Tag: news

Gold (>$1260) and silver (>$20) are extending yesterday's gains as US markets awake this morning. The crack higher at around 8:07ET caused the futures market to be halted after 3,000 Gold Futures contracts traded in one second at 08:07:45 on December 10, 2013 sending the price up $10 and tripping circuit breakers for 10 seconds. Silver is now +4% on the week and gold +2.5% as Treasuries are also bid. Stocks are stumbling overnight, driven by the "fundamentals" of a drop in EURJPY after it tagged 142 overnight and fell back.

PMs spiking again at the US open…

And halted at 8:07 – as Nanex shows,

About 3,000 Gold Futures contracts traded in one second at 08:07:45 on December 10, 2013 sending the price up $10 and tripping circuit breakers which halted trading for 10 seconds. This sort of thing is happening far too often: see also the drops on April 12, 2013,  September 12, 2013, October 11, 2013, November 20, 2013 and November 25, 2013 which also resulted in trading halts.

1. February 2014 Gold (GC) Futures Trades.

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2. February 2014 Gold (GC) Futures Trades – Zoom.

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3. February 2014 Gold (GC) Futures Depth of Book (how to read).

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and stocks tumbling to play catch up to JPY carry…

 

and Treasuries are bid…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HWVUJS7KURM/story01.htm Tyler Durden

As opposition party offices are raided and streets continue to fill with protesters, the “precarious” funding sitaution in the nation is beginning to flash red as interbank lending rates spike to 20%. Banks, clearly concerned about their own and each other’s liquidity in the face of potential deposit runs (and the accompanying counterparty risk) and huge demand for liquidity. The hryvnia is falling and bond yields are rising but it is the spike in KievPrime overnight rates that is most concerning – and policy-makers have little room to help.

 

 

Chart: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/6CYWm50tNf0/story01.htm Tyler Durden

With a title like “Are we nearly there yet?: A macro roadmap from Hope to Growth“, the “analysis” could only come from Goldman Sachs. Then again, one can see why 5 years of Fed balance sheet expansionist, central-planning, leading to record stock market highs and virtually no pick up in the economy, would be considered Hope for the 99%, even if the tiny balance of the population, such as Goldman’s CEO, uses the “Hope” period to get in line for multi-million condos in Miami.

This period, which is now running on its fourth year in the US, is called “reality” by those who are the happy recipients of leverageable $2.5 trillion in excess reserves/deposits, which can then be used to circumvent all prop trading rules and ramp risk higher. And yes, 4 years of “Hope” would be enough to make even the most staunch defender of central-planning ask themselves just what is going on? It would, however, explain why virtually all the growth in the past several years has been on the back of multiple expansion, and as the “Despair, Hope, Growth, Optimism” chart below summarizes, the US economy better roll over into growth or very soon someone, somewhere may finally realize what we have been saying since 2009: the Fed has broken the business cycle.

The corollary – after the hope phase, the centrally-planned economy may skip growth and optimism and proceed straight to Despair…

But back to the report, where according to Goldman, we are still in the Hope phase, where we have been for the past 4 years, even though the average length of duration in this part of the cycle is traditionally 10 months. That’s some serious hope going on.

We believe that the equity market is currently transitioning from a multiple expansion driven Hope phase, where the market pays for the anticipation of future improvements to a Growth phase, where these improvements materialize and earnings become the driver of returns at the index level.

 

Whereas the phases can be identified quite clearly when looking at long term histories they are much harder to identify in real time. Here we outline the signs we are seeing of this transition taking place and its investment implications.

 

Our market forecasts for the coming years are consistent with the transition from Hope to Growth. We forecast both 14% earnings growth and 14% price return from current levels for 2014. When we look at our longer term forecasts we expect earnings growth to outpace the price return for the market in both 2015 and 2016, consistent with our view that the current growth phase is likely to be substantially longer than the historical average of 33 months, due to the slow pace of economic recovery.

 

We also expect valuation to hold up better than what is typically the case in the Growth phase. We expect the valuation to be supported by still very high risk premia in equities in an environment where growth improves, yields are low and macro risks are likely to be lower than what we saw in 2011 and 2012. Indeed, we see upside risk that valuation could end up exceeding our forecasts given these factors and limited return opportunities in other asset classes. In the US we have seen the multiple expand in the last couple of years alongside growing earnings.

In other words, valuation currently is not supported by reality, but there is hope this will change soon. And if not, Goldman can just run this “analysis” again in 1 year, when the hope phase will be 1 year longer, and the S&P will be at 2100 or wherever the Fed’s balance sheet is at that moment..

And to really cement it is a Goldman report, the following sentence slams it shut:

Assuming that we do move into the Growth phase, what would history suggest in terms of the macro environment and the performance of assets?

As an aside, if we don’t move in the growth phase, that would be perfectly acceptable for Goldman: that’s where the bulk of equity returns continue to be made.

And the full Goldman investment matrix:

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/OKJw87gDteA/story01.htm Tyler Durden

• U.S. set to adopt Volcker rule to curb bank trading gambles (Reuters) After vote, lawsuits likely next hurdle for Volcker rule (Reuters)
• U.S. Congress budget talks could produce Tuesday deal, aides say (Reuters)
• Wealthy Go Frugal This Holiday Amid Uneven U.S. Recovery (BBG)
• Tearful Thai PM urges protesters to take part in election (Reuters)
• Fed’s Bullard Sees Higher QE Taper Odds as Labor Market Improves (BBG)
• Coeure Says ECB Would Offer More LTROs Only When Banks Can Lend (BBG)
• Inside China’s Super-Sterile Chicken Farms (WSJ)
• Mandela Service Rivals JFK’s as Leaders Meet in South Africa (BBG)
• China data defy slowdown forecasts (FT), and of course the word is “data”
• Cold, ice grip U.S. as more snow to blanket East (Reuters)
• Germany and France close on banking union deal (FT)
• Hidden Obamacare Website Costs Show Lack of Transparency (BBG)
• Lululemon Founder Steps Down as Chairman (WSJ)
• Singapore to Charge Rioters After Little India Violence (BBG)
• Google bus blocked in San Francisco gentrification protest (Reuters)

 

Overnight Media Digest

WSJ

* Regulators are set to usher in a new era of tough banking oversight on Tuesday that drills to the core of Wall Street’s profitable markets and trading businesses, according to a draft of the rule reviewed by the Wall Street Journal.

* Boeing Co is running the priciest corporate beauty contest in the United States, as state governments across the country try to outdo a record incentive package from Washington state to lure work that would build one of the aerospace company’s coming jetliners.

* Abercrombie & Fitch Co entered into a new contract with Chief Executive Michael Jeffries, thumbing its nose at an activist hedge fund that had pressed the company to look for a new leader.

* This holiday season, Santa will have extra helpers at the mall: devices that track shoppers. In dozens of U.S. shopping centers, small gadgets – perhaps tucked near the queue for a photo with Santa – will keep tabs on shoppers’ cellphones. Elsewhere, trackers sprinkled around the centers identify shoppers’ movements, helping mall operators and retailers tally how long people wait in line and where they shop.

* An annual push by doctors to delay cuts to Medicare patient fees is afoot, but this time the prognosis is better for a permanent solution to the long-festering problem. The Senate Finance Committee is scheduled to vote Thursday on “doc fix” legislation that would permanently change how Medicare providers are paid by the government for their services. Similar legislation was unanimously passed by the House Energy and Commerce Committee in July.

* The stage could be set for stronger economic growth next year, as a surging stock market and run-up in home values have helped Americans recoup nearly all the wealth they lost in the recession.

* European finance ministers were closing in on a new system for winding down sick banks, in which the failure of a lender could be partly financed by banks from other countries, two European officials said Monday.

* Hilton Worldwide Holdings Inc has accelerated the timetable for its potential $2.7 billion IPO and is now planning on pricing its shares after markets close on Wednesday, instead of on Thursday, people familiar with the matter said.

* The U.S. Department of Justice has been investigating possible sales of Dell computers to the Syrian government, the company said in documents released Monday.

* Medical-equipment maker Hologic Inc unveiled a management shake-up on Monday that includes the appointment of industry veteran Stephen MacMillan as its chief executive and the addition of two board members in a deal designed to placate activist investor Carl Icahn.

* Faced with the lowest corn prices in more than three years, many U.S. farmers are stashing away their grain in a bet on a rebound. The strategy is sending ripples through the corn belt-affecting everyone from grain buyers to storage-bin makers-and tempering the price declines in the $27 billion corn-futures market.

 

FT

Foreign banks in China have warned that they will lose a critical source of funding and revenue if Beijing enforces its new regulations to restrict interbank lending by domestic banks.

Medical device maker Hologic Inc appointed two directors backed by activist investor Carl Icahn to its board as part of a settlement with the billionaire.

Airbus parent EADS plans to cut 5,800 jobs at its defence businesses and close sites in Paris, Munich, Spain and Britain as it tries to lift its weak profit margins and cope with the steep cuts in European defence budgets.

The U.S. government said it had sold the last of its stake in General Motors, marking an end to a historic bailout of the country’s biggest automaker.

Sysco Corp said it would buy rival US Foods Inc for$8.2 billion including debt, in a deal that will combine the top two U.S. food distributors.

 

NYT

* The government bailout of General Motors ended on Monday with the Treasury Department’s announcement that it had sold its final shares of GM stock. The sale closes a tumultuous chapter in the history of the American auto industry, and allows the nation’s largest automaker to continue its comeback free from the stigma of being known as “Government Motors.”

* The Finnish cellphone giant Nokia is expected on Tuesday to offer almost $400 million to resolve a tax dispute with Indian authorities ahead of the company’s planned sale of its handset business to Microsoft for $7.2 billion.

* Output at German factories, mines and power plants declined in October for a second straight month, official data showed on Monday, the latest sign that the economy at the heart of the euro zone recovery might not be growing as quickly as had been hoped.

* Not limiting their activities to the earthly realm, American and British spies have infiltrated the fantasy worlds of World of Warcraft and Second Life, conducting sur
veillance and scooping up data in the online games played by millions of people across the globe, according to newly disclosed classified documents.

* The advent of a new medium to conduct business inevitably means avenues for criminals to swoop in to take advantage. The development of Bitcoin, the virtual currency that is not issued by any government, presents challenges for the authorities to use laws that were not designed for the digital world to combat illegal conduct.

* Shortly after 1 a.m. on a day nearly a year ago, Cerberus Capital Management announced that it planned to sell its gun manufacturing company, the Freedom Group, after the deadly school shooting in Connecticut four days earlier. But the efforts to sell the company, which produced the Bushmaster rifle that Adam Lanza used in his assault on Sandy Hook Elementary School in Newtown, Conn., have been hamstrung by the public furor that prompted the auction in the first place.

* European Aeronautic Defense and Space, the parent company of Airbus, announced plans on Monday to cut 5,800 jobs from its military and space divisions over the next three years as it responds to reductions in European military budgets driven by austerity measures.

* The billionaire trader Steven A. Cohen is one step closer to converting his onetime $15 billion hedge fund into a family office after a tentative deal to sell a reinsurance firm he formed in 2012. Hamilton Reinsurance Group – a privately held firm led by the former insurance executive Brian Duperreault and Two Sigma Investments – will be buying the firm, known as SAC Re Ltd, for an undisclosed amount.

* When you think about Nelson Mandela, you probably think about freedom – free people, free country, free speech. What may be overshadowed by Mandela’s extraordinary legacy was his complicated journey to support free markets and a free economy.

 

Canada

THE GLOBE AND MAIL

* First Nations are threatening to challenge Quebec’s new Mining Act in court after the government cut short debate to force passage of the bill. Innu Chief Gilbert Dominique, a spokesperson for the Assembly of First Nations of Quebec and Labrador, warned on Monday that any new mining project on aboriginal land would be blocked if it failed to meet the approval of native communities.

* Canada’s Foreign Affairs Minister John Baird said his government intended to lay claim to the North Pole, but is delaying a full international bid for seabed rights in the resource-rich Arctic until scientists gather sufficient data to back up this territorial expansion.

Reports in the business section:

* Chip Wilson is stepping down as chairman of yoga apparel retailer Lululemon Athletica Inc, a decision made about a month after he touched off a controversy by suggesting that women’s body shapes were to blame for the chain’s problems with its black pants.

* Canada’s top 1 percent of earners took home 10.6 percent of the country’s income in 2011, a share that plateaued from a year earlier but remains higher than in recent decades.

* Canadian Oil Sands Ltd has tapped insiders to fill the company’s top two executive positions, with Ryan Kubik taking over as its chief executive in the new year.

NATIONAL POST

* Ontario’s governing Liberals plan to bring in legislation in the new year to cap the salaries of senior executives in the broader public sector – a key New Democratic Party demand. The minority Liberals agreed to the New Democrats’ request last spring in order to pass their budget and avoid an election.

* As Britain enacts laws forcing Internet companies to block access to pornography unless customers opt in, a fledgling movement is under way to bring similar laws to Canada.

FINANCIAL POST

* Major energy companies in Western Canada are bracing for another cycle of rising costs, as planned oil sands expansion and natural gas export terminals revive fears of skill shortages and competition for materials.

* Revenu-Quebec is seeking prison sentences and fines totaling $750 million for Kitco Metals Inc founder Bart Kitner and directors with several other gold trading firms following one of the biggest tax fraud investigations in provincial history.

* Canadian Business magazine is merging with PROFIT and the combined publication will put out a reduced number of issues, Rogers Communications Inc said on Monday. The Toronto-based telecom giant’s publishing division owns both of the titles and said in a statement that the new magazine, which would operate under the Canadian Business brand, would publish monthly, starting Jan. 16.

 

China

SHANGHAI SECURITIES NEWS

– Chinese cities and provinces including Shanghai, Shenzhen, Chongqing and Wuxi plan to roll out policies that will accelerate reform of state-owned enterprises.

– An unidentified investor bought 1.13 billion Shanghai-traded shares of China Merchants Bank on Monday through block trades at 12.07 yuan ($1.99), representing a 10.7 percent premium to the market price and valuing the deal at 13.67 billion yuan.

– Shanghai Port Group said it plans to buy 4.6 billion yuan worth of shares to be newly issued by Bank of Shanghai Co Ltd.

– Oriental Securities has become China’s first brokerage to launch a mutual fund, after regulators expanded the business scope of Chinese securities firms.

CHINA DAILY

– The first report to rank court transparency in China was published on Monday, as part of efforts to encourage judicial openness. The report by the Chinese Academy of Social Sciences’ Institute of Law looked at 103 courts in Zhejiang province.

PEOPLE’S DAILY

– The paper that acts as the government’s mouthpiece is starting a new column on Tuesday to highlight China’s changes over the last year. The column will cover new achievements and ideas among others.

 

Britain

The Telegraph

BANKERS FACE ‘ANNUAL HEALTH CHECK’ UNDER REFORMS

Banks will be required to give regulators an annual health check on all their senior staff to confirm they are suitable to keep their “authorised” status in the UK.

DRAX’S 2 BLN STG ‘CLEAN COAL’ PROJECT WINS GOVERNMENT FUNDING

Plans to capture carbon dioxide emissions from power stations and bury them under the North Sea moved a step closer on Monday as the British Government awarded funding to Drax to develop a proposed “clean coal” plant in Yorkshire.

H&M COULD RAISE PRICES TO PAY FOR HIGHER WAGES

Swedish fashion giant H&M, which has 226 stores in the UK, has warned it could raise retail prices in order to pay better wages to some of the world’s poorest textile workers.

The Guardian

UK ECONOMY NEEDS SUSTAINED LOW INTEREST RATES, SAYS MARK CARNEY

Britain’s economy needs sustained low interest rates to spur growth and repair the stricken banking sector, the Bank of England Governor Mark Carney has warned, in a strong rebuttal of critics calling for a rapid rate hike in response to a galloping housing market.

ROYAL MAIL WORKERS WIN PAY INCREASE OF 9 PCT OVER THREE YEARS

Royal Mail staff will get a pay increase of more than 9 percent over three years after the company and its union announced what they said was a groundbreaking legal agreement on industrial relations at the newly privatised company.

The Times

RYANAIR BOWS TO PASSENGERS ON BAGGAGE

Passengers habitually stung by Ryanair’s hefty fees for overweight bags were given relief yesterday as the Irish airline halved its charges as part of an attempt to overhaul its dismal reputation for customer service.

BRITONS FLICK SWITCH ON THE BIG SIX

The number of homes switching energy supplier to secure a better deal hit a three-year high last month in the wake of the inflation-busting rises in gas and electricity bill
s.

The Independent

HSBC RETAIL ARM SPIN-OFF TALK FAILS TO IMPRESS THE CITY

City insiders today played down talk that HSBC could be planning to float off a slug of its UK High Street business with a potential value of 20 billion pounds

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Blackhawk (HAWK) upgraded to Buy from Neutral at Citigroup
CGG SA (CGG) upgraded to Outperform from Market Perform at Raymond James
Celgene (CELG) upgraded to Outperform from Neutral at Credit Suisse
Geron (GERN) upgraded to Buy from Hold at Needham
Harman (HAR) upgraded to Outperform from Market Perform at Wells Fargo
Hellenic Telecom (HLTOY) upgraded to Overweight from Neutral at JPMorgan
Johnson Controls (JCI) upgraded to Top Pick from Outperform at RBC Capital
Royal Dutch Shell (RDS.A) upgraded to Neutral from Underweight at JPMorgan
United Rentals (URI) upgraded to Top Pick from Outperform at RBC Capital

Downgrades

Edwards Lifesciences (EW) downgraded to Market Perform at Wells Fargo
Home Properties (HME) downgraded to Underweight from Equal Weight at Morgan Stanley
Quest Diagnostics (DGX) downgraded to Underperform from Buy at BofA/Merrill
Tenneco (TEN) downgraded to Outperform from Top Pick at RBC Capital

Initiations

3D Systems (DDD) initiated with a Buy at Deutsche Bank
AFC Enterprises (AFCE) initiated with a Buy at Jefferies
Allegion (ALLE) initiated with an Outperform at Credit Suisse
Allete (ALE) initiated with a Buy at Wunderlich
Athlon Energy (ATHL) initiated with a Buy at Topeka
AvalonBay (AVB) initiated with an Equal Weight at Morgan Stanley
Bonanza Creek (BCEI) initiated with a Neutral at Mizuho
ExOne (XONE) initiated with a Hold at Deutsche Bank
PDC Energy (PDCE) initiated with a Buy at Mizuho
Papa John’s (PZZA) initiated with a Hold at Jefferies
Quanta Services (PWR) coverage resumed with a Neutral at Goldman
Rambus (RMBS) initiated with a Buy at Jefferies
Relypsa (RLYP) initiated with an Overweight at Morgan Stanley
RigNet (RNET) initiated with an Outperform at William Blair
Spectra Energy (SE) initiated with a Sector Performer at CIBC
Stratasys (SSYS) initiated with a Buy at Deutsche Bank
Synergy Resources (SYRG) initiated with a Buy at Mizuho
zulily (ZU) initiated with a Buy at BofA/Merrill
zulily (ZU) initiated with a Neutral at Citigroup
zulily (ZU) initiated with a Neutral at Goldman
zulily (ZU) initiated with a Sector Perform at RBC Capital

HOT STOCKS

Treasury sold remaining stake in General Motors (GM)
Volvo (VOLVY) to sell Volvo Rents in North America for about $1.1B
Lloyds Banking (LYG) to sell 21% stake in St. James Place
lululemon (LULU) founder, non-executive chairman Chip Wilson to resign
Rambus (RMBS), Micron (MU) signed broad patent cross license agreement
Avan Projects acquired controlling interest in Papa John’s India (PZZA)
Vitran (VTNC) to be acquired by Manitoulin Transport for $6.00 per share
Vail Resorts (MTN) reaffirmed FY14 EBITDA $280M-$295M

EARNINGS

Companies that beat consensus earnings expectations last night and today include: Burlington Stores (BURL), HD Supply (HDS), Toll Brothers (TOL), ABM Industries (ABM), Medley Capital (MCC), Alico (ALCO), Comtech (CMTL), PVH Corp. (PVH)

Companies that missed consensus earnings expectations include:
Leidos (LDOS), Triangle Petroleum (TPLM), Pep Boys (PBY), Vail Resorts (MTN), Casey’s General Stores (CASY)

Companies that matched consensus earnings expectations include:
Synergetics (SURG)

NEWSPAPERS/WEBSITES

• Regulators are set to usher in a new era of tough banking oversight today that drills to the core of Wall Street’s profitable markets and trading businesses, according to a draft of the Volcker rule reviewed by the Wall Street Journal
• Boeing (BA) is running the priciest corporate beauty contest in the U.S., as state governments across the country try to outdo a record incentive package from Washington state to lure work that would build one of the aerospace company’s coming jetliners, the Wall Street Journal reports
• St. Louis Fed President James Bullard, sometimes seen as a bellwether for U.S. monetary policy, unexpectedly offered his voice to a growing contingent at the central bank that has argued for reducing the Fed’s bond buying at a meeting next week, Reuters reports
• Time Warner Cable’s (TWC) incoming CEO Rob Marcus said he’s in no hurry to sell the company, while Charter’s (CHTR) CEO Tom Rutledge, a potential suitor, said the smaller company sees benefits in growing through acquisitions, Reuters reports
• Nokia (NOK) is ready to pay at least $487M to India’s tax authorities to enable the transfer of a factory in the country to Microsoft (MSFT), sources say, Bloomberg reports

SYNDICATE

Ares Capital (ARCC) files to sell 14.3M shares of common stock
Darling (DAR) files to sell 40M shares of common stock
EVERTEC (EVTC) files to sell 15.29M shares of common stock for holders
Icahn Enterprises (IEP) announces sale of 2M depositary units for limited partners
NXP Semiconductors (NXPI) files to sell 25M shares of common stock for holders
Pinnacle Foods (PF) files to sell 17M shares of common stock for holders
Post Holdings (POST) to offer $300M of convertible preferred stock
StealthGas (GASS) files to sell 10M shares of common stock
Taminco (TAM) files to sell 10M shares for holders
TravelCenters (TA) files to sell 5M shares of common stock

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HlFfg95v66w/story01.htm Tyler Durden

The grind higher in equities, and tighter in credit, continues as markets brush aside concerns about a December taper for the time being. Overnight futures levitation has pushed the Fed balance sheet driven record high S&P even higher, despite as Deutsche Bank points out, the fact that we had three Fed speakers advocate or talk up the possibility of a December taper, including the St Louis Fed’s James Bullard who is viewed as a bit of a bellwether for the FOMC. Bullard said the probability of a taper had risen in light of the strengthening of job growth in recent months. Indeed, he noted that the best move for the Fed could be a small December taper given the improving jobs data but below-target inflation readings. The Fed could then pause further tapering should inflation not return toward target during the first half of 2014.

Overnight, China saw a slew of goalseeked economic data including slightly weaker than expected November Industrial Production Y/Y 10.0% vs. Exp. 10.1% (Prev. 10.3%) and
slightly better Retail Sales Y/Y 13.7% vs. Exp. 13.2% (Prev. 13.3%). Following the disappointing German Industrial Production report yesterday, today we got the October manufacturing numbers out of everyone else in Europe, including France at -0.3%, same as September,and below the 0.1% expected. Industrial production in Italy grew 0.5%, above the 0.2% expected, while UK Industrial production met expectations of a 0.4% rise, down from 0.9%.

Among central bank speakers, ECB’s Coeure said large-scale asset purchases are one option for ECB, currently sees no need for large-scale asset purchases. He also said that the ECB would offer more LTROs only when banks can lend and that the council will discuss minutes in early 2014.

Speaking of Fed speakers, there will be no more in the US until next week as the Fed blissfully entered its blackout period at midnight.

Looking at today’s calendar, the focus will be on US JOLTs job openings – a report which Yellen has previously highlighted as an important supplement to more traditional labour market indicators. US small business optimism and wholesale inventories are the other major data releases today. As mentioned above, US financial regulators are due to announce Volcker rules at some point today although as we just reported, the CFTC’s meeting on Volcker was just cancelled due to inclement weather.

Overnight news bulletin from Bloomberg and RanSquawk

• Chinese Industrial Production (Nov) Y/Y 10.0% vs. Exp. 10.1% (Prev. 10.3%) and Retail Sales (Nov) Y/Y 13.7% vs. Exp. 13.2% (Prev. 13.3%).
• Fed’s Fisher (non voter – hawk) said Fed should begin tapering bond buying at earliest opportunity and the cost of Fed’s bond buying program ‘far exceeds its purported benefits’.
• ECB’s Coeure says large-scale asset purchases are one option for ECB, currently sees no need for large-scale asset purchases
• Treasuries gain, most curve spreads narrow before week’s $64b debt auctions begin with $30b 3Y notes, yield 0.645% in WI trading after drawing 0.644% in Nov.
• Final version of the Volcker Rule curbs some types of trading while largely freeing chief executives from personal responsibility
• Regulators granted a broader exemption from the ban for banks’ market-making desks, on the condition that traders aren’t paid in a way that rewards proprietary trading, according to a draft of the final rule
• Senate will try again to confirm Rep. Mel Watt (D-N.C.) to lead the FHFA, which oversees government-chartered mortgage finance companies Fannie Mae and Freddie Mac
• China’s industrial output rose less than estimated in November while retail sales unexpectedly accelerated, giving a mixed picture of growth as leaders gather in Beijing to set economic policies for the coming year
• U.K. industrial production rose 0.4% in October, matching the median estimate in a Bloomberg survey
• ECB’s Benoit Coeure said policy makers would consider offering more long-term loans to banks only when they are in a position to lend to companies and households
• Germany softened its opposition to key elements of a plan for handling euro-area bank failures as EU finance ministers raced to break a deadlock on the proposal before next week’s EU summit
• Japan’s government retirement fund plans to invest in overseas infrastructure as it seeks to diversify its portfolio, according to two people with direct knowledge of the matter
• While Obama’s health agency said it spent $319m building an online health-insurance marketplace through October, it’s almost impossible to verify and track that spending through public records; data presented on web sites is incomplete and often contradictory, according to open government advocates
• Sovereign yields mostly lower. EU peripheral spreads narrow. Asian stocks post modest losses, European stocks, U.S. equity index futures gain. WTI crude higher, gold and copper little changed

Market Re-Cap

Stocks recovered from a lower open and gradually moved into positive territory, with industrials outperforming where Weir Group shares rose over 3% amid talk that the company may be a target for General Electric. At the same time, the evident risk on sentiment ensured that the more defensive sectors have underperformed, which in turn meant that the health care heavy SMI index remained in the red. Despite the recovery in stocks, Bunds remained better bid even as supply from Spain and Austria was absorbed. Looking elsewhere, even though the 3-month Euribor rate edged up to 0.260% from 0.255% yesterday, the Euribor curve remained marginally flatter, supported by an uptick in ECB excess liquidity which rose to EUR 157bln, compared to EUR 154bln on Dec-6th, which was the lowest level in almost two years. In FX, a combination of option related flow, together with touted selling of USD/JPY by Japanese and Norwegian names, resulted in EUR/JPY and also GBP/JPY to come off the best levels of the session. Going forward, market participants will get to digest the release of the latest NIESR GDP estimate, weekly API report after the closing bell on Wall Street and the US Treasury will sell USD 30bln in 3y notes.

US Event Calendar

• 7:00am: ECB’s Draghi speaks in Rome
• 7:30am: NFIB Small Business Optimism, Nov., est. 92.6 (prior 91.6)
• 9:30am: U.S. regulators meet on Volcker Rule Supply
• 10:00am: JOLTs Job Openings, Oct., est. 3.895m (prior 3.913m)
• 10:00am: Wholesale Inventories, Oct., est. 0.3% (prior 0.4%); Wholesale Sales, Oct., est. 0.3% (prior 0.6%) Central Banks
• 11:00am: POMO – Fed purchases $1b-$1.5b TIPS in 2018-2043 sector
• 11:30am: U.S. to sell 4W bills, $25b 1Y bills
• 1:00pm: U.S. to sell $30b 3Y notes

Asian Headlines

Chinese Industrial Production (Nov) Y/Y 10.0% vs. Exp. 10.1% (Prev. 10.3%)
– Industrial Production YTD (Nov) Y/Y 9.7% vs. Exp. 9.7% (Prev. 9.7%)
– Retail Sales (Nov) Y/Y 13.7% vs. Exp. 13.2% (Prev. 13.3%)
– Retail Sales YTD (Nov) Y/Y 13.0% vs. Exp. 13.1% (Prev. 13.0%)

China 2013 GDP may be 7.7% and China 2013 CPI may be 2.6%, according to a CASS report. CASS added that it sees China’s economy to expand 7.5% in 2014 and sees China exports rising 9.1% and imports increasing 8.5%

EU & UK Headlines

French Manufacturing Production (Oct) M/M 0.4% vs Exp. 0.2% (Prev. -0.7%, Rev. -0.5%)
French Industrial Production (Oct) M/M -0.3% vs Exp. 0.1% (Prev. -0.5%, Rev. -0.3%)
Italian Industrial Production (Oct) M/M 0.5% vs Exp. 0.2% (Prev. 0.2%)
UK Industrial Production (Oct) M/M 0.4% vs Exp. 0.4% (Prev. 0.9%)
UK Manufacturing Production (Oct) M/M 0.4% vs Exp. 0.4% (Prev. 1.2%)
UK Visible Trade Balance GBP/Mn (Oct) M/M GBP -9,732 vs Exp. GBP -9,200 (Prev. GBP -9,816, Rev. GBP -10,099)
UK RICS House Price Balance (Nov
) 58% vs. Exp. 60% (Prev. 57%) – highest since June 2002. While, the BoE said that Q3 gross mortgage advances highest since 2008.
ECB’s Coeure says large-scale asset purchases are one option for ECB, currently sees no need for large-scale asset purchases. He also said that the ECB would offer more LTROs only when banks can lend and that the council will discuss minutes in early 2014.

– EU is closing in on funding compromise that could break stalemate on single resolution mechanism, according to officials who added that EU governments consider separate treaty to share costs of bank wind downs.

Italy buys back total of EUR 3.99bln of bonds. The Treasury was scheduled to buyback the 3/15 and 4/15 BTPs and the 12/14 and 9/15 floating rate CCTs and the 9/17 inflation-linked BTPei’s. Domestic buying supported the Italian curve this morning, particular the 5y sector.

US Headlines

Fed’s Fisher (non voter – hawk) said Fed should begin tapering bond buying at earliest opportunity and the cost of Fed’s bond buying program ‘far exceeds its purported benefits’.

Manpower Survey: US employers outlook is strongest since Q1 2008.

Equities

Heading into the North American open, stocks in Europe are seen broadly higher, albeit marginally and with heath care under performing which in turn resulted in the SMI index in Switzerland under performing its peers. The move higher was led by industrials, where Weir Group shares rose over 3% amid talk that the company may be a target for General Electric.

S&P says ECB’s Eurozone bank review to have limited rating impact because they already recognise weakness in capital and asset quality in current ratings, and would expect some banks to adjust regulatory capital positions before the October 2014 announcement of results.

FX

In FX, a combination of option related flow, together with touted selling of USD/JPY by Japanese and Norwegian names, resulted in EUR/JPY and also GBP/JPY to come off the best levels of the session. Elsewhere, AUD/USD trended higher throughout the session, supported by touted buying by mining names, rising above the 10DMA line in the process.

Commodities

Deutsche Bank sees bearish global crude market next year, cut 2014 brent crude price forecast to USD 97.50/bbl, cut 2014 WTI crude price forecast to USD 88.75/bbl and expects OPEC to cut production to defend prices. At the same time, analysts at Commerzbank said that Brent-WTI spread is to narrow in coming months.

Deutsche Bank sees ‘ongoing downside risks’ for gold prices, favours lead and zinc and recommends long copper trade. China October gold output is at 39.84 tons, according to the industry association.

The US chemicals industry is planning a sharp increase in its exports as a result of the cost advantage created by the shale gas boom, putting pressure on competitors in Europe and Asia, according to the FT.

DB’s Jim Reid concludes the overnight recap

The grind higher in equities, and tighter in credit, continues as markets brush aside concerns about a December taper for the time being. Indeed, the S&P 500 (+0.18%) reached another record high yesterday despite the fact that we had three Fed speakers advocate or talk up the possibility of a December taper, including the St Louis Fed’s James Bullard who is viewed as a bit of a bellwether for the FOMC. Bullard said the probability of a taper had risen in light of the strengthening of job growth in recent months. Indeed, he noted that the best move for the Fed could be a small December taper given the improving jobs data but below-target inflation readings. The Fed could then pause further tapering should inflation not return toward target during the first half of 2014. DB’s Joe Lavorgna highlights that this is a bit of change in stance from earlier in the year at the June FOMC meeting, when Bullard dissented because he wanted the FOMC to “signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings”. So the fact that Bullard is now floating the idea of a December taper on the table is quite telling. The Dallas Fed’s Fisher, a voter next year, was his usual hawkish self and advocated that the Fed should taper at the earliest opportunity and he opposed any changing of the Fed’s unemployment threshold for rate hikes. The Richmond Fed’s Lacker, a hawk, commented that the Fed should telegraph the path of QE tapering and that he was wary of changing the pace of Fed asset purchases frequently.

Despite all the talk of tapering, it was a relatively soft day for the US dollar on Monday (Dollar index -0.23%) which is a theme that has continued in overnight trading.  Indeed, GBPUSD (+0.15%) and EURUSD (+0.1%) are both higher as we type, and this follows a 0.50% and 0.24% rise in both USD crosses yesterday. The GBPUSD is now at its highest level since Q3 of 2011 and EURUSD is at its highest level since late October. Some of the overnight strength in GBP has come after Mark Carney warned of risks to the UK housing market from the BoE’s stimulus, in comments on Bloomberg’s Charlie Rose show. Outside of equities and currencies, we also had a fairly strong day for credit both in DM and EM on Monday, which is a theme that has persisted since Friday. As we mentioned yesterday, the strength in risk markets (and softness in the dollar) post the US payrolls data seems to have been explained by the argument that either the whisper number was higher than consensus or that the numbers don’t merit aggressive tapering over the coming months even if they do decide to go for December. It’s worth reiterating that the PCE inflation number fell from 1.2% to 1.1% on Friday. This side of the dual mandate gets far less attention.

Elsewhere overnight, Asian equities have been in consolidation mode with falls in the Hang Seng (-0.2%) and Nikkei (-0.2%) offset by better risk sentiment in Chinese A-shares (+0.2%) and a few Asian EM bourses such as Indonesia (+1%) and Thailand (+0.4%). 10yr UST yields are little changed in Asian trading (2.84% as we type) while Asian and Australian credit spreads continue their slow grind tighter (1-2bp tighter today). In China, the government has started the annual Central Economic Work Conference, which will outline economic priorities for 2014. There is talk that the government may lower its GDP growth target to 7% from 2013’s 7.5% at this meeting. The Chinese yuan continues to strengthen against the USD, with USDCNY setting another record low overnight. As we go to print, Chinese industrial production data (10.0% YoY vs 10.1% forecast) for November have been released which was roughly in line with consensus, while retail sales numbers have managed to beat estimates (13.7% YoY vs 13.2% expected).

It’s been a fairly eventful year out of Capitol Hill but we still have the significant issue of the US budget to address before the House adjourns for the year on Friday. Also worth watching from Capitol Hill is the long-awaited final version of the Volcker rule, which is due to be released by US financial regulators today. According to the WSJ who have reportedly reviewed a draft of the rule, banks will be required to provide a “demonstrable analysis of historical customer demand” for financial assets for which they make markets on. The rule is designed to prevent banks from engaging in proprietary trading, but the draft apparently contains multiple new rules designed to discourage proprietary trading including changes in “compensation arrangements” so that they “do not reward or incentivise prohibited proprietary trading”. The Washington Post describes the rules as “tougher-than-expected”. Three of the five regulators involved – the Federal, the Federal Deposit Insurance Corp and the Commodity Futures Trading Commission – will vote on the final rule at public meetings. Meanwhile, the Office of the Comptroller of the Currency and the SEC wi
ll not conduct public meetings. The rules have been in the works for quite a while, but it will be interesting to see whether they have an impact on how the US broker dealers trade today.

Staying in the US, there were a couple of interesting snippets in the Fed’s quarterly flow of funds data released late yesterday. Firstly, household wealth increased $1.9 trillion to $77.3 trillion in the third quarter, the highest level ever, probably driven largely by equity and housing market gains. It was the ninth straight quarter of wealth increases. Secondly, the FT points out that US household balance sheets have notched up a post-financial crisis milestone by recording their first rise in mortgage debt since 2008. After reducing debt for 21 consecutive quarters, US households increased their net mortgage liabilities at an annualised rate of 0.9% in Q3. Total mortgage debt of $9.4tn is now 12% below its peak in the first quarter of 2008. Although outstanding mortgage debt rose, it is now down to 56% of GDP compared with a peak of 74%. The outstanding stock of government debt grew an annualised pace of just 1.5%, reflecting the government’s spending cuts and tax rises this year.

Looking at today’s calendar, French, Italian and UK industrial production and UK trade are the major data releases in Europe. Draghi speaks in Rome today. Across the Atlantic, the focus will be on US JOLTs job openings – a report which Yellen has previously highlighted as an important supplement to more traditional labour market indicators. US small business optimism and wholesale inventories are the other major data releases today. As mentioned above, US financial regulators are due to announce Volcker rules at some point today.

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At least the dog didn’t eat the London Whale’s trade blotter, or Bart Chilton’s hair wasn’t caught in a snowblower. Perhaps, Mr. Chilton will blame the meeting cancelation on the day the regulators are expected to vote on banning of bank prop trading and pass a rule that was “tougher than the banks expected“, on the CFTC’s low budget which does not permit it to buy antifreeze?

Source: CFTC

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