Evening Headlines
Bloomberg:
- Kuroda $235,000 Salary Highlights Goldman Concern. The
central bank chief’s pay is about 24 million yen
($235,000) for the year ending March 31, down from an inflation-adjusted
39 million yen in fiscal 1998, based on a BOJ statement on Nov. 29.
Swaps signal an average inflation rate of 1.2 percent over the coming
five years, compared with 2.03 percent in the U.S. and 1.38 percent in the euro zone. Japan’s cost of living rose in October by the most in five years even as salaries extended declines from June 2012,
threatening to derail Prime Minister Shinzo Abe’s efforts to
sustain a recovery in the world’s third-largest economy.
- Japan Economy Chief Amari Faces Surgery With Reforms Undone. Japan’s economy chief will undergo surgery for cancer as soon as next week, casting a cloud over
the future of a politician charged with crafting plans to revamp
industrial regulation and liberalize trade rules. Akira Amari, 64, told reporters in Tokyo yesterday that he
has been diagnosed with an early stage of tongue cancer, and
submitted his resignation only to see Prime Minister Shinzo Abe
reject it. Amari has served as Abe’s point man for the growth-strategy pillar of the government’s campaign to end two decades
of economic stagnation.
- China Reforms Seen Adding Less Than Half Point to Growth. China’s broadest economic reforms
since the 1990s will add less than half a percentage point to
annual growth this decade, a survey showed, underscoring the
likelihood of a cut in the nation’s expansion target.
Fourteen of 19 economists see policies from a Communist
Party summit last month boosting gross domestic product either
by a negligible amount or less than 0.5 percent a year compared
with their previous outlook, according to the Bloomberg News
survey.
- China Swap Rate Rises Most This Week Since June as Cash Drained.
China’s interest-rate swaps rose the most since June this week as the
central bank drained funds from the banking system, and on speculation
the government will speed up the process of relaxing controls on
borrowing costs. The People’s Bank of China withdrew a net 47 billion
yuan ($7.7 billion) this week, after injecting 17 billion yuan last
week. It suspended sales of 14-day reverse-repurchase agreements
yesterday after conducting the operation for two weeks. The PBOC said in
a Dec. 2 statement that financial institutions in a free trade zone in
Shanghai will get priority in issuing large-denomination negotiable
certificates of deposit. The one-year interest-rate swap, the fixed
payment needed to receive the floating seven-day repo rate, climbed 26
basis points, or 0.26 percentage point, this week to 4.78 percent as of
10:36 a.m. in Shanghai, data compiled by Bloomberg show.
That’s the biggest increase since June 21. It advanced one basis
point today. The cost of the five-year swap rose to a record
4.94 percent.
- China’s Stocks Fall Most in Three Weeks as Coal Shares Decline.
China’s stocks fell the most in three weeks, led by coal and financial
shares, as money-market rates climbed before trade data.
Environmental-protection stocks rose as record-high levels of pollution
in Shanghai forced health warnings and cancelled flights. China Shenhua
Energy Co., the biggest coal producer, slid the most in six weeks. Citic
Securities Co. and Haitong Securities Co., the two largest brokerages,
sank more than 3 percent after rallying earlier this week on regulators’
plan to resume initial public offerings. Fujian Longking Co., which
makes pollution control equipment, rallied 2.1 percent. The Shanghai Composite Index (SHCOMP) slipped 0.6 percent to
2,233.30 at the 11:30 a.m. break, heading for the biggest loss
since Nov. 13 and paring this week’s gain to 0.6 percent.
- Asian Stock Swing From Gains to Losses on Fed Stimulus.
Asian stocks swung between gains and losses, with the regional
benchmark index set for its biggest weekly drop since August, as
improving U.S. economic data fueled speculation the Federal Reserve may
bring forward stimulus cuts. Qantas Airways Ltd. dropped 1.2 percent,
adding to yesterday’s 11 percent drop, after Standard & Poor’s cut
its credit rating on Australia’s largest carrier to junk status. Nufarm
Ltd. slid 1.1 percent in Sydney after Credit Suisse Group AG cut its
rating on the supplier of farm chemicals. Advantest Corp. jumped 6.3
percent on a newspaper report that cost cuts by the Japanese maker of
semiconductor equipment helped reduce its break-even point. The MSCI Asia Pacific Index added 0.1 percent to 139.69 as of 11 a.m. in Tokyo, after falling 0.1 percent.
- Rubber Pares Weekly Gain as Strong Yen, Tapering Bets Cut Appeal. Rubber pared a second weekly advance
on speculation that improving U.S. economic data may bring
forward stimulus cuts while a strengthening Japanese currency
reduced the appeal of yen-based contracts. Futures for delivery in May on the Tokyo Commodity Exchange
lost as much as 1.4 percent to 270.5 yen a kilogram ($2,656 a
metric ton) before trading at 273.4 yen at 11:20 a.m. local
time.
- China Rebar Heads for Third Weekly Gain as Iron Ore Cost Rises.
Steel reinforcement-bar futures in Shanghai headed for a third weekly
advance after iron ore prices rallied to the highest in almost four
months. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, traded little changed at 3,691 yuan
($606) a metric ton at 10:41 a.m. local time.
- German Wage Accord Seen Risking Job Cuts That Foil Aims. Germany’s
nationwide minimum wage to be introduced by Chancellor Angela Merkel’s
third-term coalition risks killing jobs while failing to narrow income
inequality, German economists say. The 8.50 euro ($11.55) per hour
wage floor set in her governing pact with the Social Democrats “would
not even out inequalities in the disposable incomes of private
households or significantly reduce poverty,” according to the
Berlin-based
DIW economic institute. A potential increase in unemployment
will depend on exceptions to the general rule, it said.
- Two Regional Fed Presidents Call for Timetable for Tapering QE. Two Federal Reserve regional bank
presidents who have disagreed on the need for additional easing
said any decision to taper bond buying should be accompanied by
a limit on the size of the program or a timetable for ending it. “If
and when the FOMC arrives at a decision to wind down
asset purchases, it’s my view that it will be helpful to the
transition process to provide as much certainty as possible
about how this will be done,” said Atlanta Fed President Dennis
Lockhart, referring to the Federal Open Market Committee, in a speech in
Fort Lauderdale, Florida. He has backed record stimulus and won’t vote
on policy until 2015.
- Citi(C), Wells Fargo(WFC) Sued by L.A. for Discriminatory Lending. Citigroup Inc. and Wells Fargo & Co.
were accused of discriminatory mortgage lending by the city of
Los Angeles, which seeks damages for reduced property tax
revenue and the costs of maintaining foreclosed properties. The city filed complaints against both banks today in
federal court in Los Angeles. Citigroup and Wells Fargo have
been engaged in discriminatory lending to minority borrowers
since at least 2004, which placed the borrowers in loans they
couldn’t afford and caused a high number of foreclosures in
minority neighborhoods, Los Angeles said.
Wall Street Journal:
- Nelson Mandela Dies at 95. Nelson Mandela,
who rose from militant antiapartheid activist to become the
unifying president of a democratic South Africa and a global symbol of
racial reconciliation, died at his Johannesburg home following a lengthy
stay at a Pretoria hospital, the government said Thursday. He was 95. In a state television address, President Jacob Zuma said Mr. Mandela had died that evening after a long illness. "Our nation has lost its greatest son. Our people have lost a father," said Mr. Zuma, dressed in a dark jacket and reading his statement in deep
somber tones. "Although we knew that this day would come, nothing can
diminish our sense of a profound and enduring loss."
- Volcker Rule to Require CEOs Guarantee Compliance. Decision Marks Latest Setback for Wall Street Firms. The Volcker rule will require bank
executives to guarantee their firms are in compliance with the
regulation, said people familiar with the rule, another setback for Wall
Street firms that lobbied against such a requirement. The
inclusion of so-called CEO attestation is intended to help increase
accountability at firms by ensuring that top executives know what types
of trades are occurring at their firms, these people said.
Barron's:
MarketWatch.com:
Zero Hedge:
Commentary:
Passauer Neue Presse:
- Schaeuble Says Interest Rates Too Low for Germany. Interest rates are too low for Germany over the long term, citing German Finance Minister Wolfgang Schaeuble as saying in an interview. Sees too much liquidity in global markets.
Yonhap News:
- N. Korea seen expanding activity in Yongbyon nuclear site. North Korea seems to be notably expanding activities at its main nuclear complex in Yongbyon, a U.S. think tank said Thursday, based on analysis of new satellite imagery.
The revelation adds to worries that the communist nation may be turning
back to a provocation cycle after months of unanswered peace overtures
towards Washington.
Kyodo:
- Japan DPJ Considers No-Confidence Motion Against Cabinet. The
opposition Democratic Party of Japan is considering submitting a
no-confidence motion against Prime Minister Shinzo Abe's Cabinet to the
lower house of parliament.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 137.0 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 110.0 -1.0 basis point.
- NASDAQ 100 futures +.14%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Change in Non-Farm Payrolls for November is estimated to drop to 185K versus 204K in October.
- The Unemployment Rate for November is estimated at 7.2% versus 7.3% in October.
- Average Hourly Earnings for November is estimated to rise +.2% versus a +.1% gain in October.
- Personal Income for October is estimated to rise +.3% versus a +.5% gain in September.
- Personal Spending for October is estimated to rise +.2% versus a +/2% gain in September.
- The PCE Core for October is estimated to rise +.1% versus a +.1% gain in September.
9:55 am EST
- Preliminary Univ. of Mich. Consumer Confidence for December is estimated to rise to 76.0 versus 75.1 in November.
3:00 pm EST
- Consumer Credit for October is estimated at $14.55B versus $13.737B in September.
Upcoming Splits
Other Potential Market Movers
- The Fed's Evans speaking, Fed's Plosser speaking, German Factory Orders report, (ITW) annual meeting and the (ADT) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 15.30 +4.08%
- Euro/Yen Carry Return Index 145.07 unch.
- Emerging Markets Currency Volatility(VXY) 9.20 +.46%
- S&P 500 Implied Correlation 52.90 -2.74%
- ISE Sentiment Index 139.0 +15.83%
- Total Put/Call .77 -12.60%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.10 +1.89%
- European Financial Sector CDS Index 102.62 +3.09%
- Western Europe Sovereign Debt CDS Index 60.0 -2.65%
- Emerging Market CDS Index 299.27 -1.98%
- 2-Year Swap Spread 9.0 -.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -1.0 +1.75 basis points
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- Yield Curve 257.0 +2 basis points
- China Import Iron Ore Spot $139.50/Metric Tonne -.14%
- Citi US Economic Surprise Index 16.50 +11.2 points
- Citi Emerging Markets Economic Surprise Index -13.80 -1.6 points
- 10-Year TIPS Spread 2.13 unch.
Overseas Futures:
- Nikkei Futures: Indicating -57 open in Japan
- DAX Futures: Indicating -3 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- ECB Cuts Inflation Forecast as Draghi Pledges Low Rates.
European Central Bank President Mario Draghi re-affirmed that interest
rates will stay low for the foreseeable future, after officials cut
their inflation forecast for next year. “We may experience a
prolonged period of low inflation,” Draghi said at a news conference in
Frankfurt today, echoing language he used last month after the ECB
unexpectedly cut
interest rates. Today, the ECB kept its main rates unchanged.
- Draghi Hints Any New LTRO-Style Operations Will Be Conditional. European
Central Bank President Mario Draghi said any new long-term refinancing
operations will be targeted at the economy to prevent banks from
exploiting such measures to enhance their balance sheets. “If we do
operations similar to LTRO, we want to make sure this is being used for
the economy,” Draghi said today after the ECB kept interest rates
unchanged at a record low. “And we want to make sure that this operation
is not going to be used for subsidizing capital formation by the
banking system under these carry trade operations.”
- Deutsche Bank(DB) Cuts 200 as Commodities Jobs Fall to 2009 Low. Deutsche
Bank AG, Europe’s biggest investment bank, will cut about 200 jobs in
commodities as it shrinks its trading business at a time when headcount
at commodities units at the top 10 banks is already at the lowest since
2009 amid tighter regulations and sliding revenue.
- Russian Inflation Jump to Three-Month High Exceeds Estimates. Consumer prices rose 6.5 percent from a year earlier after
a 6.3 percent increase in October, the Federal Statistics
Service in Moscow said today in a statement. Economists
predicted an increase of 6.4 percent, according to the median of 19 estimates in a Bloomberg survey. The rate has held above the
target range of 5 percent to 6 percent for 15 months.
- European Stocks Post Longest Losing Streak in Five Months.
European stocks slid, posting their
longest losing streak in five months, as European Central Bank President
Mario Draghi said that financial-market developments and low domestic
demand may hurt the euro area’s economy. FLSmidth (FLS)& Co. A/S
retreated 1.9 percent as the Danish mining-equipment maker cut its
earnings margin forecast. Vienna Insurance Group AG (VIG) declined 5.2
percent as an unidentified investor sold 2.29 million shares in the
company. AZ Electronic
Materials SA surged the most since its initial public offering
in October 2010 after Merck KGaA agreed to buy the company for
about 1.6 billion pounds ($2.6 billion). Merck rose 4.9 percent. The Stoxx Europe 600 Index lost 0.9 percent to 314.41 at the close of trading in London.
- Keynesians Revive a Depression Idea by Caroline Baum. The
“it” is secular stagnation, which seems to be the New New Thing or the
new new normal: a way to describe the persistent state of subpar
economic growth plaguing developed nations. Think of it as Japan’s lost
decade gone global.
- Budget Talks Target One Year Deal as Lawmakers Protest. U.S. budget negotiators are narrowing
a possible deal to ease automatic spending cuts to just one year
amid objections from affected groups and lawmakers in both
parties, said people familiar with the talks. A compromise being crafted by the two leaders of a 29-member panel is drawing protests from Democrats and groups
including federal employees, who could contribute more to their
pensions under the proposal, and airlines, which could face
higher fees. Some Republicans are concerned a bipartisan deal
will replace spending cuts set in law with promises of future
savings that might not be realized.
Wall Street Journal:
- Fed's Fisher Says Unemployment Rate Still Not Good Enough. U.S. Economic Growth Just 'Modest to Moderate'. Asked whether the stock-market highs were
sustainable given the chance that the Fed will change policy, Mr. Fisher
said they may not be. He pointed to the stock market's reaction to
fears of possible Fed tapering during the summer as evidence of the
influence of Fed policy on the markets and economy. "We
had a discussion about whether" to dial back purchases of Treasurys and
it "sent a shiver up the spine of the economy," Mr. Fisher said. "That tells me people are way too dependent on the Federal Reserve," Mr. Fisher said. "One
has to take into account whether on a nominal basis or a
inflation-adjusted basis, we're a few points off all-time highs" on the
stock market, Mr. Fisher said. "I
believe markets are manic-depressive mechanisms…they overshoot on both
sides," he said. "We're at least a standard deviation above the norm on
an inflation-adjusted basis. Is that sustainable? You know your math;
it's rarely sustainable."
- Edward Lampert's Hedge Fund Shrinks as Investors Pull Money. Clients of Goldman Sachs Make Redemption Requests. Clients
of Goldman Sachs Group Inc. who invested about $3.5 billion in Edward
Lampert's hedge fund through a 2007 deal have asked for their money back,
according to people with knowledge of the matter. The redemption
requests were submitted last year in advance of the expiration of the
five-year lockup of the investors' money.
Barron's:
- 30-Yr Mortgage Rate Hits 10-Week High 4.46%. With Treasury yields creeping higher lately, mortgage rates rose in the latest week as well, with the
average 30-year fixed-rate mortgage rate jumping to 4.46% – the highest
reading since the week ending Sept. 19 – from 4.29% a week earlier,
according to Freddie Mac’s (FMCC) latest Primary Mortgage Market Survey.
A year ago that rate stood at 3.34%, just off its all-time low 3.31%.
Fox News:
- NSA reportedly collects 5 billion cell phone location records a day. The NSA collects nearly 5 billion records a day on the locations of cell
phones overseas to create a huge database that stores information from
hundreds of millions of devices, including those belonging to some Americans abroad, the Washington Post reported Wednesday.
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
Real Clear Politics:
- Obamacare's Next Problem: Doc Shock. Meet Chico, Calif., attorney Kenneth Turner. His wife found out that she
has breast cancer two days before they received their cancellation
notice. She's scheduled for surgery Dec. 20 and will hear the prognosis
Dec. 30. Two days later, she loses the doctor who will have operated on
her, as well as other doctors she has seen for decades.
Reuters:
- Latin America poverty decline slowing as economies cool - U.N. Weaker macroeconomic performance
and rising food costs have put the brakes on the rate of poverty
decrease in Latin America, the United Nations' economic body for
the region said on Thursday.
An annual survey by the Economic Commission for Latin
America and the Caribbean shows 27.9 percent of Latin Americans
live in poverty, while 11.5 percent are in extreme poverty. The number of poor - about 164 million - has remained stable
compared to 2012, falling slightly in percentage terms. The
numbers in extreme poverty rose slightly to 68 million.
- Bargain-hunting dents U.S. retailers' November sales. Several major U.S. retailers
posted disappointing sales for November after shoppers remained
cautious about spending, the latest sign that the holiday season
is shaping up to be the toughest in years. Some companies that reported sales gains had to offer more
bargains to attract shoppers. The need to keep discounting, which stems from sagging
consumer confidence and shoppers trained to wait for bargains,
will persist through the remainder of the season, said Edward
Jones analyst Brian Yarbrough.
- METALS -Nickel, tin up on Indonesia ban, copper down on Fed fears. Nickel and tin rose on Thursday after Indonesia reiterated it would impose an export ban on ore, while copper dipped on worries the Federal Reserve could curtail monetary stimulus following
strong U.S. economic data. Copper was last bid at $7,068, down 0.4 percent,
after failing to trade in closing open outcry activity. It
reached a nine-day high in the previous session.
- Fed should define a clear path to end of QE3: Fisher. The Federal
Reserve should lay out a clear plan for the end of its current
round of quantitative easing, a top Fed official who has never
supported the bond-buying program said on Thursday.
"We should define a very clear path," Dallas Federal Reserve
Bank President Richard Fisher told reporters after a talk here,
reducing the Fed's $85 billion-a-month bond buying program by a
set amount until it reaches zero.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
Japan Times:
- Japan-ASEAN draft implies China’s new ADIZ is a security threat. Japan and the Association of Southeast Asian Nations will express their
concern in a joint statement that any abuse of power in international
civil aviation could pose a security “threat,” a Japan-ASEAN diplomatic
source said Thursday, in an implicit reference to China’s new air
defense zone.
Style Underperformer:
Sector Underperformers:
- 1) Education -1.66% 2) Software -1.43% 3) HMOs -1.11%
Stocks Falling on Unusual Volume:
- SP, ECOL, TITN, EPB, CEQP, FRAN, PFPT, MSFT, BOBE, KR, BIG, EA, CUK, ELGX, QLTY, ADBE, BWP, OMED, PHI, MDP, MBT, SJM, THRX, SFUN and NCR
Stocks With Unusual Put Option Activity:
- 1) IEF 2) FNSR 3) MSFT 4) PAYX 5) PHM
Stocks With Most Negative News Mentions:
- 1) TITN 2) LB 3) KR 4) TD 5) EOG
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +2.02% 2) Gaming +.82% 3) Papers +.53%
Stocks Rising on Unusual Volume:
- PBYI, MEI, CONN, MFRM, GGP, DG, KFY, ARRS, AWAY, MKTG, LNG and SCTY
Stocks With Unusual Call Option Activity:
- 1) CONN 2) DG 3) CNP 4) BRCM 5) T
Stocks With Most Positive News Mentions:
- 1) TWTR 2) OCR 3) LNKD 4) YHOO 5) T
Charts:
Evening Headlines
Bloomberg:
- China Risks Cooler South Korea Ties With Air Defense Zone. China’s overlap of its new air zone with that of South Korea
in the East China Sea has complicated its efforts to forge closer ties
with President Park Geun Hye and gives her an incentive to further
strengthen relations with the U.S. Park will tomorrow meet Vice
President Joseph Biden, who has called on South Korea and Japan to stand
with the U.S. in the face of China’s assertion of its military muscle.
Park and her top defense officials were hosting Chinese state councilor
Yang Jiechi less than three weeks ago as part of her effort to boost
trade and secure China’s help in containing North Korea.
- China Swap Rate Rises for Fifth Day After PBOC Doesn’t Add Funds.
China’s one-year interest rate swaps rose for a fifth day as the
central bank refrained from adding funds to the interbank market. The
People’s Bank of China didn’t inject money by selling 14-day
reverse-repurchase agreements today, according to two traders at primary
dealers required to bid at the auctions. The monetary authority
auctioned the contracts on Nov. 21 and Nov. 28, after a two-week halt. The
PBOC drained a net 47 billion yuan ($7.7 billion) this week, after
injecting 17 billion yuan last week, according to data compiled by
Bloomberg. The cost of interest-rate swaps, the fixed payment needed to
receive the floating seven-day repo rate, rose one basis point, or 0.01
percentage point, to 4.7 percent as of 10:15 a.m. in Shanghai, according
to data compiled by Bloomberg. That matched yesterday’s intra-day peak,
which was the highest level
since June 21.
- Most Asian Stocks Drop After U.S. Data; Aussie Bonds Fall.
Most Asian stocks fell, while
Australian bond yields climbed to a two-year high and gold retreated.
Indian equities rallied with the rupee as votes were counted for state
elections. Almost two shares dropped for each that gained on the MSCI Asia Pacific Index, which was little changed at 1:03 p.m. in Tokyo.
- Copper Falls Amid Speculation Fed May Taper Monetary Stimulus. Copper fell after the biggest daily
gain yesterday in 11 weeks as traders turned their attention to the likelihood of stimulus cuts by the Federal Reserve. Metal for delivery in three months on the London Metal Exchange fell as much as 0.4 percent to $7,065 a metric ton and
traded at $7,066 at 10:49 a.m. in Tokyo.
- Rebar Falls From 7-Week High on Ore Inventory, Freezing Weather.
Steel reinforcement-bar futures in Shanghai fell with iron ore as
inventory of the raw material in China surged and freezing temperatures
slowed construction projects. Rebar for May delivery, the most-active contract on the
Shanghai Futures Exchange, fell as much as 0.3 percent to 3,701
yuan ($608) a metric ton, and traded 3,703 yuan at 10:40 a.m.
local time.
- Currency Volatility Climbs to 8-Week High Before U.S. Data, ECB. “After what has been a relative dearth of U.S. data,
markets have swung back to focusing on the U.S.,” said Callum Henderson, the Singapore-based global head of currency research
at Standard Chartered Plc. “I would think we’re going to see
more choppy price action from now until year end.” JPMorgan’s Global FX Volatility Index was at 8.8 percent,
headed for the highest close since Oct. 9.
- Treasury Yields Climb to 11-Week High as ADP Spurs Jobs Optimism. Treasuries slid, pushing 10-year
yields to the highest level since September, as industry data
showed job growth accelerated more than forecast, adding to bets the Federal Reserve may reduce bond purchases this month. The difference in yields on two- and 10-year notes approached the widest level since July 2011.
- Spain Credit Falls to ’05 Shadow After Price Collapse: Mortgages.
Spanish property broker Donpiso
pledges on its website it can sell homes within 60 days. That’s
possible, said Juan Luis Nolasco, who runs one of the firm’s Madrid
branches, only if owners are realistic about prices and the difficulties
buyers face getting mortgages after six years of falling values. “A
lot of sellers are still living in the land of Peter Pan,” Nolasco said,
referring to the fictional Neverland. “The biggest problem is lack of
access to financing for buyers.” Currently, it can take about six
months to sell a property, he said. Buying a home hasn’t gotten any
easier for Spaniards, even after home prices tumbled as much as 40
percent. Rising borrowing costs, currently more than one-and-a-half
times the cost in Germany, the end of mortgage tax breaks, and shrinking
disposable incomes are making it increasingly difficult for Spanish
families to own their own home. Fewer than 15,000 mortgages were
granted in September compared with about 129,000 at the September 2005
peak, according to the National Statistics
Institute.
- Job Cuts Loom at European Banks as Stagnant Economy Pinches Fees. European banks, which eliminated more
than 140,000 jobs in two years, are poised to keep shrinking. Lenders in the region probably will cut at least 5 percent
of trading and advisory staff next year, according to a survey
of three London-based investment-bank recruiters, and the
reductions could reach 15 percent, two of them said. That would
be twice the 7 percent shrinkage across the industry since 2011.
- RBS and S&P Sued by European CPDO Investors in Class Action. Royal Bank of Scotland Group Plc (RBS) and
Standard & Poor’s were sued in the Netherlands by 16 investors
over a complex derivative product that fell in value by as much
as 90 percent during the financial crisis. The class-action lawsuit relates to so-called constant-proportion debt obligations created by RBS’s ABN Amro unit and
rated AAA by McGraw Hill Financial Inc.’s S&P, according to
Bentham IMF Ltd. (IMF), the company which is funding the case. The
investors are seeking about $250 million.
Wall Street Journal:
- Volcker Rule Won't Allow Banks to Use 'Portfolio Hedging". In
a defeat for Wall Street, the "Volcker rule" won't allow banks to enter
trades designed to protect against losses held in a broad portfolio of
assets, according to people familiar with the rule. The practice,
known as portfolio hedging, has become a focal point of regulators
drafting the rule, a controversial plank of the 2010 Dodd-Frank
financial law that seeks to prevent banks from putting their own capital
at risk in pursuit of trading profits.
- Apple(AAPL), China Mobile Sign Deal to Offer iPhone.
Tie-Up Would Give Apple Access to 700 Million Subscribers. China Mobile
Ltd. has signed a long-awaited deal with Apple Inc. to offer iPhones on
its network, a person familiar with the situation said, an arrangement
that would give the U.S. technology giant a big boost in the world's
largest mobile market. The
rollout of iPhones on the world's largest mobile carrier by users, with
over 700 million subscribers, is expected to start later this month,
around the time of a Dec. 18 China Mobile conference in Guangzhou,
according to two people familiar with the carrier's plans. China Mobile
is one of the world's last major carriers that doesn't offer the iPhone. At
the Dec. 18 event, China Mobile plans to unveil a brand for its
fourth-generation, or 4G, network. China Mobile executives have said
they would only begin to sell the iPhone after introducing 4G services.
China's Ministry of Industry and Information Technology said Wednesday
it gave licenses to China Mobile and its smaller rivals to operate the
higher-speed mobile networks, clearing one of the last hurdles.
- Medicaid Is Latest Health-Site Victim. States
are warning that they may not process Medicaid enrollments from people
who have signed up for the health program through the troubled
HealthCare.gov site, raising the prospect that several hundred thousand
low-income people who thought they had obtained insurance actually may
not have it. The
federal health-insurance site, which serves residents in 36 states, is
designed to sell policies from private insurers. But some people who
apply for coverage through the site discover they are eligible instead
for Medicaid, the joint federal-state health-insurance program for the
poor and disabled.
- Jihadists Returning Home to Europe from Syria Pose New Terror Threat.
Series of Arrests Heighten Fears, Problem Expected to Grow as Conflict
Drags On. Scores of jihadist fighters from Europe who
streamed to Syria to join Islamic extremist rebels have begun returning
home, where some are suspected of plotting terror attacks, according to
U.S. and European intelligence and security officials. Authorities in
the U.K. and France recently made several terror-related arrests of
individuals suspected of links to Syria. "They're
real committed jihadists," a senior U.S. intelligence official said.
"The concern is that we're at the very early stages of this."
- Drug-Cost Surprises Lurk Inside New Health Plans. Americans with chronic illnesses—who are
expected to be among the biggest beneficiaries of the health law—face
widely varying out-of-pocket drug costs that could be obscured on the
new insurance exchanges. Under the law,
patients can't be denied coverage due to existing conditions or charged
higher rates than healthier peers. The law also sets an annual
out-of-pocket maximum of up to $6,350 for individuals and $12,700 for
families, after which insurers pay the full tab.
Barron's:
Fox News:
- Reid exempts some staff from having to buy insurance on ObamaCare exchange. Senate Majority Leader Harry Reid is allowing some staffers to keep
their health insurance instead of making them buy it through an
ObamaCare exchange, although he was one of the strongest Capitol Hill
supporters of the 2010 law. The Nevada Democrat is exercising his discretion under the
president’s signature law to designate which staffers can keep their
federal insurance plan and which must now purchase a policy through the
District of Columbia’s health-care exchange. However, he purportedly is the only top congressional leader to
exercise that option, which resulted in sharp criticism Wednesday from
Texas Republican Sen. Ted Cruz, perhaps the staunchest ObamaCare
opponent on the Hill.
CNBC:
- Christmas taper talk picking up steam. Even with spotty economic data, the unofficial odds are rising that the
Fed will announce plans at its December meeting to taper its bond-buying
program.
Zero Hedge:
ValueWalk:
Business Insider:
Reuters:
- U.S. House passes bill to exempt private equity funds from rules. The U.S. House of
Representatives passed a bill on Wednesday that would largely
spare private equity fund advisers from federal regulations
enacted after the 2007-2009 financial crisis.
The bill would exempt many private equity fund advisers from
a provision in the 2010 Dodd-Frank Wall Street Reform law which
required advisers with more than $150 million in assets under
management to register with the U.S. Securities and Exchange
Commission.
- Aeropostale's(ARO) holiday quarter forecast disappoints. Apparel retailer Aeropostale Inc forecast a much bigger-than-expected loss for the holiday shopping
quarter as it struggles to keep up with the tastes of young shoppers,
sending its shares down 4 percent in extended trading.
Aeropostale, under pressure from some investors to sell itself, also reported its fourth straight quarterly loss.
Financial Times:
- Brazil trade growth poor in spite of weak currency.
Brazilian trade has grown much less than expected this year in spite of
a sharp weakening of the local currency against the dollar,
highlighting the country’s declining competitiveness. Brazilian
container traffic is forecast to rise 4 per cent in 2013 compared with
earlier expectations of 6-7 per cent, according to the world’s largest
shipping company by volume, Maersk Line.
- Iran threatens to trigger oil price war. Tension
between Iran and Saudi Arabia over Tehran’s plans to raise oil output
spilled into the open on Wednesday as Opec rolled over its production
target in the belief a wall of supply will fail to materialise next year.
The oil producers’ cartel controls around a third of the global oil
market and, as the only source of spare capacity, exerts a big influence
over prices.
Nikkei:
- Japan May Cut Tax Exemption for Workers on Over 10m Yen. Japan's
govt and ruling coalition are considering reducing income tax exemption
on company workers with annual salary of more than 10m yen. Change may
be included in 2014 tax system plan to be compiled this month. Change
would mean additional 70,000 - 110,000 yen in annual taxes for worker on
15m yen salary.
China Business News:
- Shanghai Warns on Commercial Property Financing Risks.
China Banking Regulatory Commission's Shanghai branch asks banks to pay
"high attention" to risks of financing to the city's commercial real
estate, citing a notice issued by the regulator. The regulator says
Shanghai commercial property prices rose "too fast" and the potential
risks are "way larger" than those in residential property sector,
according to the report. Banks in Shanghai have issued over 70b yuan
outstanding loans to 149 city complexes as of September, 30-40% higher
than the same period last year, the report cites regulator's survey as
saying.
Evening Recommendations
Deutsche Bank:
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 135.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 111.0 +.75 basis point.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 322K versus 316K the prior week.
- Continuing Claims are estimated to rise to 2800K versus 2776K prior.
- 3Q GDP is estimated to rise 3.1% versus a prior estimate of a +2.8% gain.
- 3Q Personal Consumption is estimated to rise +1.5% versus a prior estimate of a +1.5% gain.
- 3Q GDP Price Index is estimated to rise +1.9% versus a prior estimate of a +1.9% gain.
- 3Q Core PCE is estimated to rise +1.4% versus a prior estimate of a +1.4% gain.
10:00 am EST
- Factor Orders for October are estimated to fall -1.0% versus a +1.7% gain in September.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Fisher speaking, Fed's Lockhart speaking, ECB's Draghi speaking,
BoE rate decision, ECB rate decision, Challenger Job Cuts report for
November, RBC Consumer Outlook Index for December, weekly EIA natural
gas inventory report, weekly Bloomberg Consumer Comfort Index and the
(HSP) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity
and industrial shares in the region. I expect US stocks to open
mixed and to weaken into the afternoon, finishing modestly lower. The
Portfolio is 25% net long heading into the day.
