World News

Egypt

• In the wake of last week's protests, which forced President Hosni Mubarak out of office, the Egyptian cabinet approved a law yesterday that criminalises strikes, protests, demonstrations, and sit-ins that interrupt private or state owned businesses or affect the economy in any way. Individuals who call for or incite action can be sentenced to up to one year in prison and fined up to half a million pounds. The law has to be approved by the Supreme council of the Armed Forces, and would be in force as long as Egypt is in a state of emergency (currently, 30 years and counting).

European Union

• The Telegraph is reporting that the European Commission has released plans to create a "single European transport area" intended to create "a profound shift in transport patterns for passengers" by 2050. Goals include getting 50% of all travel over 186 miles to be made by rail, and reducing the number of gasoline and diesel-driven cars and trucks within cities by half by 2031 and to 0 by 2050. Opposition to the plan is already beginning to be heard.

International

• In an opinion piece written for al Jazeera, economist Robert Shiller expresses his belief that the next market bubbles will be in food and farm land.

Japan

• Immediate safety upgrades have been ordered at all 55 of Japan's nuclear power plants. The required upgrades include improved back-up power and having fire trucks with hoses ready at all times to ensure cooling for reactors and spent fuel pools. Japanese Minister of Economy, Trade, and Industry Banri Kaidea does not anticipate that these upgrades will require plant operations to be halted.
• Tokyo Electric Power (TEPCO), which has already secured $24 billion in private loans, has warned that this will not be enough to keep it afloat, repair damage at Fukushima and other sites, and pay reparations and other damages they anticipate.

Libya

• Rebel forces have been driven out of the oil town of Ras Lanuf under heavy bombardment from the Libyan army.
• OPEC oil production has not compensated for production losses in Libya. Production has fallen about 300,000 barrels per day from February's average, although some analysts are expecting to see Saudi Arabia begin boosting output further to compensate.

United States

• President Obama is preparing a speech in which he will outline his strategy to reach an announced goal of cutting US oil imports by a third over 10 years. The plan is expected to focus on increasing domestic energy production, encouraging the use of more natural gas in public transit, making vehicles more fuel efficient, and encouraging the use of biofuels and other alternative energies.
• Al Jazeera is reporting an increase in illnesses and deaths along the Gulf Coast due to the chemical dispersants used by BP.

Metrics: European And Canadian

Let's start with Europe, shall we? We've got economic data flowing in from Switzerland, Germany, France, and the EU as a whole.

In Switzerland, seasonally adjusted unemployment remains flat at 3.6% (missing expectations by 10 bps), while non-seasonally adjusted unemployment rises 20 bps to a level of 3.8% (also missing expectations by 10 bps).

Germany's got a ton of data coming out, and it's all bad. First off, their merchandise trade[1] surplus dropped E2.4 billion (brutally missing expectations, which anticipated an increase in the trade surplus to E15.0 billion) to a level of E11.8 billion in November. Imports jumped 380 bps for the month to a level of 4.1%, while exports rose 160 bps to a level of 0.5%. Retails sales fell 250 bps in November, dropping from a revised 0.1% (revised downward from the original 2.3% reported for October[2]) increase to decline 2.4% (also brutally missing expectations, which anticipated a decline to an increase of only 1.0%). Finally, to round out this trifecta of misery, industrial production fell 370 bps in November from a revised 3.0% increase to a 0.7% decline (missing expectations by 40 bps).

France is not experiencing much joy either. Their merchandise trade figures for November can be read in one of two ways: either as a E7.3 billion shift from a E3.43 billion trade surplus in October to a E3.87 billion trade deficit in November, or (using the revised October figures) as E0.16 billion shift from a E3.71 billion trade deficit to a E3.87 billion trade deficit. The first is an almost inexplicable single-month face-heel turn, and the second smacks of sheer incompetence amongst the offices of the French equivalent of the Department of Labor[3].

Do things get any better for the European Union as a whole? Well, their Q3 final revision for GDP cuts the quarter over quarter growth to 0.3% (down from the previous revision of 0.4%, and missing expectations that the final figure would remain 0.4%). Year over year GDP remains unchanged at 1.9%. the EU's unemployment rate remains unchanged at 10.1% in November, exactly meeting expectations.

On to Canada, where the Labor Force Survey shows things improving by at least a small amount. Employment rose 22,000 in December (up 6800) beating expectations by a small margin (analysts were expecting to see 20,300 new jobs). As a result, the unemployment rate for the year comes in at 7.6%, beating expectations by 10 bps.

Coming up next, we'll be looking at the US Employment Situation!

[1] Merchandise trade is imports and exports of tangible goods and services.

[2] There's no real explanation about how 0.1% was mistaken for 2.3% in the original data.

[3] I mean, really. How else do you look at the trade figures one month and say "Aha! We exported 3.43 billion more Euros worth of goods than we imported! Viva la France!" and then the next month say "Our bad. We made a 7.3 billion Euro mistake in our calculations"? Were they holding the balance sheet upside down?

Europe Is Happy, And Jobless Claims Are Better Than Expected

In Europe, Swiss CPI fell 20 bps to a level of 0.0% for December - good news, but still missing expectations by 20 bps (and bringing the annual CPI increase to a 0.5%, which also misses expectations by 20 bps). German Manufacturer's Orders climbed 360 bps in November to finish at a 5.2% increase for the month.

The European Union released a couple of average figures as well. Across the member states, retail sales fell 130 bps to a level of -0.8% for November (missing expectations by 90 bps). Economic sentiment is positive though, improving 110 bps in December to a level of 106.2, with industrial sentiment up 310 bps to 4, but consumer sentiment falling 160 bps to -11. Obviously, European manufacturers and retailers are more positive than consumers at this moment.

And is Europe up on this overall good news? Let's see... As of 8:36 AM, the FTSE 100 is up 0.59%, the DAX is up 1.26%, and the CAC 40 is up 0.86%. So yes, yes they are.

Leaving Europe behind, we travel north and then south to the United States, where First Time Jobless Claims are due out any moment now. If you remember from last week, we had unexpectedly good news with only 388k new claims. For the week ending January 1, analysts are expecting to see that climb back up (possibly on seasonal employment coming to an end) to 412k new claims. The actual figures - 409,000 new claims - are mildly better than expected. Six states (Florida, Texas, Georgia, Oklahoma, Illinois, and Arizona) saw their first time jobless claims improve, but seventeen states saw things get worse (with California almost single-handedly counteracting the improvement in the six positive states)[1]

Later today, we get the US Chain Stores Sales report[2], the EIA Natural Gas Report (at 10:30 AM EST), and the Fed Balance Sheet and the Money Supply Report (both at 4:30 PM EST).

[1] If that's not clear, try this: Combined, Florida, Texas, Georgia, Oklahoma, Illinois, and Arizona saw jobless claims decline by 17,209. California saw it's first time jobless claims increase by 15,972.

[2] Target, Wal-Mart, K-Mart, and so on and so forth. This is not a huge market mover, but these chain stores do represent about 10% of domestic retail sales. So they are considered to indicate the direction of general retail sales and of consumer spending trends. It comes out when it comes out.

ADP: Employment Is Good. (Also, Other Metrics)

Starting in Europe, the European Union reported its November PPI around 5 AM EST today. October saw a 0.4% increase (for a 4.4% increase year over year), and the consensus expectation was for an additional 0.1% increase (keeping the year over year figures flat). The EU actually came in at a 0.3% increase, bringing the year over year PPI to 4.5%. Not great, but not terribly bad.

Hopping across the Arctic to Our Neighbors to the North, Canada has released its Industrial Product Price Index (IPPI). Which has missed expectations. For November, analysts were expecting to see a 0.3% increase, and they actually had a 0.5% increase. Oddly, however, their year over year IPPI has declined 20 bps to 2.1%, so investors probably won't take this all that badly.

Here in the states, the Mortgage Bankers Association released its Weekly Mortgage Applications Survey figures for the week ending 12/31. The Market Composite Index (which measures margin loan application volume) was up 2.3% for the week, while the Refinance Index (which tracks refinancing volume) was up 3.9% and the Purchase Index (which tracks volume for first-time mortgages) was down 0.8%. Refinancing made up 71.0% or all mortgage activity for the week, and the average contract interest rate for 30-year fixed-rate mortgages fell to 4.82%.

The implication is that we're starting to find ourselves in a more favorable interest rate environment and that banks are more willing to refinance, but that that we may be expecting home sales to remain soft. Still, while interesting, this report isn't a huge deal for the markets.

ADP has released its monthly National Employment Report for December, and the word is, well, surprisingly good. November saw 92,000 new nonfarm private sector jobs (revised downwards from the original release of 93,000, but we can live with that[1]) . The Street doesn't make predictions for this one, so I'll just go ahead and tell you that ADP sees nonfarm private-sector employment increasing by 297,000 in December. Here's the breakdown:

• Service sector jobs increased by 270,000[2], the single largest monthly increase in the history of the report. Financial services, a subset of this sector, shed 8000 jobs.
• Goods-producing sector jobs rose 27,000. As a subset of this, manufacturing sector jobs increased 23,000 and construction sector jobs remained unchanged (meaning they didn't drop for the first time since June 2007)
• The greatest gains came from medium businesses, which hired 144,000 new employees. Small businesses hired 117,000, and large businesses hired 36,000.

At 10 AM EST we're looking for the Institute for Supply Management's Non-Manufacturing Index. This tracks the health of all of the various sectors of the US economy that aren't factories - agriculture[3], mining, construction, retail trade, whatever. Just so long as it doesn't come from a factory. Anything over 50% is considered a growing economy. November had a 55%, and we're looking for a 56% for December.

Then at 10:30 EST, we get the Energy Information Administration's weekly figures on petroleum inventories. This has an inverse impact on oil prices in the US - if supplies are increasing, prices tend to fall (and vice-versa). It's not a huge market mover, but commodities traders and people who invest in oil stocks tend to like it.

[1] Unless you're one of the 1000 people revised downwards, anyway.

[2] No word on how many of these are seasonal jobs, though, so this could be a fluke driven by the Holiday shopping season. I'm not saying it is, since I don't know. I'm just saying that January's employment situation report could be a letdown in the face of this explosive growth.

[3] Yeah, yeah, factory farming. Doesn't count.

Metrics: Domestic and Foreign

Highlights from around the world (well, from Europe anyway) and around the corner.

In Europe, Germany reported it's December 2010 unemployment rate, which remains unchanged at 7.5% Great Britain's PMI Manufacturing Index beat expectations by rising 30 bps from November to finish at 58.3 (the consensus expectation had been only 57.0). Italy's CPI rose to finish at a 0.4% increase for December (making a 1.9% increase in consumer prices for 2010). Finally, the European Union has reported its annual inflation rate, which was expected to come in at 2.1% for 2010 (up 20 bps from 2009). The actual figure is 2.2% which, while worse than expected, is not terrible.

All told, the news ranged from good (German unemployment and Great Britain's Manufacturing Index) to tolerable (EU inflation) to "bad but who cares" (Italy's CPI[1]). It's not particularly surprising that the FTSE 100 is up 2.21%, the DAX is up 0.22%, and the CAC 40 is up 0.65% on the news[2].

Winging our way over the North Pole (because, really, we usually take the Atlantic route and I'm bored with it), we have a few measures coming up in the US. Factory Orders are due out at 10 AM EST - a moderate market mover because it gives a second look at the productivity of the US manufacturing sector.. For November expectations are, in a word, bleak. October saw a 0.9% decrease in factory orders, and November is expected to be absolutely flat (a 0.0% increase). At some point today we're also expecting the Domestic Vehicle Sales (tracking sales of domestic-made cars[3], which is expected to rise 100,000 to net sales of 9.2 million for December.

Finally, the FOMC minutes are due out at 2:00 PM EST. Look for such surprises as the Fed being concerned about inflation but still expressing a willingness to keep monetary policy loose to stimulate GDP, an overall consensus to leave the target rate for the federal funds rate at 0 to 1/4 percent, and for Thomas Hoenig to vote against the policy because he's concerned about the loose money policy promoting high future inflation.

[1] They're one of the PIIGS, and has had its fair share of troubling the market anyway. It's going to take more than a 40 bps CPI increase to make European traders flinch these days.

[2] As of 8:21 AM EST. Actual numbers are subject to change without warning.

[3] No idea yet if this includes say, Toyota, which has a large factory complex in Kentucky. Or if it includes say, GM or Ford, whose vehicles are only an average of 70% domestic parts. Do we prorate?

German CPI, Rare Earth Excitement, and Man v. Internet

There's just not a lot of market data due out today. Germany has reported its Consumer Price Index for the month of December, and the news is brutal. In November, consumer prices rose 0.1%. For December, they rose 90 bps to 1.0%. But the German economy can take comfort in the fact that the entire jump was driven by the almost irrelevant forces of home energy, motor fuel, and food. If you strip all of that out and look solely at core CPI, prices haven't changed at all![1]

The Swiss KoF Leading Indicators[2] dropped 2 bps to a 2.10%; not great news, but it still points to a reasonable amount of growth in the Swiss economy.

Everybody in the world that is not China[3] is now complaining about China's move yesterday to cut exports of rare earth minerals. The US Trade Representative's office is "very concerned" about the quota reductions. The EU is demanding that China "respect its recent assurance of a guarantee of rare earth supplies to Europe". On the other hand, everyone in the world that isn't China that has the ability to mine these rare earth minerals is ecstatic. Demand for these rare earths is set to increase by more than 125% in the next 5 years, so that's money in the bank for anyone that can supply them.

Speaking of money in the bank, Paul Allen[4] is suing the entire internet for patent infringement. His suit claims that Interval Research holds patents on how data is related to information being browsed, the way information is relayed to a computer screen in an unobtrusive manner, and the way web browsers are alerted to new items of interest based on the activity of other users. AOL, Apple, eBay, Facebook, Google, Netflix, Office Depot, OfficeMax, Staples, Yahoo! and YouTube are the major companies named in the suit, which asks for damages and a ban on products that use the disputed patents[5].

Apple is also getting sued, in what the law firm bringing the suit hopes will become a class action lawsuit, over privacy issues. It is alleged that Apple apps "leak" personally identifiable data, despite Apple's policy that only allows data sharing if an app requires the information to keep running. Google may also face a similar lawsuit.

The SEC is also getting involved in the internet, by looking into trading in privately-held internet companies (such as Facebook and Twitter). It appears that there are some online trading services that allow trading of unlisted Internet firms, and the SEC would like some information about how the shares are being valued, and whether or not this trading violates SEC rules[6]. So far, the probe is in the early stages.

[1] Yay?

[2] A composite of business surveys from the industrial, retail, and wholesale sectors, used to try to project GDP growth about 8 months into the future.

[3] Still not wanting to replace the US as the world's sole economic and military superpower.

[4] Co-founder of Microsoft and founder of Interval Research Corporation, a company you probably have not heard of.

[5] This would include Google's search engine, iTunes, AOL Instant Messenger, Apple's Dashboard, Google Talk, Google's Gmail Notifier, and Google's Android phone system, just to name a few things.

[6] Specifically, private companies must either have fewer than 500 shareholders or else publically disclose significant financial information.

French GDP, Swiss Consumption, and the Case-Shiller HPI

Leaving Japan behind, we cast our eyes westward towards Europe and the United States. France reported its final revision for Q3 GDP, showing that it softened slightly in the third quarter (growing only 0.3%), with year over year growth remaining unchanged at 1.7%. UBS released its (Swiss) Consumption Index, showing growth in consumer spending decreasing 9 bps from October's 1.72% to November's 1.63%.

Also from Europe, Yves Mersch is now on record as saying that "the recent European proposals for reform of the economic governance of the euro area go in the right direction, but are not ambitious enough to ensure a healthy and efficient functioning of monetary union." He would like to see faster responses to excessive deficits, with automatic sanctions applied early. And why should anyone care what Yves Mersch says? Because he's on the Governing council of the European Central Bank, making him a voice that will be heard as debate about the future of the euro and the European Union continues.

Arriving in the howling arctic wastes that were once the eastern seaboard of the United States of America, the S&P/Case-Shiller Home Price Index is out. The 10-City Composite increased (barely) 0.2% while the 20-City Composite fell 0.8%, and home prices fell in all 20 metropolitan areas covered by the index.

Also in US news, the winter of our (fiscal) discontent is not made glorious summer by this son of Chicago. Not only do we not have a 2011 federal budget[1], now it has been announced that delivery of a FY 2012 budget will be delayed until around February 21. Mostly because the confirmation of the President's budget director wasn't finalized until November 18, and it takes a while to put a budget together.

Next up? Consumer confidence, in about half an hour.

[1] Blame for that can go to the Congress, though.

Lucky Chinese PIIGS, Sacred (Crazy) War, And World Stocks

Anyone remember this quote from Monday? "Despite concerns from Friday, North Korea has not felt "any need to retaliate against every despicable provocation", and did not end up reigniting the shooting part of the as-yet unresolved Korean Conflict." Well, it's been three days and Pyongyang has apparently decided to change their minds on the subject. Now, Kim Yong-chun (the North Korean Minister of Armed Forces) is on record as saying that "to counter the enemy's intentional drive to push the situation to the brink of war, our revolutionary forces are making preparations to begin a sacred war at any moment necessary based on nuclear deterrent."[1]

China, which must be getting increasingly tired of North Korea[2], confirmed yesterday's report that it stands ready to bail out the PIIGS. Or, in the words of Foreign Ministry spokeswoman Jiang Yu from yesterday's press conference, "China-EU economic and trade cooperation is featured by mutual benefit, win-win outcome and sound development momentum. The two sides agree that in the context of slow recovery of the world economy and existence of many uncertainties and unstable factors, the two should strengthen cooperation for stable and healthy development of the two economies as well as strong, sustainable and balanced growth of the world economy."

And finally, in the (hopefully) good news category, the MSCI world equity index hit its highest level since September 2008 and is up nearly 10% just in 2010.

[1] Security analysts are pretty sure they don't actually have any way to launch the "nuclear deterrent".

[2] And which still doesn't want to replace the United States as the world's sole military and economic superpower. Really. Trust them.

Forecast Is for "Bad Craziness"

That's right. We're having one of those news days that cries out for the mad prose stylings of Hunter S. Thompson himself.

Unfortunately, you'll have to settle for me.

So let's get this party started right by inviting in the Crown Prince of Crazy himself, the Dear Leader Kim Jong Il and the People's Glorious Revolutionary Atomic Mushroom Brigade! South Korea has announced that they will be conducting a live fire artillery drill on Yeonpyeong Island from December 18-21. The response from North Korea Crazy? A neopolitan ice cream of insanity, offering three distinct flavors for the price of one. They are now accusing the south of attempting to "kick up hysteria of war of aggression against the DPRK"[1], they have put forward the claim that the reason the south is doing this is to undermine "the progress made in the June 15 era of reunification" and to derail "the dialogue and cooperation between the north and the south", and they are warning[2] that the live-fire exercise "will play out a more serious situation than on November 23 in terms of the strength and scope of the strike"[3].

There is some speculation that all of this is just a way to improve the north's position when negotiations begin again. Rather like the way a small child attempts to improve his position regarding the acquisition of a toy by pitching a tantrum. Only with high explosives. And death.

China, which is no doubt banging its collective head on its collective desk over the antics of its crazy eastern neighbor, has hit a 28-month high for consumer inflation. It's up 5.1% from November 2009 (mostly on food prices), about 210 bps higher than the 3% target they had for 2010 and 110 bps higher than their 2011 goal. This, of course, is considered an omen of rising reserve requirements and interest rates[4].

Spinning the globe around to Europe, Moody's has cut Ireland's credit rating from Aa2 to Baa1, putting them on the same level as Russia and Lithuania. That's still investment grade, but you almost have to throw the air quotes when you say that. Meanwhile, on day two of the EU summit to create a permanent financial safety net for the euro zone, leaders refused temporary steps such as increasing the size of the EU bailout fund or using the bailout fund to buy bonds. European traders pouted and demanded that the summit offer more short term guarantees, and possibly milk and cookies before bed.

On the positive side for Europe - or, at, for the two-time would be rulers of Europe - the Ifo Business Climate Germany is out. The business climate index, the business situation index, and the business expectations index are all showing an across-the-board 60 bps improvement. So, overall, businesses are doing well and expecting to continue to do well in Germany.

Closer to home, the House passed the tax "compromise" on a 277-148 vote. The IMF Managing Director is pleased, although I'm not certain why Reuters felt the need to bring his opinion into the article[5]. In possibly unrelated news, Senate Democrats also threw in the towel on passing a budget, and agreed to a temporary funding measure.

So that's some of what's driving the markets around. Fear and madness and bad craziness. And four witches.

[1] No, really. That's the official English translation.

[2] "Warning" as the word is defined in North Korea, means "kicking someone in the teeth out of nowhere, and then threatening them with a switchblade if they try to punch back".

[3] For good measure, they also threw a diplomatic bone to the US: "The state of armistice is persisting on the Korean Peninsula and danger of war is not defused there because of the U.S. hostile policy toward the DPRL and its wild ambition for aggression."

[4] And you don't even need to visit Delphi on the seventh of the month for that one.

[5] Although the CIA World Factbook confirms that our public debt as a percentage of GDP is actually 30 bps higher than Spain's, so maybe we should be courting the IMF's good graces now...

Housing Gets Started, Unemployment Insurance Gets Claimed, And Spain's Pains Stay On The Plains

We've got some stuff happening today. About an hour ago, Housing Starts and Jobless Claims came out. Then, at 10 AM, we get the Philadelphia Fed Survey. Busy, busy day. And that's not even considering President Obama's tax cut "compromise" going to the House today[1], or FedEx (FDX) second-quarter profits missing expectations.

Last month, we had a heartily disappointing 519k new Housing Starts in October (we were expecting 590k). For this month, the Street is looking for 550k new starts. Meanwhile, last week, we saw 421k new jobless claims for the week ending 12/4 (marginally better than the 425k that had been predicted), and the Street is going conservative and predicting a mild improvement to only 420k new claims,

The reality is slightly better than expected. Housing starts for November hit 555k, beating the revised October figure of 534k (yes, the final number was revised upwards) by 3.9%. 465k of those were single-family homes, while only 72k were buildings with five units or more. 513k privately-owned housing units were completed in November (up 14.1% from October) and 530k new building permits were issued (up 4%). the bulk of these were in the region the Census Bureau describes as "South", so I guess that makes sense.

Turning to the First Time Jobless Claims, we came in at 420k new claims for the week ending 12/11, down 3k from the previous week's revised figure of 423k. Yes, that's right. The 12/4 421,000 new claims were revised upwards, meaning more people lost their jobs than was originally reported. Iowa and Idaho came out the best (they had a decrease in the number of claims), while 30 states had more than 1000 new claims (New York was worst off at +16,863, with North Carolina, Pennsylvania, and Georgia hot on it's heels with over 15k new claims each).

Combine all of this with the fact that Spain hasn't taken Europe's economy down in flames yet, and it shapes up to pretty good news for the morning.

[1] I'd expect it to be DOA. But I expected that when it hit the Senate as well, so now it's a wait-and-see game.

Jobless Claims! Also, News!

Last week, we had some depressingly bad results for first time jobless claims - 425,000 were anticipated, and we actually had 436,000. Well, it's new jobless claims day again, and the Street is going for optimism. The consensus is that for the week ending 12/4, we will only see 425,000 new claims.

While we wait for the results, let's check the news.

Futures are up, partly on optimism about the jobless claims expectations and partly on general excitement that 2010 is almost over. No, that doesn't (just) mean that traders are looking to the future and wishing away the last few months of lackluster performance. No, it's also driven by the fact that with only 16 trading days left in the year, underperforming fund managers will be under pressure to snap up stocks with solid fundamentals and good performance. When (if) this happens, the sudden spike in demand will lift market prices.

Debate on the Bush income tax "compromise" deal should hit the Senate by Friday. Senate Majority Leader Harry Reid thinks it's pretty much a done deal, and Republicans believe that the Democrats should "...get together and look at the overall bill and realize this is the presentation on the table." In preliminary statements, the rank and file Democrats do not seem impressed. If it passes, look for the equity markets to have a little party (yay! lower taxes!) and the bond markets to sell off more Treasuries (aiee! increasing Federal debt!).

Looking to Europe, the Bank of England (in a move that surprised no one) voted to keep in place the 0.5% interest rate and 200 billion pounds of quantitative easing they've had in place since February. The response from the European markets was to shrug, watch Fitch Rating downgrade Ireland's sovereign debt (BBB+, down from A+), and then go ahead and hit a 26-month high on optimism about the US economy.

China and North Korea reached a consensus on North Korea Crazy's Yeongpyeong Island Tour. What was that consensus? That they "agree on the need to resolve the situation." The world can now breathe a sigh of relief.

Now, back to the first time jobless claims results. On the up side, the week ending 12/4 saw only 421,000 new claims - better than expected and better than the previous week. On the down side, the prior week figures were revised upwards to 438,000 new claims - which is not so good.

Super Diplomatic Ministerial Ninja Team, Sanjo!

So. What seems like it's going to push the markets around tomorrow?

First off, we have a compromise on the expiring "Bush tax cuts". Let's see here. The Republicans get an across-the-board two-year renewal of the tax cuts, a 2% employee payroll tax cut, extended breaks on dividend and capital gains taxes, and a 35% estate tax with a $5 million personal exemption. The Democrats get... well, they get a 13-month extension on unemployment benefits. And I guess they get to not be presented as the grinch that raised taxes on 96.9% of the American people for Christmas.[1]

I think we have to call this a win for the Republicans.

The European Central Bank still isn't bowing to pressure to conform to rumors and rain euros from the heavens. Or, as the Prime Minister of Luxembourg put it, "We don't have any new decision to announce to you."

European markets are expected to collectively throw themselves on the floor, kick their feet, cry and scream "I hate you ECB" until the bank gives in.

The Super Diplomatic Ministerial Ninja Team, consisting of Secretary of State Clinton, Foreign Minister Maehara, and Foreign Minister Sung-hwan, have officially urged China to "shape North Korea's behavior". There is no word on when the People's Glorious Revolutionary Atomic Mushroom Brigade will issue an official response.

There's the massive PR storm called "Operation Broken Trust" going on right now. I doubt that this will have any significant impact on the markets, though. It'll result in a few sexy show trials, a lot of trials that nobody will care about unless they were directly involved, and the remaining frauds remembering to cover their trails better.

[1] No matter which way you lean politically, you have to acknowledge that the Republicans were going to filibuster to death any bill that didn't extend the Bush tax cuts for everyone, and then blame the Democrats for "making them do it". Where did I get the 96.9% figure? IRS data. In 2008 (the most recently compiled year), there were 142,450,569 individual tax returns filed. 138,074,910 of those returns were for adjusted gross incomes below $200,000. The rest is simple math.

Interestingly enough, the same simple math reveals that this 96.9% of the income tax filing households paid 72.7% of the total income taxes that were actually collected by the IRS. The remaining 3.1% paid 27.3% of the total. That's a topic for a different time, but it's something to consider the next time someone says the rich (i.e. those making more than $200,000) aren't "paying their fair share".

Of Course They're Not Pushing. Really.

The Financial Times Deutschland is reporting that several member nations of the European Union are now pushing Portugal to seek a bailout loan. (I'd have provided a link to the original article, but when I went looking for it I discovered that what German I can read has atrophied to the point that I could barely pick out one word in twelve.) This makes perfect sense, since Portugal is one of the PIIGS.

Of course, as we saw just two days ago, Portugal is denying this. They're insisting that they don't need help and all they need to do is enact some austerity measures to ensure that their budget remains solvent. "There is no reason for us to trigger any mechanism," is the official word from the Portuguese Ministry of Finance. There's been no political discussions about triggering any mechanism. We don't know how many times we have to say this, as a government, to stop all this inaccurate speculation."

No, wait. I'm wrong. That quote came from the Irish Minister of State for European Affairs, Dick Roche, on November 15. The Portuguese quote, from 11/21, states: "Once again I recall that Portugal is equipped with a banking system that is modern, sophisticated, well regulated and supervised, resilient and strongly capitalised."

Despite official declarations from Portugal and the EU that all is well, the markets are demanding increasing premiums for buying Portuguese sovereign debt.

"EU denies pushing Portugal towards bailout"

GM's IPO and US data lead to stocks' strength

* GM IPO leads the charge for global stocks
* Government bond prices fall, Irish debt tensions ease
* Commodity prices rebound (Updates with U.S. markets, GM's public trading debut)

By Daniel Bases
NEW YORK, Nov 18 (Reuters) - A blockbuster General Motors Co stock offering dovetailed with upbeat U.S. economic data and easing Irish debt tensions to lift global stocks on Thursday, while the dollar gained on the yen and cut losses versus the euro.

GM's return to the market less than 18 months after it emerged from government-funded bankruptcy raised $20.1 billion, the largest initial public offering in U.S. history, and provided a positive backdrop for investor sentiment.

"The company has rid itself of a lot of liability costs, so there is good reason for this excitement and demand," said Paul Larson, equities strategist at Morningstar in Chicago. "And with all the pent-up demand for vehicles, the outlook for the whole industry is very bright."

Commodity prices rose while U.S. government debt prices fell as credit tensions eased.

Manufacturing activity in the U.S. Mid-Atlantic region grew much more than expected, according to a survey from the Philadelphia Federal Reserve Bank. An improvement in the latest weekly initial claims for jobless benefits also helped strengthen the U.S. dollar.

The U.S. data helped erode the euro's gains as uncertainty about the Irish crisis ebbed after Dublin agreed to work with a European Union-International Monetary Fund mission on steps to shore up its shattered banking sector.

But analysts remained skeptical that any rebound in risk appetite would be sustained, with fiscal problems still severe in Ireland and other peripheral euro-zone countries such as Portugal, and many investors inclined to cut risk exposure before year-end.

"It's absolutely vital for the authorities to take pro-active steps in order to try to resolve this crisis as soon as possible. The market should see some relief in relation to that," said Henk Potts, equity strategist at Barclays Wealth.

In late morning trade, the Dow Jones industrial average rose 177.83 points, or 1.56 percent, to 11,179.71. The Standard & Poor's 500 Index gained 19.55 points, or 1.66 percent, to 1,198.14. The Nasdaq Composite Index climbed 46.94 points, or 1.89 percent, to 2,522.95.

GM's common stock, priced at $33 in the initial public offering on Wednesday night, was up 6.8 percent at $35.25 around noon on the New York Stock Exchange.

The pan-European FTSEurofirst 300 index of top shares climbed 1.34 percent to close provisionally at 1,107.07 points after being as low as 1,091.06.

The MSCI world equity index was up 1.71 percent after touching a one-month low the previous day.

The gains came after Japan's Nikkei jumped 2.1percent to close above 10,000 for the first time since late June, while China shares also rose. Emerging stocks were up 1.6 percent.

EURO'S GAINS PARED
The enthusiasm for stocks led to some paring back of the euro's gains after Ireland's central bank chief said he expected Dublin to receive tens of billions of euros in loans from European partners and the IMF.

The euro was up 0.73 percent at $1.3618, but that represented a pullback from its earlier gain of 1.1 percent to a session high of about $1.3668 on trading platform EBS.

The dollar was down 0.48 percent against a basket of currencies.

The dollar rose 0.47 percent to 83.63 yen .

The benchmark 10-year U.S. Treasury note fell 17/32 of a point in price, pushing the yield up to 2.95 percent.

The 10-year Irish/German government bond yield spread was last at 567 basis points, around 15 basis points tighter for the day but off the session's tightest levels.

U.S. crude oil futures rose $1.78 to $82.22 per barrel and retraced part of a four-session drop, while spot gold gained $19.40 to $1,356.20 an ounce. (Reporting and writing by Daniel Bases; Additional reporting by Jessica Mortimer, Wanfeng Zhou, Ryan Vlastelica, Atul Prakash and Neal Armstrong; Editing by Jan Paschal)

Stocks little changed as banks offset retail stocks

By Leah Schnurr
NEW YORK (Reuters) - Stocks ended little changed on Wednesday with indexes unable to recoup recent losses as banks wilted on worries about Federal Reserve regulation of the sector going forward.

Indexes also suffered from the continued uncertainty of Ireland's financial crisis, which contributed to Wall Street's drop of nearly 2 percent on Tuesday.

"I think the market is in a deterioration trend. It's worrisome at this point, considering that we had a selloff yesterday with pretty big volume and poor advance-decline numbers," said Frank Gretz, market analyst and technician at the Shields & Co brokerage in New York.

"The market is certainly vulnerable, and I think it is in fact headed for a correction."

Financials sagged after the Federal Reserve said it will allow some banks to increase dividends but would also evaluate the ability of 19 large institutions to withstand losses in "adverse" economic scenarios.

The KBW bank index gave up 1.4 percent. Regional bank KeyCorp (KEY:$7.6800,$-0.3000,-3.76%) slid 3.8 percent to $7.68 after Credit Suisse downgraded its shares.

Volume was light and some of the day's quietness was due to investors awaiting the pricing of General Motors' initial public offering after the market's close, said Nick Kalivas, senior equity index analyst at MF Global in Chicago.

The automaker set the terms for a landmark IPO that could be the largest in U.S. history, raising up to $22.7 billion.

"There's a feeling a lot of money has been sucked out of the market to go pay for that. Once that gets out of the way, that theory's going to be put to the test," said Kalivas.

The Dow Jones industrial average was off 15.62 points, or 0.14 percent, to 11,007.88. The Standard & Poor's 500 Index edged up 0.25 point, or 0.02 percent, at 1,178.59. The Nasdaq Composite Index added 6.17 points, or 0.25 percent, to 2,476.01.

Retailers kept a floor under the market as discount chain Target Corp (TGT:$55.6200,$2.0800,3.88%) rose 3.9 percent to $55.62 after it forecast its best same-store sales in three years during the upcoming holiday season. The S&P consumer discretionary group rose 0.7 percent.

Investors kept a close eye on the situation in Ireland. Dublin agreed to work with a European Union-International Monetary Fund mission on urgent steps to shore up its shattered banking sector, a process that could lead to a bailout despite Ireland's deep reluctance.

The CBOE Volatility index , Wall Street's so-called fear gauge, declined 3.6 percent but remained above 20. On Tuesday, it closed at its highest point in more than a month.

In the latest U.S. economic data, housing starts slumped to their lowest level in more than a year in October, while consumer prices rose, but the annual increase in core CPI was the smallest on record.

(Reporting by Leah Schnurr; Additional reporting by Angela Moon; Editing by Kenneth Barry)

Wrapup

Dow down 15.62 (0.14%). NASDAQ up 6.17 (0.25%). S&P 500 up 0.25 (0.02%).

The cause for these rather tepid final numbers? Good CPI (CNN Money describes it as "near historic lows"), combined with raging paranoia about inflation being too low and QE2 driving prices up as a result (lots of money chasing scarce goods means prices go up). In other words, people are concerned that low inflation (and a huge money supply) will drive hyperinflation.

Nobody's ever happy, right?

Oh, and let's not forget Ireland. In what may be denial, the Irish Prime Minister is saying that the country does not have a drinking problem, and it can stop any time. And by drinking problem, I mean terrible economic situation. But they have agreed to work with the EU and the IMF to get out of that situation they really aren't in anyway, don't you know, it's just an occasional drink before bed or with the guys after work.

Euro turns down on concerns about bailout

NEW YORK (MarketWatch) -- The dollar turned higher against the euro in mid-morning trading on Tuesday amid rising worries that Ireland doesn't want to accept a bailout from its neighbors, and that some euro-zone members are also reticent to give financial aid. Also, stocks are falling, in part because of worries about china, weighing on investors interest in riskier assets. "Foreign exchange traders are focused on the developments in Ireland, news that Austria is withholding the next tranche of bailout of funds to Greece and the prospect of monetary tightening in China," said Kathy Lien, director of currency research at GFT. "Risk aversion flows should benefit the dollar." The dollar index , which measures the greenback against a basket of six major currencies, added to gains, reaching 78.965, compared to 78.652 late Monday. The euro turned down to $1.3550, from around $1.3580 in North American trade late Monday. Earlier, it rose to $1.3655.