All eyes on North Korea

The chase by Marty Cej:

2011 was not a banner year for dictators, despots and political strongmen. Kim Jong Il, the second-generation North Korean dictator has died, shoving the region into a period of uncertainty of unknown depth and time. The heir apparent is the 28-year-old son, Kim Jong Un, who has been educated in Switzerland and elsewhere and has been named a four-star general though he has no military experience. South Korean stocks slumped overnight and the country's military has gone on high alert. Japanese Prime Minister Yoshihiko Noda's cabinet held a security meeting after the announcement. China sent its sincerest condolences. The dictator leaves behind an economy that is less than 3 percent the size of South Korea's and has relied on economic handouts since the 1990s when some 2 million people died from famine. Both are important measures of a despot's regime: economic catastrophe and body count. We're pursuing insight and analysis into what this new measure of instability could mean to a crucial economic region.

Eldorado Gold has agreed to buy European Goldfields in stock and cash in a deal valued at about $2.5 billion, giving Eldorado a foothold in the Aegean. Calls are out to the principals and we're looking at how the European Goldfields properties mesh with Eldorado's existing projects in China and South America.

Sino-Forest has defaulted on two sets of bond payments and will create a restructuring committee in the hopes of receiving waivers on additional payments to bondholders as it struggles to make it through another week. Our challenge today is to better understand the process of what Sino-Forest is trying to do and to talk about what recourse bondholders might have. We have contacted the company and are pursuing bond owners. We are also digging for analysts and lawyers who can tell us what the next steps are for investors.

U.S. Republicans in the House of Representatives have rejected a two-month extension of tax breaks for 160 million workers that was overwhelmingly approved by the Senate over the weekend. House Speaker John Boehner has demanded a new round of bargaining with the Democratic-controlled Senate to extend the tax break through 2012. Democrats are accusing him of reneging on a deal brokered by Senate Republican leader Mitch McConnell and his Democratic counterpart Harry Reid.

The two arrived at the modest two-month extension on Friday after failing to break a deadlock over how to pay for the tax break for a full year. The debate will be difficult to settle with less than two weeks left before the tax break expires. And so it goes.

Sense of calm hits markets

The chase by Marty Cej:

Financial markets appear to have found a modicum of composure this morning after a day that saw declines in global stocks, the euro, the Canadian dollar, precious metals and industrial commodities. Most commentators put today's modest gains in European stocks, gold, silver and the euro down to the fact they fell yesterday. Obviously, our viewers expect a little more analysis than that. A read on the euro-zone's manufacturing economy rose in December, countering expectations for a decline, but still sits in contraction territory. A sale of Spanish debt raised almost double its target. What do these data points tell us about the outlook for the European economy or confidence in Spain's fiscal authorities?

Are today's gains in European stocks and the common currency a brief reprieve or something more?
A crowded slate of U.S. economic data this morning is likely to determine the direction of markets, regardless of the European data. Inflation at the wholesale level is due out at 8:30 a.m. ET along with the current account balance, Empire State manufacturing report and initial jobless claims. Industrial production and capacity utilization are out at 9:15 and the most potentially market-moving data point, the Philly Fed index -- a read on the manufacturing economy in the Philadelphia region -- is out at 10:00. The market is anticipating an improvement in both the Empire Manufacturing data and the Philly Fed.

Many Canadian investors will zero-in on Research In Motion today as it reports third-quarter earnings after the close of trading tonight. Already this morning, agitated and agitating shareholder Jaguar Financial has called out two of RIM's directors, Barbara Stymiest and Roger Martin to stand up and insist that the company separate the chairman and CEO roles.

Some analysts and investors are saying the stock is dead money until the issue of leadership and governance is settled. Others argue that RIM could represent one of the best -- if riskiest -- bets for 2012. Should the company split into two? Should it put itself up for sale? Should it soldier on and prove the skeptics wrong? Will it beat, meet or miss? Will it warn or raise forecasts? The company reports after the close but our coverage begins now.

For the record, RIM is expected to report a 34-percent decline in third-quarter earnings per share of $1.15, the average forecast of analysts surveyed by Thomson Reuters. Revenue is seen declining 4 percent to $5.26 billion. Yes, that's right, one of the worst performing stocks on the TSX still generates sales of more than $5 billion on a quarterly basis.
Also in earnings, we're watching Fedex, which topped second-quarter expectations and ordered up 27 brand-spanking new 767 jet freighters. One of the best economic barometers in the U.S. equity markets, we'll need to pick apart the numbers.

In Canadian earnings, tourism and airline Transat reported a stronger fourth quarter on the revenue line but swung to a net loss on the bottom line. The company also cautioned the market that so far this winter, "a significant portion of seats remains to be sold and the trend towards last-minute bookings and the volatility of margins make it difficult to make forecasts."
Also today, we'll be watching for numbers from Adobe, Empire Co., Pier 1 (wicker, anyone?) and Rite Aid.

John Corzine has been invited to testify before the House Financial Services Committee.
We are also waiting for the release of the National Energy Board's Arctic Review at 12:30 p.m. ET. Any energy company with ambitions for the North will be following the release as well.