Today's Headlines

Bloomberg:

• Spain Riskier Than Bulgaria Signals Rating 'Wrong': Euro Credit. Spanish debt is more expensive to insure than Baa2-rated Bulgaria, signaling the euro region's fourth-biggest economy may not warrant its Aa2 credit status. Moody's Investors Service rates Spain two levels below AAA as does Standard & Poor's at AA. Fitch has Spain at AA+, one from the top, even after the European Central Bank stepped in to buy its bonds to bring yields down from euro-era records. While Spain is ranked the same as Slovenia by Moody's and S&P, costs to insure its debt against default are twice as much. "The rating agencies have got their head in the sand," Harvinder Sian, a strategist at Royal Bank of Scotland Group Plc in London. "Any country where you need the central bank in there supporting the bond market, and a AA rating, suggests something is very badly wrong with the ratings process." Spain's borrowing costs have soared as the government struggles to rein in the euro region's largest budget deficit after Greece and Ireland, which has pushed the debt to almost twice the level of four years ago. The surge in the 10-year yield to 6.46 percent led the ECB to start propping up Spanish bonds on Aug. 8, and has knocked 120 basis points off that high. The cost of insuring Spanish debt against default rose to 390, CMA prices showed today, compared with 329 for Bulgaria. Spain's 10-year bond yields 5.33 percent, about 160 basis points more than similar maturity bonds of Thailand, which Moody's rates five levels less than Spain at Baa1.
• Europe Bank Bonds Doubt Dollar Lending Success: Credit Markets. European bank bonds signal that investors remain skeptical that a move by central bankers around the world to provide dollars to financial institutions in need will solve the region's funding crisis. While the extra yield investors demand to hold bank bonds in euros instead of benchmark government debt shrank 15 basis points to 352 basis points after the Sept. 15 announcement, the spread remains within 18 basis points of the 2 1/2-year high reached earlier in the week, according to Bank of America Merrill Lynch index data. Euro-region banks' usual sources of dollar funding dried up on concern they'll be forced to take losses on bonds sold by Greece and the rest of Europe's most-indebted countries. In response, the European Central Bank and its counterparts in the U.K., Switzerland, Japan and the U.S. agreed to provide unlimited money to lenders until year-end. "It significantly reduces the possibility of a disorderly unwind of positions which certain banks may have had," said Roger Doig, a London-based analyst at Schroders Plc, which manages the equivalent of about $58 billion in fixed-income assets. "It doesn't change the fact that access to short-term wholesale dollar funding for certain banks is disappearing, and will be gone by the end of the year."
• Sovereign Default Risk Surges as Greek Woes Put Paid to Rally. The cost of insuring European sovereign debt rose, reversing a four-day rally, on concern a default by Greece is becoming more likely after the region's leaders failed to agree on new measures to halt the crisis. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose 14 basis points to 339 at 3 p.m. in London, approaching the record 354 set Sept. 12. Greece's economy will shrink 5.5 percent this year and will contract "notably" next year, Finance Minister Venizelos said at a conference in Athens today. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings increased 41 basis points to 756, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 12.5 basis points to 188.5. The Markit iTraxx Financial Index of swaps on the senior debt of 25 banks and insurers increased 27 basis points to 292, while the subordinated index was up 34 basis points to 499.
• Euribor-OIS Spread Widens as Greece Concerns Boost Lending Costs. A gauge of banks' reluctance to lend to each other in Europe rose for the first time in a week amid renewed concern Greece is headed for a default. The Euribor-OIS spread, the difference between the three- month euro interbank offered rate and overnight index swaps, was at 79.1 basis points as of 4:18 p.m. in London, from 75.3 at the end of last week, according to data compiled by Bloomberg. That's within six basis points of the highest level since March 2009, reached Sept. 12.
• Europe Always Does Too Little, Too Late, Summers Writes in FT. European authorities, in the past two years, have repeatedly done just enough to avoid an imminent collapse, while never doing enough to establish a basis for renewed confidence, said Lawrence Summers, a former U.S. Treasury Secretary and now a professor at Harvard. Writing in the Financial Times, Summers said that authorities who assert, in the face of all the evidence, that Greece can service all its debts on time will enjoy little credibility when they claim that the fundamentals are sound in Spain and Italy. After European bank stress tests that treat assets as risk- free when credit default swaps exceed 500 basis points, markets can hardly be blamed when they ignore regulators’ assertions about financial institutions’ solvency, he said. It’s clear that market discipline within European monetary union isn’t powerful and credible enough to guarantee sound finance; there now has to be a simultaneous increase in the central authorities’ commitment to the financial stability of member-states and a reduction in the latter’s autonomy, if the euro is to survive, Summers said.
• The crude oil tanker market is failing to adjust vessel supply through slower speeds, ship-demolitions or idling, Goldman Sachs International analyst Edouard Baldini in London said today.
• Euro to Fall After Bounce, Citigroup(C) Says: Technical Analysis. The euro’s gain last week against the dollar won’t last and the currency may depreciate to a level last reached in January, said Citigroup Inc., citing technical indicators.
• Commodities Fall, Copper Drops to 9-Month Low on Europe Concerns. Commodities fell, led by copper’s drop to a nine-month low, on speculation that demand for raw materials will decline as European policymakers prepare to assess whether Greece can meet conditions of a rescue loan. Industrial users of metals and energy and companies that use agriculture commodities to make food may slow purchases, waiting on a solution to the euro crisis. The Standard & Poor’s GSCI Spot Index dropped 2.4 percent by 3:23 p.m. London time, the biggest drop on a closing basis since Aug. 18. Copper for three-month delivery declined 4.1 percent to $8,336 a metric ton on the London Metal Exchange, the lowest price since Nov. 30. Crude oil for November delivery declined 3.4 percent to $84.99 a barrel in New York.
• Solyndra Flop Doesn't Slow Push to Wind, Solar. The Obama administration, defying congressional Republicans after the failure of solar-panel maker Solyndra LLC, is working to award as much as $9.2 billion in government financing to renewable energy companies before a Sept. 30 deadline. Loan guarantees for 14 companies will close by month’s end if the projects meet government lending rules, Damien LaVera, a Department of Energy spokesman, said in an interview. “We want to get as many of these done in a way that responsibly protects the taxpayers’ interest,” he said. “If they meet conditions set out in the agreement, then they’ll close.” Solyndra filed for bankruptcy protection on Sept. 6, after receiving $535 million in loan guarantees from the administration, and the Federal Bureau of Investigation raided its Fremont, California, headquarters two days later. Republicans have called Solyndra a “poster child” for the failure of clean-energy subsidies awarded by the Department of Energy under President Barack Obama. “I am very concerned about where the $10 billion DOE has left to spend before the September 30 deadline is going,” Representative Cliff Stearns, a Florida Republican, said at the Sept. 14 hearing of a House oversight panel he heads. “Taxpayers would be better served by not risking even more of their money, instead using it to reduce our mounting national deficit.” Obama’s stimulus program, passed by Congress in 2009, set the Sept. 30 deadline for loan guarantees for most alternative energy projects. Programs to invest in advanced-technology vehicles and nuclear power plants will continue.
• China's JinkoSolar Drops Most Ever After Idling Factory on Pollution. JinkoSolar Holding Co. fell the most ever in New York, leading other Chinese solar companies down, after idling a factory that environmental regulators say may have polluted a river. JinkoSolar’s American depositary receipts sank as much as $2.24, or 25 percent, to $6.80 in New York Stock Exchange composite trading and was down $2.08 at 12:03 p.m. That’s the biggest intraday decline since the company began trading in May 2010. They have dropped 66 percent this year. Other Chinese solar companies fell as analysts said that margins are contracting and demand for panels will be less than expected this year. Yingli Green Energy Holding Co., LDK Solar Co. and Suntech Power Holdings Co. all dropped as much as 10 percent and the Bloomberg Industries Large Solar Energy Index declines as much as 6.2 percent. “It’s more of the same, unfortunately, with many of these companies seeing shipments growth with no margin,” said Aaron Chew, analyst at Maxim Group in New York. “I think these stocks don’t really go anywhere until next year.” Goldman Sachs Group Inc. revised its global forecast for solar shipments, according to a research note published today. The company now expects total shipments of 15,697 megawatts of panels in the second half of the year, 18 percent lower than its previous estimate.
• Tyco's(TYC) Split Creates Takeover Targets: Analysts. Tyco International Ltd. (TYC) plans to break itself into three publicly traded companies that may prove more attractive to potential suitors on their own than as pieces of a conglomerate. The separation, ending a decade in which Chief Executive Officer Ed Breen transformed the scandal-plagued conglomerate into a Standard & Poor’s 500 Index outperformer, will create standalone companies from ADT’s North American residential security, flow-control and the world’s biggest commercial security and fire-systems division.
• Homebuilders Targeted by U.S. Along With Hotels Over Pay Abuses. The Obama administration, 11 states and the Internal Revenue Service will join in an effort to crack down on companies such as homebuilders, hotels and restaurants that classify employees as independent contractors to avoid paying overtime. The agencies and states agreed to share wage information filed by the companies to help the Labor Department find and prosecute companies that misidentify workers in order to skirt paying unemployment benefits or federal taxes, according to Mike Wald, a department spokesman.

Wall Street Journal:

• Obama Presses for New Taxes. President Barack Obama on Monday offered a plan to reduce the nation's deficit by $3.6 trillion, almost half of which would come from tax increases, including a new tax on millionaires. Republicans were quick to denounce the president's plan. "Pitting one group of Americans against another is not leadership," House Speaker John Boehner (R., Ohio) said in a statement. "This administration's insistence on raising taxes on job creators and its reluctance to take the steps necessary to strengthen our entitlement programs are the reasons the president and I were not able to reach an agreement previously,'' Mr. Boehner said. "And it is evident today that these barriers remain."
• Netflix(NFLX) Separates DVD and Streaming Services. Netflix Inc. Chief Executive Reed Hastings said in a blog post the company is separating its movie-streaming business and its DVD-by-mail service, to be renamed Qwikster, a move he said was the undisclosed impetus for a recent price increase that outraged customers and sent the company's stock price plummeting. "I messed up," Mr. Hastings wrote in opening his lengthy, apologetic missive posted late Sunday night on Netflix's website. "I owe everyone an explanation."
• EU Banks Stress Tests Weren't Tough Enough, Document Says. The European Union's bank stress tests used out-of-date macroeconomic assumptions that didn't reflect the severe turmoil wracking sovereign debt markets when the tests were completed, according to a confidential document prepared by senior EU finance officials. One way they could be improved, the document says, would be to use a more up-to-date scenario "to avoid that it is taken over by events and therefore becomes obsolete, as was the case for instance, for the scenario of a relatively mild shock in banking books, a scenario which was clearly taken over by events as months passed by." Banks mainly hold sovereign debt in their "banking books," which is where they park bonds that they plan to hold until they mature. The tests required banks to make relatively limited provisions for losses on sovereign bonds in the banking book, even though Greek 10-year bonds, for example, were trading at around 50 cents on the euro when the tests were published.

CNBC.com:

• Management Shakeup at Soros Hedge Fund. Soros Fund Management, the $25 billion hedge fund co-founded by legendary investor George Soros, has named Scott Bessent as its new CIO, according to an investor letter obtained by CNBC.
• Fannie and Freddie's Boss Speaks Out on Obama's Refi Plan. Barely two weeks after President Obama proposed expanding a government mortgage refinance program in order to make millions more borrowers eligible, the man who would have to guide such a program announced yet another barrier to entry. The President's plan would work through Fannie Mae and Freddie Mac and their existing Home Affordable Refinance Program (HARP), by potentially eliminating loan-to-value ratios and lowering fees. But fees at Fannie and Freddie are about to go up, according to their conservator, the Federal Housing Finance Agency (FHFA).

Zero Hedge:

• Hugh Hendry Fund Soars 40% YTD as China Sinks. As everyone else was complaining about their performance (and P&L) collapsing, blaming it on everything from the weather, to Bernanke's diet, to fundmanetals and technicals, Hugh Hendry was raking it in and is now up 38.65% YTD, with a stunning +22.5% in August alone (or pretty much mirroring the collapse at Paulson & Co) and another 11% in September!

NY Post:

• How the 'Buffett Tax' Will Kill Jobs by Charles Gasparino. So President Obama is about to come out for another “millionaires tax,” one White House insiders are calling “the Buffett tax.” The sad thing is, even if he could get it, it would just be another jobs-killer. With many economists worried that we’re heading toward a double-dip recession, our fearless leader is still playing politics. The new tax would presumably go to pay for some of the government spending he still says will spur the economy, despite the evidence of his first three years in office. Aspects of the new plan remain scant, but what we do know isn’t good.

Rasmussen Reports:

• 56% Favor Repeal of Health Care Law, 52% Says Law Is Bad for the Country.

Reuters:

• Amid China Boom, Job Search for Many Grads Goes Bust. Yan Minglong, one of millions of recent Chinese college graduates, is not impressed with the doors opened by higher education. "Jobs? What jobs?" the 23-year-old said, whiling away his Saturday afternoon in a billiards hall in Shigezhuang, a gritty neighborhood on Beijing's northern outskirts where cheap rent is the main draw for some of China's white-collar hopefuls. Students from the country's largest-ever college graduating class, 6.6 million, have gone from hitting the books to hitting the streets in search of work this summer. But pouring that many graduates into an economy long known as the world's workshop has fueled worries about the market's capacity to absorb them and the potential for political unrest.
• Italy to Cut 2011, 2012 Growth Forecasts - Sources. A government forecasting document to be published in the next few days following the austerity plan approved by parliament last week will cut the 2011 growth forecast to 0.7 percent from 1.1 percent and lower the 2012 forecast to "1 percent or below" from 1.3 percent, the sources said. Many analysts expect Italy to post growth of below 0.5 percent next year, and several believe the economy will actually contract as the austerity plan bites.
  
• Home Builder Sentiment Dips in September: NAHB. The NAHB/Wells Fargo Housing Market index slipped 1 point to 14 from 15 the month before, the group said in a statement. That was shy of expectations for 15, according to a Reuters poll of economists.
• U.S. SEC Veteran to Depart for Sidley Austin.
• Expulsion of Troubled Euro States Sends Bad Message - Merkel. It would send a disastrous political message if euro zone member states could be thrown out of the currency bloc because they faced difficulties, German Chancellor Angela Merkel said on Monday. The euro zone should consider however whether it is fully equipped to make member states follow fiscal rules, Merkel added, speaking at a regional conference of her conservative Christian Democrat (CDU) party.

USA Today:

• Anti-Virus Firms Push Security Software for Mobile Devices. The prospect of consumers and employees physically losing information-packed mobile devices, or getting them hacked, is driving a red-hot sector of the tech industry: supplying mobile security.

Telegraph:

• Alliance Trust Chief Katherine Garrett-Cox Compares European Debt Crisis With Botox. Katherine Garrett-Cox, chief executive of Alliance Trust, has dismissed Europe's attempts to solve its debt crisis as "economic cosmetic surgery", warning there is "more pain" to come over the next few months.
• Debt Crisis: Live.