zerohedge – Page 18288

Frontrunning: December 16

Tough Question for Fed: Time to Act? (Hilsenrath )
Merkel Begins Third Term Strengthened by SPD Partner Backing (BBG)
Wary of Roma, Europe cold-shoulders its new eastern workmates (Reuters)
New Medicines Emerge, but Few Blockbusters (WSJ)
SIP in the crosshairs: U.S. Exchanges Near Deal for Infrastructure Upgrade (WSJ)
Secret Inside BofA Office of CEO Stymied Needy Homeowners (BBG)
AIG Said to Near Sale of Plane Unit to AerCap (BBG)
Inside the Saudi 9/11 coverup (NYPost)
Russian Bank Chief Weighs Firings as Costs Absorb Revenue (BBG)
Video Boom Forces Verizon to Upgrade Network (WSJ)
Chinese Manufacturing Slows (AP)
Euro-Area Factory Output Expands Faster Than Forecast (BBG)
Deal Reached to Shoot Avatar Sequels (WSJ)
GOP Incumbents Lean on Donors to Beat Back Primary Foes (WSJ)

Overnight Media Digest

WSJ

* A malfunctioning HealthCare.gov website and confusion over canceled policies have kept millions of Americans from choosing new health plans so far this fall. But with website access improving and the initial deadline to sign up for coverage looming Dec. 23, insurers are starting to blanket the airwaves and social media with glitzy ads urging consumers to buy their plans.

* American International Group Inc is in advanced talks to sell its jet-leasing business to AerCap Holdings for $3 billion in cash and a minority stake in the smaller, Netherlands-based company, said people with knowledge of the talks.

* Representatives of Amazon.com Inc workers in Germany will take their beef with the e-commerce giant to the United States on Monday, staging a protest at the retailer’s Seattle headquarters in tandem with strikes planned at Amazon sites in Germany.

* Bond investors are showing the most confidence in corporate America since the financial crisis, underscoring expectations that the U.S. economy will keep rolling as the Federal Reserve prepares to trim monetary stimulus. Purchasers of corporate debt are demanding the smallest interest-rate premium to comparable government bonds since 2007.

* U.S. exchanges are near an agreement to upgrade a central piece of the country’s trading infrastructure that critics say has been neglected and caused a serious market outage in August, according to people with knowledge of the discussions.

* After years of anemic productivity, pharmaceutical companies are launching new drugs at the fastest pace since the 1990s, including 39 last year alone. But there is a problem: selling the new drugs.

* Andrew Farkas’s recent venture in commercial real-estate brokerage is quietly downsizing its New York office. NAI Global, a network of more than 200 brokerage firms around the world, has reduced the number of brokers in its Manhattan office from 12 to four, according to people familiar with the matter.

* Hollywood may leave movie-goers feeling a little too stuffed this holiday season. Twelve movies are set to open at 500 theaters or more between Dec. 12 and Dec. 25, the highest number in recent time. Over the past decade, the number of movies opening nationwide in the two weeks leading up to Christmas has averaged fewer than 10.

* The leadership upheaval at BlackBerry Ltd continues under interim Chief Executive John Chen, according to people familiar with the matter. The smartphone makers’ executive vice president in charge of global sales, Rick Costanzo, will be leaving the company by early next year, while Chris Wormald, who was in charge of BlackBerry’s mergers and acquisitions strategy, will be gone by the end of this month.

* Oracle Corp has had a rocky year. On Wednesday, investors will get a better read on whether it was a blip, or if the competition is starting to dent the corporate-technology giant.

* Corporate acquirers are no longer willing to settle for “buyer beware.” In a number of recent mergers, acquirers have demanded unusually tight protection against undiscovered alleged criminal activity that could result in big fines or reputation hits down the road.

* The collapse of a regional Australian airline, Brindabella Airline, flying to remote mining towns has highlighted pressures facing companies that rode the wave of booming investment in resources but which have recently seen business dry up.

Royal Bank of Canada, the country’s largest bank, is mulling over spinning off parts of its proprietary trading business, a move that demonstrates the long reach of the United States’ new Volcker rule against banks speculating with their own money.

Toshiba’s U.S. unit Westinghouse is close to announcing plans to buy Spanish utility Iberdrola’s 50 percent stake in British nuclear consortium NuGen for over 100 million pounds ($163 million), according to sources.

Vodafone’s Greek business has been slapped with a 250 million euro ($343 million) lawsuit claiming that the world’s No. 2 mobile operator breached its contracts with a Greek retail partner.

Sompo Japan Insurance is in advanced talks to buy the privately held Lloyd’s of London syndicate Canopius Group for about 600 million pounds.

Credit Suisse plans to back an online marketplace for investment banking and hedge fund software, highlighting the latest attempt by an investment bank to reduce the sector’s fast-rising technology costs.

NYT

* All across the country, booksellers have a Christmas wish: that the e-book thrill is gone. There is reason to believe it will come true. E-book sales have flattened in 2013, giving publishers and bookstores hope that consumers’ appetite for print books will be renewed during the most crucial sales period of the year.

* BigDog, Cheetah, WildCat and Atlas have joined Google’s growing robot menagerie. Google confirmed that it had completed the acquisition of Boston Dynamics, an engineering company that has designed mobile research robots for the Pentagon. The company has gained an international reputation for machines that walk with an uncanny sense of balance and even – cheetahlike – run faster than the fastest humans.

* A proposed $745 mi
llion tie-up between the Chinese supermarket operator Wumart Stores and C.P. Lotus, a retailer in China controlled by the Thai billionaire Dhanin Chearavanont, has fallen apart after the two sides failed to agree on final terms of the deal, both companies said Monday.

* Tim Armstrong, chief executive of AOL, is finally winding down Patch, a network of local news sites that he helped invent and that AOL bought after he took over.

* Budget Travel, the 15-year-old magazine that printed its last issue in October 2012, has spent 2013 fighting to survive in bankruptcy court. But it appears that Budget Travel may be turning a corner as it has found ways to generate revenue through digital subscriptions on iPad, Kindle, Nook and Android devices.

* Airbnb, which lets travelers rent accommodations in private residences worldwide, is introducing its first integrated, national advertising campaign on Monday, using birds and bird houses as a metaphor for its customers and their accommodations.

* The bond between banker and diamond dealer has long been a cozy one in an industry shaped by an insular culture of carats and cash, secrets and intrigues, weddings and bar mitzvahs. But lately those old bonds are dissolving in the packed square mile of gem traders here that forms the hub of the global diamond industry. A flurry of legal cases, investigations and leaked bank documents have drawn attention to the opaque movement of diamond-backed money.

* Established electronics retailers have gone to great lengths in recent months to overhaul their stores. And the heavyweights behind many of the devices – the Microsofts, Googles and Intels – have moved to open retail stores of their own. Behind all the investments in retailing is one of the technology industry’s favorite buzzwords: “user experience.”

Canada

THE GLOBE AND MAIL

* Ontario Progressive Conservative Leader Tim Hudak is pledging to put subway construction at the top of the government’s priority list – and move other infrastructure projects down – in a bid to break gridlock in the Toronto region.

* The federal government’s proposal to create a national securities watchdog is a violation of the Constitution and an intrusion into a provincial jurisdiction that defies a recent a Supreme Court of Canada ruling, says Quebec Finance Minister Nicolas Marceau.

Reports in the business section:

* Prince Edward Island is floating a plan to delay the launch of an expanded Canada Pension Plan to 2018 in a bid to forge a consensus among the provinces, and to push the federal government to act in reforming retirement benefits.

* They may take home huge paychecks, but Canada’s top CEOs are also writing big checks to cover their income tax bills. The chief executive officers of Canada’s 60 largest companies paid about $2.5 million each in income tax in 2010 on average total compensation of $6.2 million, according to a new study by compensation consulting firm McDowall Associates.

* Barrick Gold Corp is seeking to align the bulk of its executives’ compensation with the gold company’s performance and is expected to require top managers to hold their stock until retirement.

NATIONAL POST

* Police would have the option of ticketing people for a range of minor offences – instead of laying criminal charges – under a plan that could yield significant savings for the cash-strapped justice system.

* Canada’s newest union has expanded its membership to include everyone. Unifor – Canada’s largest private sector union, which formed on Labor Day from the existing Canadian Auto Workers and Communications, Energy and Paperworkers Union of Canada – has opened its doors to part-time workers, the self-employed, those without a job and even political activists by asking people to organize “community chapters” around a common cause, rather than an employer.

FINANCIAL POST

* Canada Post’s $6.5 billion pension shortfall is just a fraction of the more than $150 billion in unfunded pension liabilities facing the federal government for its employee pension plans, raising new questions about the solvency of those plans, benefits for workers and costs for taxpayers.

* WestJet Airlines Ltd has big plans to push into the East in 2014 by expanding its new low-cost regional carrier Encore in the spring, and launching flights to Europe from Atlantic Canada next summer. To accommodate these changes, WestJet will establish bases in Vancouver and Toronto, in addition to Calgary, early next year.

China

CHINA SECURITIES JOURNAL

– National Development & Reform Commission, China’s top planning body, said the country will allocate more resources for fundamental and strategic projects such as railway construction and low-income housing projects, while cutting investments in smaller projects in competitive sectors.

SHANGHAI DAILY

– China’s lunar lander and the rover it carried have sent back photos they took of each other to Earth.

CHINA DAILY

– China’s top drug administration is holding back 450,000 hepatitis B vaccines after two babies died following injections last week. Officials said no clear link has been established between the vaccines and the deaths.

PEOPLE’S DAILY

– In order to improve the work ethics of party members, institutional mechanisms must also change, said a commentary in the paper that acts as the party’s mouthpiece.

CHINA FINANCE NETWORK

Central Huijin Investments, a government-owned asset management firm, has quietly increased its holdings in New China Life Insurance and Everbright Bank.

Britain

The Telegraph

STANDARD CHARTERED FORCED BY BANK TO STRIP TOP EXEC OF RISK ROLE

The Bank of England has forced Standard Chartered to strip its finance director, Richard Meddings, of his responsibility for risk at the emerging markets-focused lender.

JAPAN’S SOMPO DUE TO BUY INSURER CANOPIUS

The Lloyd’s of London insurer Canopius is expected to be bought by Sompo Japan Insurance for 100 billion yen($969.56 million) this week.

ADIDAS MAY CUT SPORTS DIRECT FROM SUPPLY OF WORLD CUP 2014 FOOTBALL SHIRTS

Adidas may refuse to supply Sports Direct with Argentina, Germany and Spain football shirts ahead of the 2014 World Cup over concerns about the state of the discount retailer’s stores and customer service.

BIRDS EYE OWNER ASKS LENDERS FOR EXTRA BREATHING SPACE

Iglo, the debt-laden company behind Birds Eye frozen food, has asked its lenders for extra breathing space as its new chief executive, Elio Sceti, seeks to double sales by 2020.

The Guardian

INSURANCE FIRM RSA DENIES INVESTOR DEMAND FOR SALE

The troubled insurance firm RSA has denied that leading shareholders have demanded it put itself up for sale but admitted it was considering its options, including disposals and cost cuts.

VIRGIN MONEY TO ENTER CURRENT ACCOUNT MARKET

Virgin Money, the financial services company that took over Northern Rock, is expected to offer current accounts for the first time next year.

The Times

BOOST FOR JOHN LEWIS AS CHRISTMAS APPROACHES

Demand for sofas and carving trays helped John Lewis to post a 1.4 percent year-on-year rise in sales in the week to Dec. 14. Sales of 149.9 million pounds ($244.01 million) were up 12.6 percent on two years ago and an increase of 3.7 percent compared with last week’s figures.

FRACKERS SEEK COMIC RELIEF IN DISHING OUT BENEFIT FUNDS

The shale gas industry is in talks with the organisation that distributes donations on behalf of Sport Relief and Comic Relief to run its proposed 1.1 billion pound community benefit fund.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Allison Transmission (ALSN) upgraded to Buy from Neutral at BofA/Merrill
CRH Plc. (CRH) upgraded to Neutral from Underperform at BofA/Merrill
Charles Schwab (SCHW) upgraded to Equal Weight from Underweight at Evercore
Citigroup (C) upgraded to Overweight from Equal Weight at Evercore
Exxon Mobil (XOM) upgraded to Buy from Neutral at Goldman
FMC Technologies (FTI) upgraded to Neutral from Sell at Goldman
Fidus Investment (FDUS) upgraded to Strong Buy from Outperform at Raymond James
Fifth Street Finance (FSC) upgraded to Overweight from Equal Weight at Barclays
Fifth Third Bancorp (FITB) upgraded to Overweight from Equal Weight at Evercore
Lumber Liquidators (LL) upgraded to Buy from Neutral at Goldman
Monster Beverage (MNST) upgraded to Top Pick from Outperform at RBC Capital
Moody’s (MCO) upgraded to Overweight from Equal Weight at Barclays
Oceaneering (OII) upgraded to Buy from Neutral at Goldman
Old Dominion (ODFL) upgraded to Buy from Hold at Deutsche Bank
St. Jude Medical (STJ) upgraded to Outperform from Market Perform at BMO Capital
TASER (TASR) upgraded to Overweight from Neutral at JPMorgan
Yum! Brands (YUM) upgraded to Outperform from Market Perform at Bernstein

Downgrades

AMD (AMD) downgraded to Underperform from Perform at Oppenheimer
Aveo (AVEO) downgraded to Underperform from Sector Perform at RBC Capital
Broadcom (BRCM) downgraded to Perform from Outperform at Oppenheimer
Cirrus Logic (CRUS) downgraded to Underperform from Perform at Oppenheimer
Con-way (CNW) downgraded to Hold from Buy at Deutsche Bank
Hercules Technology (HTGC) downgraded to Market Perform at Raymond James
Jazz Pharmaceuticals (JAZZ) downgraded to Neutral from Buy at Goldman
Leap Wireless (LEAP) downgraded to Equal Weight from Overweight at Barclays
Marathon Oil (MRO) downgraded to Neutral from Buy at Goldman
Navistar (NAV) downgraded to Neutral from Outperform at RW Baird
Nielsen (NLSN) downgraded to Market Perform from Outperform at BMO Capital
PNC Financial (PNC) downgraded to Equal Weight from Overweight at Evercore

Initiations

Analogic (ALOG) initiated with a Buy at Brean Capital
Avianca (AVH) initiated with a Buy at Citigroup
Evogene (EVGN) initiated with a Neutral at Piper Jaffray
Impax (IPXL) coverage resumed with a Buy at Goldman
Navigator Holdings (NVGS) initiated with a Buy at Jefferies
Navigator Holdings (NVGS) initiated with an Overweight at Evercore
PVH Corp. (PVH) initiated with a Buy at UBS

HOT STOCKS

AerCap (AER) to acquire ILFC from AIG (AIG) for $3B in cash, 97.56M shares
Harvest Natural (HNR) reported share purchase agreement to sell interests in Venezuela
Carlyle Group (CG) committed up to $200M in Discover Exploration Limited
CME Group (CME) announced solution to delivery gap in Treasury futures
IBM (IBM) said will ‘vigorously fight’ lawsuit by Louisiana Sheriffs’ Pension Fund
GSK (GSK) initiated offer to increase stake in Indian subsidiary
Alaska Air (ALK), flight attendants tentatively agreed on five-year contract

NEWSPAPERS/WEBSITES

Fed officials face a delicate decision at their policy meeting this week, with stronger economic figures and a Washington budget deal adding fuel to the debate over whether to pull back on their signature bond-buying program, the Wall Street Journal reports
With HealthCare.gov website access improving and the initial deadline to sign up for coverage looming December 23, insurers are starting to blanket the airwaves and social media with glitzy ads urging consumers to buy their plans (WLP, AET, CI, WPPGY, IPG), the Wall Street Journal reports
Telecom Italia (TI) has not received information from BlackRock (BLK) regarding an increase in its stake in the Italian telecoms group to 10.14%. That stake would make BlackRock the second biggest shareholder in Telecom Italia, and give it a potentially pivotal role at a shareholder vote on Friday on whether to oust the company’s board, Reuters reports
Workers at Amazon.com’s (AMZN) German operations were set to go on strike today in a dispute over pay that has been raging for months. A delegation of German workers will also protest at Amazon’s headquarters in Seattle, helped by U.S. workers unions, Reuters reports
U.S. and Hong Kong stock market regulators are demanding that Chinese companies provide investors more warnings about the risks of a legal structure commonly used to list those shares overseas. The SEC pressed Baidu Inc. (BIDU) to make additional disclosures about its corporate structure, citing the potential for foreign owners to lose control, Bloomberg reports
Facebook (FB), Wal-Mart (WMT) and other companies planning to use facial-recognition scans for security or tailored sales pitches will help the Commerce Department write rules for how images and online profiles can be used, Bloomberg reports

BARRON’S

PayPal could drive eBay (EBAY) stock 20% higher
YPF SA (YPF) could be worth three times its current price
Innophos Holdings (IPHS) could rise 30%
Hilton Worldwide (HLT) looks expensive
athenahealth (ATHN) will probably report losses this year, next year
Time to take profits in Deckers Outdoor (DECK)

SYNDICATE

Kips Bay Medical (KIPS) files to sell 539,620 shares for holders
RMG Networks (RMGN) files to sell 150,000 shares for holders

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/8FMSnP_0VO0/story01.htm Tyler Durden

Overnight Ramp Capital Defends 50 DMA, Sends Futures Surging On Latest Low Volume Melt Up

Following last night’s freak central-planning accident (previously in history known as “selling”) in the S&P futures, we said that “we expect Overnight Ramp Capital to arrive promptly or else confidence in central-planning may take a hit ahead of the Wednesday Taperish FOMC, and Thursday’s double POMO.” A few hours later, even we were surprised by how high the low volume tape managed to drag ES, which staged a dramatic 20 point comeback, on the back of a sharp reversal in FX driven higher by both a stronger Euro (helped by better than expected German and Eurozone PMIs offsetting China PMI weakness, and lack of optimism in the core Japanese Tankan) and a weaker Yen, the two key signals for E-mini directionality. Sure enough, at last check the futures we trading just why of the “independence day” 1776, after briefly breaking the 50-DMA and then being supported by 1760 in the futures. The rest is perfectly predictable central-planning history.

Summarizing, tonight’s action, FOMC week has kicked off with Asian markets down after a lower than expected Chinese manufacturing PMI, raising fears that the Chinese economy may not be picking up steam as well as some anticipated. This lead to the previously reported big block trade in the S&P futures which tested the 50 DMA. The Nikkei closed down -1.6%, the Hang Seng is down -0.6% and the Shanghai Composite is down -1.6%.

However, European easily equities shrugged off a risk-averse Asia-Pacific trading day after Tokyo trade saw a break of the 50DMA in S&P futures saw a significant block trade passing through, sending the US equity futures and regional indices lower in a poor start to the week. European equities capitalised on the losses amid touted bargain-hunting to register gains at the mid-point of the session. The telecoms sector tops the board after reports that Sprint could be eyeing Deutsche Telekom’s T-Mobile US unit, and news that US fund BlackRock have acquired a significant stake of Telecom Italia’s equity. As was the case last week, volumes remain particularly thin, with traders sitting on the side-lines ahead of the FOMC rate decision on Wednesday. European fixed income markets trade flat after pulling back from intraday highs as German Manufacturing PMI exceeded expectations, driving the Eurozone-wide figure forward and countering France’s disappointing submissions.

Markets continue to reprice their Fed taper expectations, as Goldman Sachs reaffirm their call for a March taper due to low inflation, a preference for stronger forward guidance and the minority view of a December taper.

The rest of today’s session looks ahead to empire manufacturing and industrial production data from the US ahead of a scheduled appearance from the Fed Chairman Ben Bernanke at 1900GMT/140EST, although it is highly unlikely he will make any reference to policy ahead of the convening of the FOMC tomorrow. ECB’s Draghi is scheduled to speak in front of European parliament at 1400GMT/0900EST

Event Calendar

ECB president Draghi speaks at the EU Parliament (9:00)
Empire mfg survey, cons 5.0 (8:30)
Industrial output, cons 0.6%, capacity use, cons 78.4% (9:15)
Markit PMI, cons 55.0 (8:58)
TIC capital flows, cons $40bn (9:00)
POMO: Fed to purchase $2.75b-$3.5b in 2021-2023 sector (11:00)

Overnight headline bulletin from Bloomberg and RanSquawk

European equities shrugged off a risk-averse Asia-Pacific trading day following the release of a better than expected German and Eurozone Manufacturing PMIs.
Goldman says first Fed tapering move is more likely in March, with the taper this week unlikely because the case for tapering is mixed on basis of data since Oct.
Early USD weakness was further exacerbated by the possibility of repatriation flows for EUR as banks prepare for the ECB’s Asset Quality Review.
Treasuries gain, 30Y leads, as market waits Wednesday’s Fed decision on QE purchases and interest rates; views on tapering are split after jobs data; roundup here.
10Y yield little changed over five trading days ended Dec. 13; on Thursday closed at highest since Sept. 13 after retail sales data suggested a higher probability of Fed taper
After misleading investors with a time line for tapering its unprecedented stimulus, the Fed now is stressing that any reduction in bond purchases will depend on the economic outlook — and the message is sinking in
HSBC/Markit’s index of Chinese manufacturing fell to 50.5 in Dec., a three-month low, from 50.8 the previous month and median est. of 50.9 in Bloomberg survey
Euro-area factory output rose to 52.7 in Dec. from 51.7 in Nov., median est. 51.9; Germany led, with PMI manufacturing at 54.2 vs est. 53.
Large Japanese businesses pared their projections for capital spending this fiscal year, signaling challenges for Abenomics as a sales-tax increase looms in April
The London housing market will cool next year as a proposed tax on property sales limits demand from overseas buyers, Rightmove Plc said
The Obama administration last year took longer than normal to clear rules ranging from environment protection to food safety, a shift that an advisory body says may have been politically motivated
The U.S. failed to send data to health insurers for about 15,000 people who enrolled in Obamacare through early December, an error corrected this week before it could jeopardize their coverage, the government said
Sovereign yields mostly lower. EU peripheral spreads steady. Asian stocks decline; European stocks and U.S. equity index futures gain. WTI crude and copper higher; gold declines

Asian Headlines

Chinese HSBC Flash Manufacturing PMI (Dec) M/M 50.5 vs. Exp. 50.9 (Prev. 50.8); 3-month low.

China have set their 2014 growth target at about 7.5%. China’s economy is still under downward pressure and the country should keep its policies stable and flexible, paving the way for further reforms, according to a statement from the annual Central Economic Work Conference which sets the tone for next year’s macroeconomic policies.

Japanese Tankan Large Manufacturers Index (Q4) Q/Q 16 vs. Exp. 15 (Prev. 12); Highest level in 6-years.

Japan may set FY 2014 real GDP growth estimate at 1.3% from 1.0% after considering the impact of the stimulus package.

EU & UK Headlines

ECB’s Draghi said ECB is ready and able to take further action to stimulate growth and sees Euro area growth of 1.1% in 2014 and 1.5% in 2015.

ECB’s Asmussen said he will resign as ECB board member shortly, saying he has accepted an offer to become deputy labour minister in the new German government. There were also reports that Bundesbank VP Sabine Lautenschlaeger is to replace Asmussen in ECB.

German SPD members back coalition with Merkel’s CDU-CSU bloc, with 76% of the vote, clearing the way for a German coalition.

German finance minister Schaeuble says main goal for next 4 years to stabilize Euro area.

Bundesbank expects German economy to expand strongly in Q4 2013 and Q1 2014 with an expected piku up in industrial production, particularly cars.

Rightmove said that asking prices for houses in England and Wales could climb next year at their fastest rate since 2006, rising another 8% due to shortage of homes on the market

German PMI Manufacturing (Dec A) M/M 54.2 vs Exp. 53.0 (Prev. 52.7) – German PMI Services (Dec A) M/M 54.0 vs Exp. 55.3 (Prev. 55.7)

Eurozone PMI Manufacturing (Dec A) M/M 52.7 vs Exp. 51.9 (Prev. 51.6)

– Eurozone PMI Services (Dec A) M/M 51.0 vs Exp. 51.5 (Prev. 51.2)
– Eurozone PMI Composite (Dec A) M/M 52.1 vs Exp. 51.9 (Prev. 51.7)

French PMI Manufacturing (Dec P) M/M 47.1
vs Exp. 49.0 (Prev. 48.4)

– French PMI Services (Dec P) M/M 47.4 vs Exp. 48.7 (Prev. 48.0)

Eurozone Trade Balance SA (Oct) M/M 14.5bln vs Exp. 14.5bln (Prev. 14.3bln, Rev. 12.4bln)

– Eurozone Trade Balance NSA (Oct) M/M 17.2bln vs Exp. 15.0bln (Prev. 13.1bln. Rev. 10.9bln)

US Headlines

Goldman says first Fed tapering move is more likely in March, with the taper this week is unlikely because the case for tapering mixed on basis of data since Oct.

Fed watcher Hilsenrath said that Fed officials face a delicate decision at their policy meeting this week, with stronger economic figures and a Washington budget deal adding fuel to the debate over whether to pull back on their signature bond-buying program. Hilsenrath added that whenever the Fed starts winding down the bond program, it is clear it is on the way toward removing a tool that has been the market’s crutch for more than a year. Mr. Bernanke might start the process, but it will be Ms. Yellen’s job to finish it.

US Senate Majority Whip Durbin says Senate Democrats are still short of the votes needed to pass the bipartisan budget deal that was passed by the House of Representatives last week.

Republicans are gearing up for a new fight with President Obama over the need to lift America’s borrowing limit early next year, raising concerns that the fiscal truce established in last week’s bipartisan deal may be shortlived.

Equities

European equities have continued to rise in recent trade amid light volumes and initially being red across the board in early trade following the risk off sentiment seen across the Asia session. In terms of sectors, financials are one of the top performers this morning following a slight altering in the Fed taper timeline after Goldman Sachs said the central bank is likely to hold off from tapering its USD 85bln monthly bond-buying program until next year. Aggreko are the outperforming stock this morning after the Co. said FY likely to be ‘slightly’ ahead of expectations.

Deutsche Telekom are also seen with gains after reports for T-Mobile US, which the co. owns a 66.83% stake in, Sprint are said to be working for a bid for T-Mobile US.

From an FX perspective, the USD index is seen down around 0.25%, after initially being lead lower by USD/JPY after printing multi-year highs last week, with focus remaining on this week’s FOMC decision. As European participants came to market, early USD weakness was further exacerbated by the possibility of repatriation flows for EUR as banks prepare for the ECB’s Asset Quality Review. Furthermore, this morning’s three-month Euribor fix showed another increase as it came in at 0.290% vs. Prev. 0.282%. It is worth noting that overnight, AUD was initially pressured by the weaker than expected Chinese PMI data and comments from RBA Stevens that the government are to abandon their budget surplus targets. However, AUD did recover as it came in to strong bids towards 0.8900.

Commodities

WTI and Brent futures are trading higher with attention placed upon comments from Eastern Libya rebel leader Jedran said oil ports are not to reopen after the Libyan government did not meet conditions for handover of control.

Iraq are currently producing 3.3mln bpd of oil and are targeting more than 4mln bpd of crude next year according to deputy PM Al-Shahristani.

The Keystone XL pipeline has lost support from Continental Resources, one of the companies committed to ship crude on the pipeline, after they said the XL pipeline is no longer needed.

* * *

DB’s Jim Reid concludes the overnight recap

So all eyes on 2pm EST (7pm GMT) Wednesday as the 2-day FOMC meeting concludes with a knife-edge decision. It’s worth reminding readers that our Chief US Economist Peter Hooper thinks that the Fed might not make their final decision until after tomorrow’s CPI is known to them. Peter argued on DB’s World Outlook call last week that three of four criteria for the Fed to start tapering now look to be met, with the only missing element being their commitment to keeping inflation on target, which is an important miss in our eyes, especially in an era of very high debt. The other three that Peter sees as being met are (1) a significant improvement in the labour market, (2) confidence that the economic recovery is self sustaining (very close, especially with recent data), and (3) the removal of fiscal uncertainty (the deal over the past week has lessened concerns significantly).

With regards to inflation, Friday’s PPI number left YoY PPI and core PPI at just +0.7% and +1.3% respectively against consensus of +0.8% and +1.4%. Given the Fed’s dual mandate recent low inflation numbers are a genuine reason not to taper if the Fed believe they will be sustained into 2014. However most of their forecasts see it climbing higher with the economy next year so they could excuse the current low prints if they were so minded and assume it will improve but it would help their argument if tomorrow’s CPI wasn’t weak. Consensus is expecting a +1.3% number for the YoY CPI number and +1.7% for YoY Core CPI. So a possible pivotal release tomorrow.

Ahead of this, FOMC week has kicked off with Asian markets down after a lower than expected Chinese manufacturing PMI, raising fears that the Chinese economy may not be picking up steam as well as some anticipated. As we type the Nikkei is down -1.1%, the Hang Seng is down -0.5% and the Shanghai Composite is down -1.4%. Credit is marginally outperforming, with the Asia XJ index tighter by around 1.4bps.

Over the weekend the tensions in the East China Sea went up another notch after Japanese PM Abe stated after an ASEAN summit that China’s new air defence identification zone was a violation of international law. China responded by expressing their, “strong dissatisfaction,” with his comments. The concern is that whilst direct confrontation seems extremely unlikely China’s new defence zone has certainly raised the chances that a miscalculation by either side in this hotly contested area could see tensions rise to dangerous heights. In Europe members of Germany’s SPD party voted overwhelmingly to back the SPD’s planned coalition with Merkel’s CDU which should see the new Grand Coalition government take office this week as Merkel presents here new government to the Bundestag on Tuesday.

European equity markets were marginally down and US markets slightly positive on Friday after a weak open stabilised later in the day helped in part by the low US PPI number which softened some taper expectations. Credit outperformed on the day, with Europe’s Main, Xover and US CDX HY all tighter by 1bp, 6bps and 3bps respectively after European credit opened strongly following a weak Thursday.

In terms of news flow Friday saw reports that the US Congress had reached an agreement on legislation (known as Trade Promotion Authority) to allow fasttrack votes in 2014 if the White House achieves its aim to agree new trade deals with both the EU and Pacific Rim nations (the TPP deal). The bill will be put to a vote in January and if passed would allow any trade deals to face a simple up-or-down vote and stop Congress from adding amendments to the deal. This should help the US reach trade agreements as it will ease other nations concerns that any deal they reach with the US President will be altered significantly by Congress. As the FT reports, this Trade Promotion Authority legislation is a controversial subject and will likely see fierce battles in Congress in the new year. Looking ahead if the US can agree trade deals with European and Pacific Rim nations in 2014, these with the recent Doha agreements have the chance to provide a positive tailwind for global growth in the medium- and long-term.

With what continues to be a busy December for us here it’s good to see that economic data isn’t slowing down yet for Christmas eit
her in what will be a busy week of data releases. In the US, today will see Empire Manufacturing, Nonfarm Productivity and an important US PMI Preliminary number (consensus is expecting a rise to 55). As we’ve already flagged Tuesday will see CPI data and Wednesday we will get the Fed’s rates and purchase decision. On Thursday we have initial jobless claims before Friday’s Q3 GDP revisions and PCE data. In Europe today we have PMI’s for Germany and the Eurozone. UK and Eurozone inflation data will be released on Tuesday and we’ll have theBank of England’s minutes on Wednesday. Nevertheless, all eyes will be on the Fed’s decision on Wednesday

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BaBuSHCaiN…

“Just as we did for the Occupy Wall Street protestors in Zucotti Park and the Snow Park encampment in Oakland, we are here to support your just cause…”

WB7:

Just sayin’

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S&P Futures, Nikkei Slide On Large Block Trade

Just after 10pm Eastern, a big block in the S&P futures, over 10k contracts, was dumped in the very thin Sunday night tape, sending the complex lower by over 10 points, and after opening at 1768.5, ES dumped as low at 1754 in a matter of seconds, before recovering some of the losses to 1760. The Nikkei was hit concurrently by correlation algos impacted by the same downdraft, which also pinged the various JPY pairs lower, if leaving the EUR largely untouched. Needless to say there was no news of note to prompt this move, which appears to have been either a partial fat finger, or someone trying to exit the market in a hurry ahead of next week’s FOMC festivities.

ES:

Nikkei likewise dropped:

If a reason for the drop manifests itself, we will update this post, in the meantime, we expect Overnight Ramp Capital to arrive promptly or else confidence in central-planning may take a hit ahead of the Wednesday Taperish FOMC, and Thursday’s double POMO.

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S&P Futures, Nikkei Slide On Large Block Trade

ES:

Nikkei likewise dropped:

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Is The Perfect Storm Coming For Gold?

Due to western central bank price manipulation, the mining sector is in critical condition, the supply line is all but halted, and the physical supply is being swallowed up by Asia. The last shoe to drop is for major mining companies to start closing down production at major mines. Though this would be perceived as the end for gold, speculators will be happy to know that this would be the beginning of the biggest Fed induced bubble in history! But unlike previous Fed bubbles where they support the price increase, the gold bubble will be a result of western central planners mis-managing the gold price for the past 3 decades and finally losing control. As Peak Resources explains in the brief clip, the perfect storm is coming for gold…

Via Peak Resources,

Friday October 11th, gold trading was shut down for 10 seconds according to the CME.

Why, because someone sold 2 million ounces of gold at one time. Who does this? Who sells nearly 2 and half percent of annual gold production in a single minute? The gold valued at over $2.5 billion could not have been sold by a small trader, and certainly not the smart money, institutional investors know that you don’t exit a large trade like this…

So who could it be? Try the dumb money, The Western Central Banks.

As noted by organizations like GATA, TF Metals Report, ZeroHedge, and Shtfplan, gold manipulation is out in the open. Friday October 11th is just one of the daily examples.

With the western central banks suppressing the price, the eastern central banks have been happy buyers.

However, PeakResources.org believes this gold price suppression scheme is nearing its end.

With the Federal Reserve on a fiat currency suicide mission with QE forever, and the U.S. federal government bankrupt, the days of dollar supremacy are in its last days.

For gold though, the central banks have really screwed themselves.

At a price of $1,250, gold mining companies can no longer make a profit. Recent studies show their all in cash cost anywhere from $1,400 to as high as $1,700. Liquid fuels, human energy, and new exploration are costly in the mining process, so it is unlikely these costs can be cut to accommodate the low gold price.

Since gold’s peak in 2011, the TSX Venture exchange, home to the worlds gold exploration companies, is down more than 59%

The gold juniors index, the GDXJ, is down 83%

And the large cap gold companies, despite seeing a 400% increase in the price of gold over the past 12 years, are trading at lower valuations then they did even 20 years ago.

As noted in our video Peak Gold, no major gold discoveries have been found in more than 10 years! Gold production as a whole has plateaued.

Remember, all mines have a limited supply of gold, at some point in time they either deplete themselves or become uneconomical. Uneconomical meaning companies can’t mine for profit, which is exactly the case for nearly all gold mines today!

Consider a very famous gold mining region, South Africa

In 1971 South Africa produced 47.5 million ounces of gold, accounting for 68% of global mine production.

In 2011, South Africa accounted for only 7% of gold production with about 8 million ounces of mine production.

Despite all the technological advances and billions in exploration and development, South African gold production is down 82%.

South Africa isn’t an anomaly either, here in the U.S. production in the past 20 years is down 30%.

Current discoveries are small, in remote areas, and are lower grade deposits.

PeakResources.org recently attended a gold mining event in London, what we learned was that exploration budgets were being slashed! No development, no exploration, and a scaling back of projects.

What this all leads to is a price spike in gold, just as gold rose rose from $35 to $850 in the 70s, The Dow Jones from 2,000 to 11,000 in the 1990, and Bitcoin from a penny to $1,200 more recently, so to can gold have a parabolic spike.

The perfect storm is coming for gold…

Due to western central bank price manipulation the mining sector is in critical condition, the supply line is all but halted, and the physical supply is being swallowed up by Asia.

The last shoe to drop is for major mining companies to start closing down production at major mines. Though this would be perceived as the end for gold, speculators will be happy to know that this would be the beginning of the biggest Fed induced bubble in history! But unlike previous Fed bubbles where they support the price increase, the gold bubble will be a result of western central planners mis-managing the gold price for the past 3 decades and finally losing control.

With fiat currency being pumped into the system daily and the gold sector in shambles, the central banks are in for a big surprise because sooner or later supply and demand economics will crush the very people who are behind the devastation we have seen in the gold mining and precious metal industry.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/1sbiPsEYqgM/story01.htm Tyler Durden

Peter Schiff Bashes "Feeble And Fictitious" Budget Deal

David Stockman’s exclamation at the “betrayal” realized within the latest so-called “festerng fiscal” budget deal is taken a step further with Peter Schiff’s head-shaking diatribe on Congress’ inability to show that it is truly “capable of tackling our chronic and dangerous debt problems.” So America blissfully sails on, ignoring the obvious fiscal, monetary, and financial shoals that lay ahead in plain sight. I believe that will continue this dangerous course until powers outside the United States finally force the issue by refusing to expand their holding of U.S. debt. That will finally bring on the debt and currency crisis that we have created by our current cowardice.

Submitted by Peter Schiff via Euro Pacific Capital,

They Bravely Chickened Out

Earlier this week Congress tried to show that it is capable of tackling our chronic and dangerous debt problems. Despite the great fanfare I believe they have accomplished almost nothing. Supporters say that the budget truce created by Republican Representative Paul Ryan and Democratic Senator Patty Murray will provide the economy with badly needed certainty. But I think the only surety this feeble and fictitious deal offers is that Washington will never make any real moves to change the trajectory of our finances, and that future solutions will be forced on us by calamity rather than agreement.

There can be little doubt that the deal resulted from a decision by Republicans, who may be still traumatized by the public relations drubbing they took with the government shutdown, to make the 2014 and 2016 elections a simple referendum on Obamacare. Given the ongoing failures of the President’s signature health care plan, and the likelihood that new problems and outrages will come to light in the near future, the Republicans have decided to clear the field of any obstacles that could distract voters from their anger with Obama and his defenders in Congress. The GOP smells a political winner and all other issues can wait. It is no accident the Republican press conference on the budget deal was dominated by prepared remarks focusing on the ills of Obamacare.

Although he had crafted his reputation as a hard nosed deficit hawk, Paul Ryan claimed that the agreement advances core Republican principles of deficit reduction and tax containment. While technically true, the claim is substantively hollow. In my opinion the more honest Republicans are arguing that the Party is simply making a tactical retreat in order to make a major charge in the years ahead. They argue that Republicans will need majorities in both houses in 2014, and the White House in 2016, in order to pass meaningful reforms in taxing and spending. This has convinced them to prioritize short term politics over long term goals. I believe that this strategy is wishful thinking at best. It magnifies both the GOP’s electoral prospects (especially after alienating the energetic wing of their party) and their willingness to make politically difficult decisions if they were to gain majority power (recent Bush Administration history should provide ample evidence of the party’s true colors). Their strategy suggests that Republicans (just like the Democrats) have just two priorities: hold onto their own jobs, and to make their own party a majority so as to increase their currency among lobbyists and donors. This is politics at its most meaningless. I believe public approval ratings for Congress have fallen to single digit levels not because of the heightened partisanship, but because of blatant cowardice and dishonesty. Their dereliction of responsibility will not translate to respect or popularity. Real fiscal conservatives should continue to focus on the dangers that we continue to face and look to constructive solutions. Honesty, consistency and courage are the only real options.

In the meantime we are given yet another opportunity to bask in Washington’s naked cynicism. Congress proposes cuts in the future while eliminating cuts in the present that it promised to make in the past! The Congressional Budget Office (which many believe is too optimistic) projects that over the next 10 years the Federal government will create $6.38 trillion in new publicly held debt (intra-governmental debt is excluded from the projections). This week’s deal is projected to trim just $22 billion over that time frame, or just 3 tenths of 1 percent of this growth. This rounding error is not even as good as that. The $22 billion in savings comes from replacing $63 billion in automatic “sequestration” cuts that were slated to occur over the next two years, with $85 billion in cuts spread over 10 years. As we have seen on countless occasions, long term policies rarely occur as planned, since future legislators consistently prioritize their own political needs over the promises made by predecessors.

The lack of new taxes, which is the deal’s other apparent virtue, is merely a semantic achievement. The bill includes billions of dollars in new Federal airline passenger “user fees” (the exact difference between a “fee” and a “tax” may be just as hard to define as the difference between Obamacare “taxes” and a “penalties” that required a Supreme Court case to decide). But just like a tax, these fees will take more money directly from consumer’s wallets. The bigger issue is the trillions that the government will likely take indirectly through debt and inflation.

The good news for Washington watchers is that this deal could finally bring to an end the redundant “can-kicking” exercises that have frustrated the Beltway over the last few years. Going forward all the major players have agreed to pretend that the can just doesn’t exist. In making this leap they are similar to Wall Street investors who ignore the economy’s obvious dependence on the Federal Reserve’s Quantitative Easing program as well as the dangers that will result from any draw down of the Fed’s $4 trillion balance sheet.

The recent slew of employment and GDP reports have convinced the vast majority of market watchers that the Fed will begin tapering its $85 billion per month bond purchases either later this month or possibly by March of 2014. Many also expect that the program will be fully wound down by the end of next year. However, that has not caused any widespread concerns that the current record prices of U.S. markets are in danger. Additionally, given the Fed’s current centrality in the market for both Treasury and Mortgage bonds, I believe the market has failed to adequately allow for severe spikes in interest rates if the Fed were to reduce its purchasing activities. With little fanfare yields on the 10 year and 30 year Treasury bonds are already approaching multi-year highs. Few are sparing thoughts for yield spikes that could result if the Fed were to slow, or stop, its buying binge.

So America blissfully sails on, ignoring the obvious fiscal, monetary, and financial shoals that lay ahead in plain sight. I believe that will continue this dangerous course until powers outside the United States finally force the issue by refusing to expand their holding of U.S. debt. That will finally bring on the debt and currency crisis that we have created by our current cowardice.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/bf12rUwErjU/story01.htm Tyler Durden

Peter Schiff Bashes “Feeble And Fictitious” Budget Deal

Submitted by Peter Schiff via Euro Pacific Capital,

They Bravely Chickened Out

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Japanese Stocks Tanking After Schizophrenic Tankan

Japanese stocks are confused this evening (whether good news is bad news or bad news is good news). The headline Tankan business conditions (soft-survey) beat expectations modestly (a la Europe’s in the summer as it rode a wave of short-lived optimism) and pressing to 6 years highs (oh no – less QE?) But, the more forward-looking “manufacturing outlook” missed expectations by the most since March 2012. On the services side, things were worse, as the outlook there missed for the 11th quarter in a row. And the triple-whammy was the Capex spend missing expectations significantly (what no investment? where have we seen that before). The result – mixed news is bad news – Nikkei futures are down 150 from Friday’s close and JPY crosses have drifted back lower.

Headlines are “good” but the details are “bad”

And stocks are disappointed…

Charts: Bloomberg

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The Uncomfortable Truth Of A New Normal America (In One Cartoon)

Despite the ongoing declarations by Wall Street’s strategists and Washington’s leaders that recovery is here (or just around the corner), record numbers of Americans in poverty and government handouts suggest otherwise. However, the insidious chipping away at the possibility of the American Dream has been replaced by an IPO-chasing, zero-interest-income-earning, yield-reaching, insider-trading, ‘dance-while-the-music-is-playing’, beggars can be choosers, get-rich-quick-scheme nation of takers (and entitled-ers)…

h/t Sunday Funnies at The Burning Platform blog

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/IOvPRTw1n-s/story01.htm Tyler Durden