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September Trade Balance Worse Than Worst Estimate; Trade Deficit With China Hits Record

Despite the great shale revolution, US exports posted a $0.4 billion decline to $188.9 billion in October driven by decreases in industrial supplies and materials ($1.3 billion), other goods ($0.2 billion), consumer goods ($0.2 billion), and capital goods ($0.1 billion). This was offset by a $2.7 billion increase in imports to $230.7 billion broken down by increases in industrial supplies and materials ($0.9 billion); automotive vehicles, parts, and engines ($0.9 billion); capital goods ($0.8 billion); and consumer goods ($0.6 billion). End result: a September trade balance of $41.8 billion, which was higher than the highest forecast of $41.6 billion among 72 economists queried by Bloomberg, and the highest deficit print in 4 months.

The major deficits broken down by grography: with China $30.5 ($29.9), European Union $8.0 ($9.8), Germany $6.1 ($5.4), OPEC $5.9 ($7.3), Japan $5.5 ($6.4), Mexico $5.3 ($4.9), Canada $3.2 ($2.4), Saudi Arabia $3.2 ($3.6), Korea $2.1 ($1.7), Ireland $1.8 ($1.9), India $1.7 ($1.6), and Venezuela $1.3 ($1.5).

This was the largest trade deficit gap with China posted on record.

Initial Jobless Claims Miss Expectations For 6th Week In A Row (More Glitches)

Following the end of the plague of system glitches last week, the Labor Department admits that 5 states estimated levels this week. The initial jobless claims print remains near 4 month-highs (adjusted to for the prior glitch unreality). At 339k vs 330k expected, this is the 6th straight week of disappointment for the ‘critical real-time indicator of the economy’s health’ that some have called this noisy data series. Last week’s ‘encouraging’ print was revised higher from 336 to 341k, we can’t wait to see how the 5 estimates affect next week’s revision.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vH9ITTCttc8/story01.htm Tyler Durden

Hey Congress, How About Proposing Actual Alternatives to Obamacare?

Writing in the
Wall Street Journal, Ramesh Ponnuru (AEI, National Review) and
Yuval Levin (National Affairs, Ethics and Public Policy Center)
argue that the Republicans should propose a concrete alternative to
Obamacare. I think they are correct that if the GOP actually wants
to improve health-care policy – as opposed to simply enjoy immense
political gain in the near-term – it needs to do more than
slow-clap as the good ship ACA goes down.

Their basic idea is replacing Obamacare with

a flat and universal tax benefit for coverage. Today’s tax
exclusion for employer-provided health coverage should be capped so
that people would not get a bigger tax break by buying more
extensive and expensive insurance. The result would be to make
employees more cost-conscious; and competition for their favor
would make insurance cheaper….

Medicaid, the country’s health insurance program for the poor,
“could be converted into a means-based addition to that credit” and
people with pre-existing conditions would have access to “coverage
through subsidized, high-risk pools.”

None of this is particularly radical or out of step with most
people’s experience in every other aspect of our lives, where we
figure out what we want from many alternatives. At its core, it
simply suggests injecting more and clearer market mechanisms into
an area in which vagueness rules. Quick: Do you know how much your
last blood test cost you or your insurer? The answer is almost
certainly no. But you probably know how much your car’s last oil
change cost.

Ponnuru and Levin note that “conservative policy experts have
long proposed such approaches” but were rebuffed by House
Republicans in 2009, who chose instead to offer “an alternative to
ObamaCare that did nothing about today’s market-distorting tax
policy and thus did not do much to help the people whom that
policy—by inflating premiums—has locked out of the insurance
market.”

There’s a strong case to be made that their plan doesn’t go far
enough in addressing cost issues (Medicare!) and there’s a reason
to be queasy any time “tax benefits” float into conversation (our
tax code is already complicated enough). But their basic idea is
worth exploring and discussing not just on the nation’s op-ed pages
and blogs, but in Congress.

At the top of the
required-reading list for Congress and other policy analysts should
be Ronald Bailey’s 2009 Reason story, “In
Health Care, Nobody Knows Anything.” Bailey starts by
paraphrasing the screenwriter William Goldman’s famous maxim about
Hollywood and noting that premiums had doubled over the past 10
years. He then proceeds to lay out a clear and concise case for
increasing basic market competition by dismantling

the McCarran-Ferguson
Act of 1945 that allows state governments to regulate the
business of insurance without federal government interference. The
Act is, in part, responsible for the evolution toward state
insurance markets dominated by just a few large insurers. Consumers
cannot purchase insurance policies that are not licensed by their
state insurance commissions and which do not incorporate all the
mandates imposed by those commissions. Congress and the states
should open up competition between insurance companies by enabling
“regulatory federalism” that would allow individuals and employers
to purchase health insurance from other states.

At the same time he calls for changes that would allow more
competition among insurance providers (and a move toward actual
risk-based coverage, rather than pre-payment plans that obscure and
drive up prices), Bailey also argues for deregulation among health
care providers.

For example, many states have certificate of need programs that
forbid the construction of new health care facilities without prior
regulatory approval. Passed by Congress in 1974 as a cost-cutting
measure, the ostensible purpose of the programs is to keep health
care costs low by requiring advance approval by state agencies for
most hospital expansions and major equipment purchases. But
regulations don’t really work that way. “Market incumbents can too
easily use [certificate of need] procedures to forestall
competitors from entering an incumbent’s market,” according to a
2004 Federal Trade Commissionreport.
In fact, “programs can actually increase prices by fostering
anti-competitive barriers to entry.” State enforced monopolies
increase prices? Who knew?

Read the whole thing. And then read Reason’s
ongoing coverage of
Obamacare.

The disastrous rollout of Obamacare has given the country
another chance to address problems with the health care industry,
all of which stem from a massive lack of exactly the same basic
market mechanisms that have allowed so much progress in virtually
every other area of our daily lives, from coffee shops to the
online world to airline ticket prices.

Yes, health care is
a specific market that requires certain specific rules and
regulations. But that doesn’t mean it requires fewer market and
pricing signals (the muffling of which always helps powerful
interests in a given industry).

Now is the perfect time to propose real alternatives that even
if not perfect actually increase the ability of individuals to make
meaningful choices that will affect their lives. Here’s hoping that
congressional Republicans and Democrats rise above themselves to
actually do something that might help us all rather than simply
position their partys for 2014 or 2016.

from Hit & Run http://reason.com/blog/2013/11/14/hey-congress-how-about-proposing-actual
via IFTTT

Highest Conviction Hedge Fund Exposure By Asset Class

Curious where the “hedge fund hotel” is currently located, for both most loved and hated asset classes? The following table shows both the penthouse and the basement of the most recent groupthink, which not surprisingly, indicates that hedge funds, which have simply become highly-levered momentum and beta chasers, are most bullish on the Nasdaq, and offsetting this, are most bearish on 10 Year notes. Of course, since the bulk of the very highly levered marginal cash (for those who haven’t seen it, Balyasny’s leverage chart is a stunning eye opener) is already deployed, all that remains now is the profit-taking, and as such anyone who wishes to take advantage of the inevitable and recurring hedge fund hotel collapse would be advised to put on a short Nasdaq, long 10Y pair on and await the unraveling.

Source: SocGen

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4OuJJUy2SQg/story01.htm Tyler Durden

Wal-Mart Misses Revenue, Guides Below Expectations: FX, Slow Economic Growth Blamed

It’s deja vu time for Wal-Mart. Spot the trend:

Spot it yet? Good. Sure enough, in Q3 continuing the trend, moments ago Wal-Mart just missed revenues, and you got it: lowered guidance.

Full breakdown:

EPS $1.14 vs Expectations of $1.13. This was driven by a buyback of 23 million shares for $1.7 billion in the quarter
Revenues missed $115.69 billion vs Expectations of $116.82 billion
Q3 WalMart US comp store sales missed, and ex-fuel printed at -0.3% vs +0.5% expected, and down from +1.5% a year earlier
Q3 Total comp store sales missed, ex-fuel printed at -0.1%, +0.3% expected, and down from +1.7% a year earlier
WMT guided to Q4 EPS of 1.50-1.60 (including adjustments) vs expectations of $1.69
WMT guided to year end EPS of $5.01-$5.11 (including adjustments) vs a previous guidance of $5.10-$5.30

From the report:

“For the fourth quarter, we expect EPS to range between $1.50 and $1.60. Our guidance includes the impact of approximately $0.10 per share for certain items described below. Accounting for these factors, we believe our fourth quarter underlying1 EPS will range between $1.60 and $1.70,” said Holley.

“For the full year, we are updating our EPS guidance to range between $5.01 and $5.11. Accounting for the $0.10 of certain items that will impact the fourth quarter, our full year underlying1 EPS will range between $5.11 and $5.21,” added Holley.

The company’s guidance reflects a view of global economic trends, including ongoing headwinds from currency exchange rate fluctuations, a competitive holiday season, and a full-year effective tax rate that is expected to range between 31 and 33 percent.

And the punchline:

“A challenging global economy and negative currency exchange rate fluctuations impacted our sales growth in the third quarter,” said Doug McMillon, Walmart International president and CEO. “In the fourth quarter, we will continue our progress on managing expenses well and staying focused on growing sales, including e-commerce. Still, the slow-growth macroeconomic environment is persisting through the first month of this quarter, and the markets continue to be competitive.”

And now, BTFATH.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/KhOWF_prDEs/story01.htm Tyler Durden

Frontrunning: November 14

Yellen to defend Fed’s ultra-easy monetary policy (Reuters)
Japan growth slows on global weakness (WSJ)
Eurozone third-quarter growth falters (FT)
Fed Debates Its Low-Rate Peg (Hilsenrath)
Yellen: Economy Still Needs Fed Aid (WSJ)
‘Obamacare’ launch fiasco rouses sceptics (FT)
DoubleLine’s Gundlach says U.S. equities ‘only game in town’ (Reuters)
Indian Inflation Exceeding Estimates Adds Rate-Rise Pressure (BBG)
HUD Said to Fail in Bid to Sell $450 Million of Mortgages (BBG)
Boeing machinists reject labor deal on 777X by 67 percent (Reuters)
Australia’s Senate Rejects Raising Debt Ceiling to A$500 Billion (BBG)
ECB’s Praet puts asset buying on agenda (Reuters)
Default ‘Wave’ of $1.6 Trillion Looming for Junk, Fridson Says (BBG)
Carney’s economic glass is half full (FT)

Overnight Media Digest

WSJ

* The government’s antitrust settlement with AMR Corp and US Airways Group Inc sets up what may be the last big land grab at major airports for some time, as the planned merger cements a new structure for the industry after a decade of bankruptcies and consolidation.

* In a sign of the fervor once again rising around Internet startups, the 23-year-old CEO of a two-year-old company with no revenue has rejected a $3 billion buyout offer from Facebook . Snapchat Inc is being wooed by other investors and potential acquirers. Chinese Internet giant Tencent Holdings Ltd had offered to lead an investment that would value Snapchat at $4 billion.

* Boeing’s largest union rejected an eight-year contract that would have guaranteed the plane maker’s updated long-range 777X jetliner and its wings would be built in unionized facilities in Puget Sound.

* Crocs, famous for its colorful plastic clogs, is considering going private, its sales and stock price off their peaks.

* Business owners throughout the U.S. used-smartphone market are reporting they suddenly cannot unlock old Apple iPhones. None of them knows exactly what changed, but AT&T seems to be at the center of it.

* The nation’s railroads are asking safety regulators to require that all existing tank cars that carry crude oil, ethanol and other flammable liquids be modified or upgraded to better withstand accidents or be “aggressively” phased out of service.

* KKR and Google have struck a pact to invest about $400 million in six solar power plants being built by Recurrent Energy in California and Arizona, according to people familiar with the matter.

* With thousands of debt-laden new lawyers entering the market at a time when plum jobs at big firms are in short supply, the influential New York City Bar Association is trying out some alternatives.

* Fairholme Capital Management said it wants to buy parts of bailed-out mortgage-finance giants Fannie Mae and Freddie Mac from the government in a recapitalization valued at $52 billion.

* Sotheby’s sold a silvery Andy Warhol diptych of a man slumped amid his crumpled car, “Silver Car Crash (Double Disaster),” for $105.4 million, an auction high for the Pop artist.

Network equipment maker Cisco Systems Inc warned that revenue would decline by as much as 10 percent in the current quarter, blaming sliding demand due to a “level of uncertainty or concern” among customers after recent revelations about internet surveillance by the U.S. National Security Agency.

Two of Barclays’ most senior bankers, including Britain’s former top financial industry regulator Hector Sants, have resigned, dealing a blow to Chief Executive Antony Jenkins’ attempts to revive the lender and restore its reputation.

The Bank of England brought forward its unemployment forecast on Wednesday and said it believes the UK economy is recovering so quickly that it is likely to consider raising interest rates from their historic lows as soon as this time next year.

The latest income tax bill for Starbucks Corp has been cut to zero after it was ordered on Tuesday to pay $2.7 billion to Kraft Foods for ending the companies’ packaged coffee partnership early, the coffee chain revealed in its restated accounts on Wednesday.

Rolls-Royce, the world’s second-largest maker of aircraft engines, is preparing to use 3D printing technology to make components, in a bid to speed up production and reduce the weight of parts.

Research Group CCS Insight predicted unprecedented mergers and acquisitions activity in the next two years in the technology and telecommunication sectors with a handful of large companies expected to expand their regional and global reach by 2016.

NYT

* A contract between JPMorgan Chase and a consulting firm run by the daughter of the former prime minister points to the bank’s strategy to build its influence in China.

* Snapchat, a social media service based in Venice Beach, California, has become one of the most sought-after businesses in the technology industry.

* Janet L. Yellen, President Obama’s choice to lead the Federal Reserve for the next four years, plans to tell senators at her confirmation hearing on Thursday that continuing the Fed’s enormous stimulus campaign is the best way to revive the economy and hasten the program’s end.

* Just over 106,000 people picked health plans in the first month of open enrollment through the state and federal insurance marketplaces established by the Affordable Care Act, President Obama’s health secretary said Wednesday, a fraction of the administration’s initial estimate for enrollment during that period.

* The race for consumers’ dollars has prodded more retailers to open their doors on Thanksgiving, a day before the traditional start of the holiday season.

* On Thursday IBM will announce that Watson, the computing system that beat all the humans on “Jeopardy!” two years ago, will be available in a form more than twice as powerful via the Internet.

* Online real estate brokerage Redfin has raised $50 million in a new round of mezzanine capital, led by Tiger Global Management and T. Rowe Price. Five existing investors, including Greylock Partners and DFJ Venture Capital, also participated.

* JPMorgan called off a question-and-answer session with James Lee, its vice chairman and top deal maker, after Twitter users complied with its reque
st for queries with a stream of ribald questions and hostile jokes.

* A Brazilian tour operator backed by the Carlyle Group could raise as much as 1 billion reais ($428 million) for its existing shareholders through a planned offering.

* Goldman Sachs has promoted 280 executives to managing director, one step down from the brass ring of partner. Promotions are up 5 percent over last year, when the firm named 266 employees managing director.

Canada

THE GLOBE AND MAIL

* Canada boasts world-class destinations such as the Rockies and Niagara Falls, but it’s missing out on a global tourism boom, costing the economy billions of dollars a year. The number of international visitors to Canada has plunged 20 percent since 2000 even as global travel soars, according to a sobering report being released Thursday by Deloitte Canada.

* Former staffers in the office of Toronto Mayor Rob Ford have alleged a series of abusive behavior by their boss, with one staffer telling police detectives the mayor drove while intoxicated, and another describing a lurid night in 2012 when there were allegations of cocaine use and a “professional escort.”

Reports in the business section:

* Mounting competition from giant U.S. chains is forcing supermarkets to lower their prices, a trend that hit grocers Loblaw Companies Ltd and Metro Inc in their latest financial quarter. Basic commodities such as corn and sugar have also fallen this year, meaning there is virtually no inflation pressure in food to help the bottom line.

* Governments in Ontario and Quebec have thrown political hurdles in front of Alberta’s efforts to expand markets for its crude, launching public hearings into controversial pipeline proposals the industry regards as necessary to enable its fast-growing oil production.

NATIONAL POST

* With the dust barely settled on a day of tense face-offs, interrogations and intervention-like pleas to a defiant Toronto mayor, Rob Ford learned on Wednesday that he is facing a new attempt to curtail his power, as city councillors try to strip him of his ability to deal with city emergencies.

* Canada and Sri Lanka traded shots on Wednesday in the build-up to the Commonwealth meeting in Colombo, which Canadian Prime Minister Stephen Harper is boycotting over Sri Lanka’s human rights record.

FINANCIAL POST

* It’s a relatively small upscale mall in Toronto’s north end but the $500 million price being paid for Bayview Village is sending a strong message about the property market in Canada. Real estate prices in the right markets are still strong.

* Quebec is asking companies involved in public contract bid-rigging years ago to repay the sums they overcharged or risk a civil suit.

China

CHINA SECURITIES JOURNAL

– Some of China’s provincial authorities have set dates by which state-controlled developers will exit property development, official sources said. By the end of 2013, 23 part or full state-owned Nanjing developers will complete their exit from projects.

SHANGHAI SECURITIES NEWS

– Shanghai Jinfeng Investment Co Ltd said its parent is in talks with real-estate developer Greenland Group on a possible restructuring deal.

– Private equity firm Warburg Pincus has invested $100 million in privately-run hospital Amcare Corp, and will help it accelerate expansion over the next five years.

CHINA DAILY

– China and the West hold different views on human rights, said an editorial in the paper. No country has the right to impose its own perceptions of human rights upon others or use the concern as an excuse to interfere in internal affairs, it said.

PEOPLE’S DAILY

– An important political task for China’s Communist Party is to ensure strong entrepreneurial and opportunity awareness, said a commentary in the paper which acts as the party’s mouthpiece.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

CAE (CAE) upgraded to Outperform from Sector Perform at RBC Capital
Carlyle Group (CG) upgraded to Buy from Neutral at Goldman
Finish Line (FINL) upgraded to Buy from Neutral at B. Riley
Invesco (IVZ) upgraded to Buy from Neutral at Goldman
LifePoint Hospitals (LPNT) upgraded to Buy from Hold at Deutsche Bank
Office Depot (ODP) upgraded to Buy from Underperform at BofA/Merrill
PGT, Inc. (PGTI) upgraded to Outperform from Neutral at Credit Suisse
Sony (SNE) upgraded to Overweight from Equal Weight at Morgan Stanley
SunTrust (STI) upgraded to Outperform from Perform at Oppenheimer
Zogenix (ZGNX) upgraded to Outperform from Perform at Oppenheimer

Downgrades

Affiliated Managers (AMG) downgraded to Neutral from Buy at Goldman
Cisco (CSCO) downgraded to Hold from Buy at Deutsche Bank
Fortress (FIG) downgraded to Neutral from Buy at Goldman
Hercules Technology (HTGC) downgraded to Hold from Buy at Wunderlich
NetEase.com (NTES) downgraded to Hold from Buy at Deutsche Bank
PNC Financial (PNC) downgraded to Perform from Outperform at Oppenheimer
Penn National (PENN) downgraded to Neutral from Overweight at JPMorgan
Telefonica Brasil (VIV) downgraded to Neutral from Buy at Goldman
WhiteHorse Finance (WHF) downgraded to Neutral from Outperform at RW Baird
lululemon (LULU) downgraded to Underperform from Neutral at Sterne Agee

Initiations

Bright Horizons (BFAM) initiated with an Outperform at Wells Fargo
Burlington Stores (BURL) initiated with a Buy at BofA/Merrill
Burlington Stores (BURL) initiated with an Outperform at BMO Capital
Echo Global (ECHO) initiated with an Outperform at Cowen
Essent Group (ESNT) initiated with an Outperform at JMP Securities
Gaming and Leisure Properties (GLPI) initiated with a Neutral at JPMorgan
Heritage Oaks (HEOP) initiated with an Outperform at Keefe Bruyette
International Rectifier (IRF) initiated with a Buy at Drexel Hamilton
Maxim Integrated (MXIM) initiated with a Hold at Drexel Hamilton
NXP Semiconductors (NXPI) initiated with a Buy at Drexel Hamilton
SanDisk (SNDK) initiated with a Buy at Drexel Hamilton

HOT STOCKS

Fairholme Capital proposed purchase of Fannie Mae (FNMA), Freddie Mac (FMCC) MBS insurance units
Eli Lilly (LLY) to invest $700M to enhance global insulin manufacturing capacity
BlackBerry (BBRY) CEO: Company has significant financial strength for long-haul
Boeing (BA) sees $550B market in Middle East for new airplanes
Cisco (CSCO) CEO Chambers: Emerging markets more challenging than anticipated
Cisco raised stock buyback program by $15B
BorgWarner (BWA) announced two-for-one stock split
NetApp (NTAP) said ongoing macro environment ‘uncertain’

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
North American Palladium (PAL), Chimerix (CMRX), Helmerich & Payne (HP), eLong (LONG), Kinross Gold (KGC), Spark Networks (LOV), Tetra Tech (TTEK), Radiant Logistics (RLGT), SeaWorld (SEAS), Cisco (CSCO), NetApp (NTAP)

Companies that missed consensus earnings expectations include:
Penford (PENX), WGL Holdings (WGL), NetEase.com (NTES), Eagle Bulk Shipping (EGLE), CUI Global (CUI), American Midstream Partners (AMID), ExOne (XONE)

Companies that matched consensus earnings expectations include:
GasLog (GLOG), Luxfer (LXFR), Aegean Marine (ANW)

NEWSPAPERS/WEBSITES

KKR (KKR) and Google (GOOG) struck a deal to invest about $400M in six solar-power plants being built by Recurrent Energy LLC in California and Arizona, sources say, the Wall Street Journal reports
The roaring market for IPOs has hit some speed bumps this month, with a number of deals attracting less investor
enthusiasm than had been the case for much of the year. IPOs remain on track for their busiest year since the financial crisis, with bankers and investors expecting a steady stream of deals through year-end and into 2014, the Wall Street Journal reports
Riverbed Technology (RVBD) is not now considering a sale, sources say, denying a media report that pushed up the technology company’s stock earlier yesterday, Reuters reports
Alitalia’s board approved a revised business plan, promising severe cost cuts to make the Italian airline more profitable, but that failed to convince top shareholder Air France-KLM (AFLYY), which voted against the plan, sources say, Reuters reports
Google (GOOG) and Hewlett-Packard (HPQ) are stopping sales (BBY, AMZN) of the Chromebook 11 laptop after some users reported overheating power supplies, a setback for the devices that have been gaining momentum with consumers, Bloomberg reports
Fed Vice Chairman Janet Yellen will testify before the Senate Banking Committee today and signal that she will carry on the central bank’s unprecedented stimulus until she sees improvement in an economy that’s operating well below potential, Bloomberg reports

SYNDICATE

CDW Corporation (CDW) 15M share Secondary priced at $20.50
Genesee & Wyoming (GWR) announces sale of 5.98M shares by Carlyle funds
Hougton Mifflin (HMHC) 18.25M share IPO priced at $12.00
Lumos Networks (LMOS) files to sell 2.512M shares of common stock
Parametric Sound (PAMT) announces $5.1M registered direct offering
Sapiens (SPNS) announces proposed public offering of 5.65M shares
Tandem Diabetes Care (TNDM) 8M share IPO priced at $15.00
Vertex Energy (VTNR) files to sell $8M in common stock

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XwpX2SzSHjs/story01.htm Tyler Durden

Avidano named MVP in Fla. tourney

Starr’ Mill High School senior Ryan Avidano was named Most Valuable Pitcher at Perfect Game’s 15th annual World Wood Bat Association World Championship in Jupiter, Fla., last month.

About 1,700 players on 85 teams attended the event along with hundreds of college coaches and professional scouts.

Avidano, a lefthander who stands six-feet-seven, is verbally committed to the University of Georgia. He earned the victory in the championship game pitching four scoreless innings with seven strikeouts. It was his second appearance in two days at the tournament.

via The Citizen http://www.thecitizen.com/articles/11-14-2013/avidano-named-mvp-fla-tourney

Market Awaits Coronation Of The QEeen

Japan growth cut in half, Europe growth cut by more than half, but none of that matters: today it will be all about the coronation of QEeen Yellen, who testifies before the Senate Banking Committee at 10am. Not even Japanese finance minister Aso’s return to outright currency intervention warnings (in addition to the BOJ’s QE monetary base dilution), when he said that Japan must always be ready to send signal to markets to curb excessive and one sided FX moves and it is important that Japan has intervention as FX policy option, which sent the USDJPY back up to 100 for the first time since September 11 made much of an impact on futures trading which after surging early in the session following the release of Yellen’s prepared remarks, have now “tapered” virtually all gains. Certainly, the follow up from Europe doing the same and also warning it too may engage in QE, has been lost. Which is odd considering the entire developed world is now on the verge of engaging in the most furious open monetization of virtually everything in history.

Key events on the US docket

US: Initial jobless claims, cons 330k (8:30)
US: Yellen testifies to Senate banking committee (10:00)

Market Re-Cap

Stocks traded higher in Europe, after the positive sentiment which saw the Nikkei 225 index finish up over 2% carried over into the European trading session. The move higher by the Nikkei 225 index, which moved into bull market territory was itself driven by a weaker JPY after Japanese finance minister said that it is important that Japan has intervention as FX policy option. As a result, broad based JPY weakness saw the spot rate move back above 100.00 level for the first time since early September, which in turn erased DNT barrier level and prompted profit taking as delta hedge positions were unwound. In spite of the risk on sentiment, dovish comments by Fed’s Yellen who said that the economy and jobs are performing far short of potential ensured that Bunds and USTs also traded higher. Looking elsewhere, GBP underperformed EUR this morning, after the ONS said that UK retail sales volumes fell 0.7% in October, with mild weather affecting sales of winter clothing. Going forward, market participants will get to digest the release of the weekly jobs report from the US and the weekly DoE data. Also, the US Treasury will auction off USD 16bln in 30y Bonds.

Overnight news bulleting from Bloomberg and RanSquawk:

Japanese Finance Minister Aso said Japan must always be ready to send signal to markets to curb excessive and one sided FX moves and it is important that Japan has intervention as FX policy option. The Nikkei 225 closed up 2.12% at 14876.41, after rallying in the session to enter into bull territory amid a weaker JPY.
Fed’s Yellen says economy and jobs performing far short of potential. Yellen said unemployment is too high, inflation short of 2% goal, and Fed has made significant progress towards goals but has more work to do.
UK Retail Sales Ex Auto (Oct) M/M -0.6% vs. Exp. -0.1% (Prev. 0.7%, Rev. to 0.8%) – According to ONS, declining motor fuels sales led to fall in sales in October
Treasuries steady before week’s refunding auctions conclude with $16b 30Y, Yellen testimony before Senate Banking Committee today.
Yellen, in prepared remarks released yesterday, signaled she will continue continue with stimulus until she sees improvement in the economy.
30Y notes to be sold today yield 3.805% in WI trading; drew 3.758% at October auction and 3.820% in Sept., which was highest since August 2011
10Ys sold yesterday stopped at 2.750%, about 0.4bp below WI yield at 1pm bidding deadline; first 10Y refunding to stop through since May 2012, according to Stone & McCarthy
The euro area’s recovery came close to a halt in the 3Q as German growth slowed, France’s economy unexpectedly shrank and Italy extended its record-long recession
The Obama administration yesterday indicated it was willing to consider Democratic legislation to halt some of the hundreds of thousands of insurance cancellations that have raised alarm among voters and lawmakers
Only 26,794 sign-ups for private plans were made through the federal marketplace since its Oct. 1 launch; figures reflect people who have selected a plan without necessarily paying their first premium, the final step in enrollment. The administration had projected 495,000 enrollees
U.K. retail sales unexpectedly fell in October as consumers reduced spending on household appliances, clothing and automotive fuel
Bruce Berkowitz’s Fairholme Capital Management LLC is seeking to buy two businesses that insure MBS from Fannie Mae and Freddie Mac and support them with $52b in equity
Sovereign yields lower, EU peripheral spreads tighten. Asian and European stocks, U.S. equity-index futures higher. WTI crude and copper lower; gold lower

Asian Headlines

Japanese Finance Minister Aso said Japan must always be ready to send signal to markets to curb excessive and one sided FX moves and it is important that Japan has intervention as FX policy option.

Japanese GDP Annualized SA (Q3 P) Q/Q 1.9% vs. Exp. 1.7% (Prev. 3.8%); GDP SA (Q3 P) Q/Q 0.5% vs. Exp. 0.4% (Prev. 0.9%).

EU & UK Headlines

European GDP SA (Q3 A) Q/Q 0.1% vs Exp. 0.1% (Prev. 0.3%)
German GDP SA (Q3 P) Q/Q 0.3% vs. Exp. 0.3% (Prev. 0.7%)
French GDP (Q3 P) Q/Q -0.1% vs. Exp. 0.0% (Prev. 0.5%)
Italian GDP WDA (Q3 P) Q/Q -0.1% vs Exp. -0.1% (Prev. -0.3%)
Dutch GDP (Q3 P) Q/Q 0.1% vs Exp. 0.1% (Prev. -0.1%, Rev. 0.0%)
UK Retail Sales Ex Auto (Oct) M/M -0.6% vs. Exp. -0.1% (Prev. 0.7%, Rev. to 0.8%) – According to ONS, declining motor fuels sales led to fall in sales in October.
BoE’s Mark Carney “would be prepared to raise interest rates before an election if this was necessary”. While BoE’s Fisher said timing of rate rise is very uncertain; BoE wont raise rates anytime soon.

US Headlines

Fed’s Yellen says economy and jobs performing far short of potential. Yellen said unemployment is too high, inflation short of 2% goal, and Fed has made significant progress towards goals but has more work to do. These comments from Yellen came out earlier than expected as she is testifying to the Senate Banking Committee today.

Fed’s Bernanke said Fed missing on it’s jobs and inflation mandates adding that Fed credibility on inflation ‘very strong’. Bernanke said sooner rather than later US employment rate will be back in 5-6% range and Inflation expectations have been quite stable around 2%. He added Fed will be able to normalize monetary policy once economy has been restored.

Equities

Stocks in Europe failed to maintain the momentum which was observed at the open and came off the best levels as market participants digested comments from Fed’s Yellen and also Japanese Finance Minister Aso, which led to broad based JPY weakness overnight but in turn saw the USD index advance 0.5%. Of note, Spanish IBEX 35 and the FTSE MIB underperformed, where share placement of CaixaBank weighed on the Spanish index and less than impressive earnings from Tod’s in Italy saw shares slide over 7%.

Cisco shares are seen down 11% ahead of the cash open after the company reported Q1 Adj. EPS USD 0.53 vs. Exp. USD 0.51 and also warned its revenues could fall as much as 10% in the current quarter.

USD/JPY trended higher throughout the session, erasing touted 100.00 DNT option barrier level in the process after Japanese Finance Minister Aso said it is important that Japan has intervention as FX policy option. He added that Japan must always be ready to send signal to markets to curb excessive and one sided FX moves. As a result, USD ind
ex advanced almost 0.5% and in turn weighed on both EUR/USD and GBP/USD. The release of weaker than expected retail sales report from the UK briefly resulted in GBP under performing EUR, however the fact that the BoE is perceived to be in a more hawkish mode than the ECB meant that EUR/GBP resumed the downward trend.

Commodities

The IEA said that demand for oil products is on the verge of a seasonal increase and refineries should steeply raise the amount of oil they process in November and December.

An Iraqi oil official says there has been no reduction in oil production or exports from violence at Souther Rumaila Oilfield.

China’s Oct crude oil output up 0.24% Y/Y at 18.07mln tonnes. Further from China, the nation is to cut fuel prices by less than 2%.

China set to cut gasoline price by CNY 160/t from tomorrow.

US API Crude Oil Inventories (Nov 8) W/W 599k vs. Prev. 871k
– Cushing Crude Inventory (Nov 8) W/W 1700k vs. Prev. 999k
– Gasoline Inventories (Nov 8) W/W 1700k vs. Prev. -4300k
– Distillate Inventory (Nov 8) W/W 606k vs. Prev. -27

Israeli PM Netanyahu yesterday warned that a ‘bad deal’ with Iran on its nuclear programme could lead to war and his aides challenged US assertions to have offered Tehran only ‘modest’ relief from sanctions.

China was the world’s top gold consumer in the third quarter, extending a demand gap against India, which is usually the No. 1 consumer of the precious metal, World Gold Council data showed Thursday. Indian demand was undermined by a slide in the rupee’s value and import curbs, which pushed domestic prices to near-record levels.

SocGen’s views on the key macro catalysts:

Fed chair nominee Janet Yellen will take centre stage today, testifying to the US Senate banking committee. Backed by strong support from Senate Democrats, her confirmation for the top post is thought to be a foregone conclusion though she is likely to grilled by certain Republicans. So what is the fuss all about? Republicans have been strong critics of the bond buying stimulus programme and so they will scrutinise Ms Yellen about her take on the programme and the path to stimulus exit. It is doubtful however that she will provide clues on when tapering will start and may instead present her thoughts on the labour market and threshold conditionality for raising rates. Her plans to improve transparency and communication will also be a source of scrutiny. Will Yellen inspire participants to further short the Treasury market (higher yields) and add to long USD positions?

In the eurozone, the advance GDP estimate for France shows that the economy contracted by 0.1% q/q in Q3. The German economy grew by 0.3%, a touch slower than the strong 0.7% q/q increase in Q2. We forecast Italy to report a 0.6% qoq contraction and consequently the eurozone average to come in flat q/q. A negative surprise will add to speculation of further policy easing in the New Year even if inflation risks are now thought to be balanced by the ECB after last week’s 25bp rate cut. Weak data and the fact that the ECB chief economist has openly put “asset purchases” on the table as a policy tool supports the widening in US/EU swap spreads, and our outlook for lower EUR/USD.

The pound strengthened but cable gains were capped yesterday at 1.6000. UK 10y swaps edged higher after the BoE quarterly inflation report upgraded the outlook for GDP growth for this and next year to 1.6% and 2.8% (from the previous 1.4% and 2.5%) respectively, and brought forward its forecast of unemployment reaching the 7% threshold by 18 months to Q3 2015 from late 2016. The BoE emphasis on a market rate based set of projections for unemployment implies a 25bp rate hike by Q2/Q3 2015. The press is rife this morning with talk of a first hike earlier than that (late 2014) but we see no move before H2 2015, though we forecast inflation rising to around 3.5% within the next 2 years.

Within emerging markets RBI Governor Raghuram Rajan tried to calm nerves after the recent INR depreciation through an emergency press conference. The aim was to allay market fears of renewed stress on the rupee. Rajan reiterated that the current account shortfall is improving and is expected to fall to less than 3% of GDP this fiscal year. Today the ball will be back in the court of the USD with EM investors bracing for fresh turmoil.

DB’s Jim Reid concludes the overnight recap:

The initial chatter, second guessing and eventual release of Yellen’s confirmation testimony saw the S&P 500 add more than 1.2% or 21 points from the early lows as equities powered through to the close. The S&P 500 managed to close 0.8% higher as cyclical sectors such as consumer goods (+1.2%), tech (+1.1%) and banks (+1%) led the list of outperformers yesterday. Retail posted a 1.3% gain after Macy’s Inc provided an upbeat holiday sales outlook. 10yr UST yields firmed 7bp yesterday, including a sharp 5-6bp rally in the final minutes of trading, capping a turnaround for fixed income across most DM and EM markets. Gold (+1.1%) enjoyed a much needed rally after fears of a December tapering led to a 6% drop in the precious metal over the past two weeks.

Looking at markets this morning, S&P 500 futures are up a further 0.15% and Asian equities are up around 1-2% across most major indices. The dovish sentiment has been bolstered by Bernanke who commented at a townhall event that the Fed is missing on its jobs and inflation mandates. And while we’re on the topic of central bank stimulus, the ECB’s Praet was on the newswires again overnight. He again suggested that the ECB can go into negative deposit rates and take a number of measures, including presumably outright purchases as he mentioned yesterday. EURUSD is down 0.10% this morning. Praet also said that the disagreement among council members was on the timing of the recent rate cuts. So within the space of the last 12 hours we’ve had three senior central bank officials (including arguably the two most powerful in the monetary policy world) make dovish statements to the market.

Yellen’s testimony has provided some respite for EM Asian names such as Indonesia. Indonesian stocks are up 1.6% as we type, erasing much of yesterday’s losses and the lower UST yield is prompting better buying across in the Indonesian bond curve. 5yr Indonesian CDS is quoted around 8-9bp tighter on the day. Chinese stocks opened up weaker as the plenum disappointment continues to cascade through A-shares, and they are still lagging somewhat this morning (Shanghai Comp +0.2%). In Japan, Q3 GDP growth was reported at 1.9% QoQ which is better than the 1.7% rate of growth expected but is half of last quarter’s 3.8%. Some analysts have noted a slowdown in external export demand. Japanese finance minster Aso commented that it is important that Japan has intervention as a FX policy option. The Nikkei is up by a region leading +2.5%. The USD is steady against major currencies amid relatively light flows after cheapening yesterday, and gold is up a further 0.23%. Coming back to the Fed, the WSJ’s Hilsenrath wrote overnight that in addition to weighing up a lowering of the central bank’s employment threshold to 6% from 6.5%, other potential changes to forward guidance are being floated. One idea is that the Fed could signal that it won’t hike rates if inflation falls below a threshold like 1.5%. Another idea being floated is to somehow strengthen the Fed’s commitment that rate hikes would come slowly even after the 6.5% employment threshold is crossed.

Looking at the day ahead, all eyes will on the Q&A session of Yellen’s testimony before the Senate Banking Committee. The hearing starts at 3pm London time. We also get an important data point in the form of Q3 GDP numbers for the euro area (consensus is +0.1% QoQ vs 0.3% last quarter) as well as the individual growth numbers for Italy, France and Germany. UK retail sales data are also due today. In the U
S, jobless claims and the September trade balance are the main data releases.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jXo5zC8J2nM/story01.htm Tyler Durden

Andrew Napolitano Asks: If Federalism Can’t Keep Us Safe, What Can?

Andrew Napolitano’s Fox News colleague Jana
Winter was ordered by a state judge in Colorado to reveal her
sources on a story and threatened with incarceration. Winter lives
in New York and filed an application to her state’s courts asking
to block Colorado’s request. This should have been a no-brainer
demonstration of federalism, but the New York courts denied her
application. Napolitano points out the dangers of ignoring states’
rights like this.