Today's Headlines

Bloomberg:

• Euro Falls to a 15-Month Low Versus Dollar on ECB Moves, Italy's Auction. The euro fell to a 15-month low against the dollar as Italian bond yields rose after the nation sold less than its maximum target at an auction, highlighting funding difficulties amid the region’s sovereign-debt crisis. The 17-nation currency dropped to a decade low versus the yen as concern increased that the European Central Bank will inject more cash into the financial system to avoid a credit crunch from the region’s debt crisis. The yen and dollar strengthened against most of their major counterparts as demand increased for safer assets. “The Italian debt auction was a little bit underwhelming,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “The fact that the 10-year yield didn’t come down and they sold a bit less than that maximum target amount, that spurred further euro selling.” The euro was little changed at $1.2945 at 1:38 p.m. in New York after falling to $1.2858, the weakest level since Sept. 14, 2010.
• ECB Has More Scope to Cut Rates as Prices Wane. The European Central Bank has more room to cut interest rates to a record low early next year after reports showed the sovereign debt crisis is damping inflation pressures. The rate of growth in M3 money supply, which the ECB uses as a gauge of future inflation, fell to 2 percent in November from 2.6 percent in October, the Frankfurt-based central bank said today. Growth in loans to households and companies across the 17-nation euro area also slowed, while inflation in Germany, the region’s largest economy, decelerated in December. The data reinforce the view “that underlying inflationary pressures are easing and that the ECB has ample scope to cut interest rates again in the early months of 2012,” said Howard Archer, chief European economist at IHS Global Insight in London. “Euro-zone inflation is poised to retreat markedly over the coming months.”
• Libor Gap Hints at Debt Crisis Money-Market Freeze: Euro Credit. The gap between the highest and the lowest rates that banks say they can borrow from each other in dollars is close to a 2 1/2 year high, a sign Europe's failure to end the debt crisis is straining the financial industry. The divergence from reported fixings by the 18 banks contributing to the three-month London interbank offered rate reached 28 basis points yesterday, within two basis points of the widest since May 2009. Libor for three-month loans climbed to .579 percent yesterday, the most since July 2009, even as central banks injected cash into the market.
• Sovereign, Corporate Bond Risk Rises, 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 climbed three basis points to 355 at 11:30 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 15 basis points to 770, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 3.5 basis points to 177 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased nine basis points to 283 and the subordinated index was 12 higher at 519.
• Most Germans believe the sovereign-debt crisis in the euro area isn't over, AWD Holding AG said, citing a survey the financial-services broker commissioned from polling company Forsa. Some 90% of Germans expect other euro-area countries will require a bailout in the "near future," according to the survey of 1,000 people for Hanover, Germany-based AWD.
• U.S. Lawmakers Backtrack on Pledges by Expanding Federal role in Mortgages. Washington lawmakers, who began 2011 with sweeping plans to shrink the U.S. government’s role in mortgage finance, are heading into 2012 after enacting policies that expand it. An 11th-hour payroll tax cut extension signed into law last week will for the first time divert funds directly from Fannie Mae (FNMA) and Freddie Mac, the two mortgage-finance companies under U.S. conservatorship, to pay for general government expenses. That move came after two others that also could increase government involvement: Lawmakers allowed a tax break on private mortgage insurance to expire and raised loan limits for mortgages insured by the Federal Housing Administration. Advocates of private mortgage finance say they are concerned that using fees from Fannie Mae and Freddie Mac is setting a precedent that will keep the government in the mortgage business for a decade or more.
• Bond Ratings Show Credit Quality May Have Peaked: Credit Markets. Credit-ratings firms are growing less optimistic about U.S. corporate borrowers, downgrading more companies as they forecast defaults will rise. The ratio of upgrades to downgrades fell to 1.08 this year from 1.4 in 2010, according to data from Moody's Capital Markets Group.
• China Industrial Corn Consumption May Slow. Industrial use of corn in China, the second-biggest consumer, may grow at the slowest pace in at least five years as the economy cools, curbing the need for imports, said state-affiliated researcher Cngrain.com.
• Home Sales in U.S. Beat Forecasts. The number of Americans signing contracts to buy previously owned homes rose more than forecast in November as falling prices and low borrowing costs boosted demand. The index of pending home sales (USPHTMOM) increased 7.3 percent to the highest level since April 2010 after climbing 10.4 percent the prior month, figures from the National Association of Realtors showed today in Washington. Economists forecast a 1.5 percent gain, according to the median estimate in a Bloomberg News survey.
• U.S. Business Activity Grows Faster Than Forecast Despite Europe Slowdown. The Institute for Supply Management-Chicago Inc. said today its business barometer (CHPMINDX) was little changed at 62.5 from a seven- month high of 62.6 in November.
• China Stops Encouraging Foreign Investment in Auto-Industry Manufacturing. China will stop encouraging foreign investment in car manufacturing to allow for “healthy development” of a market that saw sales growth plummet to a tenth of last year’s pace. The change ends seven years of foreign-investor benefits including reduced tariffs on imported plant equipment, said Jenny Gu, a senior market analyst at LMC Automotive in Shanghai. Foreign investment in more fuel-efficient vehicles will still be encouraged, the National Development and Reform Commission and the Ministry of Commerce said in a statement.

Wall Street Journal:

• Italian Bond Risk Bubbles Away. While 10-year yields below 7% are more palatable than above, they are still two percentage points above where they started the year. That is despite ECB rate cuts and a plunge in German yields of more than a percentage point. Italy has no choice but to push on with its gargantuan funding program. It can sustain high yields for some time thanks to its long average debt maturity of seven years which means the higher rates take time to feed through. But 2012 still carries a serious risk that investors again feel the heat, and leap for the exit.
• Canadian Household Debt Levels Merit Monitoring: CMHC. Canadians' record level of household debt is a "serious issue" that merits closer monitoring by authorities in the years ahead, Canada Mortgage and Housing Corp. (CMH.YY) said. In a year-end publication released Thursday, CMHC - the government-owned provider of mortgage insurance in Canada - said mortgage debt accounts for 68% of total household debt, by far the largest contributor.
• Egyptian Forces Storm NGOs. Egyptian soldiers and police stormed nongovernmental organization offices throughout the country Thursday, banning employees inside from leaving while they interrogated them and searched through computer files, an activist and security official said. Egyptian state television reported at least 18 offices were targeted in the raid.
• Turkish Air Strike Kills 35 Kurds. Thirty-five people were killed on Turkey's border with northern Iraq late Wednesday, in what Kurdish politicians say was a Turkish air strike against civilian Kurds, mistaken for members of the outlawed Kurdistan Workers Party, or PKK. Deputy Chairman of Turkey's governing Justice and Development Party, or AK Party, Huseyin Celik, confirmed late Thursday that the 35 dead were smugglers, all under 30 years of age, but stopped short of calling them "civilians". If the dead are confirmed to be civilians, Mr. Celik said, the incident was "an operational accident."
• Goldman Sachs(GS) + Warren Buffett = Not Many Jobs.
  

MarketWatch:

• Gold ETF(GLD) Is Almost A Buy.

Business Insider:

• Princeton Students Disrupt A JPMorgan(JPM) Recruiting Session With A Devastating Chant.
• A Rare Look Inside The Fukushima Evacuation Zone. (pics)
• These 10 Dates Are Crucial For The Future Of Europe.
• The White House Just Agreed To Sell Saudi Arabia The Largest US Overseas Arms Package Ever.
• MF Global Client Attorney On Closing His JPMorgan(JPM) Account: 'Don't Worry Jamie, Mine Won't Be The Only One.'
• China Is Steadily Buying Up The US Auto Industry.
• US Gasoline Sales Show No Sign Of Economic Recovery. (graph)
  

Zero Hedge:

• Will "Tax the Rich" Solve Our Deficit/Spending Crisis? If we look at tax revenues and income in a practical way, we find "tax the rich" will not close the widening $1.5 trillion gap between Federal revenues and spending.
• New Fiscal Compact, Or More Of The Same For Europe?
  

Seeking Alpha:

• Healthcare Stocks Hedge Fund Managers Are Crazy About.

Wall Street All-Stars:

• Congress Sics The IRS On The AARP.
  

Rasmussen Reports:

• Election 2012: Romney 45%, Obama 39%.

Financial Times:

• Land Prices Surge in US Shale Oilfields. The cost of drilling rights in US shale oilfields surged during 2011 as large US energy groups and state-owned oil companies embarked on a “resource grab”, according to data provided to the Financial Times. Oil extracted in the US by “fracking” – drilling through dense rock, then fracturing it with high-pressure fluids – has grown fivefold since 2006 to 500,000 barrels a day.
  

Telegraph:

• Eurozone Credit Crunch Fears on M3 Money Contraction. Europe is at mounting risk of a fresh credit crunch after the eurozone money supply contracted for a second month in November and the volume of private loans began to shrink. Data released by the European Central Bank shows that M3 money figures tracked by experts as a leading indicator for the economy have turned negative since August, signalling almost certain recession over coming months for the region as a whole. "The message of these numbers is that the eurozone faces a bleak 2012, with inflation falling rapidly," said Tim Congdon from International Monetary Research. "There is a desperate need to restore growth to the banking system and boost the quantity of money."
• Italian Bond Auction Highlights Eurozone Nation's Woes. Signs that Italy faces a tough start to 2012 were evident on Thursday as the country's final bond sale of the year saw nervous investors demand close to 7pc to hold the ailing nation's 10-year debt.

Bild Zeitung:

• The euro currency area may break up in 2012, as steps taken to preserve it remain inadequate, Beatrice Weder di Mauro, a member of German Chancellor Angela Merkel's council of economic advisers, said in an interview. The German economy may shrink as much as .5% next year if the crisis holds back growth in global trade, Weder di Mauro said.

Cinco Dias:

• Spanish banks are preparing to sell so-called contingent convertible bonds as a means to cover extra provisioning costs from a cleanup of real estate assets planned by the government. The government's latest idea is to apply a new discount of about 20% on real estate assets on their books.

DigiTimes:

• Apple(AAPL) to Unveil Two Versions of Next-Generation iPad in January, Sources Claim.