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 Good morning! Here's what you need to know. - Most markets in Asia closed lower Wednesday. Japan's Nikkei fell -0.33%. Korea's Kospi was off -0.71%. Chinese indices defied the trend, with Hong Kong's Hang Seng up 0.18% and the Shanghai Composite up 0.62%. European markets are lower across the board, with London's FTSE off most at -0.28%. U.S. futures are pointing lower.
- Ben Bernanke gave a speech last night at the annual National Economists Club dinner in which he laid out how the Fed has sought to align market expectations with imminent Fed actions. He said that although the market completely misread the Fed's intentions at the June FOMC meeting and tightened, the Fed's subsequent decision to leave its bond buying program unchanged at the following FOMC meeting despite even more signs of an improving economy ended up strengthening its credibility by "surprising" the market again. "When, ultimately, asset purchases do slow," he said, "it will likely be because the economy has progressed sufficiently for the Committee to rely more heavily on its rate policies, the associated forward guidance, and its substantial continued holdings of securities to maintain progress toward maximum employment and to achieve price stability....The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after the unemployment threshold is crossed and at least until the preponderance of the data supports the beginning of the removal of policy accommodation."
- Japan's trade deficit unexpectedly widened in October as growth in imports outpaced robust increases in exports to the U.S. and China, Reuters says. While a weakening Japanese yen has lifted exports, it's increased the cost in yen terms for imports, especially of oil and natural gas meant to offset declines in power from shutting down Fukushima. Japan has now seen 16-straight months of deficits. BI's Joe Weisenthal says you're being misled about Abenomics if you're fixated on exports. "...if your conception of Abenomics — Japan's big economic experiment which has seen a weakened yen as part of aggressive monetary policy — is that it's just about making exports more competitive, you're totally wrong. It's not a beggar thy number/currency war move. If Abenomics is to work — and there are signs that it is — it works by stoking inflation expectations so that people domestically spend rather than horde cash."
- The minutes from the latest Bank of England meeting are out, and analysts say its policy making committee remains in "wait and see" mode. "The way out of the current fragile recovery is not around the corner and policymakers don't feel the pressure to reduce the accommodation in the current uncertain environment," the FT quotes Newedge's Annalisa Piazza. "The 7% unemployment rate is not seen as a trigger of the first rate hike as policymakers are willing to look at the broader picture to judge when the time for less accommodation has arrived. In the meanwhile, the expected spike in inflation (due to rising utility prices) is not considered as a threat for price stability in the medium term."
- We've got a busy day in economic data and releases. At 8:30 am ET we get both October consumer price inflation, with a consensus for core inflation to rise 0.1% from the previous month and 1.7% year over year; and retail sales, with total sales expected to advance 0.1% and non-auto-and-gas sales expected to rise by 0.2%. Then at 10 am we get September business inventories, which are expected to climb 0.3%; and October existing home sales, which are expected to have slowed to 5.14 million units at a seasonally adjusted annual rate. At 2 pm we get minutes from the October FOMC meeting. Plus New York Fed President William Dudley speaks at 10 am, and St. Louis Fed President James Bullard speaks at 12:10 pm.
- JC Penney (consensus -$1.72/share) reports earnings this morning. Deere earnings beat at $2.11 versus $1.89 expected, while revenues came in in-line.
- The Wall Street Journal's Scott Patterson and Andrew Ackerman report there are new hiccups in implementing the Volcker rule designed to limit proprietary trading at financial firms. Some regulators at the SEC and CFTC are now "arguing [the rule] is too soft on banks," which threatens to "further delay [the rule's] implementation beyond the year-end deadline set by the Obama administration."
- Duncan Weldon explains in a new blog post this morning how short-term thinking among corporate brass has led to rising inequality. He first quotes from a recent piece by Reuters' James Saft: "[In the 1970's], companies invested about 15 times more in new equipment and ventures than they returned to shareholders via dividends. Now the ratio is less than two. As recently as the 1990s, this number was as high as six. Why? The change toward ever greater executive pay, doled out in share options which are highly sensitive to short-term stock price movements, has changed how CEOs behave." In other words, Weldon writes, "We have stumbled into a system whereby corporations are often run not for their own long term benefit but for the benefit of top staff. As Mariana Mazzucato has argued with are all too often rewarding value extraction rather than value creation."
- A gaming company has been fined $1 million by the state of New Jersey after it secretly installed code on users' computers that turned their computers into Bitcoin mining units. The firm blames a rogue employee. Bitcoin prices fell sharply overnight and now stand at $470.
- California saw its first monthly increase in realtor licenses since early 2007 in August, Calculated Risk's Bill McBride reports. The figure remains 32.4% from its peak and is off 3.3% year-over-year. Broker's licensing rates are still declining, albeit slowly, and are just 8.4% from their peak. "This might be the bottom (or near the bottom) for real estate licensees in California, but so far there is no sign of a new bubble in real estate agents!" he says.
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