China Fires a Warning Shot at Yuan Speculators With Bank Bans. China has a message for currency speculators: the free lunch is over. The
People’s Bank of China has suspended at least two foreign banks from
conducting some cross-border yuan business until late March, according
to people with direct knowledge of the matter. The clampdown comes as
the growing offshore-onshore spread makes it profitable for those who
skirt capital controls to buy the currency at a discount in Hong Kong
and sell it in Shanghai.
Perpetual Faith in China. Hong Kong's aging billionaires have been reducing investments in China
as the economy's prospects dim. The latest sale, by New World
Development's Cheng Yu-tung, has a whiff of desperation.
Australian Investor Mortgage Growth Slows to 17-Month Low. Home loans to Australian landlords grew at the slowest pace in 17 months as a regulatory crackdown forces lenders to raise interest rates and tighten lending standards. Investor
housing credit expanded 9.1 percent in the 12 months to Nov. 30, the
weakest pace since June 2014, according to data from the Reserve Bank of
Australia. Growth has slowed for the fifth consecutive month, the data
Asian Stocks Poised for Second Year of Decline on Commodity Rout. Asia-Pacific stocks fell in light trading on the final day of the
year, with the regional benchmark index heading for its first
back-to-back annual decline since 2002, as energy shares followed crude
oil lower. The MSCI Asia Pacific Index excluding Japan slipped 0.1
percent to 410.54 as of 8:10 a.m. in Hong Kong, with raw-material
companies leading declines. The MSCI gauge that includes Japan headed
for a 4.5 percent drop this year amid decelerating Chinese growth and a
rout in commodities. That compares with a 0.2 percent advance for the
Standard & Poor’s 500 Index and a 7.4 percent increase for the Stoxx
Europe 600 Index.
Capital Economics Sees a Wild Ride for Iron Ore as $20s Loom. Iron ore may be in for a roller-coaster ride next year as prices
swoon into the $20s, then rally to end higher after three annual losses,
according to Capital Economics Ltd. The ore may initially drop as
low-cost supplies rise further, helping the top producers to expand
market share, according to Caroline Bain, the forecaster’s London-based
senior commodities economist, who correctly predicted in June that
prices would sink into the $30s this half.
Clinton's New Drug-Price Attack. After shaking the pharmaceutical industry earlier this year with a tweet, Hillary Clinton is back on the drug-price warpath.
Wall Street Journal:
Obama Administration Preparing Fresh Iran Sanctions. Nearly a dozen companies and individuals targeted over ballistic-missile program. The Obama administration is preparing to impose its first financial
sanctions on Iran since it forged a landmark nuclear agreement in July,
presenting a major test for whether Tehran will stay committed to the
deal. The planned action by the Treasury Department, U.S.
officials told The Wall Street Journal, is directed at nearly a dozen
companies and individuals in Iran, Hong Kong and the United Arab
Emirates for their alleged role...
New Year’s Terror Threats Spur Responses in Turkey and Belgium. Citing Islamic State holiday plots, Ankara authorities arrest two suspects and Brussels cancels fireworks event. Turkish authorities arrested two suspected Islamic State extremists
allegedly planning to kill revelers during New Year’s Eve celebrations
in Ankara, and Belgium canceled the main fireworks display in Brussels,
amid a heightened state of alert over possible Islamic State attacks
around the holidays.
Speaking Fees Meet Politics for Clintons. Former president spoke to groups with issues before State Department. At Hillary Clinton’s confirmation hearing for secretary of state, she
promised she would take “extraordinary steps…to avoid even the
appearance of a conflict of interest.”
Fannie and Freddie Forever. The mortgage giants are once again claiming their paper has no risk for taxpayers. Yeah, right. Washington is a place where bad ideas go to live forever. How else to
explain the latest innovation from federal regulators to keep Fannie Mae
and Freddie Mac dominating the market for mortgage finance?
‘Highly provocative’: Iran rocket launch near US ship latest challenge for Washington. (video) Despite the Obama administration touting its Iran nuclear deal as a
triumph of diplomacy that finally thaws a four-decade freeze, Tehran
appears to be doing all it can to keep the flames of confrontation
burning. The latest challenge was a missile launch over the
weekend less than a mile from a U.S. aircraft carrier -- which came on
the heels of two other similar incidents, two ballistic missile tests,
and the harsh treatment of American prisoners including a Washington
Initial Jobless Claims for last week are estimated to rise to 270K versus 267K the prior week.
Continuing Claims are estimated to fall to 2190K versus 2195K prior.
9:00 am EST
ISM Milwaukee for December is estimated to rise to 48.5 versus 45.34 in November.
9:45 am EST
Chicago Purchasing Manager for December is estimated to rise to 50.0 versus 48.7 in November.
None of note
Other Potential Market Movers
The Fed balance sheet update could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to strengthen into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.
China seen ending share sale ban that drew foreign fund scorn. China stock investors are about to find out whether a
budding equities recovery can cope with the end of a sales ban that's
kept an estimated $185 billion of shares off the market. All seven
strategists and fund managers surveyed by Bloomberg say it can, with
those respondents expecting regulators to allow major shareholders to
sell their investments when a six-month ban imposed at the height of the
stock crash expires Jan. 8. The measure drew criticism at the time from foreign investors
including Templeton Emerging Markets Group and UBS Wealth Management,
who saw the intervention as a step too far as authorities struggled to
stem a $5 trillion rout.
China Sends Japan a ‘Don't Meddle’ Message Via an Ex-Navy Ship.Tensions are rising in the East China Sea after China deployed an
armed, former navy frigate for the first time to challenge Japan’s
control of contested islands in what may be an attempt to shift Tokyo’s
attention away from disputes in the South China Sea.
Three ships including the frigate still equipped with gun turrets and
now operated by the Chinese coast guard sailed within the 12-mile
exclusion zone that Japan claims around the islands on Dec. 26, said a
Japanese foreign ministry official who asked not to be named, citing
government policy. Japan lodged an official protest over the incident.
The escalation in the East China Sea comes at a time of heightened
tensions in the South China Sea after the U.S. Navy began freedom of
navigation patrols there to challenge China’s claims in territorial
contests with the Philippines and Vietnam. Japan is home to the U.S.
Seventh Fleet, which is leading the patrols, and backs the U.S. effort.
China has repeatedly urged Prime Minister Shinzo Abe to stay out of the
South China Sea dispute.
S. Korea's Factory Output Unexpectedly Falls on Export Decline.
South Korea’s factory output missed estimates in November as poor
exports due to weak global demand continue to weigh on production in
Asia’s fourth-largest economy. Industrial
production fell 0.3 percent from a year earlier, Statistics Korea said.
Output fell 2.1 percent from October, the most since January this year.
Exports declined in the first 11 months of this year and that trend is
expected to continue, with an almost 12 percent drop forecast for this
In World With Too Much Crude Oil, 1,100-Foot Steel Monsters Rule. The most destructive oil crash in a generation is giving ship owners a billion-dollar windfall. With
the Organization of Petroleum Exporting Countries abandoning output
limits in a drive for market share, ships that carry as much as 2
million barrels a trip are in demand to haul crude from the Middle East
to Asia and North America. While oil prices fell 34 percent in 2015,
average earnings for these carriers jumped to $67,366 a day, the most
since at least 2009, according to Clarkson Plc, the world’s largest
Too Much Rubber, Too Few Tires Leaves Tappers in a Sticky Place. As rubber prices slumped toward a six-year low, 20 of 30 workers who
drained the sticky latex from trees on Winai Chaikunanant’s plantation
in Thailand quit. Even with income sharing, they earned less than the
minimum wage. Winai isn’t faring much better. The 70-year-old
loses money on every kilogram produced on the farm he’s tended for five
decades because government subsidies aren’t big enough to make up the
difference. Half his trees were left untapped this season, and he plans
to raze about 100 rai (40 acres) to grow cassava or pineapple instead.
And the market may only get worse for rubber growers.
Noble Group(NBL) Shares Tumble After Moody's Cuts Rating to Junk. Noble Group Ltd.’s shares and bonds slumped after the commodity
trader had its credit rating cut to junk by Moody’s Investors Service on
concerns about the company’s liquidity amid the rout in raw materials. The
stock fell as much as 5.7 percent to 41.5 Singapore cents and traded at
42 cents at 9:55 a.m. local time. The shares have lost 63 percent this
year, the most among members of the Straits Times Index. Noble Group’s
dollar bonds due in 2020, its most liquid, were down 1.8 U.S. cents on
the dollar at 67.7 cents, the lowest since Nov. 16, according to
Colorado Republican Says Trump Is Hurting Party. Swing-state Senator Cory Gardner says Republicans can't be "against people." A young up-and-coming Republican senator from a swing stateassailed
his party's presidential front-runner, Donald Trump, for hurting his
party by spreading hate. "Anytime you present a message that is
seen as hate," said Senator Cory Gardner of Colorado, "you're going to
have a negative impact." Gardner, a Senate freshman with
impeccable conservative credentials, made these comments in an interview
on the Charlie Rose Public Broadcast System television program. A shrewd and cautious politician, Gardner supports Marco Rubio's bid for
the Republican nomination. The Coloradans' anti-Trump
rhetoric–stronger than that of most Republicans–underscores the concern
among office-holders over the impact the billionaire showman is having
on the party.
NYSE Arca Rules Partly Responsible for August ETF Rout, SEC Says. A bout of market mayhem that halted trading in hundreds of
exchange-traded funds in August was exacerbated by stock exchange rules
intended to limit extreme price movements, according to a U.S.
regulator’s report released Tuesday. The Securities and Exchange
Commission’s analysis of the events on Aug. 24 said price bands imposed
by exchange NYSE Arca restricted how quickly ETFs could rebound after
steep price declines triggered halts. Arca’s narrow bands, which it has
since proposed to widen, may have spurred more delays by limiting faster
price adjustments, the regulator’s report said.
Wall Street Journal:
U.S. Spy Net on Israel Snares Congress. National Security Agency’s targeting of Israeli leaders also swept up the content of private conversations with U.S. lawmakers.
President Barack Obama announced two years ago he would curtail
eavesdropping on friendly heads of state after the world learned the
reach of long-secret U.S. surveillance programs. But behind the scenes,
the White House decided to keep certain allies under close watch,
current and former U.S. officials said. Topping the list was Israeli
Prime Minister Benjamin Netanyahu.
Buffett subsidiary faces renewed misconduct claims. The
mobile home subsidiary of Warren Buffett's Berkshire Hathaway is
strongly denying renewed accusations that it exploits minorities, as the
controversy threatens to seep into the 2016 presidential race.
Brazil primary budget deficit swells, debt seen climbing. Brazil's primary
public sector budget deficit widened sharply in November, the central
bank said on Tuesday, as falling tax revenues undermined government
efforts to shore up public accounts amid a deepening recession. At
19.567 billion reais ($5.07 billion), the November primary shortfall
was the third worst on record. The deficit, which represents revenues
minus expenditures before debt interest payments, is a closely watched
gauge of creditworthiness.
Isis 'fatwa' on female sex slaves tells militants how and when they can rape captured women and girls. (video) Thousands of women and girls from religious minorities have been captured and enslaved by the group.
Isis has released a fatwa detailing how and when its fighters can
rape female sex slaves – “one of the inevitable consequences of jihad”.
The document, drawn up by the terrorist group’s “Committee of Research
and Fatwas”, was revealed by Reuters news agency after being discovered
among a huge
trove of documents seized by US special forces in Syria.
Oettinger Warns of 'Serious' Danger EU May Break Up. Cites number of
countries with unstable or populist govts as reason for concern, citing
interview with the European Commissioner.
None of note
Asian equity indices are -.25% to +.50% on average.
Asia Ex-Japan Investment Grade CDS Index 138.25 unch.
Asia Pacific Sovereign CDS Index 72.0 unch.
Bloomberg Emerging Markets Currency Index 69.52 -.08%.
Pending Home Sales for November are estimated to rise +.7% versus a +.2% gain in October.
10:30 am EST
Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,766,670 barrels versus a -5,877,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +411,110 barrels versus a +1,111,000 barrel gain the prior week. Distillate supplies are estimated to rise by +433,330 barrels versus a -661,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.09% versus a -.6% decline prior.
None of note
Other Potential Market Movers
The Eurozone M3 data, $35B 5Y T-Note auction and the $29B 7Y T-Note auction could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer 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.