement On The Sony Hack.

• Name The Exponential Chart.

Reuters:

• ECB's Hansson: ECB govt bond buys would be 'borderline' - Sueddeutsche Zeitung. Any move by the European Central Bank to buy government bonds would be "very borderline" and should not be made hastily, ECB Governing Council member Ardo Hansson told a German newspaper. "Governments could borrow more money than before because the interest costs would be lower," Sueddeutsche Zeitung quoted Hansson as saying in a summary of an interview to be published on Saturday. One would then have to ask "whether the ECB is illegally financing states or not," said Hansson, who is the head of Estonia's central bank.

Telegraph:

• China quietly joins Asia's currency wars to avert deflation. China is exposed like a sore thumb as countries devalue on all sides, from Russia, to Japan, Indonesia and Malaysia. 

People's Daily:

• Ruble Drop Won't Change China-Russia Ties. Ruble's depreciation affected China's exports to Russia and made it more difficult for the two countries to implement joint projects, yet the challenges shouldn't be exaggerated, according to the commentary.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 103.0 -2.0 basis points.

• Asia Pacific Sovereign CDS Index 65.25 -2.5 basis points.

• S&P 500 futures +.06%.

• NASDAQ 100 futures  +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WAG)/.75

• (CALM)/.86

Economic Releases
8:30 am EST

• Durable Goods Orders for November are estimated to rise +3.0% versus a +.4% gain in October.

• Durables Ex Transports for November are estimated to rise +1.0% versus a -.9% decline in October.

• Cap Goods Orders Non-Defense Ex Air for November are estimated to rise +1.0% versus a -1.3% decline in October.

• 3Q GDP is estimated to rise +4.3% versus a prior estimate of a +3.9% gain. 

• 3Q Personal Consumption is estimated to rise +2.5% versus a prior estimate of a +2.2% gain.

• 3Q Core PCE is estimated to rise +1.4% versus a prior estimate of a +1.4% gain.
  

9:00 am EST

• FHFA House Price Index for October is estimated to rise +.3% versus unch. in September.

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for December is estimated to fall to 93.5 versus a prior estimate of 93.8.

10:00 am EST

• Richmond Fed Manufacturing Index for December is estimated to rise to 7.0 versus 4.0 in November.

• New Home Sales for November are estimated to rise to 460K versus 458K in October.

• Personal Income for November is estimated to rise +.4% versus a +.2% gain in October.

• Personal Spending for November is estimated to rise +.5% versus a +.2% gain in October.

• The PCE Core for November is estimated to rise +.1% versus a +.2% gain in October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The French GDP report, UK GDP report, $35B 5Y T-Note auction, weekly US retail sales reports and the (FDO) special meeting could also impact trading today.

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