Today's Headlines

Bloomberg:

• Merkel Seeks German Backing for Summit. Chancellor Angela Merkel will seek backing from German lawmakers to bolster the euro bailout fund on the same day she heads to a European summit, as banks joust with leaders over the size of losses they take on Greek bonds. Leveraging the European Financial Stability Facility rescue fund to more than 1 trillion euros ($1.4 trillion) and how far to cut Greece’s debt load emerged as two main hurdles in the way of a deal to stop the debt crisis at the Oct. 26 European Union summit, the second in four days. The euro weakened as Merkel’s party proposed a full vote in parliament, also on Oct. 26. “We are still missing some important parts of the complex puzzle that is how to solve Europe’s debt crisis,” Kathleen Brooks, research director at Forex.com in London, said today. “The biggest challenge for the German Chancellor over the next 48 hours is to persuade the German Bundestag to agree to the changes to the EFSF.” Merkel, as the biggest contributor to euro-area bailouts, is once more the fulcrum in the deliberations to stamp out the crisis that came to light two years ago in Greece. Under the terms of an agreement struck with her coalition, she must seek parliamentary backing for any changes to the rescue fund that carry budget implications for Europe’s biggest economy. “This is new territory,” Steffen Seibert, Merkel’s chief spokesman, told reporters in Berlin today, when asked whether parliament could dictate Merkel’s stance at the next summit. Lawmakers will discuss two models for leveraging the EFSF, neither of which is “mutually exclusive,” Seibert said.
• Sovereign, Bank Risk Rises as Europe Waits on Debt-Crisis Fix. The cost of insuring against default on sovereign and bank debt rose in Europe as policy makers wrangle over how to contain the region’s debt crisis. The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 banks and insurers increased four basis points to 242 according to JPMorgan Chase & Co. at 2 p.m. in London. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed nine basis points to 333. Credit-default swaps protecting French debt rose four basis points to 190, contracts on Ireland increased 13 basis points to 765, Italy widened four basis points to 444, and Portugal was 36.5 basis points higher at 1,111, according to CMA.
• Dollar Libor-OIS Spread at 2-Year High Amid Europe Bank Concern. A gauge of banks’ reluctance to lend widened to the most since July 2009, a sign that market tensions are increasing as Europe’s leaders work on a plan to bolster their nations’ banks. The dollar Libor-OIS spread was 34.13 basis points at 2:10 p.m. London time. The spread widened to 34.53 basis points, according to data from the British Bankers’ Association. That’s the most since July 6, 2009, based on closing-market rates. “This highlights that there’s still some stress in the funding markets,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London. “Banks are having problems attracting dollar funding, probably because so much is still unknown about the European bank recapitalization plans.” Measures of money-market stress have been elevated throughout the regional debt crisis, Wand said. The rate at which London-based banks say they can borrow for three months in dollars rose to the most in more than a year. The London interbank offered rate, or Libor, for dollar loans climbed to 0.420282 percent from 0.41833 percent yesterday, data from the British Bankers’ Association showed. That’s the highest since August 2010. A measure of banks’ reluctance to lend to one another in Europe also increased. The Euribor-OIS spread, the difference between the borrowing benchmark and overnight index swaps, rose to 76.3 basis points from 74.5 basis points. Lenders increased overnight deposits at the European Central Bank to the most since Oct. 10. Banks parked 202 billion euros at the Frankfurt-based ECB. That compares with a year-to- date average of 62.8 billion euros.
• Caterpillar(CAT) Beats Estimates. Caterpillar Inc. (CAT), the world’s largest construction and mining-equipment maker, posted third- quarter profit and sales that topped analysts’ estimates as demand rose for shovels and drills used to dig up metals. Net income climbed 44 percent to $1.14 billion, or $1.71 a share, from $792 million, or $1.22, a year earlier, the Peoria, Illinois-based company said in a statement today. The average of 15 analysts’ estimates compiled by Bloomberg was for $1.57. Sales increased 41 percent to $15.7 billion from $11.1 billion, compared with the $14.9 billion average of analysts’ estimates. The shares climbed as much as 5.7 percent in New York.
• Oracle(ORCL) Buys RightNow(RNOW) for $1.5 Billion to Add Cloud Services. Oracle Corp. (ORCL), the world’s second- largest software maker, agreed to buy RightNow Technologies Inc. (RNOW) for $1.5 billion, gaining customer-service expertise to bolster a new Internet-based product. RightNow investors will get $43 a share, Oracle said today in a statement. That’s 20 percent more than Bozeman, Montana- based RightNow’s closing price on Oct. 21.
• Crude Oil Rises for Second Straight Day on Economic Growth in China, Japan. Crude oil rose to the highest level in more than two months, exceeding $90 a barrel as data showed economic growth in China and Japan and as U.S. equities rose. Crude for December delivery rose $3.12, or 3.6 percent, to $90.52 a barrel at 12:34 p.m. on the New York Mercantile Exchange. The price reached $90.86, the highest level since Aug. 4. Brent oil for December settlement increased $1.18, or 1.1 percent, to $110.74 a barrel on the London-based ICE Futures Europe exchange.
• China GDP Engine Gets Less Mileage: BlackRock(BLK). A near doubling in the Chinese economy’s reliance on credit over the past decade will prompt slower growth in coming years, risking diminished returns for investors, according to research by BlackRock Inc.
• Jobs Outlook in U.S. Worse Since 2010, Business Economists Say. U.S. companies’ hiring plans reflect the worst employment outlook since January 2010 as demand slows in the world’s largest economy, a private survey showed. Fewer companies project payrolls to rise in the next six months compared with a July survey, while more plan to cut workers, the National Association for Business Economics said today in Washington.
• MF Global(MF) May Be Lowered to Junk by Moody's as Corzine Adds Trading Risk. MF Global Holdings Ltd. had its credit ratings cut to the lowest investment grade by Moody’s Investors Service after the broker run by former New Jersey governor Jon Corzine failed to reach earnings targets and on concern risk management isn’t sufficient. Moody’s lowered MF Global’s long-term ranking to Baa3 from Baa2 and left the New York-based company on review for a further downgrade, the ratings firm said today in a statement. The “current low interest environment and volatile capital market conditions” make it unlikely MF Global can achieve financial targets of $200 million to $300 million in annual pretax earnings, Moody’s said. Corzine, who helped run Goldman Sachs Group Inc. from 1994 to 1999, is attempting to transform MF Global into a medium- sized investment bank and has sought to increase trading with the firm’s money and facilitate transactions for clients. Moody’s highlighted added exposure through repurchase transactions to the debt of European governments that have been among the hardest hit by the region’s sovereign debt crisis. “MF Global’s increased exposure to European sovereign debt in peripheral countries and its need to inject capital into its broker-dealer subsidiary to rectify a regulatory capital shortfall highlights the firm’s increased risk appetite and raises questions about the firm’s risk governance,” Al Bush, a senior analyst at Moody’s, said in the statement announcing the downgrade.

Wall Street Journal:

• Fearing Europe in Japan. Norio Nakajima is losing sleep. The head of one of Japan's biggest asset managers says a gut feeling born of 40 years' experience in the financial markets keeps him awake nights: fear of another flare-up in the European debt crisis.
• FedEx(FDX) Expects Holiday Shipments to Rise 12%. FedEx Corp. forecast record holiday shipping Monday but said the increased package volume would be fueled by its least-profitable, ecommerce-related residential service.
  

MarketWatch:

• Europe Bank Recapitalization Not So Easy. It’s a testament to the scope of the euro zone’s debt crisis that a multibillion bank recapitalization plan is described as the “easy” part of the deal being negotiated by European officials. Recapitalization is the easiest element politically, said Michael Symonds, credit analyst at Daiwa Capital Markets in London. But it’s not clear the recapitalization plan, as currently envisioned, will inspire lasting market confidence.

CNBC.com:

• Why Don't We Know More About Bank of America's(BAC) Derivatives?

Business Insider:

• A Greek Trader Tells Us The State Of Things.
• The 10 Biggest Problems With Doing Business in China.
• Apple(AAPL) is Building iTV Prototypes, And You Can Probably Expect a 50" iTV by Late Next Year.
• Meanwhile, The Entire European Economy Looks Like A Horror Show. (graph) From Markit, a look at a bunch of fresh PMI numbers across Europe. While China may be holding up... Europe not so much. Everyone is negative, except Germany, which is just clinging to growth.

Zero Hedge:

• Chart of the Day: Correlation Between Hedge Fund Returns and Market Hits All Time Record. (graph)
• Head of China Sovereign Wealth Fund Voices Displeasure With China's Debt Slaves, Call Europeans "Lazy" and "Entitled".
• Trichet Interrupts Speech Calling for Formation of European Finance Ministry, Booed Off by German Students.
• Peripheral and Core Eurozone Yields and Spreads at Widest Since October Equity Lows. (graph)
  

NY Post:

• Google(GOOG) Lender Bender. Google is not likely to finance a buyout of Yahoo! without getting an equity stake as part of the deal, said a source close to the situation. At the same time, antitrust regulators would likely frown on any deal that would give Google a stake in a rival, the source said. “Google is not in the lending business,” the source added.
  

LA Times:

• Solyndra-Linked Fundraiser Still Boosting Obama Campaign. Steven Spinner, a former Energy Department official with ties to the failed solar company, continues to raise money for the president and help organize events.

Reuters:

• Italy's Berlusconi Hits Back at EU Partners' Demands. Italian Prime Minister Silvio Berlusconi hit back at pressure for urgent reforms from European partners on Monday, and said he would bring reform proposals to the next European Union summit. "We have firm positions, that we will bring to the next EU summit," Berlusconi said in a statement. He added that no country in the EU should be giving lessons to other member states. Berlusconi summoned his cabinet for an emency meeting on Monday evening to discuss demands from Germany and France for swift economic reforms, which have met opposition from his coalition allies.

Telegraph:

• Debt Crisis: Live.

Global Times:

• Steel Traders in Difficulty as Bank Loans Become Scarce. The recent decline in steel prices has increased the difficulties confronting small- and medium-sized steel traders, industry sources told the Global Times Monday. Steel traders used to be able to get loans from banks and then use the capital to invest and make a profit, but with the downturn in prices, loans are harder to get. "It's a common way to get more profit as steel traders. Banks also can get a stable profit by providing loans to traders when the steel market is good," an employee surnamed Liu who works for a Shanghai-based trading company told the Global Times Monday. Liu said his company had halted its steel trade business because the factory price for steel is now higher than the market price.