Evening Headlines
Bloomberg:
- Franco-German Push for Budget Policing Snubs Investors' ECB Plea. Germany and France are pushing for closer economic ties among euro nations and tougher enforcement of budget rules to counter the debt crisis, snubbing investor pleas to back an expanded European Central Bank role. German Chancellor Angela Merkel, who will use a speech to lawmakers in Berlin today to outline her stance before a Dec. 9 European Union summit, has repeated her push to rework EU rules to lock in budget monitoring and seal off the ECB from political pressure. French President Nicolas Sarkozy late yesterday called for "more discipline" and automatic penalties for nations that break fiscal rules. Merkel's refusal to deploy the ECB is a rebuff to President Barack Obama after he exhorted Europe's leaders to take more action to combat the crisis. The chancellor is loath to agree to follow the Federal Reserve and the Bank of England in policies she views as akin to fighting debt with more debt. Enlisting the ECB in battling the crisis would violate the central bank's independence and set it on a course of action that might not work, destroying its credibility. "The market is questioning Merkel's tough approach," Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London, said in a telephone interview. Investors want "clarity on what the framework will look like and what the financial bridge will look like" to fund euro-area governments and banks that need aid while fiscal ties are negotiated, he said.
- EU Wimps Out on Oil Sanctions to Halt Iran's Nuclear Drive: View. Who would have thought a week in which protesters rampaged through the U.K. Embassy in Tehran would end with Europe going soft on the Iranian regime? Yet that’s exactly what happened. At a meeting Dec. 1 in Brussels, European Union foreign ministers signed off on measures against some 180 individuals and companies in reaction to Iran’s continued support for terrorism and an International Atomic Energy Agency report finding that Iran had conducted secret activities “specific to nuclear weapons.” This was expected and deserves a positive response (as do new penalties the ministers announced against Syria). The real news, however, was what the EU didn’t do: Announce an agreement, proposed by France and backed by the U.K., Germany and the Netherlands, to proceed with a full embargo on imports of Iranian oil. Instead, Catherine Ashton, the EU foreign policy chief, said that any consideration of steps against Iran’s energy sector would go “to the technical experts.”
- China's Stocks Decline on Economic Concern, Head for Fourth Week of Losses. China’s stocks (SHCOMP) fell, pushing the benchmark index towards a fourth week of losses, as sliding property prices and the slump in manufacturing added to concern the economic slowdown is deepening. China Shenhua Energy Co. (601088) and Jiangxi Copper Co. (600362) led losses for energy and material producers, the biggest decliners among 10 industry groups in the CSI 300 Index. China Southern Airlines Co. the largest domestic carrier (600029), plunged 4.9 percent after the China Securities Journal said the government raised wholesale jet fuel prices. The Shanghai Composite Index rose 2.3 percent yesterday, as the first cut in lenders’ reserve requirements since 2008 overshadowed a report showing the Purchasing Managers’ Index contracted for the first time in two years. The Shanghai Composite, which tracks the bigger of China’s stock exchanges, slid 33.88 points, or 1.4 percent, to 2,352.99 at 1:05 p.m. local time. The Shanghai Composite has fallen 1.2 percent this week, the worst performing major index in Asia. The measure has slid 16 percent this year after the central bank raised interest rates three times and lifted the reserve-requirement ratio six times to curb inflation that reached a three-year high of 6.5 percent in July.
- Hong Kong Retail Sales Growth Slows for Third Month as China Tourism Cools. Hong Kong’s retail sales growth slowed for a third straight month as the threat of a global recession clouds the outlook for the labor market and consumption in the city. Manufacturing indexes in China, Taiwan and South Korea contracted in November, reports yesterday showed, adding to evidence the global economy is slowing as Europe’s debt crisis deepens. Goldman Sachs Group Inc. and DBS Group Holdings Ltd. cut their estimates for Hong Kong’s 2012 expansion, with the city’s export dependence making it vulnerable to moderating growth in China and developed nations. “Hong Kong’s retail sales will soften on weakening consumer sentiment,” Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd., said before the release. ‘Households will spend more cautiously amid uncertainty in the economy and the jobs market while demand from Chinese visitors may also start to flag.’’
- A Euro Crisis Deal Emerges. Head of Europe's Central Bank Signals Bigger Role if Nations Tighten Fiscal Union. European Central Bank President Mario Draghi signaled the bank could ramp up its role battling the debt crisis if euro-zone governments enforce tougher deficit cutting—suggesting outlines are emerging of a deal that investors have been clamoring to see happen. In his first appearance before the European Parliament since taking the ECB helm last month, Mr. Draghi offered a road map for policy makers. He called on euro-zone governments to quickly craft a "new fiscal compact," calling it "the most important element to start restoring credibility." He added that "other elements might follow, but the sequencing matters."
- Soros: World Financial System on Brink of Collapse. The world financial system not only isn’t functioning, it’s on the brink of collapse, according to investor George Soros. Despite their assorted problems, including corruption, weak infrastructure and shaky government, developing countries are relatively unscathed by the “deflationary debt trap that the developed world is falling into,” Mr. Soros said at a New York gathering to mark the 10th anniversary of the International Senior Lawyers Project, a group that provides pro bono legal services around the world. The current global financial system is in a “self-reinforcing process of disintegration,” Mr. Soros warned, and “the consequences could be quite disastrous. You have to do what you can to stop it developing in that direction.”
- Fed Officials Don't See Central Bank Cutting. Two Federal Reserve officials shot down speculation that the central bank might cut the interest rate it charges on loans to banks from its discount window. Richard Fisher, president of the Federal Reserve Bank of Dallas, sought to shoot down market speculation the central bank will reduce the discount rate. “I wouldn’t make that assumption at all,” he said in an interview Thursday with The Wall Street Journal, adding, “I don’t think that’s the correct conclusion.”
- YouTube Redsigns Around "Channels' Strategy. YouTube unveiled its largest redesign yet Thursday, bringing user personalization and the video web site’s growing selection of programming topics, or “channels,” front and center.
- Google(GOOG) Targets Amazon's 'Prime' With 1-Day Deliver. Google Inc. is aiming to challenge the e-commerce supremacy of Amazon.com Inc. by diving deeper into the fast-growing world of Internet retailing. The Web-search giant is in talks with major retailers and shippers about creating a service that would let consumers shop for goods online and receive their orders within a day for a low fee, said people familiar with the matter. The effort is a risky one, and would escalate Google's budding rivalry with Amazon, which has been riding the success of its $79-a-year Amazon Prime program.
- 12 Great Insights From Today's Big Bloomberg Hedge Fund Conference.
- Goldman's(GS) Top Strategist Sets His S&P 500 Target For 2012.
- Here's The SEC's Statement On Why It Can Prosecute Members Of Congress, But Doesn't.
CNBC:
- Return of the Credit Crunch: Caught in the Grip. “The credit market is not functioning right now,” says Guillermo Amann at Ormazabal, a Spanish maker of electrical components. “There is no money. The situation is becoming worse and worse.”It is a complaint that is being made across Europe and, increasingly, in the rest of the world. Sir Mervyn King, governor of the Bank of England, warned this week of “early signs of a credit crunch, with concerns that it will get worse”.
- Threat of Railroad Strike Spooks Retailers. A national railroad strike could potentially take place next week and it has the nation's retailers worried about their holiday season. "The Christmas shopping season could be severely affected as products destined for stores sit idle at ports or in traffic," a leading retail association said in an appeal to President Obama. It warned the economic effects of a strike would be broad and "linger into 2012."
- New SEC Tactics Yield Actions Against Hedge Funds. Financial regulators have long relied on outsiders to generate tips about potential fraud at hedge funds: disgruntled employees, news reports and disillusioned investors. Now, the Securities and Exchange Commission is ferreting out wrongdoing in a new way — and it’s bearing fruit. On Thursday, a new “analytics” division tasked with mining hedge fund data announced actions against six individuals and three hedge fund firms for alleged fraud.
- German Fears About Inflation Stall Bold Steps in Debt Crisis. Many economists say aggressive purchases of the sovereign bonds of heavily indebted states by the European Central Bank are the quickest and surest path to stabilizing the crisis. On Thursday, Mario Draghi, the bank’s president, laid the groundwork for bolder intervention in markets if certain conditions were met. To German ears those bond purchases, or anything that smacks of printing money, sound like a recipe for skyrocketing prices. German leaders, including Chancellor Angela Merkel and her former economic adviser, Jens Weidmann, now head of the German Bundesbank, have strongly discouraged any such move by the European Central Bank, stalling the rescue of the euro zone in the view of critics. The prospect of a dim historical memory — the antique photograph of the wheelbarrow full of nearly worthless bills — helping to drive the world off the economic precipice and into another deep recession may seem like the height of irrationality and even irresponsibility. But the German obsession with inflation has been difficult to overcome because Germans perceive themselves as more vulnerable to inflation today than their neighbors are. It is a force they believe could reduce or wipe out the competitive and financial edge they have labored to build. By robbing a currency of its value, inflation wipes the slate clean for debtors and savers alike. Germans say they like the slate the way it is because they are on the plus side of the ledger.
- Salvaging The Mythology Of Man-Caused Global Warming. If you read this column completely and carefully today, you will learn about the true state of the scientific debate over global warming. You will not get the truth about that from the Washington Post, the New York Times, or the rest of the self-regarded “establishment” media. They are devoted to the fun and games of play acting as if there is no legitimate scientific debate over whether mankind’s use of low cost, reliable energy from oil, coal and natural gas portends catastrophic global warming that threatens life on the planet as we know it.
Rothstein Kass:
Legal Insurrection:
- We Know Who Lost Egypt. Obama’s foolish policy of forcing Mubarak out of office precipitously without giving non-Islamist parties time to organize has resulted in Islamists achieving a sweeping victory in the first round of parliamentary elections. Strength by the Muslim Brotherhood was expected, but the extremely hard line Salafists had a very strong showing.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 19% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -24 (see trends).
- Egypt's Islamists Poised to Dominate Parliament. Islamists appear to have taken a strong majority of seats in the first round of Egypt's first parliamentary vote since Hosni Mubarak's ouster, a trend that if confirmed would give religious parties a popular mandate in the struggle to win control from the ruling military and ultimately reshape a key U.S. ally. Final results, expected Friday, will be the clearest indication in decades of Egyptians' true political views and give the long-banned Muslim Brotherhood a major role in the country's first freely elected parliament. An Islamist majority could also herald a greater role for conservative Islam in Egyptian social life and shifts in foreign policy, especially toward Israel and the Palestinians. The showing in Egypt — long considered a linchpin of regional stability — would be the clearest signal yet that parties and candidates connected to political Islam will emerge as the main beneficiaries of this year's Arab Spring uprisings. Tunisia and Morocco have both elected Islamist majorities to parliament, and while Libya has yet to announce dates for its first elections, Islamist groups have emerged as a strong force there since rebels overthrew Moammar Gadhafi in August. They also play a strong opposition role in Yemen.
- Japan Q3 GDP Likely To Be Revised Down After Capex Fall. Sales, profits and capital spending at Japanese companies fell for the second straight quarter in July-September as some firms turned cautious about the pace of recovery in the country due to a strong yen and the murky outlook for the global economy. Analysts said the faster-than-expected 9.8 percent drop in capital spending points to a downward revision in the nation's third quarter gross domestic product numbers, released next week. While the scenario that Japan's economy rebounded from an earthquake-triggered recession in July-September will remain intact, Friday's figures indicate a cautions stance among corporations.
- TEXT: Fitch: Chinese Banks' Cash Buffer Thinning as Liquidity Erodes. Fitch Ratings says that the weakening of bank asset quality in China is unlikely to fully appear in NPL ratios until well into a deterioration, if at all, as the authorities pursue a selective policy of forbearance and support for distressed borrowers. Instead, loan delinquencies will manifest themselves first as liquidity stress, as cash inflows from distressed borrowers slow and more resources are directed to support weak entities. In a special report published today, Fitch notes that while recent problems in informal lending and among property developers, SMEs, and local governments have not reached systemic levels, these are not isolated cases of distress, but rather emblematic of excesses from the recent credit boom.
- US Senators Blast CFTC, Gensler for MF Global Mess. Republican lawmakers blasted the chairman of the U.S. futures regulator on Thursday for his agency's role in the collapse of MF Global and called his recusal from the investigation a way to "avoid the heat." The Commodity Futures Trading Commission and its chairman, Gary Gensler, are under pressure because of the quick collapse of the futures brokerage and for allegedly not policing the firm's bookkeeping closely enough. Investigators are searching for as much as $1.2 billion in missing customer money, which regulators have said the firm may have diverted for its own needs.
- Solyndra Saw Staff 'Mutiny' Before Obama Visit. In the weeks leading up to a visit by President Barack Obama to Solyndra on May 25, 2010, the California solar-panel maker was in crisis. Prices for solar panels were in free-fall and the company's chief executive officer was bickering with customers unhappy with the amount of electricity produced by the cylindrical panels he invented, according to new e-mails released by Republicans investigating the now-bankrupt company. An initial public offering was on the skids, and finally, there was a "mutiny" by the company's entire executive team, who flagged the crisis to the company's board of directors.
- MF Global Accessed Client Funds For Weeks. MF Global had been dipping into client funds for weeks before its failure – rather than just in its final days as had been previously reported – say US authorities investigating the broker-dealer’s collapse. This comes as the failed company’s bankruptcy trustee revealed that some customer money from MF would never be recovered.
- The stress test for European banks won't be intensified, according to an agreement between the European Banking Authority and national regulators, citing a person close to the talks.
- Shanghai Home Sales Plunge to 6-Year Low in November. Transactions by area slump 53% y/y to 450,000 square meters last month, citing data from Shanghai Deovolente Realty. Sales were 36% lower than during the same time in 2008. Average home prices fell 6.6% y/y in November to 20,988 yuan per square meter. November new home transactions fell 39% y/y to 6,683 units in Beijing, the biggest drop among top 4 cities, citing Centaline Property data. Beijing's daily average sales of used-homes fell 56% y/y in Nov to lowest in 35 months.
Night Trading
- Asian equity indices are -1.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 206.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 160.25 -1.75 basis points.
- FTSE-100 futures +.41%.
- S&P 500 futures +.35%.
- NASDAQ 100 futures +.48%.
Earnings of Note
Company/Estimate
- (BIG)/.09
8:30 am EST
- The Change in Non-Farm Payrolls for November is estimated at 125K versus 80K in October.
- The Unemployment Rate for November is estimated at 9.0% versus 9.0% in October.
- Average Hourly Earnings for November are estimated to rise +.2% versus a +.2% gain in October.
Upcoming Splits
- None of note
- The Fed's Fisher speaking, Fed's Plosser speaking, Fed's Stark speaking and the Fed's Rosengren speaking could also impact trading today.