Evening Headlines
Bloomberg:
- Asian Sovereigns Lose for First Year Since 2008 as Growth Stalls. Dollar-denominated
bonds sold by
Asia’s sovereigns are losing money for the first time since 2008 as
growth slows in four of the region’s five largest economies. Debt issued
by countries outside Japan lost 7.1 percent since Dec. 31, the worst
performance in five years, according to JPMorgan Chase & Co.
indexes. Quasi-sovereign borrowers, such as Indonesia’s PT Perusahaan
Listrik Negara, fell 2.8 percent while corporates gained 1 percent.
Emperor International Holdings Ltd., which develops real estate in Hong
Kong, Macau and China, hired banks for a possible sale in the U.S.
currency, according to a Dec. 10 statement.
- Shenzhen Finds H7N9 Flu Virus in Markets Near Hong Kong. The risk of sporadic human infection
is high after three samples collected from live-poultry markets
in the southern city of Shenzhen tested positive for the H7N9
avian influenza virus, the Chinese government said. The Guangdong
province health authority examined 70 samples from 13 live poultry
markets in Shenzhen, it said in a statement yesterday. Shenzhen is an
hour’s train ride from downtown Hong Kong and a popular day-trip
destination for shopping and dining.
- Asian Stocks Drop Second Day Amid Concern Fed Will Taper.
Asian stocks fell, with the regional index heading for its lowest close
in two months, as investors speculate the U.S. budget deal will give
the Federal Reserve confidence to curb stimulus as soon as next week.
Doosan Heavy Industries and Construction Co. sank 4.6 percent in Seoul
after the maker of factory equipment said it will sell 9.5 million
treasury shares. QBE Insurance Group Ltd. lost 5.1 percent in Sydney,
extending this week’s slump to 32 percent, as Fitch Ratings cut the
outlook on Australia second-largest insurer by market value to negative
from stable. Full Speed Inc. surged 16 percent in Tokyo as the
Internet-marketing
firm returned to profit. The MSCI Asia Pacific Index slid 1.1 percent to 138.27 as
of 12:16 p.m. in Hong Kong, with all 10 industry groups on the
gauge falling.
- Rebar Near 11-Week High as Steel Mills in China Reduce Output.
Steel reinforcement-bar futures in Shanghai traded near the highest in
11 weeks as China’s steel mills are under pressure from the government
to reduce output on environmental considerations. Rebar for May delivery, the most-active contract on the
Shanghai Futures Exchange, was little changed at 3,730 yuan
($615) a metric ton at 11:02 a.m. local time, after climbing as
much as 0.3 percent to 3,745 yuan, the highest since Sept. 24.
- Draghi Builds Stress-Test Credibility as ECB Readies Bank Review. The
European Central Bank is showing that it can repair the reputation of
stress tests. More than 90 percent of economists surveyed by Bloomberg
News said that stress tests next year, in the final part of an ECB-led
review of the euro area’s most prominent banks, will be
more credible than previous exercises by the London-based
European Banking Authority. Details of the examinations of about
130 lenders from Banco Santander SA to ABN Amro Bank NV are due
to be released at the end of January.
- Fed to Come Under ‘Rigorous’ House Scrutiny, Hensarling Says.
Representative Jeb Hensarling, chairman of the U.S. House committee
that oversees the Federal Reserve, said he plans to subject the Fed to
unprecedented scrutiny while considering legislation over the coming
year that may focus on its structure, mandates and powers. “It will be the most rigorous examination and oversight of
the Federal Reserve in its history,” Hensarling, a Republican
from Texas and Financial Services Committee chairman, said today
to reporters, referring to a series of hearings scheduled to
start tomorrow. “We will be studying the history, purposes and
policies of the Fed.”
- Senators Vow to Add to Iran Economic Sanctions in 2014. A
number of U.S. senators vowed to continue seeking new sanctions against
Iran after meeting with Secretary of State John Kerry and Treasury
Secretary Jack Lew, who say such measures endanger an international
accord designed
to limit that nation’s nuclear program.
- Airlines Get Relief Under U.S. Budget While Passengers Pay. U.S. airlines won a repeal of $380
million in fees they pay for aviation security each year as part
of a congressional budget deal that raised related charges on
their passengers. The Aviation Security Infrastructure Fee is to be repealed
on Oct. 1, 2014, according to a summary of the deal released by
the House Rules Committee today. The Sept. 11 Security Fee paid
by passengers on airline tickets will more than double, over the
objection of lawmakers who set aviation policy. “The government and the administration shouldn’t treat
airline passengers to be like piggy banks,” House
Transportation and Infrastructure Chairman Bill Shuster, a
Pennsylvania Republican, said in a speech in Washington today.
“Those of us who fly are paying more than our fair share to
reduce the deficit in this country.”
- Big U.S. Bank Stocks Unlikely to Beat Market in 2014, KBW Says. Stocks
of the largest U.S. banks
probably won’t outperform the broader market in 2014 after many
climbed more than 30 percent this year, said Christopher Mutascio, an
analyst at Stifel Financial Corp.’s KBW unit. The median growth in
earnings per share at 11 of the
largest banks, including JPMorgan Chase & Co. and Wells Fargo &
Co., is likely to be 2 percent next year, after a 16 percent
jump in 2013, Mutascio wrote in a report today. Adjusted
earnings per share may fall at JPMorgan and PNC Financial
Services Group Inc., he said. “The large-cap banks no longer appear cheap,” Mutascio
wrote. “The three primary tailwinds for large bank earnings
growth in recent years are either becoming headwinds or are
likely to represent much less of a catalyst going forward.”
Wall Street Journal:
- Fischer Poised to Be Picked as Fed's No. 2. Stanley Fischer, widely seen as a dean among the world's top central
bankers, is President Barack Obama's choice to become second-in-command
at the Federal Reserve, according to people familiar with the matter. A White House nomination isn't far off, said one person familiar with
the matter. Another said talks with Mr. Fischer were well advanced, but
an announcement could take as long as a couple of weeks. Unforeseen
events could derail a nomination, as has happened to other Obama
candidates in recent years.
- Top Western-Backed Rebel In Syria Is Forced to Flee. Islamic Front Takes Over Aid Warehouses From Moderate Rebels. Islamist fighters ran the top Western-backed
rebel commander in Syria out of his headquarters, and he fled the
country, U.S. officials said Wednesday. The
Islamists also took over key warehouses holding U.S. military gear for
moderate fighters in northern Syria over the weekend. The takeover and
flight of Gen. Salim Idris of the Free Syrian Army shocked the U.S.,
which along with Britain immediately froze delivery of nonlethal
military aid to rebels in northern Syria.
- Businesses Stung by $15-an-Hour Pay. Small Businesses Discuss the Problems Posed by a Rising Minimum Wage. With 40 employees and less than $5 million in annual revenue, the
franchise hotel in SeaTac, Wash., could be the typical American small
business. But the Holiday Inn Express will soon have to give most of its
staff pay raises that are anything but routine.
- Juking the ObamaCare Stats. HHS won't disclose the enrollment data that really matter. Most of Washington seems to have bought the White House claim that the
36 federal exchanges are finally working, and glory, glory, hallelujah.
But if that's really true, then what explains the ongoing secrecy and
evasion?
- Norman Podhoretz: Strike Iran Now to Avert Disaster Later. A conventional-weapons attack is preferable to the nuclear war sure to come. Not too many years ago, hardly anyone disagreed with John McCain when he
first said that "the only thing worse than bombing Iran is letting Iran
get the bomb." Today hardly anyone disagrees with those who say that
the only thing worse than letting Iran get the bomb is bombing Iran. And
in this reversal hangs a tale.
MarketWatch.com:
CNBC:
- Hilton Worldwide prices IPO at $20. Hilton Worldwide, the world's largest hotel operator, raised roughly $2.34 billion in its IPO on Wednesday after pricing shares toward the high end of its range.
Zero Hedge:
Business Insider:
Reuters:
Financial Times:
- ECB Aims to Require Banks to Hold Capital Against Sovereign
Bonds. Central bank will seek to combine its new powers as principal
banking regulator with current role as currency issuer to strengthen
requirements on sovereign bonds, which have traditionally been classes
as risk free, citing an interview with Peter Praet, ECB executive board
member. Bank to seek change in regulatory thinking through its health
check of euro zone's 130 biggest lenders combined with any new offer of
cheap long-term liquidity. If sovereign bonds were treated "according to
the risk that they pose to banks' capital," lenders would be less
likely to use central-bank liquidity to buy more government debt, Praet
said.
Evening Recommendations
Night Trading
- Asian equity indices are -1.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 129.0 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 103.0 -1.25 basis points.
- NASDAQ 100 futures -.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance for November are estimated to rise +.6% versus a +.4% gain in October.
- Retail Sales Ex Autos for November are estimated to rise +.2% versus a +.2% gain in October.
- Retail Sales Ex Autos and Gas for November are estimated to rise +.3% versus a +.3% gain in October.
- Initial Jobless Claims are estimated to rise to 320K versus 298K the prior week.
- Continuing Claims are estimated to rise to 2757K versus 2744K prior.
- The Import Price Index for November is estimated to fall -.7% versus a -.7% decline in October.
10:00 am EST
- Business Inventories for October are estimated to rise +.3% versus a +.6% gain in September.
Upcoming Splits
Other Potential Market Movers
- The 30Y $13B T-Bond Auction, SNB rate decision, Bloomberg Dec. US Economic Survey, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (UTX) Analyst Meeting, (MYGN) Investor Day, (ABC) Investor Day, (DHR) Analyst Meeting, (AET) Investor Conference and the (DTV) Investor Day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology
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.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Every Sector Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.84 +6.69%
- Euro/Yen Carry Return Index 147.50 -.04%
- Emerging Markets Currency Volatility(VXY) 9.03 +1.69%
- S&P 500 Implied Correlation 52.15 +1.84%
- ISE Sentiment Index 149.0 +13.74%
- Total Put/Call .97 +29.33%
Credit Investor Angst:
- North American Investment Grade CDS Index 69.42 +2.44%
- European Financial Sector CDS Index 96.50 +1.69%
- Western Europe Sovereign Debt CDS Index 56.0 -8.47%
- Emerging Market CDS Index 282.31 +.12%
- 2-Year Swap Spread 10.0 +1.0 basis point
- TED Spread 17.75 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap .5 -2.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .07% unch.
- Yield Curve 253.0 +3.0 basis points
- China Import Iron Ore Spot $139.10/Metric Tonne -.22%
- Citi US Economic Surprise Index 34.10 +1.1 points
- Citi Emerging Markets Economic Surprise Index -13.80 +.9 point
- 10-Year TIPS Spread 2.14 +3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -155 open in Japan
- DAX Futures: Indicating -15 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- Junk Debt’s Escalating Risk Enticing Money Managers: Euro Credit. Europe’s
high-yield bond market will get riskier next year, with some of the
world’s biggest money managers predicting the lowest-rated and
most-indebted companies will escalate sales to take advantage of cheap
borrowing. Investors earned an average 9.5 percent buying a record
71 billion euros ($98 billion) of junk bonds this year, according to
data compiled by Bank of America Corp. and Bloomberg. The average
yield investors demand to hold speculative-grade debt dropped 69 basis
points in the period to 5 percent, approaching a record low, the data show. “Credit quality is weakening,”
said Michael Phelps, London-based head of European credit investments
at BlackRock Inc. (BLK), the world’s biggest money manager with $4.1
trillion in assets, including $31 billion in high-yield. “A lot of supply is coming from first-time issuers
and that’s creating attractive opportunities.” Money managers are
taking on more risk because corporate default rates are approaching
historic lows and the European Central Bank has pledged to suppress interest rates for an
“extended period of time.”
- Era of Lucrative Debt Team Fades as Credit Suisse Sees Exits.
Thirteen years after Credit Suisse Group AG crowned itself Wall Street’s
new junk-bond king by buying Donaldson Lufkin & Jenrette Inc., the
last vestiges of its reign in the most lucrative credit business are
being squeezed out by post-crisis banking regulations.
- European Stocks Fall as Investors Consider U.S. Budget.
European stocks fell for a second day as investors weighed an accord
between U.S. lawmakers to limit automatic spending reductions and avoid
another government shutdown, as well as a possible cut in Federal
Reserve stimulus. Royal Bank of Scotland Group Plc lost 2.9 percent as
Nathan Bostock said he will quit as chief financial officer. Mediolanum
(MED) SpA slipped 6.9 percent as its largest investor sold a stake.
European Aeronautic, Defence & Space Co. surged the most in a year
after
reiterating plans to increase dividend payments. BAE Systems Plc added
2.6 percent as the U.S. budget deal provided $31.5 billion of relief
from forced military spending cuts. The Stoxx Europe 600 Index fell 0.5 percent to 313.3 at the close of trading.
- Treasuries Fall for First Time in Four Days Amid Bets on Taper. Treasuries
ended a three-day advance amid speculation a U.S. budget agreement will
support the economy and make it easier for the Federal Reserve to start
reducing bond purchases. U.S. 10-year notes headed for the worst annual performance in four years as the government sold $21 billion of them to
lower-than-average demand in its last auction of the securities
for 2013. Budget negotiators unveiled an agreement yesterday to
ease automatic spending cuts by about $63 billion over two years
and cut the deficit by $23 billion, ending a three-year cycle of
fiscal standoffs. The Fed meets Dec. 17-18.
- Yen Strengthens From 6-Month Low as Stock Decline Fuels Demand. “There are a lot of risk-off plays that are causing the
yen to appreciate,” Ravi Bharadwaj, a Boston-based senior
market analyst at Western Union Business Solutions, a unit of
Western Union Co., said in a phone interview. “The empty
Japanese economic calendar today has also added to the effect of
the stock market on the yen.”
The yen rose 0.3 percent to 102.56 per dollar at 1:35 p.m.
New York time.
- Crude Falls From Six-Week High as U.S. Fuel Supply Rises.
WTI for January delivery slipped $1.21, or 1.2 percent, to $97.30 a barrel at 2:07 p.m. on the New York Mercantile Exchange. It traded at $97.82 before the report and rebounded to $98.34 immediately after. The contract settled at $98.51
yesterday, the highest close since Oct. 28. The volume of all
futures traded was 15 percent above the 100-day average.
- One-Hundred-Year Bond Plummet Shows Taper Concern: Mexico Credit. Mexico’s
100-year bonds are on the verge of losing all their gains over the past
two years as speculation the Federal Reserve will curb stimulus
overshadows the nation’s biggest economic reforms in almost two decades. The
$2.7 billion of dollar-denominated debt due in 2110 has tumbled 29.1
cents to 91.24 cents on the dollar this year, after climbing 32.3 cents
from 2010 to 2012, according to data compiled by Bloomberg. The notes
have lost 19.4 percent in 2013, exceeding the 12.7 percent average drop
for emerging-market sovereign bonds due in 10 years or more, according to data
compiled by Bloomberg.
- Fracking Boom Pushes U.S. Oil Output to 25-Year High. U.S.
crude production rose to the highest level in a quarter-century as a
shale drilling boom in states such as Texas and North Dakota cut the
need for foreign oil and pushed the country closer to energy
independence. The U.S. pumped 8.075 million barrels a day in the week ended Dec. 6, a gain of 0.8 percent, or 64,000 barrels a day,
the Energy Information Administration said today. It’s the most
since October 1988.
- Tobin's Q Sends Caution Signal on U.S. Stocks: Chart of the Day.
Share prices may be running out of room to rise in the U.S. because the
market value of companies is greater than the replacement cost of their
assets, according to Pavilion Global Markets Ltd. Tobin's Q ended the
third quarter at .98, according to data compiled by the Fed and released
2 days ago. The ratio is based on market and asset values for
non-financial companies. Readings of more than 1 show stocks are
overvalued. The fourth-quarter performance of the S&P 500 points
to a ratio of 1.06, Pierre Lapointe, head of global strategy and
research at Pavilion, and two colleagues wrote. The ratio has been above
1.0 during only one other period since the 1930s, which was during the
1990's tech stock bubble.
- Joy(JOY) Profit Forecast Misses Estimates Amid Mining Slump. Joy Global Inc.
(JOY), the world’s largest maker of underground mining equipment,
forecast lower-than-expected earnings for fiscal 2014 as customers
continue to restrict spending after a decline in commodity prices. Profit excluding one-time items will be $3 to $3.50 a share
in the coming year through October, the Milwaukee-based company
said today in a statement. The average of 22 analysts’ estimates
compiled by Bloomberg is for $3.67. Joy fell 4.4 percent to
$53.75 at 8:07 a.m. before the start of regular trading in New
York.
- Gender Pay Gap Is Narrowest on Record for New Workers, Pew Says. American women starting their
careers today can expect to be paid almost as much as their male
peers, though they fall behind as they have children, according
to a Pew Research Center study. Women between the ages of 25 and 34 were paid 93 percent as
much as men in 2012, up from 67 percent in 1980 and the
narrowest gap on record, according to the research group. “Today’s young women are the first in modern history to
start their work lives at near parity with men,” according to
the report released today.
Wall Street Journal:
- J.P. Morgan's(JPM) Dimon Says Bank to Spend Double on Controls Next Year. Bank Will Spend Up to $2 Billion in 2014 as It Operates Under Heightened Regulator Scrutiny.
J.P. Morgan Chase JPM -0.97% & Co. Chief Executive and Chairman
James Dimon expects to double the amount the largest U.S. bank spends on
controls in 2014 as it operates under heightened scrutiny from
regulators.
- U.S. Suspends Some Aid to Syrian Rebels After Islamists Gain Ground. Free Syrian Army Rebels Cede Warehouses to New Islamic Front Coalition. The U.S. and Britain suspended nonlethal aid
to moderate rebels in northern Syria after Islamist fighters took over
their warehouses, the latest sign that the Western-backed opposition is
weakening while religious opponents of the regime gain strength. The
new Islamic Front alliance took over the aid warehouses in the town of
Atmeh near the Bab al-Hawa border crossing with Turkey on Saturday, U.S.
officials, Syrians who coordinate aid deliveries and activists in the
area said.
MarketWatch:
CNBC:
- S&P downgrades US growth forecast. "We've lowered our forecast for U.S. GDP growth in light of the
additional sequester spending cuts in 2014 as well as the potential for
another political standoff in Washington after the October government
shutdown," S&P said on Monday, ahead of the bipartisan budget deal
struck in Washington.
- The rich do not pay the most taxes, they pay ALL the taxes. Buried
inside a Congressional Budget Office report this week was this nugget:
when it comes to individual income taxes, the top 40 percent of wage
earners in America pay 106 percent of the taxes. The bottom 40
percent...pay negative 9 percent.
Zero Hedge:
Business Insider:
efinancialcareers:
boombustblog:
Powerline:
Reuters:
- S&P Sees India Rating Under Pressure on Hung Parliament.
India's sovereign rating may come under pressure if general electionsl
ead to a hung parliament or with a govt unable to push through reforms,
citing S&P's credit analyst Terry Chan.
- U.S. mutual funds hit investors with big capital gains. Capital gains pain has arrived
for U.S. mutual fund investors. U.S. mutual funds are disclosing some whopper capital gains
distributions, anywhere from 6 percent to 60 percent of net
asset value, underscoring stock market success and a potential
year-end tax headache for investors. The year-end distributions
are among the largest seen since the start of the financial
crisis in 2008, according to U.S. regulatory filings.
Handelsblatt:
- ECB's Asmussen Says EU Banking Compromise Doesn't Go Far Enough.
ECB Executive Board member Joerg Asmussen says in an interview with
Handelsblatt that he hopes to see a breakthrough next week. Asmussen
says compromise is too complex.
Great Wisdom:
- China Local-Govt Debt 18t Yuan as of End-June. Audit results show
China government debt was about 30t yuan as of the end of 1H, 12t yuan
of which was central govt debt, citing an official from the fiscal
system. The country's local government debt rose 68% in 2 1/2 years if
compared with 10.7t yuan debt found at the end of 2010, according to the
report.
Haaretz:
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -2.64% 2) Homebuilders -2.35% 3) Biotech -2.15%
Stocks Falling on Unusual Volume:
- IEP, RSE, ALSN, LH, GMLP, POST, GNE, JOY, ENTA, LUX, HRB, AVP, PDCE, XRS, COST, BRE, DGX, IOC, DDC, PBYI, SNN, ZIV, ICFI, ENZY, ULTA, GILD, TOWR, THC, GDP and PCYC
Stocks With Unusual Put Option Activity:
- 1) FIO 2) JOY 3) SHLD 4) JNK 5) KRE
Stocks With Most Negative News Mentions:
- 1) MU 2) HRB 3) EA 4) LH 5) MOS
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +.66% 2) Airlines +.03% 3) Retail -.20%
Stocks Rising on Unusual Volume:
- NRF, SNI, MA, KND and RKUS
Stocks With Unusual Call Option Activity:
- 1) AAL 2) SHLD 3) JOY 4) AFSI 5) CVS
Stocks With Most Positive News Mentions:
- 1) BA 2) CAT 3) CSCO 4) PSX 5) LMT
Charts:
Evening Headlines
Bloomberg:
- Riot Exposes Dark Side of Singapore's Boom.
From all appearances, Singapore seems to have dealt with the nation’s
first riot since 1969 with its usual efficiency. The streets of Little
India -- where an Indian migrant worker was killed by a bus on Sunday
night, sparking two hours of mayhem -- have been cleared of debris. The
government has called for a commission to investigate the
incident, and has charged 24 Indian nationals with rioting. Officials
have banned the sale of alcohol in the area this weekend. Citizens have
been instructed to remain calm.
- HSBC Sells 8% Stake in Bank of Shanghai to Spain’s Santander. (graph) HSBC
Holdings Plc (HSBA), Europe’s largest bank, agreed to sell its 8
percent stake in Bank of Shanghai Co. to Banco Santander SA (SAN) as it
exits minority investments to boost profitability. HSBC didn’t disclose a price for the shareholding valued at about $468 million on its balance sheet, according to a
statement from the London-based bank yesterday. The lender paid
about $63 million in 2001 for the stake.
- China’s Stocks Drop Most in Month as Coal Shares Pace Declines.
China’s stocks fell, sending the benchmark index towards its biggest
loss in a month, as investors assess the outcome of a high-level
government meeting that will decide economic policies for next year.
China Shenhua Energy Co. (601088) and China Coal Energy Co., the biggest
coal producers, dropped 1.5 percent after the nation’s economic planner
announced measures to curb consumption of the fuel next year because of
worsening air pollution. Citic Securities Co. (600030), China’s biggest
listed brokerage, slid 3.4 percent. Shanghai Waigaoqiao Free Trade Zone
Development Co. plunged 4.1 percent, paring this year’s rally to 273
percent. All 10 industry groups in the CSI 300 Index declined. The
Shanghai Composite Index (SHCOMP) dropped 1.1 percent to 2,211.88 at
11:30 a.m. local time, heading for the biggest loss
since Nov. 13.
- Asian Stocks Slide With Metals as Yen Extends Advance.
Asian stocks fell for the first time
in three days and precious metals declined as investors weighed the
outlook for a paring of Federal Reserve stimulus after American
lawmakers unveiled a budget deal. The yen gained versus major peers. The MSCI Asia Pacific Index slid 0.8 percent as of 12:55 p.m. in Tokyo, with Japan’s Topix (TPX) index retreating 1 percent as
the yen rose against the euro and the dollar.
- Rebar Falls for Second Day as Weaker China Data Spurs Selling. Steel reinforcement-bar futures
declined from the highest level in almost two months as weaker-than-estimated factory output in China spurred selling. Rebar
for May delivery, the most-active contract on the Shanghai Futures
Exchange, dropped as much as 0.7 percent to 3,691 yuan ($608) a metric
ton and traded at 3,697 yuan at 10:05 a.m. local time.
- EU Finance Chiefs Lay Down Red Line on Creditor-Writedown Rules. European Union finance ministers
said they won’t accept any weakening of planned rules for
creditor writedowns at failing banks, potentially hampering
compromise talks with the European Parliament. German Finance Minister Wolfgang Schaeuble and his Dutch
counterpart, Jeroen Dijsselbloem, were among those to urge a
tough line on a bill called the Bank Recovery and Resolution
Directive, or BRRD, ahead of negotiations tomorrow in
Strasbourg, France. Lithuania, which holds the rotating
presidency of the EU, is seeking to strike a deal with EU
lawmakers on the legislation as a foundation for further
measures to centralize decision taking for stricken banks.
- Volcker Rule Seen as Boon for $1,000-an-Hour Wall Street Lawyers.
For Wall Street law firms including Debevoise, whose senior partners
have billed clients more than $1,000 an hour in the past, as well as
Sullivan & Cromwell LLP and Davis Polk & Wardwell LLP, the final
Volcker rule offers an opportunity for
new business and additional fees. Hundreds of lawyers will be
needed to interpret the rule, establish models for compliance
and find new strategies for securities firms with $44 billion at
stake from market-making activities.
- Volcker Rule Shift Lets Banks Continue Muni Bond Speculation. U.S. financial regulations that curb banks’ ability to
speculate with their own money included an exemption for the $3.7
trillion municipal bond market after issuers complained the rules could increase borrowing costs.
The Volcker Rule, issued today by regulators, allows banks to invest in
securities issued by states, localities and government agencies. The change is a victory for borrowers and municipal securities dealers
that pressed regulators to broaden the exemption. Without it, agencies
that sell bonds for public works projects said they might have faced
higher borrowing costs by eliminating banks as investors.
- Keystone Foe Podesta Joins Obama Inner Circle as Top Aide. John Podesta’s return to the White
House, aimed at bolstering President Barack Obama, places an
opponent of the Keystone XL pipeline within his circle just as
the administration weighs whether to approve the project. The Democratic veteran, who previously served as President
Bill Clinton’s chief of staff, joins the administration as
Obama’s approval ratings have fallen to all-time lows after the
fumbled rollout of the Patient Protection and Affordable Care
Act. White House spokesman Jay Carney said Podesta, 64, will
advise on a range of issues, “with a particular focus on issues
of energy and climate change.”
- IBM(IBM) Says Economy Remains Discouraging.
International Business Machines Corp. (IBM), the world’s largest
provider of computing services, continues to face economic challenges as
it tries to reignite declining sales, Senior Vice President Erich
Clementi said. Demand for technology services, IBM’s biggest source
of revenue, “depends on what the economic climate is, and that has not
been very encouraging,” Clementi said at a Bank of Montreal conference in New York yesterday. “Europe has shown signs of recovery. North America has been a little more uncertain.”
Wall Street Journal:
- Deal Brings Stability to U.S. Budget. Congressional Negotiators Avert January Shutdown and Soften Sequester Cuts; Airline Fees to Climb. House
and Senate negotiators, in a rare
bipartisan act, announced a budget agreement Tuesday designed to avert
another economy-rattling government shutdown and to bring a dose of
stability to Congress's fiscal policy-making over the next two years.
Sen. Patty Murray (D., Wash.) and Rep. Paul Ryan (R., Wis.), who struck
the deal after weeks of private talks, said it would allow more spending
for domestic and defense programs in
the near term, while adopting deficit-reduction measures over a decade
to offset the costs.
- Crackdown in Kiev Follows Bid at Compromise. Security forces stormed an encampment of
protesters gathered in the Ukrainian capital's central square early
Wednesday, hours after top western diplomats had met President
Viktor Yanukovych
to call for a nonviolent resolution to the country's worst
political crisis in nearly a decade. Riot
police wearing black helmets and carrying shields took up positions
around the square about 1 a.m. local time and gradually began pushing
through makeshift barricades. The hundreds of protesters then on the
square, some wearing orange hard hats hastily gathered for their
defense, shouted "shame" as the sounds of police chain saws cutting
their wooden barriers rose in the freezing weather.
- FDIC Details Bailout Plans Without Taxpayer Funds. Regulator to Maximize Use of Funding From Private Debt Markets.
Federal regulators provided the strongest
indication yet about how they plan to dismantle large financial firms on
the verge of collapse without a taxpayer bailout. On
Tuesday, the Federal Deposit Insurance Corp.'s board unanimously
approved a draft plan of how it would keep parts of a failing
institution open, prioritize payments to creditors and recapitalize the
firm. The agency, which asked for public comment on the plan, is
authorized by the 2010 Dodd-Frank financial-overhaul law to take over a
failing firm and help prevent its collapse from rippling through the
financial system.
Fox News:
- Lawmakers unveil tentative budget deal, call for rolling back sequester. Congressional negotiators on Tuesday announced a tentative budget
deal that would avoid a partial government shutdown, but also begin to
unravel hard-fought spending cuts. The lead negotiators -- Senate
Budget Committee Chairwoman Patty
Murray, D-Wash., and House Budget Committee chairman Paul Ryan, R-Wis.
-- detailed the specifics of the proposal at an evening press
conference.
MarketWatch.com:
- Good luck buying big city real estate next year. The lower cap on FHA mortgages will hit city dwellers hardest. The Department of Housing and Urban Development announced on Friday that
it will lower the loan limits for its Federal Housing Administration
mortgage — a loan used by many first-time and lower-income home buyers —
from $729,750 to $625,500. The FHA insures mortgages that banks give to
borrowers who make small down payments. Congress raised FHA mortgage
caps six years ago in the wake of the downturn.
CNBC:
- MasterCard(MA) raises dividend by 83%; shares rise. MasterCard, the world's No.2 credit and debit card company, raised its quarterly dividend by 83 percent and announced a new $3.5 billion share buyback program, sending its shares up 3 percent in extended trading. The company, which also announced a 1-for-10 stock split, raised its
quarterly dividend by 50 cents to $1.10 per share.
Zero Hedge:
Business Insider:
Washington Examiner:
CNN:
Reuters:
- Odd-lot trades add 3 pct volume to consolidated tape. Transactions in trades of less
than 100 shares boosted reported volume by 3 percent on the
first day that "odd lots" were included in the public
dissemination of stock quotes and sale prices, trading data
showed on Tuesday. Almost one out of every six trades, or 17.5 percent, that
were reported on Monday to the "consolidated tape" were odd
lots, according to the Consolidated Tape Association, a group
that includes all the U.S. stock exchanges, among others.
Telegraph:
South China Morning Post:
- City commercial lenders 'in danger of bankruptcy'. Many urban commercial banks on the mainland are in "danger of
bankruptcy" as they become the biggest victims of a mounting local
government debt problem, with local authorities struggling to repay
debts estimated to total 20 trillion yuan (HK$25.5 trillion), Haitong
International Securities chief economist Hu Yifan said. Hu told a Foreign Correspondents' Club lunch yesterday that these
banks, controlled by governments, were "the most dangerous part" of the
mainland's banking system because they were most at risk in the event of
local government debt defaults. There were 144 such banks on the
mainland last year. "Those banks usually have a high incentive to lend to the property
market," she said. "On the management level, they are not as good as the
Big Five. In the coming two to three years, mergers and acquisitions of
such banks will be a big trend." Local government debt, borrowed from the banks and poured in large
part into thin-margin infrastructure projects, accounts for up to 40 per
cent of the mainland's gross domestic product, Hu estimates. "China now has about 50 cities constructing railways and 18 airports
under construction," Hu said, adding that the money borrowed to build
them was "highly unlikely to be collected". Meanwhile, a property tax would be a "golden bullet" to help the deleveraging process, Hu said. The central government could allow the Guangzhou, Shenzhen and
Hangzhou city governments to introduce trial property taxes early next
year and then expand the programme to more cities to boost local
government revenue, she said.
China Securities Journal:
- China
Should Drop Proactive Fiscal Policy. China should phase out its
proactive fiscal policy and stick to the principle of keeping fiscal
revenue and expenditures in basic equilibrium in long term to gradually
reduce the country's fiscal deficit, says a front-page commentary
written by reporter Zhang Chaohui.
Evening Recommendations
Night Trading
- Asian equity indices are -1.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 132.0 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 104.25 -1.75 basis points.
- NASDAQ 100 futures -.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-2,719,000 barrels versus a -5,585,000 barrel decline the prior week.
Gasoline supplies are expected to rise by +1,862,000 barrels versus a
+1,828,000 barrel gain the prior week. Distillate supplies are estimated
to rise by +986,000 barrels versus a +2,649,000 barrel gain the prior
week. Finally, Refinery Utilization is estimated to rise by +.48% versus
a +3.0% gain the prior week.
2:00 pm EST
- The Monthly Budget Deficit for November is estimated at -$140.0B.
Upcoming Splits
Other Potential Market Movers
- The
10Y $21B Treasury auction, Australian Unemployment, Jack Lew testimony
regarding IMF, weekly MBA mortgage applications report, Morgan Stanley
REIT summit, (MRO) analyst day, (HRB) investor day, (HD) investor
conference, (DAL) investor day and the (CBI) investor day could also
impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by real estate 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.
