Tuesday Watch

Evening Headlines 
Bloomberg: 

• Japan Salaries Extend Slide as Inflation Begins to Take Root. Japan’s salaries extended the longest tumble since 2010, increasing pressure on household finances as inflation begins to take root. Regular wages excluding overtime and bonuses fell 0.4 percent in October from a year earlier, a 17th straight monthly decline, according to labor ministry data released today.

• China IPO Flood Seen Bursting Small-Cap Bubble: Chart of the Day. The benchmark index for Chinese small-company stocks will probably enter a bear market after the government’s plan to resume initial public offerings sparked a record rout yesterday, Bocom International Holdings Co. said.

• Japan’s Secrets Bill Turns Journalists Into Terrorists by William Pesek.

• Hong Kong Confirms City’s First Human Case of Bird Flu. Hong Kong reported its first case of a form of bird flu that killed 45 people in China this year, suggesting the virus is spreading further south in poultry. A 36-year-old Indonesian domestic helper is in critical condition after being infected with the new H7N9 flu strain, Hong Kong’s government said yesterday. She’d traveled to the neighboring mainland Chinese city of Shenzhen, where she bought and slaughtered a chicken, according to a statement. 

• Thai Anti-Government Protesters Vow to Seize Police Headquarters. Thai protesters said they will seize Bangkok’s police headquarters today after failing to secure the facility yesterday, signaling their month-long effort to oust Prime Minister Yingluck Shinawatra may be losing momentum.

• Rio Tinto(RIO) to Halve Capital Spending by 2015 in Focus on Cash. Rio Tinto Group (RIO), the world’s second-biggest mining company, will cut capital spending to about $8 billion in 2015, less than half its outlay last year, as mineral producers conserve cash after prices fell. “Our capex is reducing, and will come down further,” Sam Walsh, chief executive officer of London-based Rio, said today in a statement. “From where I stand, we continue to see market fragility and volatility.” Rio’s cutback underlines efforts by the world’s largest mining companies to rein in spending as a decade-long boom in metal prices wanes. Vale SA (VALE5), the biggest iron ore producer, yesterday slashed its investment budget for a third straight year to $14.8 billion, the lowest since 2010. “It’s quite a substantial drop and it does suggest that right now Sam Walsh is concentrated very, very hard on affordability,” Evan Lucas, a Melbourne-based markets strategist at IG Ltd., said by phone.

• Australia Food-Bowl Dream at Risk as Foreigners Shunned: Economy. Prime Minister Tony Abbott’s election pledge to turn Australia’s remote north into a food bowl for Asia has set him on a collision course with his own government over foreign ownership of agricultural land. 

• Asian Stocks Outside Japan Fall on Fed Tapering Outlook. Asian stocks outside Japan fell as signs the U.S. economy is strengthening fueled speculation that the Federal Reserve will soon start tapering stimulus. Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, sank 6.6 percent as the bullion’s price headed for its first annual drop in 13 years as it traded near a five-month low. Hyundai Motor Co., South Korea’s No. 1 carmaker, fell 4.2 percent as November sales fell. Sekisui Chemical Co. led Japanese stocks higher, rising 7.5 percent after a report that it developed a cheaper and longer-lasting material for lithium-ion batteries used in the electric vehicles. The MSCI Asia Pacific excluding Japan Index dropped 0.6 percent to 471.88 as of 12:41 p.m. in Tokyo, with eight of the 10 industry groups on the gauge falling.

• Rubber Retreats as Rally to Two-Month High May Weaken Demand. Rubber dropped from a two-month high, snapping a three-day winning streak amid concern that rising prices may sap demand from China, the largest consumer. The contract for delivery in May on the Tokyo Commodity Exchange lost as much as 1 percent to 272.5 yen a kilogram ($2,643 a metric ton) and traded at 274.1 yen at 11:35 a.m. local time. Futures settled yesterday at the highest level since Sept. 26. 

• Rebar Trades Near Highest in Six Weeks. Steel reinforcement-bar futures in Shanghai traded near the highest level in six weeks on speculation that the Chinese economy is stabilizing. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, climbed as much as 0.2 percent to 3,702 yuan ($608) a metric ton, the highest level since Oct. 17, before trading little changed at 3,693 yuan at 10:51 a.m. local time.

• JPMorgan(JPM), Goldman Sachs(GS) Capital Plans Clear Fed Review. JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS), the world’s biggest trading firms, had their revised capital plans for 2013 cleared by the Federal Reserve yesterday, a month before next year’s submissions are required.

• NCR(NCR) to Buy Digital Insight for $1.65 Billion for Web Banking. NCR Corp. (NCR), the 129-year-old maker of cash registers and other payment-processing systems, agreed to acquire Digital Insight Corp. for $1.65 billion to gain software for online and mobile banking. The purchase of Digital Insight, controlled by private-equity firm Thoma Bravo LLC, is expected to be completed in the first quarter of next year, NCR said today in a statement. The transaction will boost adjusted 2014 profit, the company said.

Wall Street Journal: 

• Speed Cited in Fatal Crash. NTSB: Metro-North train was traveling 82 mph as it entered a 30 mph zone ahead of derailment. Federal investigators said the commuter train that crashed Sunday, killing four people, was going 82 miles an hour as it entered a 30-mph zone along a tight curve and that there was no apparent problem with its brakes.

• A Profitable Trade: Illicitly Shipping BMWs to China. Lucrative Re-Sales of Luxury Cars Targeted by Federal U.S. Investigators. In the U.S., the sticker price for a BMW X5 sport-utility vehicle is just over $56,000. In China, BMW advertises the same car for nearly three times that, creating an opening for arbitragers to buy the vehicles in the U.S. and ship them to China for a quick profit.

• Twitter(TWTR) Feels a Chill After Hot Debut. Research Reports Are Out; Analysts Don't Expect Share Price to Rise Much.

• Easy Credit Puts Car Sellers in Driver's Seat. Credit conditions keep getting looser. An average credit score for new car loans calculated by Experian Automotive was 753 points as of the third quarter, down 22 points over the prior four years and only four points above the easy-money days of late 2007. Overall auto-loan balances hit an all-time high last month at $783 billion, up 15% in a year. A record 84.5% of car buyers used a loan or lease in the second quarter. One sign of froth is a rebound in subprime lending and a spike in leases, a sometimes expensive way for borrowers to stretch affordability.

• Kissinger and Shultz: What a Final Iran Deal Must Do. A credible agreement must dismantle or mothball the key parts of Tehran's nuclear infrastructure. The interim nuclear deal with Iran has been described as the first step toward the elimination of Iran's ability to build a nuclear weapon. That hope resides, if at all, in the prospects of the next round of negotiations envisaged to produce a final outcome within six months. Standing by itself, the interim agreement leaves Iran, hopefully only temporarily, in the position of a nuclear threshold power—a country that can achieve a military nuclear capability within months of its choosing to do so. A final agreement leaving this threshold capacity unimpaired would institutionalize the Iranian nuclear threat, with profound consequences for global nonproliferation policy and the stability of the Middle East.

Fox News: 

• Fact Check: Is President Obama's latest health care promise true?

Zero Hedge: 

• Record Numbers Of Homeless Flood Massachusetts Even As State Shelters Overflowing.

• Welcome To The Riskless Market.

• Why Equity Bulls Are Hoping for Bad Macro News. (graph)

• Gold Drops Below Cash Cost, Approaches Marginal Production Costs.

• War On Democracy: Spain And Japan Move To Criminalize Protests.

• Venezuela Plunges Into Darkness As President Maduro Lays Out Socialist Vision On National TV.

• Birinyi, Sonders, & Rukeyser Celebrate The "Magical Stock Market Environment" In 1999. (video)

Business Insider:

• 'Quant' Hedge Funds: Computer Says No. IF SOMETHING has not worked for five years, most people would conclude that it was broken. Tell that to the geeks managing "quant" hedge funds, who craft elaborate algorithms to profit from market movements. Once money-spinners, their prized formulae have misfired since 2009, losing money in four of the past five years. Unless their results improve markedly, the giant funds will finish this year as the worst-performing of the most common hedge-fund strategies.

• The PC Market Has Shrunk By 10% Because People Don't Want New Ones.

• BRIAN BELSKI: 'We Enter 2014 Less Optimistic Than We Have In The Past Few Years'.

• Ukraine May Be Heading For A Currency Crisis.

• Amazon's(AMZN) Private Drone Deliveries Offer Up A Whole New Universe Of Surveillance.

• Apple(AAPL) Acquires A Social Media Analytics Company For ~$200 Million.

Washington Post:  

• For Democrats in 2014, the Web site is not the problem. Democrats are praying that this weekend’s relaunch of the Obamacare Web site will save them from an electoral bloodbath in 2014. Their hopes are misplaced. Here are five numbers that suggest that public anger over Obamacare will only grow as Election Day 2014 approaches:

Reuters:

• Islamists take Syrian Christian town, monastery: state media. Islamist fighters in Syria have taken over the ancient quarter of the Christian town of Maaloula and are holding several nuns in a monastery there, state news agency SANA said on Monday. Fighting for the town, about five km (three miles) from the main road linking Damascus to Homs, is part of a wider struggle between rebel fighters and President Bashar al-Assad's forces for control of the strategic central Syrian highway.'

• Biden: U.S. 'deeply concerned' about China air defense zone-media. The United States remains "deeply concerned" about China's establishment of an air defense zone in the East China Sea, U.S. Vice President Joe Biden, visiting Japan, was quoted by the Asahi Shimbun daily as saying. 

• Yum's(YUM) November KFC China sales flat, sees 2014 earnings rebound. Yum Brands Inc said November sales at established KFC restaurants in China, its top market, failed to grow despite a successful half-priced chicken promotion, and it forecast a return to earnings per share growth in 2014. 

• EMERGING MARKETS-Real sinks past 2.35/dlr, Mexico peso at 3-wk low.

• Chicago Fed suspends U.S. Midwest factory index for revamp.

• EMERGING MARKETS-Brazil's Bovespa plunges as oil producer Petrobras tanks.

• U.S. sends new submarine-hunting jets to Japan amid East Asia tension. The U.S. Navy's first two advanced P-8A Poseidon patrol aircraft have arrived in Japan, U.S. military officials said on Monday, helping to upgrade America's ability to hunt submarines and other vessels in seas close to China as tension in the region mounts.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Financial Times: 

• Obama administration tells China to scrap air defence zone procedures. The US called on China to rescind its controversial new air defence zone procedures on Monday because of the risk of accidents, as vice-president Joe Biden began a likely tense week of meetings with leaders in northeast Asia.

Nikkei:

• Japan LDP Tax Reform Plan to Forgo Tax Breaks for Capex. Japan's ruling Liberal Democratic Party plans to forgo giving breaks on fixed-asset levy for capital investment, citing the party's FY 2014 tax reform draft.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.75% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 132.0 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 107.75 +1.25 basis points. 

• FTSE-100 futures -.26%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BOBE)/.55

• (OVTI)/.43

• (UNFI)/.54

• (CTB)/.53

Economic Releases
10:00 am EST

• IBD/TIPP Economic Optimism for December is estimated to rise to 43.0 versus 41.4 in November.

Afternoon:

• Total Vehicle Sales for November are estimated to rise to 15.8M versus 15.15M in October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia GDP report, UK Construction PMI, weekly retail sales reports, ISM New York for November, Citi Basic Materials Conference, UBS Emerging Markets Conference, Piper Jaffray Healthcare Conference, CS Industrials Conference and the FBR Investor Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity 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.