Tuesday, November 01, 2011

Today's Headlines

Posted by Gary .....at 2:32 PM

Bloomberg:
  • European Stocks Sink as Greece's Government Calls Referendum; Banks Tumble. European stocks sank the most in four weeks, as Greece’s government called a referendum on its latest bailout package, spurring concern that the country may default. Credit Suisse Group AG (CSGN) and Danske Bank A/S led a selloff in lenders, both sliding more than 7 percent, after posting earnings that fell short of analysts’ estimates. National Bank of Greece SA (ETE) sank 15 percent in Athens trading. Mining companies tumbled after a gauge of Chinese manufacturing dropped to the lowest level since February 2009. The Stoxx Europe 600 Index slid 3.5 percent to 234.98 at 3:34 p.m. in London, extending yesterday’s 2.2 percent selloff and paring last month’s biggest advance since 2009. The VStoxx Index (V2X), which measures the cost of protecting against a decline in shares on the Euro Stoxx 50 Index, jumped 18 percent to 41.27, its biggest gain since Sept. 9.
  • Italy Bonds Slide, Premium to Bunds at Record, on Greece Concern. Italian bonds led declines in the securities issued by Europe’s most indebted nations after a Greek plan to hold a referendum on its international bailout added to concern the region’s financial turmoil will deepen. Italy and France’s 10-year borrowing costs climbed to the highest levels relative to benchmark German bunds since before the creation of the euro in 1999. Bund yields fell the most on record, with the securities outperforming all their euro-area peers, as investors sought the safest assets. Greek two-year yields climbed to a record high 87.28 percent as members of the nation’s ruling party called for Prime Minister George Papandreou to resign. “If we keep seeing yields rise in this way day after day as we now wait for this referendum then I think you really can talk about that market being in meltdown,” Steven Barrow, a London-based economist at Standard Bank Plc, said in an interview with Ken Prewitt on Bloomberg Radio’s “Bloomberg -- The First Word.” “Italy is the main focus.” Italian 10-year yields rose 10 basis points, or 0.1 percentage point, to 6.19 percent at 4:59 p.m. London time, after climbing to as much as 6.34 percent. The 4.75 percent debt maturing September 2021 dropped 0.650, or 6.50 euros per 1,000- euro ($1,370) face amount, to 90.14. The difference in yield, or spread, over similar-maturity German bunds reached a euro-era record 455 basis points.
  • Greek Writedown Condemns Italy by Avoiding Default: Euro Credit. Europe's success in reducing Greece's debt burden without triggering default insurance leaves investors with no way of guarding against losses when lending to indebted nations such as Italy. "You've only got to look at peripheral bond yields to see what the market thinks," said John Davies, a fixed-income strategist at WestLB AG in London. "If these other countries are seeing Greek bondholders effectively having a 50 percent haircut thrust upon them, you have to wonder at what point Portugal, Ireland, or even Spain or Italy think to themselves that structure may be a better route for them." The yield on two-year Italian notes climbed 42 basis points to 5.41 percent at 3:23 p.m. in London, the most since 2000. Spain's two-year yield was 11 basis points higher at 4.10 percent.
  • Greek Gamble on Calling Referendum Stuns Euro Partners, Merkel Allies Say. Greece’s decision to call a referendum on its five-day-old bailout blindsided its European partners and placed another hurdle in the way of efforts to staunch the debt crisis. The announcement came “out of the blue, it’s surprising, very risky,” Norbert Barthle, the ranking member of German Chancellor Angela Merkel’s Christian Democratic Union party on parliament’s budget committee, said in a telephone interview. “There’s an enormous amount at stake. Do we know how the Greek people will treat their government in this referendum? No. We have a new unknown.”
  • Bond Risk Surges as Greece Triggers Disorderly Default Concerns. The cost of insuring against default on European sovereign debt surged the most in almost four months on concern a referendum on Greece’s bailout package may push the country into a disorderly default. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments soared 29 basis points to 333 at 1 p.m. in London. The cost of protecting corporate and financial debt rose by the most in percentage terms since May 2010. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high- yield credit ratings increased 88.5 basis points to 726 basis points, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was up 21 at 183 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers added 35 basis points to 262 and the subordinated gauge was 66 higher at 493.
  • Morgan Stanley(MS) Leads Bank Shares Lower. Morgan Stanley (MS) fell as much as 12 percent in New York trading, leading financial stocks lower on concern a Greek referendum on Europe’s bailout plan will worsen the region’s debt crisis. Morgan Stanley dropped $1.11, or 6.3 percent, to $16.53 at 10:37 a.m., the biggest decline in the 81-company Standard & Poor’s 500 Financials Index, which slid 2.3 percent. Citigroup Inc. (C) fell 4.3 percent and JPMorgan Chase & Co. (JPM) decreased 4.1 percent.
  • U.S. Bank Credit Swaps Jump as Greece Calls for Bailout Vote. The cost to protect against defaults by U.S. banks and companies jumped on concern that Greece’s move to call a referendum could derail Europe’s bailout plan. The Markit CDX North America Investment Grade Index, a credit-default swaps index that investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 6 basis points to a mid-price of 126.8 at 10:39 a.m. in New York, according to index administrator Markit Group Ltd. Over two days, the measure has jumped the most since Sept. 22. “If the Government loses these votes, the most recent plan would be for naught and Greece would surely head toward an unscripted default and contagion would likely follow,” Adrian Miller, fixed-income strategist at Miller Tabak Roberts Securities LLC in New York, wrote in a note to clients and reporters. Swaps on Morgan Stanley climbed 41 basis points to 383 basis points, according to London-based data provider CMA. That’s the biggest jump in almost a month. Contracts on Goldman Sachs rose 28 basis points to 314 basis points, CMA data show. Swaps on Bank of America jumped 25 basis points to 360 basis points, according to broker Phoenix Partners Group. Contracts on Citigroup Inc. increased 13 basis points to 245, Phoenix prices show.
  • U.S. Hedge Fund Compensation to Fall 10% This Year, Glocap Says. U.S. hedge-fund compensation will fall an average of 10 percent this year compared with 2010 as performance suffered, according to a report by Glocap Search LLC and Hedge Fund Research Inc. Portfolio managers' pay, which is most closely tied to performance, should see the biggest decline, slumping about 30 percent on average, according to Adam Zoia, chief executive officer of Glocap, a New York-based recruiting firm. Hedge funds have lost 5.4 percent on average this year, according to data compiled by Bloomberg, as the European debt crisis worsened and the U.S. economy threatened to slip back into recession.
  • GM(GM), Chrysler and Ford(F) Sales Rise Less Than Estimates. General Motors Co. (GM), Ford Motor Co. (F) and Chrysler Group LLC said U.S. deliveries rose less than analysts’ estimates that called for the best sales month since February.
  • ISM Index of U.S. Manufacturing Falls. Manufacturing grew less than forecast in October, depressed by a drop in inventories that may set U.S. factories up for stronger growth heading into 2012. The Institute for Supply Management’s factory index dropped to 50.8 last month from 51.6 in September, the Tempe, Arizona- based group’s data showed today.
  • Potash(POT) Rally to Slow as Uralkali Increasing Mining Capacity: Commodities. Potash’s rebound from the biggest plunge in 48 years will slow next year as Mosaic Co. (MOS), Potash Corp. of Saskatchewan Inc. and OAO Uralkali increase mining capacity. Potash Corp., the largest producer by market value, will see its average selling price climb 22 percent in 2012 after an estimated 35 percent gain this year, Don Carson, an analyst at Susquehanna Financial Group in New York, said in an Oct. 28 note. U.S. Midwest prices will fall 5.2 percent in 2012 after rising 32 percent this year, according to RBC Capital Markets.
  • IMF May Create Credit Line for Countries Facing Shocks. The International Monetary Fund may create a six-month credit line for countries facing shocks, officials from Group of 20 governments and IMF said, as the European debt crisis rocks global financial markets. The amount would be capped at five times a nation’s contribution to the Washington-based IMF, known as a quota, making the credit line best suited for smaller countries, the people said. It is likely to be endorsed at a meeting of G-20 leaders this week in Cannes, France, where European nations will seek financial support from other members, said the three officials, who declined to be identified because the plan hasn’t been made public. The instrument would be the latest in a set of IMF tools intended to increase liquidity as Europe’s crisis threatens to spread beyond Greece. It could be used as part of a broader international package to aid larger economies such as Spain, with IMF participation serving to reassure other creditors, said Bessma Momani, a political science professor at the University of Waterloo in Canada.
Wall Street Journal:
MarketWatch:
  • Bowles, Simpson Warn of U.S. Downgrade. The heads of President Barack Obama’s fiscal commission warned the congressional supercommittee on Tuesday that failure to reach a deficit-cutting deal later this month could result in another downgrade of U.S. debt.
CNBC.com:
Business Insider:
Zero Hedge:
LA Times:
MoneyShow:
  • Big Sentiment Shift Shakes FX Market. The most recent COT data shows a sizable sentiment shift among large speculators like hedge funds, as bullish positions on the US dollar have been lightened in favor of other currencies like the yen and aussie. The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators decreased their bullish positions in favor of the US dollar as bets in favor of the Japanese yen soared. Despite last week’s decline, speculative positions have now totaled a bullish dollar bias for a seventh straight week. Non-commercial futures traders, usually hedge funds and large speculators, diminished their total US dollar long positions to $8.92 billion on October 25 from a total long position of $14.86 billion on October 18, according to the CFTC COT data and calculations by Reuters, which calculates the dollar positions against the euro (EUR), British pound (GBP), Japanese yen (JPY), Australian dollar (AUD), Canadian dollar (CAD), and the Swiss franc (CHF).
Rasmussen Reports:
Reuters:
Financial Times:
  • EU Leaders Battle To Save Greece Deal. European political leaders held emergency talks on Tuesday as the Greek political crisis threatened to sink a deal agreed last week in Brussels to bail out the debt-burdened eurozone nation.
Telegraph:
  • Revenge of the Sovereign Nation. Greece’s astonishing decision to call a referendum – "a supreme act of democracy and of patriotism", in the words of premier George Papandreou – has more or less killed last week’s EU summit deal. The markets cannot wait three months to find out the result, and nor is China going to lend much money to the EFSF bail-out fund until this is cleared up. The whole edifice is already at risk of crumbling.
  • Debt Crisis: Live.

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