Tuesday Watch

Evening Headlines

Bloomberg:

• Euro Holds Gains Versus Dollar, Yen Before Merkel and Lagarde Meeting. The euro held a one-day gain versus the dollar before Germany’s chancellor and the International Monetary Fund’s managing director meet amid optimism Europe’s leaders are taking steps to resolve the debt crisis. The 17-nation currency remained higher against the yen after yesterday’s advance as the leaders of Germany and France discussed a rulebook for closer fiscal union within the euro area. The franc maintained a three-day gain versus the euro on prospects traders may test Switzerland’s currency ceiling after central-bank Chairman Philipp Hildebrand’s resignation. The Australian and New Zealand dollars climbed as Asian stocks rose, boosting demand for higher-yielding assets. “Some positive comments from European leaders are assisting the euro, though traders are cautious, waiting to see what action plan is put in place and how bond yields react,” said Tim Waterer, a currency dealer at CMC Markets in Sydney.
• Soros Says Europe's Debt Woes 'More Serious' Than 2008 Crisis. Billionaire investor George Soros said Europe’s sovereign-debt woes are “more serious” than the financial crisis of 2008 and that the world faces the prospect of a “vicious circle” of deflation. “We have a more dangerous situation now than in 2008,” Soros, 81, said in response to a question at an event in the southern Indian city of Bangalore today. “The crisis in Europe is more serious than the crash of 2008.”
• Copper imports by China, the biggest consumer, fell 5.1% last year, the first annual drop since 2008, amid destocking and slowing demand growth, customs data showed today.
  
• Biggest Rubber Glut Since 2004 Cuts Michelin Costs: Commodities. Rubber plantations from Indonesia to Ivory Coast will tap a global crop this year that will create the biggest glut since at least 2004, cutting costs for Bridgestone Corp., Michelin & Cie. and other tiremakers. The market will switch to a 413,000-metric-ton surplus, from an 87,000-ton shortage in 2011 that helped drive rubber to a record in February, Goldman Sachs Group Inc. estimates. Prices fell since then on prospects for more supply and slower growth in China, the largest consumer. Futures will drop as much as 10 percent to 240 yen ($3.12) a kilogram (2.2 pounds) in Tokyo this year, the lowest since November 2009, the median estimate in a Bloomberg survey of 14 analysts and traders shows. Commodities posted their first annual loss in three years in 2011 as China, the biggest user of everything from coal to cotton to copper, slowed growth to cool inflation that reached a three-year high in July. Auto sales in the nation rose 2.6 percent in the first 11 months of last year, down from 32 percent in 2010, industry data show. That’s adding to pressure on raw-material prices, already weakening as economists surveyed by Bloomberg forecast the slowest global growth since 2009. “The outlook for rubber prices is linked to global and Chinese economic growth,” said Chris Pardey, chief executive officer of Singapore-based RCMA Commodities Asia Group, which trades natural and synthetic rubber. “My view is negative on the global economy and therefore negative on rubber.”
• Alcoa(AA) Posts First Quarterly Loss Since 2009. Alcoa Inc. (AA), the largest U.S. aluminum producer, reported its first quarterly loss in more than two years after prices tumbled for the lightweight metal. The fourth-quarter net loss was $191 million, or 18 cents a share, compared with net income of $258 million, or 24 cents, a year earlier, the New York-based company said yesterday in a statement. The loss excluding restructuring costs was 3 cents a share, matching the average projection from 18 estimates compiled by Bloomberg. Sales rose 6 percent to $5.99 billion from $5.65 billion. The loss is Alcoa’s first on an adjusted basis (AA) since the second quarter of 2009, when the company was dealing with a slump in aluminum prices that followed the global financial crisis. Aluminum fell in 2011, with the benchmark three-month price in London averaging 11 percent lower in the fourth quarter than a year earlier, and Alcoa said last week it would close 12 percent of its smelting capacity. The loss “makes it very much an uphill battle” to meet analysts’ current expectations in 2012, Jorge Beristain, an analyst at Deutsche Bank AG who rates the shares “hold,” said by phone yesterday. Alcoa needs earnings before interest, taxes, depreciation and amortization “to essentially double in the next quarter and then stay at that level for the next four,” he said.
• Juniper(JNPR) Shares Drop After Reduced Fourth-Quarter Sales, Profit Forecast. Juniper Networks Inc. (JNPR) tumbled in late trading after saying fourth-quarter revenue and profit were probably lower than forecast, citing weaker-than-expected demand for routers from telecommunications-service providers. Sales based on preliminary results were $1.11 billion to $1.12 billion in the quarter, less than an earlier company prediction of $1.16 billion to $1.22 billion, Sunnyvale, California-based Juniper said in a statement today. Per-share earnings, excluding certain expenses, were 26 cents to 28 cents, compared with a prior forecast of 32 cents to 36 cents. Juniper fell 6.4 percent to $20.15 at 4:16 p.m. in extended New York trading after the revised outlook was released. The stock has tumbled 43 percent in the past year, while larger competitor Cisco Systems Inc. (CSCO) has fallen 9.5 percent. The Standard & Poor’s 500 Index was little changed. Juniper plans to provide full fourth-quarter results on Jan. 26. In addition to a drop in sales and profit, the company said its operating margin will be below the previous forecast of 21 percent to 23 percent.
• Florida Casino Plan Clears First Hurdle With Senate Panel. Florida would become the most populous state with full casino gambling outside American Indian control under a proposal that cleared its first legislative hurdle today. The vote in the Senate Regulated Industries Committee would allow the fourth-largest state by population to have as many as three Las Vegas-style casinos, with dealers and table games in addition to slot machines.
• Threat to Hormuz Shipping Seen Receding as EU Plans Sanctions. Iran is unlikely to shut down oil shipping through the Strait of Hormuz in response to Western sanctions, President Barack Obama’s former adviser on Iran said. Oil prices fell today as concern eased that Iran would attempt to impede shipping through the Strait, which accounts for about a fifth of the oil traded globally. The decline occurred even as tensions increased, with Iran announcing it has taken another step in its nuclear program and that it had sentenced to death a former U.S. soldier of Iranian descent accused of spying. “Do I really think that they’re going to go ahead and try to shut down the Straits of Hormuz?” Dennis Ross, who served two years on the National Security Council as Obama’s special assistant on Iran, said today in an interview at Bloomberg’s office in Washington. “I do not. They will be the ones who suffer the most from that.”

Wall Street Journal:

• Panel to Watch Beijing. President Barack Obama plans to create a U.S. government task force designed to monitor China for possible trade and other commercial violations as part of a larger White House effort to get more assertive with Beijing this election year, people familiar with the matter said. The group, called the Enforcement Task Force, will aim to enforce U.S. trade rules. Despite the generic name, officials said the group is specifically meant to target China.
  
• Hostess Preparing to File for Bankruptcy Protection.
• How Microbes Teamed to Clean Gulf. Scientists Studied 52 Species of Bacteria and Water Currents to Explain Demise of Oil and Gas Plum.
• China Is Expected to Resist Oil Shift. U.S. Treasury Secretary Timothy Geithner is likely to get a skeptical hearing in Beijing on Tuesday and Wednesday as he presses leaders to reduce purchases of Iranian oil and explains tough new U.S. sanctions rules meant to hobble Iran's financial sector.
• The Stephanopoulos Standard. Republicans can turn media bias to their advantage. A funny thing happened on the way to the New Hampshire primary: ABC moderator George Stephanopoulos embarrassed himself on national television with questions plainly intended to embarrass the Republican candidates. Therein lies a lesson.

Barron's:

• CME(CME) Shares Keep Falling In After-Hours; Is Breakup On The Table?

MarketWatch:

• Australia's Biggest Economic Threat Is China. Australia has been one of the world’s best performing economies during the economic crisis, attracting strong investment interest from overseas investors. But the outlook is cloudy.

Business Insider:

• Tim Cook's Total Compensation For 2011 Is Almost $400 Million.

Zero Hedge:

• The PunchLine...January Charts.
• Lowest Volume Of The Year As Stocks Inch Higher. (graphs)
  

CNBC:

• China Trade Growth Slows to 2-Year Lows in December. Annual exports grew 13.4 percent in December, just below the 13.5 percent forecast in a Reuters poll of 23 economists and the slackest pace of expansion since November 2009 — excluding the volatile month of February last year when the Lunar New Year holiday disrupted activity. Growth in imports slowed to a 26-month low of 11.8 percent, well below the 17 percent forecast."The main disappointment is with imports, which show a much weaker number compared to November and are way below consensus," said Kevin Lai, an economist at Daiwa Capital Markets, in Hong Kong. "That means the boost in November was temporary, the domestic economy is slowing sharply."
• Why Earnings May Be Better Than All The Dire Forecasts.
• Hopes for Fresh Chinese Reforms Dashed. Signs that China is losing its appetite for key financial reforms are fuelling concerns that the country will remain on a path of unbalanced growth, increasing the chances of a future economic crisis.

NY Times:

• Ackman Plans Proxy Fight at Canadian Pacific(CP). Mr. Ackman, whose firm, Pershing Square Capital Management, is the largest shareholder in the railway, raised the specter of a proxy fight in a interview shortly after John E. Cleghorn, the chairman of Canadian Pacific, released an open letter to shareholders supporting Fred Green, the current chief executive, and his long-term plans for the company.
• UniCredit's Weak Share Offering Is Poor Omen in Europe. UniCredit, Italy’s largest bank, is undergoing a trial by fire in the stock market, underscoring the challenges that European banks face in trying to right themselves. Shares of UniCredit have been in free fall as investors have balked at a new stock offering meant to bolster the bank’s capital. Since last week, UniCredit’s market value has plunged by more than 40 percent. It is a bad omen for struggling European banks. At the behest of regulators, the region’s financial institutions must raise a combined $145 billion by June. But banks may have a tough time convincing investors to plow more money into the beleaguered industry if UniCredit’s experience is any indication. “I think this should scare policy makers,” said Nicolas Véron, a senior fellow at Bruegel, a research institute in Brussels. “Banks have been saying for some time that it’s impossible for them to raise money collectively in this market.

The Weekly Standard:

• New Chief of Staff: Former Hedge Fund Exec. at Citigroup(C), Made Money Off Mortgage Defaults. From 2006-2008, Jack Lew was chief operating officer of Citibank's alternative investments division. And it was his division that made billions of dollars betting "U.S. homeowners would not be able to make their mortgage payments," as the Huffington Post reported. The piece also reported: “Lew made millions at Citi, including a bonus of nearly $950,000 in 2009 just a few months after the bank received billions of dollars in a taxpayer rescue, according to disclosure forms filed with the federal government. The bank is still partly owned by taxpayers.” Of course, one should not begrudge Lew his personal, professional, and financial successes. But one might wonder what kind of message the president is sending with this appointment.
  

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -19 (see trends).

USA Today:

• Trend Alert: 10 New Products to Watch for in 2012.

Reuters:

• Exclusive: SocGen Sees 2012 Investment-Bank Revenue Slump. French bank Societe Generale is forecasting a "significant" drop in 2012 investment-bank revenue compared with 2011, weighed by higher funding costs and efforts to slash its balance sheet, according to an internal memo obtained by Reuters on Monday. France's second-biggest listed bank has also decided to exit or strongly reduce property, shipping and aircraft financing activities, as well as physical energy trading in North America, according to the 245-page memo sent to employee representatives. "(SocGen) CIB expects a significant drop in revenues for 2012 compared with 2011, weighed by higher charges linked to funding and balance-sheet reduction," the memo said.
• Iran Starts Uranium Enrichment, Condemns American to Death. Iran has begun enriching uranium deep inside a mountain and sentenced an American to death for spying, angering the West and undermining hopes that diplomacy could avert further sanctions or war. The start of enrichment at the Fordow bunker near the Shi'ite Muslim holy city of Qom was confirmed on Monday by an Iranian official in Tehran and by the Vienna-based International Atomic Energy Agency.
• SMSC(SMSC) Forecasts Q4 Loss, Shares Down. Chipmaker Standard Microsystems Corp posted third quarter below analysts' expectation on lower demand, and forecast a fourth-quarter adjusted loss. Shares of the company fell 9 percent in extended trade, after closing at $24.98 on the Nasdaq on Monday.

Financial Times:

• Gold Feels Weight of Paulson Curse. When John Paulson’s hedge fund bought almost 100 tonnes of gold in early 2009, the public support from one of the world’s most respected hedge fund managers was a boon for the bullion market. Now Mr Paulson’s enormous investment seems more like a curse.

Telegraph:

• Can the Euro Survive Another Year? We won't know for sure whether the single currency will keep on muddling through until eurozone policymakers face up to their predicament – that sustaining the euro requires more or less indefinite transfers of money from richer to poorer regions. That's the reason Germans are so opposed to ECB bond purchases, for such buying is in essence as much a form of liability transfer between governments as outright eurobonds. As long as policymakers keep burying their heads in the sand of Tobin taxes and other such diversions, this underlying choice goes unaddressed.
• Germany's Stance on Financial Transaction Tax Risks French Rift. Angela Merkel has warned that German support for the financial transaction tax (FTT) is not guaranteed, in a move that could open up a rift with France just days before the next European summit.

Economic Information Daily:

• China's largest export provinces of Guangdong, Jiangsu and Zhejiang cut their trade-growth forecasts for this year, citing local officials. Guangdong's 2012 import and export growth may be 7.5%, compared with 16% last year, citing Liang Yaowen, the province's director-general of the Dept. of Foreign Trade and Economic Cooperation, as saying. Jiangsu's 2012 trade is likely to increase 8%, compared with 15% last year, citing Zhu Min, head of the province's commerce dept., as saying. Zhejiang's exports will probably rise 10% this year, compared with 19.9% in 2011; while its total trade may gain 11%, compared with 22% last year, citing Jin Yonghui, head of the province's commerce dept., as saying.

South China Morning Post:

• Toy Firms Fear Crisis Will Cut Into Sales. As some manufacturers try to raise factory-gate prices at toy fair, firms exposed to the euro-zone crisis and US may see 30 per cent sales decline. Tensions between buyers and exhibitors flared yesterday at the Hong Kong Toys and Games Fair as manufacturers raised factory-gate prices by about 10 per cent to offset swelling costs amid fears that sales could fall.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.25% to +1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 209.0 +.5 basis point.
  
• Asia Pacific Sovereign CDS Index 160.50 +1.0 basis point.
• FTSE-100 futures +.71%.
  
• S&P 500 futures +.45%.
  
• NASDAQ 100 futures +.52%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (SNX)/1.15

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for December is estimated to rise to 93.8 versus 92.0 in November.

10:00 am EST

• The IBD/TIPP Economic Optimism Index for January is estimated to rise to 45.3 versus 42.8 in December.
• Wholesale Inventories for November are estimated to rise +.5% versus a +1.6% gain in October.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Esther George speaking, Fed's Williams speaking, JOLTs Job Openings report for November, 3-Year Treasury Note Auction, weekly retail sales reports, Needham Growth Conference, Goldman Sachs Energy Conference, Deutsche Bank Auto Industry Conference and the CES 2012 could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and real estate shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Slightly Higher into Final Hour on Euro Bounce, Short-Covering, Better US Economic Data, China Stock Bounce

Broad Market Tone:

• Advance/Decline Line: Higher
  
• Sector Performance: Mixed
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 21.07 +2.13%
  
• ISE Sentiment Index 156.0 +67.64%
  
• Total Put/Call .90 -6.25%
  
• NYSE Arms .85 -41.76%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 119.94 +.36%
  
• European Financial Sector CDS Index 276.50 +1.49%
  
• Western Europe Sovereign Debt CDS Index 389.50 +.97%
  
• Emerging Market CDS Index 311.39 -.99%
  
• 2-Year Swap Spread 40.0 -3 bps
  
• TED Spread 57.0 unch
  
• 3-Month EUR/USD Cross-Currency Basis Swap -99.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.
  
• Yield Curve 171.0 +1 bp
  
• China Import Iron Ore Spot $140.0/Metric Tonne unch.
  
• Citi US Economic Surprise Index 89.70 -2.2 points
  
• 10-Year TIPS Spread 2.09 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -31 open in Japan
• DAX Futures: Indicating +19 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech and Biotech sector longs
  
• Disclosed Trades: None
  
• Market Exposure: 75% Net Long

BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 trades slightly higher despite Eurozone debt angst, global growth fears, technical resistance and high energy prices. On the positive side, Alt Energy, Oil Tanker, Semi, Networking, Biotech, HMO, Road & Rail and Airline shares are especially strong, rising more than +1.0%. Cyclical and small-cap shares are relatively strong again. Gold is down -.60% and Oil is down -.54%. The France sovereign cds is falling -2.08% to 237.67 bps, the Spain sovereign cds is falling -2.12% to 441.33 bps, the Russia sovereign cds is down -2.94% to 275.67 bps and the Belgium sovereign cds is down -2.48% to 331.33 bps. On the negative side, Coal, Internet, Restaurant and Hospital shares are under pressure, falling more than -.75%. Lumber is falling -2.35%, Copper is down -.55% and the UBS-Bloomberg Ag Spot Index is up +1.72%. Major Asian indices cut opening losses and finished mixed, led by a +2.89% surge in the Shanghai Composite. It is noteworthy that most of the leading Chinese tech companies that are traded here in the US, such as BIDU, SINA, SOHU and NTES, are diverging from this index. Major European indices fell today, led down by a -1.7% drop in Italian shares, which are now down -4.5% ytd. As well, the Bloomberg Europe Bank/Financial Services Index dropped another -2.11% today and is now down -5.7% ytd, while the (XLF) has risen +3.4% ytd. The extent of this divergence is likely unsustainable over the intermediate-term. Moreover, the 10Y T-Note continues to trade well, which is another concern. The China sovereign cds is gaining +2.0% to 149.33 bps, the Japan sovereign cds is gaining +1.91% to 152.50 bps, the Saudi sovereign cds is jumping +3.40% to 136.34 bps and the Brazil sovereign cds is gaining +1.14% to 162.0 bps. The Italian/German 10Y Spread is rising +.73% to 531.36 bps(very near highest since Dec. 1995). The Western Europe Sovereign CDS Index made a new all-time high today. The TED spread continues to trend higher and is very near the highest since May 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is near the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is rising +1.81% to -99.31 bps, which is back to early-Nov. levels. The Libor-OIS spread is very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. Overall, European credit gauges are still performing very poorly given that the European debt crisis “can-kicking” solution is supposedly at hand, which remains a large red flag. China Iron Ore Spot has plunged -22.6% since Sept. 7th of last year. Leadership is lacking today and volume remains poor. The market is beginning to take on a "tired" feel. The declines in Eurozone financials are becoming worrisome again, as well. Overall, investor complacency remains fairly high given the backdrop. For a sustainable equity advance from current levels, I would still expect to see meaningful European credit gauge improvement, subsiding hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on Eurozone debt angst, global growth fears, high energy prices, technical resistance, profit-taking and more shorting.

Today's Headlines

Bloomberg:

• German Industrial Output Drops in Sign Growth Stalling. German industrial output declined in November as factories produced fewer investment and consumer goods, adding to signs that growth in Europe’s largest economy may have stalled. Production fell 0.6 percent from October, when it rose 0.8 percent, the Economy Ministry in Berlin said today. Economists forecast a 0.5 percent drop, according to the median of 30 estimates in a Bloomberg News survey.
• Sarkozy Wins Merkel Backing for Transaction Tax. French President Nicolas Sarkozy won the backing of German Chancellor Angela Merkel for a tax on financial transactions, a levy that Britain maintains won’t work unless it’s applied worldwide. The French government, long a proponent of the tax, stepped up its campaign last week, going so far as to suggest that France would impose the levy even if others didn’t. At a joint press conference in Berlin with Sarkozy today, Merkel threw her weight behind the tax. “Personally, I’m in favor of thinking about such a tax in the euro zone,” Merkel said. “Germany and France both equally view the financial transaction tax as a correct response.”
• Germany Sells Bills With Negative Yield for First Time Amid Crisis Concern. Germany sold six-month treasury bills at a negative yield for the first time amid demand for the debt securities of Europe’s biggest economy as a haven from the sovereign debt crisis roiling the region. The government auctioned 3.9 billion euros ($4.98 billion) of securities maturing in July at an average yield of minus 0.0122 percent, the Federal Finance Agency said in an e-mailed statement today. It was the first time it sold the securities at a negative yield, Joerg Mueller, a spokesman in Frankfurt, said in a telephone interview. The Netherlands sold 107-day bills at minus 0.007 percent on Dec. 12.
• Sovereign Bond Risk Falls in Europe, Reversing Climb to Record. The cost of insuring against default on European sovereign debt fell, reversing an earlier rise, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments declined two basis points to 380 at 11:30 a.m. in London, after climbing to a record 386. The cost of insuring corporate and financial debt rose, according to JPMorgan Chase & Co. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased six basis points to 757. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.25 basis points to 179.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed 4.5 basis points to 295 and the subordinated index increased three to 528.
• Fannie Rating Faces Cut as Lawmakers Siphon Funds, BofA Says. The odds of credit rating downgrades on the bonds of Fannie Mae and Freddie Mac rose after lawmakers tapped the government-supported mortgage companies to pay for last month’s extension of a payroll tax cut, according to Bank of America Corp. Investors in the so-called agency debt market should favor the bonds of other government-sponsored enterprises such as the Federal Home Loan Banks and Federal Farm Credit Banks because of the risk, Ralph Axel, a Bank of America analyst in New York, wrote in a Jan. 6 report. Congress, to finance the two-month extension of the tax cut in December, ordered an increase in the premiums that Washington-based Fannie Mae and Freddie Mac in McLean, Virginia, charge to guarantee mortgage debt. The funds generated by the extra fees will be directed to the government for the next 10 years.

Wall Street Journal:

• Bombs Kill 17 in Iraqi Capital. Three car bombs exploded Monday evening in the Iraqi capital and killed at least 17 people, authorities said. At least one appeared to target Shiite pilgrims, sinking the country deeper into a new wave of sectarian violence.
  

Dow Jones:

• Greek debt holders will be asked to accept a 60% haircut.

MarketWatch:

• Chinese Outlook Unusually Uncertain: Experts.

CNBC.com:

• US Government Plans to Sell Foreclosures in Bulk to Investors.
• Stronger Recovery Held Back by Washington, Welch Says. The U.S. economy is well on the road to recovery, but would be doing better if not for a repressive environment in Washington, Jack Welch, author and former General Electric chairman, told CNBC Monday.

Business Insider:

• Europe Has A Much Bigger Problem Than Debt, And Nobody Has Any Clue How To Fix It.
• White House Chief of Staff Bill Daley Stepping Down.
• Incredible Time-Lapse Of A 30_story Hotel In China Built In 15 Days. (video)
• Tim Tebow Set A Twitter Record Last Night.
• Former TARP Czar Barofsky Blasts Obama's Recess Appointment of Richard Cordray.
• Norway Makes Its Second Huge Oil Discovery In The Past Year.
  

Zero Hedge:

• ECB Resumes Buying Bonds With Gusto As Italian Yields Remain Well Wide Of 7%.
• Iran Sentences Alleged CIA Spy To Death.
• European Companies Are Now Funding European Banks And The ECB - Is "Investment Grade" Cash Really Just Italian Treasurys?
• Greece Spends Bailout Cash On European Military Purchases.
  

New York Times:

• A Boom in Starter Capital for Hedge Funds. There is a seeding frenzy happening in the hedge fund industry. As the industry returns have been disappointing, big money investors need somewhere to park their big money — and handing development capital to emerging hedge funds has become a strategy of choice.

Reuters:

• Brocade(BRCD) Gets First-Round Bids for Sale: Sources. Brocade Communications System Inc has received first-round bids from a handful of potential buyers as the company explores a sale, sources familiar with the matter said. The San-Jose, California-based maker of switches and routers for managing data traffic, which has a market value of $2.35 billion, hired Frank Quattrone's Qatalyst Partners in November to focus on a deal that could result in a leveraged buyout, the sources said.
• Copper Falls, Europe Debt Crisis Dims Demand Prospects.
• BMW Sees Emerging Markets Protectionism On The Rise. Germany's BMW is seeing a trend of increasing protectionism in emerging economies that are trying to attract foreign investments and more local production at the expense of imports. "We are seeing in these markets the rise of protectionism," BMW group sales chief Ian Robertson said at the Detroit Car Show on Monday, citing countries like Brazil, Argentina, Turkey, Russia and India.

Telegraph:

• Debt Crisis: Live. Cameron warns Germany may have to accept a big transfer of wealth to weaker southern European nations to address a fundamental lack of competitiveness as Merkel and Sarkozy push for transaction tax.

Die Welt:

• Germany Is in Recession, Citing Survey of Economists. Welt surveyed 14 economists. They estimate there was contraction in 4Q that's continuing in 1Q.

Tagesspiegel:

• The 50% bond writedown creditors agreed to as part of a bailout package for Greece will probably not suffice to rescue the country, citing Gerhard Schick, the finance policy spokesman for the German Green Party in parliament. European taxpayers will have to make an additional contribution should it prove impossible to persuade creditors to take higher losses on Greek debt.

Cinco Dias:

• Four Spanish savings banks that received money from the state rescue fund lost $14 billion of deposits in the 10 months from January to October last year, citing data from the savings bank association known as CECA.

Bear Radar

Style Underperformer:

• Large-Cap Growth (+.03%)

Sector Underperformers:

• 1) Coal -1.0% 2) Internet -.90% 3) Hospitals -.81%

Stocks Falling on Unusual Volume:

• UBS, GSK, CHG, BFS, NTES, GOOG, MSTR, CMG, CNQR, COST, IPCM, THRX, PRAA, CLMS, PSMT, ALGN, CPTS, CME, NTRI, ZLTQ, THOR, TIBX, ARBA, GME, ALGN and CFN
  

Stocks With Unusual Put Option Activity:

• 1) GME 2) REE 3) GM 4) XLNX 5) COST
  

Stocks With Most Negative News Mentions:

• 1) CME 2) AFL 3) COST 4) CNW 5) BHI
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value (-.09%)

Sector Outperformers:

• 1) Oil Tankers +.98% 2) Networking +.97% 3) Airlines +.79%

Stocks Rising on Unusual Volume:

• INHX, MAKO, DNDN, QCOR, ACOR, VVUS, SPRD, ITMN, VRUS, ZNH, MR, FCS, CY, AYI, OPEN, KRO and RL
  

Stocks With Unusual Call Option Activity:

• 1) INHX 2) BSX 3) MAKO 4) VECO 5) MUR
  

Stocks With Most Positive News Mentions:

• 1) LMT 2) BA 3) LUV 4) FOSL 5) CSC
  

Charts:

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

Monday Watch

Weekend Headlines
Bloomberg:

• Merkel, Sarkozy Return to Work on Euro Rescue. German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today for the first time in 2012 as they seek to craft a master plan for rescuing the euro over the next three months. The two leaders gather in Berlin to flesh out a new rulebook for fiscal discipline negotiated at a Dec. 9 summit that seeks to create a “fiscal compact” for the 17-member euro area. They meet at 11 a.m. local time at the Federal Chancellery and hold a joint press conference at about 1:30 p.m. The German and French leaders have sponsored a plan to install new guidelines by March. A crisis that began in Greece more than two years ago has moved to the euro area’s core, and leaders are struggling to persuade investors they can contain the risk and assure the euro’s survival. “They urgently need to formulate and clearly communicate a vision for a sound and stable euro area that deserves the name fiscal compact,” Thomas Harjes, senior European economist at Barclays Capital in Frankfurt, wrote in a note on Jan. 6. The euro extended its decline against the U.S. dollar last year, sliding 1.7 percent so far this year. The single currency lost 9.4 percent in the last six months against the greenback. Borrowing costs for sovereign debt have increased. Spanish 10-year yields rose by the most in almost 17 years last week, leading bonds of the region’s most-indebted countries lower, on concern that they will struggle to cut budget deficits amid the economic slowdown. Spain, Italy, the Netherlands, Austria and Germany plan to sell bonds this week, offering a gauge of market confidence.
• Euro Declines to 11-Year Low Against Yen Ahead of Merkel-Sarkozy Meeting. The euro (EUR) fell to an 11-year low against the yen and dropped to its least in nearly 16 months versus the dollar before the German and French leaders meet amid signs the region’s sovereign-debt crisis is hurting growth. The 17-nation currency slid versus most of its 16 major counterparts ahead of bond sales by Spain and Italy this week after yields rose. A report today is forecast to show industrial production in Germany, Europe’s biggest economy, declined in November. The dollar gained after data Jan. 6 showed the U.S. labor market is strengthening. “We’re going to see more ongoing political noise and that’s really just a distraction from the bigger driver of the euro, which is the relatively weak growth outlook,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “As long as European growth underwhelms, the euro will continue to underperform the U.S. dollar, yen and probably also the rest of the major currencies.”
• EFSF's Regling Plans to Offer Investors 30% Guarantee, Bild Says. Klaus Regling, who heads the European Financial Stability Facility, plans to offer potential investors in the fund a guarantee of as much as 30 percent on their investment, rather than the 20 percent currently offered, Bild- Zeitung reported. The current insurance rate isn’t enough given the risk involved, the newspaper said, citing comments made by Regling to policymakers of the German Christian Social Union at Wildbad Kreuth in Bavaria last week. The CSU belongs to Chancellor Angela Merkel’s ruling coalition. Separately, the German government is considering an earlier start of the planned European Stability Mechanism program, Bild cited unidentified people in the government as saying. European states may add the scheduled 80 billion euros ($102 billion) to the pool in one move rather than in installments or raise the amount to 100 billion euros, Bild said.
• Belgium Freezes $1.7 Billion of Spending After EU Warns of Deficit Overrun. Belgium froze 1.3 billion euros ($1.7 billion) in spending after the European Union warned that a weaker-than-projected economy would push the deficit above the new government’s targets. “It’s a purely administrative suspension to give us time to conduct the budget review,” Budget Minister Olivier Chastel told L’Echo newspaper. He defended the government’s budget math, saying it will squeeze the deficit down to 2.8 percent of gross domestic product in 2012 as planned. The EU’s prediction of a higher deficit weighed on Belgian bonds (GDBR10) yesterday, pushing the extra yield over German debt up by 6 basis points to 278 basis points, the most since a six-party government took office on Dec. 6 with a pledge to cut the budget.
• Monti Says No New Budget Cuts Needed to Balance Budget. The Italian government will not have to carry out an additional package of budget cutting measures to meet its goal of eliminating its deficiti in 2013, Prime Minister Mario Monti said.
• Corporate Profit Growth at 2-Year Low as U.S. Feels Europe Drag. U.S. corporations ended 2011 with the slowest profit growth in two years as the mending economy that lifted Macy’s Inc. (M) was met by a European slump that vexed companies more tied to global sales, such as Cisco Systems Inc. (CSCO) Standard & Poor’s 500 Index companies may have earned $24.74 a share (SPX) in the fourth quarter, according to analysts’ estimates compiled by Bloomberg as of Jan. 6. The projected 6 percent gain is the smallest against a year-earlier quarter (SPWPPRCT) since September 2009, just after the U.S. recovery began. “Slowing global growth, some impairment of export activity to Europe and perhaps even the rise of the dollar collectively have begun to sort of work against the multinational story,” said Mark Luschini, chief investment strategist at Philadelphia- based Janney Montgomery Scott LLC, which manages $54 billion. While growth is still “subpar,” he said he intends to invest more in the U.S. to avoid higher international risk.
• Paulson's Advantage Plus Fund Drops 51% in 'Aberrational Year'. John Paulson, the billionaire money manager mired in the worst slump of his career, lost 51 percent in one of his largest funds last year amid a failed bet on an economic rebound. Paulson’s Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, declined 8.6 percent last month, according to an investor update, a copy of which was obtained by Bloomberg News. The fund’s gold share class dropped 10 percent in December and 36 percent last year. “Clearly, this has been an aberrational year for us,” Paulson wrote yesterday in a signed letter to investors that was released with the update. “Going forward, we remain committed to restoring all of our funds to profitability.” Paulson, 56, has scaled back bullish bets across his funds after suffering losses from holdings ranging from Citigroup Inc. to Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. One bet that worked for Paulson in the first part of the year was gold, which slumped 14 percent in the final four months of 2011, leaving his Gold Fund, which can buy derivatives and other gold-related securities, with an 11 percent loss last year. The fund declined 20 percent in December. Paulson’s biggest funds, Advantage Plus and Advantage, employ similar strategies and have $11 billion in combined assets, which are mostly invested in shares of banks, insurance companies and other financial services firms. The dollar- denominated Advantage Fund fell 6.2 percent in December and 36 percent last year. Its gold share class slumped 11 percent last month and 22 percent in 2011. Paulson investors can choose between dollar-and gold-denominated versions for most of the firm’s funds. The Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic upturn, including hotels, financial services and real estate companies, rose less than 0.1 percent in December and fell 28 percent last year. The gold share class declined 6.4 percent last month and 18 percent in 2011. The Paulson Partners Enhanced Fund, which invests in the shares of merging companies, decreased 2 percent last month and 19 percent last year. Its gold share class declined 8.7 percent in December and 9.5 percent in 2011. Paulson’s Credit Opportunities Fund slumped 0.2 percent last month and 18 percent last year. Its gold shares dropped 6.2 percent in December and 5.8 percent in 2011.
• Ahmadinejad Woos Chavez-Led Allies in Latest America Tour. Iranian President Mahmoud Ahmadinejad, facing tighter U.S. sanctions and rising tensions in the Persian Gulf, will turn to his diminished group of allies in Latin America for support this week. Ahmadinejad arrived in Venezuela yesterday to kick off a four-nation tour to push investment projects such as a hydro- electric power plant in Ecuador. He’ll be joining forces with leaders like Venezuela’s Hugo Chavez and Cuba’s Raul Castro in taking shots at the U.S. in its own backyard, defying attempts to isolate Iran over its nuclear activities.
• Oil Trades Near One-Week Low as Europe Deb Concern Counters Iran Tension. Oil traded near the lowest settlement in a week in New York as bets that Europe’s debt crisis will worsen and curb fuel demand countered concern that tension with Iran may disrupt Middle East crude exports.
• Cohan: How Wall Street Turned a Crisis Into a Cartel. Almost 65 years ago, in 1947, the U.S. government sued 17 leading Wall Street investment banks, charging them with effectively colluding in violation of antitrust laws. In its complaint -- which was front-page news at the time - -- the Justice Department alleged that these firms had created “an integrated, overall conspiracy and combination” starting in 1915 “and in continuous operation thereafter, by which” they developed a system “to eliminate competition and monopolize ‘the cream of the business’ of investment banking.”
• Bristol-Myers(BMY) Agrees to Acquire Inhibitex for $2.5 Billion. Bristol-Myers Squibb Co. agreed to buy Inhibitex Inc. for about $2.5 billion to boost its position in hepatitis C medicines as it faces generic competition for its best-selling blood thinner Plavix this year. Both boards approved the transaction, the companies said in a statement today. Inhibitex agreed to recommend that its shareholders accept an offer of $26 per share, more than double its closing price of $9.87 on Jan. 6.

Wall Street Journal:

• A Quiet Fed Voice Emerges as Force Inside the Temple. Five years ago, a brainy San Francisco researcher named John Williams co-wrote an academic paper called "Revealing the Secrets of the Temple," in which he argued that the Federal Reserve should be more open about its plans for interest rates. Mr. Williams, now president of the Federal Reserve Bank of San Francisco, will get what he asked for when Fed officials gather this month.
• Mr. Corzine Is Seeking Manhattan Office Space.
• Romney at Bain: Big Gains, Some Busts. The Wall Street Journal, aiming for a comprehensive assessment, examined 77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999, to see how they fared during Bain's involvement and shortly afterward.
• Investing in a 'Fat Tail' World by Mohamed A. El-Erian. By pushing interest rates to very low levels, central banks are pushing investors out the risk spectrum.
• Parties Maneuver in Germany's Political Crisis. The chairman of Germany's largest opposition party said the Social Democrats would work with Chancellor Angela Merkel to find a consensus candidate for the German presidency, as pressure mounted on President Christian Wulff to resign, a party spokesman said on Sunday.

Marketwatch.com:

• QE Not Likely Now, Given Data: Fed's Bullard. More bond purchases, otherwise known as quantitative easing, are not likely at least in the short term because the economy seems on more solid ground, St. Louis Federal Reserve Bank President James Bullard said Saturday. “We already have an easy policy, and the economy is improving, and so we can probably wait and see for now,” Bullard said. There is no risk that inflation will be too low in 2012, Bullard said. The personal consumption expenditure index — the Fed’s favorite inflation target — rose 2.5% for the 12 months ending November. “I am not worried that inflation is going to be too low. Either it will come back toward our longer-run implicit inflation target [of 2.0% or a little less] or there is some risk that it would stay fairly high where it is and not come down too much further,” he said.
• Obama Facing Uphill Re-Election Battle: Economist. President Barack Obama is facing an uphill re-election battle and on track to receive only 43% of the vote in a two-man race, according to an election model by IHS Global Insight. Sara Johnson, senior research director at the Lexington, Mass.-based firm, said that the model has been wrong only twice in the past 16 presidential races. In a presentation Friday at the American Economic Association meeting, Johnson said that the high unemployment rate is the biggest factor hurting Obama’s re-election chances. Another factor is the slow growth in real per-capita disposable income, Johnson said.

Business Insider:

• Slow Growth And High Unemployment Is Pulling Europe Back Into Dangerous Territory.
• Check Out All The Best Gadgets From CES 2012 Right Here.
• America's Secret Demographic Trump Card. (graph)
• An Alarming Development In China That Everyone Has Missed.
  

Zero Hedge:

• UBS Predicts Greece to Experience "Coercive" Restructuring With CDS Triggering Around March.
• Key Events In The Following Week.
• Russia, Iran Proceed With Bilateral Trade, Drop Dollar; Russian Warships Park In Syria; Iran Accelerates Nuclear Enrichment.

CNBC:

• US Holiday Electronics Sales Drop 5.9%. A research firm says U.S. sales of consumer electronics fell 5.9 percent this past holiday season, as smartphones cannibalize sales of standalone gadgets like cameras, camcorders and GPS navigation devices. The NPD Group says electronics sales, including TVs and PCs, totaled $9.5 billion in the five weeks ending Dec. 24. Camcorder sales plunged 43 percent, and sales of digital picture frames fell 38 percent. GPS units slumped 33 percent. PC and TV sales slipped just 4 percent, bolstered by sales of TVs bigger than 50 inches.

Wall Street All-Stars:

• Indicator Update: New Year, New Tone?
  

Seeking Alpha:

• Education Stocks Hedge Funds Are Buying.
• Hedge Funds Love These 9 Rebounding Biotech Stocks.
  

IBD:

• TJX Cos.(TJX) Prices For Profits.

NY Times:

• Lull in Strikes by U.S. Drones Aids Militants in Pakistan. A nearly two-month lull in American drone strikes in Pakistan has helped embolden Al Qaeda and several Pakistani militant factions to regroup, increase attacks against Pakistani security forces and threaten intensified strikes against allied forces in Afghanistan, American and Pakistani officials say.
• Germany Resists Europe's Pleas to Spend More. Spain, Italy and Greece are taking a knife to public spending because they have no choice. But Germany is still healthy enough that it could do its troubled trading partners a favor and focus more on promoting demand and less on cutting debt. Could, but almost certainly will not. Even if German lawmakers had not made a balanced budget a constitutional obligation two years ago, there is a deep consensus among policy makers and economists that austerity and growth are not enemies. They are comrades.

NY Post:

• Bonus Battles: Disgruntled Bankers Threaten to Sue or Walk. Wall Street bankers are fuming about the prospect of paltry payouts come bonus time — and plan to go nuclear. They’re taking their cues from their disgruntled brethren in London, who are eyeing lawsuits to regain their over-the-top pay. Here at Jefferies Group, a group of brokerage executives reportedly threatened management that they would walk away from the firm if their year-end compensation was not up to par with The Street. This hubris is just the beginning of much more to come as the downtrodden banking industry gets ready to dole out the most meager bonuses since the 2008 financial crisis.
• Icahn't Believe Carl's 35% Return. Investors who fled Carl Icahn’s hedge funds after losing money with him in 2008 might want to sit down for this one. In a year when the average hedge fund fell between 4 percent and 7 percent — with some prominent funds down in the deep double-digits — the Far Rockaway native returned 35 percent in trading profits last year. “I didn’t think we’d do so great this year, but we did very well,” Icahn told The Post when asked about the returns. “I was pretty hedged this year too,” he said, referring to his protective moves against big losses.

Forbes:

• East Asian Economies Slump. Singapore’s economy contracted last quarter, falling 4.9%. Not all analysts predict the current period will also be down, but don’t expect a robust expansion anytime soon.

CNN:

• Happy New Year? Gas Prices on the Rise Again. Gas prices in the United States increased by more than a dime over the past three weeks, the first increase seen since mid-October, according to a survey published Sunday. The average price of a gallon of regular gasoline was $3.35 as of Friday, the Lundberg Survey found. That's an increase of 12 cents from the last survey of 2011, conducted December 16.

NJ Today:

• Fraud and Folly: The Untold Story of General Electric's(GE) Subprime Debacle. Ex-employees say GE ignored warnings from whistleblowers. For General Electric Co., hawking subprime mortgages was a long way from making light bulbs and jet engines. That didn’t stop the industrial giant from jumping into the subprime business in 2004, lending blue-chip respectability to the market for risky home loans by paying roughly half a billion dollars to buy California-based WMC Mortgage Corp.

USA Today:

• Possible U.S., China Trade Dispute Looms. Strained trade relations between the world's largest economies will be further tested this year as the U.S. weighs anti-dumping duties on a range of Chinese products.

Reuters:

• Germany's CSU - Europe works even if some drop currency. The head of one of Angela Merkel's coalition partners contradicted Saturday one of her tenets on the euro, saying that the EU would be fine if a country dropped the currency. Horst Seehofer, leader of the conservative Christian Social Union (CSU), said in an interview with Deutschlandfunk radio that he did not agree with Merkel's statement "If the euro fails, Europe fails." "There are many healthy economies in Europe that do not have the euro, and Europe works nonetheless," he said in a transcript of the interview. "Great Britain is an example." Turning to Greece, arguably the worst-off member in the euro zone, Seehofer said that the country's small size meant that its withdrawal from the currency bloc would not bring economic side effects strong enough to harm Europe. "I am not proposing it, but if Greece did leave, it would not bring damage and destruction to European integration," he said. Despite warnings by the head of Europe's current bailout fund, Klaus Regling, Seehofer said that his party continued to insist that the euro zone should be able to eject member states that repeatedly breach debt rules. "Kicking them out may be a rather crude term, but removal must be possible as a last resort. This has been our position for months."

AP:

• Nigerian Sect Kills 15 Churchgoers; Christians Vow Defense. A radical Muslim sect attacked a church worship service in Nigeria's northeast during assaults that killed at least 15 people, authorities said Saturday, as Christians vowed to defend themselves from the group's widening sectarian fight against the country's government. The attacks by the sect known as Boko Haram came after it promised to kill Christians living in Nigeria's largely Muslim north, exploiting long-standing religious and ethnic tensions in the nation of more than 160 million people. The pledge by the leader of an umbrella organization called the Christian Association of Nigeria now raises the possibility of retaliatory violence. In the last few days alone, Boko Haram has killed at least 44 people, despite the oil-rich nation's president declaring a state of emergency in regions hit by the sect. Speaking Saturday to journalists, Pastor Ayo Oritsejafor, president of the Christian Association of Nigeria, vowed the group's members would adequately protect themselves from the sect.
  

Financial Times:

• The Unprecedented Behaviour of the Central Banks. In economic policy nowadays, the unthinkable suddenly becomes the inevitable, without pausing for long in the realm of the improbable. (See this piece in The Economist.) Nowhere has this been more true than in central banking, where the recent huge expansion in the size of balance sheets would have seemed inconceivable as recently as 4 years ago.
• Basel Rejects Delay to Liquidity Buffers. Banks will be required to hold emergency stocks of easy-to-sell assets starting in 2015 but will be permitted to dip into these liquidity buffers during times of stress, said global regulators meeting in Basel, Switzerland.

Der Spiegel:

• Greece will not be able to bear its debt burden under the current restructuring plan because of a worsening economy, citing an internal IMF document. IMF experts plan to adjust key points of the current rescue plan as part of the next Troika mission, set to start in mid-January. Greece must do more to consolidate its finances, or private creditors must write off a larger share of their claims or euro area countries have to add more funding, the IMF document said.
• Hans-Werner Sinn, president of the Munich-based Ifo economic institute, said Germany is being "marginalized" in the European Central Bank, citing an interview.
  

Vima:

• The planned 50% writedown of Greek government bonds held by private creditors as part of a debt swap won't be enough to make the country's debt sustainable, an adviser to German Finance Minister Wolfgang Schaeuble said in an interview.

Asahi:

• North Korea's new leadership led by Kim Jong Un asked the U.S. for food aid at the end of last year, citing unnamed people.

The Times of India:

• India Seeks Waivers on Iran Sanctions. As new US sanctions on Iran's oil sector take effect, India, which expects to be hit, will ask the US for waivers to minimize the effect of the curbs that may be given to Washington's key allies like Japan, Turkey and South Korea, who, like New Delhi, are all importers of Iranian oil.

Yonhap News:

• S. Korea Central Bank May Raise Reserve Ratio. The Bank of Korea is also considering reducing the aggregate loans it provides to smaller companies in an effort to curb inflation.
  

Xinhua:

• Beijing will continue regulatory measures on the real estate sector and bring housing prices to "reasonable levels," citing the municipal housing and urban-rural development committee.
• Land sales in China's southern city of Shenzhen fell 21.7% last year from 2010, citing a government report released at a local government meeting.
• Chinese central bank governor Zhou Xiaochuan said the nation must be ready to pick appropriate policy instruments to combat external shocks at any time, citing an interview. The global economy will face a 'string' of difficulties and uncertainties, Zhou said. China shouldn't loosen policies that were designed to rein in consumer prices and manage inflation expectations, citing Zhou. In a global downturn, China would likely see a "mass" withdrawal of foreign capital, he said.
• Chinese central bank governor Zhou Xiaochuan said the country doesn't need to adjust its total money supply because of structural problems, citing an interview with Zhou.
  

Economic Information Daily:

• Chinese companies may enter into the "hardest period" this year since the start of the century, citing a report by the State Council's Development Research Center. Chinese companies will face weak demand internally and externally, increasing labor and raw material costs, yuan gains and other challenges, citing Zhao Changwen, a researcher at the center.

China Securities Journal:

• China should adopt a tight monetary policy and a loose fiscal policy this year, citing Li Daokui, an adviser to the People's Bank of China.

Al Ahram:

• A delegation from the IMF will arrive in Eqypt on Jan. 15 to resume talks on a $3.2 billion loan, citing Finance Minister Momtaz El-Saieed. The IMF isn't imposing conditions to help Egypt, the minister said.
• Egypt's Freedom and Justice Party, an affiliate of the Muslim Brotherhood, won 35.2% of votes in the third and final round of parliament elections.
  

Tehran Times:

• Iran plans to increase daily crude oil exports to Jaapn to 240000 barrels in 2012, citing Mohsen Qamsari, head of international affairs at the state-owned National Iranian Oil Co.

Weekend Recommendations
Barron's:

• Made positive comments on (JOY) and (AA).

Night Trading

• Asian indices are -1.0% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 208.50 +4.0 bps.
• Asia Pacific Sovereign CDS Index 159.50 +2.25 bps.
• FTSE-100 futures -.37%.
  
• S&P 500 futures -.48%.
• NASDAQ 100 futures -.35%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AA)/-.01
• (SMSC)/.34
• (AYI)/.65
• (SCHN)/.23

Economic Releases
3:00 pm EST

• Consumer Credit for November is estimated to fall to $7.0B versus $7.645B in October.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Lockhart speaking, Merkel/Sarkozy Summit and the JPMorgan Healthcare Conference could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the week.