Today's Headlines

Bloomberg:

• Spanish Bonds Decline After Election; Bunds Gain on Safety Bid. Spanish bonds dropped, extending six weeks of losses, after Prime Minister-elect Mariano Rajoy told the nation to brace for difficult times as he starts work on tackling the euro-area’s third-largest deficit. Italy’s two-year notes fell as concern the regional debt crisis is worsening pushed up dollar-funding costs for European banks. German bonds rose as the Finance Ministry said economic growth is slowing and as U.S. lawmakers struggled to agree on deficit cuts, spurring demand for safer assets. The European Central Bank said it boosted sovereign-debt purchases last week. “Even with a majority, it will be a hard life for the Spanish government,” said Alessandro Giansanti, a senior interest-rates strategist at ING Groep NV in Amsterdam. “The market is realizing the situation in Spain is not too rosy compared with Italy.” The Spanish 10-year yield rose 17 basis points to 6.55 percent at 4:08 p.m. London time, after climbing to a euro-era record 6.78 percent on Nov. 17. The 5.5 percent bond due in April 2021 fell 1.14, or 11.40 euros per 1,000-euro ($1,347) face amount, to 92.73. Two-year rates climbed 14 basis points to 5.57 percent. Rajoy, whose People’s Party swept the ruling Socialists from power after eight years, said on Nov. 18 he hoped Spain wouldn’t need a bailout before he can be sworn in as prime minister in a month. He inherits a stalled economy with the euro area’s highest jobless rate and a deficit of more than twice the euro-region limit. The extra yield investors demand to hold 10-year Spanish securities instead of German bunds expanded 24 basis points to 465 basis points, after reaching 503 basis points on Nov. 18.
• Euro Zone Needs 'Momentous Deal': Credit Suisse. Euro leaders must reach “a momentous deal” toward fiscal and political union by mid- January to save the 17-nation bloc, Credit Suisse said in a note to investors. The analysts, led by Jonathan Wilmot, the bank’s London- based chief global fixed-income strategist, also predicted the European Central Bank will move “more aggressively” to lower its benchmark 1.25 percent rate and provide banks with longer- term funds. “In short, the fate of the euro is about to be decided,” according to the note, which was published today. At the same time, Italian and Spanish 10-year bond yields could jump above 9 percent and French yields could go above 5 percent, Credit Suisse’s note said. Yields on German bunds could also rise. As things stand now, investors “simply cannot be sure what exactly they are holding or buying in the euro zone sovereign bond markets,” said the report. “We suspect this spells the death of ‘muddle-through’ as market pressures effectively force France and Germany to strike a momentous deal on fiscal union much sooner than currently seems possible, or than either would like. Then and only then do we think the ECB will agree to provide the bridge finance needed to prevent systemic collapse.”
• German Growth May Grind to Halt as Region's Crisis Saps Exports: Economy. Growth in Germany, Europe’s largest economy, may slow to a near standstill next year as the region’s debt crisis saps demand for exports, the Bundesbank said. The Frankfurt-based central bank cut its 2012 growth forecast to between 0.5 percent and 1 percent from a June prediction of 1.8 percent, and said a “pronounced” period of economic weakness can’t be ruled out if the crisis worsens. “The significant weakening in foreign demand coupled with financial market nervousness” means “the German economy faces more difficult terrain in the months ahead,” the Bundesbank said in its monthly bulletin published today. There are “weighty” risks to the outlook, it said.
• War on Sovereign Ratings May Backfire on Bonds: Euro Credit. Europe's sovereign debt market is ossifying as restrictions on default-swap insurance and the threat of a ban on credit ratings for governments make traders and investors wary of owning bonds. "Primary dealers may pull out and won't overbid at auctions because they can't get rid of the bonds," said Soeren Moerch, head of government-bond trading at Danske Bank A/S in Copenhagen. "Banks don't want to hold government debt if they have to take writedowns on supposedly risk-free assets."
• Barton Biggs Sees 60% to 70% Odds of Recession. (video) Biggs said the chance of a recession during the first half of 2012 has risen to between 60 percent and 70 percent.
• Crude Oil Declines to One-Week Low on U.S. Budget Concern, European Debt. Oil dropped for a third day in New York on signs that U.S. lawmakers won’t agree on cutting the budget deficit and on concern that Europe’s debt crisis will send the region’s economy into a recession. Growth in Germany, Europe’s largest economy, may slow next year, the Bundesbank said today. Saudi Arabian Oil Co. Chief Executive Officer Khalid Al-Falih said the world economy is at risk of a double-dip recession. Crude oil for January delivery fell $1.50, or 1.5 percent, to $96.17 a barrel at 1:34 p.m. on the New York Mercantile Exchange. The price ranged from $95.24, the lowest level since Nov. 10, to $97.86. Futures are up 5.3 percent this year. Brent oil for January settlement dropped $1.25, or 1.2 percent, to $106.31 a barrel on the London-based ICE Futures Europe exchange.
• Tahrir Square Clashes Erupt for Third Day as Egyptians Defy Military Rule. Clashes erupted in Cairo for a third day after fighting between security forces and demonstrators protesting military rule left at least 22 people dead, a week before Egypt’s first parliamentary elections since the ouster of Hosni Mubarak. Protesters were driven back by tear gas in Tahrir Square, the center of the uprising that toppled Mubarak in February, some waving Egyptian flags and others hurling stones at riot police, in scenes televised from the site. Besides those killed, hundreds were injured in the fighting that started on Nov. 19, Health Ministry spokesman Mohammed el-Sherbeeny said today by telephone. The events in the square recalled the clashes between police and demonstrators during the anti-Mubarak uprising and have threatened to disrupt elections scheduled to start on Nov. 28 as tensions rise between activists and the ruling military council. Egypt’s government is trying to secure financing to support an economy still struggling to recover from the revolt. This afternoon, demonstrators staged a march through Tahrir Square, chanting “The people want to topple the field marshal,” referring to Mohammed Hussein Tantawi, the head of the military council that took power from Mubarak. Television footage showed protesters carrying away at least one person who appeared to be wounded or dead.
• BofA's(BAC) With Fannie Escalates Over Loan Buyback Stance. Bank of America Corp. told Fannie Mae it refuses to cooperate with the U.S. mortgage firm's new stance on loan buybacks, setting the lender up for a potential surge in claims and penalties. The bank is disputing Fannie Mae's demand that lenders repurchase mortgages or cover any losses themselves if an insurer drops coverage, Bank of America said this month in a regulatory filing. The lender, ranked second by assets among U.S. banks, said it “does not intend to repurchase loans” under what it deems to be new rules, and the refusal may trigger penalties or other sanctions.
• MF Global Shortfall May Exceed $1.2 Billion: Trustee. MF Global Inc.’s shortfall in U.S. segregated customer accounts may exceed $1.2 billion, more than double what was previously expected, said the trustee overseeing a liquidation of the failed brokerage run by former New Jersey Governor Jon Corzine. That would mean customer accounts are missing about 22 percent of their total of $5.4 billion. A shortfall of 11 percent had been previously estimated by a person with knowledge of probes into the firm’s collapse. James Giddens, the trustee, said today that forensic accountants and investigators are working “around the clock,” and the estimate may change.

Wall Street Journal:

• Brussels Seeks More Control Over Euro-Zone Member Budgets. The European Commission will set out proposals Wednesday that would significantly tighten Brussels' control over the budget policies of euro-zone member states, according to draft documents. The proposals would see struggling governments forced to submit to frequent reviews of their policies and accounts, and could see euro-zone governments effectively forced to seek financial assistance by a vote of their peers.
• Congress's Deficit 'Bomb': Scary or Not? Now that the committee has apparently failed, lawmakers and others are taking a harder look at the automatic cuts, or “sequester,” which will kick in starting January 2013 unless Congress acts. And they look plenty scary. Here’s what they entail:
• Gilead(GILD)-Pharmasset(VRUS) Deal: Wall Street Reacts. Gilead announced a roughly $10.4 billion deal to buy Pharmasset, a company that doesn’t yet have meaningful revenue but is developing treatments for hepatitis C. The deal price of $137 a share was about 59% more than Pharmasset’s highest-ever closing stock price. Here is a look at early Wall Street analysts’ reaction to the takeover:
• The Two Stocks Smacking Hedge Funds. Stockholdings of J.P. Morgan(JPM) and General Motors(GM) seem to be causing bleeding in hedge funds’ portfolios. About 30 funds count either of the two stocks among their top 10 favored stocks as of Sept. 30, with a 5% portfolio weighting, according to a Goldman Sachs report. But J.P. Morgan’s 21% stock decline year-to-date until Nov. 15, and GM’s 37% decline over the same period don’t bode well for those fund managers.
• US Health Care Costs Rise 4.3% For Insured Workers In 2Q. Health-care costs in U.S. employer-sponsored health-care plans rose 4.3% in the second quarter from a year earlier and edged up 1.3% from the first quarter, according to data from Thomson Reuters.

MarketWatch:

• Hedge Funds and Insiders Love These Stocks.

CNBC.com:

• Why Holiday Sales May Hing on How 'The One Percent' Feels.
• Home Sales Spit by Price. Sales of existing homes in October beat expectations, registering a gain of 1.4 percent from the previous month, but that number masks a market that is heavily weighted to the low end.

Business Insider:

• ECONOMIST: Bernanke Is Going To End Up Bailing Out All Of Europe. Regardless of Bernanke's avowed commitment to save the United States from a repeat of the Great Depression, the political will to truly prop up the rest of the world doesn't seem to exist in the U.S. If Congress is already breathing down the Fed's neck, just wait until the "U.S. taxpayer" is absorbing the fiscal profligacy of Italy and Greece.
• CNBC's Kaminsky Goes Off: MF Global Is Having a Devastating Impact On Psychology.
• Egypt's Cabinet Has Submitted Its Resignation To The Military Council, As Huge Protests Break Out In Cairo. (pics)
• Goldman: Sovereign Risk is Spreading Like Wildfire.
  

Zero Hedge:

• Muddy Waters Releases 80 Page Report Disclosing Latest "Strong Sell" Target: China's Focus Media(FMCN).
• Margin Debt Soars By Most Since June 2007 Just In Time For November Market Rout. (graph)
• The Real Reason The "Voluntary" Greek Haircut Is Hurting.
• Europe Needs Debt Relief and Structural Reforms, Not Hyperinflation.
  

Wall Street All-Stars:

• Hewlett-Packard(HPQ) Reports Tonight.

Jefferies:

• Jefferies Posts Letter to Defend Capital Position.

The Daily Caller:

• MSNBC's Chris Matthews to Obama: 'Just tell us, commander. Give us our orders'. (video) In a Sunday evening interview on MSNBC, “Hardball” host Chris Matthews spoke candidly not just of his allegiance to the president’s agenda, but also of the frustrations many on the professional left are feeling with the administration’s lack of leadership. “There’s nothing to root for,” Matthews lamented. “What are we trying to do in this administration? Why does he want a second term, would he tell us? What’s he going to do in his second term, more of this? Is this it? Is this as good as it gets? Where are we going? Are we going to do something his second term? He’s yet to tell us.” “He has not said one thing about what he’d do in his second term,” Matthews continued. “He never tells us what he’s going to do with reforming our health care systems, Medicare, Medicaid. How he’s going to reform Social Security? Is he going to deal with long-term debt? How? Is he going to reform the tax system? How?" “Just tell us — why are we in this with him? Just tell us, commander. Give us our orders and tell us where we’re going. Give us the mission.”

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).

Financial Times:

• Le Pen Calls for France to Quit Euro. Marine Le Pen, the leader of France’s far-right National Front, has made abandoning the euro one of the pillars of her presidential election campaign, launching a powerful attack on the ailing single currency as she seeks to bolster her already strong showing in the opinion polls. Presenting her “presidential project”, Ms Le Pen said Europe should give up the euro, which had “asphyxiated our economies, killed our industries and choked our jobs” for years, as well as causing France to accumulate “Himalayan” debts. In any case, she added, the country should prepare a planned exit from the currency union. “We need to anticipate the collapse of the euro rather than suffer from the collapse of the euro,” she said in a television interview on Sunday.
• CDS' Demise Has Been Greatly Exaggerated. There has been so much criticism of credit default swaps (CDS) of late that you would think no one was using them any longer. Yet today we see net open positions of $2,900bn, up from $2,400bn at this time last year. This simple fact belies the inordinate amount of misperceptions surrounding the CDS market. In spite of all the rhetoric, CDS remain a robust and effective financial tool for hedging risk or taking on exposures.
• China Property Sale Falls Could Hit Banks. The number of property transactions in China’s largest cities has fallen to dangerously low levels, according to regulatory documents obtained by the Financial Times. According to the documents, the China Banking Regulatory Commission earlier this year ordered domestic banks to weigh the impact of a 30 per cent decline in housing transactions in “stress tests” aimed at determining the health of the Chinese financial system.

Telegraph:

• France Warned on Outlook for AAA Credit Rating by Moody's. Moody's warned France that a sustained rise in its debt yields coupled with weakening economic growth could harm its ratings outlook, fuelling concern the eurozone's second largest economy might lose its AAA status. Today, the rating agency said that a worsening in the French bond market - amid fears the sovereign debt crisis was spreading to the eurozone's core - posed a threat to its credit outlook, though not at this stage to its actual rating. "Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications," Moody's said. The premium investors charge on French 10-year debt compared to the German equivalent was up around 20 basis points at 163 bps following publication of Moody's report but remained well short of the 202 bps hit last week, a new euro-era high.
• Self-Serving Myths of Europe's Neo-Calvinists. Eurozone leaders now face a choice between two unpalatable alternatives. Either they accept that the eurozone is institutionally flawed and do what is necessary to turn it into a more stable arrangement. This will require some of them to go beyond what their voters seem prepared to allow, and to accept that a certain amount of ‘rule-breaking’ is necessary in the short term if the eurozone is to survive intact. Or they can stick to the fiction that confidence can be restored by the adoption (and enforcement) of tougher rules. This option will condemn the eurozone to self-defeating policies that hasten defaults, contagion and eventual break-up.
• Graphic: How Bureaucracy is Slowing Europe's Recovery.
  

Die Welt:

• Germany should have a greater say at the ECB given the country holds 30% of the financial responsibility, citing Alexander Dorindt, general-secretary of the Christian Social Union, as saying. ECB President Mario Draghi has gotten off to a "very problematic" start in the job by accelerating the central bank's government bond purchases, Dobrindt said in an interview.

O Estado de Sao Paulo:

• Brazil's government may reduce its forecast for economic growth this year to 3.5% after cutting its estimate to 3.8% on Nov. 18, citing Deputy Finance Minister Nelson Barbosa.

South China Morning Post:

• Last Chance for China to Burst Bubble Without Chaos: Andy Xie. The bursting of China's housing bubble may lead to bankruptcies, but laid-off workers should find new jobs quickly as the labor market remains tight, writes independent economist Andy Xie. The biggest mistake China could make is to allow the property bubble to grow, leading to hyperinflation, currency devaluation, and social/economic chaos, Xie said. The bubble may burst even without government curbs, he said. Lobal governments and developers are unlikely to succeed in pressuring Beijing to keep the bubble going, like before, says Xie.