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Today’s AM fix was USD 1,255.25, EUR 912.05 and GBP 765.49 per ounce.
Yesterday’s AM fix was USD 1,245.75, EUR 906.13 and GBP 757.76 per ounce.

Gold rose $21.90 or 1.77% yesterday, closing at $1,262.50/oz. Silver soared $0.53 or 2.67% closing at $20.40/oz. Platinum climbed $15.25, or 1.1%, to $1,386.99/oz and palladium also rose $1.50 or 0.2%, to $735.20/oz.

Gold in U.S. Dollars, 5 Years – (Bloomberg)

Gold neared a three week high after climbing the most in 7 weeks, on strong physical buying in China and a weak dollar. Gold has recovered from a 5 month low on December 6 to reach $1,268/oz yesterday, its highest price since November 20. Physical demand, especially from Asia seems to be outweighing the jitters regarding the Federal Reserve’s much mooted ‘tapering’.

 
Silver in U.S. Dollars, 5 Years – (Bloomberg)

Shanghai Gold Exchange’s spot contract, rose for a third day to 15,224 kilograms yesterday showing continuing robust demand in the emerging global economic powerhouse.

Markets may have already priced in the possibility of a December tapering as prices did not show any weakness after last week’s stronger than expected non-farm payrolls data. Rather, gold has risen and hedge funds have rushed to cover their short positions ahead of the Fed meeting next week and due to growing concerns of a short squeeze.

However, market participants may again be proved wrong regarding tapering as there is a real risk that the Fed’s $85 billion bond buying programme continues. There is even a chance that the Fed’s bond buying programme increases due to the very fragile U.S. economy. 

The dollar index is trading near a six-week low today as investors evaluate the uncertain outlook for the U.S. economy and dollar in 2014.

BOE Says U.S. “Could Do Today” And U.S Authorities Doing Simulation Exercises
The U.S. already has in place plans for bail-ins in the event of banks failing. Indeed, the U.S. has conducted simulation exercises with the U.K. in recent weeks and will do so again in 2014.

On October 12, Art Murton, the FDIC official in charge of planning for resolutions, and the Bank of England’s Deputy Governor Paul Tucker, both confirmed that the U.S. system is ready to handle a big-bank collapse.

The Bank of England’s Tucker, who has worked with U.S. regulators on the cross-border hurdles to taking down an international firm said that “U.S. authorities could do it today — and I mean today.” 

The Bank of England

“A global financial system will not survive if we don’t crack this problem”, said Tucker.

The 2010 Dodd-Frank Act empowered the  Federal Deposit Insurance Corp. (FDIC) to seize a company or bank and dismantle it if regulators think a bankruptcy would pose a significant threat to the financial system.

This resolution authority hasn’t been tested, and the FDIC Chairman Martin J. Gruenberg, said his agency will disclose a full description of its approach by year-end — opening the idea to public comment.

Gruenberg said that China, Switzerland, Germany and Japan are among nations close to reaching arrangements with U.S. regulators with regard to dealing with mechanisms for failed banks.

U.S. regulators are working with German and Swiss counterparts on joint white papers similar to agreements already in place with the U.K. for how banks governed by multiple jurisdictions could be unwound by their host nations, Gruenberg said in remarks prepared for a speech in Washington on October 13. The FDIC will secure memorandums of understanding on bank resolutions with China and Japan soon, he said.

“It is critical that home and host jurisdictions understand well the approach to resolution of their counterpart and work together to develop a cooperative approach,” he said.

Germany and Switzerland share the U.S. preference for a so-called single point of entry, in which the host nation takes over a failed bank’s holding company, imposes losses on shareholders and lets healthy subsidiaries stay open. The approach depends on long term debt held in the parent to absorb losses and capitalise a healthy bridge company, Gruenberg said.

Federal Deposit Insurance Corp. (FDIC)

The agency is consulting with the Federal Reserve on a future rule to set a minimum and importantly it has conducted and is conducting simulation exercises.

U.S. regulators will run simulation exercises with U.K. counterparts this year and in 2014, Gruenberg said.

Gruenberg appeared to warn that the UK was vulnerable to bail-ins when he said that
“Nearly 70 percent of the on- and off-balance sheet assets of our major institutions are held in the U.K,” he said. “There is no close second.”

How Likely Are Bail-Ins?
There are differing opinions as to the severity of the on-going financial crisis, and whether it has turned a corner. There are two very broad ‘schools of thought’.

The first school believes that the U.S. Federal Reserve, along with partner central banks internationally, has successfully stabilised the global financial system through low interest rates and quantitative easing, while the EU has managed to help recapitalise banks and avoid bank insolvencies in the European Union and and the breakup of the European Monetary Union (EMU).

The second school is more skeptical of this view and believes that many banks globally remain vulnerable to insolvency because they are being kept on life-support due to extremely accommodating central bank measures including near zero percent interest rates and quantitative easing. Banks are also being supported through the use of almost fictional, though internationally endorsed, accounting treatment for their asset books, such as mark-to-model valuations for their over-the-counter (OTC) derivatives exposures and by failing to have realistic valuations on problematic property loan portfolios.

Many sovereigns nations remain vulnerable to sovereign debt crises. The Eurozone debt crisis and other sovereign debt crises have been solved for the moment through various forms of ultra loose monetary policies, quantitative easing or debt monetisation.

All short term panaceas have not addressed the root cause of the global debt crisis – too much debt.

Indeed, the concern is that the solution of socialising the debt and transferring it to the sovereign and taxpayers, has simply bought some time and may make the crisis much worse in the long term.

We believe the second school will be proved right in the coming months and years; therefore, depositors with deposits in certain banks, or planning to place deposits, must look at the likelihood of and how likely that bank is to get bailed in.

This likelihood would be a function of the strength of the individual bank, which jurisdiction that bank is governed by, which financial systems and economies the bank is exposed to, the extent to which the bank has potentially problematic property or derivatives exposure, and whether deposits are insured by deposit protection schemes
, and to what extent are they insured.

In practice, the financial markets would normally do this analysis, but the previous approach of bail-outs and across the board central bank support appears to have clouded the analysis.

The movement by international monetary and financial institutions towards a bail-in regime and the extent of preparation for bail-ins suggest that bail-ins will happen should banks get into trouble again.

Recent statements by Mario Draghi suggest that depositors might be bailed-in in the future.

In a letter on the July 30th to Joaquín Almunia, the Vice President of the European Commission, Draghi suggested that bondholders might be spared in future, for fear that once burned bond investors may not return.

This would strongly suggest that sovereign governments would be required to make a decision as to whether they would absorb losses or instead force bailins on depositors. As do the preparations being put in place by the Bank of England and the FDIC.

Download our Bail-In Guide: Protecting your Savings In The Coming Bail-In Era(11 pages)

Download our Bail-In Research: From Bail-Outs to Bail-Ins: Risks and Ramifications –
Including 60 Safest Banks In The World List  (51 pages)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Pfkk0Ch11n0/story01.htm GoldCore

The 21st century has proven interesting when it comes to Time’s choices for person of the year: George Dubya, twice, Barack Obama, twice, Vladimir Putin, Ben Bernanke, and of course, Mark Zuckerberg. And now, moments ago, the Time person of the year 2013 has been revealed: the winner – Pope Francis, best known recently for bashing materialists and those who cry over a 2 point drop in stocks everywhere. Sorry Miley Cyrus – more twerking will be required in 2014 to make up for this epic loss.

From CNN:

Time has named Pope Francis its person of the year.

 

Jorge Bergoglio of Argentina is known as a humble man, a capable administrator and — as expected of a new Pope — a man of great faith.

 

He is also a man of many firsts: the first non-European Pope in the modern era; the first pontiff from South America; and the first Jesuit to be elected head of the Roman Catholic Church.

 

In his first public act, the new Pope broke with tradition by asking the estimated 150,000 people packed into St. Peter’s Square to pray for him, rather than bless the crowd first.

 

Francis, 76, was born in Buenos Aires on December 17, 1936. The son of an Italian immigrant, he trained as a chemist before deciding to become a priest.

 

He was ordained by the Jesuits in 1969 and became co-archbishop of Buenos Aires in 1997, then sole archbishop of that city one year later. He was made a cardinal in 2001 and was president of the Argentine bishops conference from 2005 to 2011.

 

As cardinal, Francis clashed with the government of Argentine President Cristina Fernandez de Kirchner over his opposition to gay marriage and free distribution of contraceptives.

 

He was runner-up in the 2005 papal conclave, behind then-Cardinal Joseph Ratzinger, according to a profile by CNN Vatican analyst John Allen published by the National Catholic Reporter.

 

The new Pope brings together the first and the developing worlds, Allen writes. Besides his Italian roots, Francis studied theology in Germany.

 

His career coincided with the so-called Dirty War in Argentina, which lasted from 1976 to 1983. It is estimated that as many as 30,000 people were killed or disappeared during the country’s military dictatorship.

 

The church was seen by some as not having done enough in that period. In particular, Francis was accused in a complaint filed three days before the 2005 conclave of complicity in the 1976 kidnapping of two liberal Jesuit priests, Allen writes. Francis reportedly denied the charge.

 

He is known for his simplicity and has a reputation of being a voice for the poor.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VNauKguj7AQ/story01.htm Tyler Durden

The last time the housing bubble popped, the “frontier” marginal market of Las Vegas was the first harbinger of what was about to come. It is that again, and as real estate expert Mark Hanson explains, “Las Vegas housing demand has crashed.” This is hardly an auspicious sign for the rest of the epically reflated housing market which as we have been tirelelessly pointing out for the past two years, has not recovered, but has merely had its 4th dead cat bounce on the back of i) the implicit bank subsidy of foreclosure stuffing, ii) money laundering by “all cash” foreign buyers using the NAR’s anti-money laundering exemption loophole, and iii) private equity zero cost of credit REO-to-Rent programs which are now in their last days.

From Mark Hanson: Lost Vegas

Las Vegas housing demand has crashed.  “Crash”…there is no other word to use.  This is not hyperbole.  “Crashed” is absolutely the appropriate word to use here given sales are suddenly the weakest levels since Armageddon 2009.  I mean come on…sales at the same pace as when the stock market was in the midst of one of the greatest plunges in history speaks loudly…at least to me.  Volume precedes price.

Supply is surging in Vegas with “months-supply” back to nearly 7 months (over 7 for condos), and at 2010/11 levels.  There certainly is NO LACK OF SUPPLY in this market.  And ponder about this for a minute…and apply it to all these other “investor-centric” regions around the nation.  That is, in Vegas there are 10s of thousands of single-family houses being readied for rent by new-era “investors”.  This flood of freshly rehabbed “for rent” supply will competes at some level with resale and builder “for sale” supply.  Even if it competes at a factor of .4, then Las Vegas “normalized” month’s supply could right now be back to a year.

Lastly, houses are as expensive on a monthly payment basis — and relative to the income needed to qualify for a loan — then they were at the peak of the bubble in 2006.  But, this is a fact masked over for the past year by the plethora of all-cash buyers who are not governed by employment, income and safe & sound mortgage lending requirements.  Like Sacramento, Phoenix, regions in the Inland Empire, and a dozen other “hot” real estate markets around the nation — that, “not”-coincidentally are the regions in which private and new-era “investors” swarmed with cash regularly paying 10% to 20% over appraised value / list price using flawed cap rate models as a guide — when the stimulus go-go juice ran out this market hit a literal “brick wall” the size of 2007.

With house as expensive on a monthly payment basis than they were in 2007, when this market turns back towards “organic” being the incremental demand driver (people that can only buy as much house as their job, earnings, and mortgage qualifications dictate) serious double-digit percent points of house price downside will occur.  That’s in the process of happening now.

The next year in Vegas could easily bring a 50% retracement of the past two years historic annualized gains, which to all the investor models predicting 10% appreciation in perpetuity, will feel like a crash.

So, question is, what businesses are levered to the past couple of years of resale house volume momentum and energy?  Those are the stocks that will shock the most amount of people in 2014.  Companies levered to Existing Sales typically feel trend changes two to three quarters afterward meaning Q1/Q2 will usher in a hard downshift — especially relative to Q1/Q2 2013 when volume was going parabolic — since 2008 and the period following the expiration of the Homebuyer Tax Credit.

November Existing Sales/Supply Stats

Demand plunging

Sales…

• down 17% MoM
• down 20% YoY
• down 32% from peak summer
• down 33% from Nov 2011, down 24% from Nov 2010, and down 45% from Nov 2009
• lowest sales volume since Jan 2009

Supply Soaring

• Highest “months supply” metric since 2011
• SFR at 6.5 months, up 11% YoY
• Condo at 7.4 months, up 23% YoY

Item 1)  Las Vegas November House Sales down 20% YoY and at their lowest levels since Jan 2009

Item 2)  Broken out, Condo are performing slightly better but sales are still at 2009 lows.

Item 3)  Month’s supply surging…back to 2010/11 levels

Item 4)  It costs the same per month and requires the same monthly income today to buy the Nov median priced house as in 2006 at the bubble peak.

If that was a bubble then…

h/t Doug Kass

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vs7mjxBfrsw/story01.htm Tyler Durden

• Wall Street Exhales as Volcker Rule Seen Sparing Market-Making (Reuters)
• GM to End Manufacturing Down Under, Citing Costs (WSJ)
• U.S. budget deal could usher in new era of cooperation (Reuters)
• Ukraine Police Back Off After Failing to Stop Protest (WSJ)
• First Walmart, now Costco misses (AP)
• Dan Fuss Joins Bill Gross Shunning Long-Term Debt Before Taper (BBG)
• China New Yuan Loans Higher Than Expected (WSJ)
• China bitcoin arbitrage ends as traders work around capital controls (Reuters)
• Blackstone’s Hilton Joins Ranks of Biggest Deal Paydays (BBG)
• Europe sketches plan to close troubled banks (Reuters)
• Madoff Planned Everything, Cried Before Arrest, Jury Told (BBG)
• US and Japan differences stall Pacific Rim trade deal (FT)
• FDIC Details Bailout Plans Without Taypayer Funds (WSJ)
• China cuts more red tape, paves way for NDRC slim-down (Reuters)

 

Overnight Media Digest

WSJ

* House and Senate negotiators, in a rare bipartisan act, announced a budget agreement Tuesday designed to avert another economy-rattling government shutdown and to bring a dose of stability to Congress’s fiscal policy-making over the next two years.

* The U.S. government’s first major auction of wireless airwaves since 2008 has speculators panning for gold. After years of complaining about the need for more airwaves, none of the major carriers have signed up. Instead, the January auction is crowded with people who don’t own networks but are hoping to cash in on a scarce asset.

* Discovery Communications Inc is considering a bid for Food Network majority owner Scripps Networks Interactive Inc said a person familiar with the matter, signaling that a consolidation wave among television channel owners may be on its way.

* Massachusetts gambling regulators set the table Tuesday for another public vote on whether the Suffolk Downs thoroughbred track near Boston’s Logan Airport can proceed with efforts to land a $1 billion resort-casino.

* U.S. gun sales are slowing from their recent torrid pace. Smith & Wesson Holding Corp said late Tuesday that its profit in the three months ended Oct. 31 fell 20 percent from the year-earlier quarter as sales rose just 2 percent. That follows rival Remington Outdoor Co’s forecast a day earlier for sales growth between about 34 percent and 37 percent for 2013, slowing from the 51 percent surge in the first nine months of this year.

* Thermal-coal prices may be running out of steam as Asian power producers wind down purchases after a period of pre-winter stockpiling and an underlying supply glut reasserts itself.

* Jon Brod, a veteran AOL Inc executive who co-founded the company’s Patch network of local news sites, is expected to leave AOL early next year to join a startup, according to a person familiar with the matter.

* Entergy Corp’s plan to shed its electricity-transmission business hit a wall on Tuesday when regulators in Mississippi rejected the transfer of the big utility’s transmission assets to another company.

* After three years of seizing market share from Chinese rivals, foreign auto makers are starting to take it from each other. Ford Motor Co, Volkswagen AG and Hyundai Motor Co are poised to end the year with significant market-share gains in the world’s No. 1 auto market, having been quick to meet demand for sport-utility vehicles and new models tailored to Chinese tastes.

* U.S. natural-gas production hit its highest level since at least 2009 in November, according to a government report released Tuesday, and domestic production is expected to grow in 2014.

 

FT

Royal Bank of Scotland’s finance director of just 10 weeks, Nathan Bostock, has resigned to become deputy chief executive of Santander UK.

Mining Giant BHP Billiton said it would invest $4 billion a year in its U.S. shale business, which it expects to generate $3 billion of cash annually by the end of the decade.

FirstGroup has received a letter from one of its biggest shareholders, urging the British bus and rail operator to sell its U.S. businesses in order to pay down debt.

Tesco Bank has laid out plans to enter the current account market within months, a move that will restrain its profit growth for the next few years.

3i Group’s global head of healthcare is to leave the London-listed investment group after 12 years to raise his own fund.

 

NYT

* Mid- to high-end fashion brands are finding themselves as acquisition targets. In the latest deal, private equity firm Leonard Green & Partners agreed on Tuesday to buy Lucky Brand Jeans from the Fifth & Pacific Companies, the clothier formerly known as Liz Claiborne, for about $225 million.

* The United States and 11 other Pacific Rim nations said they would not complete a sweeping deal to reduce trade barriers by their own end-of-year deadline.

* The European Parliament on Tuesday approved a rescue plan for the European Union’s system for trading carbon-emission credits. The lawmakers hope to revive prices for carbon credits, which have been so low that the system is creating few incentives for smokestack industries to cut back on their emissions of greenhouse gases.

* New York State’s top prosecutor is investigating why American cellphone carriers have yet to embrace anti-theft software on Samsung smartphones, raising questions about possible coordination among the biggest carriers.

* Two weeks after naming a new chief executive, Walmart announced on Tuesday that David Cheesewright, president of several overseas divisions, would soon take on all of the company’s international operations.

* A new congressional report criticizes the federal government for awarding tens of billions of dollars in contracts to companies even though they were found to have violated safety and wage laws and paid millions in penalties. Issued on behalf of the Democratic senators on the Health, Education, Labor and Pension Committee, the report cited examples over the past six years.

* Wholesale businesses increased their inventories in October by the most in two years as their sales rose sharply, encouraging signs for economic growth in the final three months of 2013. Wholesale inventories grew 1.4 percent in October, the Commerce Department rep
orted Tuesday.

* Advertising, journalism and technology continue to converge. The latest example: Vice Media’s acquisition of Carrot Creative, a digital agency that creates apps, websites and games for media companies and brands. In its new home, Carrot will experiment with ways to distribute Vice’s editorial content. The agency will also focus on building digital initiatives for brands that work with Vice.

* The Supreme Court heard arguments on Tuesday in a knotty environmental case over how to hold states responsible for air pollution that drifts across their borders and causes harm in downwind states.

 

Canada

THE GLOBE AND MAIL

* Millions of visitors to Canada would be charged a new fee under a proposed electronic security screening plan. The federal government is soliciting public comment on the plan to introduce online travel applications as a part of the sweeping perimeter security pact with the United States.

* As British Columbia Mines Minister Bill Bennett heads to Ottawa this week to make an impassioned pitch for the proposed New Prosperity copper-gold mine near Williams Lake, he is facing questions about his government’s rejection of another, smaller open-pit project in a different part of the province.

Reports in the business section:

* Canada Goose Inc, the wildly successful company behind the ubiquitous high-end parka, has sold a majority stake to U.S. private equity giant Bain Capital in a move that allows it to aggressively push into new markets in the United States and overseas in places such as South Korea.

* A wave of Canadian companies has shifted into job-cut mode as competitive pressures, weaker commodity prices and the perception Canada is a costly place to do business dent confidence.

* Talisman Energy Inc said on Tuesday that it has reached a deal to sell its stake in a pipeline in Colombia, although at a lesser price than some analysts expected the company to fetch. Talisman will sell its 12 percent interest in the Ocensa pipeline for $595 million.

NATIONAL POST

* Ontario Power Generation immediately fired three executives on Tuesday following the release of a damning auditor-general report accusing the utility of unnecessarily driving up electricity prices through rampant nepotism, high labor costs and one of the province’s most generous public-sector pension plans.

* Toronto’s budget chief, Frank Di Giorgio, wants to cut all home buyers a break on the municipal land transfer tax at the expense of those trying to break into the real estate market for the first time.

FINANCIAL POST

* Air Canada said on Tuesday that it would be expanding its relationship with Air Georgian by awarding its regional affiliate several new U.S. cross-border routes that were previously flown by Chorus Aviation Inc.

* The threat to Canada’s financial stability has eased for the first time in two years, but risks are never far away. A resurgent domestic housing market and large consumer debt, aided by still-tantalizingly low interest rates, remain major concerns to government and monetary officials.

* Intense lobbying by senior Canadian officials including federal Finance Minister Jim Flaherty and former Bank of Canada governor Mark Carney has successfully blunted far-reaching implications for the country’s largest banks from the biggest overhaul of financial regulation in the United States since the Great Depression.

 

China

CHINA SECURITIES JOURNAL

– China should phase out “aggressive” fiscal policy, said a commentary in the paper. The consequences of such measures include a high long-term budget deficit, coupled with high risk hidden local debts, it said.

CHINA BUSINESS NEWS

– China’s GDP growth is estimated to hit 7.5 percent next year, according to a survey of industry experts polled by the paper. Most predictions were within the range of 7 to 7.5 percent, while some estimates came in between 7.8 percent and 8 percent.

SHANGHAI DAILY

– Shanghai plans to build a small reservoir on the Taipu River to supply water to five of the city’s districts, after tests on the Huangpu River showed standards failed to reach national levels for tap water resources. Water from the Taipu reservoir will supply Shanghai’s Qingpu, Jinshan, Songjiang, Minhang and Fengxian districts.

CHINA DAILY

– China is using the annual Central Economic Work Conference as a platform from which to launch reforms focused on sustainable growth, said a commentary in the paper. The country can no longer afford to pursue the growth-at-all-costs economic model as it has meant the sacrifice of the environment and improvement in people’s livelihoods for fast expansion, it said.

PEOPLE’S DAILY

– China should unswervingly adhere to and develop socialism with Chinese characteristics, said a commentary in the paper that acts as the party’s mouthpiece. Such commitment will lead to national revival and achieve dreams of glory for this generation of Chinese, it said.

 

Britain

The Telegraph

RBS FINANCE CHIEF NATHAN BOSTOCK QUITS AFTER JUST 10 WEEKS

Nathan Bostock, who was appointed finance director at RBS on Oct. 1, is to join Santander, as deputy chief executive.

FIRSTGROUP INVESTOR SANDELL PUSHES FOR U.S. BUSINESS SPLIT

An activist investor with a stake in FirstGroup has called on the bus and rail operator to boost shareholder value by more than 50 percent through a split from its U.S. businesses.

FORMER ASDA EXECUTIVE GIVEN TOP WALMART JOB

A former Asda executive has been handed one of the biggest jobs in the retail industry after being named chief executive of Walmart International. David Cheesewright, who is British, will run Walmart’s 6,200 stores outside the US from February 1.

ARCHBISHOP OF CANTERBURY SUMMONS BIG SIX ENERGY BOSSES TO DISCUSS PRICE RISES AND FUEL POVERTY

The Archbishop of Canterbury has summoned the bosses of the Big Six energy companies to a private meeting on Wednesday to discuss fuel poverty and rising energy prices.

CARPETRIGHT WARNS OF ‘VERY VOLATILE’ UK ECONOMY

The flooring retailer Carpetright says trading in the UK remains “very volatile” despite signs that the economy is recovering.

The Guardian

FOXTONS ESTATE AGENT GAINS PROMOTION TO FTSE 250 INDEX

Foxtons, the estate agent that Londoners love to hate but cannot do without, is set to join the ranks of Britain’s leading companies on Wednesday when it is promoted to the FTSE 250 index.

TESCO PUTTING UP PRICES FASTER THAN ANY OTHER UK GROCER, CLAIMS ANALYST

Tesco’s UK strategy has been slammed in an outspoken note by a U.S. stockbroker that claims the retailer has put up prices faster than any other British grocer while its non-food ranges are more expensive than those at John Lewis.

The Times

CLOSING HEATHROW ‘WOULD COST 250,000 JOBS’

The closure of Heathrow in favour of a new hub airport to the east of London would cost up to 250,000 jobs and turn the most prosperous region outside the capital into an economic wasteland, a report claims.

MORTGAGE LENDERS RELAX RULES DESPITE BUBBLE FEAR

Banks and building societies have begun to relax their mortgage lending standards in an early sign that a bubble may be building in the housing market.

The Independent

BANK’S MARK CARNEY DEFIES DOOMSTERS ON THE ECONOMIC OUTLOOK FOR THE WEST

Fears that advanced economies, including Britain, might have entered a phase of “secular stagnation” were rejected last night by the Bank of England Governor, Mark Carney.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

3M Company (MMM) upgraded to Buy from Neutral at Nomura
Boise Cascade (BCC) upgrad
ed to Buy from Neutral at Goldman
Charles River Labs (CRL) upgraded to Market Perform from Underperform at Raymond James
Children’s Place (PLCE) upgraded to Outperform from Market Perform at FBR Capital
Demand Media (DMD) upgraded to Market Perform from Underperform at JMP Securities
Dentsply (XRAY) upgraded to Buy from Neutral at Goldman
FirstEnergy (FE) upgraded to Neutral from Sell at Goldman
Groupon (GRPN) upgraded to Outperform from Market Perform at Wells Fargo
ITC Holdings (ITC) upgraded to Buy from Hold at Deutsche Bank
NanoString (NSTG) upgraded to Outperform from Neutral at RW Baird
Qualcomm (QCOM) upgraded to Buy from Neutral at Citigroup
Radware (RDWR) upgraded to Outperform from Market Perform at Wells Fargo
Sprouts Farmers Markets (SFM) upgraded to Neutral from Underperform at BofA/Merrill

Downgrades

Avanir (AVNR) downgraded to Neutral from Buy at Mizuho
BlackBerry (BBRY) downgraded to Sell from Neutral at Citigroup
Enzymotec (ENZY) downgraded to Underperform from Buy at BofA/Merrill
LabCorp (LH) downgraded to Hold from Buy at Canaccord
MeadWestvaco (MWV) downgraded to Underperform from Market Perform at BMO Capital
Owens-Illinois (OI) downgraded to Neutral from Buy at Goldman
Tortoise Energy (TYG) downgraded to Underperform from Neutral at BofA/Merrill
W.R. Grace (GRA) downgraded to Neutral from Outperform at RW Baird

Initiations

3D Systems (DDD) initiated with a Buy at Jefferies
ARC Group (ARCW) initiated with a Buy at Brean Capital
Access Midstream (ACMP) initiated with a Buy at Goldman
Atlas Pipeline Partners (APL) initiated with a Neutral at Goldman
Avis Budget (CAR) initiated with a Hold at Deutsche Bank
Brocade (BRCD) initiated with a Sell at Citigroup
C.H. Robinson (CHRW) initiated with a Hold at KeyBanc
CST Brands (CST) initiated with a Neutral at Citigroup
Ciena (CIEN) initiated with a Neutral at Citigroup
Cisco (CSCO) initiated with a Sell at Citigroup
Corning (GLW) initiated with a Neutral at Citigroup
Cott Corp. (COT) initiated with a Neutral at Goldman
Crosstex Energy LP (XTEX) initiated with a Neutral at Goldman
DCP Midstream (DPM) initiated with a Buy at Goldman
eHealth (EHTH) initiated with a Buy at Jefferies
EQT Midstream Partners (EQM) initiated with a Buy at Goldman
Ericsson (ERIC) initiated with a Neutral at Citigroup
ExOne (XONE) initiated with a Buy at Jefferies
F5 Networks (FFIV) initiated with a Buy at Citigroup
FactSet (FDS) initiated with a Neutral at Credit Suisse
Garmin (GRMN) initiated with a Neutral at Citigroup
Gartner (IT) initiated with an Outperform at Credit Suisse
Hertz (HTZ) initiated with a Buy at Deutsche Bank
IHS Inc. (IHS) initiated with a Neutral at Credit Suisse
Infoblox (BLOX) initiated with a Neutral at Citigroup
Juniper (JNPR) initiated with a Neutral at Citigroup
MarkWest Energy (MWE) initiated with a Buy at Goldman
McGraw Hill Financial (MHFI) initiated with an Outperform at Credit Suisse
Merit Medical (MMSI) initiated with a Buy at Noble Financial
Moody’s (MCO) initiated with an Outperform at Credit Suisse
Motorola Solutions (MSI) initiated with a Neutral at Citigroup
Nielsen (NLSN) initiated with an Outperform at Credit Suisse
Nokia (NOK) coverage assumed with a Buy at Citigroup
Overstock.com (OSTK) initiated with a Neutral at B. Riley
Polycom (PLCM) initiated with a Neutral at Citigroup
Rambus (RMBS) initiated with a Neutral at Citigroup
Regency Energy Partners (RGP) initiated with a Neutral at Goldman
Riverbed (RVBD) initiated with a Buy at Citigroup
Southcross Energy Partners (SXE) initiated with a Sell at Goldman
Stratasys (SSYS) initiated with a Buy at Jefferies
Summit Midstream (SMLP) initiated with a Neutral at Goldman
Targa Resources Partners (NGLS) initiated with a Neutral at Goldman
USA Compression (USAC) initiated with a Neutral at Goldman
Verisk Analytics (VRSK) initiated with a Neutral at Credit Suisse
Voxeljet (VJET) initiated with a Hold at Jefferies
Western Gas Equity (WGP) initiated with a Buy at Goldman
Western Gas Partners (WES) initiated with a Buy at Goldman

HOT STOCKS

HP (HPQ) CEO told CNBC doesn’t expect headwinds from macroeconomic environment in FY14
Home Depot (HD) sees meeting operating margin target one year earlier
Scripps Networks (SNI) surged after Variety reported Discovery (DISCA) weighing bid
GM (GM) to halt manufacturing in Australia by 2017
MasterCard (MA) announced 10-for-1 stock split, 83% dividend increase, $3.5B buyback
RadioShack (RSH) closed new five-year financing totaling $835M
Cameron (CAM) increased share repurchase authorization by $750M
Twitter (TWTR) said can now share, view photos via direct message
Salem Communications (SALM) acquired Twitter (TWTR) curation site, Twitchy.com
Northstar Realty (NRF) announced plan to spin-off asset management business
H&R Block (HRB) CEO Cobb said making progress with bank divestiture
Celanese (CE) to close two European manufacturing facilities

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Phototronics (PLAB), Smith & Wesson (SWHC)

Companies that missed consensus earnings expectations include:
Joy Global (JOY), Miller Energy (MILL), Dominion Diamond (DDC), Mitcham Industries (MIND), H&R Block (HRB)

Companies that matched consensus earnings expectations include:
Peregrine (PPHM)

NEWSPAPERS/WEBSITES

• A broad new government rule, the so-called Volcker rule approved by five financial regulatory agencies, to limit risk-taking by Wall Street, will force banks to rethink virtually every aspect of their trading activities, setting the stage for more tumult at the largest U.S. financial institutions, the Wall Street Journal reports
• Legislative proposals to study whether videogames are linked to real-life violence or mental health—prompted by a rash of mass shootings—have stalled amid a campaign by the industry (MSFT, SNE, NTDOY) to quash the efforts, according to lobbying records and lawmakers, the Wall Street Journal reports
• General Motors (GM) said it would stop making cars in Australia by 2017 due to high costs and a cripplingly strong currency, fueling fears Toyota Motor (TM) will follow suit and put the entire local autos industry at risk, Reuters reports
• Europe’s second highest court upheld a decision today by EU regulators clearing Microsoft’s (MSFT) $8.5B takeover of Skype in 2011, rejecting a challenge by Cisco Systems (CSCO), Reuters reports
• Fed officials are renewing a debate over cutting interest paid to banks on excess reserves, a move aimed at convincing investors that tapering its bond-buying isn’t the same as tightening its monetary policy, Bloomberg reports
• Blackstone Group (BX), which has put $1B of equity this year into Asian real estate, says it’s poised for more deals in the region as maturing funds sell assets and banks retreat amid new regulations, Bloomberg reports

SYNDICATE

Allison Transmission (ALSN) sells 12.5M shares for selling stockholders
American Midstream Partners (AMID) files to sell 2.4M common units for partners
Amicus Therapeutics (FOLD) files to sell 19.28M shares of common stock for holders
Autohome (ATHM) 7.82M share IPO priced at $17.00
Cell Therapeutics (CTIC) files to sell 15.67M shares of common stock for holders
Exa Corp. (EXA) files to sell $75M in common stock for holders
Gevo (GEVO) files to sell stock units, convertible senior notes, warrants
HomeAway (AWAY) files to sell 5.5M shares of common stock
Teekay (TK) files to sell 5.7M shares of common stock for holders
TravelCenters (TA) 6.5M share Secondary priced at $9.25

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jfkyv3Se9DQ/story01.htm Tyler Durden

Contrary to some expectations, the budget deal has done absolutely nothing to push global markets or US futures higher which was to be expected: markets are no longer driven by fundamentals but by such things as carry pairs which signal monetary policies. Sure enough, as a result of the strength in the Yen, overnight markets have reacted with a mixture of cautiousness and optimism. On the cautious side, Asian equities are down across the board which can at least be partially attributed to nervousness at the prospect of a December Fed taper. If Congress passes the budget over the next few days, the probability of a taper next week increase at the margin, given that we have lower fiscal uncertainty (and higher spending) over the next two years. Losses in equities are being led by the Nikkei (-0.7%) and the Hang Seng (-1.3%). Asian credit shows no sign of taper nervousness this morning with the Asia IG index 4bp tighter and high beta EM names such as Indonesia trading firmer (5yr CDS -10bp). 10yr UST yields are unchanged at 2.80% and the US dollar is slightly stronger against the major crosses. The Hang Seng China Enterprises index is down 2.3% ahead of the results of China’s central economic work conference which is expected to end tomorrow and may set a number of economic targets for 2014.

In European trade, equities are seen mainly up across the board with the exception of the FTSE MIB. In terms of fixed income markets, outperformance has been observed in Spanish bonds after being supported by domestic buying, with a tightening in the 5y and 10y SP/GE spread. Furthermore, this morning also saw a Schatz auction which had a lower bid-to-cover ratio of 1.7, compared to the previous of 2.2. From an FX perspective, the USD index has risen after going through the 61.2% fib level taken from the highs seen in the November rally.

The only events due today in the US include the usual US weekly mortgage applications (up 1% this week compared to a -12.8% drop last week) and the monthly US budget statement estimated to post a $140 billion budget deficit. There will be no other major data releases across Europe or the US.

 

Overnight news bulletin from Bloomberg and RanSquawk

• US Representative Ryan said he and Senator Murray reached an agreement on the US budget deal and that the deal would reduce the deficit without raising taxes and would avoid a government shutdown in January.
• Looking ahead for the session there is a relatively light macroeconomic calendar with the release of the DoE inventories and a US 10y note auction.
• Today also sees the FTSE Quarterly rebalance which is due after-market where Vedanta Resources is set become the third miner to be demoted from the FTSE-100 index this year and is expected to be replaced by the recently privatised Royal Mail.
• Treasuries steady, 10Y yield at 2.80% before U.S. sells $21b of the securities; yield 2.81% in WI trading after drawing 2.75% in November.
• Congressional negotiators are touting a U.S. budget accord that will ease the automatic spending cuts for the next two years, remove the risk of a government shutdown and cut the deficit by $23b
• Wall Street banks avoided their worst fears of the Volcker rule after regulators crafted the ban on speculative trading to leave market-making operations intact
• China’s stocks fell as investors speculated the government may cut growth targets at an economic policy meeting this week
• European Union finance ministers headed toward a showdown with the bloc’s parliament over a bank-failure fund as they struggled to put together a blueprint for their leaders to agree upon next week
• Royal Bank of Scotland Group Plc said Nathan Bostock resigned two months after becoming chief financial officer as Britain’s biggest government-owned lender struggles to return to profit
• Ukrainian activists swarmed into central Kiev, reclaiming the center of anti-government protests after an overnight police raid that left dozens injured
• Sovereign yields lower. EU peripheral spreads narrow. Asian stocks fall, Shanghai down 1.5%, European stocks mixed, U.S. equity index futures decline. WTI crude little changed, gold falls, copper gains

 

US Event Calendar

• 7:00am: MBA Mortgage Applications, Dec. 6 (prior -12.8%)
• 11:00am: POMO – Fed to purchase $1.25b-$1.75b in 2036-2043 sector
• 1:00pm: U.S. to sell $21b 10Y notes in reopening
• 2:00pm: Monthly Budget Statement, Nov., est. -$140b Central Banks

Market Re-Cap from RanSquawk

In European trade, equities are seen mainly up across the board with the exception of the FTSE MIB, which is being lead lower by Mediolanum following a share placement, with DiaSorin also seeing losses as they are set to be removed from the FTSE MIB. In terms of sector specific movements, basic materials are the only sector in the red following an ebbing lower in gold prices after the recent rally. This move has also been exacerbated by reports that Vedanta Resources is set become the third miner to be demoted from the FTSE-100 index this year. In terms of fixed income markets, outperformance has been observed in Spanish bonds after being supported by domestic buying, with a tightening in the 5y and 10y SP/GE spread. Furthermore, this morning also saw a Schatz auction which had a lower bid-to-cover ratio of 1.7, compared to the previous of 2.2. From an FX perspective, the USD index has risen after going through the 61.2% fib level taken from the highs seen in the November rally. Looking  ahead for the session there is a relatively light macroeconomic calendar with the release of the DoE inventories and a US 10y note auction.

Asian Headlines

Asian-Pacific GDP growth is set to rise in 2014, according to an S&P report.

The Chinese government will likely maintain its targets of 7.5% for growth and 3.5% for inflation next year, according to Barclays.

S&P says India’s rating may come under pressure if parliament elections show hung result, new government unable to implement reforms.

Goldman Sachs says China’s state-owned enterprise reform may reverse stock underperformance.

EU & UK Headlines

Finance ministers from the biggest euro-zone countries reached a political understanding on SRM, but the final signoff will have to wait until next week.

Single Resolution Mechanism (SRM) board to be responsible for banks under direct ECB supervision and some cross border banks, according to a draft paper.

BoE’s Andy Haldane, head of financial stability, has called for a revival in the market for bundled-up debt in Britain.

French Non-Farm Payrolls (Q3 F) Q/Q -0.1% vs Exp. -0.1% (Prev. -0.1%)
French Current Account Balance (Oct) M/M -2.1bln vs Prev. -3.9bln (Rev. -3.6bln)

German CPI (Nov F) M/M 0.2% vs Exp. 0.2% (Prev. 0.2%)
German CPI (Nov F) Y/Y 1.3% vs Exp. 1.3% (Prev. 1.3%)

Italy PM Letta says is to aim for 1% economic growth in 2014 and 2% in 2015.

Germany sold EUR 4.38bln of 0% 2015 Schatz, bid/cover 1.7, prev. 2.2 (yield 0.21%, prev. 0.10%) and retention of 12.4% (Prev. 19.4%).

US Headlines

US Representative Ryan said he and Senator Murray reached an agreement on the US budget deal and that the deal would reduce the deficit without raising taxes and would avoid a government shutdown in January. US Senator Murray also commented, stating the the budget deal covers 2 years and added that extending unemployment aid isn’t part of the accord. The deal which is expected be voted on by Congress later this week also spurred comments from US President Obama who called the deal a good first step and that the budget pact clears path for critical investments. Obama further stated that the accord breaks the cycle of crisis-driven decisions but that it doesn’t incl
ude everything he’d like.

US Senate vote on confirming Janet Yellen to head Federal Reserve likely next week according to a Senior Democratic aide.

S&P forecasts the US economy expanding 2.6% next year, which is down from a prior forecast of 3.1%. S&P said it lowered it’s forecast for US GDP growth in light of additional sequester spending cuts in 2014 and also commented that low inflation in US means the Fed will likely taper its asset purchases slowly.

Equities

In European trade, equities are seen mainly up across the board with the exception of the FTSE MIB, which is being lead lower by Mediolanum following a share placement, with DiaSorin also seeing losses as they are set to be removed from the FTSE MIB. In terms of sector specific movements, basic materials are the only sector in the red following an ebbing lower in gold prices after the recent rally. This move has also been exacerbated by reports that Vedanta Resources is set become the third miner to be demoted from the FTSE-100 index this year, with the FTSE Quarterly rebalance due after-market. In terms of other stock news this morning, HSBC Holdings have agreed to sell its entire 8.0% shareholding in Bank of Shanghai to Banco Santander with the transaction expected to complete during first half of 2014.

FX

From an FX perspective, the USD index has risen after going through the 61.2% fib level taken from the highs seen in the November rally, which has translated through into GBP/USD which is currently trading near the lows for the session. Furthermore, EUR/GBP is currently trading just below the 0.8400 handle and therefore could see some further movement in the pair during today’s session. NZD is still one of the underperformers for the session following overnight news that Fonterra maintained its 2013/2014 Farmgate milk price forecast at NZD 8.30/kg vs. some expectations of a hike, which pressured the currency as New Zealand exports around 90% of its dairy products.

Commodities

US API Crude Oil Inventories (Dec 6) W/W -7500k vs. Prev. -12400k
– Cushing Crude Inventory (Dec 6) W/W 693k vs. Prev. -58k
– Gasoline Inventories (Dec 6) W/W 6270k vs. Prev. -119k
– Distillate Inventory (Dec 6) W/W 1180k vs. Prev. 540k

The IEA monthly oil report raised forecasts for global oil demand growth by 145,000bpd to 1.2mln bpd for 2013 and by 110,000bpd to 1.2mln bpd for 2014. They see persistent upside risks to oil from both supply and demand sides of the market. This follows OPEC’s crude oil supply falling in November for a fourth straight month by 160,000bpd to 29.73mln bpd, led by losses in Libya. The IEA also stated that making room for Iran, after years of sanctions could be a challenge for other oil producers as non-OPEC supply rises.

North Korea has begun to sell large amounts of gold to China in a bid to tide over its economic crisis, according to multiple sources familiar with the nations affairs. Furthermore, according to South Korean government data, North Korea holds about 2,000 tons of gold reserves worth at least USD 8bln.

China refined copper production at 654,803 tonnes in November vs 637,958 tonnes in October

– China refined lead production at 386,973 tonnes in November vs 432,710 tonnes in October

Credit Suisse says gold’s modest rally is a chance to start new shorts.

* * *

DB’s Jim Reid concludes the event recap:

Yesterday was certainly a day that could have done with a bit of a touch-up to make it more exciting although news of a budget deal way after the US close is an important story. The interaction between the budget deal and markets is complicated though as many feel the Fed are more likely to taper if a deal is reached so these negotiations are not easy to interpret from the macro side. The deal was announced by Senate Budget Committee chair Patty Murray and House Budget Committee chair Paul Ryan. The terms of the 2 year agreement will set spending levels at $1.012 trillion for fiscal 2014, reversing a two-year decrease in spending, and increasing slightly to $1.014 trillion in fiscal 2015. The 2 year budget increases spending by $63bn compared with sequester spending levels. An extension of long-term jobless benefits, sought by Democrats, wasn’t included in the budget package. The cost of the near-term spending increases will be offset by spending cuts and tax increases over the next decade including $12.6bn higher security fees for airline passengers, $8bn in higher fees for federal insurance of private pensions, $6bn in reduced payments to student-loan debt collectors and $3bn saved by not completely refilling the nation’s strategic petroleum reserves. Another $12 billion of savings will come from reduced contributions to federal pensions, split evenly between military retirees and new civilian workers who start after Jan. 1. This last measure is a strong point of contention amongst Democrats (Washington Post).

The budget deal now goes to the House and Senate for approval. According to the WaPo, the House could stage a vote as soon as Thursday before they officially adjourn for the year on Friday. The Senate will vote before adjourning next week. There is no guarantee that the deal will be approved by both houses, though last night’s announcement did provide a rare display of bipartisanship on Capitol Hill. The level of spending increases and decade-long savings measures are relatively small at $63bn and $85bn respectively which may favour the odds of getting it approved by Congress. For the fiscal conservatives, the budget outlines a net $22bn in savings over the next decade but one could argue that the magnitude of spending cuts are fairly immaterial over a ten year time frame. For the liberals, the deal replaces sequester-level spending cuts, but approves spending at much lower levels than the Democrats had sought earlier in the year. If a deal is approved by Congress, it will likely avoid a government  shutdown in mid-January (and for the next two fiscal years), and would bode well for the next debt ceiling debate which is due early next year.

As mentioned above the interaction between the budget deal and markets isn’t likely to be straightforward. Indeed, overnight markets have reacted with a mixture of cautiousness and optimism. On the cautious side, Asian equities are down across the board which can at least be partially attributed to nervousness at the prospect of a December Fed taper. If Congress passes the budget over the next few days, the probability of a taper next week increase at the margin, given that we have lower fiscal uncertainty (and higher spending) over the next two years. Losses in equities are being led by the Nikkei (-0.7%) and the Hang Seng (-1.3%). Outside of Asian equities, risk sentiment is a little firmer with S&P500 futures up 1pt or 0.1%. Asian credit shows no sign of taper nervousness this morning with the Asia IG index 4bp tighter and high beta EM names such as Indonesia trading firmer (5yr CDS -10bp). 10yr UST yields are unchanged at 2.80% and the US dollar is slightly stronger against the major crosses. The Hang Seng China Enterprises index is down 2.3% ahead of the results of China’s central economic work conference which is expected to end tomorrow and may set a number of economic targets for 2014.

Outside of the US budget, it was a fairly dull day but we did note that the 800+ page Volcker rule text had little impact on banks – perhaps because of the long lead time to implementation (mid 2015).. This month’s Eurogroup/ECOFIN meeting ended inconclusively with no agreement on a Single Resolution Mechanism for banks but an additional meeting has been scheduled for 18th December, which is the eve of the next EU Leaders Summit. Finance ministers are also considering approving the creation of a common resolution fund that would become a last-resort fund after a transition period of 10-years.

Turning to the day ahead, Italian prime minister Enrico
Letta is expected to hold a confidence vote in parliament to confirm support for his reform agenda. Letta is expected to win the vote. The usual US weekly mortgage applications and the monthly US budget statement are the highlights on the data calendar. There will be no other major data releases across Europe or the US.

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