Today's Headlines

Bloomberg:

• EU Summit Tussle Over Costs Threatens to Derail Bank Union Plans. The French-backed effort to fast- track a European bank supervisor is running into German-led concern over potential costs as the region’s leaders tussle over putting their crisis-fighting blueprint into action. The 27-nation European Union has struggled to maintain momentum on a June plan to spur investor confidence by putting the European Central Bank in charge of banks across the euro area. Divisions have flared over the scope of the ECB’s supervisory powers and how losses would be shared. As leaders gather in Brussels for a two-day summit, French President Francois Hollande says efforts to stem the turmoil that began in 2009 could unravel if the EU fails to deliver on its promises. He called on the EU to press ahead on banking union, provide economic help to countries that rein in budget deficits, and show investors that Greece will be able to stay in the euro zone if it keeps its commitments. 
• Merkel Proposes EU Aid Fund as Disagreements Loom Over Summit. German Chancellor Angela Merkel proposed a new European aid fund to bolster competitiveness as she highlighted disagreements over budget rules, joint borrowing and bank supervision in a pre-summit address. Speaking to lawmakers in Berlin before heading to Brussels for a two-day gathering of European Union leaders, Merkel laid out her vision for more economic coordination, while expressing “surprise” at negative reaction to a proposal for a watchdog with veto power over national budgets. Her vision includes a fund “limited in time and project-based” and possibly stocked by the proposed financial transaction tax, she said. “To give all member states the opportunity then to improve their competitiveness and to actually be able to implement these commitments, I propose that we introduce a new element of solidarity,” Merkel said in her speech at the Reichstag parliament building. “Yes, we need solidarity, but we need a form of solidarity that leads to what we need: more competitiveness.”
• On Crisis Anniversary, Athens Tear Gas Defies Merkel’s Stability.  
• UBS(UBS) Said to Widen Job Cuts to 400 at Investment Bank. UBS AG (UBSN) is preparing another round of job cuts across its investment bank in Europe as Chief Executive Officer Sergio Ermotti tries to overhaul the firm, two people with knowledge of the matter said. UBS is considering cuts in equities and fixed income as it trims its merger advisory staff, bringing total reductions to about 400, or 10 percent of the unit’s front-office employees in the region, said the people, who asked not to be identified because the review is private. The cuts are part of plans to pare back headcount globally, said one of the people.
• Google(GOOG) Reports Profit, Sales That Miss Analysts’ Estimates. Google Inc. (GOOG) reported third-quarter profit and sales that missed analysts’ estimates, a sign that its tools are becoming less valuable to advertisers while costs associated with expansion into new businesses are chipping away at profitability. Profit excluding some items was $9.03 a share, the Mountain View, California-based company said in a regulatory filing today. Excluding sales passed to partner sites, revenue was $11.3 billion. Analysts on average had estimated profit of $10.65 a share on sales of $11.8 billion. The stock tumbled after the results were released inadvertently, and trading was later halted. The average amount advertisers paid each time a user clicks on a promotion declined about 15 percent from a year earlier, and was 3 percent less than the prior period. The company also is ramping up spending on engineering, marketing and acquisitions to help it expand beyond search advertising. The company earlier this year spent $12.4 billion on Motorola Mobility Holdings, pushing it further into the hardware market and stepping up its rivalry with Apple Inc. “The core business itself is slowing down,” said Colin Gillis, an analyst at BGC Partners LP. Google shares tumbled as much as 11 percent to $676 after the report, which came during regular trading hours in New York. The stock was later halted.
• Wall Street CMOs Crushed as Sales at 3-Year Low: Credit Markets. The Federal Reserve’s effort to support the economy by acquiring $40 billion a month of mortgage bonds is crimping Wall Street’s business of packaging the government-backed securities into new notes. After falling last month to a three-year low of $19 billion, issuance of so-called agency collateralized mortgage obligations, or CMOs, may decline 10 percent to 20 percent in October, according to Scott Buchta, head of fixed-income strategy at Brean Capital LLC. Sales last month were 25 percent below the 2012 average through August, according to data compiled by Bloomberg. “When you have a buyer with a different goal than the rest of the market” it can crowd out other investors, said Bill Anast, who runs the agency CMO business in New York at Barclays Plc, the third-largest underwriter.
• Man Group Outflows Rise to $2.2 Billion Amid ‘Subdued’ Sales. Man Group Plc (EMG), the world’s biggest publicly traded hedge-fund manager, said outflows increased 57 percent in the third quarter amid an environment for sales Chief Executive Officer Peter Clarke called “subdued.” Clients pulled a net $2.2 billion from the firm, up from $1.4 billion in the second quarter, the London-based firm said in a statement today. Customers redeemed $5.2 billion from Man Group’s investment funds, compared with $3 billion of sales. “The flow environment continues to be challenging and this was reflected in lower sales in the quarter,” Clarke said in the statement. “Investor sentiment, and consequently the outlook for flows, continues to be subdued.”
• A123(AONE) Shows Risks as Battery Science Meets Government Cash. A123 Systems Inc., the electric-car battery maker that filed for bankruptcy this week, had promising chemistry and marquee customers. What it couldn’t overcome, even with government funding, were missteps in manufacturing. A123’s filing immediately became a presidential campaign issue, because the Obama administration pledged $249.1 million in grants three years earlier to help the company bring jobs and factories to the U.S. Republican Mitt Romney’s campaign pointed to the bankruptcy as an example of President Barack Obama’s failures in economic policy.

Wall Street Journal:

• Dividends: Start Screaming. Enough about the "fiscal cliff." What about the dividend cliff? At one second after midnight on Jan. 1, 2013, the maximum tax rate on dividends is likely to go from 15% to either 18.8% or 43.4%. The best-case scenario: Congress retains the top dividend-income tax rate of 15%, and the only increase is the scheduled 3.8% surtax on investment income for high earners. The worst case: Congress decides dividends are to be taxed at ordinary-income rates, and the highest rate jumps to 39.6%, plus the same 3.8% surtax.
• Weaker U.S. Jobs Data Pressure Copper Price. The most actively traded contract, for December delivery, was recently down 1.60 cents, or 0.4%, at $3.7320 a pound on the Comex division of the New York Mercantile Exchange. Weekly claims for initial unemployment benefits in the U.S. unexpectedly ticked higher in the week ended Oct. 13, instilling a cautious tone among copper traders. Jobless claims rose by 46,000 to a seasonally adjusted 388,000, exceeding forecasts of 365,000 new applications.

CNBC:

• Google's(GOOG) Miss Highlights Big Worry on Wall Street. Google's stunning earnings disappointment on Thursday is a dramatic example of what has become Wall Street's latest worry: revenue is coming in much worse than anyone thought. 
• Student Loan Debt Hits Another New Record: Study. The average college student who graduated in 2011 had $26,600 in student loans, according to a new report, which estimates two-thirds of last year’s college graduates had student loan debt. 
• Cyberattacks 'Huge Security Issue' for the US: PNC(PNC) CEO. Computer hackers and other foreign adversaries pose an increasingly grave challenge to the U.S. banking system, PNC Financial Services CEO James Rohr told CNBC Thursday, adding that growing cyberthreats “could really disrupt this country.”

Zero Hedge:

• Reality Storms Back As Jobless Claims Explode Higher By 46,000 From Last Week's Upward Revised Aberration. (graph) 
• To Promote The Great European Socialist Revolution, France's Hollande Will Ban Homework.  
• Philly Fed Beats Even As Core Components Deteriorate. (graphs)
• How '125' Became The Most Important Number For The US Economy. Unintended consequences of 'leaking liquidity' finding its way into hard assets and 'things that have relatively limited supply' have stalled hopes of a stimulus in China (food inflation) and caused refis to mysteriously lag on misplaced future rate expectations in the US (ZIRP). The biggest 'problem' the central-bankers face, however, is energy prices. The liquidity surges directly impact the price of oil (which is already under pressure from the ever-igniting fears of Middle-East flare-ups).   
• Banker-Muppet M.A.D. Begins: JPM Cuts 2013 GDP By 1% Due To "Fiscal Cliff".

Business Insider: 

• GALLUP: Romney Opens Up Huge Seven-Point Lead Over Obama. Mitt Romney widened his lead over President Barack Obama to seven points today, giving the Republican challenger his biggest lead yet in the poll and putting him well outside the margin of error. The seven-day tracking poll of likely voters showed Romney at 52 percent, up from 51 percent Wednesday. Obama's numbers stayed static at 43 percent. Today's results — which include polling from last Thursday through yesterday — are the first round of national poll numbers that factor in the second presidential debate. 
• ZULAUF: China Is Actually Growing At A 3% Rate. Swiss hedge fund manager Felix Zulauf believes everyone is overestimating China's growth rates while underestimating its problems. 

Washington Post:

• Obama’s plan: Push Republicans off the fiscal cliff. I’ve criticized the Obama campaign for failing to detail much of a vision for a second term. But that’s not to say they don’t have one. They do. It’s just a hard one to campaign on.

NYPost:

• Getting off easy. Source: FTC leaning toward light Google(GOOG) penalties

AARP:

• AARP: No Further Extension of Payroll Tax Holiday. AARP CEO A. Barry Rand sent a letter opposing any further extension of the Social Security payroll tax holiday to Congress and the White House.
  

FXStreet.com:

• Is Italy the Next Domino to Fall After Spain? - Capital Economics.

Reuters:

• Spanish bad loans hit new record in August. Spanish households and companies defaulted on their debts in record numbers in August, hurting the country's lenders and highlighting the need for an aid package and bad bank to help the economy out of recession. A property crash left banks with billions of euros in bad debt from real estate developers on their balance sheets but the problems have spread to small businesses and other sectors. Loans that fell into arrears in August increased by 5.3 billion euros ($7 billion) from July, reaching 178 billion euros, Bank of Spain data showed on Thursday. Spain is setting up a bad bank to siphon property assets off lenders' balance sheets and banks are preparing to receive the first funds from a 100-billion-euro credit line agreed with the European Union. But the record loan data raises the question of whether consumer loans should also be transferred to the bad bank and if Spain will take too little of the European cash. The government estimates it only needs 40 billion euros. "The most obvious thing from this data is that the Spanish government should aim for a greater recapitalization exercise," said Gilles Moec, economist at Deutsche bank. "There is a risk of undershooting with the recapitalization plan as it stands today."
• Britain seems to be saying "bye bye" to EU, says Finland. Britain's policy towards Europe is becoming harder to understand and there is a sense the country is slowly waving goodbye to the European Union, Finland's Europe minister said on Thursday. Speaking at an EU summit, Alex Stubb said Britain appeared to be purposefully putting itself at odds with its partners. Finland allies closely with Germany on a range of EU issues and has a substantial voice in EU policymaking. "It's almost as if it's 26 plus 1, to be very honest," he said when asked if the push for deeper integration among the 17 euro zone countries risked leaving Britain and the other nine EU member states in a second-tier group. "I think Britain is right now, voluntarily, by its own will, putting itself in the margins," he told Reuters in an interview. "We see it in foreign policy, we see it in economic policy, we see it linked to the single currency. And I, as someone who advocates the single market and free trade, find that very unfortunate, very unfortunate. "It's almost as if the boat is pulling away and one of our best friends is somehow saying 'bye bye' and there's not really that much we can do about it."
• European slowdown could hurt Mexico -cenbank's Sanchez. A further decline in Europe's economic growth could hurt Mexico by causing a reduction in exports to Europe and curbing investment in Mexico, central bank board member Manuel Sanchez said on Thursday. Sanchez, in the text of a speech delivered to a central bank conference in Poland, also said some Mexican banks could face fallout from events affecting their European parents, although the sector in general was in a sound position. "Further deceleration of EU growth could hurt Mexico's economic prospects, indirectly if the U.S. economy slows as a result, but also directly through less dynamic exports of goods and services to Europe, especially in vehicle shipments which are the most important export item, and lower European investment, likely in manufacturing and financial services, which have been the leading recipient sectors," he said.

Telegraph:

• Debt crisis: EU summit - live. Police fire tear gas at Greeks on the sidelines of a protest against austerity held amid a general strike, as EU leaders prepare to gather in Brussels to discuss a banking union and Spanish bail-out.
• EU Summit: Angela Merkel moves to block Hollande bank union deadline. Angela Merkel refused to commit to Francois Hollande’s deadline for the banking union, frustrating one of the key aims of a summit paralysed by indecision. 
• EU summit: France to clash with Germany over eurozone bailout fund. France and Germany will clash over Berlin’s attempts to block using the eurozone bailout fund to recapitalise banks but no decision will be taken before the end of the year, say senior officials.