“A market is the combined behavior of thousands of people responding to information, misinformation and whim”. — Kenneth Chang (NYT journalist)

1. India raises interest rates by quarter-point — The Reserve Bank of India raised its benchmark interest rate by 0.25 percentage point on Tuesday, marking its seventh such increase since the beginning of 2010 to cool soaring prices.
2. British economy unexpectedly shrinks to 0.5% in fourth-quarter GDP — British economic output shrank in the final quarter of 2010, shocking economists and raising questions about the resilience of the economy as the government prepares to implement far-reaching austerity measures.
3. BoJ raises outlook — the Bank of Japan kept its interest rate unchanged, as expected, but raised its forecasts for the year through March to 3.3% from 2.1%. The board believes “the economy will probably emerge from its slump soon and return to a moderate recovery path.”
4. Consumer Confidence Index Hits 8-Month High — The Conference Board said Tuesday its Consumer Confidence Index climbed to 60.6 this month, up from 53.3 in December. While that reading was better than economists had expected, confidence is still far from the 90 level that signals a healthy consumer mindset.
5. S&P cuts Japan’s credit rating — Standard & Poor’s on Thursday cut Japan’s long-term sovereign-credit rating, with the news sending the yen sharply lower against its major rivals.
6. China crackdown on property — the Chinese government, faced with a losing battle against rising home prices, launched a new set of measures to make housing more affordable to the masses.
7. Deficit spirals ever higher — the U.S. budget deficit is on track to rise to $1.48T, or 9.8% of GDP, by the end of the current fiscal year, largely because of the extension of lower tax rates and the economy’s continued weakness, reported the Congressional Budget Office. That’s $60B more than the White House projected last summer, and a notable increase from 2010’s $1.29T deficit.

The week ahead — Economic data from Econoday.com:

“Experience is helpful, but it is judgement that matters” — General Colin Powell

1. FDIC approves rule on creditors — the FDIC voted to approve regulation that outlines how the government will treat creditors in situations where large, failing financial firms have been seized and liquidated.
2. Apple’s Jobs takes medical leave — Apple (AAPL) CEO Steve Jobs unexpectedly announced that he’s taking a medical leave from the company, his second in as many years and his third absence over the last decade.
3. Eyeing growth, Obama launches regulatory review — President Obama is launching a broad regulatory review, aiming to eliminate federal rules that hamper economic growth.
4. China quarterly growth surges, inflation eases — Gross domestic product was up 9.8% year-on-year in the December-ended quarter and rose 10.3% for all of 2010, according to data released Thursday by the National Bureau of Statistics. Consumer inflation hit 4.6% year-on-year in December

The week ahead — Economic data from Econoday.com:

“[A contrarian’s opportunity]. If everybody is thinking alike, then somebody isn’t thinking” — General George S. Patton

1. FDIC weighs mortgage disclosure rules — The FDIC is reportedly considering whether to impose new rules that would require increased disclosures from major banks seeking to package and sell mortgage securities to investors.
2. China’s shrinking trade surplus — China’s trade surplus came in 40% smaller than expected in December, as export growth showed softness. The surplus for the month was $13.08B, down from $22.9B in November and vs. economists’ expectations of $21.7B. Exports were up 17.9% Y/Y vs. a 34.9% rise in November, while imports climbed 25.6% vs. 37.7% previously.
3. Bailout expectations wrack Portugal debt — news reports over the weekend and on Monday said the Portuguese government was under pressure from European Union partners to tap the rescue fund established by the EU and the International Monetary Fund in hopes such a move would quell the ongoing turmoil in European sovereign-debt markets.
4. Floods hit Rio Tinto output — Rio Tinto’s (RIO) Alcan division declared a force majeure event impacting the supply of aluminum from Boyne Smelters Ltd. in Australia as a result of severe flooding.
5. South Korea’s surprise rate hike — Bank of Korea raised its key interest rate 25 bps to 2.75%. Economists had expected the bank to leave its rates unchanged.
6. Crop forecast falls short — the U.S. Department of Agriculture surprised investors yesterday by cutting stock forecasts for key crops, sending corn and soybean prices to 30-month highs.
7. China raises reserve ratio — China raised its reserve ratio for the fourth time in two months, ordering banks to increase their reserves by 50 bps effective Jan. 20.
8. Muni bond market in turmoil — the market for municipal bonds is coming under growing pressure, as borrowers scramble to refinance tens of billions of dollars of debt and investors show lukewarm interest. Most recently, a New Jersey agency was forced yesterday to cut the size of a bond issue by 40% and pay a higher rate than expected because of tepid demand; the news sent the muni bond market to its lowest level since the financial crisis.

The week ahead — Economic data from Econoday.com:

“I skate to where the puck is going to be, not where it was” — Wayne Gretsky.

1. Presidential 3rd Year — S&P500 performance in third year (1955-2003)

2. Below highlights the 2010 returns (in local currencies) for equity markets around the world — courtesy from the Bespoke Investment Group. As shown, the average country saw its major equity market index gain 15.33% in 2010.

3. Auto sales climb — All automakers except Toyota (TM) enjoyed gains as U.S. sales rose for the 11th consecutive month. December sales were up 11%, equivalent to an annualized sales pace of 12.6M vehicles when seasonal factors are accounted for. Overall, 2010 sales came in at 11.6M vehicles. Analysts believe 2011 sales could reach 13M, an important macro data point for the overall economy. Among December’s highlights: GM (GM) +7.5% to 223,932 vehicles, its best month of 2010. Ford (F) +6.7% to 190,976 vehicles. Chrysler (FIATY.PK) +16% to 100,702 vehicles. Toyota (TM) -5.5% to 177,488 vehicles.
4. FOMC stands by QE2 — Fed officials stood behind their bond purchases as long-term interest rates rose, saying: “While the economic outlook was seen as improving, members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program.”
5. Gulf spill blamed on BP, industry, regulators — The presidential commission charged with investigating the Gulf of Mexico spill has concluded that everyone is to blame, at least to some degree. The report, which will be released in full next week, slams BP (BP) and two of its contractors, Transocean (RIG) and Halliburton (HAL), for various missteps that led to an avoidable disaster.
6. U.S. inches towards debt limit of $14.3 Trillions — Economists believe the U.S. will hit its $14.3T debt limit by the end of March or sometime in April unless Congress takes action to raise the limit. Hitting the debt ceiling could force shutdowns of federal offices, as happened in 1995, jeopardize federal benefits programs or potentially cause a default on federal debt payments.

The week ahead — Economic data from Econoday.com:

“News on stock is not important. How the stocks reacts to it is!” — Michael L. Burke

1. China’s Christmas rate hike — China raised interest rates by 25 basis points on Saturday. The one-year lending rate will now be 5.81% and the one-year deposit rate will be 2.75%. It’s the second hike since mid-October as the country moves to combat inflation and slow credit growth, and some analysts believe China may front-load its monetary tightening to the first half of 2011.
2. China cuts rare earth exports — China has once again reduced its rare earth export quota, with its first round of permits for 2011 allotting 14,446 metric tons of rare earth exports split between 31 companies. This is 11% less than 2010’s first round of exports.
3. China opens anti-dumping probe — China said it will begin an anti-dumping probe into U.S. sales of livestock feed. The feed in question, known as distiller’s dried grains, is a byproduct of ethanol production from corn, and is expected to be a key new export for U.S. farmers.
4. Barron ‘s Outlook for 2011 and 2010 Recap — http://online.barrons.com/article/SB50001424052970203319504576019660899709744.html#articleTabs_panel_article%3D1

The week ahead — Economic data from Econoday.com: