Eagle Eye Opener: Boehner Proposes Budget Deal; Japan’s Prime Minister Gains Allies; Election Results Lift Nikkei

Eagle Eye Opener

Republicans Blink First (Reuters)

Republican House Speaker John Boehner indicated that his party would accept higher tax rates for the rich — those making more than $1 million a year — while extending lower tax rates for those making less than that. While that would put more money in some investors’ pockets, President Obama has said that he wants that threshold amount to be $250,000. So, while there was some give on the Republican side, the two factions remain far apart on taxes… and even farther on other issues such as entitlements where Republicans still desire cuts to Medicaid, Medicare and other government-sponsored health programs for the poor and elderly. Thus, an impasse remains just two weeks until the Jan. 1 deadline for so-called fiscal cliff policy changes to take effect.

Japan Fills Lower House with Prime Minister’s Allies (Bloomberg)

Elections in Japan yesterday created a two-thirds majority in the country’s lower house for the Liberal Democratic Party — the same party of incoming Prime Minister Shinzo Abe. What this means for investors is that in the coming year, Abe will be able to move forward with his plan of more fiscal stimulus in the country — to kick-start a moribund economy.  A two-thirds majority in the lower house can override any action by the upper house, if that latter group attempts to stop Abe’s stimulus policy. The hope is that this stimulus will ignite an economy mired in recession for 20 years and saddled with the identity of the country with the world’s largest public debt.

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Markets React or Not… to Japanese Elections (Bloomberg)

The Liberal Democratic Party’s victory yesterday in Japan’s lower house sent the Nikkei up .94%. Yet investors in China appeared unsure of what that could mean as Hong Kong’s Hang Seng fell .41%, while the Shanghai Composite rose .45%. Smaller Far East national indexes responded with minor losses as well, including Korea, Taiwan, New Zealand and the Philippines. European markets, seemed to display a euro-pout, with the FTSE 100, CAC-40 and DAX all down marginally. To round out Japan’s non-existent impact on global markets, U.S. Futures on the Dow, Nasdaq and S&P 500 all sunk slightly, as well.

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HSBC’s China Purchasing Manager’s Index (PMI) rose, to a 14-month high of 50.9. That’s the third month in a row that the PMI has been above 50, which represents manufacturing expansion. Far East markets rose slightly on the news.


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