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Daily Agenda: U.S. Equity Investors Give Thanks

No major oil production cuts are anticipated from OPEC; U.S. consumers in focus in advance of Black Friday.

Given that volatility levels are low across most traded assets, it appears as if many U.S. investors are already relaxing for the Thanksgiving holiday. At a time for counting blessings, the big question on the minds of many market participants is simply what, if any, near-term macro factor could disrupt investor sentiment. Yesterday’s positive surprise for U.S. gross domestic product, revised up for the third quarter to 3.9 percent, sent a signal that the economy is strong enough to weather the end of easing by the Federal Reserve. In a note released yesterday, Don Rissmiller, chief economist at Strategas Research Partners in New York, commented “the U.S. cycle appears mature enough that the economy is powering through remaining regulatory restraint (bank fines) and registering solid growth,” adding, “emergency monetary policy (ZIRP) is looking harder and harder to justify at the Fed, even with inflation tame.” For now, U.S. equity investors are positioned to give thanks for good news at home. Combined with intervention abroad, the present market situation makes a glass-half full argument for stocks.

The U.S. consumer takes the spotlight. The U.S. Bureau of Economic Analysis this morning is releasing personal income and outlays data for October. Consensus forecasts call for a modest increase in spending and wages for the month, while personal consumptions expenditures price index levels are expected to remain flat for the month. Separately, November University of Michigan consumer sentiment data, also due out today, will provide forward looking insight into the mood of shoppers in the lead-up to Black Friday, two days from today. Because of the Thanksgiving holiday, note that U.S. weekly initial jobless claims will be released today rather than on Thursday as usual.

Major oil producers suggest cuts not likely. Russian energy giant Rosneft’s CEO Igor Sechin indicated yesterday that Russia would not dramatically reduce oil production levels, despite a recent marginal cutback. Saudi Arabia’s oil minister delivered a similar message today in Vienna in advance of tomorrow’s meeting of the Organization of the Petroleum Exporting Countries (OPEC). Both nations are intent on keeping production levels charging forward for different reasons. Cash-strapped Russia, struggling with economic sanctions by the West, needs to maintain cash flow while Saudi leaders are continuing to keep pressure on North American producers as more shale capacity comes online. This is a disappointment for multiple poor OPEC states such as Venezuela that are struggling with low crude prices.

Deere earnings disappoint. Moline, Illinois-based heavy equipment manufacturer Deere & Co. announced fiscal fourth-quarter earnings this morning that fell short of consensus analyst forecasts at $1.9 billion for the period, versus an anticipated $2.2 billion. In advance of today’s announcement, Barclays analysts cut their price target for the stock and Berkshire Hathaway filings indicated that the firm had liquidated its holdings in the company’s shares, as slowing agricultural profits weighed on sales prospects.

Europe charts new plans to bolster economy. European Commission President Jean-Claude Juncker unveiled a €300 billion ($374 billion) program to spur growth in the European Union through private investment rather than increased public spending. Reaction to the announcement from analysts was skeptical, despite Juncker’s insistence that there was no need for quantitative easing as moribund European economies continue to struggle to rein in their debt levels.

Washington steps in to Google’s rescue. A bipartisan U.S. congressional group released a statement yesterday attacking EU antitrust legislation that could force Google to restructure its service offerings in the region, labeling the move as being politically motivated to protect local business interests. The European Parliament is scheduled to discuss the issue in sessions tomorrow.

Chinese tax collectors gear up. Media outlets have reported that a U.S.-controlled company, believed to be Microsoft, will be subject to fines in excess of 800 million yuan ($130.4 million) for tax evasion. Beijing agreed last year to join other global governments in tracking the flow of profits at multinationals operating within China and crack down on tax avoidance in violation of local or international regulations.

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