Bloomberg:
- Russia Capital Control Jitters Appear in Moscow-to-London Spread. Evidence is surfacing in Russia’s bond market that investors are concerned President Vladimir Putin will impose capital controls to stem the ruble’s 39 percent plunge this year. Bond buyers are demanding a growing premium to own ruble-denominated bonds traded in Moscow rather than ruble debt that trades in London and other international markets. The yield gap between the two securities has swelled to 0.66 percentage point, the widest since January 2013 and more than six times the average over the past two years, according to data compiled by Bloomberg. It had been as small as 0.03 percentage point in September.
- Ukraine to Observe One-Day Truce Amid Plan for New Peace Talks. Ukraine will observe a day of truce in the east, which may set the stage for a new round of peace talks with pro-Russian separatists this week. Ukraine will hold a “day of silence” today after a deal with representatives from Russia, rebels and the Organization for Security and Cooperation in Europe. Talks in the Belarusian capital Minsk are possible later this week, the Tass news service reported, citing representatives of separatists and unidentified officials in Kiev.
- China’s Rate Swaps Surge Most Since June 2013 as Bonds Tumble. China’s one-year interest-rate swaps jumped 29 basis points, the most since a record cash crunch in June 2013, to 3.67 percent. The yield on government debt due October 2019 surged 16 basis points to 3.90 percent as of 9:04 a.m. in Shanghai, according to prices from the National Interbank Funding Center. That’s the biggest increase for a five-year note since November 2013, ChinaBond data show. China has halted new corporate bond repurchase applications for debt with ratings below AAA, according to a statement posted to the China Securities Depository and Clearing Corp.’s website yesterday. Rising rates in the bond and money markets pose a challenge for policy makers as they seek to spur spending in an economy that’s forecast to expand this year at the slowest pace in more than two decades.
- Australian Business Confidence at 16-Month Low as Rate Cuts Seen. Australian business sentiment dropped to the lowest level since before last year’s election, National Australia Bank Ltd. said as its economists predicted the central bank will cut interest rates twice in 2015. The confidence index dropped to 1 in November from a revised 5 a month earlier, a NAB survey of more than 400 companies taken Oct. 27-31 and released in Sydney today showed. The business conditions gauge, a measure of hiring, sales and profits, slid to 5 from 13.
- Brazil’s Real Touches Nine-Year Low as China’s Imports Decline. Brazil’s real touched a nine-year low after an unexpected decline in China’s imports last month added to concern that Latin America’s largest economy will struggle to regain momentum. The real dropped 0.5 percent to 2.6004 per U.S. dollar at the close of trade in Sao Paulo, after falling to 2.6174, the weakest intraday level since April 2005. Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, climbed seven basis points, or 0.07 percentage point, to 12.48 percent on the contract maturing in January 2016.
- Asian Stocks Follow U.S. Shares Lower as Oil Slides, Yen Gains. Asian stocks fell, after U.S. shares dropped the most in almost seven weeks, as oil extended its decline and a stronger yen weighed on Japanese exporters. The MSCI Asia Pacific Index (MXAP) slid 0.3 percent to 139.70 as of 9:06 a.m. in Tokyo after adding 0.1 percent yesterday. Japan’s Topix (TPX) index decreased 0.7 percent after the yen added 0.6 percent against the dollar yesterday.
- JPMorgan Cuts Iron Ore Outlook as Growth in Supply Beats Demand. Iron ore prices will extend declines as growth in low-cost supply from the world’s largest producers outstrips demand, according to JPMorgan Chase & Co., which reduced forecasts through 2017. The steel-making raw material will average $67 a metric ton next year, 24 percent less than previously forecast, and $65 in 2016, down 23 percent, the bank said in an e-mailed report received today. So far this year, it’s averaged $98.95 a ton, according to data from Metal Bulletin Ltd. In 2017, prices will average $69 a ton, 16 percent less, the bank said.
- Copper Retreats for Third Day as Demand Seen Slowing. Copper for delivery in three months on the London Metal Exchange slipped 0.2 percent to $6,393 a metric ton at 9:58 a.m. in Shanghai. In New York, March futures retreated 0.2 percent to $2.8785 a pound, while in Shanghai the metal for February delivery fell 0.5 percent to 45,670 yuan ($7,385) a ton.
- Oil Drops as Deeper OPEC Discounts Signal Fight for Market Share. West Texas Intermediate fell to a five-year low as Iraq followed Saudi Arabia in cutting prices for crude sales to Asia, adding to signs that OPEC’s biggest members are defending market share. Brent was steady in London.
- Too-Big-to-Fail May Lead to U.S. Bank Pay Rules: Hoenig. U.S. lawmakers may follow their European counterparts and regulate bankers’ pay if reforms aimed at ending government bailouts for lenders stall, Federal Deposit Insurance Corporation Vice Chairman Thomas Hoenig said. Regulatory focus on bankers’ pay “will become more of an issue in the U.S. if we don’t solve the too-big-to-fail problem,” Hoenig said in an interview in Amsterdam yesterday. “If we focus on that and get that solved, then the remuneration issue will become less significant and we’ll just see how that plays.”
- Fed Aims to Signal Shift on Low Rates. Central Bank Could Drop ‘Considerable Time’ Phrasing in Policy Statement. Federal Reserve officials are seriously considering an important shift in tone at their policy meeting next week: dropping an assurance that short-term interest rates will stay near zero for a “considerable time” as they look more confidently toward rate increases around the middle of next year.
- Crude Oil’s Fall Pressures Energy Megaprojects. Oil Industry’s Multibillion-Dollar Investments Come Under New Scrutiny.
- ObamaCare’s Casualty List. Three elections later, the law continues to be a political catastrophe for Democrats. Mary Landrieu’s defeat in Saturday’s Louisiana Senate runoff was no surprise, but that doesn’t mean it should be ignored as inevitable. Ms. Landrieu was a widely liked three-term incumbent, and her GOP foe was hardly a juggernaut, yet she lost by 14 points after Washington Democrats all but wrote her off. Think of Ms. Landrieu as one more Democrat who has sacrificed her career to ObamaCare.
- St. Louis police allege hate crime in latest attack on Bosnian resident. The St. Louis police chief has asked for the FBI's help investigating what he believes was a hate crime attack against a woman in the same Bosnian neighborhood where a man was beaten to death days earlier by hammer-wielding teens, and where assaults have spiked dramatically in recent months.
- Angry Eurodollar Traders Have Had Enough: "This Is The Year The Fed Is Going To Lose Credibility". (graph)
Telegraph:
- China's stock mania decouples from economic reality. The stock boom comes as Chinese industry battles with massive overcapacity in everything from steel to shipbuilding, coal output, cement and solar panels.
- Local Chinese Regulator Warns of Margin-Trading Risk. A local securities regulator in China expressed concerns over rapidly growing risks in margin trading and short-selling businesses at a meeting yesterday, citing a person who participated in the meeting. Securities cos.' margin trading and short selling businesses will face high risks if stock market encounters sharp decline after surging. Some brokerages use working capital on these businesses, which may result in liquidity risks once the market shifts direction. Brokerages that open accounts for unqualified clients will be severely punished.
- None of note
- Asian equity indices are -1.0% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 101.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 63.25 +1.5 basis points.
- FTSE-100 futures n/a.
- S&P 500 futures -.18%.
- NASDAQ 100 futures -.10%.
Earnings of Note
Company/Estimate
- (AZO)/7.16
- (KKD)/.19
- (KFY)/.45
7:30 am EST
- The NFIB Small Business Optimism Index for November is estimated to rise to 96.5 versus 96.1 in October.
- The JOLTS Job Openings report for October is estimated to rise to 4790 versus 4735 in September.
- Wholesale Inventories for October are estimated to rise .2% versus a +.3% gain in September.
- Wholesale Trade Sales for October are estimated to rise +.1% versus a +.2% gain in September.
- The IBD/TIPP Economic Optimism Index for December is estimated to rise to 47.0 versus 46.4 in November.
- None of note
- The Fed's meeting on risk-based capital, Japan CPI report, China CPI report, $25B 3Y Note auction, US weekly retail sales reports, Wells Fargo Energy Symposium, CapitalOne Energy Conference, Goldman Financial Services Conference, Barclays Tech Conference, (BRCM) analyst day, (PHM) investor day, (WEX) investor day and the (TSO) analyst presentation could also impact trading today.
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