Tuesday, December 18, 2012

Tuesday Watch

Evening Headlines 
Bloomberg: 
  • Obama Offer Raises Tax Increase Threshold to $400,000. President Barack Obama made a new budget offer that would raise taxes by $1.2 trillion and increase tax rates for households earning more than $400,000 a year, up from $250,000, said a person familiar with the talks. Obama’s plan would cut $1.22 trillion in federal spending, including interest savings, said the person, who spoke on condition of anonymity. It would change the inflation measure used to calculate Social Security benefit increases. In his offer, Obama would increase the U.S. debt limit for two years
  • U.S. Banks Lack Liquidity to Withstand Crisis, Study Says. U.S. banks representing more than half the industry’s assets need an additional $840 billion in cash on hand to cover short-term obligations if financial markets seize up again, according to a study. The 11 financial firms surveyed, which have about $9.2 trillion in combined assets, need the funds in cash, Treasury bonds or other liquid assets to cover 30 days of debt costs and other expenses under international capital rules, according to a report released today by the New York-based Clearing House, which represents 18 of the largest lenders. The so-called liquidity coverage ratio, a buffer of banks’ liquid assets regulators require in case markets freeze, improved from 59 percent in the fourth quarter of 2010 to 81 percent in the second quarter of this year, the Clearing House said. Three of 11 companies surveyed have a coverage ratio of 100 percent or more while eight have shortfalls
  • China Home Prices Gain in Majority of Cities as Curbs Stay. China’s new home prices rose in the majority of cities the government tracks in November as property curbs slowed construction, reducing the supply available for sale. Prices climbed in 53 of the 70 cities from the previous month, compared with 35 in October, according to data from the National Bureau of Statistics today. That was the most in 18 months. Prices fell in 10 cities.
  • China to Stick to Property Curbs, Ministry Says. China will stick to its property curb policies, Liao Yonglin, an official from the Ministry of Land and Resources, said at a presser today, according to a transcript on the ministry's website.
  • China Foreign-Investment Declines for 12th Time in 13 Months. Foreign direct investment in China fell for the 12th time in 13 months, suggesting the nation’s economic-growth rebound has yet to attract a fresh influx of capital spending from abroad. Investment dropped 5.4 percent in November from a year earlier to $8.29 billion, the Ministry of Commerce said in Beijing today. FDI inflows in the first 11 months of the year fell 3.6 percent to $100 billion.
  • Copper Falls as Supplies, Budget Impasse Signal Slowing Demand. Copper fell to a one-week low in New York as a jump in stockpiles monitored by the London Metal Exchange and a U.S. budget standoff added to demand concerns. Inventories in warehouses tracked by the LME rose for an eighth session, climbing 9.5 percent to 298,625 metric tons, the most since Sept. 5, 2008, exchange data showed today.
  • Lacker Says Fed Asset Buying Won’t Speed Growth Above 2%. Federal Reserve Bank of Richmond President Jeffrey Lacker predicted the economy will grow 2 percent next year and said the Fed’s stepped up purchases of bonds won’t do much to spur the recovery. “It’s not clear that monetary policy, by itself, can bring about any material improvement in economic growth,” Lacker said today in a speech in Charlotte, North Carolina. “The supply of bank reserves is already large enough to support the economic recovery, and the benefits of further asset purchases are unlikely to be sizeable.
  • General Motors(GM) idles Malibu plant in Kansas for 5 weeks-source. General Motors Co idled the Kansas plant that makes the Chevrolet Malibu on Dec. 3 and will not reopen it until Jan. 7 in an attempt to cut into the hefty supply of the midsize sedan, said a source familiar with the situation. The plant, in Fairfax, Kansas, was to be down for a week-and-a-half beginning December 24 for a normal holiday break. An extra 3-1/2 weeks of no-production days were added to allow GM to work through the oversupply of the Malibu and the Buick LaCrosse, which is also made at the plant.
  • Samsung Wins Order Denying Apple Request for U.S. Sales Ban. Samsung Electronics Co. won a court order rejecting a permanent U.S. sales ban on 26 of its devices sought by Apple Inc. following a jury verdict in August finding infringement of six of the iPhone maker’s patents.
Wall Street Journal: 
  • The Fiscal Cliff: Live Stream.
  • Clues Hint at School Shooter's State of Mind.
  • Struggles Mount for Greeks as Economy Faces Winter. Maria Katri sent her son to live at a charitable home for poor boys after Greece's economy crashed. Now, as Greece slides deeper into depression, the widowed mother is so poor that her teenage daughter, who stills lives at home, is "jealous that her brother is having a better time than her in the institution," Ms. Katri says. The spread of economic hardship is fraying Greece's social fabric and straining its political cohesion as the country enters the harshest winter of its three-year-old debt crisis. Even the tightknit Greek family—an institution that has helped the population to absorb a collapse in employment—is under pressure as household incomes dwindle.
  • Probe Sparks Split on Trades. A regulatory investigation into whether stock exchanges have given unfair advantages to high-speed traders has sparked complaints against the exchanges, fueling a broader debate about how the market operates and is regulated. The Investment Company Institute, trade group for mutual funds, complained in a recent letter to the Securities and Exchange Commission that U.S. stock exchanges "facilitate strategies" for rapid-fire trading firms "that can lead to disorderly markets or that can benefit market participants at the expense of long-term investors." 
  • ECB Chief Defends Austerity Measures. European Central Bank President Mario Draghi urged governments to build on "painful progress" they have made on narrowing budget deficits and overhauling their economies, despite the near-term damage these policies have inflicted on business activity and unemployment. Mr. Draghi's strident defense of fiscal austerity as a means of ensuring economic growth in the long run comes against mounting criticism that these measures are weakening already-fragile countries such as Spain and Portugal, leading to persistently high unemployment and sharp contractions in output.
  • Apple(AAPL) in Talks With Foursquare About Data-Sharing Deal.
  • ObamaCare's Faux Federalism. GOP Governors are smarter than some of their conservative critics. As for conservatives who say running an exchange is a last stand against single-payer medicine, well, all we can say is good luck with that one. ObamaCare was designed to make a Washington-dominated and -paid for system inevitable. Within three or four years the same people who passed ObamaCare will be talking about "solving" ObamaCare's government-created problems with more government. The 26 Governors are merely saying they won't be accomplices.
Fox News:
  • The Cost of Spending: Federal government racking up huge tab. The problem is right now you have a situation in which the government in its overspending ways tries to rationalize it by saying that actually the problem is we're under-taxing the American public,” he said. “It's like your irresponsible brother-in-law runs up his credit cards and goes bust and says the real problem is because you've stopped sending me checks."
CNBC: 
  • Even Without Congress, Obama Could Act to Restrict Guns. Unburdened by re-election worries and empowered by law to act without Congress, U.S. President Barack Obama could take action to improve background checks on gun buyers, ban certain gun imports and bolster oversight of dealers.
Zero Hedge: 
Business Insider:
NY Times:
Reuters: 
  • Obama held talks with Biden, Cabinet members on Newtown response. President Barack Obama held talks on Monday with Vice President Joe Biden and three Cabinet members to look at ways to respond to the Newtown, Connecticut, school shootings, a White House official said.
  • Obama 'cliff' offer is flawed but positive - Boehner aides. Aides to House of Representatives Speaker John Boehner said on Monday the latest White House offer on resolving the fiscal cliff impasse is flawed but moves negotiations in a positive direction. "Any movement away from the unrealistic offers the president has made previously is a step in the right direction, but a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced," said Brendan Buck, a Boehner spokesman. "We hope to continue discussions with the president so we can reach an agreement that is truly balanced and begins to solve our spending problem," Buck said.
  • Syria 'genuinely worried' extremists could get chemical weapons. Syria is "genuinely worried" that some countries might equip extremist groups with chemical weapons and then claim they were used by the Syrian government, the country's U.N. envoy said in a letter to U.N. chief Ban Ki-moon and the Security Council. Syria's U.N. Ambassador Bashar Ja'afari also accused the U.S. government of supporting "terrorists" in Syria and waging a campaign that claims Syria could use chemical weapons in the 20-month-old civil war that has killed at least 40,000 people.
  • Boeing(BA) resumes $3.6 bln share repurchase program. Boeing Co said Monday it will raise its dividend 10 percent and resume share repurchases after suspending them in 2009. The Chicago-based aerospace company set a regular quarterly dividend of 48.5 cents per share, payable on March 8, meaning Boeing will not join Wal-Mart Stores Inc and other companies that decided to issue dividends in December to avoid the looming possibility of a tax increase in the new year.
  • Wal-Mart(WMT) affiliate used bribes to open 19 new stores in Mexico: NY Times. Wal-Mart Stores Inc's Mexican affiliate routinely used bribes to open stores in desirable locations, according to a New York Times investigation published Monday, which cites 19 instances of the retail giant paying off local officials.
Telegraph:
  • Major protests expected in Spanish cities. Hundreds of thousands of people are expected to pack the streets of Spanish cities in evening protests against the conservative government's anti-crisis austerity measures.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 109.0 unch.
  • Asia Pacific Sovereign CDS Index 84.0 -.25 basis point.
  • FTSE-100 futures +.51%.
  • S&P 500 futures +.27%.
  • NASDAQ 100 futures +.33%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • None of note
Economic Releases
 8:30 am EST
  • The 3Q Current Account Deficit is estimated at -$103.0B versus -$117.4B in 2Q.
 10:00 am EST
  • The NAHB Housing Market Index for December is estimated to rise to 47 versus 46 in November.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Fisher speaking, 5Y T-Note auction, weekly retail sales reports, China property price data and the (MED) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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