- The U.K. is likely to pull out of the European Union’s single market for goods and services and seek a completely new trading relationship with the bloc, Prime Minister Theresa May will say Tuesday as she sets out her plan for Brexit. In a blow to business groups pressing for the closest possible links to Europe, May will use a speech in London to explicitly say she expects Britain to leave the single market and overhaul its links to the customs union, according to a person familiar with the matter. She has no interest in a “partial” or “associate” membership of the EU or “anything that leaves us half-in, half-out,” according to extracts released by her office. “We seek a new and equal partnership -- between an independent, self-governing, global Britain and our friends and allies in the EU,” the premier will say, according to the extracts. “We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave.”
- As Chinese leaders prepare for Donald Trump taking office this week, Premier Li Keqian warned that an increasingly complicated global political situation will weigh on the economy. Geopolitical risk and political shifts add great uncertainty to the existing headwinds for the expansion, Li said at a meeting Friday on the government work report for this year, the state-run People’s Daily reported Monday. Li’s comments came ahead of President Xi Jinping’s keynote speech to the World Economic Forum on Tuesday, in which he is expected to talk about global economic conditions. Chinese leaders are preparing for what may be a tumultuous new year after Trump occupies the White House on Jan. 20, as well as new elections coming soon in Europe and South Korea.
- When Kevin Smith realized late last year that China was getting serious about defending its currency, his first move was to dial back bearish bets on the yuan. His second move: double down on wagers against Chinese stocks. Smith, whose global macro hedge fund has returned about 350 percent over the past decade, says China’s attempts to prop up its currency are tightening domestic monetary conditions and making a credit crisis increasingly likely. To him, that means shares of banks and other “zombie” companies may be the first dominoes to fall as China faces a reckoning after years of debt-fueled growth.
- German carmakers pushed back Donald Trump’s threats of import duties on the autos they make in Mexico, pointing to extensive production expansion in the U.S. in recent years. BMW AG, which the president-elect singled out in an interview with German newspaper Bild on Sunday, sought to defuse potential tensions by stating that its largest factory is in South Carolina and that cars made at a planned, smaller factory in Mexico will be exported globally. Trump said BMW will face a 35 percent import duty on vehicles it exports to the U.S. from Mexico. “We take the comments seriously, but it remains to be seen if and how the announcements will be implemented by the U.S. administration,” Matthias Wissmann, president of German auto industry association VDA, said in an e-mailed statement. The U.S. Congress will probably show “substantial resistance” against the duty proposals, he said.
- Emerging-Market Currencies and Stocks Slide on Trade Jitters. Emerging-market assets declined as concern grew that threats to global trade and growth are proliferating. Mozambique’s international bond tumbled after the nation said it won’t make an interest payment on Jan. 18. The MSCI Emerging Markets Index dropped the most in more than three weeks and a gauge of currencies slipped for the first time in three days. Investors turned bearish after a report that the U.K.’s exit from the European Union would also involving leaving the single market. U.S. President-Elect Donald Trump said other members would also quit the bloc. All but two of the 24 emerging-market currencies tracked by Bloomberg slid, led by Turkey’s lira, the world’s worst performer this year. Saudi Arabia’s Tadawul All Share Index was the biggest drag among major world gauges.
- European stocks fell on concern Britain will quit the European Union’s single market and as U.S. President-elect Donald Trump suggested other countries could follow the U.K. out of the bloc. The Stoxx Europe 600 fell 0.8 percent at the close, after Friday’s biggest rise in a month. The U.K.’s FTSE 100 lost 0.2 percent, ending a streak of 14 straight advances and 12 consecutive all-time highs. Its losses were limited by gains in exporters as as the pound tumbled ahead of U.K. Prime Minister Theresa May’s speech on Brexit plans on Tuesday.
- OPEC probably won’t need to extend a deal it reached with other crude producers to cut output, given compliance with the reductions and the outlook for an increase in global demand, Saudi Energy Minister Khalid Al-Falih said. The re-balancing of the oil market should take place by the end of the first half of the year, Al-Falih told reporters during an energy event in the United Arab Emirates capital of Abu Dhabi. Demand will pick up in the summer, and OPEC wants to make sure markets are well-supplied, he said.
- Donald Trump and the U.S. Federal Reserve are heading for a collision that will almost certainly result in a stronger dollar, two leading economists said. “I see a likelihood for a major clash developing in the next year, year and half, between the Trump administration’s desire to go for 3 to 4 percent growth and the growing attention of the Fed to emerging inflation in their own 2 percent mandate,” Northwestern University’s Robert J. Gordon told a conference in Paris on Monday. Barry Eichengreen of the University of California Berkeley sees “double-digit” dollar appreciation as a possible consequence of Trump’s fiscal stimulus, tax reform and protectionist trade policy.
Wall Street Journal:MarketWatch.com:
- China Digs In Heels, Girds for Trump’s Unpredictability. Chinese officials, academics reached out to U.S. contacts to help interpret president-elect’s remarks.
- Democrats’ Fissures Re-Emerge as Party Seeks New Leader. Officials fear hangover from Sanders-Clinton primary fight may threaten unity.
- For Shale Drillers, Rising Oil Prices Also Come With Rising Costs. Much of shale firms’ savings during downturn came at expense of oil-field-services firms, which aim to raise prices.
- Pound Slides After Theresa May's Full Speech Leaks, Laying Out Her 12-Point Plan.
- Angry Germany Slams Trump Criticism: Urges US To "Build Better Cars", Accuses Washington Of Causing Refugee Crisis.
- Trump Promises "Insurance For Everybody" In Obamacare Repeal.
- Istanbul Nightclub Attacker Who Killed 39 On New Year's Day Has Been Captured.
- IMF Downplays Trump Stimulus Effect; Slashes Saudi, Mexico Growth In Latest World Economic Outlook.
- While Davos Elites Address Populism, Just "Eight Men Own Same Wealth As Half The World".
- NYSE Short Interest Plunges To Lowest In Three Years. (graph)
- Obama Sends 10 More Guantanamo Detainees To Oman.
- Oil Slides After Saudis Suggest Early End To OPEC Deal. (graph)
- China Warns Trump "It Will Take Off The Gloves" If He Continues To Provoke Beijing.
- Ray-Ban Maker Luxottica To Merge With French Esilor, Creating $49 Billion Eyewear Giant.
- Tumbling Pound Rattles Global Markets; Chinese Stock Slide Forces Government Intervention. (graph)
- Can Marine Le Pen Pull Off French Election Stunner? Germany Loses No Matter Who Wins.
- Trump Responds To CIA Chief Brennan, Asks "Was He The Leaker Of Fake News?"
- Davos Elite Eat $40 Hot Dogs While "Struggling For Answers", Cowering in "Silent Fear".
- Exclusive: China to target around 6.5 percent growth in 2017 - sources. China will lower its 2017 economic growth target to around 6.5 percent from last year's 6.5-7 percent, policy sources said, reinforcing a policy shift from supporting growth to pushing reforms to contain debt and housing risks. The proposed target was endorsed by top leaders at the closed-door Central Economic Work Conference in mid-December, according to four sources with knowledge of the meeting outcome. "The target will be around 6.5 percent, which indicates that slightly slower growth is acceptable," said one of the sources, a policy adviser.
- China stocks fall for 5th session, pressured by tech stocks. China's main indexes fell for the fifth straight session on Monday, led by tech stocks as investors grew gloomy about 2017 prospects following comments by the premier and official estimates suggesting slowing economic growth in big cities. The blue-chip CSI300 index was unchanged at 3,319.45 points, while the Shanghai Composite Index lost 0.3 percent to 3,103.43 points. The tech-heavy ChiNext Price Index, the benchmark index tracking listed start-up companies, slumped as much as 6.1 percent in its 8th session of losses to hit a 16-month low, as faster approvals for IPOs increased the supply of equity in the market. The start-up index closed 3.6 percent lower, within sight of lows plumbed during the market crash in 2015.
- Asian indices are -.5% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 118.0 +1.5 basis point.
- Asia Pacific Sovereign CDS Index 34.5 +.5 basis point.
- Bloomberg Emerging Markets Currency Index 69.77 -.44%.
- S&P 500 futures -.29%.
- NASDAQ 100 futures -.22%.
Earnings of Note
8:30 am EST
8:30 am EST
- Empire Manufacturing for January is estimated to fall to 8.4 versus 9.0 in December.
- (NAVG) 2-for-1
- The Fed's Dudley speaking, Germany ZEW Index, World Economic Forum and the UK CPI report could also impact trading today.