Bloomberg:
- Spanish Banks Need More Capital Than Tests Find, Moody’s Says. Spain’s banks face a capital shortfall that could climb to 105 billion euros ($135 billion), almost double the estimate the government provided last week, according to Moody’s Investors Service. The nation’s lenders may need infusions of 70 billion euros to 105 billion euros to absorb losses and still keep capital ratios above thresholds outlined in legislation last year, Moody’s analysts wrote yesterday in a report. That compares with the 53.7 billion euro shortfall found last week after officials commissioned a stress test designed to lift doubts about the financial industry’s ability to withstand losses.
- Portugal Tolerance for Higher Taxes Reaching Limit: Euro Credit. Prime Minister Pedro Passos Coelho's tax increases during Portugal's two-year recession may be about to backfire. The CGTP labor group said Sept 29 at a demonstration against austerity policies in central Lisbon that it may call a general strike. Portugal already has Western Europe's poorest population in terms of output per capita.
- JPMorgan(JPM) Sued by N.Y. for Fraud Over Mortgage Securities. JPMorgan Chase & Co. (JPM), the biggest U.S. bank, was sued by New York Attorney General Eric Schneiderman over claims that the Bear Stearns business the bank took over in 2008 defrauded mortgage-bond investors. Investors were deceived about the defective loans backing securities they bought, leading to “monumental losses,” Schneiderman said in a complaint filed today in New York State Supreme Court.
- Investors Doubt QE3 Lift to U.S. Discretionary Spending. Investors are proving skeptical that the Federal Reserve’s announcement of additional quantitative easing will get Americans to spend more. The Consumer Discretionary Select Sector SPDR Fund -- which includes Amazon.com Inc. (AMZN) and Macy’s Inc. (M) --has lagged behind the Consumer Staples Select Sector SPDR Fund by 2.8 percent since Sept. 14, the day after the Fed unveiled plans to buy mortgage- backed securities at a pace of $40 billion a month until the labor market improves.
- Hunt for Obama’s Middle East Policy Comes Up Empty. Like many observers of the Obama administration, I’ve been confused by its unwillingness to take even the relatively modest steps required to bring about a decisive end to the regime of Bashar al-Assad. More than 30,000 people have been killed since the beginning of the uprising against him, according to the Syrian Observatory for Human Rights, and untold numbers have been wounded, tortured or raped.
- Militant Link to Libya Attack. U.S. Tracks Egyptian Operative Freed From Prison in Wake of Arab Spring. The revolutions that swept the Middle East and North Africa also emptied prisons of militants, a problem now emerging as a potential new terrorist threat. Fighters linked to one freed militant, Muhammad Jamal Abu Ahmad, took part in the Sept. 11 attack on U.S. diplomatic outposts in Libya that killed four Americans, U.S. officials believe based on initial reports. Intelligence reports suggest that some of the attackers trained at camps he established in the Libyan Desert, a former U.S. official said. Western officials say Mr. Ahmad has petitioned the chief of al Qaeda, to whom he has long ties, for permission to launch an al Qaeda affiliate and has secured financing from al Qaeda's Yemeni wing. U.S. spy agencies have been tracking Mr. Ahmad's activities for several months. The Benghazi attacks gave a major boost to his prominence in their eyes.
- Strike Looms at ABC Ahead of Presidential Debate. As media outlets prepare for Wednesday’s first presidential debate, the specter of strike action is looming at ABC, which is providing broadcast coverage for all networks. The membership of the National Association of Broadcast Employees and Technicians has authorized its negotiation committee to call a strike, if necessary, among its members employed by ABC, which include camera operators. The Walt Disney Co.-owned network and the union have been in negotiations since the union’s labor contract ended in early 2011. The talks have been tense and have lately required the addition of a federal mediator.
- Greece's Creditors Look Askance at Cutbacks. Greece's international lenders cast doubt on parts of Athens' plans to save billions of euros through new cutbacks and tax measures, throwing a potential wrench in the government's efforts to reach a quick deal to unlock new aid for the country.
- Earnings Wizardry. CFOs around the nation have been busy closing their books and preparing for yet another earnings season. (It kicks off in earnest on Oct. 9, as always, with Alcoa Inc.) But what exactly have they been busy with? If you believe a recent academic study, one out of five U.S. finance chiefs have been scrambling to fiddle with their companies' earnings. Not Enron-style, fraudulent fiddles, mind you. More like clever—and legal—exploitations of accounting standards that "manage earnings to misrepresent [the company's] economic performance," according to the study's authors, Ilia Dichev and Shiva Rajgopal of Emory University and John Graham of Duke University. Lightly searing the books rather than cooking them, if you like.
- Property Owners Face a New Surtax. Passed in 2010 to help fund the health-care overhaul, this 3.8% surtax kicks in next year on many forms of investment income—including some interest, dividends, rents and capital gains.
- Stephens: Benghazi Was Obama's 3 a.m. Call. Libya was a failure of policy and worldview, not intelligence. Why won't the Libya story go away? Why can't the memory of U.S. Ambassador Chris Stevens and his staff be consigned to the same sad-and-sealed file of Americans killed abroad in dangerous line of duty? How has an episode that seemed at first to have been mishandled by the Romney camp become an emblem of a feckless and deluded foreign policy? The story-switching and stonewalling haven't helped. But let's start a little earlier.
- The fault lines of Anti-Japan fury in China. Police did little to calm unrest and looters of stores were organized. Recent anti-Japan fury spurred angry crowds to march through streets in cities across China. The protests sometimes turned violent, as when a vicious rampage in Xi’an, in the northern province of Shaanxi, left a father paralyzed.
- After 'Fiscal Cliff,' 90% of Americans' Taxes Would Rise. In the latest forecast of trouble ahead if Capitol Hill cannot overcome its fiscal paralysis, the Tax Policy Center, a Washington think tank, predicted taxes would rise by $500 billion in 2013, or an average of almost $3,500 per household.
- China's Broken Growth Model.
- Presenting Spain's Economic Collapse In Context. (graph)
- Everything You Wanted To Know About Tri-Party Repo Markets But Were Afraid To Ask.
- Australian Government 'Finds' Extra $338bn Assets (But No Unicorns Yet).
- Mexican Diplomat Says America Pretty Much Invited The Sinaloa Drug Cartel Across The Border. Leaked emails from the private U.S. security firm Stratfor cite a Mexican diplomat who says the U.S. government works with Mexican cartels to traffic drugs into the United States and has sided with the Sinaloa cartel in an attempt to limit the violence in Mexico. Most notably, the reports from MX1 line up with assertions by a Sinaloa cartel insider that cartel boss Joaquin Guzman is a U.S. informant, the Sinaloa cartel was "given carte blanche to continue to smuggle tons of illicit drugs into Chicago," and Operation Fast and Furious was part of an agreement to finance and arm the Sinaloa cartel in exchange for information used to take down rival cartels.
- Student Loan Default Rates Are Getting Real Ugly. (graph)
Reuters:
- Exclusive: Spain ready for bailout, Germany signals "wait"- sources. Spain is ready to request a euro zone bailout for its public finances as early as next weekend but Germany has signaled that it should hold off, European officials said on Monday.
- Samsung allowed to sell Galaxy Tab in US as court lifts ban. A U.S. court removed a temporary sales ban against Samsung Electronics Co Ltd's Galaxy Tab 10.1 won by Apple Inc(AAPL) in a patent dispute, allowing the South Korean company to sell the product in the United States.
- Lockheed(LMT) won't issue notices on job cuts after US government guidance. The White House got some good news on Monday when Lockheed Martin said it would not issue notices of possible job reductions before the Nov. 6 election. With numerous defense industry jobs on the line in critical states including Virginia, a wave of job cuts could embarrass Democratic President Barack Obama's administration.
- Brazil car sales plunge in Sept as tax breaks lose punch. Brazilian auto sales plunged 31 percent in September from a record-breaking August, an industry group said on Monday, as the effect of extended tax breaks waned on consumers. Sales of cars and light trucks were also down 8 percent compared with September of last year, according to data from dealer association Fenabrave.
- Call for bank bonuses to be paid in debt. Banks should pay bonuses in debt, which would be wiped out if a bank failed, an EU banking report will suggest as Europe attempts to step up the fight against bankers’ pay. The Liikanen commission, an independent review set up almost a year ago by EU commissioner Michel Barnier, will on Tuesday recommend reforms for long-term pay incentives as well as advocating ringfencing trading activities to make big banks safer.
- Banks reap profits on mortgages after QE3. Although the average rate on a fixed 30-year mortgage reached 3.4 per cent this week – a record low – mortgage rates could be lower if banks passed on the full drop in their funding costs. “For banks which are mortgage originators this [QE3] was some of the best news they could possibly have heard,” said Steven Abrahams, mortgage strategist at Deutsche. “They will continue originating loans and selling them into the market at a significant premium.”
- Why Germany must face up to its €1 trillion headache. Here's another fine mess the political hubris of the euro has got Europe into.
- None of note
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 136.50 unch.
- Asia Pacific Sovereign CDS Index 114.25 -1.0 basis point.
- FTSE-100 futures -.60%.
- S&P 500 futures +.06%.
- NASDAQ 100 futures +.01%.
Earnings of Note
Company/Estimate
- (AYI)/.93
- (MOS)/1.16
Afternoon:
- Total Vehicle Sales for September are estimated to rise to 14.5M versus 14.46M in August.
- None of note
- The Eurozone inflation data, Brazil industrial production report, China's Non-Manufacturing PMI, Australia trade figures, ISM New York for September, weekly retail sales reports, RBA rate decision, (PVH) analyst day and the (ATU) investor day could also impact trading today.
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