Wednesday, December 11, 2013

Morning Memo: Wednesday, December 11, 2013

"Morning Memo" begins below this "NOTE for  NEWCOMERS" to "Morning Memo"...... Each morning, we post a short bullet-point list of noteworthy events, data, etc that find their way into the assessment of global markets.  It's far from complete and is not meant to be an exhaustive reconciliation of all things that could possibly impact stocks, bonds, currencies and commodities!  Rather, it's best viewed as a cryptic memo of "highlights", noteworthy items that took place in Asia, European and US hours.....and color-coded 'Red' for seemingly negative impact on equity markets, 'Green' for positive.
This will also serve as a useful review mechanism, as scrolling through the series of "Morning Memo" posts over time ought to summarily highlight what generally drove price action.  

We hope you find this useful and informative....and as always, that you'll share feedback!!

5:00am ET...
  • Asia...generally lower.  This is despite word late yesterday that US House and Senate negotiators had reached a two-year budget deal that will replace some of the automatic spending cuts that have come from 'sequestration'.  (The deal is viewed as good news in that another government shutdown will be avoided, but bad news in that it's too small of a deal.  The deal still has to be approved by both houses of Congress).  (In another 'deal' related event, the Volcker rules were approved yesterday, restricting banks on certain types of speculative and proprietary trading.  Overall reports indicate that the degree of harshness towards banks is not as bad for them as they had feared, but proponents of the deal think there are good limitations that with good enforcement will be effective in avoiding another '08 financial meltdown).
  • Japan...stronger Yen hurt exporters. 
  • China...concerns over reforms' impact on their bottom lines sent bank stocks down. Under the new reforms, banks will face more negotiated rates on interbank borrowings, which could be higher than the cost of funding from deposits.
  • deficit declines, but due to a drop in Exports and an even bigger drop in Imports, neither a very good sign for the economy.  The drop in imports appears to be the result of government policies to specifically slow down imports with the use of tariffs and other restrictions.  Gold, in particular, has been targeted, but some argue that demand remains strong and that gold may be finding its way into the country through unofficial means.
  • Australia...lower consumer confidence data sends equities lower to a level not seen in four months.
  • Korea...Unemployment drops slightly to 2.9% in Nov. from 3.0% level of prior two months.  Hiring in tourism and consumption driven industries driving employment growth, along w/gov't programs to motivate hiring of women and youth.
  • Europe...moves slightly higher, apparently more enthralled with the US budget deal than was Asia markets!  Also, EU Finance Ministers continue to work on a plan for some form of banking union that would deal w/failing banks.  Yesterday, new proposals were aired that indicate some small steps towards a deal that would include a separate entity to determine which banks have 'failed' and to manage the funds of the related nations to effect a bail out.  Still lots of work to be done on this.
  • Italy...PM Letta is facing another confidence vote in Parliament which he's expected to win.  A new leader of his own party, however, is likely to be a more vocal advocate for the party's center-left platforms especially with the s;lit up of the Berlusconi party and Berlusconi's ouster from Parliament.
  • US.(yesterday).Johnson Redbook....chain store sales in first week of Dec rise 2.6% vs same period last yr.  VS prior week, sales dropped inline w/expectations for a post-Thanksgiving week.
  • US.. (yesterday) Wholesale inventories rose 1.4% in October, challenging the view that higher inventories in Q3 would suppress growth in Q4. 
  • Of interest:  This piece in the tweet below by Moody's Analytics draws attention to wealth gains due to rising equity market values and increases in home prices.  Mortgage debt has picked up some, but part of that is reduced levels of foreclosures, while overall consumer credit is expanding in auto and student loans, but not much spending driven growth.  (Editorial note: some argue that the wealth effect of higher equity and housing prices is a 'bubble in the making'.  See this piece in MarketWatch).
    •  more later....
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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
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