Evening Headlines
Bloomberg:
- G-20 Unity Born in Crisis Fractures as Leaders Pursue Own Ends. President Barack Obama finds himself on the defensive before a summit of world leaders tomorrow as his European and Asian counterparts disparage U.S. policies they say weaken the dollar and stoke hot-money flows. The fissures over U.S. policy and concern countries may react with competitive currency devaluations underscore how the end of the financial crisis has paved the way for national divisions to overtake the desire for a coordinated response that first brought the G-20 leaders together.
- Einhorn's Greenlight Says Fed's Quantitative Easing Won't Benefit Economy. David Einhorn’s Greenlight Capital Inc. said the Federal Reserve’s plan to buy an additional $600 billion of U.S. Treasuries through June won’t stimulate the economy, and helps explain the rally in gold to record levels. The Fed’s so-called quantitative easing announced Nov. 3 will probably result in rising prices of basic goods for consumers and businesses, curtailing economic growth, the New York-based hedge-fund firm said in a Nov. 1 letter to clients, a copy of which was obtained by Bloomberg News. “It is quite likely that QE2 will slow the economy by raising food and energy prices, which would act as a tax on consumers and business,” the firm said in the letter. “Other than satisfying the political need to ‘do something,’ we believe it is doubtful that QE2 will be successful.”
- Fed Monetary Stimulus Prompts Clashing Views From Senate's Shelby, Johnson. Top lawmakers on the U.S. Senate Banking Committee stated opposing views about the Federal Reserve’s expansion of record monetary stimulus, widening the political rift over the effort to spur the U.S. recovery. “I commend the Fed for being willing to try and help improve economic growth in America,” South Dakota’s Tim Johnson, a Democrat who’s in line to begin leading the committee in January, said today in a statement to Bloomberg News. Alabama Senator Richard Shelby, the panel’s top-ranking Republican, said he’s “worried about the risks” of the Fed’s actions.
- China Said to Order Some Banks to Raise Reserve Ratio by 50 Basis Points. China ordered some lenders including Bank of Communications Co. to increase their reserve ratios by 50 basis points, said a person with direct knowledge of the situation. The increases will be effective Nov. 15, said the person, who asked not to be identified as the orders weren’t public. Lu said reserve requirements will now stand at 18 percent for the nation’s four biggest banks. Bank shares fell in Hong Kong and Shanghai, with the Hang Seng Finance Index dropping 1.3 percent as of 12:20 p.m. China may miss the government’s target for 3 percent inflation this year, the nation’s top economic planning agency said yesterday.
- Credit Swaps Rise for Second Day as Rally Runs 'Out of Gas'. The cost of protecting bonds in the U.S. from default rose for the second day, after falling last week to the lowest in six months, on concern that the debt rally is running “out of gas.” The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 2.7 basis points to a mid- price of 90.5 basis points as of 4:56 p.m. in New York, according to index administrator Markit Group Ltd.
- The cost of trading Irish government bonds may jump after LCH Clearnet Ltd., the world's second-largest fixed-income clearing house, told customers it may increase margin requirements, UBS AG said. "LCH has given its clients an early warning, an opportunity to get out," said Penn, a market analyst in London. "The spread has moved to a point where they probably need to be doing something."
- Credit-default swaps on the junior bonds of Allied Irish Banks Plc are signaling that full government ownership of the lender is "all but fully priced in" by traders, according to Credit Agricole SA.
- Surging Rare-Earth Prices Spur Mining in Kazakhstan, Kyrgyzstan, Greenland. Surging rare-earth prices are spurring developments of deposits in Kazakhstan, Kyrgyzstan and Greenland as China cuts exports of the metals used in BlackBerrys, televisions and Toyota Motor Corp.’s hybrid cars.
- Baucus, Levin Say Congress to Keep 'Onerous' Minimum Tax From Increasing. Congress will “do everything possible” to prevent the alternative-minimum tax from forcing 21 million households to pay an additional $66 billion in taxes this year, four lawmakers said in a letter to the Internal Revenue Service. Max Baucus of Montana and Charles Grassley of Iowa, the chairman and top Republican on the Senate Finance Committee, urged IRS Commissioner Douglas Shulman today to prepare for the 2011 tax filing season by assuming the minimum tax will be adjusted for inflation.
- U.S. to Give More Aid to Palestinian Authority, Official Says. Secretary of State Hillary Clinton tomorrow will announce additional assistance to the Palestinian Authority, which is striving to close its budget deficit as the U.S. seeks to revive talks toward peace with Israel. “We are in a new fiscal year and we will have the opportunity to make an additional contribution to the Palestinian Authority,” U.S. State Department spokesman Philip J. Crowley said today in Washington. Clinton will make a statement on the aid in a video conference with Palestinian Prime Minister Salam Fayyad scheduled for 10:15 a.m. Washington time. Fayyad, during a visit to the United Nations General Assembly in September, asked donors for about $500 million to help close his budget deficit. The Palestinian Authority needed $1.2 billion in aid in 2009 and $1.8 billion in 2008.
- Netanyahu Rejects Obama Criticism of East Jerusalem Construction Planning. Prime Minister Benjamin Netanyahu rejected U.S. and Palestinian criticism of Israeli plans to build more homes in east Jerusalem, saying Israel has never accepted “any limitations” on construction in what it regards as its capital city. “Jerusalem is not a settlement,” Netanyahu said, according to a text message sent from his office yesterday. “Jerusalem is the capital of the state of Israel. Israel never took upon itself any limitations on construction in Jerusalem.”
- Ireland's Fate Tied to Doomed Banks. With doubts swirling about the solvency of the Irish state in early September, Finance Minister Brian Lenihan summoned a dozen senior government and bank officials to a conference room nicknamed the "torture chamber," a nod to its history as a venue for painful meetings.
- The Next Credit Crisis? Munis. Debtholders Are Left Steamed as Some Cities Forgo Repayment Promises. The housing crisis was fueled by cash-strapped homeowners who walked away from their mortgages. Some analysts and investors now are worried about the same problem happening with debts of cities and towns.
- Extending Tax Cuts, But With a Catch. Top Democrats Link Keeping Bush-Era Breaks to an Overhaul of Tax Code; Republican Aides Say They Are Open to the Idea. Two top Senate Democrats floated the idea Tuesday of extending the Bush-era income-tax rates for a limited time only, and tying that move to an overhaul of the U.S. tax code or passage of policies to address the budget deficit.
- Don't Look Now, But Here Comes the New, New Bank Fees. Less than a year after the passage of new laws limiting banks' ability to impose certain fees on credit and debit cards, Bank of America Corp., Discover Financial Services, J.P. Morgan Chase & Co. and other lenders are using different tactics to boost their fee income. Some are raising minimum payments on certain customers' accounts in order to increase late penalties. Others are ramping up credit-protection insurance programs and charging customers for coverage without permission. Still others are pushing aggressively into high-fee prepaid cards, which are exempt from most of the new rules.
- CME Taps the Brakes on Silver. Tapping the brakes on the silver rally, the CME sent a letter to its clearing member firms and others Tuesday raising the amount of margin needed to trade silver futures contracts.
- Lawsuits Pile Up Against US Banks in Mortgage Mess. Lawsuits against banks over their mortgage lending and foreclosure practices continue to pile up, with JPMorgan Chase, PNC Financial and Ally Financial disclosing suits on Tuesday.
Zero Hedge:
- Debt Bubble Chronicles: Does Bernanke REALLY Think QE Will Boost Home Prices... Or is He Simply Trying to Hide and Even Bigger Problem?
- Exclusive: Presenting the Flash Crashes of 2010 - Part I. In an exclusive collaboration between Nanex and Zero Hedge, we are pleased to present to our readers the first part of a multi-series project that will demonstrate the flash crashes of 2010, and subsequently, of 2009 and 2008.
Politico:
- Report: White House Edited to Favor Drilling Ban. The White House rewrote crucial sections of an Interior Department report to suggest an independent group of scientists and engineers supported a six-month ban on offshore oil drilling, the Interior inspector general says in a new report. In the wee hours of the morning of May 27, a staff member to White House energy adviser Carol Browner sent two edited versions of the department report’s executive summary back to Interior. The language had been changed to insinuate the seven-member panel of outside experts – who reviewed a draft of various safety recommendations – endorsed the moratorium, according to the IG report obtained by POLITICO.
- President Obama in Jakarta: 'Indonesia is a part of me'. President Barack Obama believes Indonesia and the United States have two things in common that could bridge the east-west divide: democracy and himself. “Let me begin with a simple statement,” Obama said Wednesday in a speech to the Muslim world at the University of Indonesia. He then spoke in Indonesian: “Indonesia is a part of me,” a statement which drew cheers and applause.
Reuters:
- ACLU Sues to Stop Defense of Marriage Act. The American Civil Liberties Union filed suit on Tuesday challenging the constitutionality of a federal law defining marriage as between a man and a woman, contending it denies equal protection for gays and lesbians. The suit targets the Defense of Marriage Act, passed by the U.S. Congress in 1996, which allows states to deny recognition of same-sex marriages performed in other states.
- Qualcomm(QCOM) CEO: May Exit India Broadband Mid-2011. U.S. chipmaker Qualcomm could exit its wireless broadband business in India by the second half of next year, the Business Line newspaper reported on Wednesday citing the company's chief executive.
- Short Bets in U.S. Stocks Fall in Late October. Bearish bets fell further in late October, U.S. stock exchanges said on Tuesday, suggesting investors abandoned their positions as the market rallied. Short interest on the NYSE and Nasdaq declined about 2 percent through the second half of October.
- China can "stand firm" against pressure to appreciate the yuan at the upcoming G20 summit, Yao Yang, director of the China Center for Economic Research and Peking University professor, wrote. A stronger currency would benefit the U.S. a little while depressing China's gross domestic product and employment by 3%, Yao wrote.
- Goldman(GS) Executive Fired Over Violations.
- EU Threatens to Block Chinese Bids for Public Contracts. The European Union will block access for Chinese companies bidding for publicly funded contracts unless businesses from Europe get the same access in China, under new proposals tabled in Brussels as David Cameron held trade talks in Beijing.
- One-Third of Nationwide Home Loans in Arrears. MORE than a third of residential mortgages issued by Irish Nationwide Building Society are in arrears, the Irish Independent has learned. Around half of the buy-to-let mortgages issued by the society in the past few years are also in arrears.
- The U.S.'s second round of quantitative easing, or QE2, is financial protectionism, Su Jingxiang, a researcher with the China Institutes of Contemporary International Relations, wrote.
- Liu Mingkang, head of China's banking regulator, said the nation's economic growth this quarter may be less than 9%. The Chinese currency's appreciation since June has put great pressure on exports, Liu was cited as saying.
Citigroup:
- Reiterated Buy on (ALL), boosted estimates, target $37.
- Reiterated Buy on (MDR), boosted target to $23.
- Asian equity indices are -1.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 96.0 +2.25 basis points.
- S&P 500 futures -.06%
- NASDAQ 100 futures -.06%.
Earnings of Note
Company/Estimate
- (RL)/1.69
- (M)/.04
- (KLIC)/.87
- (CSC)/1.17
- (AAP)/.92
- (CSCO)/.40
8:30 am EST
- The Trade Deficit for September is estimated at -$45.0 Billion versus -$46.3 Billion in August.
- The Import Price Index for October is estimated to rise +1.2% versus a -.3% decline in September.
- Initial Jobless Claims for last week are estimated to fall to 450K versus 4457K the prior week.
- Continuing Claims are estimated to fall to 4305K versus 4340K prior.
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +1,950,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,000,000 barrels versus a -2,689,000 barrel decline the prior week. Distillate inventories are expected to fall by -2,000,000 barrels versus a -3,568,000 barrel decline the prior week. Finally, Refinery Utilization is expected unch. versus a -1.9% decline the prior week.
- The Monthly Budget Deficit for October is estimated at -$140.0 Billion versus -$176.4 Billion in September.
- None of note
- The $16 Billion 30-Year Treasury Bond Auction, weekly MBA Mortgage Applications report, Piper Jaffray Tech/Media/Telecom Conference, Wells Fargo Tech/Media/Telecom Conference, (CSFB) Healthcare Conference, (BBD) investor day and the (HA) analyst meeting could also impact trading today.
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