Today's Headlines

Bloomberg:

• Spanish Banks Bleeding Cash Cloud Bailout Debate: Euro Credit. Spanish banks, already hooked on cheap European Central Bank loans, are hemorrhaging deposits as the government debates whether to seek a bailout. Households and companies drained 26 billion euros ($34 billion) from Spanish bank accounts in July, driving the ratio of loans to deposits among lenders to 187 percent from 183 percent in December and 182 percent a year earlier, according to data compiled by the Bank of Spain. Shrinking deposits undermine the ability of banks to support economic growth by lending to companies and consumers. “There are significant outflows of deposits now in Spain and they won’t start coming back until people are sure they’re safe and that Spain is secure,” said Simon Maughan, a financial strategist at Olivetree Securities Ltd. in London.
• Spanish 10-Year Yield Rises to 6% as Bonds Slide for Third Day. Spanish 10-year bonds extended their decline, falling for a third day and pushing the yield on the securities to 6 percent. The rate climbed 22 basis points, or 0.22 percentage point, to 6.00 percent as of 3:01 p.m. London time, the highest level since Sept. 7.
• ECB to Set Up Repo Database as EU Moves to Rein in Shadow Banks. The European Central Bank plans to boost oversight of trading in repurchase agreements by setting up a transactions database amid a push by regulators to rein in so-called shadow banking, a European Union document shows. Michel Barnier, the EU’s financial services chief, raised the plan at a meeting of European Union finance ministers and central bankers in Nicosia, Cyprus, on Sept. 14-15, according to the document, whose authenticity was confirmed by an EU official. The database would cover the European market for repos. The official spoke on condition of anonymity because the talks are private. Barnier told the meeting that he is working on regulations targeted at “key actors” in the shadow-banking system, in particular money-market mutual funds, according to the document.
• European Stocks Slip From 15-Month High; SSAB Tumbles. SSAB sank 6.9 percent as the Swedish steelmaker said demand for strip products has been much weaker than expected. Hennes & Mauritz AB slid 1.6 percent after third-quarter sales missed estimates.
• Dry-Bulk Hire Costs Fall to 45-Month Low on Atlantic Cargo Slump. Hire costs for Panamax vessels, the largest to transit the Panama Canal, slumped to the lowest in three years and nine months, as a shortage of cargoes in the Atlantic Ocean region worsened an oversupply of ships. Average daily returns declined for a 17th day, falling 3.9% to $3,833, according to the Baltic Exchange. Rates have plunged 40% in four weeks and are within 8.4% of the record low recorded on Dec. 12, 2008, exchange data show.
• Slowdown Seen in U.S. Manufacturing With Parker Hannifin. Illinois Tool Works Inc. (ITW) and Parker Hannifin Corp. (PH), which will be releasing their quarterly results next month, are showing why the U.S. economy is maintaining a slow expansion. Both could see their total revenue fall “slightly,” primarily because of “adverse currency translation” and also because of disappointing sales in Europe and Asia, according to Robert McCarthy, a senior analyst with Robert W. Baird & Co. in Chicago. While it’s “incrementally more difficult” to forecast order growth in North America, it probably didn’t contract for either company in the three months ending Sept. 30, as this business segment continues to expand, he said.
• China-Japan Dispute Over Islands Risks $340 Billion Trade. China and Japan’s worst diplomatic crisis since 2005 is putting at risk a trade relationship that’s tripled in the past decade to more than $340 billion. Toyota Motor Corp. (7203), Honda Motor Co. (7267) and Panasonic Corp. (6752) reported damage to their operations in China as thousands marched in more than a dozen cities on Sept. 16 after Japan last week said it will purchase islands claimed by both countries. Protesters called for boycotts of Japanese goods and in some instances smashed store fronts and cars.

Wall Street Journal:

• U.S. Balks at GM(GM) Plan to Sell Government Stake at Huge Loss Before Election. Government Is Reluctant to Sell Auto Stake at a $15 Billion Loss. The Treasury Department is resisting a push by General Motors GM Co. to sell the government's entire stake in the auto maker—the latest source of tension between two unlikely partners thrust together at the depths of the financial crisis. U.S. taxpayers kept the nation's largest auto maker by sales afloat with a $50 billion bailout in 2009 and now own 26.5% of the Detroit company. But GM executives have grown increasingly frustrated with that ownership, and the stigma of being known as "Government Motors." Executives have said the U.S.'s shadow is a drag on its reputation and hurts the company's ability to recruit talent because of pay restrictions. Privately, executives are also irked at the continued curbs on corporate jet use. Earlier this summer, GM floated a plan with Treasury officials to repurchase 200 million of the roughly 500 million shares the U.S. holds in the auto maker, according to people familiar with the discussions. Under the plan, Treasury would sell the remaining shares through a public stock offering. But Treasury officials aren't interested in GM's offer at the current price and aren't in a rush to offload shares, according to people familiar with the matter. The biggest reason: A sale now would leave the government with a hefty loss on its investment. At GM's Friday share price of $24.14, the U.S. would lose about $15 billion on the GM bailout if it sold its entire stake. While GM stock would need to reach $53 a share for the U.S. to break even, Treasury officials would consider selling at a price in the $30s, people familiar with the government's thinking have said.
• B-School Applicants Decline for Four Years. The business-school numbers are in and they aren't pretty. Applications for two-year, full-time M.B.A. programs that start this fall declined for the fourth year in a row, according to new data from the Graduate Management Admission Council, which administers the Graduate Management Admission Test. The median number of applications world-wide fell 22% in 2012 for the two-year degrees, after a nearly 10% decline last year.
• Chicago Teacher Strike Moves to Courtroom. The teacher strike that has shut 350,000 students out of classes will continue for at least another day, as a judge declined Monday to immediately rule on a city lawsuit seeking to force teachers back into the classroom. The Chicago school district, under the control of Mayor Rahm Emanuel, had asked a Cook County Circuit Court judge to prohibit the Chicago Teachers Union from striking on grounds that it is illegal.
• BASE METALS: Weaker Manufacturing Data Weigh on Copper. Copper futures fell Monday on unexpected declines in the New York Federal Reserve's manufacturing activity index and amid pressure from a stronger dollar. The most actively traded contract, for December delivery, was recently down 2.45 cents, or 0.6%, at $3.8080 a pound on the Comex division of the New York Mercantile Exchange. The Empire State business conditions index fell to minus 10.41 in September, after it plunged more than 13 points to minus 5.85 in August. The index has been declining since May, though economists had forecast a much healthier reading of 0 for September.
• Protests Turn Violent Around Asia. Hundreds of protesters demonstrating against an anti-Islam film torched a press club and a government building in northwest Pakistan on Monday, sparking clashes with police that left at least one person dead. Rioting demonstrators battled with police outside a U.S. military base in Afghanistan and the U.S. Embassy in Indonesia. In Lebanon, thousands of followers of Lebanon's powerful Hezbollah militant group are rallying against an anti-Islam film that has provoked a week of unrest in Muslim countries worldwide.
• Violent Protests in Kabul, Jakarta (pics).

MarketWatch:

• Moody's lowers 2013 growth forecast for auto sales. Moody's Investors Service said it has lowered its growth forecast for global auto sales in 2013 amid sluggish demand in Europe and weakening sales in China. The ratings company projected growth in global light-vehicle sales of 2.9% for next year, down from its January forecast for a 4.5% increase.

CNBC.com:

• Brusca: China's 'Truth' and Consequences. It is not as though China is being singled out. US energy giant Enron cooked its books. Greece, got help playing hide and seek from the facts using Goldman Sachs’ advice, and hid a pile of its debt to join the European Monetary Union. Bankers have long come to mistrust official data when they make lending decisions in the international realm. But how do they pick and choose who to believe?
• Shine Comes Off Euro Membership, Even for Poorest Country. Once seen as a crowning moment in a long process for new EU states aspiring to full integration, even the EU's poorest member is now having second thoughts.

Business Insider:

• Look How Much Less Americans Can Afford Now Compared To Six Years Ago.
• We Asked David Kotok What His Biggest Economic Fear Was, And What Told Us Was Absolutely Terrifying.
• The 16 Most Insane Images From The Anti-Japan Protests In China.
• 1000 Chinese Boats Now Setting Sail Towards Disputed Islands. (video)
• Wall Street Pros Tell Us The #1 Thing That Could Wreck This Rally.
• Bob Woodward Says Obama Is 'In Over His Head'.

Zero Hedge:

• Empire Manufacturing Index Prints At Lowest Since April 2009. (graph)
• What's More Important - Growth Or Policy? (graph)
• Japanese Businesses Shuttering Chinese Facilities As Mainland Anger Spreads.
• Full Summary Of The Latest In Anti-American Sentiment. (map)
• Update: The San Fran Fed Asks What People Think Of QE3: The People Respond.
  

Rasmussen Reports:

• 53% Favor Repeal of Health Care Law. The latest Rasmussen Reports national telephone survey finds that 53% of Likely U.S. Voters favor repeal, while 43% are opposed. This includes 45% who Strongly Favor repeal of the health care measure and 33% who are Strongly Opposed.
• Swing State Daily Tracking: Romney 47%, Obama 45%.

Reuters:

• France calls emergency G20 grains meeting for mid-Oct. France has called an emergency meeting of G20 farm ministers for mid-October to discuss curbing price swings on grain markets, the French president's office said, after a year of drought and record prices renewed fears of a crisis in food supplies. France currently presides over a grains body created last year under the Group of 20 major economies and it has made several proposals in recent days, including the development of strategic stocks and a halt in the expansion of biofuels that use food crops.
• Muslim protesters rage at United States in Asia, Middle East.
• Schwab trading volumes fall in August. Charles Schwab Corp said on Monday its trading volumes fell 31 percent in August from a year earlier, highlighting the difficult environment for brokerage firms due to disengaged retail investors and low volatility in the markets. Schwab, one of the largest U.S. brokerages, said its clients made an average of 375,900 trades a day in August, down 31 percent from August 2011 and down 5 percent from July.
• Hezbollah leader warns U.S. over Prophet film. Hezbollah leader Sayyed Hassan Nasrallah made a rare public appearance on Monday to warn the United States that it faced further anger and repercussions across the Muslim world unless it suppressed a video that mocks the Prophet Mohammad. "The world should know our anger will not be a passing outburst but the start of a serious movement that will continue on the level of the Muslim nation to defend the Prophet of God," Nasrallah told tens of thousands of marchers in Beirut's southern suburbs.

Die Welt:

• ArcelorMittal warns against the costs of the energy shift in Germany leading to potential factory closures, citing an interview with Lutz Bandusch, the co.'s head in Hamburg. Steel companies will have to pay an additional $2 billion a year as of 2013, he said.