Today's Headlines

Bloomberg:

• Spain's Debt Rating May Be Cut by Moody's Amid Struggle to Limit Contagion. Spain’s credit rating may be cut from Aa1, Moody’s Investors Service said, as the government prepares its final bond sale of the year tomorrow amid concern it may follow Greece and Ireland in seeking a bailout. Spain has to raise 170 billion euros ($226 billion) next year, while refinancing needs for its regions total 30 billion euros and for banks around 90 billion euros, Moody’s estimates. “Spain’s substantial funding requirements, not only for the sovereign but also for the regional governments and the banks, make the country susceptible to further episodes of funding stress,” Kathrin Muehlbronner, an analyst at Moody’s, said in a report today. The euro fell and the extra yield that investors demand to hold Spanish 10-year bonds over German bunds widened to as much as 257 basis points after the Moody’s report, less than 30 basis points shy of a euro-era closing record. The spread eased to 250 basis points at 12:30 p.m. in London.
• Germany Stiffens Opposition to Bigger Bailout in Crisis Face-Off With ECB. Germany stiffened its opposition to expanding government-financed aid for debt-plagued euro nations, leaving the European Central Bank to shoulder the bulk of the burden of fighting the crisis. With Chancellor Angela Merkel ruling out an increase in the euro area’s 750 billion-euro ($1 trillion) emergency fund, Germany yesterday put the spotlight on the ECB by endorsing a possible boost in its capital. Discord between Merkel and ECB President Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker on the eve of a European Union summit evokes the tensions during the first phase of the debt crisis, when Germany held out for more than two months before consenting to a loan package for Greece. “The consequence is a stalemate that leaves us with a familiar sense of déjà vu,” Ken Wattret, chief euro-area economist at BNP Paribas SA in London, said in a note to investors. “Market tensions are likely to resurface, as governments remain very publicly divided on the appropriate way forward.”
• Wall Street Pushes for Delay in U.S. Rules to Curb Commodities Speculation. U.S. regulators and lawmakers this week are considering rules aimed at curbing speculation in commodities trading, as Wall Street firms call for delay and companies including Delta Airlines Inc. urge strict limits. The CFTC has received hundreds of comments on how to implement a contentious part of the Dodd-Frank financial overhaul -- limits on the influence of big traders in markets for crude, gasoline heating oil and natural gas. Commissioners have discussed so-called position limits in at least 75 of the more than 400 meetings they’ve held with banks, oil companies, hedge funds and others, according to the agency’s website. “The speculative bubble in oil prices has concrete detrimental consequences for the real economy,” said Richard B. Hirst, general counsel to Delta, in a Dec. 13 letter that encouraged the CFTC to move “aggressively” to limit the number of contracts a single firm can hold. The law gives the CFTC until January to impose restrictions on energy and metals trading, and until April to place a cap on agricultural contracts. Gensler said last week that the agency will consider splitting proposals for position limits between spot month and all other months combined. The agency may move “expeditiously” on the spot month proposal, he said. Companies including Goldman Sachs Group Inc.(GS), Vitol and Cargill Inc. have met with the CFTC about the rules, according to the commission’s website. “If the Commission fails to act in a timely way or fails to adopt strong position limits, markets and consumers will be vulnerable to excessive commodity prices and volatility arising from speculative trading activity,” said William F. Galvin, the chief financial regulator for the state of Massachusetts, in a Dec. 9 letter.
• Bearish Illumina(ILMN) Options Volume Rises as Shares Climb to Record. Illumina Inc.’s put-options volume jumped to seven times the four-week average as the maker of DNA analysis equipment rose to a record after the shares more than doubled this year. More than 2,500 puts to sell the stock changed hands, nine times the number of calls to buy, as of 11 a.m. in New York.
• The Baltic Dry Index, a measure of commodity-shipping costs, extended its longest losing streak in almost a month on falling rates to hire smaller iron ore and coal transporters. The index declined 22 points, or 1.1%, to 2,047 points today. That's the seventh straight drop and the longest decline since a 17-day run to Nov. 19.
• RIM(RIMM) Rally May Fizzle as Estimates for iPad Rival Are Seen Too Optimistic. Research In Motion Ltd. has surged 41 percent since August on prospects for its new tablet device. That may be too big a jump given the product is late to a market led by Apple Inc.’s iPad, say analysts who are cutting ratings.
• Wal-Mart(WMT) Raising Toy Prices, Squeezing More Out of Holidays. Wal-Mart Stores Inc., the world’s largest retailer, raised prices on hundreds of toys this month, squeezing more out of sales during the biggest shopping period of the year. Wal-Mart managers in the U.S. received instructions to mark up an average of 1,800 types of toys per store, according to a company e-mail dated Nov. 30 obtained by Bloomberg News.
• BP(BP) Sued by Obama Administration Over Worst Oil Spill. The Obama administration sued units of BP Plc and four other companies, saying they violated environmental laws in the largest offshore oil spill in U.S. history, according to a court filing. The civil lawsuit, filed today in U.S. District Court in New Orleans, is the first brought by the U.S. over the oil spill caused by the explosion of the Deepwater Horizon rig in April. The Justice Department’s civil investigation is continuing, as is a probe of potential criminal violations.
• Goldman Execs to Get $111 Million in 2007, 2009 Bonuses. Goldman Sachs Group Inc. Chief Executive Officer Lloyd C. Blankfein and his top deputies will collect about $111.3 million in stock next month in a delayed payoff from last year and their record-setting 2007 bonuses. Blankfein, 56, is poised to receive about $24.3 million in January, based on yesterday’s share price, while President Gary D. Cohn, 50, will get about $24 million, company filings show. The payouts, just a portion of the $67.9 million bonus awarded to Blankfein for 2007 and the $66.9 million paid to Cohn, reflect a 24 percent decline in the stock’s value since it was granted at $218.86. Within a year after the bonuses were approved, Goldman Sachs took $10 billion from the U.S. Treasury, converted to a bank and was borrowing as much as $35.4 billion a day from Federal Reserve emergency programs. This year the firm paid $550 million to settle U.S. regulators’ fraud charges related to a mortgage-security the company sold in 2007.
• Euro Drops After Moody's Says Spain on Review for Downgrade; Dollar Gains. The dollar rose against most of its major counterparts as a possible downgrade of Spain’s credit rating rekindled concern the euro zone’s financial crisis is spreading, spurring demand for the safety of the U.S. currency. The greenback rose against the euro and yen as U.S. data showed a recovering economy with historically low inflation. The Canadian dollar rallied against most of its major counterparts as industrial production in the U.S. increased more than forecast in November, fueling demand for North American assets.“You still have the debt concerns in Europe, that’s what’s weighing down on the euro,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “It’s the overall European situation and the uncertainty of how it’s going to be resolved.”
• U.S. Homebuilder Confidence Unchanged in December Amid Depressed Demand. Confidence among U.S. homebuilders was unchanged in December from a month earlier, indicating residential construction will stay near depressed levels. The National Association of Home Builders/Wells Fargo index of builder confidence held at 16, matching the median forecast of economists surveyed by Bloomberg News, data from the Washington-based group showed today. Readings below 50 mean more respondents said conditions were poor.
• U.S. Industrial Production Rises More Than Forecast. Industrial production in the U.S. increased more than forecast in November, helped by gains in computers, home electronics and appliances, signaling factories will support economic growth into next year. Output at factories, mines and utilities rose 0.4 percent, the biggest gain since July, after a revised 0.2 percent drop in October, figures from the Federal Reserve showed today in Washington. Economists forecast a 0.3 percent gain, according to the median of 75 projections in a Bloomberg News survey. Manufacturing rose 0.3 percent for a second month.

Wall Street Journal:

• WSJ/NBC Poll Shows Solid Support for Tax Package. The poll found that 59% approve of the agreement, against 36% that disapprove, and those numbers are relatively consistent across party lines.

CNBC:

• What, Me Worry? Investors are Surprisingly Bullish on Stocks. Call it being complacent over complacency—redundant for sure, but an expression of how even a healthy level of fear has seemed to come completely out of the stock market.
• Obama's CEO Summit: Who Is, and Isn't, Around the Table.
  

Business Insider:

• Jerry Brown: California Budget Is "Much Worse Than I Thought - We've Been Living In Fantasy Land".
• Dylan Grice: Actually, Buying Commodities is a Terrible Idea and Your Real Return Will be Zero. Dylan Grice of Societe Generale doesn't think commodities themselves make a very good investment. In fact, Grice is confident commodities make a real return of 0% over the long-haul. This may be shocking, with all the bullish talk of surging commodity prices, the market seems a natural investment. Grice contends that, actually, a long-term bet on commodities is a long-term bet against human ingenuity.

Zero Hedge:

• Rosie On Further Evidence of the "Mother of all Margin Squeezes". (graphs) A slew of traditionally interesting insights in today's piece by David Rosenberg. Probably the most interesting data point has to do with further evidence of what as we have been claiming for about two months now, is shaping up to be the "mother" of all margin squeezes.

New York Times:

• U.S. Called Vulnerable to Rare Earth Shortages. The United States is too reliant on China for minerals crucial to new clean energy technologies, making the American economy vulnerable to shortages of materials needed for a range of green products — from compact fluorescent light bulbs to electric cars to giant wind turbines. So warns a detailed report to be released on Wednesday morning by the United States Energy Department.
• Anti-Austerity Protest in Greece Turns Violent. Thousands of Greeks took to the streets of the capital on Wednesday for a protest against a fresh wave of austerity measures which was marred by violence as a general strike brought international travel and public services to a standstill.

TheStreet.com:

• Mortgage Activity Eases as Rates Head Up. The volume of mortgage loan applications decreased 2.3% on a seasonally adjusted basis in the week ending Dec. 10, the Mortgage Bankers Association said early Wednesday. Mortgage activity fell 0.9% in the prior week. Refinancing application volume decreased 0.7% from the previous week. It was the fifth consecutive weekly drop in refinancing activity, and came on the heels of a 1.4% drop in the prior week. Home-purchase loan applications fell 5% in the week, on a seasonally adjusted basis, after ticking 1.8% higher a week earlier. On an unadjusted basis, the MBA's purchase index was 16.6% lower than in the year-earlier week. The average rate on a 30-year fixed mortgage increased to 4.84%, from 4.66% in the prior week. It was the highest rate observed since early May and was the fifth consecutive weekly increase.
  

Tech Ticker:

• Europe in Crisis: "There's a Lot of Potential Dominoes Over There," Mauldin Says. (video) Europe's debt crisis returned to center stage Wednesday after Germany again balked at expanding the size of the EU bailout package and Moody's warned it may downgrade Spain's debt. Looking out into 2011, the potential for a European banking crisis is "the one thing that makes me nervous," says John Mauldin, president of Millennium Wave Securities and author of the Thoughts from the Frontline e-letter. EU banks, led by those in Germany and France, have $2.28 trillion of exposure to the debts of Greece, Ireland, Portugal and Spain, according to the Bank for International Settlements. Add in the exposure of European banks to the debts of other European banks - likely in the trillions when the nominal value derivatives are included -- and "there's a lot of potential dominoes over there," he says.

Reuters:

• Baidu(BIDU) Sees Growth Rate Slowing in 2011. China's top search engine, Baidu Inc (BIDU), sees its top-line and bottom-line growth rates softening over the next year on a higher base of comparison, as it eyes acquisitions and "contextual" ads to boost growth in the future. "No ... We have such a bigger base," Haoyu Shen, Baidu's senior vice president of business operations, said at the Reuters China Investment Summit when asked whether the firm can keep up its stellar top and bottom-line growth rates into 2011.
• US Credit Card Delinquencies, Usage Fall. Credit card delinquency rates fell at major U.S. lenders in November as fewer consumers fell behind on their bill payments, signaling that they are recovering from the stress of the financial crisis. But consumers are also avoiding racking up more debt on their credit cards, even during the holiday shopping season, in a sign that lenders will be struggling to rebuild their businesses for some time to come.
• U.S. Equity Investors Most Bullish in 2 Years - Data. U.S. equity investors are more bullishly positioned than at any time in the last two years, figures from Data Explorers show, following a sharp market rally since September. Investors currently have 10.8 times as many long positions as short positions -- bets on falling prices -- in the United States, the highest since the ratio was calculated two years ago, according to the data.

Financial Times:

• No Easy Exit From Vicious Spanish Debt Circle.

Die Zeit:

• Germany must be prepared to sacrifice more sovereignty and money in order to preserve the euro, former Chancellor Helmut Schmidt said. Germany ought to be prepared to sacrifice more to the European project because the country had "massively contributed to conflict" in the past, Schmidt said.

RTE:

• The European Union will charge Ireland a 3% interest margin on teh 22.5 billion euros of its aid package. RTE in the report broadcast today also cited the European Court of Auditors as saying that the EU has never charged an interest margin for money it has lent or guaranteed.

ABC:

• Spanish Prime Minister Jose Luis Rodriguez Zapatero will ask the European Union to be more flexible with the use of the region's bailout fund. Zapatero will request that the fund be used spontaneously to give lines of credit to member countries which are experiencing a lack of liquidity due to the excessive lack of confidence shown by markets.

Xinhua:

• Chinese are decreasingly satisfied with their lives, including economic status, occupation and social security, citing the Chinese Academy of Social Sciences. Migrant workers born in the 1980s work longer and earn less than older migrants, citing the government research body's annual "Blue Book" on Chinese society.

Macau Daily Times:

• Government Says No More Direct Land Grants to Casinos. There will be no more land plots granted for casino projects without a public tender once the new Land Law comes into effect, the Land, Public Works and Transport Bureau (DSSOPT) director Jaime Carion said yesterday.