Today's Headlines

Bloomberg:

• Italian Yields Reach 7%, French Debt Slides. Italian bonds led a slump in euro- area government debt as investors abandoned all but the safest assets amid rising borrowing costs at auctions and concern the region’s financial woes are deepening. “It’s a confidence crisis,” said Elwin de Groot, a senior market economist at Rabobank Nederland in Utrecht, Netherlands. “Investors have no confidence that the euro zone can solve its problems. They will look for the most safe place they can store their money, which is Germany. Everything else is suffering.” German two-year rates dropped below 0.3 percent for the first time, while the extra yield investors demand to hold 10- year bonds from France, Belgium, Spain and Austria instead of bunds all climbed to euro-era records. Italy’s 10-year yield rose above 7 percent as prime minister-in-waiting Mario Monti wrapped up talks on forming a new government. Spain and Belgium sold less than the maximum target of bills at auctions today as financing costs increased. Italy’s 10-year yield climbed 37 basis points, or 0.37 percentage point, to 7.07 percent at 5 p.m. in London. It rose to a euro-era record 7.48 percent on Nov. 9. The 4.75 percent bond due September 2021 slid 2.285, or 22.85 euros per 1,000- euro face amount ($1,351), to 84.57. The spread investors demand to hold 10-year French debt instead of German bunds widened 26 basis points, the most since the euro started in 1999, based on closing-market rates, to 190 basis points. It touched 191 basis points, also the most since the common currency was introduced. The yield on the 10-year bund fell one basis point to 1.77 percent, less than half France’s 3.67 percent rate.
  
• Monti Moves to Establish Italian Government as Markets Ratchet Up Pressure. Mario Monti, Italy’s premier-in- waiting, wrapped up talks on forming a new government as markets piled on pressure for the former European Union Competition Commissioner to announce his new team.
  
• European Growth Fails to Accelerate in Third Quarter as Debt Slows Demand. Europe’s economic expansion failed to accelerate in the third quarter as Germany and France struggle to shore up a region bracing for a recession sparked by an escalating debt crisis. Gross domestic product increased 0.2 percent from the previous three months, when it rose at the same pace, the European Union’s statistics office in Luxembourg said in a statement today. That matched the median forecast of 39 economists surveyed by Bloomberg News. From a year-earlier, GDP increased 1.4 percent. A separate report showed that German investor confidence fell to a three-year low in November. European growth may slow in the fourth quarter as leaders continue to battle the sovereign-debt crisis. Italian and Spanish bond yields climbed today on concern governments will struggle to implement promised austerity measures. EU Economic and Monetary Affairs Commissioner Olli Rehn said last week that the recovery “has come to a standstill” and European Central Bank President Mario Draghi warned about the risk of a “mild recession” when the ECB unexpectedly cut rates this month. “An economic contraction in the current fourth quarter seems hard to avoid,” said Martin van Vliet, an economist at ING Groep NV in Amsterdam. “The risk of a new recession threatens to compound the euro zone’s debt crisis, which, judging from today’s surge in Italian and Spanish bond yields, is very much alive and kicking.” The ZEW center in Mannheim Germany said today its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 55.2 from minus 48.3 in October. That’s the lowest since October 2008.
• Italy, Spain Credit Risk Rise to Records as Investors Shun Debt. Italian, Spanish and French credit- default swaps surged to records as Europe’s worsening debt crisis prompts investors to shun the weakest government bonds. Swaps on Italy jumped 27 basis points to 589 and Spain climbed 23 to 480, according to CMA prices at 4 p.m. in London. France rose 19 basis points to 233 and Belgium increased 21 basis points to a record 344. An increase signals worsening perceptions of credit quality. Kokusai Global Sovereign Open, Japan’s biggest mutual fund by assets, dumped almost $1 billion of its holdings of Italian government bonds by Nov. 10, a weekly report from the fund shows. Yields on Italian and Spanish 10-year bonds surged as economic growth in Europe failed to accelerate in the third quarter, the European Union’s statistics office said today. “We now have the possibility of both Italy and Spain calling for help at the same time,” said Bill Blain, the co- head of strategy at broker Newedge Group in London. The yield on Spain’s 10-year bond rose 21 basis points to 6.32 percent, the highest since August 1997, while the yield on Italian 10-year bonds climbed 35 basis points to 7.05 percent, according to data compiled by Bloomberg. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 19 to 362.5 basis points. Swaps on Finland rose 5 basis points to 72, the Netherlands increased 15 to 120 basis points, and Austria was up 20 at 222 basis points, according to CMA. The cost of insuring corporate debt also increased with contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rising 28 basis points to 770.5 basis points, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was up 9 at 189.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers added 16.5 basis points to 297.5 and the subordinated gauge was 19 higher at 534.
• U.S. Retail Sales Beat Forecast on Autos. Retail sales rose more than projected in October as American shoppers gave the economy a boost at the start of the fourth quarter. The 0.5 percent gain, helped by the biggest jump in electronics purchases in two years, followed a 1.1 percent increase for September, Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for a rise of 0.3 percent.
• Hedge Funds Ejected Citigroup(C) as Shares Slid in Third Quarter. Paulson & Co., Lansdowne Partners LP, and Lone Pine Capital LLC were among investment firms that cut stakes in Citigroup Inc. as shares of the bank slid 38 percent in the third quarter. Paulson & Co., founded by billionaire John Paulson, sold about 8.4 million shares of New York-based Citigroup during the quarter while Lansdowne, Europe’s biggest equity hedge fund, sold 1.3 million and Lone Pine disposed of 3.8 million, according to regulatory filings. Hedge funds collectively sold about 30.8 million shares, based on data compiled by Bloomberg from 757 managers.
• Oil Advances in New York, Approaches $100/Barrel. Crude oil for December delivery rose $1.07, or 1.1 percent, to $99.21 a barrel at 12:46 p.m. on the New York Mercantile Exchange. Futures are up 8.6 percent this year. Brent oil for December settlement, which expires today, increased 57 cents, or 0.5 percent, to $112.46 a barrel on the London-based ICE Futures Europe exchange. The January contract climbed 52 cents, or 0.5 percent, to $111.80.
• Fisher: Regulators Should Split 'Behemoth' Banks. Federal Reserve Bank of Dallas President Richard Fisher said regulators should break up so- called too-big-to-fail financial institutions to curtail the risk they pose to financial stability. “I believe that too-big-to-fail banks are too-dangerous- to-permit,” Fisher said in the text of remarks given in New York today. “Downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Then, creative destruction can work its wonders in the financial sector, just as it does elsewhere in our economy.”

Wall Street Journal:

• Police Clear Zuccotti Park. Police brought the two-month-old Occupy Wall Street encampment in Zuccotti Park to an abrupt end early Tuesday morning, as hundreds of officers swept in and cleared out protesters and their tents. About 200 protesters were arrested, including many who refused to leave. The raid sent others into the surrounding streets, setting off clashes and marches throughout Lower Manhattan.
• ObamaCare and the Limits of Government. When asked if the health law was constitutional, then-Speaker Nancy Pelosi sneered, 'Are you serious?' Now the Supreme Court has decided it's a worthy question.

CNBC.com:

• More Bond Buying Would Have Risks: Fed's Bullard. More Federal Reserve bond purchases could fuel inflation risks, even though they would be a forceful measure to spur growth, a top Fed policy maker said Tuesday.
• US Pension Agency Deficit Largest Ever at $26 Billion. The U.S. agency that insures corporate pensions reported a record annual deficit of $26 billion on Tuesday with its potential exposure to financially weak companies also on the rise in a tough economy.
• Greece, EU Head For Showdown Over Bailout Pledge. Greek conservatives set themselves on a collision course with the European Commission on Tuesday, refusing its request to sign a pledge to meet the terms of a bailout designed to save the country from bankruptcy and safeguard the euro zone.

Business Insider:

• The Only Surprising Thing About The Collapse Of Europe.
• Scandal Deepens: Energy Department Pushed Solyndra To Wait To Announce Layoffs Until After Midterm Elections.
• There's Something Fishy About The White House's $433 Million Investment In A Smallpox Vaccine.

Zero Hedge:

• European Funding Crisis Accelerating. (graph)
• BTPs Break 7% Again On Italian Downgrade Rumors. (graph)
• Europe Gets It. (graph) The stock market seems to be the last group still buying into the Europe "gets it" argument.

Reuters:

• EU Plans Investigation on US Bioethanol Subsides - Diplomats. The European Union's trade authority plans to start an investigation into whether U.S. bioethanol exporters are receiving illegal state subsidies and selling their fuel to Europe at illegally low prices, diplomats said on Tuesday. The European Commission investigation could result in import tariffs as early as next year on hundreds of millions of litres of the fuel if EU officials were to unearth evidence of unfair trade practices in the United States. "The Commission wants an investigation and EU capitals will not stand in the way, so it will begin this month," said one diplomat. Specifically, trade officials will investigate EU industry allegations that tax credits in the United States allow its exporters to cut their EU selling price by about 40 percent, the diplomats said. They will also investigate EU industry complaints that the price of U.S. ethanol is 15 to 20 percent lower in Europe than at home, the diplomats added -- a practice known as dumping that is illegal under international trade rules.

Telegraph:

• Debt Crisis: Live. ECB: European Governments Won't Make Us The Lender Of Last Resort.
• EC Set to Overhaul Credit Ratings Agencies. The European Commission will crack down on credit rating agencies - forcing them to report how they assign ratings and making them liable for compensation when mistakes are found.

ShanghaiDaily.com

• Shanghai Posts Dismal Data. THE tighter government measures have caused Shanghai's industrial production to weaken sharply in October while investments fell. The outlook for manufacturing is even gloomier when the city's Purchasing Managers' Index, a harbinger of future industrial performance, fell 0.7 point from a month earlier to 47.7 in October, the lowest since July 2009. A reading below 50 means contracting manufacturing activities, and October was third straight month for Shanghai's PMI to fall below 50. Industrial output in Shanghai edged up 0.9 percent from a year earlier to 261.1 billion yuan (US$41.3 billion) last month, a sharp drop from the 4.7 percent in September and 7 percent in August, the Shanghai Statistics Bureau said yesterday. Fixed-asset investment fell 1.9 percent annually to 374.8 billion yuan in the first 10 months, led by less injection of capital in the city's infrastructure projects. Wang Zehua, an analyst at the bureau, attributed the moderation to the tight policies, a cooling economy and the city's efforts to upgrade its economic structure. "Small firms, which account for more than two-thirds of Shanghai's economic output, are under great pressure to survive in the current credit conditions," Wang said. The six key industries in Shanghai - information technology, vehicles, refined oil, fine steel, machinery equipment and biomedicine - reported their output gained 2 percent to 175.6 billion yuan in October, better than the city's average pace. But the sharp moderation in manufacturing growth and falling investment may trigger a disastrous economic slowdown, some analysts said.