“Successful investing is anticipating the anticipations of others.” – John Maynard Keynes

1. ECB’s Draghi Starts Squaring QE Circle in Month of Persuasion — bloomberg, as European officials prepare to consider sovereign-bond purchases on Jan. 22, ECB president Mario Draghi is busy working to get as many policy makers as possible on his side. One concession being debated is to require national central banks to be responsible for at least some of their own credit risk, according to people familiar with the talks. The stimulus is intended to expand the ECB’s balance sheet by as much as €1T ($1.2T).
2. Abbvie (ABBV) New Hepatitis C Drug Gets Helping Hand — WSJ, the price war over hepatitis C drugs continues, after Express Scripts (NASDAQ:ESRX) announced that it will only cover AbbVie’s (NYSE:ABBV) newly approved Viekira Pak, which received clearance from the FDA on Friday. The move will help the drug maker take market share away from Gilead Sciences (NASDAQ:GILD) and J&J (NYSE:JNJ), which make blockbuster hep C drugs, including Sovaldi, Harvoni and Olysio. AbbVie’s Viekira Pak will have a price of $83,319, although the agreement with Express Scripts involves a significant discount to that price.
3. Russia Tells State Exporters to Sell Forex Revenues to Help Ruble — CNBC, Russian Prime Minister Dmitry Medvedev has signed an order forcing the country’s largest state exporters to sell part of their foreign currency revenues to help stabilize the ruble. Orders were sent to gas firm Gazprom (OTCPK:OGZPY), oil firms Rosneft (OTC:RNFTF) and Zarubezhneft and diamond producer Alrosa.
4. Russia on Verge of Junk as S&P Puts Rating on Negative Watch — Bloomberg, Russia may lose its investment-grade credit rating for the first time in a decade after Standard & Poor’s placed the country on CreditWatch Negative. The move “stems from what we view as a rapid deterioration of Russia’s monetary flexibility and the impact of the weakening economy on its financial system,” the agency said in a statement.

The week ahead — Economic data from Econoday.com:

“Obviously the thing to do was to be bullish in a bull market and bearish in a bear market… I came to learn that even when one is properly bearish at the very beginning of a bear market it is not well to begin selling in bulk until there is no danger of the engine back-firing.” – Jesse Livermore

1. China Economic Growth May Slow to 7.1 Percent in 2015 — NYTimes, China’s economy may slow to 7.1% in 2015 from an expected 7.4% this year as a sagging property sector weighs on the world’s second-largest economy, researchers from the nation’s central bank said. Stronger global demand could boost exports, but not by enough to counteract the impact from weakening property investment. China’s economic growth came in at 7.3% in Q3, its slowest pace in five years.
2. Russia Lifts Interest Rate to 17% from 10.5% — FT, despite hiking interest rates to 17% from 10.5% in an emergency midnight move, Russia’s central bank has still failed to halt the ruble’s collapse. The currency fell more than 10%, its worst intraday drop against the dollar since the 1998 financial crisis.
3. Obama to sign new Russian sanctions bill by end of week — The additional sanctions will hit the Russian weapons and energy sector, hammering an economy that is already being battered by a fall in oil prices and a plunging currency. The ruble dropped to record lows yesterday, falling as much as 20% against the dollar despite the Russian central bank’s move to raise interest rates to 17%.
4. A Pimco Emerging-Market Fund Hit by Russian-Debt Bet — WSJ, Pimco is facing mounting losses on its Russian bond holdings, following the ruble’s single worst day since 1998. The $3.3B Pimco Emerging Markets Bond Fund (MUTF:PAEMX) had total exposure to Russia of 18.2% – mostly in corporate bonds – as of September 30, more than twice the 8.43% Russia weighting in the benchmark index. Up 5.65% year-to-date at the start of December, the fund is now lower by 3.4% for the year and has lost 9% of its value this month.
5. U.S. to Restore Full Relations With Cuba — Obama has ordered the restoration of full diplomatic relations with Cuba and the opening of an embassy in Havana in the coming months. The move will ease travel restrictions to Cuba and the eventual lifting of the Cuban embargo.
6. Putin Says Economy to Rebound, Wants End to Ukraine Crisis in Annual Speech — Reuters, addressing Russia in his annual speech, Vladimir Putin said that the country’s current economic difficulties could last for the next two years but the situation could improve faster. Putin also declared that the central bank and government were taking adequate measures to support the ruble and that Russia’s current economic situation was caused by external factors, mainly from the price of oil and gas.
7. DuPont Names Planned Performance Chemicals Spinoff — WSJ, the new public company created by the spinoff of its company’s performance chemicals business The Chemours Company, which will be led by Mark Vergnano, current EVP of the Performance Chemicals segment. DuPont (NYSE:DD) will record a pre-tax charge of about $315M in Q4 related to the spinoff, which is expected to result in at least $1B in savings.

The week ahead — Economic data from Econoday.com:

“If everyone is thinking alike, then somebody isn’t thinking.” George S. Patton

1. Oil Slumps to Five-Year Low — Bloomberg, brent crude fell to a new five-year low as a number of banks, including Morgan Stanley cut price forecasts, saying oversupply would peak next year after OPEC decided not to cut output. WTI for January delivery also slumped, dropping as much as $1.25 to $64.59 a barrel on the New York Mercantile Exchange.
2. Beijing Tightens Rules for Loans On Stocks — regulator banned investors from using low-grade corporate debt as collateral to borrow cash as Beijing took fresh steps to rein in growing risks in the country’s debt-laden financial system. Policymakers gathering in Beijing this week for a key summit are signaling to the investing public they should prepare for a lengthy period of slower economic growth after years of binging on debt to fuel high growth levels.
3. Retail Sales Grow the Most in Eight Months — MarketWatch, U.S. retail sales rose 0.7% in November, up from 0.5% in October, the U.S. Commerce Department reported. U.S. retail sales in November grew the fastest in eight months as shoppers snapped up everything from cars to clothing, according to the latest government data released.
4. Congress Reaches Deal for $1.1 trillion U.S. Spending Bill — a final agreement has been reached on a $1.1T U.S. spending bill that would prevent a government shutdown at midnight on Thursday and fund every government agency but the Department of Homeland Security through next September. The bill largely keeps fiscal 2015 domestic spending unchanged, but as the deadline loomed, a number of policy provisions were negotiated into the measure, including easing of regulations on the environment and financial derivatives trading.
5. Halliburton Lays off 1,000 Employees in Eastern Hemisphere — fuelfix, unrelated to its proposed $35B acquisition of Baker Hughes (NYSE:BHI), Halliburton (NYSE:HAL) has announced that it is laying off about 1,000 employees across multiple regions in the Eastern Hemisphere, effective immediately. The Middle East “seems to be the nexus of our current woes in terms of dropping prices and production,” CFO Mark McCollum told investors late last week.

The week ahead — Economic data from Econoday.com:

“I think to be in the upper echelon of successful traders requires an innate skill, a gift. It`s just like being a great violinist. But to be a competent trader and make money is a skill you can learn”. – Michael Marcus, Trader

1. Russian Ruble Registered the Biggest One-Day Fall Since 1998 As Oil Drops Below $70 — the ruble registered its steepest one-day fall since the Russian financial crisis of 1998 last Monday, plunging more than 6 percent against the dollar before recovering to losses of around 4 percent due to a drop in oil prices. Oil and gas account for about two thirds of Russia’s exports and half of federal budget revenues, making its economy and asset prices heavily dependent on global energy prices.
2. ‘Black Friday’ Fades as Weekend Retail Sales Sink — WSJ, Retail spending over this year’s four-day Thanksgiving weekend fell 11% to $50.9B according to the National Retail Federation, although total holiday sales through the end of the year are expected to rise 4.1%. The decline, the second annual drop in a row, comes as retailers, including Target (NYSE:TGT) and Wal-Mart (NYSE:WMT), offer their sales and promotions days or even weeks before the holiday weekend.
3. Cyber Monday sales start slower than Expected — Cyber Monday sales grew by much less than expected, according to data from IBM. Online retailers began their web promotions and sales during and even before the Thanksgiving weekend. Cyber Monday sales, which were projected to grow between 13%-15%, only reported an 8% rise.
4. U.S. Oil and Gas Well November Permits Tumble Nearly 40 Percent — Reuters, falling oil prices sparked a decline of almost 40% in new oil and gas well permits issued across the U.S. in November. A total of only 4,520 new well permits approved last month, down from 7,227 in October. New permits, which outline what drilling rigs will be doing 60-90 days in the future, showed heavy declines for the first time this year across the top three U.S. onshore fields: the Permian Basin, Eagle Ford and Bakken shale.
5. More Than $150 Billion of Oil Projects Face the Axe in 2015 — Reuters, Oslo-based research firm Rystad Energy stated that global oil and gas exploration projects worth more than $150B are likely to be put on hold next year as plunging oil prices render them un-economic. With rising costs of production and analysts forecasting oil to average $82.50 a barrel next year, around one third of the spending on a total of 800 oil and gas projects worth $500B, is unlikely to be approved.

The week ahead — Economic data from Econoday.com:

“Be Patient – There’s the Rarest Thing On Wall Street” – Jeff Saut

1. OPEC Share of US Oil Imports At 30-year Low — FT, U.S. imports of crude oil from OPEC nations are at their lowest level in almost 30 years, underlining the impact of the shale revolution and advances in hydraulic fracturing. OPEC’s share of U.S. crude oil imports in August dropped to 40% – accounting for 2.9M bpd. The import is the lowest since May 1985.
2. U.S. House to Hold Hearing On Oil Export Ban — according to Reuters, the House subcommittee on energy and power, chaired by Representative Ed Whitfield, will hold a hearing on Dec. 11 over whether Washington should lift its nearly 40-year crude oil export ban. The debate will come into sharper focus in January, when Republicans take over leadership of both the House and Senate.
3. Carl Icahn Raises Stake In Car Rental Company Hertz — Activist investor Carl Icahn has raised his stake in Hertz (NYSE:HTZ) to 10.8% from 8.5%, now owning 49.3M shares. Icahn landed three Hertz board seats in September, and has backed the recent hiring of John Tague as CEO.
4. Q3 GDP Revised Up — the second reading of Q3 GDP was released by the Bureau of Economic Analysis was 3.8%. Wall Street economists were looking for a revision downward from 3.5% quarter-over-quarter seasonally-adjusted annual rate (SAAR) growth in the initial reading from one month ago to 3.3% QoQ SAAR.
5. OPEC Sticks To Oil Production Targets — MarketWatch, OPEC members agreed late last week to stick to the oil-producer group’s existing output target with minimal cuts in production. The Organization of the Petroleum Exporting Countries said its 12 members, who collectively pump around one-third of the world’s oil, would comply with its current production ceiling of 30 million barrels a day. That would involve a supply cut of around 300,000 barrels a day. As of last week, the enery ETF (XLF) dropped nearly 9% on the news.

The week ahead — Economic data from Econoday.com: