Bloomberg:
- German Industrial Production Unexpectedly Fell in October.
German industrial production unexpectedly dropped for a second month in
October, signaling an uneven recovery in Europe’s largest economy. Output
(GRIPIMOM), adjusted for seasonal swings, decreased 1.2 percent from
September, when it fell a revised 0.7 percent, the Economy Ministry in
Berlin said today. Economists predicted a gain of 0.7 percent,
according to the median of 38 estimates in a Bloomberg News survey.
Production climbed 1 percent from a year earlier when adjusted for
working days.
- Putin to Shut RIA in Overhaul of Russian State News Coverage. President Vladimir Putin unexpectedly
revamped Russian state-controlled print and radio news media,
abolishing the RIA Novosti wire service and naming an outspoken
television presenter to lead its successor. Dmitry Kiselyov, a deputy director of Russia’s state
television and radio holding VGTRK and a host of a weekly news
program on the Rossiya 1 television channel, will head the newly
formed agency, called Rossiya Segodnya or Russia Today,
according to a document signed by Putin and published on the
Kremlin’s website today.
- Ukraine Interbank Rates Soar to 20% as Intervention Drains Cash. Ukrainian interbank lending rates
soared to a one-year high as policy makers’ bid to prop up the
currency depletes cash from the economy and threatens to deepen
the country’s third recession since 2008. The KievPrime overnight index, which shows one-day
borrowing costs for the country’s lenders, jumped to 20 percent
at today’s daily fixing from 12 percent on Dec. 6 and 4.32
percent on Nov. 29. Investors sold Ukraine’s dollar notes,
driving yields to record highs, after the country’s foreign
reserves dwindled 9 percent last month, according to central
bank data published on Dec. 6.
- European Stocks Rise a Second Day as Chinese Exports Gain.
European stocks rose for a second day after a report showed Chinese
exports climbed more than expected and a gauge of telecommunications
operators gained. Inmarsat Plc rallied 5.8 percent, lifting a gauge of
phone companies higher. Banca Monte dei Paschi di Siena SpA advanced 4.9
percent after the lender’s largest investor said it would vote against
any share sale taking place before May. The Stoxx Europe 600 Index added 0.2 percent to 317.15 at the close of trading in London after earlier falling as much as
0.2 percent.
- Brent Crude Falls on German Data as WTI Discount Narrows. Brent crude
dropped after German industrial output unexpectedly fell, signaling an
uneven recovery for Europe’s largest economy. The oil’s premium over
West Texas Intermediate shrank for the fourth time in five days.
Futures slid as much as 1.7 percent.
- Jumbos Surge 34% With Record ARMs Belying ’08 Anxiety: Mortgages. Jumbo loans, both adjustable and fixed-rate, increased by 34 percent to
$216 billion in the first nine months of this year, with ARMs
comprising the majority of the gain, said Guy Cecala, publisher of
Inside Mortgage Finance, a trade publication in Bethesda, Maryland. A
decade ago, jumbo ARMs helped fuel the housing bubble by letting
buyers qualify for homes they only could afford at the low rates before
they reset. Banks approved mortgages based on the
assumption that house prices would keep rising and the loans could be
refinanced before higher costs kicked in.
- Glass-Steagall Fans Plan New Assault If Volcker Rule Deemed Weak.
Five U.S. agencies will finish the Volcker rule tomorrow after more than
three years of Wall Street resistance to its limits on trading and
investing. Lawmakers and their allies who want to
rein in big banks are ready to pounce if it isn’t strict enough.
- Sysco(SYY) to Acquire US Foods for $3.5 Billion. Sysco Corp. (SYY) agreed to acquire closely held US Foods for $3.5 billion, adding brands from Cattleman’s
meat to Devonshire desserts, in the largest food-distribution
deal in eight years in North America. The shares jumped the most
since at least 1980.
Wall Street Journal:
Fox News:
- ObamaCare exchanges limit access to top hospitals, medical centers.
If you like your hospital, you might not be able to keep it. In the
latest surprise to emerge during the implementation of the
Affordable Care Act, people seeking insurance on the ObamaCare exchanges
are finding the plans limit access to some of the best-ranked hospitals
and cancer centers in the country. The access problem is a byproduct of the effort to drive down costs
of subsidized coverage, prompting insurance companies to shy away from
more expensive facilities.
MarketWatch:
CNBC:
- Investors have been fleeing the municipal bond market. The U.S. municipal bond market shrank to $3.686 trillion in the third
quarter of the year, the smallest since the end of 2009, from $3.721
trillion in the second quarter of the year, according to Federal Reserve data released on Monday. Households
held $1.64 trillion in bonds in the quarter, the lowest since the final
quarter of 2006 and less than the $1.67 trillion they held in the
second quarter, according to the report on the country's financial
accounts.
- Retail and big-money crowd heading in opposite directions. Mom-and-pop retail investors are zigging and big-money institutions
are zagging as the market tries to figure out which way things are
going after a record-busting year on Wall Street. While the
overall market mood is solidly bullish, recent fund flows show almost
diametrically opposed views as to where money will be best treated.
Zero Hedge:
Business Insider:
New York Times:
- South Korea Announces Expansion of Its Air Defense Zone. Defying both China and Japan, South Korea announced on Sunday that it
was expanding its air patrol zone for the first time in 62 years to
include airspace over the East China Sea that is also claimed by Beijing
and Tokyo.
Credit Bubble Stocks:
Real Clear Politics:
Reuters:
- McDonald's(MCD) November sales miss as U.S. weakness persists. The fast-food chain, the world's
largest by revenue, has struggled for more than a year to significantly
increase those monthly sales, hindered by slack demand and intense
competition for the business of budget-conscious diners.
November's
biggest disappointment came from the United States, where monthly sales
at restaurants open at least 13 months fell 0.8 percent, versus the 0.3
percent gain expected, on average, by 14 analysts polled by Consensus
Metrix.
Telegraph:
London South East:
- Putin Taps Hardline TV Anchor To Head New News Agency. President Vladimir Putin on Monday disbanded Russia's biggest news
agency and appointed a hardline state television anchor to head a new
media outlet, measures seen as a crackdown on media freedom. Dmitry
Kiselyov will head Rossia Segodnya, a new news agency that will replace
RIA Novosti, according to an order published on the Kremlin's website. A
deputy director of Russia's state TV holding VGTRK, Kiselyov rose to
prominence as host of the Sunday weekly news programme on the Rossia 1
channel, where he fiercely criticises the West.
Xinhua:
- China Won't Rely on GDP to Assess Local Officials. China won't
use GDP as the only major indicator to assess local government and
officials' performance, citing a statement from the Organization
Department of the Communist Party of China Central Committee. China will
strengthen inspection of local govt debt and use it as an "important
indicator" for local officials' performance reviews.China will change
government official assessment from purely comparing economic growth to
development sustainability. Greater emphasis of local official
evaluation will be placed on environmental protection, product safety
and elimination of excess capacity. Economic growth shouldn't be
achieved by excess investment and high pollution, it said.
Style Underperformer:
Sector Underperformers:
- 1) Alt Energy -1.55% 2) Oil Tankers -1.53% 3) Education -.94%
Stocks Falling on Unusual Volume:
- OSIS, EW, ULTA, BIG, RALY, IEP, NFX, PBYI, WPRT, WLL, BRE, TOT, LMOS, ONTX, IOSP, QEP, EZPW, EOG, RH, BAK, SGEN, CLR, SALE, SEAC, SM, EPL, INFI and PCYC
Stocks With Unusual Put Option Activity:
- 1) CTIC 2) XLB 3) HK 4) CBST 5) JOY
Stocks With Most Negative News Mentions:
- 1) ETR 2) MOS 3) TRIP 4) TSL 5) DF
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +2.18% 2) Homebuilders +1.35% 3) Gold & Silver +1.15%
Stocks Rising on Unusual Volume:
- GIVN, SYY, INFI, TNXP, IOC, BKS, DK, FNSR, AWI, DVA and CELG
Stocks With Unusual Call Option Activity:
- 1) SYY 2) QCOR 3) INFI 4) SWHC 5) BMY
Stocks With Most Positive News Mentions:
- 1) MCD 2) SYY 3) FTNT 4) GOOG 5) T
Charts:
Weekend Headlines
Bloomberg:
- Abe Calls for China Talks Citing 2006 Trip as Tensions Rise. Japanese Prime Minister Shinzo Abe
called for a summit with Chinese President Xi Jinping to reset
relations after an escalation in bilateral tensions, invoking a
2006 visit to Beijing during his first administration. “Since there are issues, it is all the more important to
have a leaders’ meeting,” Abe said in an interview in the prime
minister’s official residence in Tokyo. “I visited China as
prime minister and met with Hu Jintao and we shared the view
that we should develop our ties based on a strategic, mutually
beneficial relationship. Now is the time to go back to that
starting point.”
- Japan Posts Slower Growth, Surprise Current-Account Deficit.
Japan’s growth slowed more than an initial estimate in the third
quarter while the country posted an unexpected deficit in its broadest
trade gauge in October, underscoring headwinds to Prime Minister Shinzo
Abe’s efforts to cement a recovery. Gross domestic product expanded an annualized 1.1 percent
from the previous quarter when it rose 3.6 percent, the Cabinet
Office said today in Tokyo, lower than a preliminary reading of
1.9 percent. Japan’s current account registered a 128 billion
yen ($1.2 billion) shortfall, the first deficit since January,
according to the finance ministry. The median forecast was for a
surplus of 149 billion yen.
- China State Firms to Lead $11 Billion IPO Revival as Freeze Ends. China’s decision to end a 15-month
freeze on initial public offerings may unleash at least $11
billion of share sales in next year’s first half. More than 760 mainland Chinese companies are waiting to go
public, their plans halted when regulators imposed the
moratorium in September 2012 as they drafted rules aimed at
curbing price manipulation.
- First Default Seen as Record $427 Billion Debt Due: China Credit. Chinese company debt twice the size
of Ireland’s economy will come due in 2014, spurring concern the
nation is on the cusp of its first corporate bond default. A record
2.6 trillion yuan ($427 billion) of interest and principal on securities
issued by non-financial companies must be repaid next year, 19 percent
more than this year and the most since China International Capital Corp.
began compiling the data in 2008. Ten-year AAA corporate bond yields
surged 89 basis points since Dec. 31 to 6.18 percent, touching a record
6.23 percent on Nov. 27. That compares with a 70 basis-point rise to
2.68 percent for similar-rated notes globally.
- Rebar Extends Three-Week Rally as Stronger Economy Lifts Demand.
Steel reinforcement-bar futures in Shanghai rose, extending a third
weekly gain, on optimism that a strengthening economy may support demand
from the world’s biggest consumer of the material used in housing and
railroads. Rebar for May delivery, the most-active contract on the
Shanghai Futures Exchange, rose as much as 0.7 percent to 3,726 yuan
($614) a metric ton, and traded at 3,720 yuan at 9:54 a.m. local time.
- Hedge Fund Gold Wagers Slump to Lowest Since 2007: Commodities. Hedge
funds are the least bullish on gold since 2007 as signs of faster U.S.
economic growth bolster the case for the Federal Reserve to trim
stimulus and cut demand for haven assets. The net-long position in gold
fell 16 percent to 26,774 futures and options in the week ended Dec. 3,
the lowest since June 2007, U.S. Commodity Futures Trading
Commission data show. Short bets rose 6.2 percent to 79,631, within 0.6
percent of the record reached in July. Net-bullish wagers across 18
U.S.-traded commodities climbed to a four-week high. The Standard &
Poor’s
GSCI Spot Index of 24 raw materials capped the biggest weekly
gain since August as faster economic growth boosted prospects
for energy, metals and grains consumption.
- Italy’s Bonds Drop With Spain’s on Concern ECB to Limit Support. Italian
10-year bonds fell, with
yields rising the most in more than two months, on speculation the
European Central Bank will prevent lenders using future loans it
provides to buy sovereign debt. Spanish 10-year securities dropped
for a third week. German 10-year yields climbed by the most since August
as a report yesterday showed U.S. employers added more workers in
November than analysts forecast and the jobless rate dropped, boosting
the case for the Federal Reserve to cut stimulus. The ECB wants to
ensure any future offerings of long-term cash find their way into the
economy, and not hoarded by banks, President Mario Draghi said after a
policy meeting in Frankfurt.
- BIS Sounds Alarm Over Record Sales of Payment-in-Kind Junk Bonds. Record sales of high-yield payment-in-kind bonds are triggering uneasiness among international
regulators concerned that investors may suffer losses when
central banks tighten monetary policy. Issuance of the notes, which give borrowers the option to
repay interest with more debt, more than doubled this year to
$16.5 billion from $6.5 billion in 2012, according to data
compiled by Bloomberg. About 30 percent of issuers before the 2008
financial crisis have since defaulted, the Bank for International
Settlements said in its quarterly review. Companies are taking advantage of investor demand for riskier debt as central bank stimulus measures suppress interest rates and defaults approach historic lows. The average yield on junk-rated corporate bonds fell to a record 5.94 percent
worldwide in May, Bank of America Merrill Lynch index data show.
- Fed December Taper Odds Double in Survey as Jobs Beat Estimate. The share of economists predicting the Federal Reserve will
reduce bond buying in December doubled after a government report showed
back-to-back monthly payroll gains of 200,000 or more for the first time
in almost a year. The Federal Open Market Committee will
probably begin reducing $85 billion in monthly bond purchases at a Dec.
17-18 meeting, according to 34 percent of economists surveyed yesterday
by Bloomberg, an increase from 17 percent in a Nov. 8 survey. In
November, 53 percent predicted a tapering in March, compared with 40
percent in yesterday’s poll of 35 economists.
- Volcker Rule to Force Banks to Comply With Five Regimes. U.S. banks that must comply with the proprietary-trading ban known as
the Volcker rule are facing inconsistent future demands from the five
agencies responsible for enforcing it. Even before the final
version is released next week, current and former regulators and bank
lawyers predict an uneven approach on enforcement because of differences
in style and jurisdiction between the three U.S. regulators that police
banks and the two agencies that monitor markets. For many banks, how
enforcement is handled could wind up being more important than the
language in the 1,000-page text.
Wall Street Journal:
- Fed Closes In on Bond Exit. Strong Jobs Report Moves Central Bank Nearer to Paring Purchases; Dow Soars. Federal Reserve officials are closer to
winding down their controversial $85 billion-a-month bond-purchase
program, possibly as early as December, in the wake of Friday's
encouraging jobs report. Fed Chairman
Ben Bernanke will have to build consensus among officials about how soon
to pull back on a program that has been the center of market attention
for months and whose effectiveness isn't wholly clear. Many are getting
more comfortable with starting a delicate process of winding the program
down, though disagreements about timing and strategy could emerge,
according to public comments and interviews with officials.
- High Deductibles Fuel New Worries of Health-Law Sticker Shock. Some Lower-Cost Plans Carry Steep Deductibles, Posing Financial Challenge. As enrollment picks up on the HealthCare.gov website, many people with modest incomes are encountering a troubling
element of the federal health law: deductibles so steep they may not be
able to afford the portion of medical expenses that insurance doesn't
cover. The average individual deductible
for what is called a bronze plan on the exchange—the lowest-priced
coverage—is $5,081 a year, according to a new report on insurance
offerings in 34 of the 36 states that rely on the federally run online
marketplace. That is 42% higher than the average deductible of $3,589 for an
individually purchased plan in 2013 before much of the federal law took
effect, according to HealthPocket Inc., a company that compares
health-insurance plans for consumers.
- Congress Readies a Year-End Dash. Action on Budget, Other Fronts Is Possible in Final Weeks of Session. A Congress stymied by partisan divides,
blown deadlines and intraparty squabbling gets a late chance this week
to end the year with an elusive budget deal and to make headway on other
fronts. In the final week of 2013 that
the Senate and House are scheduled to be in Washington at the same
time, lawmakers and aides are optimistic that negotiators can reach a
budget accord and continue to make progress on a farm bill and other
measures.
- Global R&D Spending Growth Is Expected to Slow This Year. Report Cites Weak U.S. and European Economies for Likely Faltering. Global growth in spending on research and
development is expected to falter this year as a result of the weak U.S.
and European economies, though it will likely pick up again next year,
according to a new forecast. Global
R&D spending by governments and corporations is expected to rise
2.7% to $1.558 trillion in 2013 from $1.517 trillion in 2012 in current
dollars. By comparison, the growth rate was 7.6% in 2012 and is forecast
to be about 3.8% next year, according to the study by the Battelle
Memorial Institute, a nonprofit organization that does scientific
research for government and industry. "Europe
and the U.S. are still wrestling with global economic conditions," said
Martin Grueber,
a Battelle senior researcher and co-author of the report.
"R&D spending decisions are often based on profit and profit
margins, so R&D budgets always get a bit tentative" in slow
economies. The study is to be released in R&D Magazine on Monday.
- Bradley A. Smith: The Latest IRS Power Grab. The left wants the disclosure of private information
about conservative donors. Six months after the Internal Revenue Service's inspector general
revealed that the tax-collection agency had been targeting conservative
organizations for added scrutiny and delaying their applications for
tax-exempt status, the IRS has proposed new rules for handling political
activity by nonprofits. The proposed rules would plunge the agency
deeper into political regulation.
Marketwatch.com:
- Significant warning on China reform roadblock: WSJ.
The extensive reform blueprint the Communist Party released last month
has unleashed a sense of optimism about Beijing's ability to steer the
country away from the potholes that have brought other fast-growing
economies to a halt. But at least one high-profile government adviser is
worried that the road ahead is still strewn with major roadblocks. Wu
Jinglian, a major intellectual force behind China's economic reforms
since the 1980s and someone described as "the conscience of China's
economic circles", said in a widely distributed interview ( in Chinese)
broadcast on Chinese Central Television on Thursday evening that he was
"worried that vested interests are the biggest obstacle to reform and a
market economy."
Fox News:
- Afghanistan agrees to pact with Iran, while resisting US accord. Afghan President Hamid Karzai agreed on a cooperation pact with Iran,
despite continuing to resist signing a security agreement with the
U.S., Reuters reported. Karzai made the deal with Iranian President Hassan Rouhani in Tehran Sunday. "Afghanistan agreed on a long-term friendship and cooperation pact
with Iran," Karzai's spokesman Aimal Faizi said, according to Reuters.
"The pact will be for long-term political, security, economic and
cultural cooperation, regional peace and security."
CNBC:
ValueWalk:
- Hedge Funds Go Long-Only On Clients’ Demand. Going
beyond the traditional long/short hedging strategy, managers are now
all-in on the bull market. The survey further noted that the the most
popular non-traditional product that these hedge funds were offering was
the long-only strategy.
Business Insider:
New York Times:
- Bank Charted Business Linked to China Hiring.
Federal authorities have obtained confidential documents that shed new
light on JPMorgan Chase’s decision to hire the children of China’s
ruling elite, securing emails that show how the bank linked one
prominent hire to “existing and potential business opportunities” from a
Chinese government-run company.
- A Public Works Boom in Japan Has Echoes From the Lost Decade. The bulldozers started up with a rumble this year in this bucolic corner
of southern Japan, unleashing a construction frenzy — and a sinking
feeling of déjà vu. The traffic cones and “under construction” signs alongside Saga’s roads
and waterways are about the only visible change brought about by
“Abenomics,” Prime Minister Shinzo Abe’s much-lauded plan to put Japan
back on the path to growth. Residents here say the building boom is a
throwback to Japan’s troubled 1990s, when far-flung regions across the
country tried to build their way back to prosperity. And they worry that, like previous attempts, growth will not last.
The Blaze:
Real Clear Politics:
Bild:
- Merkel
Party Industry Wing Rejects Coalition Aims. The Economic Council, a
group of companies affiliated with Chancellor Angela Merkel's Christian
Democrats, rejected proposals from the country's prospective coalition,
citing the groups. Planned national minimum hourly wage, widened pension
benefits, power price increases linked to energy proposals and tax cuts
canceled in program are unacceptable to the group, citing Council
President Kurt Lauk.
El Pais:
- Spanish PM Rajoy Says Biggest Worry Is Europe. Says what "worries" him most is Europe, "that is to say, that all the governments, and particularly the German government - which is very important because of its GDP and population - should be clear on where we are headed."
Asahi:
- Japan Abe Cabinet Support Rate Falls 3 Ppt to 46%. Approval
rating for Japanese Prime Minister Shinzo Abe's Cabinet falls from 49%
in previous poll. Disapproval rating rises 4 ppt to 34%.
Daily Telegraph:
- Carbon Tax Reduced Emissions By Less Than .1%. LABOR'S $6 billion carbon tax reduced Australia's greenhouse gas emissions by less than 0.1 per cent. As PM Tony Abbott ratchets up the pressure on Labor's Bill Shorten
to axe the carbon tax by Christmas, the new figures will be released
this week by Australia's National Greenhouse Gas Inventory.
Weekend Recommendations
Barron's:
- Bullish commentary on (IGT), (TTWO), (M), (BBY), (WYNN), (LUV), (COH), (AF), (BRKL), (NFBK), (AGN) and (LVS).
Night Trading
- Asian indices are -.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 134.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 106.25 -3.75 basis points.
- NASDAQ 100 futures +.20%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The
Fed's Bernanke speaking, Fed's Bullard speaking, Fed's Fisher speaking,
3Q Household Change in Net Worth, Eurogroup Meetings, Germany Trade
Balance Report, China New Loan Data, Wells Fargo Pipeline/MLP/Energy
Symposium, KeyBanc Engineering/Construction/Utilities Conference,
Raymond James Semi/Software/Supply Chain Conference, UBS
Media/Communications Conference, (TXN) Mid-Quarter Update, (BDC) analyst
meeting and the (SLG) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as rising long-term rates, Fed taper fears, profit-taking and
increasing emerging markets/European debt angst offsets seasonality,
investor performance angst and short-covering. My intermediate-term
trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.
