Good morning,

Markets are called to open high this morning. This is what's happening today:

  • Japanese stocks climbed as the yen weakened to the lowest since April 2011 after the Liberal Democratic Party returned to power with calls for more monetary easing;
  • China relaxed limits for some overseas investors, driving the yuan higher;
  • 10-year Italian debt is yielding 4.597%, 10-year Spain is yielding 5.373% and 10-year portuguese debt is yielding 6.992%;
  • Gold is trading at $1691.30/ t oz;
  • Brent is trading at $108.25;
  • Apple closed the session at $509.79

Today all the news is on the elections which took place in Japan yesterday. The Liberal Democratic Party won the elections and the markets are up 1% in Japan because the new Prime Minister Abe is pro-stimulus. However, Abe will have to contend with an economy still reeling from last year’s record earthquake and nuclear disaster. Japan fell into another recession in the third quarter while confidence among the country’s largest manufacturers slid to the lowest level in almost three years, according to the Bank of Japan’s quarterly Tankan survey.

In China, the yuan rebounded from its biggest weekly loss since July as the People’s Bank of China raised the currency’s reference rate by 0.05%, the most since Nov. 27. Sovereign wealth funds, central banks and monetary authorities investing in China’s capital markets can now exceed the $1 billion limit that still applies to other qualified foreign institutional investors, according to revised regulations posted Dec. 14 on the State Administration of Foreign Exchange’s website.

UBS AG is set to pay as much as $1.6 billion to settle claims of Libor manipulation by the US Justice Department, the Commodity Futures Trading Commission, the U

K Financial Services Authority and the Swiss Financial Market Supervisory Authority, said a person familiar with the probes. The announcement could come by tomorrow. The $1.6 billion figure would be more than three times the $469 million that Barclays Plc agreed to pay last June to settle allegations that its employees conspired to manipulate the London interbank offered rate, which is used in bank borrowing.

Barclays came out with a report titled 'Global Top Picks for 2013.' Quoting from the report, 'The macro risks that have weighted on markets for much of 2012 have subsided, heralding a new period of lower correlations between asset classes, as well as reduced volatility. Aggressive monetary easing by major central banks has reduced tail risks, but has not produced the kind of growth momentum that would justify a bullish call on risk assets.

Our economists forecast a modest acceleration of growth in 2013, from 3.1% in 2012 to 3.3% in 2013. Yet our strategists still recommend an overweight allocation to developed market equities relative to fixed income, on account of the valuation gap between risky and safe-haven assets.

In the US, lack of progress on the fiscal cliff presents a short-term risk, but we still forecast equity returns only modestly below historical norms. In Europe, even against a backdrop of anaemic growth, falling profit margins and fair valuations, we expect equities to rally in 2013. Japan could also present a buying opportunity as the Bank of Japan is expect to adopt more aggressive policy easing.'

Stock to watch: Agco (Price $48.80, Price Target $60)

Barclays research – We maintain our price target of $60 now based on 10.5x our 2013 EPS estimate of $5.70 (from $60 based on 11x our prior 2013 EPS estimate of $5.45). Our 2013 EPS estimate reflects somewhat faster revenue growth and margin expansion than we previously modeled. However, we lower our target multiple by 0.5x, reflecting ongoing uncertainty about European economies which could continue to weigh on the stock.

For more information on Agco or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli