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US stock market, economy and companies update (December 31, 2012)

Contributed by Trade The News

- US equity markets are grinding higher this morning in the final trading session of 2012. Fiscal cliff negotiations are intense, with rapid-fire updates providing plenty of volatility. Ahead of the US open, headlines citing sources suggested that Democrats agreed to raise the threshold for tax increases to $450K a year from $250K if the Republicans agreed to raise the highest tax brackets back to Clinton-era top rates (36% and 39.6%). A 60-90 day package of spending cuts is said to be under discussion to replace the sequestration. Reports indicate talks are very close to a deal.

- The S&P500 rose as much as 0.75% in the first hour of trading before giving up some gains, with the DJIA flat on the session. The Shanghai Composite gained 1.6% overnight after the Dec China HSBC Manufacturing PMI rose to 51.5 from 50.5 in November, marking the fastest rate of expansion in Chinese manufacturing in 21 months. European indices were mixed: the FTSE closed out the lower on the day and the CAC higher by 0.6%. Germany's DAX closed the year out last Friday.

- The Dec Dallas Fed index was very good, gaining strongly after November's negative reading. There were concerns about the negative new orders component.

- EUR/USD was flat for most of the European session, then around the US open made a lunge toward yesterday's highs only to give up all the gains, moving on various fiscal cliff headlines. Spot gold is more or less flat on the day.

- On the M&A front, investment banking firm Duff & Phelps has agreed to be taken private by a consortium of private equity firms, including the Carlyle Group, for $665M or $15.55 a share (a 19% premium to the prior close).

- American Airlines parent AMR Corp. and US Airways Group took another step toward merging. Over the weekend, the board of American's pilots union approved an interim labor framework deal should the two carriers proceed with a combination.

***Looking Ahead***
- 11:30 (US) Treasury to sell 3-Month Bills
- 11:30 (US) Treasury to sell 6-Month Bills
- 13:15 (DE) German Chancellor Merkel gives New Year's speech
- 19:01 (KR) South Korea Dec External Trade Balance: $3.3Be v $4.4B prior; Exports Y/Y: +0.8%e v 3.9% prior; Imports Y/Y: -2.2%e v +0.7% prior
- 20:00 (CN) China Dec Manufacturing PMI: 51.0e v 50.6 prior

***Economic Data***
- (IS) Israel Q3 Preliminary GDP Annualized: 2.8% v 2.9% prior
- (IS) Israel Nov Unemployment Rate: 6.7% v 6.9% prior
- (IN) India Q3 Current Account Balance: -$22.3B v -$23.5Be (record reading)
- (PL) Poland Central Bank (NBP) Dec Inflation Expectations: 3.4% v 3.3%e
- (MX) Mexico Nov Net Outstanding Loans (MXN): 2.268 v 2.223T prior
- (US) Dec Dallas Fed Manufacturing Activity: +6.8 v -2.8 prior