Today's Headlines
Bloomberg:
- Brussels Will Remain on Lockdown Monday With Metro, Schools Closed. The terror threat in Brussels will stay at the highest level at least through Monday afternoon, meaning schools, universities and the entire metro network will remain closed amid fears of a major and imminent terrorist attack. “What we expect is an attack similar to the one that unfolded in Paris with multiple people who launch offensives in many places at the same time,” Belgian Prime Minister Charles Michel told reporters in Brussels late Sunday. The threat is “very serious and imminent,” he said. He said authorities suspected bars, shops and public transport to be the main targets. They will make a fresh assessment Monday afternoon. The city’s terror threat has been at level 4, the maximum, since Friday night and will remain so at least until a re-analysis Monday afternoon. The rest of the country remains at level 3. With most institutions of the European Union and NATO based in Brussels, security has been stepped up across the city. NATO and the EU said late Sunday that their facilities would be open on Monday with increased security. A meeting of euro-area finance ministers scheduled for Monday afternoon will go ahead as planned, the EU said.
- Brussels Becomes a Ghost Town as Terror Keeps People Inside. Steven Devisscher’s bar in downtown Brussels normally teems with more than 200 customers quaffing specialty Belgian beers on a Saturday night. Not last night. After a government warning of an “imminent” Paris-style terrorist attack, his doors were locked and his lights off. “People are afraid,” said Devisscher, the manager of Monk, situated a short walk from the city’s historic Grand Place. He didn’t need to turn people away because the city was empty. “The police wanted us to close; we still decided to stay open, but there was nobody about. The streets are dead.” It was a scene repeated across the Belgian capital as restaurants told of cancellations throughout the day. Many didn’t open at all. The Grand Place, famed for its chocolate shops and ornate cafes, was practically deserted as Brussels went into lockdown.
- Hollande to Press Obama, Putin for Terror Response. President Francois Hollande faces the challenge of knitting together a coherent coalition with a durable strategy for tackling the Islamic State in meetings this week with the leaders of France’s closest allies as well as Russia’s Vladimir Putin. Ten days after terrorists killed 130 people in and around Paris, Hollande hosts British Prime Minister David Cameron for a working breakfast in the French capital Monday, before seeing President Barack Obama Tuesday in Washington and German Chancellor Angela Merkel in Paris on Wednesday. He meets Putin in Moscow Thursday. With the U.S. refusing military cooperation with Russia, Hollande faces no simple task. While the Islamic State controls large parts of Syria and Iraq and is attributed as the force behind the Paris attacks and possibly the downing of a Russian airliner in Egypt’s Sinai dessert, Obama said Putin needs to make a “fundamental shift” in his support for Syrian President Bashar al-Assad before joint action can be considered. “To what extent this will function as a coalition rather than a collection of states is entirely unclear at this stage,” Francois Heisbourg, head of the London-based International Institute for Strategic Studies, said in an interview. “Will the Russians accept to have jointly agreed targets? I find that very difficult to believe.”
- Masters of the Finance Universe Are Worried About China. David Tepper says a yuan devaluation may be coming in China. John Burbank warns that a hard landing there could spark a global recession. Tepper, the billionaire owner of Appaloosa Management, said last week at the Robin Hood Investor’s Conference that the Chinese yuan is massively overvalued and needs to fall further. His comments follow similar forecasts from some of the biggest hedge fund managers, including Crispin Odey, founder of the $12 billion Odey Asset Management, who predicts China will devalue the yuan by at least 30 percent. The money managers are losing faith in China’s ability to revive its economy, which suffers from rising nonperforming loans and falling exports, after the surprise 1.9 percent currency devaluation in August and global market rout that followed. The investors made their dire forecasts after shares of U.S.-traded Chinese companies, which their funds sold in the third quarter, began to rebound in October. “The downside scenario for China seems more intimidating than ever before,” billionaire Dan Loeb wrote on Oct. 30 to investors at Third Point, which manages $18 billion. “The new question is not whether but how severe the slowdown of the world’s foremost growth machine will be.”
- Devaluation Watch May Force China to Pay Premium on Dim Sum Debt. China is set to pay more to sell sovereign bonds in Hong Kong than in the onshore market for the first time, as investors brace for the possibility of another yuan devaluation. The Ministry of Finance will sell 14 billion yuan ($2.2 billion) of Dim Sum notes in the city this week, including 2 billion yuan to individuals. The yield on offshore yuan securities due 2020 was 3.39 percent on Nov. 20, 25 basis points higher than debt of the same maturity in Shanghai, suggesting the government will have to pay more to borrow outside of the country.
- Carmakers at China Show Predict New Era of Slower Sales Growth. Executives gathered last week at the biggest motor show in southern China were unanimous in their view that the days of exponential growth are over, underscoring how a sharp economic slowdown has tempered expectations in the world’s largest car market. At the Guangzhou Auto Show last Friday, Volkswagen China Executive Vice President Soh Weiming predicted that industry passenger vehicles may expand three to five percent next year. Jiang Jun, president of FAW Toyota Motor Sales Co., said the company won’t set high targets for its dealers in 2016 to allow them to “regain strength.” Hubertus Troska, head of China for Daimler AG, noted the heavier discounts in the market while Infiniti Chief Executive Officer Roland Krueger said growth was “normalizing.”
- China to Double Margin Requirements From 50 to 100%. (video)
- China Restarts IPO Process for Ten Companies. (video)
- Shanshui Default Woes Hit China Inc. as More Bond Sales Scrapped. The default by China Shanshui Cement Group Ltd. is forcing more Chinese companies to scrap bond sales as yields surge. About 43 companies have canceled or delayed 46.7 billion yuan ($7.3 billion) of notes since the cement maker issued a default warning on Nov. 5 before missing the payment, according to statements to Shanghai Clearing House and Chinamoney. In the 10 trading days after Baoding Tianwei Yingli New Energy Resources Co. defaulted last month, only nine companies scrapped a total of 8.8 billion yuan of bond issuance.
- Euro Drops to Seven-Month Low as Draghi Feeds Bears; Kiwi Falls. The euro weakened toward a seven-month low after futures traders added to bearish bets and European Central Bank President Mario Draghi encouraged speculation his board will ease policy next week.Europe’s common currency dropped versus all its major peers on Friday after Draghi said the ECB will do what they must to raise inflation “as quickly as possible.” The Governing Council meets in Frankfurt on Dec. 3 for its next monetary-policy decision. Hedge funds ramped up wagers on dollar strength last week by the most since August 2014. The New Zealand currency led declines Monday against the greenback on rising speculation the South Pacific nation’s central bank will cut interest rates. The euro slid 0.3 percent to $1.0614 at 9:55 a.m. in Singapore Monday from $1.0646 on Friday, when it dropped 0.8 percent.
- Asian Commodity Producers Decline as Consumer Stocks Advance. Asian commodity stocks declined while consumer shares advanced, leaving a regional equity gauge little changed following last week’s rally. Markets in South Korea and Australia edged up as Japan was closed for a holiday. The MSCI Asia Pacific excluding Japan Index was little changed at 420.55 as of 8:26 a.m. in Hong Kong, before Chinese markets opened.
- Commodity Slump Deepens as Dollar Gains; Materials Stocks Slide. Commodities started the week on a downward trajectory, with oil and industrial metals retreating with gold as the dollar cemented its gains. Materials shares led losses across Asia, while bonds in the region fell. Crude extended its drop below $42 a barrel and gold slid a second day as comments from Federal Reserve officials about the prospect of a December interest-rate hike bolstered the greenback. Copper touched the lowest level since 2009, and BHP Billiton Ltd. shares were the biggest drag on a index of Asian commodity producers. Guotai Junan International Holdings Ltd. plunged in Hong Kong after the brokerage said its chairman can’t be contacted. Australian 10-year bond yields rose to a one-week high.
- Venezuela Sees Crude in Mid-$20s If OPEC Doesn't Act. Oil prices may drop to as low as the mid-$20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said. Venezuela is urging the Organization of Petroleum Exporting Countries to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Del Pino told reporters Sunday in Tehran. Saudi Arabia and Qatar are considering his country’s proposal for an equilibrium price at $88 a barrel, he said.
- Oil Bulls See Little Chance of Help From OPEC as Supply Grows. Hedge funds are betting OPEC won’t do anything next month to keep crude oil above $40 a barrel. OPEC ministers are likely to keep its output quota steady at a meeting on Dec. 4 in Vienna, according to analysts from JBC Energy GmbH and Societe Generale SA. Last November, Saudi Arabia led the group in maintaining production, accelerating a plunge in oil prices. Supply may swell further next year if Iran resumes sales that were halted by sanctions. "We remain at risk of falling into an even deeper hole," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “We might be looking for the supply surplus to continue through 2016 and through the first half of 2017."
- Iran Is Seeking to Increase Output Within OPEC’s Existing Ceiling. OPEC should make room for increased Iranian crude production within its ceiling of 30 million barrels a day, the nation’s oil minister said, adding the group will probably leave that limit unchanged when it meets next month. Iran has asked OPEC to accommodate its return to previous production levels when international sanctions are lifted, Bijan Namdar Zanganeh told reporters in Tehran. Iran plans to add 1 million barrels a day within five to six months of the curbs being removed and that increase should be within OPEC’s production ceiling, Amir Hossein Zamaninia, deputy minister for commerce & international affairs, said in Tehran on Saturday.
- Iron Ore Bear Andy Xie Predicts Prices Below $40 by Year-End. Iron ore bear Andy Xie is sticking to his guns. The price will drop below $40 a metric ton before year-end, and trade in the $30s in 2016 as demand in China sputters, according to Xie, an independent economist who’s predicted a collapse since at least 2012. Mills in China will cut output and high-cost iron ore miners will go under, he said in an interview. “The steel industry is reaching a critical point,” said Xie, a former Asia-Pacific chief economist at Morgan Stanley. “They’ll have to cut production,” said Xie, who forecast in February -- when iron ore was in the $60s -- that prices would drop below $40 this year. It ended at $44.91 last week, the lowest since July.
- Fed's Williams Sees 'Strong Case' for Dec Increase If Data Holds Up. There’s a “strong case” for a Federal Reserve interest rate increase in December assuming U.S. economic data continues to be encouraging, San Francisco Fed President John Williams said, adding that the slope of increases after an initial move is “most important.” The U.S. central bank’s policy-setting Federal Open Market Committee will convene in Washington on Dec. 15-16 to discuss a possible policy move. Most economists in a Bloomberg survey and traders of federal funds futures expect lift-off from near-zero, where the bank’s key lending rate has been since 2008, at that meeting. “Assuming that we continue to get good data on the economy, continue to get signs that we’re moving closer to achieving our goals” and are gaining confidence that inflation will move back toward the Fed’s 2 percent target, there’s “a strong case that can be made in December to raise rates,” Williams said, speaking with reporters at the University of California at Berkeley on Saturday.
- Elon Musk's Connection to SolarEdge Casts Long Shadow on Stock. For SolarEdge Technologies Inc., ties with Elon Musk are no longer something to brag about. The Silicon Valley billionaire’s SolarCity Corp. is the biggest buyer of its components for photovoltaic systems. That turned SolarEdge into a darling of investors until its top client announced it would scale back installations of panels. Shares of the Israeli company that had soared as high as $42 are back down at $18, the price of their March trading debut in New York. The broader concern is whether the solar industry can live without government support. The expiration of U.S. tax credits for the renewable energy source at the end of 2016 sparked a selloff that has engulfed SolarEdge, whose executives are now trying to assure shareholders that the company will continue to grow regardless of SolarCity’s troubles and subsidies.
Wall Street Journal:
- Obama Sticks to Strategy on Syria, Islamic State. President continues to defy critics, rejects calls for major change. Despite the Paris terror attacks, President Barack Obama continues to defy critics by sticking to his strategy in Syria and against Islamic State. Mr. Obama’s rejection of calls for a major strategy change, while Paris scrambles to head off future attacks and Brussels was locked down under a terrorist threat, can make him appear indifferent or out of touch. But Mr. Obama’s aides say it is designed with an eye on...
- Big Banks’ New Burden: What Lurks in Debt Rules? The Fed’s proposal to require banks to hold more long-term debt contains some unexpected twists. The latest plan to bolster banks—and keep taxpayers from footing the bill for their failure—comes with unexpected twists that could weigh on bank earnings. Under new rules proposed by the Federal Reserve just before Halloween, the biggest U.S. banks will have to bolster their “total loss-absorbing capacity.” This is a measure that combines shareholders’ equity and some long-term debt. Banks will need this to be...
- Concerns Over Valeant(VRX) Spread to Other Drug Makers. Horizon, Mallinckrodt, Concordia shares have tumbled as investors question business models.
- Donald Trump Suggests He Is Open to Independent Bid.
- The Coming Government Takeover of Drug Pricing. ObamaCare provides the tools for a unilateral move against the industry the left loves to demonize. Hillary Clinton has plenty of allies as she demonizes drug-company profits and pushes for federal control over how drugs are priced. There’s a drug-pricing task force led by the White House and a similar Democrat-led effort in Congress. Many of the pharma industry’s proponents in Washington and on Wall Street dismiss this as political noise, arguing that new restrictions impeding investment and innovation are unlikely to get through a Republican Congress. But the Affordable Care Act reordered the...
- Why Paris Could Happen Here. The elements of an attack are available, including the weapons, manpower and a ‘permissive environment.’ In the afternoon of Nov. 13, when news of the horrific Paris attacks began to reach the U.S. and the fear and chaos there began to sink in, many Americans asked one important question: Could a similar attack by jihadists linked to Islamic State occur in a major American city? The answer is yes. To understand why, it is vital to deconstruct the Paris attack and the factors that enabled it and then see if they can be mapped onto an American urban environment. During my tenure as director of intelligence analysis at the New...
Barron's:
- Had bullish commentary on (AMCX), (MAR), (WHR), (GPRO) and (M).
- Had bearish commentary on (LNCE).
Breaking News:
BNO News:
Fox News:
BNO News:
Fox News:
- FOX News Poll: Rubio does best against Clinton in 2016 ballot test. (video) Republicans want a candidate who can beat Hillary Clinton. A new Fox News poll finds Marco Rubio performs best against the presumptive Democratic nominee. Rubio has an eight-point edge: 50 percent to Clinton’s 42 percent.
CNBC:
- Fed needs to raise rates: Cantor Fitzgerald's Lutnick. (video) Higher rates are perceived to be bullish for financials, which may explain why the CEO of one major financial institution is calling for the Federal Reserve to raise rates. In the central bank's most recent minutes, most officials believed that the recent economic conditions justify a rate hike at the next Fed meeting in December. A rate hike, however marginal, will constitute the Fed's first tightening campaign in about a decade.
- Oil companies brace for big wave of debt defaults. (video) Low oil prices are leaving many oil and gas companies with difficult debt loads, causing them to default at an extraordinary rate. On top of that, rating firm Moody's forecasts the default rate will increase. "The energy sector remains the most troubled, accounting for almost a quarter of the 79 defaults so far this year," said Sharon Ou, Moody's Credit Policy Research senior credit officer. The strain on the oil patch comes after years of borrowing heavily at the start of the domestic energy renaissance.
Zero Hedge:
- Brussels Lockdown Day 2: Police Hunt "Two Terrorists," Jihadi John Accomplice As Civilians Urged To "Remain At Home".
- What The Fed Hath Wrought - Bonds/Stock Positioning Most Extreme Since The End Of QE1. (graph)
- What CNBC Didn't Tell You About The Market's "Best Week Of The Year". (graph)
- "Winter Is Coming" - Wall Street Economists At Work. (graph)
- Equities vs 'Everything Else' - Deutsche Bank Warns "One Of These Sides Has To Be Wrong". (graph)
- Brazil's Disastrous Debt Dynamics Could "Create Contagion" For Emerging Markets, Barclays Warns.
- Stagflation Ahead: Goldman Is "Unreservedly Disappointed" With Latin America.
- South Pacific Showdown? Japan May Send Warships To China Islands.
- El-Erian Says "The Market Believes Central Banks Are Our Best Friends Forever", Just Don't Show It "Figure 4". (graph)
- In China, Money Is Power... Literally. (pic)
- Recovery? "We Never Came Close". (graph)
Business Insider:
- Here's a worrying sign that it's only a matter of time before the next Middle Eastern crisis breaks out.
- Authorities missed many 'red flags' before the Paris shootings.
- Assad: Syrian troops are advancing thanks to Russian airstrikes.
- Pfizer(PFE) is set to buy Allergan(AGN) for more than $150 billion.
- Thanksgiving dinner will cost you more this year. (graph)
- Why 20-somethings are miserable.
- Wall Street pay has crashed.
- US retailers have left us with a lot of grim questions ahead of the holiday shopping season.
- Brown University unveils a $100 million plan to address campus diversity.
- A Berkeley professor has found a pattern in when the Fed leaks secrets about monetary policy.
- At this point, the Fed is 'damned if they do, damned if they don't'.
- A sign that the world's richest are about to hit a rough patch. Quietly, over the last three months, Sotheby's auction house has seen its stock lose one-quarter of its value. This is, in large part, due to its high-end clients. Something is about to happen to them.
Reuters:
- Western leaders agreed to extend Russia sanctions by six months: diplomat. Western leaders who met on the margins of last week's Group of 20 summit in Turkey agreed to extend sanctions imposed on Russia for its intervention in Ukraine by six months until July of next year, a senior European diplomat told Reuters. The decision was taken despite mounting calls to cooperate more closely with Russian President Vladimir Putin in the fight against Islamic State following the militant group's Nov. 13 attacks in Paris which killed 130 people.
Telegraph:
- Britain set to join air strikes against Isil in Syria before Christmas. David Cameron will set out his “comprehensive strategy” to defeat Islamic State as he accelerates efforts to win cross-party backing for British air strikes in Syria.
Shanghai Metals Market:
- Nickel Ore Inventories at China Six Major Ports up 60,000 tonnes. Nickel ore inventories at six major Chinese ports were 10.03 million tonnes last week, up 60,000 tonnes on a weekly basis, according to SMM data.
Night Trading
- Asian indices are unch. to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 125.5 -.75 basis point.
- Asia Pacific Sovereign CDS Index 67.75 unch.
- Bloomberg Emerging Markets Currency Index 70.96 -.22%.
- S&P 500 futures +.02%.
- NASDAQ 100 futures +.07%.
Company/Estimate
- (GME)/.60
- (JEC)/.76
- (TSL)/.28
- (TSN)/.88
- (CPRT)/.43
- (PANW)/.32
- (POST)/.26
Economic Releases
8:30 am EST
8:30 am EST
- The Chicago Fed National Activity Index for October is estimated to rise to .08 versus -.37 in September.
- Preliminary Markit US Manufacturing PMI for November is estimated to fall to 54.0 versus 54.1 in October.
- Existing Home Sales for October are estimated to fall to 5.4M versus 5.55M in September.
- None of note
Other Potential Market Movers
- The Eurozone Services PMI report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, weighed down by technology and consumer 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.
