Today's Headlines

Bloomberg: 

• Spanish Notes Drop as Rajoy Says Under No Pressure to Seek Aid. Spanish government notes fell, with two-year yields rising from the lowest in more than six months, after Prime Minister Mariano Rajoy said he was not facing pressure to seek a sovereign bailout.The two-year securities dropped for the first time in four days as Rajoy’s comments at a European Union summit in Brussels fueled concern a delay in asking for aid will prolong the nation’s debt crisis. German bunds advanced, pushing the yield down from near the highest in a month. Italian bonds completed a third weekly gain after the Treasury said yesterday it received orders for more than 18 billion euros ($23.6 billion) of retail securities it was selling to investors. “The market is still very sensitive regarding the bailout request” from Spain, said Michael Leister, a fixed-income strategist at Commerzbank AG in London. “Our view is that the market will have to wait to get clarity.”  
• EU Leaders Agree On Bank Oversight Amid Merkel Questions. German Chancellor Angela Merkel said it’s an open question whether European policy makers can meet the deadline they’d set hours earlier to establish a euro-area bank supervisor by year-end. “There are complicated questions to clarify and we’ll see in December if we complete it or not,” Merkel told reporters after a two-day European Union summit in Brussels wrapped up today. “For now, the political will is there.” The comments underscore Germany’s go-slow approach that may stymie plans laid down in June to break the link between banks and governments that has worsened the region’s debt crisis. She also ruled out allowing Spain to shift bank-bailout loans off its balance sheet if they are made before the new system starts operating.  
• European Stocks Fall as EU Leaders Fail to Discuss Spain. Bankia SA led lenders lower, losing 14 percent as a gauge of banks contributed most to the Stoxx Europe 600 Index’s drop. Aggreko Plc (AGK) fell 7.2 percent after it said bad-debt provisions would hurt full-year results. Spectris Plc (SXS) surged 12 percent after it reported a 12 percent increase in sales last quarter and said it will meet its full-year targets. Carrefour SA (CA) advanced 5.9 percent after it agreed to sell its Colombian unit. The Stoxx 600 fell 0.8 percent to 274.08 at the close of trading. French President Francois Hollande said additional assistance for Spain wasn’t discussed at the summit of European leaders in Brussels. 
• Greece Nears Aid Revival as Samaras Wins EU Summit Praise. Greek Prime Minister Antonis Samaras moved closer to winning a delayed aid disbursement when European leaders praised his government’s budget-cutting push. At his first European Union summit since becoming premier in June, Samaras said record unemployment showed the price Greece was paying for austerity demanded by the euro area as a condition for emergency loans. He urged parallel steps to kick- start the economy and stuck to a request for two extra years until 2016 to meet targets for narrowing the budget deficit, prompting signs of European goodwill.  
• China Might Have Overstated Growth in Standard Chartered View. A slowdown in electricity production and an “unimpressive” reading in a manufacturing survey are reasons September’s pickup in factory output was “a bit difficult to believe,” Standard Chartered said in an Oct. 18 note. Electricity output slowed to a 1.5 percent year-over-year growth rate in September from 2.7 percent in August, according to the National Bureau of Statistics. Power production was down 11 percent from August.  
• Wealthy Advised to Sell for Gains Before Unfriendly 2013. Sell. That’s the message from some financial advisers, who are telling wealthy clients that the remainder of 2012 amounts to a last-chance sale on federal tax rates. Taxes are set to rise in January in the U.S., pushing the top rate on dividends to 43.4 percent from 15 percent and the top rate on capital gains to 23.8 percent from 15 percent. Even if Congress averts the so-called fiscal cliff of tax increases on investments, income and estates, pressure to reduce budget deficits will mean higher taxes eventually, said Ron Florance of Wells Fargo & Co. (WFC) The answer is to take advantage of historically low rates and move taxable income and investment gains into this year, said Florance, managing director of investment strategy at the company’s private bank. “It’s the opposite of what people normally do,” said Florance, whose clients usually have at least $1 million in investable assets. “You’re paying taxes today in anticipation of higher rates in the future.”  
• Swaps Rule Sends Wall Street Into Clearing Limbo: Credit Markets. The securities industry misinterpreted rules it assumed allowed as many as nine months to start moving swaps into clearinghouses that are meant to limit risks to the financial system. Firms dealing in $648 trillion of outstanding swaps contracts expected that trading during a phase-in period wouldn’t need to be processed by central clearinghouses, according to an Oct. 5 e-mail sent to clients by Davis Polk & Wardwell LLP, which represents the Securities Industry and Financial Markets Association. They were wrong, misreading one sentence in 17,000 words of regulation. Unless lobbyists convince the Commodity Futures Trading Commission to soften the deadlines, derivatives users that speculate on or hedge against losses on everything from changes in interest rates to corporate bankruptcies may need to find cash and Treasuries to back the trades sooner than they anticipated. 
• McDonald’s(MCD) Profit Falls 3.5% as U.S. Growth Slows. McDonald’s Corp. (MCD), the world’s largest restaurant chain by sales, reported third-quarter profit fell 3.5 percent as sales growth slowed at U.S. stores. Net income (MCD) dropped to $1.46 billion, or $1.43 a share, from $1.51 billion, or $1.45, a year earlier, the Oak Brook, Illinois-based company said today in a statement. Foreign- currency exchange-rate fluctuations reduced net income by 8 cents a share in the third quarter. Analysts projected $1.47, the average of 26 estimates compiled by Bloomberg. Chief Executive Officer Don Thompson, who took the helm in July, has tried to draw budget-conscious Americans with a new extra-value menu. Sales at U.S. stores open at least 13 months rose 1.2 percent in the quarter, marking the slowest growth in 11 quarters. Analysts projected an increase of 1.7 percent, according to 21 estimates compiled by Consensus Metrix. 
• Republicans Press Obama on Libya Security Before Debate. Top Republicans on a House oversight panel demanded that President Barack Obama say whether the White House staff played any role in decisions on security at the U.S. consulate in Benghazi, Libya, raising new questions days before a presidential debate on foreign policy. “Your administration has not been straightforward with the American people in the aftermath of the attack” on Sept. 11 that killed U.S. Ambassador to Libya Chris Stevens and three other Americans, House Oversight and Government Reform Committee Chairman Darrell Issa and Representative Jason Chaffetz, who heads a subcommittee, said today in a letter to Obama. In addition to repeating criticism of the administration’s changing accounts of the attack, the Republicans said the panel found requests from personnel in Libya for increased security beforehand had been turned down because the administration was eager for a “normalization” of relations with that country after the rebellion that ousted ruler Muammar Qaddafi. “These critical foreign policy decisions are not made by low or mid-level career officials –- they are typically made through a structured and well-reasoned process that includes the National Security Council at the White House,” wrote Issa of California and Chaffetz of Utah. 
• Honeywell(HON) CFO Says China Growth May Slow to 23-Year Low. Honeywell International Inc., the maker of cockpit controls and thermostats, is forecasting 2013 economic growth in China may decelerate to less than 7 percent, the slowest pace since 1990. The euro area will remain in recession next year and U.S. growth will likely be 1.8 percent, said Dave Anderson, chief financial officer of the Morris Township, New Jersey-based manufacturer. The company plans to cut costs and introduce new products to keep earnings growth in 2013 at a similar level as this year, he said. “It wouldn’t be surprising to us if China didn’t break 7 percent GDP growth in 2013,” Anderson said in a telephone interview. “Our expectation is that there’s going to be relatively muted growth overall in 2013.”

Wall Street Journal: 

• Tech Stocks Spark Dow Fall. Technology and materials shares paced a broad stock-market decline, as the tech-oriented Nasdaq Composite traded at its lowest level since August. The Dow Jones Industrial Average fell 195 points, or 1.4%, to 13354, in Friday afternoon trading. The index's stumble comes on the 25th anniversary of Black Monday, when the Dow tumbled more than 20% in a single day. The Standard & Poor's 500-stock index lost 23 points, or 1.6%, to 1432, and the Nasdaq gave up 65 points, or 2.2%, to 3008. 
• Germany Takes Hard Line on Spanish Banks. German Chancellor Angela Merkel took a hard line on Spain Friday, saying that Madrid will have to keep on its own balance sheet the tens of billions of dollars it is about to inject into its banks and won't be able to transfer them to the euro-zone bailout fund. That position, laid out after a two-day summit of European Union leaders in Brussels, would mean that Spanish borrowing from the euro zone to bolster the capital of shaky banks—estimated to be as much as €60 billion ($78.72 billion)—will swell the country's already-heavy debt load.
• Failed U.S. Deals Stir Tensions With China. 
• Spain's Largest Unions Call Nationwide Strike. Spain's largest unions Friday called a nationwide strike, warning Prime Minister Mariano Rajoy of their opposition to his austerity policies as he negotiates the terms of an international financial bailout. The strike announced by the General Workers Union and the Labor Federation will take place on Nov. 14, in tandem with planned general strikes in Greece and Portugal. Heavy budget cuts and high jobless rates have increased social tensions during the persistent debt crisis across peripheral euro zone nations. 

MarketWatch.com:

• Sales of existing homes drop in September.

CNBC: 

• Why 'Fiscal Cliff' May Be Bigger Threat Than You Think.

Zero Hedge:

• Chart Of The Day: Q4 Deja Vu Dead Cat Bounces Again.  
• Q3 Earnings Season To Date: Revenue Beats: 41%; Misses 59%. (graphs)  
• Spain's Regional Bailout Fund: A Drop In A Bucket Of Insolvency.  
• Europe Ends Winning Week By Giving Half Of It Back.  
• This Is The Housing Bubble Beneath The "Recovery".  
• Why Rajoy's 'Delay-And-Pray' Strategy Won't Work.

Business Insider:

• GALLUP: ROMNEY LEADS BY SIX POINTS. 
• Nassim Taleb's New Paper Explains Why Governments Always Miss Their Own Budget Targets. 
• The Economist Behind The Existing Home Sales Report Said Something Very Important Today. Here's what NAR chief economist Lawrence Yun had to say about that: "The shrinkage in housing supply is supporting ongoing price growth, a pattern that could accelerate unless home builders robustly ramp up production." This speaks to a troubling dynamic that's been developing in the market for new homes. In recent months, homebuilders have been ramping up the construction of new homes. In a new report from the Census, housing starts surged to a their highest levels since 2008. The problem is that new home sales haven't been keeping up pace. Here's a chart from TD Securities economist Millan Mulraine:  
• Microsoft(MSFT) Was Asked A Critical Question About Its Future Yesterday — And Its Response Wasn't Encouraging.  
• Everyone's Talking About The Growing Odds Of An Electoral College Nightmare. 

Reuters: 

• GE(GE) cautious on 2013 after sales miss Wall Street target. General Electric Co reported weaker-than-expected third-quarter revenue, hurt by unfavorable exchange rates, and set a cautious tone for 2013, saying it expects the tough economic environment to continue. The largest U.S. conglomerate on Friday reported a 2.8 percent rise in sales, with revenue down at its aviation and healthcare arms, while the stronger U.S. dollar crimped overall results by diminishing the value of its foreign sales. Its shares fell almost 3 percent. "We're not assuming that Europe gets any better," Chief Executive Officer Jeff Immelt told investors on a conference call. "We're looking at '13 being kind of like '12, with the big variable being the fiscal cliff." 
• Protests, gunfire in Lebanon after Beirut killing. Sunni Muslims took to the streets and burned tyres across Lebanon in protest against the killing of senior intelligence official Wissam al-Hassan in a car bomb on Friday, witnesses said. Protesters, infuriated by the death of the prominent Sunni, blocked roads in the eastern Bekaa valley region, the northern area of Akkar, neighbourhoods of the capital Beirut and in the southern city of Sidon. Former Lebanese Prime Minister Saad al-Hariri accused Syrian President Bashar al-Assad - a member of an offshoot of Shi'ite Islam - of being behind the huge car bomb which killed Hassan and at least seven other people in central Beirut on Friday. The attack has brought the violence in neighbouring Syria to the Lebanese capital, confirming fears that the conflict is infecting the surrounding region. 
• Al Qaeda attack on Yemen army base kills 24. Al Qaeda killed 16 soldiers in an attack on an army base in south Yemen on Friday, medical and military sources said, in a further show of strength by Islamist militants despite a U.S. campaign of drone strikes to neutralise them. Militants tightened their hold on parts of Yemen during an uprising that ousted veteran president Ali Abdullah Saleh in February, raising concern for the security of top oil exporter Saudi Arabia next door and nearby shipping lanes.

Financial Times:

• Manufacturers warn of ‘fiscal cliff’ threat.

Telegraph: 

• Europe mistakes market lull for vote of confidence.

Handelsblatt:

• BlackRock's(BLK) Fink Says Market to Stay Volatile. Political risks, which are high at the moment, will continue to cause financial-market volatility, BlackRock CEO Laurence D. Fink said in a guest commentary. Public attention is shifting to U.S. from European debt crisis. European govts raising taxes adn cutting benefits has led to uncertainty and has put a brake on consumption. 

Cinco Dias:

• Spanish Banks Resist Taking Stakes in Bad Bank. Bank of Spain governor Luis Maria Linde met executives of lenders including Santander, BBVA, La Caixa, Banco Sabadell, Bankinter, Kutxabank and Unicaja. Lenders don't like to take part in the bad bank as Bank of Spain has yet to clear purchase prices to be applied by the bad bank. Lenders also want clarification on possible inclusion in the bad bank of new types of assets, including real estate, such as consumer loans.