- Spanish Bad Bank Risks Investor Conflict With Stressed Lenders. Spain must ensure a so-called bad bank meets investor demands for yield without undermining the balance sheets of lenders as the government seeks a panacea for the country’s real estate crisis. “If the new investors do not believe they are going to get a good return on their investment, they will not want to get involved,” said Vanessa Gelado, director of Drago Capital, a Madrid-based real estate fund that’s considering investing in the bad bank. “It’s a very difficult equilibrium to achieve.” The terms of Spain’s 100 billion-euro ($129 billion) bank bailout oblige Prime Minister Mariano Rajoy to set up an asset management firm to house foreclosed homes and real estate loans from banks that received state aid. The government wants private investors to own the majority of the bank so the debt doesn’t contaminate national accounts as it tries to rein in the euro region’s third-biggest budget deficit. The strategy pits investor demands for low valuations on assets transferred to the bad bank with the needs of some lenders to support real estate prices to avoid further losses, said Luis Garicano, a professor at the London School of Economics. “It’s a very difficult balance to achieve, or maybe it’s impossible,” said Garicano in a phone interview. “If you’re the government, you’re trying to attract investors, but at the same time you don’t want to underpay for the assets or you risk undermining the banks and maybe having to recapitalize them unnecessarily.”
- China Stocks Swing Between Gains and Losses. The Shanghai Composite Index fell 0.1 percent to 2,030.68 as of 10:37 a.m. local time, after changing directions at least 10 times.
- China Wealth Gap to Stay in Danger Zone, Government Adviser Says. China's income gap will persist at a “dangerously” high level over the coming decade, putting pressure on the nation’s incoming leaders to curb corruption and state control of industries, according to a government adviser. China’s Gini coefficient a measure of inequality, may hover around 0.5, Li Shi, who helped draft a government plan on income distribution, said in an interview last week. The government hasn’t published a countrywide Gini figure since 2000. The index ranges from 0 to 1, readings at 0.4 or higher are used by analysts as a gauge of the potential for social disturbances.
- Pork Supply Shrinks to Lowest Since 1975 on Drought: Commodities. U.S. hog farmers are slaughtering animals at the fastest pace since 2009 as a surge in feed costs spurs the biggest losses in 14 years, signaling smaller herds next year and a rebound in pork prices.
- Copper Stockpiles in Bonded Shanghai Warehouses Seen at Record. Copper inventories at bonded warehouses in Shanghai probably climbed to a record as import premiums dropped to a four-month low, signaling demand in China may not be improving as much as expected after a summer lull. Reserves were 650,000 metric tons, according to the median of nine estimates from traders, analysts and warehouse managers, compiled by Bloomberg. Five said that this was a record. The amount compared with an estimate of 550,000 tons by Macquarie Group Ltd. on Aug. 20.
- Financial Firms Post Fewer Job Openings in Global Economic Slump. Financial firms are advertising fewer open jobs worldwide as slower economic growth in the United States and the European debt crisis put pressure on bank revenue, according to data compiled by Bloomberg. Job postings for the sector dropped 21 percent to 7,540 in September from a year earlier, according to Bloomberg Industries. That figure fell 17 percent to 1,373 in the U.S., 24 percent to 2,508 in Britain and 15 percent to 2,377 in Asia, the data show.
- Caterpillar(CAT) Cuts 2015 Outlook as Mining Spending Falls. Caterpillar Inc., the world’s biggest construction and mining equipment maker, cut its forecast for 2015 earnings after commodity producers reduced capital expenditure. Caterpillar said profit will be $12 to $18 a share, compared with a previous projection of $15 to $20. While a global recession remains possible, Caterpillar is forecasting moderate and “anemic” growth through 2015, Chairman and Chief Executive Officer Doug Oberhelman said today in a presentation to analysts at the MINExpo industry conference in Las Vegas. Construction activity in emerging markets will probably show modest improvements, he said. “We’ve seen a slowing in economic growth that was more than we expected,” he said. “We think ‘13 could look like 2012 in terms of worldwide economic growth.’’ Oberhelman has bet on a continuation of growth in commodity demand by buying mining-equipment maker Bucyrus International Inc. for $8.6 billion last year and agreeing in November to acquire ERA Mining Machinery Ltd. in China. His plans are coming under pressure as mining companies cut capital expenditures after economic expansion slowed in China, the world’s largest user of coal and metals. Global mining capital expenditures will drop 14 percent through 2014 from a peak of $136 billion this year, JPMorgan Chase & Co. said in a Sept. 21 report. Caterpillar fell 2.2 percent to $88.87 at 6:30 p.m. after the close of regular trading in New York.
- CFTC Will Give Banks 2 Minutes to Accept or Reject Cleared Swaps. Swaps dealers will have two minutes to accept or reject trades that will be sent to clearinghouses starting next month, the Commodity Futures Trading Commission said in the most-detailed requirement about timing to date. The time allowed for trade approval will fall to one minute 90 days after the CFTC rules are published in the Federal Register, according to a Sept. 21 e-mail sent by Ananda Radhakrishnan, director of the division of clearing and risk. Banks including JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc. and Morgan Stanley have argued that the technology to instantly verify the credit and risk allowance of their customers doesn’t exist and asked the CFTC to reconsider.
- New Wave of Workers Tries Novel Approach: Save More. As older Americans lose jobs, lose homes and delay retirement, their children are watching and reacting. Growing numbers of young Americans are boosting savings, cutting spending and planning for retirement.
- Romney Attacks Obama on ‘Bumps in the Road’. Mitt Romney accused President Barack Obama on Monday of downplaying recent foreign crises as he seeks to gain an edge on foreign policy – a relative area of strength for the president. President Barack Obama was assessing his support for the governments that have sprung up in the wake of the Arab Spring when he argued in a 60 Minutes interview that aired Sunday that “I was pretty certain and continue to be pretty certain that there are going to be bumps in the road.” “Bumps in the road?” Mr. Romney said Monday as he sized up Mr. Obama’s interview performance and rattled off examples of tumult abroad. “We had an ambassador assassinated…twenty thousand people have been killed in Syria. We have tumult in Pakistan and of course Iran is that much closer to having the capacity to build a nuclear weapon. These are not bumps in the road, these are human lives.”
- State of Europe's Banks: Safe and Stressed. Germany's Lenders Find Fortunes Tied To Spanish Peers.
- Hon Hai Riot Shows Squeeze on Chinese Manufacturers.
The 10% President.
The annotated Obama: How 90% of the deficit becomes somebody else's
fault. A question raised by President Obama's immortal line on CBS's "60
Minutes" on Sunday—"I think that, you know, as President, I bear
responsibility for everything, to some degree"—is what that degree
really is. Maybe 70% or 80% of the buck stops with him? Or is it
halfsies? Nope. Now we know: It turns out the figure is 10%. The other
90% is somebody else's fault. This revelation came when Steve Croft
mentioned that the national
debt has climbed 60% on the President's watch. "Well, first of all,
Steve, I think it's important to understand the context here," Mr. Obama
replied. Fair enough, so here's his context in full, with our own
annotation and translation below:
- More Bank Layoffs Coming: 'Bad as I've Seen It': Whitney. Banks have been behind the curve in terms of downsizing, with their employees paying for it now through a rash of furloughs, analyst Meredith Whitney told CNBC.
- Now Taiwan Is Also Claiming The Senkaku Islands: 70 Fishing Boats Set Sail To Stake Claim.
- Is Draghi's Bond-Buying Dream Circling The Drain As ECB/Bundesbank Lawyer Up?
- Ex-Regulator Has Harsh Words for Bankers and Geithner. Sheila C. Bair, who tormented Wall Street and its Washington allies as a banking regulator, is taking a fresh swipe at her foes in retelling the dark days of the financial crisis. In a book to be released on Tuesday, the former chairwoman of the Federal Deposit Insurance Corporation takes aim at the bankers she blamed for the crisis. She also criticized fellow regulators, including current Treasury Secretary Timothy F. Geithner, for their response to the problems. Ms. Bair painted Mr. Geithner, the former head of the Federal Reserve Bank of New York, as an apologist for Wall Street, opposing some postcrisis reforms. She questioned whether his effort to inject billions of dollars into nine big banks masked a rescue intended solely for Citigroup, a theory that other government officials have rejected.
- Clinton reassures Egypt's Mursi on U.S. assistance. Secretary of State Hillary Clinton reassured Egypt's new Islamist president on Monday that the United States would forge ahead with plans to expand economic assistance despite anti-American protests that cast new shadows over U.S. engagement with the region. Clinton met Egyptian President Mohamed Mursi in New York, where both are attending this week's U.N. General Assembly meeting, and reinforced the Obama administration's continued commitment to provide both military and economic aid for Cairo, a senior State Department official said.
- Red Hat narrows full-year revenue forecast. Red Hat Inc, the world's largest distributor of Linux operating software, reported a lower-than-expected adjusted profit as costs rose, and lowered the top end of its full-year revenue outlook on slow growth in its services business.
- Wall St engineering revival of CDS. Wall Street financial engineers have devised a new way to combat declining trading in the credit derivatives market – they are revamping an index to add financial instruments that do not exist.
- Barack Obama shrugs, but the debt keeps mounting. A fiscal horror is unfolding on the president’s watch, yet few seem concerned , writes Jeff Randall.
- Bundesbank castigates IMF for saving Europe. Germany's central bank has launched a blistering attack on the International Monetary Fund, accusing officials of spraying around money like confetti and overstepping their legal mandate.
- Patience snaps in Portugal.
- Toyota to Reduce Lexus Output Amid Unrest in China. The co. plans to reduce production of Lexus vehicles for the China market by about 20% as early as this month.
- Rated (GHDX) Outperform, target $43.
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 137.0 +3.5 basis points.
- Asia Pacific Sovereign CDS Index 116.50 +5.5 basis points.
- FTSE-100 futures +.27%.
- S&P 500 futures +.28%.
- NASDAQ 100 futures +.28%.
Earnings of Note
9:00 am EST
- The S&P/CS 20 City MoM% SA for July is estimated to rise +.75% versus a +.94% in June.
- Consumer Confidence for September is estimated to rise to 63.2 versus 60.6 in August.
- The Richmond Fed Manufacturing Index for September is estimated to rise to -5 versus -9 in August.
- The House Price Index for July is estimated to rise +.6% versus a +.7% gain in June.
- None of note
- The Fed's Plosser speaking, ECB's Draghi speaking, Germany inflation data, weekly retail sales reports, 2Y T-Note auction and the (JOY) analyst day could also impact trading today.