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Pre-Market Primer: Japan Ups Stimulus and the US Trade Deficit Unexpectedly Widens


China might have to cut back on the stimulus, however.


US stocks might decline slightly today after Japan revealed a souped-up stimulus plan and America's account balance swung to a bigger deficit than forecast.

The US trade deficit widened to $48.7 billion in November 2012 from $42.1 in October. Economists expected the deficit to narrow by $1 billion. Export and import prices met expectations, both falling 0.1%.

Stock futures were slightly lower this morning. Futures on the Dow Jones Industrial Average (INDEXDJX:.DJI) fell 0.10% to 13,393 and S&P 500 (INDEXSP:.INX) futures slipped 0.04% to 1,46.40. Nasdaq (INDEXNASDAQ:.IXIC) futures are down 0.03% to 2,736.25.

Wells Fargo (NYSE:WFC), the first lender to report earnings this season, booked $0.91 per share of profit, beating expectations by $0.02. Revenue rose 7% over the year before to $21.9 billion. Shares of the company fell 1.19% in the premarket, however.

Ford (NYSE:F) shares rose 1.1% after it said it would hire 2,200 new salaried employees this year. This is the biggest hiring spree that the automaker went on in over 10 years. The announcement prompted Goldman Sachs (NYSE:GS) to add the company to its conviction buy list.

Along with its earnings report, American Express (NYSE:AXP) announced that it will cut 5,400 jobs, or 8.5% of its staff. Earnings for the latest quarter beat expectations at $1.09 per share on revenue of $8.1 billion. The credit card company will take a $600 million charge in the fourth quarter for the layoffs.

Japan hopes to create 600,000 jobs and raise GDP by two percentage points by adding 10.3 trillion yen to government stimulus. Japan just dipped into its third recession in five years. Last month, the country elected a new government with a mandate to take drastic action to improve the economy. Today, the government reported that the country's current accounts swung to a massive 222.4 billion yen deficit. Analysts expected a shortfall of 3.5 billion yen. Today's data underscores the need to weaken the yen, which fell to a 2.5 year low of 88.97 to the dollar.

Chinese stocks fell the most in over three months after the country's inflation rate rose more than expected. On an annual basis, China's consumer price index rose 2.5% in December 2012 to a seven-month high. Higher inflation might result in more hawkish monetary policy and reduced fiscal stimulus in the future.

News was mixed in Europe, however. Peripheral Europe's debt market seems to have improved after this week's successful Spanish bond sale. Italy sold 3.5 billion euros of two-year debt at an average yield of 1.85%, down from 2.5% in a Dec. 13 auction.

Disappointing manufacturing output in the UK raised fears of a triple-dip recession. The monthly indicator of industrial activity fell by 0.3% in November 2012. On a yearly basis, this was a 2.4% drop. Economists expected a monthly rise of 0.5%. The decline in Spanish industrial production accelerated to a 7.2% annual drop.

Twitter: @vincent_trivett

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