Bloomberg:
- EU Aims For Euro-Area Bank Supervision To Start In 2013. European leaders committed to their goal of establishing a euro-area bank supervisor by year-end, opening the prospect of direct aid to Spain’s banking sector. The EU will seek to agree on a framework that makes the European Central Bank the main supervisor by Jan. 1, according to conclusions released early today after leaders met at a summit in Brussels. The new system, intended to break the link between banks and governments at the root of the region’s financial crisis, will phase in over the next year and could cover all 6,000 euro-area banks by Jan. 1, 2014. The supervisor can “probably be effectively operational,” allowing the euro bailout fund to lend directly to banks, as soon as 2013, EU President Herman Van Rompuy told reporters after the meeting. He said finance ministers will design rules for such bank rescues. German Chancellor Angela Merkel, underscoring a go-slow approach, said before direct aid, the bank-oversight system needs to reach “practical completion.”
- Rajoy Seeks Proof Cuts Don’t Mean Defeat in Spain Regional Vote. Prime Minister Mariano Rajoy may hold on to power in his home region of Galicia even as fallout over austerity saps his support elsewhere, in local voting that may ease an obstacle to a Spanish bailout request. The People’s Party may hold on to its 38 seats in the 75- member regional assembly in voting this weekend, maintaining the majority it’s held since 2009, a poll by the state-run CIS indicated on Oct. 5. If it falls short, Socialists and Galician nationalists would seek to govern in a coalition. The Basque Country, where the PP has never won an election, also votes on Oct. 21, and polls signal nationalists in the lead. Rajoy, who flies home from a European summit in Brussels today to give the closing campaign speech in Galicia, is counting on the outcome to show he can still win votes even after implementing the deepest budget cuts in three decades. The end of the campaign may also reduce political pressure on the premier to delay a European bailout request and free his hand to make deeper deficit cuts. “If they keep their majority, Rajoy’s first message will be we can implement austerity and still win elections,” said Antonio Barroso, an analyst at Eurasia in London and former Spanish government pollster. “He’ll gain breathing space.”
- Forced Conservation in France Prompts Big Brother Outcry: Energy. Heating a French home could soon require an income tax consultation or even a visit to the doctor under legislation to force conservation in the nation’s $46 billion household energy market. A bill adopted by the lower house this month would set prices that homes pay based on wages, age and climate. Utilities Electricite de France SA and GDF Suez SA will use the data to reward consumers who cut power and natural gas usage and penalize those whom regulators decide are wasteful. “It’s Orwellian,” opposition lawmaker Daniel Fasquelle said by telephone. “The law will create huge inequalities and infringe on people’s individual freedoms. It won’t work.” Socialist President Francois Hollande is pushing boundaries of privacy and privilege in carrying out a campaign promise to reduce energy costs.
- Aluminum Supply Outpaces iPhone, Audi Demand: Chart of the Day. A jump in the amount of aluminum used in products ranging from Apple Inc.'s iPhone to Audi AG cars probably won't be enough to cut a supply glut amid record output in China, the world's top producer. Inventories in 2013 are projected to be enough to supply 8.7 weeks of global demand, according to figures from Barclays Plc. That's 12% higher than this year and more than double the ratio in 2006. Output in China increased 9.4% in August from a year earlier to an all-time high, International Aluminum Institute data show. "Aluminum is a structurally weak market, and the oversupply hasn't been fully reflected in the price," said Jeffrey Sherman, who helps manage more than $45 billion in assets at DoubleLine Capital in Los Angeles. "It looks like the direction from here is lower. There's a lot of downside risk to it."
- China Navy Conducts East China Sea Exercises Amid Japan Row. China’s navy will conduct exercises in the East China Sea to better coordinate missions to protect Chinese territory, Xinhua News Agency said, a move that may heighten tensions with Japan over disputed islands. Today’s exercises with the fishery administration and the marine surveillance agency will involve 11 ships and eight aircraft, Xinhua reported yesterday, citing a statement from the navy’s Donghai fleet. “When carrying out missions in disputed waters, patrol vessels of the fishery administration and marine surveillance agency have been stalked, harassed and even intentionally interfered with by foreign vessels, greatly challenging their duties,” Xinhua said, citing the statement.
- Southeast Asia Seen Leading Rate Increases Next Year: Economy. Central banks in Southeast Asia may be forced to abandon this year’s monetary easing and raise interest rates before their north Asian peers in 2013, as rising inflation risks overshadow the current economic gloom.
- Microsoft(MSFT) Profit Falls Short as Weak PC Demand Hurts Windows. Microsoft Corp., the largest software maker, reported fiscal first-quarter profit and sales that missed analysts’ estimates as anemic personal computer sales crimped demand for Windows, its core operating system. Net income declined to $4.47 billion, or 53 cents a share, in the three months through Sept. 30, from $5.74 billion, or 68 cents, a year earlier, the Redmond, Washington-based company said in a statement. That missed the 56-cent average estimate of analysts polled by Bloomberg. Sales fell 7.9 percent to $16 billion, compared with the $16.4 billion average estimate. Microsoft’s Windows unit revenue is suffering in a depressed PC market as some consumers switch to buying tablets. During the quarter, global PC shipments slumped 8.3 percent from a year earlier to 87.5 million, market-research firm Gartner Inc. said last week.
- Black Monday Echoes With Computers Failing to Restore Confidence. A quarter century after the worst one-day stock crash in history, measures to prevent a repeat are failing to keep investors from losing confidence in the market.
- AMD(AMD) Forecast Misses Estimates; to Cut 15 Percent of Staff. Advanced Micro Devices Inc., the second-largest maker of processors for personal computers, forecast fourth-quarter sales that will miss analysts’ estimates and said it will cut 15 percent of its staff. AMD’s outlook adds to evidence that PC makers and their suppliers are being battered by a weak economy and a shift in consumer spending to tablets and smartphones -- getting scant relief from holiday sales that usually kick in this time of year.
- Early Uncertainty on Libya Account. The night before Susan Rice went public with the administration's assessment of the Sept. 11 U.S. consulate attack in Libya, intelligence analysts were receiving new information that contradicted the account she gave. It then took weeks longer—until early October—for a new intelligence assessment discounting the role of protests in the attack to make its way into public statements from senior officials in the Obama administration.
- Buyers Run Back Into Open-Ended ARMs. Luxury-home buyers are returning to adjustable-rate mortgages, despite pitfalls that pushed many homeowners into foreclosure during the housing bust. The pitch? A lower interest rate—at least for a period—than a fixed-rate mortgage means savings could be huge.
- China Faces Tough Choice on Growth. Incoming Leaders Must Decide Whether to Stick to Old Economic Model or Tackle Reforms to Get More Money to Consumers. China's latest evidence of sputtering growth underlines a dilemma for its incoming leaders: They can shore up the economy by doubling down on an exhausted growth model, or take a risky political bet on reforms that could worsen the slowdown in the short term. The challenge—an unusual one for a Communist government—is to put more money in the pockets of its consumers by tackling the burgeoning inequality in income, which has contributed to pushing China's growth off kilter.
- Syria Strikes Claim Dozens a Day After Helicopter Downed. Dozens of people were killed in airstrikes Thursday in northwestern Syria as the government appeared to move to reclaim a strategically located town from rebels, activists said, in one of the bloodiest recent incidents in the country's civil conflict. Regime fighter jets attacked Maarat al-Nouman, a town on a highway linking Syria's largest cities, according to activists, providing a gruesome glimpse into the growing toll of aerial bombardment by the regime.
- The Foreign Policy Debate. How Romney can show Americans he can be a capable Commander in Chief. When the history of the Obama Administration is written, it will be noted that never before has an American President bet so much on the power of his own charisma to change the world. As Mitt Romney prepares for the foreign policy debate in Florida on Monday, his challenge will be to show what a losing bet that's been—and how a Romney Administration would do better.
- High Profile Earnings Misses Keep Investors Skeptical.
- China's Foreign Investment Shows Further Declines. China's foreign direct investment inflows fell 3.8 percent in the first nine months from a year ago, extending the longest run of declines since the depths of the global financial crisis as stiff economic headwinds dent corporate spending plans. The Commerce Ministry said on Friday that China drew $83.4 billion in foreign direct investment between January and September, with September's inflow alone down 6.8 percent on year-ago levels at $8.4 billion.
- Top Bankers Urge Washington to Avoid Fiscal Cliff. Top financial industry executives urged the Obama administration and Congress on Thursday to stop automatic fiscal austerity measures from kicking in at year-end, but did not propose fresh ideas for replacing those harsh budget and tax measures. "The consequences of inaction ... would be grave," members of the Financial Services Forum, an industry trade association, wrote to President Barack Obama and members of Congress in a letter released on Thursday. The letter, signed by 15 top executives of some of largest U.S. and global financial services companies, points to rising concern that lawmakers will run out of time to seal a deal to avoid sharp tax increases and spending cuts. With a presidential election leaving the political landscape uncertain, negotiations to avert what has become known as the fiscal cliff are not expected until after the ballots have been counted on November 6 - and that has made many nervous.
- Some Context On Spain's 'Big' Week. (graphs)
- Spain Proposes Law Prohibiting Recording And Capturing Of Local Cops In Action.
- Man Self-Immolates In Front Of Rome's Presidential Palace.
- There's A Troubling Dynamic Developing In The Market For New Homes.
- Here's How The US Invited Iranian Hackers To Attack America's Banks.
- Obama Has Completely Lost His Lead In Wisconsin.
- CHIPOTLE(CMG) MISSES EARNINGS BIG, STOCK PLUNGES AFTER HOURS.
Washington Post:
Washington Examiner:
- CIA seeks to expand drone fleet, officials say. The CIA is urging the White House to approve a significant expansion of the agency’s fleet of armed drones, a move that would extend the spy service’s decade-long transformation into a paramilitary force, U.S. officials said. The proposal by CIA Director David H. Petraeus would bolster the agency’s ability to sustain its campaigns of lethal strikes in Pakistan and Yemen and be able, if directed, to shift aircraft to emerging al-Qaeda threats in North Africa or other trouble spots, officials said.
- Poll shows Romney leading in blue Pennsylvania. A new poll shows Republican Mitt Romney leading in Pennsylvania, a state that Republicans had all but written off just weeks ago but which is now listed as a toss up by the Real Clear Politics website. Susquehanna Polling and Research provided The Washington Examiner with a poll it conducted for state party officials that shows Romney with a 49 percent to 45 percent lead over President Obama. It's the first poll to show Romney leading among likely voters in the Keystone State.
- Obama on Benghazi attack: 'When four Americans get killed, it's not optimal'. President Obama vowed Thursday to fix any problems that contributed to the deaths of four American foreign service personnel during last month's attack on the U.S. Consulate in Benghazi, Libya, saying that "when four Americans get killed, it's not optimal."
- Ally Financial latest U.S. bank to face cyber attacks. Ally Financial Inc on Thursday became the latest U.S. financial institution to face cyber attacks that may stem from hackers in Iran. Bank of America Corp (BAC.N), Wells Fargo & Co (WFC.N) and other banks in recent weeks have suffered so-called denial of service attacks in which hackers use a high volume of incoming traffic to delay or disrupt customer websites. Regional bank BB&T Corp (BBT.N) and credit card issuer Capital One Financial Corp (COF.N) confirmed disruptions earlier this week. A spokeswoman for Ally, the former auto lending arm of General Motors Co (GM.N), said the bank was investigating the "unusual traffic" on its website. Sources have previously told Reuters that the attacks could be part of a year-long cyber campaign waged by Iranian hackers against major U.S. financial institutions and other corporate entities.
- Moody's keeps negative outlook for German banking system. Moody's Investors Service said the outlook for Germany's banking system remained negative, citing margin pressure due to intense competition, limited loan growth, Europe's recession and deteriorating asset quality. "Moody's says that intense competition and low interest rates are causing margin pressure that will likely further erode the banks' already-weak revenues and profits over the 12-18 month outlook period," the rating agency said in a report.
- SanDisk(SNDK) sees margin growth, memory prices stabilizing. SanDisk Corp's quarterly results topped expectations as rising demand for chips used in smartphones and tablets and a limited supply drove up prices for flash memory, a trend that the chipmaker expects will continue. The surprisingly strong margin outlook from the company and current-quarter revenue forecast of $1.5 billion, plus or minus $50 million, drove shares up 4 percent after market.
- China Solar-Panel Industry Like 'Patient on Life Support'. China's solar-panel industry will have to undergo "radical" consolidation and cuts to overcome its "crisis" of overcapacity, citing Li Junfeng, deputy director of the energy research institute of China's National Development and Reform Commission, as saying. At least half of the global solar-panel-manufacturing capacity will have to be eliminated, he said in Beijing.
- China Should Keep Stimulus Small, CASS Researcher Says. China should keep stimulus measures to a scale that won't cause a rebound in housing prices, Yi Xianrong, researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences, writes in a commentary today. Loose monetary policy would likely reverse housing market curbs, Yi writes. Low borrowing costs wouldn't promote growth because companies won't expand investment without increases in orders, he said.
- China's Xinjiang should curb the "rapid" rise in electrolytic aluminum capacity, citing the National Development and Reform Commission.
- China should avoid large profits in the real estate industry, citing Wang Juelin, a researcher at the Ministry of Housing and Urban-Rural Development. China will continue limits on property purchases for at least the next 1-2 years, citing Wang.
Piper Jaffray:
- Raised (CMI) to Overweight, target $115.
- Asian equity indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 115.50 +2.50 basis points.
- Asia Pacific Sovereign CDS Index 92.75 -2.75 basis points.
- FTSE-100 futures -.31%.
- S&P 500 futures -.01%.
- NASDAQ 100 futures unch.
Earnings of Note
Company/Estimate
- (APD)/1.44
- (BHI)/.85
- (CBE)/1.14
- (GE)/.37
- (HON)/1.13
- (IDXX)/.73
- (IR)/.98
- (MAN)/.68
- (MCD)/1.48
- (PH)/1.76
- (SLB)/1.07
10:00 am EST
- Exiting Home Sales for September are estimated to fall to 4.74M versus 4.82M in August.
- None of note
- The German PPI could also impact trading today.
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