“The market is a voting machine, whereas countless individuals register choices which are the product partly of reason and partly of emotion” — Graham & Dodd

1. Monti’s plan to quit sends markets into turmoil — Italian shares have sunk 3.3% and 10-year bond yields soared 36 bps to 4.88% after Prime Minister Mario Monti said he plans to resign once the 2013 budget is authorized.
2. Japan slips back into recession — Japan’s Q3 GDP fell an annualized 3.5%, worse than a forecast of -3.3%. With the government revising Q2 from growth to slight contraction, the country technically slipped into a recession in the last quarter.
3. Ingersoll to Spin Off Security Unit in Peltz Accord— per WSJ, Ingersoll-Rand PLC (IR) is expected to announce a plan to spin off its security-technology business, launch a share-buyback program and increase its dividend as part of a compromise reached with Trian Fund Management LP.
4. Obama offers to revamp tax code — the White House has reportedly offered to include an overhaul of the corporate tax code in any deal on the fiscal cliff, although it didn’t provide specifics, such as how the reform would affect the overall tax burden. The Administration also cut its goal for new tax revenue to $1.4T from $1.6T.
5. Fed Sets Jobless Rate, Inflation Targets and to Purchase More Bonds — Fed Chairman Ben Bernanke and his colleagues agreed, for the first time, they would hold rates close to zero while the unemployment rate is above 6.5% as long as inflation is not projected to rise above 2.5%. As expected, the Fed announced a new $45 billion bond-buying program in fresh action to keep the recovery going in the languishing jobs market.
6. China manufacturing data show further improvement — MarketWatch, Business conditions for Chinese manufacturers improved further in December. HSBC’s so-called “flash” manufacturing PMI for December — a closely watched indicator of the world’s second-largest economy — came in at 50.9, compared to a final print of 50.5 for November and 49.5 for October. A reading above 50 signals an improvement in activity, while one under 50 represents contraction.

The week ahead — Economic data from Econoday.com: