Top Stories
Japan continues escape from deflation. Japanese November core inflation rose to a five-year high in November, increasing to 1.2% from 0.9% in October and topping consensus of 1.1%. "Core core" CPI, which excludes volatile fresh food and energy prices, accelerated to +0.6% last month from +0.3% in October, with the November gain the biggest in 15 years. Crucially for Japan's fight against deflation, total cash wages rose for the first time in five months with an increase of 0.5%.
Over 1M people set to lose unemployment benefits. An estimated 1.3M people are set to lose extended unemployment benefits when funding for those benefits runs out tomorrow. Since 2008, the federal government has provided money to those who are without a job for longer than 26 weeks and for up to 99 weeks. Concerned about people falling into poverty, Democrats plan to try to reinstate the provisions in the New Year; however, Republicans are opposed, arguing that the extended payments encourage unemployment.
Top Stock News
Textron to buy Beechcraft for $1.4B. Textron (TXT) has agreed to acquire formerly bankrupt Beechcraft for $1.4B in a deal that will add the latter's small propeller-driven aircraft to a Textron portfolio that includes Cessna planes and Bell helicopters. "Terrific product fit," wrote analyst Cai von Rumohr prior to the announcement of the deal. Textron's "Cessna and Beechcraft have complementary product lines, with Cessna focused on bizjets and Beech on turboprops (and) pistons." Textron's shares rose 2.2% in AH trading.
Fortress eyes $1.9B Japan infrastructure fund. Fortress Investment Group (FIG) reportedly intends to raise ¥200B ($1.9B) for Japan's first infrastructure fund, which will invest in roads, airports and other projects. The move comes amid a government strategy to sell rights to operate public assets - such as roads and airports. The vehicle could spark interest from Japanese pension funds as an alternative place to put their money; at the moment, they're heavily weighted towards government bonds.
Top Economic & Other News
Japanese industrial output climbs 5%. In addition to encouraging CPI figures, other data appears to show that Japan's economy is in decent shape. Industrial production rose 5% on year in November, although that was down from 5.4% a month earlier. Retail sales climbed 4% vs 2.3% and unemployment held steady at 4%, but overall household spending rose just 0.2% vs +0.9% in October and consensus of +1.7%.
Huge stashes of metal stored in "shadow warehouses." The WSJ shines a light onto "shadow warehouses," a hidden system of facilities that store tens of millions of tons of aluminum, copper, nickel and zinc across the globe for banks, hedge funds and commodity merchants. The warehouses operate outside the London Metal Exchange's system, are unregulated, and don't provide details of their holdings. As a result, it's unclear how much metal is held in the shadow system, a lack of visibility could cause major price swings.
Obama signs bipartisan budget bill into law. President Obama has signed the two-year budget and several other measures into law, including the National Defense Authorization Act for fiscal 2104. The latter provides the Pentagon with a base budget of $526.8B, although that will have to be reconciled with the $498B that was agreed to in the main budget deal. Even though it's Christmas week, legislators on the Appropriations Committees said they have been making good progress on dividing up the money that's been approved.
No Turkish delight as markets take another battering. Turkish markets have continued to suffer badly from the corruption scandal engulfing the government. The ISE 100 was -3.9% at the time of writing and the USD-TRY +1.9% at 2.1681 Turkish lira after the currency hit a record low of 2.1764, while foreigners have been unloading government bonds.
French unemployment rises. Unemployment claims of Class A registered job seekers in France rose 0.5% on month in November to 3.29M after surprisingly falling by 0.6% in October. On year, the figure climbed 5.6% in November. The figures provide further evidence that whatever French recovery appeared to be taking place has petered out. However, the government argued that when taking a longer-term view, unemployment growth has started to reverse in Q4.
Mobile data traffic continues to soar. Surging smartphone penetration rates and rapid 4G in developed markets have led to a huge increase in mobile data use. The average U.S. mobile phone owner has consumed 1.2GB a month of data this year, up 74% from 2012, analyst Chetan Sharma estimates. The average global mobile data consumption is pegged at 240MB, a jump of 71%. Other contributing factors include 3G adoption in emerging markets, growing sales of large-screen smartphones, and the popularity of mobile video services, especially YouTube.
Alpha-Rich Stock Movers and Great Calls
1) On December 19, Kingsley Park Capital - whose September call on Xyratex (XRTX) was validated by a buyout on Monday - pounded the table for NovaCopper (NCQ), arguing that irrational ETF selling was driving shares well below intrinsic value. The stock is +16.6% since his call. Read article »
2) DAG1996 pointed out on October 1 that the market was not pricing in a changing operating model at chemical maker Aceto (ACET), leaving the stock significantly undervalued. Shares are +49.8% since his call. Read article »
Alpha-Rich Stocks To Watch
1) Nassarius Capital says Callidus Software (CALD) is clearly making itself a more attractive acquisition target, which could lead to 30% near-term upside. Read article »
2) Dennis Beaudet writes that there are reasons for concern at auto parts manufacturer Martinrea International (OTC:MRETF), but that they are not enough to justify the stock's sharp recent fall, which has left shares significantly undervalued. Read article »
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Today's Markets:
In Asia, Japan flat at 16179. Hong Kong +0.3% to 23243. China +1.4% to 2101. India +0.6% to 21194.
In Europe, at midday, London +0.6%. Paris +1%. Frankfurt +0.8%.
Futures at 6:20: Dow flat. S&P -0.1%. Nasdaq -0.1%. Crude -0.05% to $99.50. Gold -0.2% to $1210.40.
Ten-year Treasury Yield flat 2.99%.
Today's economic calendar:
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
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