Today's Headlines

Bloomberg:

• Euro Weakens to 11-Month Low Versus Dollar. The euro fell to an 11-month low against the dollar on concern European leaders won’t agree on ways to expand the region’s rescue capacities as debt-strapped nations struggle to fund their deficits. The 17-nation currency dropped against most of its major counterparts after Chancellor Angela Merkel told German coalition lawmakers that the 500 billion euro ($654 billion) cap on Europe’s planned permanent bailout fund will stay in place, two officials with knowledge of the discussion said. The dollar declined against the yen before the Federal Reserve holds a meeting today amid speculation officials will maintain their pledge to keep borrowing costs at almost zero. “You continue to see strains within the euro group,” said John McCarthy, managing director of currency trading at ING Groep NV (INGA) in New York. “A division means a lower euro. The euro was already a little weaker and once we got convincingly through $1.3170, it dropped more.” The euro dropped 0.7 percent to $1.3094 at 1:32 p.m. in New York, touching $1.3057, the lowest level since Jan. 12.
• The 1-Year EUR/USD Cross-Currency Basis Swap is falling -7.1 bps to -96.0 bps, the lowest since Nov. 29 on a closing basis, amid lingering concerns about interbank funding. "The ECB allocated $51B last week and it doesn't seem like anything has changed," says TD funding strategist Mike Lin. "I'm concerned about the one-week auction tomorrow. I see a pick-up as something's going on."
• RBS Says Buy German CDS in 'Talismanic' Trade as Crisis Deepens. Royal Bank of Scotland Group Plc advised investors to buy insurance on German government debt, betting that Europe's financial woes will deepen in 2012. Investors should bet the cost to protect German bonds for five years will increase to 200 basis points from 98 basis points, the strategists wrote.
• Greece's Budget Deficit Widens to $27.1 Billion in First 11 Months of Year. Greece’s state budget deficit widened 5 percent in the first 11 months of the year, better than a revised target for the period. The gap, which excludes outlays by state-owned institutions and companies, rose to 20.5 billion euros ($26.5 billion) from 19.5 billion euros a year earlier, according to preliminary figures received by e-mail from the Finance Ministry. The figure came in below a target of 21 billion euros set in the 2012 budget, it said. Final figures are due later this month. Ordinary budget revenue declined 3.1 percent in the first 11 months as Greece’s recession weighed on tax collection. Spending rose 3 percent, or by 3.7 billion euros, boosted by a 20 percent increase in debt-servicing costs that added 2.6 billion euros to the bill, the Athens-based ministry said. Efforts to trim the shortfall have deepened the recession, now in its fourth year. The Organization for Economic Cooperation and Development expects the economy to contract 6.1 percent this year, more than the 5.5 percent forecast in the government’s budget.
• Retail Sales in U.S. Climbed Less Than Forecast. Retail sales rose in November at the slowest pace in five months, indicating American consumers were trying to live within their means heading into the holiday shopping season as wages dropped. The 0.2 percent gain in purchases fell short of the 0.6 percent median forecast of economists surveyed by Bloomberg News and followed increases in the prior two months that were larger than previously estimated, according to data from the Commerce Department today in Washington. Other reports showed inventories climbed in October and job openings fell.
• Treasuries Advance After $21 Billion 10-Year Auction Draws Strong Demand. Treasuries gained for a second day after the U.S. sale of $21 billion in 10-year notes attracted higher-than-average demand, bolstered by concern Europe’s sovereign-debt crisis is far from a resolution. The securities drew a yield of 2.020 percent, compared with a forecast of 2.050 percent in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, was 3.53, the strongest level since April 2010.
• Oil Surges on Speculation of Supply Disruption, U.S. Stimulus. Oil surged above $100 a barrel on speculation supplies will be disrupted after a report that Iran will hold drills to close the Strait of Hormuz and that the Federal Reserve may announce additional stimulus measures. Crude advanced as much as 3.6 percent after the state-run Fars news agency reported the military maneuvers will be “soon,” citing Parvis Sorouri, a member of the parliament’s national security and foreign policy committee. “I saw the Iran story yesterday but those headlines seem to have got traction this morning. There are also rumors for further action by the Fed, but where they come from I don’t know. In this electronic world things can jump quickly and trigger stops.” Crude for January delivery gained $1.91, or 2 percent, to $99.68 a barrel at 11:07 a.m. on the New York Mercantile Exchange. Crude pared gains after an Iranian Foreign Ministry spokesman said the Strait of Hormuz isn’t closed. The comments on the strait were made by people who don’t have an official title, said Ramin Mehmanparast, the spokesman.
• Oil-Tanker Glut Seen Expanding for Fourth Consecutive Week. A surplus of crude-oil tankers competing to collect crude from ports in the Persian Gulf expanded for a fourth consecutive week, according to Bloomberg. There are 20% more VLCCs for hire over the next 30 days than there are probable cargoes, according to the median survey of four brokers and two owners. The excess was 19% a week ago and 13% on Nov. 22.
• Record Aluminum Glut as Traders Seen Betting on Price Slump. Aluminum stockpiles rose to a record and orders to withdraw metal from warehouses fell to a 15-month low amid speculation traders are adding to bets the commodity will extend its biggest slump since the global recession. Inventories monitored by the LME rose 2% to 4.81 million metric tons today, enough to supply China, the biggest consumer for about 3 months. Canceled warrants fell 2.6% to 152,350 tons, the lowest since September 2010, bourse data show. Open interest, or contracts outstanding, rose 54% since mid-July, at a time when prices were falling, suggesting traders were adding to short positions, VTB Capital said in a report.
• Fitch Sees China Home Slowdown as Officials Hold Planning Session: Economy. Fitch Ratings said China faces slower growth in home sales and construction next year and UBS AG predicted stagnant exports as top officials meet in Beijing for an annual conference to map out economic policies. Lending to developers will remain tightly controlled as the government prolongs a campaign to stabilize property prices, Fitch said in a report today. The slowdown in trade may add pressure for monetary and fiscal easing, UBS said separately.
• China-Based Hacking of 760 Firms Reflects Global Cyber War. Google Inc. (GOOG) and Intel Corp. (INTC) were logical targets for China-based hackers, given the solid-gold intellectual property data stored in their computers. An attack by cyber spies on iBahn, a provider of Internet services to hotels, takes some explaining. iBahn provides broadband business and entertainment access to guests of Marriott International Inc. and other hotel chains, including multinational companies that hold meetings on site. Breaking into iBahn’s networks, according to a senior U.S. intelligence official familiar with the matter, may have let hackers see millions of confidential e-mails, even encrypted ones, as executives from Dubai to New York reported back on everything from new product development to merger negotiations. More worrisome, hackers might have used iBahn’s system as a launching pad into corporate networks that are connected to it, using traveling employees to create a backdoor to company secrets, said Nick Percoco, head of Trustwave Corp.’s SpiderLabs, a security firm.

Wall Street Journal:

• Banks in Push for Pact. Five large lenders could be forced to make concessions worth roughly $19 billion as bank representatives and government officials push to put the finishing touches on a settlement of most state and federal investigations of alleged foreclosure improprieties. Housing and Urban Development Secretary Shaun Donovan and state officials hope to reach a deal as soon as this week, though any agreement could be delayed by unresolved issues including the naming of a monitor to oversee the agreement.
• Greece, Private Creditors At Odds Over 50% Haircut: Sources. The Greek government is at odds with its private creditors over a 50% haircut in the value of bonds they own, two people with direct knowledge of the negotiations said Tuesday.
• OIL DATA: IEA Cuts 2011, '12 Demand By 0.2M B/D On Economic Woes. Global oil demand is set to fall in 2012 on the worsening global economic backdrop and persistently elevated oil prices, the International Energy Agency said Tuesday in its monthly oil market report. The Paris-based energy watchdog also trimmed its oil demand growth forecasts for the next five years in its medium-term outlook led by assumptions of slower economic growth in North America and Europe. A lower baseline figure for 2011 due to economic turmoil in the euro zone has also impacted the forecasts for this year and next, the IEA said.
  

Dow Jones:

• Merkel Rejects Raising ESM Limit, Lawmaker Says. German Chancellor Angela Merkel Tuesday at a party meeting reiterated her rejection to raise the EUR500 billion lending limit for the planned future European Stability Mechanism, or ESM, a government coalition official said. The euro after Merkel's comment continued its slide, falling to $1.3061 from $ 1.3186 before her comment. Countering fears that Germany's overall contribution to euro zone rescues may rise further, Merkel during a meeting with lawmakers of the Christian Democrats stressed that a planned increase of funds to the International Monetary Fund by Germany's Bundesbank was independent of government commitments to the ESM, the coalition official said.
  

CNBC.com:

• Europe May Be Preview Of What Is Happening In The US. (video)

Business Insider:

• FED HOLDS RATES STEADY, SAYS ECONOMY 'EXPANDING MODERATELY'.
• This Abandoned Theme Park On The Edge Of Shanghai Is Only The First Sign Of A Major Crash.
  

Zero Hedge:

• S&P Warns of Increased Corporate Bond Downgrade Risk Following Sovereign Action.
• Who Gave Permission To A Bankrupt MF Global To Sell Italian Bonds To JPM(JPM) At A 5% Discount To Market Value?
• Greek Bank Run Hits Record: Unprecedented €6.8 Billion In Deposits Pulled From Greek Banks In October. (graph)
  

The Detroit News:

• Muslims Consider Lowe's(LOW) Boycott. Local Muslim and Arab-American leaders from across the country were considering a national boycott against Lowe's after the home improvement retailer pulled its ads from the cable reality show "All-American Muslim." The move comes as Lowe's defended its position. Dawud Walid, the executive director of the Council on American-Islamic Relations Michigan, said Monday the issue has "invoked outrage in our community like I haven't seen in a while."

Hedgeweek:

• Hedge Fund Redemptions More Than Triple in October. Hedge fund redemptions in October totalled USD9 billion, more than triple September’s USD2.59 billion outflow, according to figures released by BarclayHedge and TrimTabs Investment Research. Industry assets decreased to USD1.66 trillion in October from USD1.73 trillion in September, the third straight monthly decline.

CNN:

• Best Buy's(BBY) Results Serve as a Holiday Warning. Electronics retailer Best Buy reported a large drop in quarterly earnings Tuesday, as weak sales in the months leading up to Thanksgiving cast a shadow on the all-important holiday season. Shares of Best Buy (BBY, Fortune 500) tumbled $3.23, or 11.6%, to $24.83 in early trading. Shares are now down more than 27% since the start of the year. Investors fretted the company's future even though Best Buy confirmed its full fiscal-year earnings guidance.

LA Times:

• NTSB Recommends Ban On All Driver Cell Phone Use. States should ban all driver use of cell phones and other portable electronic devices, except in emergencies, the National Transportation Board said Tuesday. The recommendation, unanimously agreed to by the five-member board, applies to both hands-free and hand-held phones and significantly exceeds any existing state laws restricting texting and cellphone use behind the wheel.

Reuters:

• Exclusive: Steve Cohen Calls Insider Trading Rules "Vague".
• Italian, Spanish Yields Rise as Ratings Threat Looms. Italian bond yields rose on Tuesday as the risk of sovereign rating downgrades across the euro zone kept markets on edge after steps towards fiscal integration failed to ease the debt crisis in the short term.Longer-dated Spanish bonds also rose as riskier assets suffered due to the risk that rating agency Standard and Poor's could act on its warning over the region's debt ratings. Measures to strengthen budget discipline agreed at a European Union summit last week were not seen as sufficient to ease immediate market worries over sovereign debt -- something only a huge financial backstop provided by the European Central Bank was seen likely to achieve. "Clearly investors have reassessed the EU agreement and the response of the sovereign ratings is at the forefront of investors' minds," said Nick Stamenkovic, strategist at RIA Capital Markets in Edinburgh. "Against that backdrop investors continue to shift away from the likes of Italy and Spain."

AP:

• Corzine Says He Never Authorized "Misuse" of Money. Jon Corzine has told a Senate panel that he never told anyone to "misuse" customer money that vanished when MF Global collapsed this fall. An estimated $1.2 billion in client funds are missing. Senators are demanding Corzine and two other executives at the securities firm explain who authorized the transfer of money in the days before the firm collapsed in the eighth-largest bankruptcy in U.S. history. "I never gave any instruction to anyone at MF Global to misuse customer funds," Corzine testified at a hearing of the Senate Agriculture Committee on Tuesday. Corzine, a former Democratic New Jersey senator and governor, resigned as CEO of the securities firm last month.

Financial Times:

• European Banks 'need tons of money', says GMO's Grantham. In a note released on Tuesday, GMO, the global asset management firm headed by Jeremy Grantham, writes that ”European banks need tons of money” to correct capital shortfalls. This much, we know.
• Meet The Credit Derivative "end-users".
  

Telegraph:

• Debt Crisis: Live.
  

Il Sole 24 Ore:

• Italy's government may delay until 2013 measures in its emergency budget plan to open up some closed professions and liberalize some businesses.

Xinhua:

• China Reasonable Home Price Fall Won't Cause Crisis. China property investment growth will slow in 2012 with falling home prices, citing Wang Yiming, director of the investment research institute under the planning body.
• China Needs 'Tight Controls' on Homes, Researcher Says. Even a "slight" change in curbs on property prices may cause a "dramatic price rebound", citing Wang Yulin, vice director of the housing ministry's policy research center. The government has set a clear tone on controlling home prices. Prices may drop 15-20% in 2012, citing Zhao Xiao, a professor at the University of Science and Technology in Beijing.