Tuesday Watch

Evening Headlines 
Bloomberg:

• Russian ADRs Drop on First GDP Contraction Since 2009. Russian stocks traded in New York fell to the lowest level in a week as the economy shrank for the first time in five years and a court hastened the scheduled reading of a verdict in the case against opposition leader Alexey Navalny. The Bloomberg Russia-US Equity Index dropped 4.5 percent to 50.41 in New York. The Market Vectors Russia ETF, the biggest exchange-traded fund tracking the country’s stocks, sank percent 8.7 percent to $14.61. The ruble tumbled 7.4 percent against the dollar. 

• French Connection Bodes Ill for Japan Stocks: Chart of the Day. French investors are piling into Japanese stocks again, a sign to Nomura Holdings Inc. that the market is poised to fall. 

• China, U.S. Join the Search for AirAsia QZ8501 in Waters Near Borneo. Chinese and U.S. military ships are heading to seas south and west of Borneo where a AirAsia Bhd. (AIRA) passenger jet is suspected of crashing as the search enters its third day. The USS Sampson will arrive today in the area where flight QZ8501 vanished Dec. 28 carrying 162 people, the U.S. Seventh Fleet said in an e-mailed statement. China will send a navy frigate and aircraft, the official Xinhua news agency said.

• ‘Cartel’ Chat Room Tied to BP Gave FX Tips From Banks to Client. Halfway down a muddy, secluded road on marshland in suburban Essex sits Wharf Pool, a lake stocked with some of the biggest freshwater fish you will ever see. A white sign with red lettering reads: “Private Syndicate: Strictly Members Only.” A metal gate, a barbed-wire fence and two CCTV cameras bar the way. Anglers hoping to spend time on the lake’s carefully tended banks must join a waiting list. Those who make it to the top pay a membership fee that buys them the chance to catch a carp that weighs more than a Jack Russell. There are hundreds of them swimming beneath the surface. It’s close to shooting fish in a barrel.

• Asian Stocks Extend 2014 Drop as Yuan Weakens; Oil Gains. Asian stocks fell amid shrinking volumes, with the regional index heading for its first annual drop since 2011. The yuan slipped to the weakest level since June, while oil climbed from a five-year low. The MSCI Asia Pacific Index lost 0.4 percent at 11:32 a.m. in Tokyo, extending this year’s retreat to 2.5 percent. Trading on Japanese, Chinese and Korean bourses was at least 16 percent lower than the 30-dayaverage. 

Fox News:

• ObamaCare fines rising in 2015, IRS prepares to collect. Don't have health insurance? Get ready to pay up.  The ObamaCare-mandated fines for not having insurance are rising in 2015 -- and for the first time, will be collected by the Internal Revenue Service.

CNBC:

• Petrobras(PBR) deadline prompts some bondholders to push for default. Petrobras, Brazil's state-run oil company, could be declared in technical default on some of its foreign debt as early as Tuesday if bondholders pursue efforts to force it to speed up its assessment of losses in a giant corruption scandal.

Zero Hedge:

• Gold Held In NY Fed Vault Drops To Lowest In 21st Century After Biggest Monthly Withdrawal Since 2001. (graph)

• The Most Important US Events Of 2014, According To Twitter. (graph)

• Inflation Watch: It Has Never Been More Expensive To Live The 1% Life. (graph)

• There "Is" Blood: Energy Services Firm Civeo Cuts Headcount 45% & Guidance By 30%, Suspends Dividend. (graph)

• 25 Years After The "Top" In Japan, Have We Learned Anything? (graph)

• WTI Hits $52 Handle As US Rig Count Tumbles To 8-Month Lows. (graph)

• Faith In Abenomics Falters: Foreign Investor Flows Collapse 94% In 2014. (graph)

• China Leading Index Plunges To Worst Since Feb 2009 Sending Yuan To Lower Trading Band Extreme. (graph)

Business Insider:

• FINANCIAL ADVISOR INSIGHTS: What's Happening In Russia Is A Big Wake-Up Call For Emerging Market Investors.

Reuters:

• Mysterious FX cycle may challenge yen bears in 2015.

Telegraph:

• Greece comes back to haunt eurozone as anti-Troika rebels scent power. Greece's finance minister warns ECB could “strangle the Greek economy in a split second” if it cuts off life-support for banks. 

Wen Wei Po:

• Microsoft(MSFT) to Close 2 China Factories in 1Q. Microsoft will shut down factories in Beijing and Dongguan and move manufacturing to Hanoi in Vietnam. More than 3,000 workers may lose jobs.

China Securities Journal:

• Some Chinese Banks May See Drop in 2015 Results. Some banks may see zero increase or even decline in 2015 performance, citing an industry participant. Bank performance affected by accelerating interest rate liberalization, regulatory scrutiny of interbank businesses and deteriorating asset quality.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.75% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 103.0 -.5 basis point.

• Asia Pacific Sovereign CDS Index 63.75 -.75 basis point.

• S&P 500 futures +.10%.

• NASDAQ 100 futures  +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (HGR)/.44

Economic Releases
9:00 am EST

• The S&P/CS Composite-20 YoY for October is estimated to rise +.4% versus a +.34% gain in September.

10:00 am EST

• Consumer Confidence for December is estimated to rise to 94.0 versus 88.7 in November.

Upcoming Splits

• (GNTX) 2-for-1

Other Potential Market Movers

• The UK Housing Price report, China Manufacturing PMI and US weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial 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.