The world is likely a better place this morning, after North Korean dictator, Kim Jong Il, dies at age 70. It appears likely he suffered a stroke in 2008, and may have also battled with pancreatic cancer, but the ultimate cause of death appears to be a heart attack, according to reports from South Korean news sources. Kim Jung Il ruled for 17 years, during which time he defied the world by building nuclear weapons, while allowing his people to starve. Shortly after the news was released (around 12pm in Tokyo)- the MSCI Asia-Pacific Index was down 1.9% and S&P futures were down 0.5%.
Overnight Asian markets remained down, with the Nikkei 225 down -1.26% this morning. The Korean KOSPI hit a low of 1750 and then rallied to 1777 on the day. As of 7am CST this morning- S&P futures are trading +0.329% higher on the day. The Euro Stoxx 50 Index is up +1.14%, right along the same range as most other Euro equity indices.
Euro-area finance ministers are trying to meet a self-imposed deadline for drawing additional aid through the IMF and put together new budget rules. They hold a conference call at 3:30pm Brussels time regarding $261B in IMF funding and the mechanics of the Dec. 9 agreement at the EU summit on the so-called “fiscal compact”. France will sell up to $9.1B of bills after Fitch lowered their outlook of the nations credit rating (France has a debt-to-GDP ratio around 82.4%).
ECB President Mario Draghi told the Financial Times (FT) that countries choosing to exit the euro would be confronted by greater problems such as, “big inflation” and the fact that those countries would still have to implement austerity measures, “but in a much weaker position,” FT quotes Draghi in an interview. Governments, companies, and central banks alike still continue preliminary planning measures for the break-up of the euro zone, despite most analysts indicating the chances of such an event are slim, less than 20%. I would personally take the over on that bet, given the current environment.
The VIX Index closed last week just below its support around ~24.5 (the Oct. 28 low), and with the 50 day EMA set to cross below the 100D EMA, the index may be set to trend lower.
U.S. 10Y Treasury yields extend their fall to 1.8354%, near all-time lows, as the Fed continues extending the maturity of its holdings (Operation Twist). Support is the Oct. 4 low of 1.72%, near the record Sept. low of 1.67%; look for resistance at the 50 DMA at 2.06%.
Read more →