Tuesday Watch

Evening Headlines
Bloomberg:

• Europe's `Ticking Time Bombs' Are Set for Shorting, Block Says. Carson Block, the short-seller whose bet against Asia’s Noble Group Ltd. helped sink its shares earlier this year, is targeting the "ticking time bombs" of western Europe. Block, who runs research firm Muddy Waters, said European companies are ripe for shorting because of their indebtedness and a lack of scrutiny by investors. In a Real Vision interview to be aired Friday, he said that investors in Europe follow a code that makes it impolite to ask hard questions. “We think Europe has a number of companies that are really problematic, heavily financially-engineered, indebted and where investors just haven’t done the work,” he said in the Nov. 24 interview on the financial video-on-demand channel. “Given what’s happened with interest rates in Europe and this environment that’s conducive to bad companies borrowing, I think it’s really created a lot of ticking time bombs.” 
• China November Manufacturing PMI Below Expectations. (video) 
• China Bears Who Foresaw the Crash Are Back With Record ETF Short. U.S. short sellers are piling on bets against Chinese equities at the fastest pace since the height of the nation’s stock-market bubble five months ago. Short interest in the largest U.S. exchange-traded fund tracking domestic Chinese stocks more than doubled in two weeks to a record 28 percent of shares outstanding on Nov. 27, according to data compiled by Markit and Bloomberg. When such wagers last climbed this fast in June, short sellers proved prescient as China’s equity-market boom turned into a $5 trillion rout.
• Economic Takeaways From South Korea's Trade, Inflation Data. Exports fell 4.7 percent in November from a year earlier (-9 percent forecast). Exports for the year to date are down 7.4 percent compared with the same period last year.
• Sydney Home Prices Drop Most in Five Years as Regulation Bites. Sydney home prices fell the most in five years in November as a regulatory crackdown forces banks to tighten lending and increase mortgage rates. Dwelling values in Australia’s largest city dropped 1.4 percent from a month earlier, data from property researcher CoreLogic Inc. showed on Tuesday. That was the biggest drop since December 2010 and the first decline since May. Prices across the nation’s capital cities dropped 1.5 percent, with Melbourne leading with a 3.5 percent decrease.
• Morgan Stanley Calls 2016 the Year of the Yen With BOJ on Hold. The yen will outshine the dollar as next year’s star performer in the $5.3 trillion-a-day global currency market, according to Morgan Stanley. In what it calls an "out-of-consensus" prediction, the bank said it expects Japan’s currency to strengthen to 115 against the greenback at the end of 2016. That contrasts with a median forecast for the yen to weaken 126 per dollar, according to analysts surveyed by Bloomberg. Morgan Stanley’s top trading recommendations for next year include buying the yen against the British pound, Swiss franc, South Korean won and offshore Chinese yuan, according to a Nov. 29 report.
• China's Stocks Fall to One-Month Low After Manufacturing Data. China’s benchmark stock index fell to the lowest level in a month after data showed manufacturing conditions are deteriorating, overshadowing the International Monetary Fund’s decision to add the yuan to its basket of reserve currencies. The Shanghai Composite Index slipped 0.3 percent to 3,435.46 at 9:35 a.m. local time, led by financial companies.
• Asian Stocks Rise Before China Factory Data as Lenders Advance. Asian stocks rose after Monday’s selloff as investors awaited Chinese factory data and financial shares climbed. The MSCI Asia Pacific Index added 0.3 percent to 132.19 as of 9:00 a.m. in Tokyo after dropping 1 percent on Monday to cap a 2 percent decline for November. 
• Copper Drops With Metals After Chinese Factory Activity Slows. Copper declined with other metals after an official gauge of factory activity in China deteriorated, underscoring a weak outlook for demand in the world’s biggest metals consumer. China’s official manufacturing purchasing managers index slipped to 49.6 last month, lower than in a survey of economists and below 50 indicating deterioration. The official PMI figure has been in contraction territory for four months. Copper for three-month delivery on the London Metal Exchange dropped 0.5 percent to $4,561.50 a ton by 9:29 a.m. in Shanghai. Nickel slid 0.2 percent and zinc fell 0.8 percent.
• Copper Bears See More Pain as Prices Trade at Lowest Since 2009. Hedge funds are betting there’s more pain in store for copper, even with prices trading at the lowest in six years.Money managers are holding the biggest net-short position in the metal since August. Futures are trading near the lowest since 2009 as economic growth slows to the weakest pace in more than two decades in China, the world’s top consumer. Declining industrial profits in the Asian country added to concern that the government still hasn’t done enough to spur a rebound.

Wall Street Journal:

• Companies Shy Away From Spending. Growth in investments limited by uneven consumer demand, global turmoil. Business investment across the U.S. is fizzling out. Companies appear reluctant to step up spending on the basic building blocks of the economy, such as machines, computers and new buildings. The broadest measure of U.S. business investment advanced 2.2% from a year earlier in the third quarter, the Commerce Department said last week, marking one of the worse performances of the six-year-old economic expansion.
• World Leaders in Paris Vow to Overcome Divisions on Climate Change. President Barack Obama calls on countries to ‘rise to this moment’. World leaders on Monday vowed to finish a deal to curb greenhouse gases and overcome a thorny divide on financing, as they kicked off international climate talks against a backdrop of heavy security.
• Obama’s Appalachian Tragedy. The president’s anti-coal policies have devastated West Virginia. Since 2009, 332 mines have closed. ‘The traveler comes to the Appalachians in the lovely season. He sees the hills, the streams, the foliage—but not the poor.” That passage comes from “The Other America,” Michael Harrington’s 1962 book that opened the eyes of liberal policy makers to America’s invisible poverty. The classic work helped provide the intellectual ammunition for President Lyndon Johnson’s “unconditional war on poverty,” announced in his State of the Union address two years later.

Fox News:

• Nearly 1,000 Clinton emails had classified info. (video) The State Department’s latest release of Hillary Clinton documents brings the total number of Clinton emails known to contain classified material to nearly 1,000. The department on Monday released its largest batch of emails yet, posting 7,800 pages of the former secretary of state’s communications. The latest batch contains 328 emails deemed to have classified information. According to the State Department, that brings the total number with classified information to 999.

MarketWatch.com:

• UnitedHealth(UNH) sees 2016 revenue below estimates. UnitedHealth Group Inc., ahead of its investor day on Tuesday, projected revenue next year that falls just shy of analysts' estimates, less than two weeks after it said weak performances on public health exchanges would cut into profit.
• This chart warns that stock market investors should be on high alert. (graph)

CNBC:

• Hatzius: Feds will raise rates 1 time each quarter. (video) With investors still uncertain about how the Federal Reserve's tightening of monetary policy will affect the economy, Goldman Sachs' top economist expects the central bank to take a slow approach—and for the status quo on growth to prevail. 
• Buffett's bad year: Trading winners and losers. (video)

Zero Hedge:

• China Manufacturing Slumps To 3-Year Lows And Soars To 5-Month Highs. (graph)
• Erdogan Says Will Resign If Oil Purchases From ISIS Proven After Putin Says Has "More Proof".
• AsiaPac Unleashes Baffle 'Em With Bullshit Data Bonanza. (graph)
• 4 Telltale Signs The Credit Cycle Is Turning Now. (graph)
• Pedro Da Costa Has The Courage To Review Ben Bernanke's Memoir, Finds A Few Gaping Holes.
• Number Of Millennials Living In Parents' Basement Climbs (Again); Weddings Blamed (Again). (graph)
• The Lull Before The Storm - An Ideal Chance To Exit The Casino, Part 1. (graph)
• 2015: The Last Christmas In America. (graph)
• Which Stocks Are Cheap? (graph)
• Stocks End November With Nothing Despite Biggest Short-Squeeze In 6 Months. (graph)

Business Insider:

• One of New York's most powerful politicians convicted in major corruption case.
• The EPA is boosting the amount of ethanol and other renewable fuels in the US gasoline supply.

Reuters:

• Einhorn's Greenlight Capital down 5 pct in Nov., off 20.6 pct YTD-sources. Hedge fund manager David Einhorn has lost 20.6 percent this year, widening already deep losses when a bet on SunEdison cratered more than 50 percent this month, two people who have seen his returns said on Monday. Einhorn's Greenlight Capital lost 5 percent in November, the people said. The Standard & Poor's 500 stock index gained 1.17 percent during the month.
• In retail slump, HK jeweller lets clients try before they buy.

Telegraph:

• George Soros' pro-democracy charity banned in Russia for being a threat to state. Open Society Foundations poses a 'threat to the foundations of the constitutional system of the Russian Federation and the security of the state', Russia says.

Evening Recommendations 

• None of note

Night Trading 

• Asian equity indices are +.50% to +1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 130.25 +.5 basis point.
• Asia Pacific Sovereign CDS Index 68.25 -.75 basis points.
• Bloomberg Emerging Markets Currency Index 70.25 +.13%.
• S&P 500 futures +.60%.
• NASDAQ 100 futures +.57%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

• (BNS)/1.44
• (BOBE)/.39
• (POWL)/.47

Economic Releases
9:45 am EST

• Final Markit US Manufacturing PMI for November is estimated at 52.6 versus a prior estimate of 52.6.

10:00 am EST

• Construction Spending for October is estimated to rise +.6% versus a +.6% gain in September.
• ISM Manufacturing for November is estimated to rise to 50.5 versus 50.1 in October.
• ISM Prices Paid for November is estimated to rise to 40.0 versus 39.0 in October.

Afternoon:

• Total Vehicle Sales for November are estimated to rise to 14.25M versus 14.14M in October.

Upcoming Splits

• (CTRP) 2-for-1

Other Potential Market Movers

• The Fed's Evans speaking, Eurozone PMI, Eurozone Unemployment rate, weekly US retail sales reports, Cowen Energy conference, Citi Basic Materials conference, Goldman Metals/Mining conference, Piper Healthcare conference and the (JCI) anaylst meeting could also impact trading today.

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

Stocks Reversing Lower into Final Hour on Global Growth Fears, Emering Markets Currency/Debt Worries, Oil Decline, Retail/Biotech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.29 +7.67%

• Euro/Yen Carry Return Index 135.99 +.04%

• Emerging Markets Currency Volatility(VXY) 10.81 +1.69%

• S&P 500 Implied Correlation 57.73 +1.58%

• ISE Sentiment Index 101.0 -24.63

• Total Put/Call 1.23 +9.82%

• NYSE Arms 1.08 -42.62% 

Credit Investor Angst:

• North American Investment Grade CDS Index 84.14 -.30%

• America Energy Sector High-Yield CDS Index 1,309.0 -.38%

• European Financial Sector CDS Index 68.09 -.69%

• Western Europe Sovereign Debt CDS Index 17.85 +.65%

• Asia Pacific Sovereign Debt CDS Index 68.20 -1.23%

• Emerging Market CDS Index 327.67 +2.62%
  

• iBoxx Offshore RMB China Corporate High Yield Index 124.14 -.01%

• 2-Year Swap Spread 6.25 +1.0 basis point

• TED Spread 25.25 +3.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -55.25 -2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.15 -.16%
• 3-Month T-Bill Yield .17% +1.0 basis point

• Yield Curve 128.0 -2.0 basis points

• China Import Iron Ore Spot $42.97/Metric Tonne -3.44%

• Citi US Economic Surprise Index -14.4 +1.1 points

• Citi Eurozone Economic Surprise Index 23.10 -5.1 points

• Citi Emerging Markets Economic Surprise Index 9.3 +3.9 points

• 10-Year TIPS Spread 1.62 -1.0 basis point
• # of Months to 1st Fed Rate Hike(Morgan Stanley) 1.78 -.07

Overseas Futures:

• Nikkei 225 Futures: Indicating +13 open in Japan 
• China A50 Futures: Indicating -141 open in China

• DAX Futures: Indicating -25 open in Germany

Portfolio: 

• Lower: On losses in my biotech/medical/retail sector longs 

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• Citi: The Growth Model of Emerging Markets Is ‘Broken’. (video) Chinese growth and strong global trade created uniquely favorable conditions that aren't likely to repeat themselves anytime soon. Strategists at Goldman Sachs and Bank of America have been calling the bottom in emerging markets. But Citigroup feels differently. In a year-ahead note, Chief Economist Willem Buiter says it's impossible to declare "EM is 'out of the woods'" just yet thanks to two major risks. The first is an interest rate hike from the Federal Reserve, which is now widely expected to occur next month. Such a move seems likely to knock back some of investment that has been flowing into emerging markets in recent years. "Higher U.S. rates do still threaten capital flows to EM, largely because some of the ‘excess’ inflow to EM in the past five years will have had cyclical characteristics, and could therefore be vulnerable as U.S. rates rise," Buiter writes in the note.
• Macau's Third-Quarter Economy Sinks 24% Compared to a Year Ago. Macau’s economy contracted a fifth straight quarter as the world’s largest center of gambling was pummeled by an economic slowdown in China and the government’s attack on corruption which scared off high-rollers. The Chinese city, which relies on gamblers for about two-thirds of economic output, saw GDP tumble 24.2 percent in the three months through September, easing from the 26.4 percent drop in the second quarter, government data released Monday showed. 
• Aberdeen's Emerging-Market Pain. As the market turmoil that started in China washes up in Scotland's granite city, 2016 is shaping up to be a crunch year for Aberdeen Asset Management. Aberdeen spelled out in gory detail on Monday how its Asian and emerging markets-focused funds are hemorrhaging cash. Net outflows accelerated to almost 13 billion pounds ($19.5 billion) in the three months through September, bringing the total for the fiscal year to almost 34 billion pounds. Aberdeen said the industry is experiencing "the worst quarter for outflows from this asset class since the global financial crisis.''
• Euro heads for biggest monthly loss since March on ECB outlook. The euro headed for its biggest monthly decline since March as economists unanimously forecast the European Central Bank will unveil additional stimulus this week. The 19-nation currency approached the lowest in seven months versus the dollar as investors are pricing in a 100 percent chance of a 10-basis-point cut in the ECB’s deposit rate on Dec. 3. A gauge of the dollar climbed to the highest since March as futures predict the Federal Reserve will increase interest rates in December, expanding the divergence between the two central banks.  
• Europe Stocks Climb to Three-Month High on Stimulus Anticipation. European stocks pulled off a second monthly advance on bets the region’s central bank will increase stimulus at this week’s meeting. The Stoxx Europe 600 Index rallied to a three-month high, taking its November gain to 2.7 percent.
• The Economic Loss From the Global Commodities Slump. (video)
• Oil Pares Monthly Decline Before OPEC Ministers Gather This Week. (video) Futures gained as much as 2.2 percent in New York, reducing November’s drop to about 8 percent. Iran expects no major decisions that would change OPEC’s output target when the group gathers Dec. 4 in Vienna, Oil Minister Bijan Namdar Zanganeh said Saturday at a conference in Tehran. Speculators increased their bullish position on Brent to a two-week high through Nov. 24. Oil is set to average below $50 for a fourth month, the longest stretch since the global financial crisis, as a record supply glut showed no signs of ending amid a producers’ fight for market share. Iran has said it will announce plans during the Vienna meeting to expand output, a year after Saudi Arabia led an OPEC decision to keep pumping and drive out higher-cost shale rivals. "As the ministers arrive in Vienna the rhetoric will start to fly," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by phone. "The market is going to be headline driven and very volatile this week. The bulls are especially desperate and will try to bid up the market on any sign of a cutback."  
• This Recovery Has Fallen Behind The Recovery After The Great Depression. The not-so-great expansion. In April 2009 Economists Barry Eichengreen and Kevin O'Rourke first compared the collapse in industrial output following the start of the 2008 "Great Recession" to the one that followed the Great Depression beginning in 1929.At the time, the declines were running at a similar pace, sparking warnings that the world was headed into another great depression.
• Distressed Debt Ratio Highest Since 2009 on Crude Crash, S&P. (graph) Plummeting oil and gas prices pushed the percentage of junk bonds trading at distressed levels to the highest since the markets were recovering from the financial crisis, according to Standard & Poor’s. The ratings firm’s so-called distress ratio increased to 20.1 percent in November, up from 19.1 percent in October and the most since September 2009, when it hit 23.5 percent. The ratio is calculated by dividing the number of distressed securities by the total amount of speculative-grade debt outstanding. “The oil and gas sector accounted for 113 of the 361 issues in the distress ratio, because drops in oil prices affected profitability for oil and gas companies, where spreads have widened considerably, and had a spillover effect to the broader speculative-grade spectrum,” Diane Vazza, head of Standard & Poor’s Global Fixed Income Research Group, said in a report. The distress ratio, along with other economic, financial and credit conditions, indicates “growing pressure” that the number of defaults might rise, according to the report.
• Banks Supplant Energy in Destroying S&P 500 Growth Outlook. The two-quarter retreat in Standard & Poor’s 500 Index earnings is about to become a three-quarter swoon, and this time it isn’t just because of plunging energy prices. Bank profit estimates are falling at the fastest pace in four years, bringing the overall forecast for S&P 500 earnings in the fourth quarter to a decline of 5.6 percent, compared with a gain of 1.4 percent as recently as August. Financial institutions are exerting an ever-increasing drag on analyst projections: what had been expected to be a 16 percent surge in their October-to-December income has narrowed to less than 1 percent.
• Fed Poised to Relinquish Crisis Tools It Used to Bail Out AIG. The Federal Reserve plans to vote Monday on giving up the lending tools it used to rescue American International Group Inc. and Bear Stearns Cos. during the financial crisis after U.S. lawmakers restricted the central bank’s power to prop up failing firms. Under the Fed’s revised authority, it would only be able to save firms in a broad-based scenario, meaning it must rescue at least five entities at the same time, according to a statement released by the central bank. The change is meant to prevent the Fed from bailing out a single company. The Fed is required to write rules that eliminate some of its sweeping emergency lending authority under the 2010 Dodd-Frank law.

Zero Hedge: 

• Sweden: "No Apartments, No Jobs, No Shopping Without A Gun".
• To JPM, This Is The Alarming Chart Suggesting The Next Recession "Is Just Around The Corner". (graph)
• More Energy Companies Accused Of Downplaying Climate Change.
• Morgan Stanley Throws In The Permabullish Towel, Says It Is "Feeling Worse, But Not Sure Can Explain It".
• The IMF Confirms Yuan Inclusion In SDR Basket At 10.92% Weight, Above JPY And GBP.
• Morgan Stanley To Cull 25% Of Fixed Income Jobs Within 2 Weeks As Revenues Plunge.
• Internal Bleeding, Cheap Tech, And Falling Angels. (graph)
• Russia Sends NATO A Clear Message By Arming Fighter Jets With First Air-To-Air Missles.
• Recession Looms As Dallas Fed Manufacturing Contracts 11th Month In A Row. (graph)
• 'Unpatriotic' Ford Agrees Union Deal To Offshore American Jobs And Hire Low-Paid Workers. 
• NAR Admits Oil Slump Finally Hits Housing Sales. (graph)
• Chicago PMI Plummets To 48.7, Below Lowest Estimate. (graph)
• Larry Lindsey Crushes Steve Liesman's Dreams, "The Foolish Fed's Bubble Policy Always Ends Badly".
• Milwaukee ISM Bounce Dies As Employment, New Orders Plunge. (graph)
• World's Largest Pension Fund Suffers $64 Billion Loss After Doubling Down On Stocks. (graph)
• BTFD "Is Coming To An End" JPM Warns, As It Lowers Equity Allocation Most In 6 Years. (graph)

Business Insider: 

• Putin's latest message to Turkey could 'spin any future incident beyond control.
• ISIS now has a 'colony' in an oil-rich Libyan city just 400 miles from Italy.
• Retail stocks are getting slammed.
• The commodities bloodbath of 2015 in one chart.

CNN:

• Paris terror attack suspect believed to be in Syria. (video) Paris attacks suspect Salah Abdeslam has escaped to Syria, according to a source close to the investigation and a counterterrorism source.

Bear Radar

Style Underperformer: 

• Small-Cap Growth -.92%

Sector Underperformers: 

• 1) Biotech -2.47% 2) Retail -2.22% 3) Hospitals -1.95%

Stocks Falling on Unusual Volume:

• EFUT, QURE, SOHU, SPTN, LULU, CPSI, UGP, CBM, TEVA, SCVL, ALGT, ULTA, OLED, CACC, MED, NTES, LMT, CBD, FUN, GLOB, UA, DECK, BC, COLM, PBH and CSC

Stocks With Unusual Put Option Activity: 

• 1) EWJ 2) XLE 3) COH 4) KSS 5) HCA

Stocks With Most Negative News Mentions: 

• 1) LULU 2) BYD 3) HOT 4) ALGT 5) PBH

Charts:

• ETFs Falling on Unusual Volume 
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Mid-Cap Value -.05%

Sector Outperformers: 

• 1) Gold & Silver +2.31% 2) Oil Service +1.62% 3) Alt Energy +.76%

Stocks Rising on Unusual Volume: 

• KANG, CSC, ITC and AMBA

Stocks With Unusual Call Option Activity: 

• 1) ASNA 2) GERN 3) ADT 4) UNH 5) NRF

Stocks With Most Positive News Mentions: 

• 1) FIT 2) CSRA 3) DE 4) EBAY 5) AAPL

Charts: 

• ETFs Rising on Unusual Volume 
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running -11.4% Below 100-Day Average
• 3 Sectors Rising, 7 Sectors Declining
• 47.8% of Issues Advancing, 48.5% Declining
• 78 New 52-Week Highs, 34 New Lows
• 38.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.0
• Vix 16.0
• Total Put/Call 1.02
• TRIN/Arms 1.31

Monday Watch

Today's Headlines

Bloomberg:

• Islamic State Could ‘Easily’ Target a U.K. City, Fallon Says. British Defence Secretary Michael Fallon told the Sunday Telegraph that “what happened in Paris and Brussels could easily happen in London.” Speaking in an interview, Fallon said the threat from Islamic State “is as potent here as it was real in Paris and Brussels.” Fallon said the security services have prevented at least half a dozen viable terror plots in recent months. “I can’t go into detail of the individual plots that have been foiled,” he said. “The threat from ISIL is as potent here as it was real in Paris and Brussels. It could be London, it could be Manchester, it could be Glasgow.” He said Islamic State are not making demands and so can’t be negotiated with. “You can only deal with them by force.” 
• Turkey's Prime Minister Criticizes Putin's Sanctions. Prime Minister Ahmet Davutoglu criticized Russian economic sanctions on Turkey after the downing of a Russian fighter jet over the Syrian border last week, saying his priority was to defuse the tension and prevent similar incidents. Russian President Vladimir Putin on Saturday announced measures against Turkey including the suspension of visa-free travel, halting tours to Turkey and a ban on the hiring of Turkish nationals. In Turkey, Deputy Prime Minister Mehmet Simsek chaired a meeting with other members of the nation’s economic administration to discuss the potential impact, according to a government official, who asked not to be named in line with official policy. 
• The World's Largest Elevator Market Is Falling and May Never Recover. The world’s biggest elevator maker said China’s best days may be behind it. After peaking at 600,000 units last year, sales in China may drop to about 500,000 next year amid a surplus of apartments and slowdown of people moving to big cities, Otis Elevator Co. President Philippe Delpech, who heads the world’s largest maker of elevators, said in an interview in Tokyo this month.
• Christie's Hong Kong Art Auction Feels China's Economic Chill. China’s economic slowdown, government anti-corruption measures and fleeing speculators are causing a chill in the Hong Kong art auction market, Christie’s Nov. 28 International Hong Kong evening sale showed. The London-based auction house sold HK$507.9 million ($65.5 million) worth of art at its Asian 20th Century and Contemporary auction, compared with HK$636 million at a similar event a year ago, and HK$935 million in November 2013. Saturday’s sale is the marquee event of Christie’s six-day Hong Kong autumn auction marathon."It’s softer this season for sure," said Hong Kong-based adviser Jehan Chu, who runs Vermillion Art Collections. "There is uncertainty, especially over the economic and political outlook in China, that has made people skittish."
• Citic, Haitong, Guosen Probed on Alleged Margin-Trading Breaches. China’s securities regulator is investigating Citic Securities Co., Haitong Securities Co. and Guosen Securities Co. over alleged breaches of rules on margin and short-selling contracts. The China Securities Regulatory Commission probes involve contracts the three brokerages signed with clients on margin finances and short-selling, according to exchange filings by the companies Sunday. The firms said their operations will remain normal and they will cooperate with the regulator. 
• Five China Bond Deadlines to Watch.
• Won Drops With Korean Stocks as China Selloff Deters Risk-Taking. The won declined for a third day as a selloff in China’s stock market deterred risk taking and after growth in South Korea’s industrial production missed estimates. The Kospi index of shares fell the most in two weeks after a regulatory probe into some of China’s largest brokerages sparked the steepest slump in Shanghai shares in three months on Friday. South Korea’s factory output rose 1.5 percent in October from a year earlier, official figures showed on Monday, compared with the median estimate for a 2.2 percent increase in a Bloomberg survey. The report comes a day before data forecast to show exports likely fell 7.9 percent in November, shrinking for the 11th straight month. The won weakened 0.5 percent to 1,159 a dollar as of 9:53 a.m. in Seoul, according to data compiled by Bloomberg. The currency’s decline is the biggest in two weeks and it’s dropped 1.6 percent this month.
• Asian Stocks Slide After Chinese Selloff as Material Shares Drop. Asian stocks fell after Chinese shares posted the biggest one-day selloff in three months. Material and consumer-staple shares led losses on the benchmark index at the start of a pivotal week for the region’s markets. The MSCI Asia Pacific Index lost 0.3 percent to 132.82 as of 9:02 a.m. in Tokyo, headed for a monthly loss of 1.2 percent, its sixth such decline in seven months.
• Iron Ore Breaches $40 in Singapore as China Port Holdings Expand. Most-active iron ore futures in Singapore sank below $40 a metric ton for the first time on concern that the economic slowdown in China will cut demand as supplies from the largest miners climb.The SGX AsiaClear contract for January fell 3.1 percent to $39.51 a ton as of 10:33 a.m. in Singapore, heading for the lowest close since trading started in April 2013. On the Dalian Commodity Exchange, futures for May delivery sank as much as 3.1 percent to 293 yuan ($45.81) a ton, a record low.
• The $30 Oil Cliff Threatening Russia's Economy. For Russia, $30 is the number to watch.Crude prices at that level will push the economy to depths that would threaten the nation’s financial system, according to 63 percent of respondents in a Bloomberg survey. Lower prices for the fuel are next year’s biggest risk for Russia, which is unprepared to ride out another shock on the oil market, most economists said. Other dangers for 2016 include geopolitics, strains in the banking industry and the ruble, according to the poll of 27 analysts. “If oil prices fall lower and stay at that low level for longer, risks of fiscal and financial destabilization increase significantly,” Sergey Narkevich, an analyst at PAO Promsvyazbank in Moscow, said by e-mail.
• Kuwait Oil Minister Leaves Post Days Before OPEC Meeting. Kuwait named Deputy Prime Minister Anas Al-Saleh as acting oil minister to replace Ali al-Omair, who became minister of public affairs and retained his role as state minister for parliamentary affairs, according to an official decree. The change comes days before al-Omair was due to represent Kuwait at the meeting of the Organization of Petroleum Exporting Countries on Dec. 4 to discuss the group’s production level amid a slump in prices due to a global glut. Earlier this month, al-Omair swapped the chief executive officers of state companies Kuwait Oil Co. and Kuwait Foreign Petroleum Exploration Co. “The current Kuwait oil policy in OPEC will definitely not change as this new minister is only there temporarily until a new one is appointed,” said Abdulsamad al-Awadhi, who was Kuwait’s OPEC governor from 1980 to 2001.

Wall Street Journal: 

• Islamic State Tightens Grip on Libyan Stronghold of Sirte. City across the Mediterranean from Europe is first outside Syria or Iraq to come under the group’s control. Even as foreign powers step up pressure against Islamic State in Syria and Iraq, the militant group has expanded in Libya and established a new base close to Europe where it can generate oil revenue and plot terror attacks.
• Scientists Dispute 2-Degree Model Guiding Climate Talks. Many scientists say the benchmark underpinning talks in Paris on climate change is an arbitrary threshold based on tenuous research. The single most important benchmark underpinning this week’s talks in Paris on climate change—two degrees Celsius—has guided climate-treaty discussions for decades, but scientists are at odds on the relevance of that target.
• NSA to End Phone Program Despite Calls for Extension. Some Republicans have urged program be extended in aftermath of Paris attacks.
• IMF Move Would Pressure China on Management of Yuan. International Monetary Fund expected to name yuan as a reserve currency.
• Divergent Paths for U.S., European Central Banks. ECB expected to further cut its already-negative deposit rate, closely watched by others in Europe, as Fed prepares to take opposite tack.

CNBC:

• Warren Buffett to join Hillary Clinton on Nebraska stump. Billionaire investor and outspoken Hillary Clinton supporter Warren Buffett will stump with the Democratic contender in Omaha on December 16.

Zero Hedge:

• Former CIA Deputy Director Gives A Stunning Reason Why Obama Has Not Attacked ISIS' Oil Infrastructure. In an interview on PBS' Charlie Rose on Tuesday, Rose pointed out that before the terrorist attacks in Paris, the U.S. had not bombed ISIS-controlled oil tankers, to which the former CIA deputy director Michael Morell responded that Barack Obama didn’t order the bombing of ISIS’s oil transportation infrastructure until recently because he was concerned about environmental damage.
• "You Are Here"... And It Is A Scary Place. (graph) The previous three times this metric fell that far into negative territory on the S&P 500 were Q1 1990, Q1 2001, and Q4 2007, coinciding with the start of each of the last three high yield default cycles.
• Chinese Currency Drops To 3-Month Lows As IMF SDR-Inclusion Decision Looms. (graph)
• Black Friday Total Sales Crash 10% (Despite Rise In Online Spend). (graph)
• "It Is All Rather Scary" - Chinese Debt Snowball Gaining Momentum.
• December 16th: A Date Which Will Live On In Monetary Infamy. (graph)
• European HIV Infections Hit Record High, CDC Blames "Migrants And Refugees".
• A critical shift is taking place in China ― and it could have brutal consequences.
• 14,000 Refugees Due For Deportation From Sweden Have Vanished: "We Simply Do Not Know Where They Are".
• As Market Awaits "Santa" Draghi, The ECB Is "Chasing Its Own Tail".
• Using New "Pre-Crime" Laws France Arrests 24 Climate Activists.
• Europe Will Pay Turkey €3 Billion To Halt Refugee Exodus.

Business Insider:

• A critical shift is taking place in China ― and it could have brutal consequences.
• The University of Chicago is canceling classes tomorrow after the FBI warned of possible gun violence.
• Putin didn't think Turkey would make good on its threats — and now it's having big consequences.
• CITI: 'Is this the start of the breakdown?'.
• Why financial markets blow up at exactly the wrong time.
• SALLIE KRAWCHECK: The economy is changing so fast that no one is safe.

New York Post:

• Jefferies Peddles Clever Way to Unload Risky Debt.
  

Washington Post:

• White House eyes better pay for top civil servants. The Obama administration is preparing an executive order designed to bolster the government’s Senior Executive Service (SES) with increased compensation, a streamlined hiring process and greater diversity in assignments. Its 7,000-plus members are top level civil servants whose leadership is critical to federal agencies. But that status has not stopped problems stemming from sluggish pay raises and congressional attacks.

Reuters:

• China's shadow banking risk shifts to booming bond market. A year after China's financial regulators squared up to the systemic perils of "shadow banking", the threat is shifting to a booming corporate bond market, and risky borrowers' debt is finding its way into products aimed at retail investors. An opaque network of trust companies and non-bank lenders had grown their annual market to a hefty 2.9 trillion yuan ($450 billion) in loans before regulators stepped in, spooked by rising defaults on wealth-management products (WMPs) backed by such high-interest shadow lending.

Telegraph:

• COP-21 climate deal in Paris spells end of the fossil era. Much of the fossil industry will go into slow run-off while the new plutocrats will be masters of post-carbon technology.

Estado: 

• S&P Visit to Brazil Heightens Downgrade Concern. S&P is visiting Brazil starting Dec. 1 to analyze country's political, economic situation. Trips increases speculation nation might be downgraded again, amid worsening of Brazil's political crisis after recent arrests.

Night Trading

• Asian indices are -1.25% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 129.75 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 69.0 +.5 basis point.
• Bloomberg Emerging Markets Currency Index 70.23 -.05%.  

• S&P 500 futures -.18%.

• NASDAQ 100 futures -.15%.

Morning Preview Links 

Earnings of Note

Company/Estimate 

• (BLOX)/.06
• (SCVL)/.48
• (THO)/.83 

Economic Releases
9:00 am EST

• The ISM Milwaukee for November is estimated to rise to 48.0 versus 46.66 in October.
  

9:45 am EST

• The Chicago Purchasing Manager for November is estimated to fall to 54.0 versus 56.2 in October.

10:00 am EST

• Pending Home Sales for October are estimated to rise +1.0% versus a -2.3% decline in September. 

10:30 am EST

• The Dallas Fed Manufacturing Activity Index for November is estimated to rise to -10.0 versus -12.7 in October.
  

Upcoming Splits

• (CTRP) 2-for-1

Other Potential Market Movers

• The Reserve Bank of Australia decision, German CPI report, China Manufacturing PMI, CSFB Industrials conference and the CSFB Tech/Media/Telecom conference could also impact trading today.

BOTTOM LINE: Asian indices are 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 week.