Morning Reads

Morning Reads

Open Interest Changes



It finally looks like t

As China's economy continues to falter, Beijing is expected to run a budget deficit of 3% of its gross domestic product next year, lower than the revised 3.8% target for 2023, with the aim of maintaining fiscal discipline. Its economic growth target is around 5% in 2024. The targets were drafted by President Xi Jinping and other officials during the Central Economic Work Conference, and will be announced publicly during China's annual parliament meeting in March.

Off-budget debt: Other fiscal support and expenditures may be covered by off-budget sovereign debt, including a potential special sovereign bond issuance amounting to 1T yuan ($140.72B). Special bonds, which are not included in China's annual budget, are used to raise funds for projects or policy goals when needed. The bond quota for local governments could be around 4T yuan ($562.88B) next year, compared to this year's 3.8T yuan.

The leaders agreed to implement a proactive fiscal policy, and step up efforts to maintain sufficient liquidity in line with economic growth targets. They agreed that financial institutions should be guided to scale up support for scientific and technological innovation. In addition, overall financing costs must steadily drop while the RMB exchange rate is maintained at a reasonable level.

Bigger picture: China's Politburo recently said "fiscal policy must be moderately strengthened" in the wake of the post-pandemic economic slowdown. The country's fiscal position has been under threat, with Moody's downgrading its government credit ratings as its government will likely have to bail out financially stressed local governments and state-owned enterprises, as well as tame its property crisis. Even so, FTSE Russell sees opportunity in investing in China, as it is "undergoing a transformational period to maintain sustainable growth after years of rapid expansion."

Too soon?

While traders around the world cheered the Federal Reserve's dovish pivot and bet on interest rate cuts starting earlier than expected, European central banks and the International Monetary Fund's chief have cautioned against jumping the gun in the battle against high inflation. "Sometimes countries prematurely declare victory and then inflation gets more entrenched and the fight becomes harder," warned IMF Managing Director Kristalina Georgieva. A day after the Fed left its key policy rate unchanged, the European Central Bank and Bank of England did the same, although both central banks pushed back against rate cut talk. But many believe the Fed has now set the tone, making it harder for other major central banks to remain hawkish. (2 comments)

Medicare crackdown

The Biden administration named 48 Medicare Part B drugs that could be subject to inflation penalties for Q1 2024, including products from the likes of AbbVie (ABBV), Amgen (AMGN), and Pfizer (PFE). The initiative, introduced as part of President Joe Biden's Inflation Reduction Act, aims to cut out-of-pocket expenses for Medicare members and discourage drugmakers from raising prices faster than inflation. To note, prices of 64 drugs have risen faster than inflation over the past four quarters. Meanwhile, Senator Elizabeth Warren (D-MA) and Representative Pramila Jayapal (D-WA) accused drugmakers such as AstraZeneca (AZN) of driving up drug prices by making "sham" claims to patents. (21 comments)

Activist fight

Activist investor Trian Fund has nominated two members to Disney's (DIS) board, including the hedge fund's founder Nelson Peltz, amid the media giant's ongoing struggles. The other nominee is former Disney CFO James Rasulo. "The root cause of Disney’s underperformance is a board that is too closely connected to a long-tenured CEO and too disconnected from shareholders’ interests," said Trian, which owns $3B worth of Disney stock. Disney defended its current board, but said it would review Trian's nominees. Peltz previously tried to run for a seat on Disney's board, but withdrew his nomination after Disney announced major cost cuts. However, its shares dropped nearly 20% since Peltz ended his proxy fight, and SA analyst Ironside Research has since moved to the sidelines. (6 comments)

Today's Markets

In Asia, Japan +0.9%. Hong Kong +2.4%. China -0.6%. India +1.4%.
In Europe, at midday, London -0.5%. Paris +0.6%. Frankfurt +0.4%.
Futures at 7:00, Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +0.4% to $72.17. Gold +0.6% to $2,056.40. Bitcoin -1.1% to $42,780.
Ten-year Treasury Yield -1 bp to 3.92%.

Today's Economic Calendar

8:30 Empire State Mfg Survey
9:15 Industrial Production
9:45 PMI Composite Flash
1:00 PM Baker Hughes Rig Count

Companies reporting earnings today »

What else is happening...

IEA: Global oil demand will slow next year amid macro weakness.

Costco (COST) tops profit estimates, will dole out special dividends.

WHO calls for ban on flavored e-cigarettes to reduce their appeal.

Retail sales unexpectedly rise in November amid holiday season.

Tesla (TSLA) bags incentives worth $153M for Mexico gigafactory.

Intel (INTC) unveils AI offerings as semiconductor index hits record.

Watch Hess as Venezuela, Guyana won't use force in border feud.

Global Payments (GPN) denies acquisition talks with Shift4 (FOUR).

GM's (GM) Cruise autonomous vehicle unit slashes 900 jobs.

Deadpool, Ghostbusters among 2024's most anticipated movies.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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