Today's Headlines

Bloomberg:

• Germany Sees No New Tools in Resolving Debt Crisis as Spanish Yields Surge. Germany rejected calls from allies and investors to do more to counter market turmoil as Spain’s financing costs surged and pressure mounted on Greek political leaders to submit written commitments to austerity measures. Bond yields in France, Spain and Italy climbed as the absence of progress toward enacting a month-old comprehensive crisis-fighting package and a dispute over the central bank’s role rattled investors. Spanish three-month bills were auctioned today at higher yields than in Greece and Portugal. “We don’t have any new bazooka to pull out of the bag,” Michael Meister, finance spokesman for Chancellor Angela Merkel’s Christian Democratic bloc, said in Berlin today. “We see no alternative to the policy we are following,” which sees debt cuts and keeping the European Central Bank from becoming a lender of last resort, he said in an interview. Germany is signaling resistance to stepping up Europe’s response as the debt crisis that began more than two years ago in Greece threatens France, after snaring Ireland, Portugal, Italy and Spain. While the extra yield investors demand to lend to AAA-rated France reached 200 basis points more than Germany on Nov. 17, the highest risk premium since 1990, Meister said current policies will work if given enough time. Merkel, speaking today in Berlin to members of the BDA employers’ association, said the euro region’s debt crisis “can’t be solved in a big bang.” “We have frittered away political trust in the euro,” Merkel said. “That is why I deeply believe that you can’t restore this confidence with purely financial means, but that only a coherent political response can create this confidence.” Merkel said the European Union will have to make swift treaty changes to deal with the situation and noted the EU summit on Dec. 9, which will deal with this issue. The additional yield sought by investors for holding 10- year French bonds instead of benchmark German bunds widened 10 basis points to 164 basis points at 3:20 p.m. in Frankfurt.
• IMF Revamps Credit Lines to Lure Nations. The International Monetary Fund revamped its credit line program to encourage countries facing outside shocks to turn to the fund with few conditions attached as European leaders fail to end their debt turmoil. The Washington-based IMF today said the new instrument, the Precautionary and Liquidity Line, can be tapped by countries with strong economies currently facing short-term liquidity needs. Countries with potential needs can also apply, as they did in the past under the Precautionary Credit Line that the new instrument replaces. “The reform enhances the Fund’s ability to provide financing for crisis prevention and resolution,” IMF Managing Director Christine Lagarde said in an e-mailed statement. “This is another step toward creating an effective global financial safety net to deal with increased global interconnectedness.” The IMF is co-financing bailouts in Greece, Portugal and Ireland and is preparing to send a team to Italy for an unprecedented audit of the country’s efforts to cut its debt.
• Sovereign Credit-Default Swaps Index Rises to Record in Europe. The cost of insuring against default on European sovereign debt rose to a record, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed four basis points to 364.5 at 4 p.m. in London. Contracts on Belgium, France and Spain also rose to all- time highs. Swaps on Belgium soared 17 basis points to 353 as coalition talks were suspended and Elio Di Rupo offered to resign from leading the negotiations after the six parties involved failed to agree about how to cut the budget deficit. Contracts on France rose three basis points to 237 on concern it may lose its top AAA credit rating, and Spain increased 11 to 484, according to CMA. Swaps on Norway rose six basis points to 52, the highest since Oct. 4. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed nine basis points to 802.5, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment- grade ratings was 1.25 at 199.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased four basis points to 319 and the subordinated gauge was eight higher at 563, both records.
• Spain Pays More to Borrow Than Greece. Spain paid more than Greece and Portugal to sell three-month bills as the newly elected People’s Party called for a European agreement to “save” the nation’s debt, saying the country can’t afford 7 percent interest rates. Spain’s three-month borrowing costs doubled as it sold bills at an average yield of 5.11 percent, more than twice the rate at the previous auction a month ago. The Treasury paid more than the 4.63 percent for 13-week bills sold Nov. 15 by Greece, which received a European Union-led bailout last year. Portugal paid 4.895 percent on three-month bills the following day. Maria Dolores de Cospedal, the deputy leader of Spain’s People’s Party which ousted the ruling Socialists on Nov. 20, yesterday called for a euro-region accord to “save and guarantee the solvency” of Spain’s 650 billion-euro ($881 billion) debt. Spain can’t afford to “continue financing itself at 7 percent,” she said, referring to the yield on 10-year debt that led Greece, Portugal and Ireland to seek EU aid. Prime Minister-elect Mariano Rajoy told German Chancellor Angela Merkel in a phone call yesterday that “countries that meet their obligations and responsibilities must be helped by European institutions,” Cospedal said. The European Commission yesterday said it had no knowledge of any Spanish request for aid or plans to seek it. Germany dismissed calls for Europe to come to Spain’s assistance. “We don’t have any new bazooka to pull out of the bag,” said Michael Meister, finance spokesman in parliament for Merkel’s Christian Democratic bloc.
• Euro-Region November Consumer Confidence Hits Two-Year Low on Job Concern. European consumer confidence dropped to the lowest in more than two years in November, as the economy edged toward a recession and companies eliminated jobs. An index of household sentiment in the 17-nation euro area fell to minus 20.4 from minus 19.9 in October, the Brussels- based European Commission said in an initial estimate today. That’s the lowest since August 2009. Economists had forecast a drop to minus 21, the median of 28 estimates in a Bloomberg survey showed. Confidence has weakened for five straight months, the longest stretch of declines since 2008.
• Dodd-Frank Law May Hinder Crisis Response by Policy Makers. Federal Reserve Chairman Ben S. Bernanke and fellow U.S. policy makers may find themselves hampered in restoring financial stability should the European debt crisis spread to America. The Dodd-Frank legislation passed last year prohibits the Fed from engaging in rescues of individual financial firms, such as it did with Bear Stearns Cos. and American International Group Inc. during the 2008 financial crisis. Lawmakers also banned the Treasury Department from again using an emergency reserve program to backstop money market funds. And the Federal Deposit Insurance Corp. now has to get Congressional approval before it can guarantee senior debt issued by banks. Investors “don’t realize the extent to which Congress has tied people’s hands,” said Donald Kohn, who served as vice chairman of the Fed from 2006 to 2010 and is now senior economic strategist for Potomac Research Group in Washington, an independent research firm. “There is less room to maneuver for the authorities.”
• U.S. Economic Growth in Q3 Revised Lower. The economy in the U.S. expanded less than previously estimated in the third quarter, reflecting a drop in inventories that points to a pickup in growth as 2011 comes to a close. Gross domestic product climbed at a 2 percent annual rate from July through September, less than projected and down from a 2.5 percent prior estimate, revised Commerce Department figures showed today in Washington. The median forecast of 81 economists surveyed by Bloomberg News called for no revision.
• FOMC Minutes Reveal a 'Few' Members Want Easing. Some Federal Reserve policy makers said the central bank should consider easing policy further, according to minutes of their Nov. 1-2 meeting. “A few members indicated that they believed the economic outlook might warrant additional policy accommodation,” the Fed said in minutes released today in Washington. “However, it was noted that any such accommodation would likely be more effective if it were provided in the context of a future communications initiative, and most of these members agreed that they could support retention of the current policy stance at this meeting.”
• Oil Gains First Time in Four Days on Iran Sanctions. Oil rose for the first time in four days as new sanctions against Iran and protests in Egypt raised concern that supplies will be disrupted. Crude advanced as much as 1.8 percent after the U.S., the U.K. and Canada expanded measures aimed at thwarting Iran’s nuclear program. In Egypt, protesters gathered in Tahrir Square for a fifth day after deadly clashes between security forces and demonstrators spurred the Cabinet to offer to quit. Crude for January delivery gained 81 cents, or 0.8 percent, to $97.73 a barrel at 12:13 p.m. on the New York Mercantile Exchange.
• Gold Rebounds From One-Month Low as Sovereign-Debt Concerns Stoke Demand. Gold futures rebounded from the lowest in almost four weeks after mounting debt woes in the U.S. and Europe spurred demand for the metal as a store of value. A U.S. congressional committee failed to reach agreement on reducing the budget deficit. Global equities have tumbled this month as Europe’s credit crisis escalated. Holdings in exchange- traded products backed by gold climbed to a record yesterday.
• Jefferies(JEF) Should Raise $1 Billion in Equity. Jefferies Group Inc. (JEF) should raise $1 billion in equity and reduce leverage as MF Global Holdings Ltd.’s bankruptcy increases scrutiny of the investment bank’s balance sheet, Egan-Jones Ratings Co. said. Without a “major deleveraging,” New York-based Jefferies may have its credit grade cut, Egan-Jones said today in a note to clients. The ratings firm downgraded the bank to BBB- from BBB earlier this month.
• Debit Card Fees Under Justice Dept. Review. The U.S. Justice Department is conducting an antitrust review of statements and actions by banks and their trade associations over possible increases in consumer fees for using debit cards. Assistant Attorney General Ronald Weich described the review in a letter released today by Representative Peter Welch, a Democrat from Vermont, who had requested an investigation. “Please be assured that if it finds that individuals, banks or other parties may have violated the antitrust laws, the department will take appropriate action,” Weich wrote in the letter, dated Nov. 16.
• Groupon(GRPN) Shares Plunge, Trading Close to IPO. Groupon Inc., the largest Internet daily-deal site, plunged as much as 15 percent in Nasdaq Stock Market trading, pushing the shares near their initial public offering price for the first time.

Wall Street Journal:

• FX Concepts: Equity Market Links Hint At More Euro Weakness. The euro looks set to fall in the weeks ahead as it follows related movements in German and U.S. stock markets, one of the world's biggest currencies fund-management firms said Tuesday.
• Egypt's Military Vows to Move Up Transfer of Power. The head of Egypt's ruling military council, in a rare public address to countrymen again embroiled in widespread protest, vowed Tuesday to move up the timeline of presidential elections and suggested he was willing to hold a public referendum on the role of the country's military.
• Big Selloff Hits Europe Bond Markets. Euro-zone bond markets suffered another selloff Tuesday, with investors especially dumping short-term debt after Spain was forced to pay a heavy price to auction its latest brace of Treasury bills. The Spanish Treasury was forced to pay a euro-era record 5.11% yield on three-month Treasury bills at auction, more than double the rate paid at last month's auction. By way of comparison, to access the short-term debt market Spain now must pay more than Greece paid at its last three-month auction a week ago.
  

MarketWatch:

• Market Still Working Off Excess Optimism. My hunch is that sentiment was a major culprit: Bullish excitement rose to dangerously high levels in the wake of the October rally, and that euphoria needed to be worked off.

CNBC.com:

• Demonstrators Plan to Occupy Retailers on Black Friday. Organizers are encouraging consumers to either occupy or boycott retailers that are publicly traded, according to the Stop Black Friday website. The goal of the movement is to impact the profits of major corporations this holiday season.
• European Banks Relying More On Central Bank for Funding. Euro zone banks' demand for central funding surged to a two-year high on Tuesday, and U.S. funds cut their lending to the bloc's banks, tightening a squeeze that looks unlikely to ease this year. The ECB's weekly, limit-free handout of funding underscored the widespread problems, with 178 banks requesting 247 billion euros, the highest amount since mid-2009.

Business Insider:

• Obama Heckled In New Hampshire By Occupy Wall Street Supporters. (video)

Zero Hedge:

• Spanish Yield Curve Inverts Most Since 1994. (graph)
• Uncle Sam To The Rescue: IMF Creates New European Bail Out Facility, The "Precautionary And Flexible Credit Lines".
  

Institutional Investor:

• ETFs Play Big Role at Major Hedge Funds. Exchange traded funds (ETFs) continue to be a favored way for many of the largest, savviest and best-known hedge fund firms to bet on the direction of the overall market or a basket of stocks in an individual industry or market. In fact, in the third quarter ETFs represented the largest holding or largest new purchase by a number of hedge funds. ETFs offer investors an efficient and low-cost way to make a market bet or to hedge a portfolio. They can also skew the movement of the underlying stocks, which can experience a bigger move up or down than they may otherwise experience had they not been included in the basket of stocks. Among the more aggressive users of these instruments is Louis Bacon’s Moore Capital.

The Bond Buyer:

• Volcker Rule May Adversely Impact Munis. Some market participants are concerned that the current version of the Volcker Rule would hurt the municipal bond market. Named after Paul Volcker, the former Federal Reserve chairman, the rule would restrict federal insured banks’ ability to trade for their own benefit.

Real Clear Markets:

• How Government Props Up Big Finance.

Reuters:

• German Econ Minister: No Need to Revive Crisis Tools.

Financial Times:

• US Banks Warn Reforms Will Hit Eurozone. U.S. banks say the so-called Volcker rules that will ban proprietary trading from July next year will hurt demand for euro area government bonds. The banks point out that trading on their own accounts makes up a large part of the U.S. presence in the $13 trillion eurozone debt market, though precise figures are hard to obtain.

Telegraph:

• Debt Crisis: Live.

Sky News:

• Exclusive: JPMorgan(JPM) Secures £30m LME Stake. JP Morgan, the US banking giant, is on the verge of securing a deal that will see it become the biggest shareholder in the London Metal Exchange (LME), I have learned. The bank is poised to snap up the 4.65% stake in the LME owned by the collapsed broker MF Global for about £30m, I'm told. A deal could be announced by KPMG, MF's administrator, as soon as this afternoon.

NRC Handelsblad:

• Political crisis in Belgium is worrying and markets may run out of patience, Jean Deboutte, director of strategy of Belgium's debt agency, said.

The Australian:

• Westpac Warns of Contagion as Fallout From Europe Threatens. EUROPE'S rolling debt crisis is increasing the nation's economic vulnerability, says Westpac chief executive Gail Kelly amid increasing signs that the waves of contagion are starting to hit Australia.