Today's Headlines

Bloomberg:

• EU's Treaty Plans Are Far From Done Deal, Handelsblatt Says. German- and French-led plans to amend European Union rules to help combat the debt crisis face misgivings from the European Commission and potentially from some other member states, the Handelsblatt newspaper said. German Chancellor Angela Merkel favors one accord to accommodate both the setting-up of a permanent bailout fund and to usher in new stringent budget constraints on euro-region countries, while the commission wants two separate treaties, the newspaper reported, citing EU President Herman van Rompuy. At the same time, it is not certain that all of the 26 states that provisionally agreed to make treaty changes at last week’s Brussels summit will finally ratify those changes, the newspaper said, without citing a source.
• Italy Sells Debt at Record Yields as Monti Rushes Budget Plan. Italy had to pay the most in 14 years to sell five-year bonds as Parliament rushes to pass a 30 billion-euro ($39 billion) budget plan that Prime Minister Mario Monti says will bring down record borrowing costs. The Rome-based Treasury sold 3 billion euros of the bonds, the maximum for the sale, to yield 6.47 percent, the most since May 1997 and up from 6.29 percent at the last auction on Nov. 14. Demand was 1.42 times the amount on offer, compared with 1.47 times last month. Monti’s Cabinet approved a sweeping budget plan on Dec. 4 aimed at raising revenue and boosting Italy’s anemic growth to persuade investors Italy can tame the region’s second-biggest debt and avoid a bailout. Parliamentary committees signed off on the amended plan last night, paving the way for a vote this week in the lower house. Monti has warned that failure to approve it could lead to Italy’s “collapse” and threaten the survival of the single currency. “Italy’s predicament is dire: it has become a proxy for euro-zone risk at a time when its funding requirements are about to balloon,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mail. “Every bond auction in January and February is going to be scrutinized for signs that Italy is having trouble maintaining market access.”
• Sovereign Bond Risk Nears Record as Cracks Emerge in Euro Pact. The cost of insuring against default on European sovereign bonds approached a record on concern cracks are emerging in last week’s agreement to resolve the region’s debt crisis. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed three basis points to 382 at 10 a.m. in London, near the record 385 set Nov. 25. An increase signals deterioration in perceptions of credit quality. German- and French-led plans to amend European Union rules and create closer fiscal union face misgivings from the European Commission and potentially from some the 26 member states that agreed to the changes, the Handelsblatt newspaper said. Italy’s borrowing costs rose at a bond sale today. “The euro leadership thought they could get away with telling markets what markets want to believe,” said Bill Blain, a strategist at broker Newedge Group in London. “Unfortunately, markets want to see tangible things happen.” Swaps on Italy rose nine basis points to 578, according to CMA. The government sold five-year bonds at an average yield of 6.47 percent, up from 6.29 percent on Nov. 14, the Bank of Italy said. Credit-default swaps on Belgium increased six basis points to 333, France climbed 4.5 to 238, Germany was up two at 239 and Spain was three higher at 447, CMA prices show. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers jumped eight basis points to 328 and the subordinated index was 14 higher at 581.5, according to JPMorgan Chase & Co. Both are nearing records set Nov. 25. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 15 basis points to 802.5, JPMorgan prices show. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose three basis points to 187.5 basis points.
• Maersk Line, the container shipping unit of A.P. Moeller-Maersk A/S, doesn't expect the worldwide crisis in container business to ease in 2012, Capital magazine reported, citing an interview with the unit head Eivind Kolding. Kolding expects the situation to deteriorate further before prices recover, he said.
• Merkel FDP Coalition Official Resigns as Euro Bailout Exacerbates Strains. The general-secretary of Chancellor Angela Merkel’s Free Democratic coalition partner stepped down today, exposing party divisions that threaten to distract the German leader as she focuses on euro-area rescue efforts. Christian Lindner, 32, resigned two years after taking the job as party members squabble over an internal vote seeking to reject the permanent bailout fund, the European Stability Mechanism. Lindner is an ally of Economy Minister and Vice Chancellor Philipp Roesler, who replaced Foreign Minister Guido Westerwelle as FDP party chief in April amid slumping support. “I don’t think it could get worse for the party,” Oskar Niedermayer, a professor of political sociology at Berlin’s Free University, said in an interview on N-TV. Merkel’s pro-business coalition partner has been skeptical about financing European bailout funds to aid indebted governments such as Greece, Ireland and Portugal.
• The 1-Year EUR/USD Cross-Currency basis swap is falling -9.2 bps to -106 bps, the lowest since Dec. 2, 2008 on a closing basis, after increased take-up in the ECB's 7-day tender suggested further funding needs in Europe. "It's a combination of everything," says Stone & McCarthy analyst Andrew Brodsky. "The central bank liquidity swaps were a step in the right direction, but banks are fearful of sovereign exposure so they're not willing to lend to each other".
• China Affirms Property Curbs Amid 'Grim' Outlook. China’s leaders affirmed they will stick next year with a campaign to bring down property prices even as a “very grim” global outlook threatens growth in the second-largest economy. The nation will target “basically stable” consumer prices and “unswervingly” implement real-estate curbs, according to a statement after an annual economic planning meeting in Beijing.
• China Money-Supply Growth at Weakest Pace in Decade Shows Slowdown Risks. China’s lending slowed in November and money supply grew the least in a decade, highlighting the risk of a deeper slowdown in the world’s second-biggest economy. New local-currency lending was 562.2 billion yuan ($88 billion), the People’s Bank of China said on its website today. That compares with 587 billion yuan in October. M2, a measure of money supply, rose 12.7 percent, the least since May 2001.
• China to Impose Duties on Large-Engine Cars Imported From U.S. China announced plans to impose anti-dumping duties on some vehicles imported from the U.S. after failing to block a U.S. tariff on Chinese tires. Punitive duties will be as high as 12.9 percent for autos from General Motors Co. (GM) and 8.8 percent for Chrysler Group LLC, China’s commerce ministry said today on its website. The U.S. units of Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) will face duties of 2 percent and 2.7 percent respectively, it said. “The move shows that China is always capable of intervening politically in its markets,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “The automobile industry is very dependent on China for growth, and there’s doubts about the pace of future expansion.” Auto sales in China are rising at the slowest pace in 13 years, putting pressure on local Chinese producers to consolidate as GM and other foreign carmakers post gains.
• Gold Tumbles Most in 11 Weeks as Fed Shuns Additional Stimulus. Gold tumbled the most in 11 weeks as the Federal Reserve refrained from taking more stimulus measures and as a stronger dollar curbed demand for alternative assets. Silver plunged more than 7 percent. The dollar rose to an 11-month high against the euro as Italian borrowing costs increased at a debt auction. The Standard & Poor’s GSCI index of 24 commodities dropped as much as 2.7 percent. The Federal Reserve yesterday said the U.S. economy is maintaining its expansion and refrained from taking new action to bolster the economy. “There is turbulence across the commodity market because of the strength in dollar,” Jochen Hitzfeld, an analyst at UniCredit SpA in Munich, said in a telephone interview. “No further stimulus from the Fed is bearish for the market.” Gold futures for February delivery dropped 3.2 percent to $1,609.50 an ounce at 10:31 a.m. on the Comex in New York, heading for the biggest slide since Sept. 23. Earlier, prices slumped to $1,602.40, the lowest since Oct. 5.
• Crude Oil Declines From One-Week High As OPEC Boosts Output Ceiling. Oil fell from a one-week high in New York as the Organization of Petroleum Exporting Countries agreed to raise its production ceiling, moving the group’s supply target nearer to current output levels. Futures declined as much as 1.8 percent, after surging 2.4 percent yesterday in the biggest gain in almost four weeks. OPEC agreed to a production limit of 30 million barrels a day, Venezuela’s Energy Minister Rafael Ramirez said at the group’s meeting in Vienna today. U.S. crude supplies rose last week and gasoline consumption decreased, the industry-funded American Petroleum Institute said yesterday. Crude extended its declines as equities fell and the euro reached its weakest level against the dollar since January. “The production cap seems quite neutral, since demand is likely to be held back by weaker growth in the first half of next year,” said Filip Petersson, commodity strategist at SEB AB in Stockholm. “Bullishness from yesterday is dissipating.” Gasoline inventories slid 12,000 barrels last week, the API report showed. The Bloomberg survey indicated supplies may have increased 1.2 million barrels. Implied demand for the fuel fell 2.1 percent to the lowest since August, the API said.
• Copper Falls Most in Six Weeks on Mounting Europe Debt Concern. Copper fell the most in six weeks on mounting concern that Europe’s debt crisis will erode demand for industrial metals. Aluminum slumped to the lowest since July 2010. German Chancellor Angela Merkel said there is no “simple and fast” solution to the region’s crisis. The Federal Reserve yesterday refrained from taking new measures to spur growth. Before today, copper dropped 23 percent this year, as Europe’s debt woes escalated and demand weakened in China and the U.S., the world’s largest metals buyers.
• Loophole in Global Warming Accord Augurs Clash. The deal struck by United Nations envoys this week to fight climate change gives the biggest polluters three options for a wider agreement by 2015, setting the stage for renewed discord between rich and poor countries. Negotiators from more than 190 nations agreed Dec. 11 to spend as long as four years drafting a “protocol, legal instrument or an agreed outcome with legal force” to take effect by 2020. While the European Union says that calls for a treaty to limit fossil-fuel emissions in all countries, two of the biggest polluters, China and India, signaled they expect to be assigned looser limits in the final accord. “The phrase ‘agreed outcome with legal force’ is new,” Lou Leonard, a lawyer and director of WWF’s climate change program in Washington, said in an interview. “They just made it up. We don’t know what it means.” With a dose of ambiguity, envoys now embark on years of more talks on how to get all nations to curb emissions, aiming to eventually regulate multinational polluters from U.S. Steel Corp. (X) to China Petroleum & Chemical Corp. (386) Negotiations failed in Copenhagen in 2009 after the U.S., China, India and the EU got bogged down in divisions over a new treaty’s legal form.

Wall Street Journal:

• First Solar's(FSLR) Chief Technologist Steps Down. First Solar Inc. Chief Technologist Markus Beck and other members of his Santa Clara, Calif.-based team are leaving the solar panel company as it tightens its focus on its core solar technology amid a decline in the market, according to a person familiar with the situation. Mr. Beck joined First Solar in 2008 after serving as chief technologist in the early period of development at Solyndra Inc., a start-up that has recently been embroiled in a political firestorm after burning through a large federal loan and then filing for bankruptcy.
  
• Greece's 2011 Budget Deficit Seen At Around 10% of GDP: Senior Govt. Official. The Greek government's budget deficit is expected to be equivalent to around 10% of gross domestic product this year, above an already revised target of around 9% of GDP, a senior government official said Wednesday. He added that the economy could shrink by more than 6% this year, against a government estimate of 5.5%.
• UK FSA Will Meet Banks on Euro-Zone Breakup Planning. The Financial Services Authority will meet banks over contingency planning.
• Sandler Chops Its Estimates for Goldman(GS), Morgan Stanley(MS). Analysts keep taking the ax to their estimates for Wall Street. Sandler O’Neill became the latest. The firm chopped its fourth-quarter estimates for Goldman Sachs and Morgan Stanley today to reflect “persistently subdued activity levels.”
  

MarketWatch:

• Schwab, E-Trade Stocks Drop as Trading Slows. Discount brokerages Charles Schwab Corp. SCHW -4.25% and E*Trade Financial Corp. ETFC -5.65% experienced steep monthly declines in trading activity as market volatility remained high and asset values have stayed under pressure.

CNBC.com:

• CEOs Worry About Inflation: Fewer Will Add Jobs: Survey. U.S. chief executives' view of the economy was little changed in the fourth quarter, though they are growing concerned about the risk of inflation in raw material prices, according to a survey released on Wednesday. Of the Business Roundtable CEOs polled, 35 percent said they expected to add jobs in the U.S. over the next six months, down from 36 percent who expected that in October.
• Consumers Plan to Spend Less This Holiday Season: Fratto. We think today’s (Tuesday's) tepid retail sales report confirms what we’ve suspected from our own survey data: as in 2010, Americans took advantage of Black Weekend sales incentives, but aren’t likely to carry through their purchasing pace through the holidays. The latest HPS/CivicScience survey of American consumers shows that while 22 percent say they expect to spend more, 36 percent expect to spend less — with nearly 20 percent saying they expect to spend “a lot less”.

Business Insider:

• The CBO Shows Exactly Why The Tobin Tax Is A Terrible Idea.
• 25 Unforgettable Pictures From The Past Year.
• This Is The Jim Chanos Presentation That Nailed The Collapse Of First Solar(FSLR).
• The Story of France, And Why Everyone Thinks It's Going to Lose Its AAA Rating.
• The Ultimate Fear Is That Europe Is Turning Itself Into AIG Circa 2008.
• The Government Could Shut Down As Soon As Friday, And It May Be Demorats' Fault This Time.
  

Zero Hedge:

• Abysmal Liquidity and Other Things to Watch.
• Kyle Bass On Rehypothecation and Other Keynesian Endgame Scenarios.
• Greek Bankruptcy Imminent?
• Euro Rebounds as S&P Leaks It Has Not Leaded An Imminent French Downgrade.
• RIP Fed Dollar Swap Intervention: Central Bank Liquidity Injection Half Life Two Weeks. (graphs)
  

Real Clear Politics:

• Obama: "Where Congress Is Not Willing To Act, We're Going To Go Ahead And Do It Ourselves". (video)

Reuters:

• Joy Global(JOYG) Warns of Slowing Sales Growth in 2012. Joy Global Inc said a sluggish economy is preventing its mining customers from embarking on new projects, and warned of slowing demand and sales growth in 2012. Shares of the mining equipment maker, which also reported a lower-than-expected fourth-quarter profit, fell as much as 13 percent to $73.67 on Wednesday on the New York Stock Exchange. "The industry will be cautious and measured," Chief Executive Officer Michael Sutherlin said on a conference call with analysts. "Existing projects will proceed... However, they will probably be slowing the projects entering the pipeline until the macros provide a clearer positive direction."
• India Economic Gloom Deepens as Rupee Fuels Inflation. India's economic gloom deepened on Wednesday as figures showed a record low rupee is adding to the central bank's inflation headache and an adviser to the prime minister said there was little that could be done to check the currency's slump. An 18 percent slide in the value of the rupee since July is adding to a growing worry of economic crisis in the country as stubbornly high inflation ties the hands of the central bank from easing policy to try to turn a grim economic outlook. A worsening fiscal picture means the government's financial firepower is also limited.
• Agrium(AGU) to Spend $1.5 Billion to Raise Potash Capacity. Agrium Inc plans to spend about $1.5 billion to increase its potash production capacity by 50 percent, as it looks to gain from continued strength in crop prices.
• AAA Loss Would Not Be A Disaster - French Minister. France's foreign minister said in an interview published on Wednesday that decisions by rating agencies were "sometimes subjective and political", and that any a loss of France's top-notch AAA rating would be regrettable but not disastrous.

Telegraph:

• Christmas Market Attacks: Belgian Gunman Nordine Amrani Had 'Grudge Against Society'. It emerged early on Wednesday morning that Amrani, 33, killed a 45-year old woman before carrying out his grenade and assault rifle attack that killed three people in Liege, including a 17-month old baby boy. The Belgian, of Moroccan origin, was on parole and had been summoned to police, where he feared being arrested and being returned to prison because his car number plate had been seen at the scene of an "immoral act". With previous convictions and jail terms for possession of arms, he would have known that the police would have raided his properties where he had a new stash of heavy weapons, including grenades and assault rifles.
• China Police Blockade Village After Protests. Police surrounded a village in southern China, cutting off supplies of food and water after protests forced local Communist Party officials to flee. For the first time on record, the Chinese Communist party has lost all control, with the population of 20,000 in this southern fishing village now in open revolt. The last of Wukan’s dozen party officials fled on Monday after thousands of people blocked armed police from retaking the village, standing firm against tear gas and water cannons. Since then, the police have retreated to a roadblock, some three miles away, in order to prevent food and water from entering, and villagers from leaving. Wukan’s fishing fleet, its main source of income, has also been stopped from leaving harbour. The plan appears to be to lay siege to Wukan and choke a rebellion which began three months ago when an angry mob, incensed at having the village’s land sold off, rampaged through the streets and overturned cars. Although China suffers an estimated 180,000 “mass incidents” a year, it is unheard of for the Party to sound a retreat.
• Debt Crisis: Live.
  

Ansa:

• The IMF will send a team of inspectors to Rome next week to begin its review of Italy's efforts to balance its budget and reduce debt, citing IMF officials in Washington.

La Tribune:

• Greece lacks the capacity to put in place measures to fix the nation's problems, particularly tax collection, said Horst Reichenbach, head of the European Union task force helping advise the country.