- Sarkozy Says Loss of AAA Wouldn't Be 'Insurmountable'. President Nicolas Sarkozy said that the loss of France’s top credit rating wouldn’t be an “insurmountable” economic difficulty, according to an interview published in Le Monde newspaper. If the rating companies “pull it, we’ll face the situation coolly and calmly,” Sarkozy was quoted as saying by the newspaper. “It would be an additional difficulty but it’s not insurmountable. What is important is the credibility of our economic policy and our strategy of reducing spending.” Moody’s Investors Service said today it will review the ratings of all European Union countries after a summit last week Brussels failed to produce “decisive policy measures” to end the region’s debt turmoil. Standard & Poor’s placed the ratings of 15 euro nations, including AAA rated France and Germany, on review for possible downgrade on Dec. 5 pending an assessment of the summit. George Magnus, senior economic adviser at UBS AG, said he expects one of Europe’s AAA rated countries to lose its top rating. “It’s inevitable,” Magnus said in a interview with Maryam Nemazee on Bloomberg Television in London today. “It’s just a question of when S&P or the other rating agencies decide to pull the trigger.” Of the five euro zone countries with the top debt rating, France may be the most vulnerable. Its 10-year notes traded at 3.30 percent at 1:55 p.m. in Paris, higher than the other four, and 121 basis points above similarly dated German debt. Credit-default swaps on France climbed 13 basis points to 222 basis points today, while those on Germany rose half a point to 99.5 basis points.
- Sovereign, Corporate Bond Risk Rise, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, according to traders of credit-default swaps. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments jumped 13 basis points to 376.5 at 9 a.m. in London, approaching the record 385 set Nov. 25. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rose 20.5 basis points to 770.5, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed six basis points to 179.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 11 basis points to 307 and the subordinated index rose 17.5 to 547.5.
- 5th European Solution Failing to Ease Stress: Credit Markets. The fifth agreement in 19 months intended to resolve Europe's sovereign crisis is failing to ease stress in the debt markets. A credit-default swaps index tied to Greece, Italy, Spain and 12 other western European nations rose today, extending a reversal of its biggest drop ever and approaching the record reached Nov. 25. A gauge of banks' reluctance to lend to one another in euros remains at about the highest since February 2009. The premium they pay to convert euro payments into dollars jumped the most in five weeks and is more than double this year's average.
- EU Summit's Failure May Consign Top-Rated Bonds to History. Europe’s failure to agree on a comprehensive solution to the sovereign debt crisis threatens to consign AAA rated bonds in the region to history. Top-rated agencies in the 17-nation euro area have at least 847.5 billion euros ($1.1 trillion) of debt outstanding, according to data compiled by Bloomberg, and will be at risk should their sovereigns be downgraded. Moody’s Investors Service said today it will review the ratings of all European Union nations after last week’s summit failed to produce “decisive policy measures,” while Standard & Poor’s announced Dec. 5 it may cut 15 euro members, including AAA rated Germany and France. “Double A is the new triple A,” said Raphael Gallardo, the head of economic research at Axa Investment Managers in Paris, which manages about $690 billion. “De facto, there are no more highly liquid, risk-free assets. It’s a dangerous problem because in a market crash, liquid AAA assets are the dam that contains the total exodus of liquidity.” European leaders’ fifth attempt to draw a line under their debt woes ended in a fiscal accord that will bring tighter deficit rules, though with many details still to be ironed out and the U.K. vetoing an agreement among all 27 EU members. A lack of top-rated sovereigns would make it harder to gauge a risk-free benchmark for securities, reduce participation in euro-region debt markets and threaten ratings of agencies and supranationals such as the European Investment Bank and World Bank.
- Italy's $71 Billion Needs Remain Crisis Flashpoint: Euro Credit. Italy holds the key to the euro's survival, shouldering one-third of the region's first-quarter funding burden as the debt crisis saps demand for its assets and shrinks its investor base. The euro zone's third-largest nation has to repay about 53 billion euros ($70.5 billion) in the first quarter from the region's total maturing debt of 157 billion euros, according to UBS AG. It owes a further 3.2 billion euros in interest payments based on the average five-year yield of the past three months. Italy's five-year borrowing costs rose to as much as 7.11 percent today, down from the Nov. 25 euro-era high of 7.85 percent. Credit-default swaps on the nation's debt surged 21 basis points to 555 on concern that crisis-fighting agreements forged by European leaders to end the region's crisis will prove insufficient. The first three months of 2012 "will be a very painful auction experience, which is detrimental to investor confidence," said Padhraic Garvey, head of developed-market debt strategy at ING Groep NV in Amsterdam. "Italian yields at about 7 percent represent fantastic value for investors, but demand is low because there's no confidence that the debt crisis can be solved quickly enough." The nation's debt-servicing costs will rise by about 30 billion euros in the next two years, Confindustria, Italy's employers' lobby, said on Dec. 1. Those costs will eat up 5.1 percent of gross domestic product next year, up from 4.2 percent this year, and climb to 5.6 percent in 2013, the report said.
- Intel Says Q4 Revenue to Miss Forecast on Shortage. Intel Corp. (INTC), the world’s largest chipmaker, reduced its fourth-quarter revenue forecast by about $1 billion, saying a shortage of hard-disk drives is cutting customers’ production of personal computers. The company said revenue will be $13.7 billion, plus or minus $300 million, compared with a previous estimate of $14.7 billion, give or take $500 million, according to a statement today. Analysts predicted $14.7 billion, the average of estimates compiled by Bloomberg. While PC sales will rise in the fourth quarter from the prior three months, Intel said customers are stockpiling fewer parts because output has been hurt by a shortage of disk drives, the main data-storage devices in computers. The supply constraints, resulting from the worst flooding in Thailand in 70 years, will continue into the first quarter, the chipmaker said. The reduced outlook from Intel, whose microprocessors power more than 80 percent of all PCs, comes after some drive makers had indicated the industry was recovering from the floods in Thailand, home to production for about a quarter of the world’s hard-disk drives. The forecast sent the Philadelphia Semiconductor Index (SOX) down 3.6 percent. Intel’s customers have cut chip orders in the past two weeks after their hard-disk suppliers updated them on the availability of their products, Intel Chief Financial Officer Stacy Smith said on a conference call today.
- Speculators Miss Oil Drop on European Debt Woes: Energy Markets. Hedge funds increased bullish bets on crude oil just before prices dropped the most in three weeks amid concern the European debt crisis will trigger a global economic slowdown. The funds and other large speculators boosted long positions, or wagers that prices will rise, 4.1 percent in the seven days ended Dec. 6, according to the Commodity Futures Trading Commission's Commitments of Traders report on Dec. 9. The net-long positions increased for a second week amid rising tensions with Iran, the second-largest producer in the Organization of Petroleum Exporting Countries. Futures dropped 2.1 percent on Dec. 8 on the New York Mercantile Exchange, the most since Nov. 17, after European Central Bank President Mario Draghi signaled policy makers wouldn't increase government bond purchases to stabilize the region's economy.
- Crude Oil Declines on Moody's Review of European Ratings, China Exports. Oil extended last week’s decline as Moody’s Investors Service said it will review the credit ratings of all European Union countries and China’s export growth slowed to the weakest pace since 2009. Crude dropped as much as 1.9 percent after Moody’s said last week’s EU summit failed to deliver “decisive policy measures” to end the debt crisis. China’s exports rose 13.8 percent in November from a year earlier, compared with 15.9 percent in October, the customs bureau said Dec. 10. “The Moody’s announcement really affects market sentiment,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There is a pretty good chance that the global oil demand will be pretty weak next year because of the European crisis and China.” Crude for January delivery fell $1.43, or 1.4 percent, to $97.98 a barrel at 12:33 p.m. on the New York Mercantile Exchange. Prices dropped 1.5 percent last week and are up 7.2 percent this year. China’s November export growth was the least since December 2009, excluding distortions in January and February each year, customs data showed. Exports to the European Union, China’s biggest market, rose 5 percent from a year earlier, a quarter of the pace reported in July and August. “The news from China is another indicator of the economic weakness in Europe and it means China will use less oil,” said James Williams, an economist at WTRG Economics, an energy research firm in London, Arkansas. Libya pumped 500,000 barrels a day in November, from a low of 45,000 barrels in the midst of the rebellion against former leader Muammar Qaddafi, according to Bloomberg estimates.
- Obama Backers Make President Top Fundraiser From Big Business. President Barack Obama, who has been characterized as anti-business by his political opponents, has received more in campaign contributions from business executives this year than any Republican presidential candidate. Obama raised $5.6 million from executives, or about a third of all their donations through Sept. 30, according to data compiled by Bloomberg. Republican candidate Mitt Romney raised $5.2 million, far outpacing his primary challengers. Former House Speaker Newt Gingrich, the front-runner in the latest national polls, raised about $272,000, or 5 percent of Romney’s total.
- U.S. Economic Data is Surprising Forecasters. U.S. economic data are outperforming expectations by the most in nine months, a trend Federal Reserve officials may incorporate into their policy statement tomorrow. The Citigroup Economic Surprise Index, a daily measure of whether economic data is better or worse than economists’ projections, improved to 85.7 on Dec. 2, the highest since March 9.
- India's Rupee Tumbles to Record as Factory Output Shrinks For 1st Time in 2 Years. India’s rupee tumbled to a record low after industrial production declined for the first time in more than two years. The currency fell 1.5 percent, the most in three weeks, as the Central Statistical Office said factory output shrank 5.1 percent in October from a year earlier, compared with the median estimate for a 0.7 percent contraction in a Bloomberg News survey. That was the first drop in output since June 2009. The Reserve Bank of India sold dollars today to curb the rupee’s slide, according to IndusInd Bank Ltd. “The bearish sentiment is very strong and there is nothing going for the rupee,” said J. Moses Harding, a Mumbai-based executive vice president at IndusInd. “The RBI has been intervening intermittently today at various levels.”
- German Voters Dissatisfied With Merkel's Leadership in ARD Poll. German voters are dissatisfied with Chancellor Angela Merkel’s leadership during the euro crisis, according to an Infratest poll conducted for ARD television. Some 55 percent of those surveyed said they were “less satisfied” or “not satisfied at all” with Merkel’s handling of the criticism while 65 percent of the respondents said solidarity with troubled euro member countries is in Germany’s best interest. Last week’s EU accord wouldn’t help stabilize the euro area, according to 57 percent.
- Martin Marietta Seeks to Buy Vulcan Materials(VMC) in $4.7 Billion Hostile Bid. Martin Marietta Materials Inc. (MLM) is seeking a hostile takeover of Vulcan Materials Co. in an all- stock transaction valued at $4.7 billion that would create the world’s largest aggregates supplier.
- CFOs Less Optimistic About Growth In 2012 - BofA Survey. Financial chiefs at U.S. companies are less optimistic about economic growth in 2012 than in previous years, however, the majority don't expect work force reductions next year, according to a recent chief financial officer outlook survey by Bank Of America Corp. (BAC) According to the annual latest survey of 600 executives by Bank Of America Merrill Lynch, 38% of respondents said they expect the U.S. economy to grow in 2012, down from 56% a year ago and 66% the prior year. CFOs rated the economy a score of 44 out of 100 -- its lowest score in the survey's 14-year history. A year ago, CFOs gave the economy a score of 47.
- Interview: Adecco Prepared For European Recession - CEO. Adecco SA (ADEN.VX) the world's largest staffing company, is preparing for a recession in Europe in 2012 and a long, slow recovery thereafter.
- Banks Sit in a Tangled Web. Dozens of banks across Europe have sold large quantities of insurance to other banks and investors that protects against the risk of ailing countries defaulting on their debts, the latest illustration of the extensive financial entanglements among the continent's banks and governments. New data released last week by European banking regulators suggest the risks of banks suffering losses tied to European government bonds could be higher and more widespread than previously realised. The numbers show European banks have sold a total of €178bn worth of insurance policies, in the form of financial derivatives known as credit-default swaps, on bonds issued by the financially struggling Greek, Irish, Italian, Portuguese and Spanish governments. If those bonds default, as some investors fear they might, banks could be on the hook for making large payments to the holders of the swaps. The banks have at least partly insulated themselves from such potential losses by buying large quantities—roughly €169bn worth—of credit-default swaps tied to the same bonds, apparently in large part from other European banks, according to European Banking Authority data. The disclosures highlight another layer of risk interwoven through the continent's banking system.
- Italian, Spanish Bond Yields Rise.
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- France's Hollande Wants to Renegotiate EU Deal. French presidential hopeful Francois Hollande said Monday that, if elected, he would seek to renegotiate the new euro-zone accord agreed by European leaders at last week’s Brussels summit, sparking concern that a power shift in France could derail the plan. In an interview with RTL Radio, Hollande said the treaty “is not the right answer” to the crisis, because it doesn’t respond to the current market pressure or stimulate sufficient growth. An LH2 poll on behalf Yahoo published on Sunday showed Hollande would capture 31.5% of the vote, while Sarkozy would win 26% in the first round of voting. The poll indicated Hollande would also triumph in a second round against Sarkozy, with a 57% majority, and therefore could act on his promise to revamp the euro-zone accord.
- Hedge Funder Hugh Hendry Is Making Breathtaking Returns Shorting China. U.K. hedge fund titan Hugh Hendry, a partner and chief investment officer at Eclectica Asset Management, is continuing to kill it this year with his "China short" fund. According to the Financial Times, his "China short" fund is up an astonishing 52% YTD. That's one awesome bet Hendry made, especially since the average hedge fund is down 4.37% YTD, the report said. Hendry's credit fund is able to go short China via Japanese credit default swaps by betting that Chinese demand to Japanese corporate credits will slow. Hendry, who has long been a bear on China, told students at the London School of Economics in October that his Confucius saying on the country is "wise man not invest in over capacity."
- David Zervos: Every Investor Must Be Prepared For This One Headline In 2012. David Zervos, the fixed income strategist from Jefferies, is very quickly becoming one of Wall Street's must-reads.
- Morning Joe: Obama Thinks His Remarkable Talents Are Wasted On America.
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- A Greek What-If Draws Concern: Dropping the Euro. It would be Europe’s worst nightmare: After weeks of rumors, the Greek prime announces late on a Saturday night that the country will abandon the euro currency and return to the drachma. The danger that Greece or some other deeply damaged country in the euro zone could leave the single-currency union can no longer be ruled out. And it was largely this prospect that drove leaders last week to agree to adopt strict fiscal rules that they hope will wrap the 17 European Union nations that use the euro into an even tighter embrace.
- Obama to Slash National Guard Force on U.S.-Mexico Border. Blaming budget cuts, the Obama administration early next year will cut the number of National Guard troops patrolling the U.S.-Mexico border by at least half, according to a congressman who was briefed on the plan. The National Guard said an announcement will be made by the White House “in the near future,” but Rep. Duncan Hunter, a California Republican who has learned of the plans, said slashing the deployment in half is the minimum number, and he said it will mean reshuffling the remaining troops along the nearly 2,000-mile border. In California, that will mean going from 264 Guard troops down to just 14, he said.
- U.S. Box Imports Estimate Cut on 'Stubbornly Slow' Recovery. The U.S. will import 2.8% more containerized goods next year, down from a previous forecast of 4.7%, The Journal of Commerce/PIERS said, blaming a "stubbornly slow" economic recovery.
- Italy Starts Strikes Against Monti's Austerity. Italy began a week of strikes by the three biggest labour unions against Prime Minister Mario Monti's 33-billion-euro austerity package, which the government may soften slightly to meet some of their demands. Port, highway, and haulage personnel stopped work for three hours and metal workers -- including those at carmaker Fiat -- put down their tools for eight hours. Printing press operators stopped for a full shift and most newspapers won't publish on Tuesday. Public transport strikes will be held on Dec 15-16. Bank employees will halt work for the afternoon of Dec 16, and the public administration will close down for a whole day on Dec 19. For the first time in six years of division, the three main union leaders shared a stage together when they spoke to striking workers in front of parliament. "We're not giving up on the idea that the austerity package must be changed," Susanna Camusso, chief of the largest labour group Cgil, told the crowd. "It hurts workers, pensions and the country as a whole," she said.
- Exclusive: Commerzbank in State Aid Talks. German lender Commerzbank (CBKG.DE) and the government have been in talks for several days over possible state aid, five people familiar with the matter told Reuters on Monday. The aim was to reach an agreement in principle by Christmas, coalition sources said on Monday. While Commerzbank, 25 percent-owned by Germany, wants to avoid state aid, it needs to find 5.3 billion euros ($7 billion) capital by mid-2012 to meet European Banking Authority capital rules. Since Germany's second-largest bank raised 5.3 billion euros from shareholders in June, writedowns on Greek sovereign debt and tougher capital rules have eroded its capital cushion. How Germany could help strengthen Commerzbank's balance sheet remains open, coalition and banking sources said.
- Copper Falls on Economic Growth, Demand Concerns.
- OECD Oct Indicator Signals Deeper Slowdown. All major economies are losing momentum, the Organisation for Economic Cooperation and Development said on Monday, with activity across the think tank's member countries at its weakest in two years. The Paris-based organisation's October composite leading indicator for its member states fell to its lowest level since November 2009, easing to 100.1 from 100.4 in September, barely staying above its long-term average of 100. "Composite leading indicators (CLIs) ... point to a slowdown in economic activity in all major economies, but with some variation in the strength of the slowdown across countries," the OECD said in statement. The Group of Seven's CLI fell to 100.2 from 100.5 while the reading for the euro zone dropped to 98.5 from 99.2, slipping further from its long-term average of 100. Among major emerging market economies, China's CLI slipped marginally to 100.2 from 100.3, India's fell to 93.1 from 93.9 and Brazil's to 94.2 from 94.7.
- S&P Says Eurozone May Need Another Shock. Ratings agency Standard & Poor's put more pressure on the euro zone on Monday, with its chief economist saying time was running out for the currency bloc to resolve its debt problems and that it might need another financial shock to get it moving.
- Wave of Insolvencies Looms for Shipping Industry. Fears are mounting that the eurozone financial crisis could spark a fresh wave of shipping insolvencies, after funding problems at many leading European banks accelerated falls in vessel values, triggered by the worst conditions in some shipping markets in 25 years.
- QE Might Not Work, BIS Tells Bank of England. The Bank for International Settlements (BIS), the world’s financial supervisor, has warned the Bank of England that printing more money to boost the economy may not succeed.
- Debt Crisis: Live.
- China's Vice Foreign Minister Fu Ying said it is 'important' for China that the euro area solves its crisis, and the nation is following closely the efforts led by Germany and France, according to an interview. "This is important for China, the EU is our biggest trade partner," she said. "Our exports to the EU dropping in October," she added.
- China Needs Long-Term Measures to Control Property Speculation, citing Zhang Liqun, a researcher at the State Council's development research center.
- Shanghai Luxury House Sales Lift Price. THE improved sales of luxury house pushed the average cost of new homes in Shanghai to a three-month high even as the overall local buying sentiment weakened again.
- China's Competitiveness On The Decline. CHINA'S industrial competitiveness showed signs of decline this year, with higher-tech industries suffering more than those at the lower end, the Chinese Academy of Social Sciences said yesterday. Whether China can rebound in 2012 depends on economic conditions in developed countries and the pressure on China's exchange rate, said Zhang Qizi, a researcher at the academy's Institute of Industrial Economics. Industrial competitiveness in the academy's report involves non-financial sectors dedicated to global trade. The global slump will put great pressure on exports and as protectionism against Chinese products is on the rise, global trade is unlikely to grow much, he said.