North American Investment Grade CDS Index 98.90 bps +.91%
European Financial Sector CDS Index 150.08 bps +7.60%
Western Europe Sovereign Debt CDS Index 195.17 bps +2.36%
Emerging Market CDS Index 246.23 bps +5.16%
2-Year Swap Spread 29.0 +3 bps
TED Spread 15.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 235.0 +2 bps
China Import Iron Ore Spot $167.80/Metric Tonne +.66%
Citi US Economic Surprise Index +22.40 +3.0 points
10-Year TIPS Spread 2.09% -4 basis points
Overseas Futures:
Nikkei Futures: Indicating +27 open in Japan
DAX Futures: Indicating +34 open in Germany
Portfolio:
Slightly Lower: On losses in my Biotech and Technology long positions
Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short
Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades slightly lower, despite rising eurozone sovereign debt angst and China inflation fears. On the positive side, Food, Homebuilding, Restaurant, Retail, Wireless, Telecom, Gold, Oil Service and Energy shares are especially strong, rising more than .5%. (XLF) has held up well throughout the day despite euro bank weakness and worries over WikiLeaks. The 10-year yield is falling -2 bps to 2.80%. The euro currency continues to trade very poorly. Copper is rising +1.29% despite euro weakness. Weekly retail sales rose +3.2% this week versus a +2.6% gain the prior week. This is the best showing since the first week of June. On the negative side, Education, Alt Energy and Internet shares are under meaningful pressure, falling more than 2.0%. Tech sector stocks are relatively weak today. The Spain sovereign cds is climbing +4.19% to 365.04 bps, the Japan sovereign cds is rising +9.6% to 70.76 bps, the Belgium sovereign cds is gaining +10.8% to 202.61 bps and the Italy sovereign cds is rising +8.61% to 268.21 bps. Moreover, the US Municipal CDS Index is surging +4.92% to 200.0 bps and other key cds indices continue their recent sharp moves higher. While the euro financial sector cds index has soared of late, it is still below levels seen during May/June. Given the ongoing jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals, rising Korean peninsula tensions and financial sector Basel III concerns, the broad market continues to remain resilient, which is a big positive. However, the situation in Europe is getting very close to the point that any further deterioration will have a significantly negative impact on global indices. I expect US stocks to trade mixed-to-lower into the close from current levels on rising euro sovereign debt angst, US municipal debt worries and China inflation fears.
EU Faces More Bailouts as Euro Contagion Spreads to Portugal: Euro Credit. The failure of the Irish rescue to stem a selloff across euro-region bond markets may spell more bailouts to come, starting with Portugal. The costs to insure Portuguese debt against default rose to a record today and Spanish bonds extended declines today after sliding the most since the euro’s debut yesterday, highlighting investor concerns that officials lack the tools to contain a debt crisis threatening the currency’s survival. The extra yield that investors demand to hold Italian debt over German 10-year bonds rose to the highest in more than 13 years. “We are barely halfway through the current crisis in the euro zone,” Paul Donovan, deputy head of global economics at UBS AG in London, said in an interview with Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance” program. “Unless we can see a further significant decline in bond yields in Portugal, the market is going to expect another bailout. And then market attention will turn to Spain.”
Obama Appoints Geithner, Lew to Negotiate on Tax Cuts. President Barack Obama said he asked Treasury Secretary Timothy Geithner and budget office director Jack Lew to lead negotiations with congressional Republicans on extending Bush-era tax cuts. Obama said after meeting with Republican and Democratic congressional leaders at the White House that both sides agree action is needed to extend tax cuts to middle-income families before the end of the year even as they remain divided on tax rates for the wealthiest Americans.
Consumer Confidence Rose in November to a Five-Month High. Confidence among U.S. consumers rose in November to the highest level in five months and a gauge of business activity unexpectedly climbed, signaling the recovery is taking hold heading into 2011. The Conference Board’s sentiment index increased to 54.1, exceeding the median forecast in a Bloomberg News survey, figures from the New York-based research group showed today. Another report today showed housing remained the American economy’s weak link. The S&P/Case-Shiller index of home values in 20 cities climbed 0.6 percent in September from the same month in 2009, the smallest gain since January, the last time prices declined year over year. The gauge fell 0.8 percent from the prior month after adjusting for seasonal variations, the biggest drop since April 2009. Factories, which helped lead the economy out of the recession, are still bolstering the expansion. The Chicago ISM’s business barometer rose to 62.5 in November, exceeding even the highest estimate of economists surveyed by Bloomberg.
Italy-Germany 10-Year Yield Spread Reaches 200 Points, Widest Since 1997. Italian and Spanish government bonds fell, driving the extra yield investors demand to hold the securities instead of German bunds to euro-era records, as Europe’s debt crisis intensified. The drop pushed the yield spread between 10-year Italian securities and similar-maturity German debt to more than 2 percentage points for the first time since 1997. The Belgian yield premium over bunds reached a record after its borrowing costs rose at a sale of 2.8 billion euros ($3.7 billion) of treasury bills. The cost of insuring debt for Italy, Spain, Portugal and Ireland surged to records, stocks and the euro slid and U.S. Treasuries advanced. “Contagion risk is still high on the agenda,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “Nobody wants to expose themselves to any peripheral risks.” The Italian 10-year bond yield rose a sixth day, gaining three basis points to 4.68 percent at 4:34 p.m. in London, after reaching 4.88 percent earlier today. The 3.75 percent security due in March 2021 fell 0.26, or 2.60 euros per 1,000-euro face amount, to 92.89. The spread with 10-year German bonds increased to as much as 212 basis points, a euro-era record.
U.S. Retail Sales Rise 3.5% as Shoppers Snap Up Deals. Weekly retail sales rose in the week ended Nov. 27 as shoppers flocked to the Black Friday sales with renewed confidence following the economic downturn. Sales climbed 0.5 percent from the preceding week, the International Council of Shopping Centers and Goldman Sachs Group Inc. said today in a statement. Sales at stores open at least a year rose 3.5 percent from a year earlier. The results don’t include online sales.
'Real Bad' Cash Jam May Force Michigan Towns to Borrow or Default by March. Cities and towns across Michigan have had property-tax collections plunge as much as 20 percent in the past year, the steepest drop since a 1994 state tax rewrite, forcing scores of communities to choose by March whether to borrow to pay bills or risk default on bonds. The municipalities rely on property taxes for as much as 60 percent of their revenue, according to the Michigan Municipal League. State support that typically makes up an additional 20 percent to 35 percent of city budgets has been slashed by almost a third in the past year, during the longest recession since the 1930s.
Gold Advances as Concern European Debt Crisis May Worsen Increases Demand. Gold in New York rose the most in a week as Europe’s escalating debt woes boosted demand for the precious metal as a haven asset. The dollar climbed today to a 10-week high against the euro. Investor concern has shifted to burgeoning debt in Spain and Portugal after European governments bailed out Ireland and Greece. Gold has risen 26 percent this year, touching a record $1,424.30 an ounce on Nov. 9. “Gold is moving higher predominantly on the continued fear of debt contagion in Europe,” said Frank McGhee, the head dealer at Integrated Brokerage Services in Chicago. Gold futures for February delivery rose $18.10, or 1.3 percent, to $1,385.60 an ounce at 11:29 a.m. on the Comex in New York. The price is up 2.1 percent in November, heading for the fourth straight monthly gain.
States Weigh Cap-and-Trade Market Spanning North America. California, New Mexico and 10 U.S. Northeastern states may try to create a North American carbon market on their own now that President Barack Obama has given up on cap-and-trade legislation that stalled in Congress. The emissions-trading system would be based on a planned carbon market in California, the most populous state, and an existing regional cap-and-trade program for power plants in the Northeast, according to state environmental officials. Three Canadian provinces have also shown interest in a cross-border carbon-trading system, the officials said.
ECB Tried to Force Ireland Into Bailout, Minister Says. European Central Bank officials tried to force Ireland to seek a bailout earlier this month and European officials are now trying to do the same to Portugal, Irish Justice Minister Dermot Ahern said. “Clearly there were people from outside this country who were trying to bounce us in as a sovereign state, into making an application, throwing in the towel before we had even considered it as a government,” he told Irish state broadcaster RTE in an interview today. “And if you notice, they are doing the same with Portugal now.” Asked about who was pressuring Ireland, he said “quite obviously people from within the ECB.”
Spain Banks Face Funding Hurdle Amid Bailout Threat. Spain’s banks may struggle to refinance about 85 billion euros ($111 billion) in debt next year as costs surge on concern continental Europe’s fourth- biggest economy may need an Irish-style bailout. “There’s a universal dumping of Spain going on,” said Andrea Williams, who helps manage about 623 million pounds ($968 million), including shares in Banco Santander SA, at Royal London Asset Management. “The fear is that Portugal, Spain and Italy are now in line after what happened in Ireland.”
Senate Backs Biggest Food-Safety Overhaul in 70 Years. The U.S. Food and Drug Administration would gain more power to police food companies under the bill that passed today in a 73-25 vote. The measure, backed by the food industry, public- health groups and consumer advocates, adds inspections and lets the FDA force recalls, rather than relying on companies to voluntarily remove contaminated foods from store shelves.
JPMorgan(JPM) Gives Bankers iPads, Signaling Danger to RIM(RIMM). JPMorgan Chase & Co. will give its investment bankers iPads to provide an additional mobile tool as Apple Inc. expands its domain to Wall Street, threatening Research in Motion Ltd. in a market it traditionally dominated. “We believe there are real benefits in our working environment that can be realized using this device - as well as the personal productivity and enjoyment that come as part of the package,” two managing directors at New York-based JPMorgan said in an e-mail obtained by Bloomberg News. Apple is building on its momentum in the tablet space, leveraging its 95 percent market share to expand from its traditional consumer base into the corporate market as RIM readies a rival device, the BlackBerry PlayBook.
Wall Street Journal:
Did New Rules Worsen Pay Situation? A study prepared for an influential shareholder group says rule changes meant to revamp Wall Street's pay culture have been negative, concluding that pay practices at six U.S. banks and securities firms have "worsened" since the financial crisis. The report, set to be released Tuesday and commissioned by the Council of Institutional Investors, which represents about 130 pension funds, contends that financial firms still tie too much of their compensation to short-term results and have increased salaries to offset the impact of recent regulatory curbs on pay.
Miners Dig In For a Fight. The phosphate mined for more than a century here in central Florida to make fertilizer has yielded thousands of jobs and countless harvests around the world. But environmental groups are arguing in federal court that the cornucopia extracts too high a price.
iGate(IGTE) Seeks Up to $700 Million Via Debt to Fund Patni Bid. Software services company iGate Corp. (IGTE) is looking to raise up to $700 million to help fund its joint bid with Apax Partners LLP to take control of rival Patni Computer Systems Ltd. (532517.BY), two people familiar with the matter said Tuesday.
Lukoil Eyes 150,000 B/D From Iraq W Qurna-2 In 2013. OAO Lukoil Holdings (LKOH.RS), Russia's largest non-state oil producer, aims to produce 150,000 barrels a day at Iraq's supergiant West Qurna Phase 2 in January 2013, a person familiar with the project said Tuesday.
Portugal's Banks Pile Up Sovereign Debt. Portuguese banks are buying their government's debt at a fast pace, a move that could pose a risk to institutions that so far have weathered the financial crisis better than many. According to the Portuguese Central Bank, the country's financial institutions, including banks, have together invested €17.91 billion ($23.5 billion) in the country's public debt as of September, up 87% from €9.58 billion a year ago. Since the beginning of the year, the exposure has risen 77%.
The Small Error That Could Ruin Dem's Health Care Efforts. Conservative foes of the Affordable Care Act want the federal courts to smother the new health care law in its crib. They've argued that Democrats failed to erect the proper safeguards to protect the legislation from being stricken down entirely by the courts. And when a Virginia district court judge rules in the coming days on the Constitutionality of the law's insurance mandate, he'll also have to decide whether none, some, or all of the law must go with it. The obscure term of art here is "severability."
Google(GOOG) is Said to be Poised to Buy Groupon. Google is near a deal to acquire Groupon, the pioneering online discounter, for as much as $6 billion, people with direct knowledge of the matter told DealBook on Monday.
Wiretaps Said to Widen Insider Treading Inquiry. Secret, court-approved wiretaps put in place more than two years ago are now being used by prosecutors in a widening inquiry of securities fraud and insider trading involving hedge funds and consultants that provide industry research, according to court documents and interviews with people close to the investigations.
Why Hasn't WikiLeaks Been Put Out of Business?So now we know what it takes to get everyone to realize how damaging WikiLeaks is to U.S. foreign policy. When WikiLeaks released nearly half a million documents undermining U.S. war efforts in Iraq and Afghanistan earlier this year, it was met with a collective yawn. And it was hard to find more than a just few top officials in the United States or abroad who complained when the site released raw footage of a shooting video taken from a U.S. helicopter in Iraq. What's the big deal? After all, those were unpopular wars. But now that the site has started releasing what it promises to be 250,000 diplomatic cables, suddenly, the entire world is up in arms. Examples:
Politico:
EPA: More Renewable Fuels Required. The Obama administration Monday increased the amounts of ethanol and other renewable fuels it wants to see as part of the nation’s gasoline supply, but a senior official took aim at the practice. Responding to a congressional mandate, the Environmental Protection Agency will require that 13.95 billion gallons of transportation fuel comes from renewable sources in 2011, or about 8 percent of domestic gasoline and diesel supplies.
Strong Showing in Anti-Earmark Vote. Thirty-nine senators voted Tuesday in support of a three-year moratorium on appropriations earmarks, the strongest showing ever by opponents of the current process and a potential game changer in the year-end budget debate. Seven Democrats backed the proposal, and the party leadership will have to decide now whether to strip out or weaken draft language in an omnibus spending bill that currently sets aside billions for home-state projects.
Reuters:
CFTC to Unveil Position Limit Plan Dec. 16: Source. The U.S. futures regulator intends to unveil on December 16 its long-awaited revised plan to limit speculative positions held by commodity traders, a source with direct knowledge of the matter said on Monday.
Baltic Index Falls, China PMI Survey Awaited. The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, fell for a fourth session on Tuesday as slower cargo business kept pressure on the larger capesize market. The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.14 percent, or 46 points, to 2,099 points. "The capes can find a support only if the Chinese start restocking again, which I don't see happening in the immediate future," said Georgi Slavov, head of dry research and structured products at ICAP Shipping.
AP:
AP-CNBC Poll: Cut Services to Balance the Budget. To ease surging budget deficits, Americans prefer cutting federal services to raising taxes by nearly 2-1 in a new poll. An Associated Press-CNBC Poll showed widespread anxiety about budget shortfalls exceeding $1 trillion a year. Eighty-five percent worry that growing red ink will harm future generations — the strongest expression of concern since AP polls began asking the question in 2008. Fifty-six percent think the shortfalls will spark a major economic crisis in the coming decade.
Les Echos:
The French government is preparing a plan to cut subsidies for solar energy. French Prime Minister Francois Fillon will meet ministers in two days to discuss a possible lowering by about 10% in the price paid by Electricite de France SA for solar power and a cap on the annual volume of installations.
Irish Independent:
IMF Chief: Yes You Can Bounce Back. THE head of the IMF mission in Ireland last night insisted the country can bounce back from the economic crisis -- but outlined a swathe of painful measures that must be taken. And he warned that further losses at the Irish banks could be uncovered, possibly in the area of tracker mortgages and small business loans. In an exclusive interview with the Irish Independent, the IMF's Ajai Chopra also insisted Ireland would be able to afford to pay back the crippling multi-billion-euro loans it received in bailout funds.
Xinhua:
China's consumer price index probably increased 4.7% on year in November, accelerating from October's 4.4% gain, citing a Bank of Communications report.
Bond Sales Tumbling in Worst Month Since Lehman Aftermath: Credit Markets. Corporate bond sales worldwide are tumbling on concern Ireland’s debt crisis will spread across Europe as returns on the notes approach their worst month since credit markets froze two years ago. Issuance has slumped 31 percent since Nov. 15, compared with the same period a year earlier, after surging 34 percent in the first half of the month, according to data compiled by Bloomberg. Plunging returns on debt of borrowers from France’s Credit Agricole SA to Bentonville, Arkansas-based Wal-Mart Stores Inc. are dragging bonds to a 1.08 percent loss in November, Bank of America Merrill Lynch index data show.
Hedge Funds Raise Natural Gas Wagers to Four-month High: Energy Markets. Hedge funds increased bullish bets on natural gas to the highest level in four months on speculation that lower-than-normal temperatures will bolster heating demand and trigger withdrawals from record stockpiles. The funds and other large speculators increased so-called net-long positions, or wagers on rising prices, by 50 percent in the seven days ended Nov. 23, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report.
Forged Comment Letters Sent to Regulators Writing Swaps Rules. Forged comment letters purportedly from an H.J. Heinz Co. executive, a Burger King Co. franchise and at least five other Arkansas-based officials or businesses were sent to the Commodity Futures Trading Commission, which is considering rules for the $583 trillion swaps market. The letters, some of which contain identical passages, criticize banks for their “cartel-like control of the derivatives market.” They include signatures from a circuit court judge, a county sheriff, a lawyer and a mental health counselor. All were forgeries, according to interviews conducted by Bloomberg News.
U.S., EU Expect Limited Progress at Climate Talks, No Treaty. U.S. and European Union envoys said they expect progress on forming a $100 billion fund to fight global warming and on protecting forests at climate talks in Cancun, Mexico, though no treaty will be agreed.
Japan Unemployment Rises, Output Falls, Showing Risk Economy May Contract. Japan’s industrial production decreased and the unemployment rate unexpectedly climbed in October, providing early signs that the country’s economy will likely shrink this quarter. Factoryoutput declined 1.8 percent from September, the sharpest drop since February 2009, the Trade Ministry said in Tokyo today. The jobless rate increased to 5.1 percent from 5 percent and the economy lost 180,000 jobs, the most since May, according to the statistics bureau. Bond prices rose. The figures add to evidence that Japan’s economy may contract for the first time in five quarters, as the expiration of stimulus measures and weak exports prompt companies such as Toyota Motor Corp. to reduce production. Japan’s central bank may face pressure to ease policy further as sluggish demand fuels deflation, according to economist Yuichi Kodama.
WikiLeaks Using Amazon(AMZN) Servers After Attack. WikiLeaks, the website that published a quarter-million sensitive diplomatic cables on Sunday, is using Amazon.com Inc. servers in the U.S. to help deliver its information. It sounds like an odd choice, but it could make sense. The site cablegate.wikileaks.org, which WikiLeaks is using for the diplomatic documents, is linked to servers run by Amazon Web Services in Seattle, as well as to French company Octopuce. Wikileaks.org, the site’s front page, links back to Amazon servers in the U.S. and in Ireland. Several Internet watchers, including technologist Alex Norcliffe, reported earlier on WikiLeaks’ use of Amazon services.
Russian Missiles Fuel U.S. Worries. The U.S. believes Russia has moved short-range tactical nuclear warheads to facilities near North Atlantic Treaty Organization allies as recently as this spring, U.S. officials say, adding to questions in Congress about Russian compliance with long-standing pledges ahead of a possible vote on a new arms-control treaty. U.S. officials say the movement of warheads to facilities bordering NATO allies appeared to run counter to pledges made by Moscow starting in 1991 to pull tactical nuclear weapons back from frontier posts and to reduce their numbers. The U.S. has long voiced concerns about Russia's lack of transparency when it comes to its arsenal of tactical nuclear weapons, believed to be many times the number possessed by the U.S.
'Cyber Monday' Sales Show Strength. Even Following a Weekend With Solid Online Shopping, Heavy Promotions Help Produce Double-Digit Gains for the Day. Early estimates indicated overall sales gains of about 20% from a year earlier for "Cyber Monday," the nickname for the Monday after Thanksgiving. That comes on top of strong online sales growth on Thanksgiving Day and Black Friday. For those two days combined, comScore Inc. reported that online shoppers spent about $1.1 billion, up more than 15% from $913 million a year earlier.
Attack by WikiLeaks. For all of his self-justification as an agent of "pure" transparency, Mr. Assange is not serving the interest of free societies. His mass, indiscriminate exposure of anything labeled secret that he can lay his hands on is a hostile act against a democracy that is fighting a war against forces bent on killing innocents. Surely, the U.S. government can do more to stop him than send a stiff letter.
ABB to Acquire Baldor(BEZ) for $3 Billion. Switzerland conglomerate ABB Group plans to announce Tuesday that it is acquiring electric motor manufacturer Baldor Electric Co. for about $3 billion, the companies said. ABB planned to pay about $63.50 per share in cash for Fort Smith, Ark.-based Baldor. The deal would mark ABB's first major acquisition in the U.S. and retain Baldor's headquarters in Arkansas and the brand name. The Baldor sale would give ABB a foundation to establish a presence in the U.S. while the deal would also allow Baldor to take advantage of ABB's global distribution. Shares of Baldor closed at $45.11 on Monday on the New York Stock Exchange, giving the company a market capitalization of $2.12 billion.
CNBC:
North Korea Says It Has 'Thousands of Centrifuges'. Secretive North Korea detailed for the first time its expanded nuclear program on Tuesday, saying it had thousands of centrifuges as pressure built on China to rein in its ally amid heightened tensions on the peninsula.
Seagate(STX) Halts Talks With Private Equity Firms. A potential takeover of Seagate Technology, which could have been worth about $9 billion, fell apart on Monday and the hard drive disk maker will instead pursue a share buyback plan.
Splits in Euro Zone Emerge Amid Debt Crisis. Even as Europe struggles to contain its latest debt crisis, fresh fissures are emerging that show the euro zone diverging into two — or even three — different economic parts that threaten to compound the problems even further.
IBD:
Drugmaker Diversifies Its Product Lineup Through Acquisitions. To diversify its asset portfolio, Endo Pharmaceuticals (ENDP) went shopping this year. In cutting three deals, Endo convinced many investors and analysts that it could survive the slowing growth and generic competition that inevitably threaten all branded drugs.
US Senate Fails to Repeal Unpopular Tax Provision. Efforts to repeal what is widely seen as a burdensome tax provision in the new federal healthcare law failed in the U.S. Senate on Monday despite broad support to drop it.
Barclays(BCS) Attracts Unusual Flurry of Put Trading. Unusual put activity on the U.S.-listed shares of British bank Barclays Plc on Monday grabbed a lot of attention among traders due to the massive amount of trading and the unusual order size. In all, about 161,000 puts changed hands in Barclays, well above their average daily volume of 1,167 contracts versus only 3,050 calls, according to option analytics firm Trade Alert.
Telegraph:
Hedge Fund Manager Mark Hart Bets on China as the Next 'Enormous Credit Bubble' to Burst. Mark Hart, an American hedge fund manager who has made millions predicting the crises in US sub-prime market and European debt, has launched a fund to bet on the imminent implosion of China. Mr Hart, who runs Corriente Advisors from Fort Worth Texas, has told potential investors in a presentation that China is in the "late stages of an enormous credit bubble". When this bursts, the financier said he expects an "economic fall-out" that will be as "extraordinary as China's economic out-performance over the last decade".
The Australian:
Hillary Clinton Condemns WikiLeaks Cable Release as 'Attack'. THE WikiLeaks release of diplomatic memos was an "attack on the international community", US Secretary of State Hillary Clinton said today. Ms Clinton vowed to prevent future leaks, as other Obama administration officials warned of a criminal investigation against website founder Julian Assange. "This disclosure is not just an attack on America's foreign policy interests. It is an attack on the international community," Ms Clinton said after meeting Turkish Foreign Minister Ahmet Davutoglu. "I want you to know that we are taking aggressive steps to hold responsible those who stole this information.
Financial News:
China's central bank should clearly state that it is shifting to a "prudent" monetary policy and allow further yuan appreciation to combat rising inflation, Sheng Songcheng wrote. Sheng is head of the central bank's Shenyang branch. China may see inflation quicken this month from October's price rises driven by food costs, making it "almost certain" that inflation will top 3% for the full year, Sheng wrote. There is still room for further increases in reserve requirement ratios for banks, Sheng said. The People's Bank of China should also relax a ceiling on the benchmark deposit rate and allow rates to float higher to help narrow the current negative real rate, Sheng said.
China Daily:
China needs to raise interest rates by another 200 basis points to curb inflation given existing excess liquidity, Zhong Jiyin, an economist with the Chinese Academy of Social Sciences, wrote.
China's Guangdong province may raise the minimum wage early next year to help ease the region's labor shortage, citing Ge Guoxing, deputy director-general of the province's labor department.
Evening Recommendations
None of note
Night Trading
Asian equity indices are -1.75% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 118.0 +7.5 basis points.
Asia Pacific Sovereign CDS Index 113.50 +1.75 basis points.
S&P/CS 20 City House Price Index MoM% SA for September is estimated to fall -.4% versus a -.28% decline in August.
9:45 am EST
Chicago Purchasing Manager for November is estimated to fall to 59.9 versus a reading of 60.6 in October.
10:00 am EST
Consumer Confidence for November is estimated to rise to 53.0 versus a reading of 50.2 in October.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Kocherlakota speaking, NAPM-Wilwaukee Index, Bloomberg FCI Monthly, weekly retail sales reports, weekly ABC consumer confidence reading, (LOW) analyst meeting, (BIIB) analyst meeting, Barclays Lodging Conference, Citi Basic Materials Conference, Piper Jaffray Healthcare Conference and the Canaccrod Genuity Energy Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and real estate shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 98.01 bps +2.49%
European Financial Sector CDS Index 146.09 bps +8.56%
Western Europe Sovereign Debt CDS Index 190.66 bps +5.73%
Emerging Market CDS Index 234.99 bps +4.24%
2-Year Swap Spread 26.0 unch.
TED Spread 14.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 233.0 -3 bps
China Import Iron Ore Spot $166.70/Metric Tonne +.12%
Citi US Economic Surprise Index +19.40 -4.7 points
10-Year TIPS Spread 2.13% -1 basis point
Overseas Futures:
Nikkei Futures: Indicating -46 open in Japan
DAX Futures: Indicating +53 open in Germany
Portfolio:
Slightly Higher: On gains in my Medical, Biotech and Technology long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades at session highs, reversing meaningful morning losses, despite rising Korean Peninsula tensions and increasing euro sovereign debt angst. On the positive side, Coal, Energy, Oil Service, Bank, Hospital, HMO, Construction, Education and Road & Rail shares are especially strong, rising more than .5%. Small-cap and cyclical shares are outperforming. (XLF) has traded very well throughout the day. The 10-year yield is falling -4 bps to 2.83%. The euro currency continues to trade very poorly. Copper is rising +.3% and the S&P GSCI Ag Spot Index is rising +.46% despite euro weakness. On the negative side, Airline, Wireless, Ag, Networking, Telecom and Drug shares are under pressure, falling more than 1.0%. The Russia sovereign cds is rising +5.76% to 172.11 bps, the Hungary sovereign cds is gaining +5.03% to 362.87 bps, the Portugal sovereign cds is surging +6.54% to 538.77 bps, the Spain sovereign cds is climbing +8.27% to 350.46 bps and the UK sovereign cds is rising +11.31% to 78.32 bps. Moreover, the Emerging Markets Sovereign CDS Index is surging +8.75% to 216.22 bps and other key cds indices continue their recent sharp moves higher. While the euro financial sector cds index has soared of late, it is still below levels seen during May/June. The Citi Asia Economic Surprise Index continues to weaken, falling -1 point to -7.9 today, which is the lowest reading globally and the lowest since May 2009. Given the ongoing jump in eurozone debt angst, recent equity gains, China inflation fears, insider trading scandals, rising Korean peninsula tensions and financial sector Basel III concerns, the broad market continues to remain resilient, which is a big positive. Market leaders remain relatively firm. Spain's debt auction on Thursday May be the market's next big test. I expect US stocks to trade mixed-to-higher into the close from current levels on bargain-hunting, diminishing economic fear, seasonal strength, less financial sector pessimism and short-covering.
