Monday, December 10, 2012

Markets waver on China news and budget talks

Dow moved up 14, advancers ahead of decliners 5-4 & NAZ added 8 with no help from Apple (AAPL).  The Financial Index was off a fraction to 215.  The MLP index pulled back in the PM to a fractional gain in the 386s & the REIT index was flattish in the 263s.  Junk bond funds were mixed & Treasuries had small gains.  Oil was off fractionally while gold rose.

AMJ (Alerian MLP index tacking fund)

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U.S. 10-year


CLG13.NYM...Crude Oil Feb 13.....86.05 ...Down 0.45  (0.5%)

Live 24 hours gold chart [Kitco Inc.]

Prime Minister Monti said that investors shouldn’t expect the imminent demise of his gov to lead to a political vacuum that will fuel market turmoil in Italy.  But Italian 10-year bond yields jumped the most in 4 months in the first day of trading since Monti said that he planned to resign after former Prime Minister Silvio Berlusconi withdrew support for the gov.  The yield rose 29 basis points to 4.82%.  The market reaction will be “contained” & investors “shouldn’t fear any decision-making void,” Monti said.  He will resign when Parliament passes his budget plan later this month & elections may be held as soon as Feb.  “I understand the market reaction, it need not be dramatized,” Monti said.  “I’m very confident that Italian elections, when they come, will give room to a coalition or government that will be in my view a highly responsible, EU- oriented government, which will be in line with the huge efforts already pursued by Italy.”  Italy’s gov crisis, which pits Monti against former premier Berlusconi, is roiling investors & bringing tensions among EU leaders to the fore.  Monti & other EU heads of state, who gathered in Oslo to collect the Nobel Peace Prize, are seeking to present a united front as the resurgent Berlusconi hits the campaign trail with his German-skeptic, anti-austerity message.   Italian elections put the EU budget policy up for review in the 4th-largest European economy.  Monti said he will resign due to parliamentary opposition from Berlusconi & his allies, who had previously backed the gov.  Elections may be held either Feb 17 or Feb 24.  Monti dashed hopes of those who would like to see him enter the race for premier & take on Berlusconi.

Xi Jinping

Photo:   Bloomberg

China's exports rose less than forecast in Nov, underscoring the need to accelerate a shift toward domestic demand as the nation confronts a jobless rate newly estimated at almost double the official figure.  Overseas shipments increased 2.9% from a year earlier & imports were unchanged, the customs administration said, contrasting with industrial production & retail sales figures yesterday that exceeded estimates.  Urban unemployment exceeded 8% this year, a central bank- backed research center said yesterday.  The Communist Party’s new leadership, headed by Xi Jinping, needs to reduce China’s reliance on exports & investment spending to sustain expansion .  Xi, who last week retraced a 1992 tour by Deng Xiaoping that spurred economic opening, faces a wealth gap that is now 50% higher than a risk level for social unrest, according to a household survey by the research center.

  • <p>               President Barack Obama gestures as he speaks to workers about the economy during a visit to Daimler Detroit Diesel in Redford, Mich., Monday, Dec. 10, 2012.  (AP Photo/Paul Sancya)
Photo:   Yahoo

Obama warned that he "won't compromise" on his demands that the wealthiest Americans pay more in taxes, digging in on the chief sticking point between the White House & Reps as they seek a way to avert the "fiscal cliff."  Obama brought kept up pressure as the nation inched closer to the economic cliff.  He said the country couldn't afford a "manufactured" crisis & pledged to cheering auto workers that he would fight to extend tax cuts for the middle class before they expire at year's end.  "That's a hit you can't afford to take," Obama declared.  This came one day after he met with John Boehner at the White House.  While neither side would characterize the meeting, the mere fact that the 2 leaders talked face-to-face was seen as progress in negotiations to avoid a series of year-end tax hikes & spending cuts.  Some GOP lawmakers are suggesting the party relent on taxes in order to win concessions from the president on changes to benefit programs such as Medicare.  But Boehner's office indicated that the speaker wasn't ready to take that step.  "The Republican offer made last week remains the Republican offer," a Boehner spokesman said.  He was referring to a GOP plan that offered $800B in new revenue over the next decade through reducing or eliminating unspecified tax breaks on upper-income earners, but not by raising tax rates.  That's where the debate stands today.

Obama says he 'won't compromise' on taxes AP

The year is winding down without a lot going on, sort of.  Europe is still a mess with the debt crisis while it deals with a recession.  But their stocks are at 18 month highs.  New leadership in China has to deal with an economy that is less than robust.  The US has one of the strongest economies in the world, although it remains far from exciting.  And the debt debate drags on.  Obama thinks taxing the rich will solve all problems & will claim a big victory when Reps give in.  But there are an endless array of other taxes to deal with & budget cuts which will take a bite out of the economy.  Last minute wrangling is not the way to solve huge economic problems.  Stocks may accept whatever is thrown at them.  There was a bit of selling at the close.

Dow Jones Industrials

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