Friday Watch

Evening Headlines 
Bloomberg:

• Putin in ETFs Hits Investors as Assets Plunge. Investors are abandoning WisdomTree Investments Inc.’s flagship emerging-markets exchange-traded fund at the fastest pace ever, and the fund provider has President Vladimir Putin to blame. Asset managers have pulled a record $1.59 billion from the WisdomTree Emerging Markets Equity Income Fund in the past year, the sixth-most among more than 1,000 U.S. ETFs tracked by Bloomberg. Russian companies, which have plunged an average 43 percent this year in dollar terms, make up 17 percent of the ETF’s holdings, five times as much as in MSCI Inc.’s industry benchmark. WisdomTree’s Emerging Markets SmallCap Dividend Fund, where Russian stocks comprise 0.1 percent, posted an outflow of less than $270,000.

• Chinese Leaders to Maintain Prudent Monetary Policy in 2015. China’s leaders will keep growth on track next year by applying a prudent monetary stance with a balance between loosening and tightening, according to a statement from a key economic meeting that ended yesterday. While China faces challenges to arrest a slowdown, growth is showing resilience and potential, giving the government plenty of room to maneuver, the official Xinhua News Agency said in a summary of the policy-setting Central Economic Work Conference yesterday. As in past years, Xinhua didn’t announce detailed growth targets for next year.

• China Rate Swap Rises for a Second Week as Stimulus Bets Recede. China’s benchmark interest-rate swaps were set to climb for a second week as the central bank’s use of targeted fund injections damped speculation there will be a more broad-based loosening of policy.

• Stevens Pushes Back on RBA Cut Calls, Sees Aussie Falling. Reserve Bank of Australia Governor Glenn Stevens indicated the nation’s currency will probably decline further next year and pushed back against calls for near-term interest rate cuts because the economy is performing as the central bank forecast.

• Asian Stocks Follow U.S. Higher as Oil Trades Below $60. Asian stocks advanced, following U.S. stocks higher on better-than-estimated retail sales in the world’s biggest economy. Oil in New York extended declines below $60 a barrel and the dollar strengthened. The MSCI Asia Pacific Index increased 0.6 percent by 11:10 a.m. in Tokyo, paring the biggest weekly decline since Oct. 17 as Japanese shares gained before elections this weekend.

• Oil Extends Drop Below $60 as Producers Tussle for Market Share. Oil extended losses below $60 a barrel amid speculation that OPEC’s biggest members will defend market share against U.S. shale producers. Brent also slid after closing at the lowest price since July 2009. West Texas Intermediate futures fell as much as 1.9 percent in New York and are down 10 percent this week. Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, said its decision to widen a discount for January sales to Asia isn’t proof of a price war. Crude will drop further next week, a Bloomberg News survey of analysts and traders shows.

• Skepticism Jumps in Options as VIX Rises 70% in Four Days. Options traders aren’t buying the stock market’s message. While the Standard & Poor’s 500 Index (VIX) posted its first gain of the week on Dec. 11, rising 0.5 percent, the Chicago Board Options Exchange Volatility Index also jumped, climbing 8.4 percent to cap its biggest four-day advance since 2011. The two gauges, one measuring share prices and the other anxiety among traders, only move in unison about 20 percent of the time. 

• Sony's Hacking Nightmare Gets Worse: Employees Medical Records Revealed. Documents stolen from Sony Corp. (6758) by hackers include detailed and identifiable health information on more than three dozen employees, their children or spouses -- a sign of how much information employers have on their workers and how easily it can become public.

• Tesla’s(TSLA) China President Resigns After Less Than 9 Months.

Wall Street Journal:

• House Passes $1.1 Trillion Spending Bill Ahead of Midnight Deadline. Measure Expected to Pass Senate, but Timing Remains Unclear. The House narrowly passed Thursday a $1.1 trillion spending bill aimed at avoiding a government shutdown just hours before the midnight deadline.

• High-Yield Bond Funds See $1.9 Billion Outflow in Latest Week. Marks Largest Weekly Decline Since Week Ended Oct. 1, According to Lipper.

• A Flawed Report’s Important Lesson. Americans regardless of party should agree torture is wrong. The “torture report” exists. It shouldn’t—a better, more comprehensive, historically deeper and less partisan document should have been produced, and then held close for mandatory reading by all pertinent current and future officials—but it’s there. Anyone in the world who wants to read it can do a full download, and think what they think.

Fox News:

• Brennan defends CIA interrogation program, challenges Senate report. CIA Director John Brennan on Thursday delivered a lengthy and detailed defense of his agency's post-9/11 interrogation techniques, reminding the nation that agents used the tactics in pursuit of a single goal -- preventing another devastating terror attack.

Zero Hedge:

• What Do They Know? CME Implements Gold, Precious Metals Circuit Breakers Up To $400 Wide.

• Cromnibust! Hindenburg Cluster Grows As Crude, Credit, & US Government Credibility Crash. (graph)

• 10 Legendary Investment Rules From Legendary Investors.

• Duck And Cover - The Lull Is Breaking, The Storm Is Nigh.

• Greece Suffers Biggest 3-Day Crash In 27 Years. (graph)

• WTI Crude Crashes Into The $50s. (graph)

• Habitual Chinese Gamblers Dump Macau, Go All In On Chinese Stocks. (graph)

Business Insider:

• Investors Are Still Bullish On The US Energy Boom Even As Oil Crashes.

• Halliburton(HAL) Cuts 1,000 Jobs As Oil Prices Tank.

Reuters:

• U.S.-based stock funds post $2.9 bln outflows in week-Lipper. 

• 'Grexit' threat could complicate ECB QE: James Saft.

• Number of hedge fund launches falls to 240 in Q3 -HFR.

Telegraph:

• Crisis as Dubai stock market suffers biggest crash in five years. The plunging oil price has dragged the Dubai stock market down in its biggest one day fall since 2009.

• France drifts into deflation as ECB 'pea-shooter' falls short. The Bank of Italy warns that any further falls in prices at this stage could have 'extremely grave consequences for economies with very high public debt levels'.

China Business News:

• China Cuts 2015 GDP Growth Target in Work Conference. China lowered its planned GDP growth target for next year at the Central Economic Work Conference which ended yesterday, without saying how much.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 106.0 unch.

• Asia Pacific Sovereign CDS Index 66.5 -1.25 basis points.

• S&P 500 futures -.18%.

• NASDAQ 100 futures  -.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NX)/.20

Economic Releases
8:30 pm EST

• PPI Final Demand for November is estimated to fall -.1% versus a +.2% gain in October.

• PPI Ex Food & Energy for November is estimated to rise +.1% versus a +.1% gain in October.
  

9:55 am EST

• Preliminary Univ. of Mich. Consumer Confidence for December is estimated to rise to 89.5 versus 88.8 in November.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Industrial Production data, (CAH) analysts day and the (NUS) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology 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.