Today's Headlines
Bloomberg:
- Islamic State Could ‘Easily’ Target a U.K. City, Fallon Says. British Defence Secretary Michael Fallon told the Sunday Telegraph that “what happened in Paris and Brussels could easily happen in London.” Speaking in an interview, Fallon said the threat from Islamic State “is as potent here as it was real in Paris and Brussels.” Fallon said the security services have prevented at least half a dozen viable terror plots in recent months. “I can’t go into detail of the individual plots that have been foiled,” he said. “The threat from ISIL is as potent here as it was real in Paris and Brussels. It could be London, it could be Manchester, it could be Glasgow.” He said Islamic State are not making demands and so can’t be negotiated with. “You can only deal with them by force.”
- Turkey's Prime Minister Criticizes Putin's Sanctions. Prime Minister Ahmet Davutoglu criticized Russian economic sanctions on Turkey after the downing of a Russian fighter jet over the Syrian border last week, saying his priority was to defuse the tension and prevent similar incidents. Russian President Vladimir Putin on Saturday announced measures against Turkey including the suspension of visa-free travel, halting tours to Turkey and a ban on the hiring of Turkish nationals. In Turkey, Deputy Prime Minister Mehmet Simsek chaired a meeting with other members of the nation’s economic administration to discuss the potential impact, according to a government official, who asked not to be named in line with official policy.
- The World's Largest Elevator Market Is Falling and May Never Recover. The world’s biggest elevator maker said China’s best days may be behind it. After peaking at 600,000 units last year, sales in China may drop to about 500,000 next year amid a surplus of apartments and slowdown of people moving to big cities, Otis Elevator Co. President Philippe Delpech, who heads the world’s largest maker of elevators, said in an interview in Tokyo this month.
- Christie's Hong Kong Art Auction Feels China's Economic Chill. China’s economic slowdown, government anti-corruption measures and fleeing speculators are causing a chill in the Hong Kong art auction market, Christie’s Nov. 28 International Hong Kong evening sale showed. The London-based auction house sold HK$507.9 million ($65.5 million) worth of art at its Asian 20th Century and Contemporary auction, compared with HK$636 million at a similar event a year ago, and HK$935 million in November 2013. Saturday’s sale is the marquee event of Christie’s six-day Hong Kong autumn auction marathon."It’s softer this season for sure," said Hong Kong-based adviser Jehan Chu, who runs Vermillion Art Collections. "There is uncertainty, especially over the economic and political outlook in China, that has made people skittish."
- Citic, Haitong, Guosen Probed on Alleged Margin-Trading Breaches. China’s securities regulator is investigating Citic Securities Co., Haitong Securities Co. and Guosen Securities Co. over alleged breaches of rules on margin and short-selling contracts. The China Securities Regulatory Commission probes involve contracts the three brokerages signed with clients on margin finances and short-selling, according to exchange filings by the companies Sunday. The firms said their operations will remain normal and they will cooperate with the regulator.
- Five China Bond Deadlines to Watch.
- Won Drops With Korean Stocks as China Selloff Deters Risk-Taking. The won declined for a third day as a selloff in China’s stock market deterred risk taking and after growth in South Korea’s industrial production missed estimates. The Kospi index of shares fell the most in two weeks after a regulatory probe into some of China’s largest brokerages sparked the steepest slump in Shanghai shares in three months on Friday. South Korea’s factory output rose 1.5 percent in October from a year earlier, official figures showed on Monday, compared with the median estimate for a 2.2 percent increase in a Bloomberg survey. The report comes a day before data forecast to show exports likely fell 7.9 percent in November, shrinking for the 11th straight month. The won weakened 0.5 percent to 1,159 a dollar as of 9:53 a.m. in Seoul, according to data compiled by Bloomberg. The currency’s decline is the biggest in two weeks and it’s dropped 1.6 percent this month.
- Asian Stocks Slide After Chinese Selloff as Material Shares Drop. Asian stocks fell after Chinese shares posted the biggest one-day selloff in three months. Material and consumer-staple shares led losses on the benchmark index at the start of a pivotal week for the region’s markets. The MSCI Asia Pacific Index lost 0.3 percent to 132.82 as of 9:02 a.m. in Tokyo, headed for a monthly loss of 1.2 percent, its sixth such decline in seven months.
- Iron Ore Breaches $40 in Singapore as China Port Holdings Expand. Most-active iron ore futures in Singapore sank below $40 a metric ton for the first time on concern that the economic slowdown in China will cut demand as supplies from the largest miners climb.The SGX AsiaClear contract for January fell 3.1 percent to $39.51 a ton as of 10:33 a.m. in Singapore, heading for the lowest close since trading started in April 2013. On the Dalian Commodity Exchange, futures for May delivery sank as much as 3.1 percent to 293 yuan ($45.81) a ton, a record low.
- The $30 Oil Cliff Threatening Russia's Economy. For Russia, $30 is the number to watch.Crude prices at that level will push the economy to depths that would threaten the nation’s financial system, according to 63 percent of respondents in a Bloomberg survey. Lower prices for the fuel are next year’s biggest risk for Russia, which is unprepared to ride out another shock on the oil market, most economists said. Other dangers for 2016 include geopolitics, strains in the banking industry and the ruble, according to the poll of 27 analysts. “If oil prices fall lower and stay at that low level for longer, risks of fiscal and financial destabilization increase significantly,” Sergey Narkevich, an analyst at PAO Promsvyazbank in Moscow, said by e-mail.
- Kuwait Oil Minister Leaves Post Days Before OPEC Meeting. Kuwait named Deputy Prime Minister Anas Al-Saleh as acting oil minister to replace Ali al-Omair, who became minister of public affairs and retained his role as state minister for parliamentary affairs, according to an official decree. The change comes days before al-Omair was due to represent Kuwait at the meeting of the Organization of Petroleum Exporting Countries on Dec. 4 to discuss the group’s production level amid a slump in prices due to a global glut. Earlier this month, al-Omair swapped the chief executive officers of state companies Kuwait Oil Co. and Kuwait Foreign Petroleum Exploration Co. “The current Kuwait oil policy in OPEC will definitely not change as this new minister is only there temporarily until a new one is appointed,” said Abdulsamad al-Awadhi, who was Kuwait’s OPEC governor from 1980 to 2001.
Wall Street Journal:
- Islamic State Tightens Grip on Libyan Stronghold of Sirte. City across the Mediterranean from Europe is first outside Syria or Iraq to come under the group’s control. Even as foreign powers step up pressure against Islamic State in Syria and Iraq, the militant group has expanded in Libya and established a new base close to Europe where it can generate oil revenue and plot terror attacks.
- Scientists Dispute 2-Degree Model Guiding Climate Talks. Many scientists say the benchmark underpinning talks in Paris on climate change is an arbitrary threshold based on tenuous research. The single most important benchmark underpinning this week’s talks in Paris on climate change—two degrees Celsius—has guided climate-treaty discussions for decades, but scientists are at odds on the relevance of that target.
- NSA to End Phone Program Despite Calls for Extension. Some Republicans have urged program be extended in aftermath of Paris attacks.
- IMF Move Would Pressure China on Management of Yuan. International Monetary Fund expected to name yuan as a reserve currency.
- Divergent Paths for U.S., European Central Banks. ECB expected to further cut its already-negative deposit rate, closely watched by others in Europe, as Fed prepares to take opposite tack.
CNBC:
- Warren Buffett to join Hillary Clinton on Nebraska stump. Billionaire investor and outspoken Hillary Clinton supporter Warren Buffett will stump with the Democratic contender in Omaha on December 16.
Zero Hedge:
- Former CIA Deputy Director Gives A Stunning Reason Why Obama Has Not Attacked ISIS' Oil Infrastructure. In an interview on PBS' Charlie Rose on Tuesday, Rose pointed out that before the terrorist attacks in Paris, the U.S. had not bombed ISIS-controlled oil tankers, to which the former CIA deputy director Michael Morell responded that Barack Obama didn’t order the bombing of ISIS’s oil transportation infrastructure until recently because he was concerned about environmental damage.
- "You Are Here"... And It Is A Scary Place. (graph) The previous three times this metric fell that far into negative territory on the S&P 500 were Q1 1990, Q1 2001, and Q4 2007, coinciding with the start of each of the last three high yield default cycles.
- Chinese Currency Drops To 3-Month Lows As IMF SDR-Inclusion Decision Looms. (graph)
- Black Friday Total Sales Crash 10% (Despite Rise In Online Spend). (graph)
- "It Is All Rather Scary" - Chinese Debt Snowball Gaining Momentum.
- December 16th: A Date Which Will Live On In Monetary Infamy. (graph)
- European HIV Infections Hit Record High, CDC Blames "Migrants And Refugees".
- A critical shift is taking place in China ― and it could have brutal consequences.
- 14,000 Refugees Due For Deportation From Sweden Have Vanished: "We Simply Do Not Know Where They Are".
- As Market Awaits "Santa" Draghi, The ECB Is "Chasing Its Own Tail".
- Using New "Pre-Crime" Laws France Arrests 24 Climate Activists.
- Europe Will Pay Turkey €3 Billion To Halt Refugee Exodus.
Business Insider:
Washington Post:
- A critical shift is taking place in China ― and it could have brutal consequences.
- The University of Chicago is canceling classes tomorrow after the FBI warned of possible gun violence.
- Putin didn't think Turkey would make good on its threats — and now it's having big consequences.
- CITI: 'Is this the start of the breakdown?'.
- Why financial markets blow up at exactly the wrong time.
- SALLIE KRAWCHECK: The economy is changing so fast that no one is safe.
Washington Post:
- White House eyes better pay for top civil servants. The Obama administration is preparing an executive order designed to bolster the government’s Senior Executive Service (SES) with increased compensation, a streamlined hiring process and greater diversity in assignments. Its 7,000-plus members are top level civil servants whose leadership is critical to federal agencies. But that status has not stopped problems stemming from sluggish pay raises and congressional attacks.
Reuters:
- China's shadow banking risk shifts to booming bond market. A year after China's financial regulators squared up to the systemic perils of "shadow banking", the threat is shifting to a booming corporate bond market, and risky borrowers' debt is finding its way into products aimed at retail investors. An opaque network of trust companies and non-bank lenders had grown their annual market to a hefty 2.9 trillion yuan ($450 billion) in loans before regulators stepped in, spooked by rising defaults on wealth-management products (WMPs) backed by such high-interest shadow lending.
Telegraph:
- COP-21 climate deal in Paris spells end of the fossil era. Much of the fossil industry will go into slow run-off while the new plutocrats will be masters of post-carbon technology.
Estado:
- S&P Visit to Brazil Heightens Downgrade Concern. S&P is visiting Brazil starting Dec. 1 to analyze country's political, economic situation. Trips increases speculation nation might be downgraded again, amid worsening of Brazil's political crisis after recent arrests.
Night Trading
- Asian indices are -1.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 129.75 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 69.0 +.5 basis point.
- Bloomberg Emerging Markets Currency Index 70.23 -.05%.
- S&P 500 futures -.18%.
- NASDAQ 100 futures -.15%.
Company/Estimate
- (BLOX)/.06
- (SCVL)/.48
- (THO)/.83
Economic Releases
9:00 am EST
9:00 am EST
- The ISM Milwaukee for November is estimated to rise to 48.0 versus 46.66 in October.
- The Chicago Purchasing Manager for November is estimated to fall to 54.0 versus 56.2 in October.
- Pending Home Sales for October are estimated to rise +1.0% versus a -2.3% decline in September.
- The Dallas Fed Manufacturing Activity Index for November is estimated to rise to -10.0 versus -12.7 in October.
- (CTRP) 2-for-1
Other Potential Market Movers
- The Reserve Bank of Australia decision, German CPI report, China Manufacturing PMI, CSFB Industrials conference and the CSFB Tech/Media/Telecom conference 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 50% net long heading into the week.
