Today's Headlines

Bloomberg:

• Schaeuble Seeks to Stifle Debate Over Euro Rescue Fund as Pressure Mounts. Germany sought to stifle debate over boosting the firepower of the euro rescue fund, damping speculation of a breakthrough in talks to quell the European debt crisis. German Finance Minister Wolfgang Schaeuble opposed moves to further scale up the European Financial Stability Facility until the final three countries approve the fund’s latest upgrade. Slovakia, the Netherlands and Malta have yet to ratify an earlier decision to expand the fund to 440 billion euros ($584 billion). “Speculating makes no sense,” Schaeuble told reporters before a meeting of European finance ministers in Luxembourg tonight. “We will wait until the other countries that haven’t ratified it also do so.” European stocks and the euro fell today and investors shunned riskier countries’ bonds amid growing international impatience with 18 months of muddling through marked by clashes among Germany, France and the European Central Bank. Europe’s financial leaders are fighting on multiple fronts, trying to extinguish the Greek crisis while insulating Italy and Spain and coming up with a formula for banks that the International Monetary Fund says face as much as 300 billion euros in credit risks. The meeting, chaired by Luxembourg Prime Minister Jean- Claude Juncker, started at 5 p.m. No time was set for the concluding press conference.
• Dexia Plunges in Brussels on Concern Second Rescue of Lender Is Required. Dexia SA (DEXB), the lender rescued by France and Belgium in 2008, plunged 10 percent in Brussels on concern the bank is struggling to fund itself and will need a second bailout. The company is holding an emergency board meeting tonight, De Tijd reported, without saying where it got the information. The shares fell 15 euro cents to 1.30 euros, cutting Dexia’s market value to about 2.5 billion euros ($3.4 billion). The bank in August posted a 4.03 billion-euro second- quarter loss, the largest in its history, as the firm wrote down its holdings of Greek debt. The Brussels- and Paris-based lender said at the time that U.S. investors’ concern about the European sovereign debt crisis had limited its ability to borrow dollars in the money market. “There’s speculation that Dexia may be on the receiving end of a bailout,” said Jawaid Afsar, a trader at Securequity Ltd. in Sheffield, England. “The big worry for Dexia shareholders is a massive dilution of shares.”
• France, U.K. Want Payments to Bailout Nations Reduced, FT Says. European Union subsidies totaling 2.9 billion euros ($3.8 billion) to Greece, Portugal, Ireland, Latvia, Romania and Hungary may be cut by at least 50 percent after some EU countries voiced concern about the effect on their own public finances, the Financial Times reported, citing unidentified diplomats. The six countries are due to receive the money as part of a European Commission plan to quicken subsidy payments to countries that have received bailouts during the crisis, the newspaper said. A group of countries led by net contributors to the EU budget, including France, the U.K., the Netherlands and the Nordic nations, are questioning the arrangement, the FT said. The commission wants to lower to a little as 5 percent the proportion of costs borne by national governments in projects otherwise funded by the EU, and to make the arrangement retrospective to the time when countries began receiving international aid, the newspaper said.
• Greece Must Exit Euro or Risk Revolt, Spence Tells Repubblica. Greece risks a violent revolution unless it leaves the euro in an “orderly exit” organized by the European Central Bank and the European Union, Nobel Prize- winning economist Michael Spence told la Repubblica newspaper. Greece’s plans to scrap as many as 30,000 public-sector jobs, coupled with other austerity moves, are “unsustainable” and mean the country “risks being torched” by people “in a long agony,” New York University professor Spence, who won the Nobel in 2001, told the daily in an interview published today. The only solution is an orderly exit from the euro that allows Greece to lower costs and regain competitiveness, Spence was quoted as saying. Such a scenario wouldn’t spark the kind of chain reaction the collapse of Lehman Brothers Holdings Inc. did in 2008 because it would be orchestrated by the ECB and the EU, he said.
• Cost of Swapping Euro Payments to Dollars Rises to 3-Week High. The rate banks pay to convert euro payments into dollars rose to a three-week high, according to a money markets indicator, as European finance ministers meet on resolving the region’s debt crisis. The three-month cross-currency basis swap was 109 basis points below the euro interbank offered rate as of 2:52 p.m. in London, compared with 105 basis points on Sept. 30. The cost was 112.5 basis points under Euribor on Sept. 12, when the swap was the most expensive since December 2008. The TED spread, or the difference between what lenders and the U.S. government pay to borrow for three months, rose to 37 basis points from 35 at the end of last week.
• Forint Drops, Hungary Bond Risk Reaches 2-Year High on Debt Plan. The forint weakened for a fourth day and the cost of protecting against default on Hungarian bonds rose to the highest in more than two years amid government plans to restructure $819 million in local county debt. Hungary’s currency depreciated 1 percent to 296.3 per euro, the weakest since 2009, by 4:42 p.m. in Budapest. The country’s five-year credit-default swaps jumped more than 17 basis points to 549.3, the highest since March 2009, according to data provider CMA. Credit swaps rise as perceptions of creditworthiness worsen. “Today’s announcement from the prime minister on the takeover and possible restructuring of counties can be seen as negative news,” Zoltan Arokszallasi, an economist at Erste Group Bank AG in Budapest, in a research report today. The deteriorating global sentiment also put pressure on the forint, he said. Hungary’s government bonds maturing in 2017 weakened for a fourth day, lifting the yield 13 basis points, or 0.13 percentage point, to 7.91 percent, the highest since January. The country needs a precautionary standby loan agreement with the IMF to defend against contagion from a potential worsening of the euro crisis, Bank of America Corp. economist Raffaella Tenconi said in a research report today. “There isn’t enough ammunition left to protect the economy against an unfavorable global backdrop if the eurozone states do not take immediate action to stabilize the crisis,” Tenconi wrote.
• Macau gaming revenue growing 47% YTD y/y may slow to 10% y/y in coming quarters versus consensus estimates of 25% growth as the China economy weakens, Deutsche Bank said. Most vulnerable sectors in Chinese economic slowdown include gaming, travel, dining, sportswear and apparel, Deutsche said. (LVS) down 22% in past 2 weeks, (WYNN) down 27%, (MGM) down 15%, (MPEL) down 30% on concerns slowdown in China may hurt Macau, they said.
• Asian Economies Weaken as European Debt Crisis Crushes Investor Confidence. Indian and Australian manufacturing data were the weakest since 2009 and Japanese business sentiment failed to recover from the March 11 earthquake, signaling Asian economies are slowing as investor confidence sinks. A purchasing managers’ index for India fell to 50.4 in September from 52.6 in August, HSBC Holdings Plc and Markit Economics said in an e-mailed report today. A gauge for Australia slid to the lowest since June 2009. In Tokyo, the Tankan index of large manufacturers was at 2 in September, compared with 6 before the quake. Asian stocks tumbled ahead of a meeting of European finance ministers to consider measures to counter the sovereign-debt crisis, highlighting limits on the support that the region can give to global growth. The MSCI Asia Pacific Index tumbled 2.9 percent at 3:04 p.m. in Tokyo, after slumping last quarter by the most since 2008.
• Loans Fall to Six-Month Low in Asia as European Banks Retreat. Asian loans slumped to the lowest level in two quarters as Europe’s sovereign debt crisis pushed up banks’ funding costs and lenders under pressure in home markets retreated. Syndicated loans in the Asia-Pacific region outside of Japan fell to $104.7 billion in the third quarter, the least since the three months ended March 31, when they totaled $96.8 billion, according to data compiled by Bloomberg. Lending climbed 12 percent from the same period a year ago, when it totaled $93.2 billion. European banks lost ground and Credit Agricole CIB dropped out of the top 20 arrangers for the first time since 2002, the data show.
• U.S. Company Credit Risk Gauge Rises to Highest Since May 2009. A benchmark gauge of U.S. corporate credit risk rose to the highest level since May 2009 as Europe’s finance chiefs sought to prevent a Greek default and the cost of insuring German government debt climbed to a record. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, added 1.5 basis points to a mid- price of 145.7 basis points as of 8:53 a.m. in New York, according to index administrator Markit Group Ltd. The credit swaps index, which typically gains as investor confidence deteriorates and falls as it improves, has increased from 136.2 on Sept. 27 as concerns mount that Europe’s sovereign debt crisis is worsening. The region’s officials prepared to meet in Luxembourg today to consider how to shield banks from the debt crisis and boost a rescue fund after Greece missed a deficit target for 2012. Credit-default swaps on German debt climbed six basis points to an all-time high of 118.
• Holding Sovereign Debt With No Capital Is Risky, IASB Chief Says. Global capital rules that allow banks not to hold any reserves against highly rated debt, including sovereign bonds, create risk, the chairman of the International Accounting Standards said today. It’s “extremely risky to have a capital regime which says for certain types of assets you don’t need to put aside any capital,” Hans Hoogervorst, IASB chairman, told lawmakers in Brussels today.
• VIX Record Gain Signals Stock Rises Since 1990. The biggest quarterly increase ever in the Chicago Board Options Exchange Volatility Index pushed it above 40, a threshold exceeded only three percent of the time in 20 years and a level that has preceded stock rebounds. The VIX rose 160 percent to 42.96 in the third quarter as the Standard & Poor’s 500 Index fell 14 percent, the biggest retreat since 2008, according to data compiled by Bloomberg. Closes above 40 in the volatility measure have come before the equity gauge gained 3.2 percent in the next three months on average, data compiled by Bloomberg show.
• Global Air-Travel Growth Slowing as Confidence Wanes, IATA Says. Growth in global air travel slowed in August and a freight decline deepened as business and consumer confidence waned amid concern that economies may slide into recession, the International Air Transport Association said. Passenger traffic grew 4.5 percent in August, slowing from a 6 percent gain in July, the trade group said in a statement today. Europe logged the biggest year-to-year advance at 7.4 percent and North America the smallest at 0.9 percent, with U.S. domestic travel contracting 0.3 percent, it said. “The industry has shifted gears downward,” IATA Chief Executive Officer Tony Tyler said in the statement. “With business and consumer confidence continuing to slump there is not a lot of optimism for improved conditions anytime soon.”
• U.S. Manufacturing Unexpectedly Accelerates as Export Demand Spurs Output. Manufacturing in the U.S. unexpectedly accelerated in September, propelled by gains in exports and production. The Institute for Supply Management’s factory index climbed to 51.6 last month from 50.6 in August, the Tempe, Arizona-based group said today. A level of 50 is the dividing line between growth and contraction. The median forecast of 82 economists surveyed by Bloomberg News projected a drop to 50.5. The ISM report wasn’t universally positive as a gauge of orders showed total demand shrank in September for a third consecutive month. A gauge of backlogs decreased to the lowest level since April 2009. “Some of the components were still pretty ugly,” said Christopher Low, chief economist at FTN Financial in New York, who projected the ISM index would rise to 52. The drop in backlogs is “worrisome because they are a buffer that allow companies to continue producing when orders are weak. If that continues, it will translate into weaker production.”
• AMR(AMR) Falls Most Since 2001 on Recession, Bankruptcy Concern. American Airlines parent AMR Corp. tumbled the most since September 2001 on growing concern the U.S. is nearing a return to recession and that the carrier may be forced to seek bankruptcy protection. Today's slide pointed toward a fifth straight drop for Fort Worth, Texas-based AMR, the longest streak in more than two months, and marked its biggest intraday plunge since Sept. 17, 2001. The shares dropped $1.05, or 35 percent, to $1.99 at 1:24 p.m. in New York Stock Exchange composite trading, after falling to $1.75. The stock was halted three times between about 12:58 p.m. and 1:21 p.m.
• Summers Told Solyndra Investor U.S. 'Crappy' Venture Capitalist. Lawrence Summers, a top economic adviser to President Barack Obama, agreed with a Solyndra LLC investor in December 2009 that the U.S. was a "crappy" venture capitalist. Summers, director of the National Economic Council until last year, sent an e-mail in response to comments by Brad Jones of Redpoint Ventures, an investor in Solyndra, who said government isn't "well-equipped" to make such decisions, according to a memo released today by staff for Democrats on the House Energy and Commerce Committee. The solar-panel maker filed for bankruptcy protection on Sept. 6, about two years after winning a $535 million U.S. loan guarantee. "I relate well to your view that gov is a crappy vc and if u were closer to it you'd feel more strongly," Summers said in his e-mail to Jones, according to the Democrats' memo.
• BofA(BAC) Falls Below $6 as Weakness in Europe, Economy Adds Pressure. Bank of America Corp., the largest U.S. lender by assets, fell below $6 in New York trading as concern increased that the world is on the brink of another recession. The bank dropped 15 cents, or 2.5 percent, to $5.97 as of 12:17 p.m. in New York Stock Exchange composite trading.
• Commodities Drop to 10-Month Low as Slowing Global Growth May Crimp Demand. Commodities fell to a 10-month low on increasing concern that stagnant global growth will crimp demand for metals, energy and agriculture. The Standard & Poor’s GSCI Spot Index dropped 8.32, or 1.4 percent, to 582.68 at 1:39 p.m. in New York, after touching 580.22, the lowest since Dec. 1. The gauge tumbled 12 percent in the third quarter, the most since the final quarter of 2008.

Wall Street Journal:

• Greek Deficit Sharpens Default Fears. European financial markets took another turn for the worse Monday, as the Greek government's announcement that it would miss its budget target made the prospect of a "hard" default more likely. Greece needs to cut its deficit to 7.6% of gross domestic product this year to keep receiving aid from the International Monetary Fund, the European Union and the European Central Bank, but Athens Sunday confirmed that an unexpectedly harsh recession means the actual deficit will be closer to 8.5%.
• White House Brushed Off Solyndra Worries, Emails Show. White House officials dismissed concerns about Solyndra LLC ahead of President Barack Obama's May 2010 visit to the failed solar-panel maker, despite acknowledging that the company and other clean-energy ventures could go "belly-up" by the 2012 election, according to emails released by Democratic lawmakers. The emails, provided to lawmakers in connection with a congressional investigation, continue to show White House and Department of Energy officials ignoring warning signs about the health of Solyndra, which filed for bankruptcy protection last month. The emails also show continuing debate between Energy Department officials and the Office of Management and Budget, which repeatedly warned about Solyndra's financial health. The company received a $535 million loan guarantee from the Energy Department in 2009.
• September U.S. Auto Sales Rise. U.S. auto sales climbed in September from a year ago as richer discounts and strong demand for larger pickup trucks and sport-utility vehicles helped the industry sidestep economic malaise. General Motors Co., Nissan Motor Co. and Chrysler Group LLC each reported U.S. auto sales last month climbed at least 20% from a year ago. Ford Motor Co. said its sales rose 8.9%. In contrast, Toyota Motor Corp and sales fell again reflecting weak dealer inventories stemming from the March earthquake in Japan. Toyota's efforts dropped 17.5% and Honda's fell 8%, both from a year ago.

MarketWatch:

• European Bank-Debt-Insurance Costs Rise. The cost of insuring European bank debt rose Monday after Moody's Investors Service warned about Dexia SA's liquidity position and exposure to Greek debt amid reports that a rescue package may be in the works for the French-Belgian bank. According to RBS analyst Christy Hajiloizou, Dexia's short-term funding position is most problematic, as the bank is over-reliant on wholesale funding. Also,"any further hits on Greek government bonds would likely generate a need to bolster capital cushion," she said. Adding to the negative tone, Greece said it would miss its deficit reduction targets. Around 1200 GMT, the iTraxx Senior and Subordinated Financials indexes, whose constituents are 25 financial institutions, were six and 11 basis points wider at 281/284 and 536/544 basis points, respectively. "Dexia is leading the way for us, but we also have to watch French and Belgian credit default swaps moving wider as well," one CDS trader said. Belgium's sovereign CDS suffered on the news, moving 18 basis points wider to 278 basis points, underperforming the rest of the European sovereigns and the SovX Western Europe index.

CNBC.com:

• Fitch Lowers Global Growth Forecasts. Fitch ratings agency on Monday revised down its growth forecasts for all major advanced economies, and said it expected growth in emerging economies to slow as well due to financial market volatility which has dented confidence and caused a drop in private consumption and business investment. Fitch revised down world growth based on market exchange rates to 2.6 percent in 2011 compared with 3.1 percent previously.
• Banks of America(BAC) Web Site Goes Down... Again. Bank of America's website, plagued by problems Friday and Saturday but supposedly fixed on Sunday, isn't working again.

Business Insider:

• Japan Is The Case Against More Quantitative Easing.
• China Is An Economy On The Verge Of A Nervous Breakdown.
• Exclusive Interview: Glenn Beck On The Future Of Television.
• If You Thought Last Week's Occupy Wall Street Protests Were Crazy, Get Ready...
  

Zero Hedge:

• Hunting the Squid(GS), Part 2: Since When Is Enough Derivative Exposure To Blow Up The World Something To Be Ignored?

Absolute Return + Alpha:

• Billion Dollar Club. The largest 241 American hedge fund firms gain $102 billion in the first half of 2011, for a total of $1.399 trillion. Bridgewater Associates maintains its number one spot with $70.30 billion.

FINalternatives:

• Short-Seller Chanos Stilll Supports Obama. Many, if not most, of the hedge fund managers who helped bankroll President Barack Obama's run for the nation's highest office three years ago have abandoned him—or worse, switched sides. Kynikos Associates' James Chanos isn't one of them. Chanos was among the 116 attendees at a $10,000 a plate fundraiser for the president and the Democratic National Committee on Friday, The New York Times reports. The event raised more than $1.5 million—but fell about 14 people short of really selling out. The event, at the Four Seasons restaurant in New York, was hosted by Berkshire Hathaway's Warren Buffett, who has also not given up on the president, despite the fact that much of Wall Street has. Indeed, his help went beyond merely hosting the dinner: Those attendees who wanted some face time with Buffett had to pony up $35,800.

Foreign Policy:

• U.S. Now Importing Chinese Shoppers to Buy Its Chinese Goods.

Reuters:

• ADR Report - Growth Fears Hit Chinese Real Estate, Gaming ADRs. Concern about slower growth and tighter credit pushed down U.S.-listed shares of Chinese companies on Monday, with gaming and real estate stocks among the biggest decliners.
• Mexico's Cemex(CX) Resumes Trading, Down 17%. Trading in Mexican cement maker Cemex was halted Monday afternoon after its shares plunged to the weakest level in more than 12 years, as investors worried about the company's financial future. Cemex's shares in the local market fell 14.6 percent to 3.79 pesos -- its lowest since the first quarter of 1999 -- when they were suspended, a trader told Reuters.
• Global Economy - Manufacturing Shrinks For First Time Since 2009.
• Senate Aims at China's Yuan With Eye on Jobs. Lawmakers will take aim at one of China's core economic policies Monday when the Senate begins debating a bill aimed at pressing China to let its currency rise in value in the hope of creating jobs. A procedural vote late Monday is expected to open a week of Senate debate on the Currency Exchange Rate Oversight Reform Act of 2011, which would allow the government to slap countervailing duties on products from countries found to be subsidizing their exports by undervaluing their currencies.

Financial Times:

• Eurozone Crisis: Live Coverage.

The Independent:

• Banks Plan New Job Cuts as Confidence Falls. Banks and other financial companies are planning a new round of job cuts after confidence in the sector dropped for the first time since the depths of the financial crisis, a closely watched survey shows. The expected job cuts will follow thousands already announced amid a grim outlook for growth and profitability in the CBI's quarterly financial services survey. Financial companies expect business growth to slow and no boost to profitability for the first time in two years. Business confidence has fallen for the first time since March 2009.

El Pais:

• The economic situation faces Europe doesn't look "very different" to a recession even if the region doesn't fall into one under a technical definition, Angel Gurria, Secretary-General of the OECD said in an interview. The process of resolving Greece's debt crisis cannot proceed without the participation of private creditors because adding more debt cannot be a solution, Gurria said.

Yonhap News Agency:

• South Korea Facing Growing Stagflation Concerns: Think Tank. South Korea's economy is facing growing risks of stagflation amid the worldwide economic slowdown and rising inflation at home, a private think tank said Monday. The Korea Institute of Finance (KIF) said in a report that an increasing number of experts are raising alarms that the country could face serious challenges down the line.
  

Economic Times:

• Shipping Corp. of India on Brink of Financial Collapse. NEW DELHI: Warning that an Air India-like situation is being replicated at SCI, the Shipping Ministry has raised red flag over the state-run company's plans to acquire fresh vessels, stating the firm stands to lose around USD 200 million from the proposed purchases. According to an internal document of the Shipping Ministry, Shipping Corporation of India (SCI) "is on the brink of financial collapse" and its plans to acquire 33 vessels would lead into a "debt-trap, almost on the lines of Air India".