Frontrunning: November 1

  • US admits surveillance on foreign governments ‘reached too far’ (FT)
  • He must be so proud: Obama halted NSA spying on IMF and World Bank headquarters (RTRS)
  • Obamacare website gets new tech experts; oversight pressure grows (Reuters)
  • R.B.S. to Split Off $61 Billion in Loans Into Internal ‘Bad Bank’ (NYT)
  • Draghi’s Deflation Risk Complicates Recovery (BBG)
  • Abenomics: Nissan slashes full-year profit forecast 15% (FT)
  • Credit Suisse Dismisses London Trader Over ‘Unusual Trading’ Losses (WSJ)
  • RBS avoids break-up with 38 billion pounds ‘internal bad bank’ (Reuters)
  • Twitter Said to Attract More Than Enough Interest for IPO (BBG)
  • Canceled U.S. health plans are disruptive part of reform -Cigna CEO (Reuters)
  • J.P. Morgan, Regulators Wage War of Wording (WSJ)
  • Brooks, Coulson Oversaw Hacking in ’Secret’ Relationship (BBG)
  • Islamist Rebels Take Fight to Suburbs of Syrian Capital (WSJ)


Overnight Media Digest


* Before JPMorgan acquired the banking operations of Washington Mutual, the bank’s lawyers tangled with regulators over the wording of the agreement. Five years later, JPMorgan and the Federal Deposit Insurance Corp are still fighting over the meaning of those words. The question of who bears responsibility for Washington Mutual’s legal liabilities is taking on increasing urgency as J.P. Morgan negotiates a pact with the Justice Department that would end probes of soured mortgage bonds issued by J.P. Morgan and Washington Mutual during the housing boom.

* By the year-end, most airline passengers will be able to use their tablets, e-readers and other gadgets during all stages of flight. The Federal Aviation Administration’s decision, its first big shift on electronic devices since it restricted their use in flight in 1966, caps years of debate over whether electronic emissions from devices can interfere with cockpit instrument.

* The CFTC is so cash starved that it is being forced to delay cases, shelve certain probes and decided not to file charges against two men in the “London whale” trading mess, a top official said.

* Euro-zone inflation fell to its lowest in almost four years, raising pressure on the ECB to ease money supply and support the recovery.

* Germany described as “incomprehensible” U.S. criticism of its export-led economic policies, saying the country’s domestic economy is the main pillar of its growth.

* Goldman Sachs Group Inc scored some points with regulators with a loan to a New York City bicycle-sharing program named after rival Citigroup Inc. The $41 million loan to the Citigroup bike program was part of $2 billion in loans and investments made by the Wall Street bank from October 2010 until December 2012 to comply with U.S. rules designed to ensure financial services reach low- and middle-income neighborhoods, according to a recent regulatory review of the bank’s adherence to the Community Reinvestment Act.

* The way things are going, the term “cable TV” may have to be replaced by “phone TV.” Nearly a decade after Verizon Communications Inc and AT&T Inc began building pipelines to carry TV service to U.S. homes, they are nearing the market share of cable operators in areas where they operate, according to third-quarter results released by cable and phone companies in recent days.

* In the wake of a major immigration-law violation case involving Indian outsourcing giant Infosys Ltd, federal agents are investigating other companies for possible similar alleged misdeeds, according to an official with the Department of Homeland Security.

* Fannie Mae sued nine of the world’s largest banks over alleged manipulation of interest rates, joining the legal battles in the rate-rigging scandal. The lawsuit, filed Thursday in U.S. District Court in Manhattan, said that the mortgage-finance giant sustained an estimated $800 million in damages from banks that allegedly manipulated the London interbank offered rate and other financial benchmarks. Fannie also sued the British Bankers’ Association, a private association of large British banks.



The Royal Bank of Scotland has suspended two traders in its foreign exchange division amid global investigations into the possible manipulation of the $5.3 trillion-a-day forex market, sources said.

Wells Fargo, the fourth-largest U.S. bank, has settled claims with the U.S. Federal Housing Finance Agency over bad mortgages the bank sold ahead of the financial crisis, according to sources.

Insurer American International Group said it had completed its first share buyback since its $182 billion government bailout during the financial crisis.

Japanese consumer electronics company Sony on Friday morning slashed its full-year profit forecast by 26 percent, hit by weakness in its struggling TV operation.



* Google has spent months and millions of dollars encrypting email, search queries and other information flowing among its data centers worldwide. Facebook’s chief executive said at a conference this fall that the government “blew it.” And though it has not been announced publicly, Twitter plans to set up new types of encryption to protect messages from snoops.

* In an announcement at the company’s office on Thursday, Google showed off an updated version of its Android mobile operating system, called “KitKat 4.4,” that can search for information both on the web and some smartphone apps.

* Now that new insurance marketplaces are opening under the Affordable Care Act, insurance companies are canceling millions of individual plans that fail to meet minimum standards.

* Time Warner Cable lost 306,000 television subscribers in the third quarter, hurt by a contract dispute that resulted in a blackout of CBS programming.

* Rebuffing a strategy of diversification, the venture capital firm XPV Capital believes it can find success by developing expertise in one area.

* Riding a surge in demand for new fuel-efficient planes, Boeing said on Thursday that it would increase production of its top-selling 737 jets to 47 a month by 2017, from 38 now.

* The Container Store has raised $225 million in its initial public offering, after demand from potential shareholders prompted the company to seek even more in its ma
rket debut.

* A majority of Oracle shareholders demonstrated their opposition to the compensation of chief executive Lawrence Ellison on Thursday, voting against a non-binding resolution on the company’s pay practices.

* Citigroup’s financial strategy and solutions group takes stock of the growing wave of shareholder activism, and concludes that what was once primarily an American phenomenon is spreading abroad.

* Fannie Mae sued nine of the world’s largest banks on Thursday, accusing them of colluding to manipulate interest rates and seeking more than $800 million of damages. In a complaint filed in Federal District Court in Manhattan, Fannie Mae, the government-controlled mortgage company, accused the banks of conspiring for many years to suppress the Libor, including during the 2008 financial crisis.




* A new environmental study into Taseko Mines Ltd’s billion-dollar New Prosperity mine proposal in British Columbia says it would pose “several significant adverse environmental effects.”

* Singing superstar Shania Twain and the late Saskatchewan curler Sandra Schmirler are among the notable Canadians who will be celebrated with postage stamps in 2014.

Reports in the business section:

* Barrick Gold Corp is moving aggressively to slash costs and deal with a debt hangover, halting construction at its expensive Pascua Lama mine and raising billions in one of Canada’s biggest stock sales.

* Some of the world’s largest energy companies have unleashed a torrent of oil sands spending, despite industry concerns about access to export markets, soaring costs and volatile Canadian heavy crude prices.


* Toronto Police Chief Bill Blair announced on Thursday that investigators have found a video of Toronto Mayor Rob Ford that allegedly depicts him smoking a crack pipe and charged his friend with extortion, leading a defiant mayor to insist he has “no reason to resign.”

* If there were any doubts about the oil sands industry’s resolve to expand amid growing protests, escalating costs and volatile oil prices, they were put to rest Thursday by mega announcements by Canadian and global oil companies that they are pushing forward with a new generation of projects.


* Two years after losing out on a bid to buy rival Prime Restaurants, Cara Operations has reached a deal with Fairfax Financial Holdings Ltd to merge the two food service giants.

* The Toronto stock market ended October trading sharply lower Thursday, amid major announcements from the oilpatch, earnings disappointments and uncertainty about the Federal Reserve’s next move.




– The management committee of the pilot Free Trade Zone in Shanghai plans to implement 19 of the 23 measures designed to expand the service industry by the end of this year.


– The Ministry of Public Security released a circular on Thursday directing police departments across the country to crack down on crimes targeting medical workers, following a spate of incidences leading to the death or injury of hospital staff.

– A policeman was detained for allegedly shooting and killing a pregnant woman in Guangxi Zhuang in the south of China, according to authorities. The case is the fourth incident in two years of a police officer killing innocents with an issued firearm.


– Leading government officials in China need to put themselves in the position of the masses to understand what people want, where there is public distress and hardship, said a commentary in the paper that acts as the government’s mouthpiece.


– China will extend its European polysilicon anti-dumping investigation by half a year, delaying the imposition of tariffs on imports, the Ministry of Commerce said on Thursday, without elaborating on the reasons for the extension.


Fly On The Wall 7:00 AM Market Snapshot



Alpha Natural (ANR) upgraded to Market Perform from Underperform at Raymond James
General Growth (GGP) upgraded to Buy from Neutral at BofA/Merrill
Green Dot (GDOT) upgraded to Overweight from Neutral at JPMorgan
Greenbrier (GBX) upgraded to Buy from Underperform at BofA/Merrill
ITT Corp. (ITT) upgraded to Outperform from Neutral at RW Baird
Netflix (NFLX) upgraded to Outperform from Neutral at RW Baird
PACCAR (PCAR) upgraded to Hold from Sell at McAdams Wright
Penn Virginia (PVA) upgraded to Outperform from Neutral at Credit Suisse
Quintiles (Q) upgraded to Outperform from Neutral at RW Baird
Siliconware Precision (SPIL) upgraded to Buy from Sell at UBS
Valero Energy (VLO) upgraded to Outperform from Market Perform at Cowen


ARIAD (ARIA) downgraded to Hold from Buy at Jefferies
ARIAD (ARIA) downgraded to Market Perform from Outperform at Leerink
Advance Auto Parts (AAP) downgraded to Hold from Buy at Deutsche Bank
Alamos Gold (AGI) downgraded to Market Perform from Outperform at Raymond James
Alamos Gold (AGI) downgraded to Sector Perform from Outperform at RBC Capital
Avon Products (AVP) downgraded to Market Perform from Outperform at BMO Capital
bebe stores (BEBE) downgraded to Neutral from Buy at Janney Capital
Chart Industries (GTLS) downgraded to Neutral from Overweight at Piper Jaffray
Craft Brew (BREW) downgraded to Neutral from Buy at Citigroup
Education Management (EDMC) downgraded to Underperform at BMO Capital
Hornbeck Offshore (HOS) downgraded to Hold from Buy at Wunderlich
Monotype Imaging (TYPE) downgraded to Neutral from Overweight at JPMorgan
PetSmart (PETM) downgraded to Neutral from Buy at BofA/Merrill
Provident Financial (PROV) downgraded to Market Perform at Raymond James
Royal Dutch Shell (RDS.A) downgraded to Hold from Buy at Societe Generale
Royal Dutch Shell (RDS.A) downgraded to Neutral from Outperform at Macquarie
Santander Mexico (BSMX) downgraded to Hold from Buy at Deutsche Bank
Solar Capital (SLRC) downgraded to Market Perform from Outperform at Wells Fargo
Sony (SNE) downgraded to Hold from Buy at Jefferies
Strayer Education (STRA) downgraded to Underweight from Equal Weight at Morgan Stanley
Taubman Centers (TCO) downgraded to Neutral from Buy at BofA/Merrill
TeleTech (TTEC) downgraded to Equal Weight from Overweight at First Analysis
Vertex (VRTX) downgraded to Market Perform from Outperform at Bernstein
Volcano (VOLC) downgraded to Market Perform from Outperform at BMO Capital
Weight Watchers (WTW) downgraded to Equal Weight from Overweight at Barclays


Wal-Mart (WMT), Green Dot (GDOT) expanded debit card pact
Republic Services (RSG) authorized additional $650M for stock repurchases
Fluor (FLR) sees FY14 revenues ‘flattish’ at consolidated level with improving margins
Starwood Property (STWD) to spin-off single-family residential business


Companies that beat consensus earnings expectations last night and today include:
Orient-Express (OEH), Minerals Technologies (MTX), MasTec (MTZ), Amerisafe (AMSF), Southwestern Energy (SWN), Republic Services (RSG), Newmont Mining (NEM), American Vanguard (AVD), Kemper (KMPR), Trimble Navigation (TRMB), Standard Pacific (SPF), AMN Healthcare (AHS),  Fluor (FLR), Callidus Software (CALD), Green Dot (GDOT), AIG (AIG)

Companies that missed consensus earnings expectations include:
Genesee & Wyoming (GWR), Portland General Electric (POR), Hutchinson Technology (HTCH), Tellabs (TLAB), LRR Energy (LRE), Bill Barrett (BBG), Ellie Mae (ELLI), CEC Entertainment (CEC), MRC Global (MRC)

Companies that matched consensus earnings expec
tations include:
Dresser-Rand (DRC), Spansion (CODE), Chef’s Warehouse (CHEF), Clovis (CLVS)


  • Verizon (VZ) and AT&T (T) are nearing the market share of cable operators in areas where they operate. Both phone companies have shown a greater willingness than their cable rivals, such as Comcast (CMCSA) and Time Warner Cable (TWC), to experiment with delivering movies and TV programming over the Internet outside the traditional pay-TV bundle, the Wall Street Journal reports
  • After years of grooming customers to expect a few thousand dollars off sticker prices on even its latest models, GM (GM) said it is changing course and promising to shun lavish discounts when it comes to selling its newest pickup trucks, the Wall Street Journal reports
  • As U.S. retailers face the shortest holiday season in years, they’re preparing to assail customers with deals and promotions this week. Wal-Mart Stores (WMT) is kicking off its online deals today, underscoring concerns that intense discounting aimed at luring budget-conscious shoppers could result in the most tepid holiday spending rise in four years, Reuters reports
  • Hilton Worldwide, owned by Blackstone Group (BX), is aiming to launch its IPO the week of December 2, sources say, Reuters reports
  • Shares of U.S. homebuilding companies (LEN, KBH, DHI) have fallen over 20% since May, even as home-improvement retailers rose to a record high, a sign some investors are too pessimistic that higher mortgage rates could derail new construction, Bloomberg reports
  • Tesla Motors (TSLA) suffered its biggest one-month loss of market value in October, a 17% decline, amid concern among some investors that a fivefold stock-price surge outpaced the growth prospects for the electric-car company, Bloomberg reports


Artisan Partners (APAM) 4.8M share Secondary priced at $56.00
Barrick Gold (ABX) 163.5M share Spot Secondary priced at $18.35
Container Store (TCS) 12.5M share IPO priced at $18.00
Ikanos Communications (IKAN) files to sell 22.5M shares of common stock
Intermountain Community Bancorp (IMCB) files $377.68M mixed securities shelf
LyondellBasell (LYB) to sell 15M shares for holders
Pebblebrook Hotel (PEB) files to sell 2.2M shares of common stock
Streamline Health Solutions (STRM) files $37.5M mixed securities shelf
Tower International (TOWR) files to sell 2.58M shares of common stock for holders
Western Digital (WDC) 10.87M share Secondary priced at $67.00


via Zero Hedge Tyler Durden

From Greece To Crude And Everything Inbetween: The Best And Worst Performing Assets In October

Curious which were the best and worst performing asset classes for the month of October? Deutsche Bank explains.

After September’s no Fed taper fuelled performance, financial markets were supported in October by the near-term satisfactory resolution of the fiscal situation in the US. Asset returns in October broadly reflect what we’ve generally seen so far YTD. Developed world equities have seeing the best of the returns while the performance of commodities has been disappointing. October’s highlights in equities centred on the European periphery where Greek, Italian and Spanish equities returned +17.2%, +11.1% and +8.3% respectively, pushing YTD returns above +20% for Italy and Spain and above +30% for Greece. That said Japanese stocks still lead the way YTD with the Nikkei up just shy of +40% (+39.9%) despite weaker returns in October (-0.9%). EM equities produced another decent month of returns (+4.9%) following the summer’s weakness with the MSCI EM index now back into positive territory YTD, only Chinese stocks (-1.5%) saw negative returns in October amongst the EM countries included in our review.

At the other end of the returns spectrum commodities saw further declines with the CRB index (-2.7%) seeing it’s 6th monthly decline of the year with the YTD performance of -5.8%. Although US WTI crude fell -5.8% in October it is still up (+5.0%) YTD; one of the few commodities to be in positive territory in 2013.

In terms of fixed income returns were positive across the spectrum as key government bond yields saw further declines. 10 year Treasury yields fell around 6bps to 2.55% and traded below 2.5% during October. Government bonds saw more impressive declines in Europe with the 10 year Bund and the 10 Year Gilt both down around 10bps to 1.67% and 2.62% respectively. So government bond total returns were positive with Italian BTPs leading the way (+2.6% in October and +6.2% YTD). EM bonds retraced more of the summer weakness but they remain in negative territory YTD. In credit we saw further outperformance from the higher beta part of the credit spectrum with Fin Sub and HY leading the way. GBP Fin Sub returned an impressive +3.2% in October and is up +8.9% YTD.


via Zero Hedge Tyler Durden

Drowsy Markets Enter November With Quiet Overnight Session

After a blistering October for stocks, drunk on yet another month of record liquidity by the cental planners, November’s first overnight trading session has been quiet so far, with the highlight being the release of both official and HSBC China PMI data. The official manufacturing PMI rose to 51.4 in October from 51.1 in September. It managed to beat expectations of 51.2 and was also the highest reading in 18 months. October’s PMIs are historically lower than those for September, so the MoM uptick is considered a bit more impressive. The uptrend in October was also confirmed by the final HSBC manufacturing PMI which printed at 50.9 which is higher than the preliminary reading of 50.7 and September’s reading of 50.9. The Chinese data has helped put a floor on Asian equities overnight and S&P 500 futures are nudging higher (+0.15%). The key laggard are Japanese equities where the TOPIX (-1.1%) is weaker pressured by a number of industrials, ahead of a three day weekend. Electronics-maker Sony is down 12% after surprising the market with a profit downgrade with this impacting sentiment in Japanese equities.

Over in Europe, the EUR continues to be pressured this morning following yesterday’s stunningly weak European jobs and inflation data. Also of note, as had been leaked previously, RBS announced the creation of an internal $61 billion “bad bank.”

Looking at the US day ahead, today’s ISM will be a major focus particularly following the bumper Chicago PMI yesterday. The first of the post-FOMC Fedspeak begins today with Bullard speaking on monetary policy in St Louis. In the UK, the manufacturing PMI is the only data of note.

US data docket

  • US: ISM Mfg, cons 55.0 (15:00)
  • US: Fed speakers: Bullard (14:10), Kocherlakota (16:15) and Lacker (17:00)

Overnight news bulletin

  • Treasuries steady, 10Y yields little changed on the week after 2Y/5Y/7Y auctions, FOMC statement that contained few surprises; ISM Manufacturing report in focus today after yesterday’s stronger than expected Chicago PMI.
  • Draghi is facing down a deflation threat with few options left to fight it as consumer prices in euro area are rising at the slowest pace in four years
  • Analysts are shifting views on ECB rates, with cuts seem more likely; BofAML, UBS and RBS see a refi rate cut at next week’s meeting, SocGen, BNP and JPM look for a move in Dec.
  • China’s official PMI rose to 51.4 in October, highest in 18 months, from 51.1 in September and the 51.2 median estimate in a Bloomberg News survey
  • The IMF joined the U.S. Treasury Department in rebuking Germany’s trade surpluses, rebuffing the claim of Merkel’s government that booming exports are a sign of economic health
  • Royal Bank of Scotland Group Plc expects to post a “substantial” full-year loss after transferring GBP38.3b of its worst loans to an internal bad bank under government pressure
  • Sovereign yields and EU peripheral spreads mixed. Nikkei -0.9%, Shanghai +0.4%. European stocks fall, U.S. equity- index futures gain. WTI crude little changed, gold lower, copper gains

SocGen’s key macro event recap:

‘December tapering is not off the table’ is the message that some market participants gleaned from Wednesday’s FOMC statement, boosting the USD and UST yields in the process. But is this interpretation correct? The market may simply have erred in pricing a first reduction in asset purchases for March 2014 and is now reassigning a greater than zero probability that tapering could still happen before year-end. Even so, SG’s economics team does not believe the balance of probability has shifted much as we still look for a tapering start in March, and USD bulls need to be mindful that any decision to start winding down bond purchases comes with a precondition for the Fed of seeing ‘more evidence of an improving economy’. Without better non-farm payroll numbers in November and December, tapering will be a story for next year.

A very weak flash Eurozone HICP inflation figure of 0.7% yoy (consensus at 1.1% and SG forecast of 0.9%) was reported yesterday and delivered a serious but not fatal blow for EUR enthusiasts. Unsurprisingly, the EUR fell against all G10 counterparts (barring SEK), and its performance against EM currencies was no less lacklustre either, with EUR/TRY down 0.92% and EUR/THB down 0.8%. After the inflation figure hit its lowest level since November 2009, speculation about further ECB policy easing has increased. In December, we expect the ECB to mark down its 2014 inflation forecast from the current 1.3% rate. A more detailed analysis of the latest inflation data can be found here “Low inflation puts pressure on the ECB” (link). EU 10y swaps also fell sharply in reaction to the inflation numbers, registering a dip below the 1.94% mark before correcting to 1.97% in Asia. As a result, the US/EU 10y spread has now widened sharply to 74bps, marking a 17bps spike from its weekly low of 57bps.

In Asia, the BoJ kept its policy unchanged yesterday and maintained that the 2% price stability target is likely to be achieved sometime during the latter half of its projected period, i.e. between October 2014 and March 2016. We expect additional QQE sometime during Q2 2014, as we forecast weaker FY14 real GDP growth than the BoJ has projected due to the consumption tax hike. More details on this by our economics team can be accessed through our research piece “Japan: additional easing needed by BoJ during Q2 2014” (link).

The USD performance so far has been relatively strong gaining against most G10 peers, greenback also strengthened vs most of the EM currencies, and 10y yields are up 3bp at 2.70%. Markets today will look to private sector employment inputs from ISM manufacturing as they hunt for hints on how the federal shutdown impacted the US economy. Also on the agenda today are a trio of Fed speakers, a series of PMI releases from the Europe and industrial production figures from Brazil.

The overnight event summary concludes with Jim Reid’s recap

One interesting development this week has been the much lower than expected European inflation rates which in most cases are taking the YoY growth back down to levels only previous seen in the modern era (for a few months) in 2009. Spanish CPI was 0.3-0.4% lower than expected on Wednesday with the straight CPI number in technical deflation at -0.1% YoY. German numbers came in around 0.2% below expectations on the same day (1.2% YoY) with Italy yesterday seeing 0.7% YoY inflation against 1.1-1.2% expected. The overall Eurozone number showed similar declines. It’s difficult to know what to think about this though. It has certainly helped the Euro come off its recent peak (1.382 earlier this week to 1.355 as we type) as the market considers the possibility of ECB rate cuts again. Higher than expected Euro unemployment (12.2% vs 12.0% expected) helped on this front too. Simultaneously it seems the Fed isn’t going to guarantee us no taper before March even if that eventually materialises. So the liquidity perception balance between the two regions has shifted a bit over the last 48 hours. But back to Euro inflation, our experts think there are some one-offs in the numbers and expect the rate to tick up over the coming months. One can also argue that low inflation in the likes of Spain is a sign of improving competitiveness. Nevertheless there are worries and it certainly ties in with the arguments made in our long-term study from September “A Nominal Problem” where we highlighted how we were having a global problem with both low real GDP and inflation. The combination not being great when you still have a high debt burden. Europe really doesn’t need the threat of deflation with so many structural issues still to deal with.
Although inflation is expected to edge back up from here we are getting to low enough levels that the behaviour of participants in the economy might start to be influenced by the prospect of falling prices and they may hold back purchases/investments. This is why central banks generally aim for at least 2% on inflation and not zero. You tend to want to make it positive enough that deflation doesn’t ever become an imminent risk. So this is one to watch going into 2014. In the nearer-term keep an eye out for the survey of professional forecasters release in the middle of this month. The ECB is very sensitive to the 2-yr ahead reading as a measure of inflation expectations and it may influence their policy stance to some degree at the December meeting and into 2014.

On a more positive note, the latest activity data from China continues to improve. The official manufacturing PMI rose to 51.4 in October from 51.1 in September. It managed to beat expectations of 51.2 and was also the highest reading in 18 months. DB’s Jun Ma highlights that October’s PMIs are historically lower than those for September, so the MoM uptick is therefore a bit more impressive. The uptrend in October was also confirmed by the final HSBC manufacturing PMI which printed at 50.9 which is higher than the preliminary reading of 50.7 and September’s reading of 50.9. The Chinese data has helped put a floor on Asian equities overnight and S&P 500 futures are nudging higher (+0.15%). The key laggard are Japanese equities where the TOPIX (-1.1%) is weaker pressured by a number of industrials, ahead of a three day weekend. Electronics-maker Sony is down 12% after surprising the market with a profit downgrade with this impacting sentiment in Japanese equities. While EURUSD continues to be pressured this morning, the sentiment is firmer in AUDUSD (+0.2%) driven by the Chinese PMIs.

In the US, a surprisingly strong Chicago PMI print set the tone early in the day. The PMI surged 10.2 points to 65.9 which was almost 11points above consensus estimates. Our economists point out that this was the largest monthly increase since July 1983 (+12.7) and the highest level since March 2011 (67.6). Initial jobless claims of 340k were broadly in line with estimates of 338k. The S&P 500 traded down to a session low of 1755 shortly after the Chicago PMI release which triggered further chatter of December tapering, but the dip proved to be brief and equities quickly recovered from those levels. Towards the end of US trading, equities once again gave up those gains to finish near the month on a sour note (S&P500 -0.38% on the day). Financials weighed on the index for much of the day and closed at the lows. A Bloomberg report suggesting that AT&T would make a tilt at Vodafone next year, saw telcos also weigh on equity markets in the final minutes of trading. If the acquisition were to go ahead, it would create the world’s largest telecom company with a market cap exceeding $250bn with more than 500 million subscribers worldwide (Bloomberg). Elsewhere, after the initial post-Chicago PMI selloff, 10yr UST yields drifted back down to be a little higher (2.554%,
+1.6bp) on the day – bucking the trend in Europe where core and periphery bond yields fell on the back of the lower inflation numbers.

Looking at the day ahead, today’s ISM will be a major focus particularly following the bumper Chicago PMI yesterday. The first of the post-FOMC Fedspeak begins today with Bullard speaking on monetary policy in St Louis. In the UK, the manufacturing PMI is the only data of note. RBS is due to report its FY13 results and the expectation is that Chancellor Osborne may speak shortly after to detail options for dealing with the bank’s problem loans. The FT reports that the bank will announce the creation of an internally managed bad bank, refocus on UK retail and business lending and pull back from its overseas operations.


via Zero Hedge Tyler Durden