“[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: