Yuan

• China Pledges Greater Role for Market in Economy (WSJ), China vows 'decisive' role for markets, results by 2020 (Reuters)
• China expected to cut growth target to 7% (FT)
• World Trade Center Tower Debuts in Manhattan Leasing Test (BBG)
• Job Gap Widens in Uneven Recovery (WSJ)
• Khamenei’s conglomerate thrived as sanctions squeezed Iran (Reuters)
• Swiss referendum on wages of high earners stirs debate (FT)
• Obama to Nominate Massad to Head CFTC (WSJ)
• Japan readies additional $30 billion for Fukushima clean-up (Reuters)
• Target Fills Its Cart With Amazon Ideas (WSJ)
• Shadow banks reap Fed rate reward (FT)

• Philippines Left Reeling in Wake of Storm (WSJ)
• Khamenei controls massive financial empire built on property seizures (RTRS)
• Race to Bottom Resumes as Central Bankers Ease Anew (BBG)
• U.S. Postal Service to deliver Amazon packages on Sundays  (LA Times)
• Obama Stocks Among Best After Re-Election as Rally Tested (BBG)
• Health-Law Rollout Weighs on Obama's Ratings, Agenda (WSJ)
• Twitter in Celebrity Spat With Facebook as Rivalry Builds (BBG)
• Iran deputy industry minister shot dead (AFP)
• Financier of Taliban-linked group shot dead in Pakistan (RTRS)
• Obama: The Lonely Guy (Vanity Fair)

A dispassionate overview of the investment climate and what to expect this week.  

The death of the dollar is coming, and it will probably be China that pulls the trigger.  What you are about to read is understood by only a very small fraction of all Americans.  Right now, the U.S. dollar is the de facto reserve currency of the planet.  Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars.  More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it.  As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world.  Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.

• Fed Anxiety Rises as QE Raises Risk of Loss With Political Cost (BBG)
• Iran Nuclear Deal Expected as Early as Friday (WSJ)
• Israel rejects mooted interim Iran nuclear deal, Kerry heads to talks (Reuters)
• JPMorgan Banker Backed $200 Million Madoff Loan in 2008 (BBG)
• Unleashing the food nazis - FDA Says Trans Fats Aren't Safe in Food (WSJ)
• Draghi Aggression Shows Pledges Backed by Rate Surprise (BBG)
• S&P Cuts France's Credit Rating by One Notch to Double-A (WSJ)
• S&P criticises France’s high tax rates for stifling growth (FT)
• Payroll Gains in U.S. Probably Cooled Amid Government Shutdown (BBG)

• Twitter's IPO to Make Market Debut (WSJ); Twitter Raises $1.82 Billion, Pricier Value Than Facebook (BBG)
• Worried Senators Press Obama on Health Law (WSJ)
• Greenspan Says Yellen Was His Guide to Economics Research at Fed (BBG)
• European Central Bank seen holding rates despite inflation tumble (Reuters)
• Wall St. Bonuses Over All Are Predicted to Rise 5 to 10% (NYT)
• Cautious consumers seen curbing U.S. economic growth (Reuters)
• China Grants U.S. Investors Indirect Access to Its Stock Markets (WSJ)
• Higher Tax Rates Give Top U.S. Earners Year-End Headaches (BBG)
• Iran Loses Nuclear Leverage as World Ignores Export Drop (BBG)
• NYPD Commissioner Ray Kelly in the running for JPMorgan job (Post)

When it comes to US equities today, the picture below summarizes it all... the only question is whether the NYSE breaks to celebrate the year's overhyped social media IPO.Aside from the non-event that is the going public of a company that will likely not generate profits for years, if ever, the overnight market has been quiet with all major stock indices in Asia trading modestly lower on the back of a modestly stronger dollar, although the main currency to watch will be the Euro (German Industrial production of -0.9% today was a miss of 0.0% expectations and down from 1.6% previously), when the ECB releases its monthly statement at 7:45 am Eastern when it is largely expected to do nothing but may hint at more easing in the future. On the US docket we have the weekly initial claims (expected at 335k) which now that they are again in a rising phase, have been the latest data item to be ignored in the Bizarro market, as well as the latest Q3 GDP estimate, pegged by consensus at 2.0%.

• Christie Sets Himself Up for Run in 2016 (WSJ)
• De Blasio Elected Next New York City Mayor in Landslide (WSJ)
• Hilsenrath: Fed Study: Rate Peg Off Mark (WSJ)
• MF Global Customers Will Recover All They Lost (NYT) - amazing what happens when you look under the rug
• Virginia, Alabama Voter Choices Show Tea Party Declining (BBG)
• Explosions kill 1, injure 8 in north China city (Reuters)
• Toyota boosts full-year guidance as weak yen drives revenues (FT)
• Starbucks wants to recruit 10,000 vets, spouses to its ranks (Reuters)
• U.S. Economy Slack Justifies Stimulus, Top Fed Staff Papers Show (BBG)
• Israel set to become major gas exporter (FT)

This morning US futures are an unfamiliar shade of green, as the market is poised for its first red open in recent memory (then again the traditional EURJPY pre-open ramp is still to come). One of the reasons blamed for the lack of generic monetary euphoria is that China looked likely to buck the trend for more monetary policy support. New Premier Li Keqiang said in a speech published in full late on Monday that adding extra stimulus would be more difficult since printing new money would cause inflation. "His comments are different from what people were expecting. This is a shift from what he said earlier this year about bottom-line growth," said Hong Hao, chief strategist at Bank of Communications International. Asian shares struggled as a result slipping about 0.2 percent, though Japan's Nikkei stock average bounced off its lows and managed a 0.2 percent gain. However, in a world in which the monetary tsunami torch has to be passed every few months, this will hardly be seen as supportive of the "bad news is good news" paradigm we have seen for the past 5 years.

There are three dimensions to the broader investment climate:  the trajectory of Fed tapering, the ECB's response to the draining of excess liquidity and threat of deflation, and Chinese reforms to be unveiled at the Third Plenary session of the Central Committee of the Communist Party. 

The Fed will have to increase QE (not taper it) because systemic debt is compounding faster than production and interest rates are already zero-bound. Lee Quaintance noted many years ago that the Fed was holding a burning match. This remains true today (only it is a bomb with a short fuse). Thirteen years after the over-levered US equity market collapsed, eleven years following Bernanke’s speech, five years after the over-levered housing bubble burst, and four years into the necessary onset of global Zero Interest Rate Policies and Long-Term Refinancing Operations, global monetary authorities seem to have run out of new outlets for credit. In real economic terms, central bank policies have become ineffective. In other words, the US is now producing as much new debt as goods and services.

• US Blasts Germany's Economic Policies (WSJ)
• Citigroup, JPMorgan Said to Put Currency Dealers on Leave (BBG)
• Watchdog: Syria Destroys Chemical-Arms Equipment (WSJ)
• Kynikos Alumni Start Hedge Fund Betting on Declining Stocks (BBG)
• China state media calls for stern action after Tiananmen attack (RTRS)
• IMF warns of financial shock risk to Africa (FT)
• Insurers Oppose Obamacare Extension as Danger to Profits (BBG)
• BoJ content to ignore Fed tapering and go its own way (FT)
• U.S. attorney wants DOJ to take civil action against BofA (RTRS)
• NSA Fallout Hits AT&T's Ambitions In Europe (WSJ)

In addition to the bevy of ugly European unemployment and inflation news just reported, the overnight session had a dollop of more ugly macro data for the algos to kneejerkingly react to and ramp stocks to fresh time highs on. First it was China, where the PBOC did another reverse repo, however this time at a fixed 4.3% rate, 0.2% higher than the Monday iteration and well above the 3%-handle from early October, indicating that China is truly intent on tightening its monetary conditions. Then Japan confirmed that despite the soaring imported food and energy inflation, wages just refuse to rise, and have declined now for nearly 1.5 years. Then, adding core insult to peripheral injury, Germany reported retail sales that missed expectations of a +0.4% print wildly, declining -0.4% from a prior downward revised 0.5% to -0.2%. And so on: more below. However, as usual what does matter is how the market digests the FOMC news, and for now the sense is that the risk of a December taper has risen based on the FOMC statement language, whether warranted or not, which as a result is pushing futures modestly lower following an epic move higher in the month of October on nothing but pure balance sheet and multiple expansion.  The big data week in the US rolls on with the highlights being the Chicago PMI and initial jobless claims, which are expected to print their first accurate, non-impaired reading since August.

This is what happens when Central Banks attempt to control the economy. 

The overnight fireworks out of China's interbank market, which saw a surge in repo and Shibor rates (O/N +78 to 5.23%, 1 Week +64.6 to 5.59%) once more following the lack of a follow through reverse repo as described previously, and once again exposed the rogue gallery of sellside "analysts" as clueless penguins all of whom predicted a quick resumption of Chinese interbank normalcy, did absolutely nothing to make the San Diego's weatherman's forecast of the overnight Fed-driven futures any more difficult: "stocks will be... up. back to you." And so they were, despite as DB puts it, "yesterday saw another round of slightly softer US data that helped drive the S&P 500 and Dow Jones to fresh highs" and "the release of weaker than expected Japanese IP numbers hasn’t dampened sentiment in Japanese equities" or for that matter megacorp Japan Tobacco firing 20% of its workforce - thanks Abenomics. Ah, remember when data mattered? Nevermind - long live and prosper in the New Normal. Heading into US trading, today the markets will be transfixed by the FOMC announcement at 2 pm, which will likely say nothing at all (although there is a chance for a surprise - more shortly), and to a lesser extent the ADP Private Payrolls number, which as many have suggested, that if it prints at 0 or goes negative, 1800 on the S&P is assured as early as today.