International Markets

From CNBC: Japan Deeper in Recession, Third-Quarter GDP Shows

Japan's economy sank more deeply into recession in the third quarter than initially thought (weakness in exports and capital spending). The export-driven economy now looks likely to keep contracting at least until the first quarter of next year -- which would mark an unprecedented four straight quarters of decline -- as leading Japanese manufacturers cut output sharply to deal with a slump in global demand.

The economy contracted 0.5 percent in July-September, far more than the preliminary figure of a 0.1 percent decrease and economists' median forecast of a 0.2 percent fall.

Japan's economy shrank at an annual rate of 1.8 percent in the quarter, three times faster than the contraction in the U.S. economy in the same period. The revision was mainly due to a mark down in inventory and government spending.

From Bloomberg: Japan Default Risks Signal Stocks are a sell!

The link between corporate default risk and stock prices indicates Japanese shares trading at record low valuations may have room to fall further.

The CHART OF THE DAY shows the inverse relationship on a 120-day basis between the Topix index and the iTraxx Japan Index benchmark of credit-default swap spreads, which measures perceived default risk. On Dec. 5, the correlation coefficient reached minus 0.75 on a scale of plus 1 to minus 1. A positive reading shows moves in the same direction and a negative number indicates moves in opposite directions.

“The CDS index is at its highest since its creation, indicating a deterioration of corporate financial conditions.”

Similar prediction has been made for S&P, which ultimate target is 450-600 region.

From Bloomberg: China's exports shrink, output cools

“November figures will come out soon, and industrial growth will be something around 5 percent and export growth will be negative.”

A collapse from October’s 19.2 percent export growth would add pressure on policy makers meeting in Beijing this week to do more to sustain the expansion of the world’s fourth-biggest economy. The government has already unveiled a 4 trillion yuan ($582 billion) stimulus package and cut interest rates by the most in 11 years as a global recession cuts demand for the nation’s toys, textiles and electronics.

Industrial-output growth of 5 percent would be the weakest since Bloomberg data began in 1999 and worse than the 7.2 percent median estimate of 14 economists in a Bloomberg News survey. Production rose 8.2 percent in October.