Bond Sales Tumbling in Worst Month Since Lehman Aftermath: Credit Markets. Corporate bond sales worldwide are tumbling on concern Ireland’s debt crisis will spread across Europe as returns on the notes approach their worst month since credit markets froze two years ago. Issuance has slumped 31 percent since Nov. 15, compared with the same period a year earlier, after surging 34 percent in the first half of the month, according to data compiled by Bloomberg. Plunging returns on debt of borrowers from France’s Credit Agricole SA to Bentonville, Arkansas-based Wal-Mart Stores Inc. are dragging bonds to a 1.08 percent loss in November, Bank of America Merrill Lynch index data show.
Hedge Funds Raise Natural Gas Wagers to Four-month High: Energy Markets. Hedge funds increased bullish bets on natural gas to the highest level in four months on speculation that lower-than-normal temperatures will bolster heating demand and trigger withdrawals from record stockpiles. The funds and other large speculators increased so-called net-long positions, or wagers on rising prices, by 50 percent in the seven days ended Nov. 23, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report.
Forged Comment Letters Sent to Regulators Writing Swaps Rules. Forged comment letters purportedly from an H.J. Heinz Co. executive, a Burger King Co. franchise and at least five other Arkansas-based officials or businesses were sent to the Commodity Futures Trading Commission, which is considering rules for the $583 trillion swaps market. The letters, some of which contain identical passages, criticize banks for their “cartel-like control of the derivatives market.” They include signatures from a circuit court judge, a county sheriff, a lawyer and a mental health counselor. All were forgeries, according to interviews conducted by Bloomberg News.
U.S., EU Expect Limited Progress at Climate Talks, No Treaty. U.S. and European Union envoys said they expect progress on forming a $100 billion fund to fight global warming and on protecting forests at climate talks in Cancun, Mexico, though no treaty will be agreed.
Japan Unemployment Rises, Output Falls, Showing Risk Economy May Contract. Japan’s industrial production decreased and the unemployment rate unexpectedly climbed in October, providing early signs that the country’s economy will likely shrink this quarter. Factoryoutput declined 1.8 percent from September, the sharpest drop since February 2009, the Trade Ministry said in Tokyo today. The jobless rate increased to 5.1 percent from 5 percent and the economy lost 180,000 jobs, the most since May, according to the statistics bureau. Bond prices rose. The figures add to evidence that Japan’s economy may contract for the first time in five quarters, as the expiration of stimulus measures and weak exports prompt companies such as Toyota Motor Corp. to reduce production. Japan’s central bank may face pressure to ease policy further as sluggish demand fuels deflation, according to economist Yuichi Kodama.
WikiLeaks Using Amazon(AMZN) Servers After Attack. WikiLeaks, the website that published a quarter-million sensitive diplomatic cables on Sunday, is using Amazon.com Inc. servers in the U.S. to help deliver its information. It sounds like an odd choice, but it could make sense. The site cablegate.wikileaks.org, which WikiLeaks is using for the diplomatic documents, is linked to servers run by Amazon Web Services in Seattle, as well as to French company Octopuce. Wikileaks.org, the site’s front page, links back to Amazon servers in the U.S. and in Ireland. Several Internet watchers, including technologist Alex Norcliffe, reported earlier on WikiLeaks’ use of Amazon services.
Russian Missiles Fuel U.S. Worries. The U.S. believes Russia has moved short-range tactical nuclear warheads to facilities near North Atlantic Treaty Organization allies as recently as this spring, U.S. officials say, adding to questions in Congress about Russian compliance with long-standing pledges ahead of a possible vote on a new arms-control treaty. U.S. officials say the movement of warheads to facilities bordering NATO allies appeared to run counter to pledges made by Moscow starting in 1991 to pull tactical nuclear weapons back from frontier posts and to reduce their numbers. The U.S. has long voiced concerns about Russia's lack of transparency when it comes to its arsenal of tactical nuclear weapons, believed to be many times the number possessed by the U.S.
'Cyber Monday' Sales Show Strength. Even Following a Weekend With Solid Online Shopping, Heavy Promotions Help Produce Double-Digit Gains for the Day. Early estimates indicated overall sales gains of about 20% from a year earlier for "Cyber Monday," the nickname for the Monday after Thanksgiving. That comes on top of strong online sales growth on Thanksgiving Day and Black Friday. For those two days combined, comScore Inc. reported that online shoppers spent about $1.1 billion, up more than 15% from $913 million a year earlier.
Attack by WikiLeaks. For all of his self-justification as an agent of "pure" transparency, Mr. Assange is not serving the interest of free societies. His mass, indiscriminate exposure of anything labeled secret that he can lay his hands on is a hostile act against a democracy that is fighting a war against forces bent on killing innocents. Surely, the U.S. government can do more to stop him than send a stiff letter.
ABB to Acquire Baldor(BEZ) for $3 Billion. Switzerland conglomerate ABB Group plans to announce Tuesday that it is acquiring electric motor manufacturer Baldor Electric Co. for about $3 billion, the companies said. ABB planned to pay about $63.50 per share in cash for Fort Smith, Ark.-based Baldor. The deal would mark ABB's first major acquisition in the U.S. and retain Baldor's headquarters in Arkansas and the brand name. The Baldor sale would give ABB a foundation to establish a presence in the U.S. while the deal would also allow Baldor to take advantage of ABB's global distribution. Shares of Baldor closed at $45.11 on Monday on the New York Stock Exchange, giving the company a market capitalization of $2.12 billion.
CNBC:
North Korea Says It Has 'Thousands of Centrifuges'. Secretive North Korea detailed for the first time its expanded nuclear program on Tuesday, saying it had thousands of centrifuges as pressure built on China to rein in its ally amid heightened tensions on the peninsula.
Seagate(STX) Halts Talks With Private Equity Firms. A potential takeover of Seagate Technology, which could have been worth about $9 billion, fell apart on Monday and the hard drive disk maker will instead pursue a share buyback plan.
Splits in Euro Zone Emerge Amid Debt Crisis. Even as Europe struggles to contain its latest debt crisis, fresh fissures are emerging that show the euro zone diverging into two — or even three — different economic parts that threaten to compound the problems even further.
IBD:
Drugmaker Diversifies Its Product Lineup Through Acquisitions. To diversify its asset portfolio, Endo Pharmaceuticals (ENDP) went shopping this year. In cutting three deals, Endo convinced many investors and analysts that it could survive the slowing growth and generic competition that inevitably threaten all branded drugs.
US Senate Fails to Repeal Unpopular Tax Provision. Efforts to repeal what is widely seen as a burdensome tax provision in the new federal healthcare law failed in the U.S. Senate on Monday despite broad support to drop it.
Barclays(BCS) Attracts Unusual Flurry of Put Trading. Unusual put activity on the U.S.-listed shares of British bank Barclays Plc on Monday grabbed a lot of attention among traders due to the massive amount of trading and the unusual order size. In all, about 161,000 puts changed hands in Barclays, well above their average daily volume of 1,167 contracts versus only 3,050 calls, according to option analytics firm Trade Alert.
Telegraph:
Hedge Fund Manager Mark Hart Bets on China as the Next 'Enormous Credit Bubble' to Burst. Mark Hart, an American hedge fund manager who has made millions predicting the crises in US sub-prime market and European debt, has launched a fund to bet on the imminent implosion of China. Mr Hart, who runs Corriente Advisors from Fort Worth Texas, has told potential investors in a presentation that China is in the "late stages of an enormous credit bubble". When this bursts, the financier said he expects an "economic fall-out" that will be as "extraordinary as China's economic out-performance over the last decade".
The Australian:
Hillary Clinton Condemns WikiLeaks Cable Release as 'Attack'. THE WikiLeaks release of diplomatic memos was an "attack on the international community", US Secretary of State Hillary Clinton said today. Ms Clinton vowed to prevent future leaks, as other Obama administration officials warned of a criminal investigation against website founder Julian Assange. "This disclosure is not just an attack on America's foreign policy interests. It is an attack on the international community," Ms Clinton said after meeting Turkish Foreign Minister Ahmet Davutoglu. "I want you to know that we are taking aggressive steps to hold responsible those who stole this information.
Financial News:
China's central bank should clearly state that it is shifting to a "prudent" monetary policy and allow further yuan appreciation to combat rising inflation, Sheng Songcheng wrote. Sheng is head of the central bank's Shenyang branch. China may see inflation quicken this month from October's price rises driven by food costs, making it "almost certain" that inflation will top 3% for the full year, Sheng wrote. There is still room for further increases in reserve requirement ratios for banks, Sheng said. The People's Bank of China should also relax a ceiling on the benchmark deposit rate and allow rates to float higher to help narrow the current negative real rate, Sheng said.
China Daily:
China needs to raise interest rates by another 200 basis points to curb inflation given existing excess liquidity, Zhong Jiyin, an economist with the Chinese Academy of Social Sciences, wrote.
China's Guangdong province may raise the minimum wage early next year to help ease the region's labor shortage, citing Ge Guoxing, deputy director-general of the province's labor department.
Evening Recommendations
None of note
Night Trading
Asian equity indices are -1.75% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 118.0 +7.5 basis points.
Asia Pacific Sovereign CDS Index 113.50 +1.75 basis points.
S&P/CS 20 City House Price Index MoM% SA for September is estimated to fall -.4% versus a -.28% decline in August.
9:45 am EST
Chicago Purchasing Manager for November is estimated to fall to 59.9 versus a reading of 60.6 in October.
10:00 am EST
Consumer Confidence for November is estimated to rise to 53.0 versus a reading of 50.2 in October.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Kocherlakota speaking, NAPM-Wilwaukee Index, Bloomberg FCI Monthly, weekly retail sales reports, weekly ABC consumer confidence reading, (LOW) analyst meeting, (BIIB) analyst meeting, Barclays Lodging Conference, Citi Basic Materials Conference, Piper Jaffray Healthcare Conference and the Canaccrod Genuity Energy Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and real estate shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 98.01 bps +2.49%
European Financial Sector CDS Index 146.09 bps +8.56%
Western Europe Sovereign Debt CDS Index 190.66 bps +5.73%
Emerging Market CDS Index 234.99 bps +4.24%
2-Year Swap Spread 26.0 unch.
TED Spread 14.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 233.0 -3 bps
China Import Iron Ore Spot $166.70/Metric Tonne +.12%
Citi US Economic Surprise Index +19.40 -4.7 points
10-Year TIPS Spread 2.13% -1 basis point
Overseas Futures:
Nikkei Futures: Indicating -46 open in Japan
DAX Futures: Indicating +53 open in Germany
Portfolio:
Slightly Higher: On gains in my Medical, Biotech and Technology long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades at session highs, reversing meaningful morning losses, despite rising Korean Peninsula tensions and increasing euro sovereign debt angst. On the positive side, Coal, Energy, Oil Service, Bank, Hospital, HMO, Construction, Education and Road & Rail shares are especially strong, rising more than .5%. Small-cap and cyclical shares are outperforming. (XLF) has traded very well throughout the day. The 10-year yield is falling -4 bps to 2.83%. The euro currency continues to trade very poorly. Copper is rising +.3% and the S&P GSCI Ag Spot Index is rising +.46% despite euro weakness. On the negative side, Airline, Wireless, Ag, Networking, Telecom and Drug shares are under pressure, falling more than 1.0%. The Russia sovereign cds is rising +5.76% to 172.11 bps, the Hungary sovereign cds is gaining +5.03% to 362.87 bps, the Portugal sovereign cds is surging +6.54% to 538.77 bps, the Spain sovereign cds is climbing +8.27% to 350.46 bps and the UK sovereign cds is rising +11.31% to 78.32 bps. Moreover, the Emerging Markets Sovereign CDS Index is surging +8.75% to 216.22 bps and other key cds indices continue their recent sharp moves higher. While the euro financial sector cds index has soared of late, it is still below levels seen during May/June. The Citi Asia Economic Surprise Index continues to weaken, falling -1 point to -7.9 today, which is the lowest reading globally and the lowest since May 2009. Given the ongoing jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals, rising Korean peninsula tensions and financial sector Basel III concerns, the broad market continues to remain resilient, which is a big positive. Market leaders remain relatively firm. Spain's debt auction on Thursday May be the market's next big test. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, diminishing economic fear, seasonal strength, less financial sector pessimism and short-covering.
EU's Irish Rescue Fails to Stem Contagion; Spain Bonds Drop. European governments’ 85 billion- euro ($113 billion) bailout package for Ireland failed to quell the market turmoil menacing the euro as stocks, bonds and the currency declined. Irish 10-year bonds slid after an early advance, Spanish bonds slid by the most since the euro’s launch and European shares sank 1.4 percent. The euro slid against 15 of its 16 major counterparts and the cost of insuring the debt of Spain and Portugal against default soared to records. “The notion that a rescue package for Ireland would create a firewall and stop the fear of contagion is clearly discredited,” said Preston Keat, director of research at Eurasia Group, a political consultancy, in London. “Portugal and Spain are already facing pressures in the markets.” Six months after the Greek rescue exposed flaws in the euro’s makeup and fueled doubts whether 16 countries belong in the same currency union, policy makers again found themselves meeting on Sunday in Brussels racing to calm markets.
Portugal, Spain Debt Risk Soars to Records on Bailout Concern. The cost of insuring against default on Portuguese and Spanish government debt soared to record-high levels as an aid package for Ireland failed to reassure investors the region’s debt crisis will be contained. Credit-default swaps on Portugal jumped 37 basis points to 539, and contracts on Spain climbed 28.75 to 351.5, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments increased 9 basis points to 197, a record based on closing prices. “The market seems to think it’s inevitable Portugal requests assistance next -- perhaps in January? -- and then after that Spain will be scrutinized with a fine tooth comb over the coming months,” said Jim Reid, head of fundamental strategy at Deutsche Bank AG in London. Swaps on Italy rose 28 basis points to 244, the highest level in almost six months, as the nation’s borrowing costs increased at a sale of 6.8 billion euros of bonds. The cost of insuring the subordinated bonds of European banks also rose as investors bet Ireland’s precedent for making junior bondholders share the cost of a rescue will be followed. Finance Minister Brian Lenihan told state broadcaster RTE the government needs to impose “big haircuts” on junior bondholders after the bailout. The Markit iTraxx Financial Index of swaps on the junior debt of 25 European banks and insurers soared 16.5 basis points to 294.5, after earlier rising to the highest level since April 2009, according to JPMorgan Chase & Co. The senior index was up 1 at 165, after earlier falling as much as 9 basis points. Swaps on Ireland increased 5.5 basis points to 604 and Greece, which was bailed out earlier this year, dropped 10 basis points to 962, CMA prices show.
Euro Falls to Two-Month Low Versus Dollar, Yen on Concern Crisis to Spread. The euro fell to the lowest levels in more than two months against the dollar and yen as an 85 billion-euro ($112 billion) aid package for Ireland failed to stem concern that Europe’s sovereign-debt crisis will broaden. “The euro is unable to sustain even modest upticks, and its weakness is dragging down other major currencies,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “The European debt situation is getting more serious. It’s not just about Ireland and Portugal anymore; Spain and Italy are being hit even harder.”
Hungary Stocks Enter Bear Market, Bonds Sink on Concern Crisis Will Expand. Hungary’s benchmark equity index dropped more than 20 percent from its 2010 peak and government bonds sank as a surprise interest-rate increase compounded concern that Europe’s debt crisis is spreading east. The BUX Index fell 2.6 percent to 20,221.37 at the close in Budapest, the world’s second-biggest drop today after Turkey’s ISE National 100 Index.
Baltic Index Drops a Third Session as Fleet Growth Lowers Rates. The Baltic Dry Index, a measure of commodity-shipping costs, fell for a third consecutive session as fleet expansion pulled down rates to hire bigger iron-ore carriers, even as steel prices rise. The gauge declined 25 points, or 1.2 percent, to 2,145 points, according to the London-based Baltic Exchange. That was the lowest level since Aug. 9. Rents to hire iron ore-hauling capesize ships retreated 4.6 percent to $29,333 a day, for a 16 percent slide in the vessels’ four-day run of losses. “Despite an improved steel-price backdrop, the dry-bulk market has been unable to participate on the back of increased vessel deliveries,” Omar M. Nokta, head of research at Dahlman Rose & Co. in New York, wrote in a note e-mailed today.
EU Says Euro-Area Growth to Weaken in 2011 as Crisis Still 'Casts Shadow'. Europe’s economy may weaken next year as budget cuts to stem a mounting debt crisis hurt consumer demand and faltering global expansion curbs exports, the European Commission said. Gross-domestic-product growth in the 16-nation euro region may weaken to 1.5 percent in 2011 from 1.7 percent this year, the Brussels-based commission said in a report published today. While Germany may expand 3.7 percent this year, the economies of Ireland, Greece and Spain will continue to shrink.
Wall Street Journal:
Kucinich Cancels Fed Hearing. Rep. Dennis Kucinich postponed a hearing to scrutinize the Federal Reserve’s latest round of debt buying — the day after his office announced it. Aides to the Ohio Democrat, who frequently questions the Fed, alerted other committee Democrats last Wednesday that the Oversight and Government Reform subcommittee he chairs will indefinitely delay a hearing, originally scheduled for Tuesday, “in order to work with the Federal Reserve to allow them to testify,” according to an email.
Japan Rejects China's Proposed Six-Party Talks. Japanese Foreign Minister Seiji Maehara rejected China's new proposal to hold emergency talks between North Korea and related nations, saying Pyongyang must first display sincere effort to ease its confrontational posture.
CNBC:
Deficits Posing Threat to More Stock Market Gains: Pros. Deficits from governments large and small pose the biggest challenge ahead to a stock market poised to go higher, a panel of experts told CNBC. While the economic climate is favorable and valuations attractive, the market and economy remain susceptible to shocks, said Goldman Sachs analyst Abby Joseph Cohen. "On the intermediate- to long-term side, we must do something to address not only the federal deficit but also the deficit at the state and local level," said Cohen, head of Goldman's Global Markets Institute. "Keep in mind much of this is related to long-term liabilities."
Dennis Gartman: 'Eventually, the Euro Breaks Apart'. Faced with "almost terminal problems," Dennis Gartman on Monday said the euro could soon unravel. "Eventually, the euro breaks apart into a northern euro and a southern euro," said Gartman, explaining that the Continent's many languages, religions and cultures are too diverse for the singular currency to work.
Obama to Freeze Government Salaries at All Time High. Of course, government workers thank him, as this means federal salaries which have exploded in the past 5 years will be stuck at all time highs for at least two years, even as nominal salaries for everyone else (except FIRE workers of course) continue to decline. (graph)
Tax Battle in DC Promises a 'Lame' Result. The first showdown of the lame duck Congress is expected to take place over extending the Bush tax cuts -- and it will do nothing but highlight the gulf between the Republican and Democratic camps, The Post has learned. Chances of a compromise are growing, though far from certain, as both sides come to grips with the realities of inaction, the source said. "The markets have priced in a two-year extension and I don't think they understand how tenuous that is," the source said, adding that Senate leaders have yet to start working on a compromise plan.
New York Times:
For PayPal, the Future is Mobile. By adding legions of new users and online retailers, PayPal is threatening to overtake eBay’s(EBAY) struggling marketplace as the biggest breadwinner within a few years.
After Del Monte(DLM), Who's Next on the Shopping List. The buyout of Del Monte Foods is the latest in a series of multibillion-dollar deals in the food industry this year, including the $19.5 billion takeover of Cadbury by Kraft Foods, and Coca-Cola’s $13.6 billion purchase of Coca-Cola Enterprises’ North American operations.
cnet:
Report: 3D TV Sales to More Than Double in 2011. The adoption of 3DTVs is expected to spike next year. Futuresource Consulting predicts that 4 million 3DTVs to be sold worldwide by the end of this year. The figure could at least double next year to 5 million 3DTVs in the U.S. and 3 million in Western Europe, the market researcher said today. Futuresource added that so far, "year-one adoption of 3DTV is running at a far quicker rate in most territories than it did for high-definition."
Congressman Wants WikiLeaks Listed as Terrorist Group. The incoming chairman of the House Homeland Security Committee says WikiLeaks should be officially designated as a terrorist organization. Rep. Peter King (R-N.Y.), the panel's presumptive next head, asked the Obama administration today to "determine whether WikiLeaks could be designated a foreign terrorist organization."
Politico:
WikiLeaks Target: American Power. The first victims of the leaked cables released Sunday are anyone who shared secrets with American diplomats, especially Arab leaders who saw their private security deals — and their insistence that those deals be kept from their people — published online with undiplomatic bluntness. But the main effect of the many details of American diplomacy revealed in the thousands of documents obtained and released by WikiLeaks was to deepen the damage to their intended targets: U.S. foreign policy, prestige and power.
Reuters:
Fed's Bullard - Funding of Consumer Bureau a Worry. St. Louis Federal Reserve President James Bullard said on Monday funding for a consumer protection office established under regulatory reform laws is not based on a clear sense of how much the bureau needs and is a source of concern. "The amount of money allocated in the law is not based on a careful assessment of what the needs of the bureau will be as it attempts to fulfill the mandate of the Congress," he said in remarks prepared for delivery to a conference at the St. Louis Fed.
Gartner Cuts PC Shipment Forecasts. Research firm Gartner cut its forecasts for global personal computer sales in 2010 and 2011, citing weaker demand in the face of an uncertain economy and as some customers choose tablet computers over PCs.
US Commercial Real Estate Vacancies Peaking - Realtors. U.S. commercial real estate vacancy rates have already peaked or will soon top out, though rents are likely to continue to fall, a realtors group said on Monday.
Financial Times Deutschland:
German CDU Wants Curbs on Solar Capacity Growth. Members of Chancellor Angela Merkel's Christian Democratic Union want to limit the growth in solar-panel installations in Germany because the rising costs to consumers may undermine the acceptance of alternative energy. CDU lawmaker and energy-policy expert Thomas Bareiss said in a letter to Environment Minister Norbert Roettgen that the government should cut the guaranteed gratuity per kilowatt hour for newly installed solar panels by an extra amount on Jan. 1, the newspaper said. Depending on installed solar-panel growth in the first months of 2011, additional special gratuity cuts for new installations should be introduced in the middle of the year, the newspaper cited Bareiss as saying. The annual amount to be paid by consumers to subsidize environmentally friendly energy production will increase to 13 billion euros ($17.3 billion) on Jan. 1 from 8 billion euros, the newspaper said.
Late November DRAM Contract Prices Down 12-13%. DRAM contract prices are dropping amid global oversupply caused by increased supply from Samsung Electronics, Inotera Memories and Nanya Technology, the sources said. As spot market prices for 2GB DDR3 modules have slipped to below US$20, contract prices may also drop to below US$20 by the end of 2010, the sources indicated.
