Weekend Headlines
Bloomberg:
- Europe Finance Chiefs Seek Greek Pact as Economy Gloom Grows. European finance chiefs will seek a program to maintain Greek solvency today after the country’s parliament approved a raft of austerity measures, even as the currency union confronts the prospect of a worsening economy. Finance ministers from the 17-member group will meet at 5 p.m. in Brussels following the Nov. 8 agreement by Greek lawmakers to make cuts in pensions and benefits. While the ministers are unlikely to finalize an updated aid package, a European official said Nov. 9 that they’ll find a way to overcome a gap in the country’s financing this week. “We remain confident that European support will be agreed on by the end of November, or early in December,” Erik Nielsen, London-based chief global economist at UniCredit SpA, wrote in a note to clients yesterday.While a two-month-old European Central Bank bond-buying plan has helped ease borrowing costs for euro-area countries, leaders including Chancellor Angela Merkel are confronting an additional challenge as economic malaise reaches Germany, whose indicators last week showed growth grinding to a halt. With the threat that a showdown over the U.S. budget could compound a slowdown in global growth, ECB President Mario Draghi said Nov. 8 the outlook for the euro area is worsening.
- German Bonds Advance as Reports Show European Slowdown Deepening. Germany’s government bonds rose for a third week as data showed the economic slowdown is spreading to Europe’s largest economies, underpinning the case for the region’s central bank to cut interest rates to boost growth. Ten-year bund yields dropped to the lowest level in two months yesterday as data showed industrial production slumped in France, Italy and Finland. European Central Bank President Mario Draghi said the euro-area economy was expected to “remain weak” after policy makers kept the main refinancing rate at a record low of 0.75 percent on Nov. 8. German two-year note yields were below zero every day this week. Spain’s bonds fell as optimism waned that the nation will ask for a bailout. “The data, particularly industrial production, was disappointing, which is causing concern that Germany is being dragged down toward recession,” said Nick Stamenkovic, a fixed- income strategist at RIA Capital Markets Ltd. in Edinburgh. “Accordingly, 10-year yields have dropped.”
- European Central Bank Should Open Its Chamber of Secrets. The European Central Bank wields more power now than at any point in its 14-year history. If it wants to use that power responsibly, it needs to be a lot more open with the people whose well-being it aims to ensure. Thanks in large part to its lead role in fighting the euro area’s festering debt crisis, the ECB is taking on vast new duties. It has become a lender of last resort, supporting governments in their battles with skeptical markets. It will soon supervise the entire currency union’s banking system. All this comes on top of its regular job as maker of monetary policy for the 17 countries that use the euro. At the same time, the central bank shares less information with the public than its counterparts in the U.S. and U.K. do.
- Spain Prime Minister to Halt Evictions Following Suicide. Spanish Prime Minister Mariano Rajoy will temporarily halt evictions of the most vulnerable families as the government devises measures to help people stay in their homes after a woman killed herself in Baracaldo. The Spanish people are experiencing “terrible things and inhumane situations,” the premier said at an election rally in Lerida, Catalonia last night. The government “will defend the most vulnerable families affected by the evictions and act with seriousness, sensitivity and great humanity,” he said.
- Japan Contraction Piles Pressure on Noda, Central Bank: Economy. Japan’s economy shrank last quarter as exports tumbled and consumer spending slumped, putting pressure on the central bank to add stimulus and hurting Prime Minister Yoshihiko Noda’s record as he prepares for elections. Gross domestic product fell an annualized 3.5 percent, the most since the earthquake and tsunami in early 2011, Cabinet Office data showed today in Tokyo. The median of 23 estimates in a Bloomberg News survey was for a 3.4 percent decline. Shipments to Asia, Europe and the U.S. all slid, as did capital spending. With analysts also seeing a GDP decline this quarter, according to a Bloomberg survey last week, Japan faces the risk of its third textbook-definition recession since 2008. The deterioration may undermine plans by Noda to implement the nation’s first sales-tax rise in more than a decade, and raises the stakes of a political impasse that’s left the government running out of cash.
- Japan Curbing China Investment as Feud-Weary Firms Flee. After anti-Japan protesters in China smashed cars and torched dealerships, Koito Manufacturing Co. (7276) suspended a plan to triple output in the country. With a new factory half-built, Koito -- a Toyota Motor Corp. (7203) supplier -- reasoned that it may no longer need it. “Demand from automakers is unclear, so we don’t know how long we will have to freeze the project,” said Shinji Karasawa, spokesman for the Tokyo-based headlight maker. Along with Koito, Japanese parts-makers including Sumitomo Electric Industries Ltd. (5802) and Toyo Tire & Rubber Co. are rethinking plans to expand in China, where Toyota’s sales plunged 41 percent in September as demonstrations over disputed East China Sea islands flared.
- Dimon Says Banks Need Truce With Washington to Revive Economy. JPMorgan's (JPM) Jamie Dimon, who once publicly challenged Federal Reserve Chairman Ben S. Bernanke’s judgment and said Paul Volcker didn’t understand capital markets, called today for U.S. officials and corporate chiefs to halt “antagonistic behavior” and work together. “Let’s just start collaborating, let’s get this country working again and stop fighting each other, because that’s not going to get us anywhere,” Dimon, the bank’s chief executive officer, said today in an interview on CNBC television. President Barack Obama’s win of a second term in the White House helped propel the KBW Bank Index to its worst drop in five months on Nov. 7.
- Israel Warns of ‘Painful’ Response to Bombings From Gaza, Syria. Israeli leaders vowed to escalate military operations against the Gaza Strip after two days of Palestinian rocket attacks and warned Syria that additional cross-border fire would bring a “painful” response. Prime Minister Benjamin Netanyahu said Israel won’t “sit idly by” after more than 65 missiles fired from Gaza yesterday caused property damage and injuries in neighboring Israeli communities. Defense Minister Ehud Barak raised the prospect of a new ground offensive, the first since Israeli troops withdrew from Gaza in 2009 after a three-week military assault that left more than 1,100 Palestinians dead. “If we have to re-enter to strike Hamas and provide security for Israeli citizens, we won’t hesitate,” Barak said, speaking at an international defense industry conference in Tel Aviv.
- Apple(AAPL) Settles HTC Patent Suits Shifting From Jobs’ War. Apple Inc. (AAPL) settled all global lawsuits with HTC Corp. (2498), signaling a new willingness to resolve patent disputes without resorting to the “thermonuclear war” stance favored by co-founder Steve Jobs.
- White House Plans Public Appeal on Deficit. Counting on the Election's Momentum, President Obama Will Try to Marshal Support for Tax Increases, Spending Cuts. The White House plans an aggressive public campaign to build support for its approach to reduce the deficit through tax increases and spending cuts, a sharp contrast to its private talks with Republicans that faltered last year. President Barack Obama will meet with labor leaders Tuesday and a number of chief executives on Wednesday, in an effort to solidify backing for his proposals.
- Shifting Landscape Threatens China's Banks. China's banks are likely to face pressure to adjust their business models as the country looks to rebalance its economy toward more consumption and away from bank-fueled investment, which has enriched lenders.
- Organic Food To Be Tested Periodically. The U.S. Department of Agriculture said Friday it would require periodic tests of organic food starting next year to help ensure producers aren't using prohibited pesticides, genetically modified organisms or other nonorganic substances.
- Weekend gas lines ease up in NY, but may return. At least for one day, drivers in the New York region seem to be getting a break from spending hours in gas lines after Superstorm Sandy. Around New York City, they still waited longer than usual Saturday at stations. But the lines that stretched a dozen Manhattan blocks earlier in the week at some stations were far shorter. Many were closed — for lack of fuel or taking a break. In Brooklyn, drivers waited about 20 minutes at most — much less than in previous days. But on Staten Island, the few open stations were busier, with about 20 cars lined up on one street amid stalled traffic.
- Investors Turn Cautious on Crude. Hedge-fund managers are losing faith that persistently strong crude-oil prices will hold amid a fragile macroeconomic backdrop, both in the U.S. and globally, and an adequate oil supply. Their shift in positions, seen in two recent surveys, could signify that oil prices, which have been declining since hitting a peak in mid-September, could drop further. Money managers, including hedge funds, cut their wagers that Brent crude prices would rise in the week ended Oct. 30 to 91,462 contracts, the lowest number since early August, according to figures reported Nov. 5 by derivatives exchange IntercontinentalExchange Inc.
- No Individual Charges In Probe of J.P. Morgan(JPM). The top U.S. securities regulator doesn't intend to charge any individuals in its planned enforcement action against J.P. Morgan Chase & Co. for the allegedly fraudulent sale of mortgage bonds, according to people close to the investigation. The largest U.S. bank by assets will pay a significant financial penalty under the proposed deal, which has been approved by Securities and Exchange Commission staff but not by the agency's five commissioners, said the people close to the probe.
- The Hard Fiscal Facts. Individual tax payments are up 26% in the last two years. Even if Mr. Obama were to bludgeon Republicans into giving him all of the tax-rate increases he wants, the Joint Tax Committee estimates this would yield only $82 billion a year in extra revenue. But if growth is slower as a result of the higher tax rates, then the revenue will be lower too. So after Mr. Obama has humiliated House Republicans and punished the affluent for the sheer joy of it, he would still have a deficit of $1 trillion. Most of our readers know all this, but we thought you'd like some new evidence to rebut the kids who voted for your taxes to go up when they return from college for Thanksgiving. Maybe they'll figure it out when they have a job, if they can find one.
CNBC:
Business Insider:- 'Fiscal Cliff' Mess Is a 'Grand Canyon': Bill Gross. Two of the most influential market prognosticators today — Pimco’s Bill Gross and Goldman Sachs’s Jim O’Neill — both warned clients over the weekend of the perils of the coming "fiscal cliff," when tax increases and spending cuts kick in at the end of the year. “U.S. fiscal cliff (is) deeper than advertised,” said Gross, whose firm oversees $1.9 trillion, in a tweet. “It’s a Grand Canyon. Washington will defer entitlement cuts & raise revenues only marginally.” O’Neill, chairman of Goldman Sachs Asset Management, warned clients in a note that market momentum was quickly turning down on fears of policy gridlock. “The world and the U.S.’s own people need Washington, D.C. to be sensible,” wrote O’Neill. “We had a rehearsal of life without a fiscal package in August 2011, and it wasn’t very pleasant.”
- The Most Important Chart To Consider For The Weekend (Or Tom Lee's Nightmare).
- Reading Between The Lines. One of the great faults with paying attention to Europe is to take what they tell you as factual. It is going to be either “debt forgiveness” or “more money” or “brute force” and there are quite serious consequences for many nations and many governments whichever path is chosen.
- If The Greek Elections Were Held Today.
- Spot The Start Of The End Of The Keynesian Dream. (graph)
- Austerity Farm: Where Cuts For Some Are More Equal Than Cuts For Others.
- Visualizing The Impotence Of Bernanke's Wealth Transmission Channel.
- Petraeus' Resignation Will Stop Him From Testifying About Benghazi.
- Rail Traffic Takes A Turn For The Worse. (graph)
- President Obama Has Drawn A Dangerous Line In The Sand. The headlines make it seem like B&O are ready to work together, and achieve the necessary compromises to avoid falling off a cliff. I think the press has it wrong. We’re headed into a bitter fight; in part, because the President has drawn a very dangerous line in the sand.
- China’s New Loans Fall 14% Raising Questions About Its Recovery.
- Coal miner blames President Obama's energy policies for layoffs of 156 workers in Utah, Ill. A coal producer owned by a longtime critic of President Barack Obama's energy policies is laying off nearly 160 workers at Illinois and Utah mines in the wake of the president's re-election. In a statement, Murray Energy blames what it calls the Obama administration's "war on coal" for the pink slips being given to 102 workers at its West Ridge Mine in Utah and 54 at its operation in the southern Illinois town of Galatia.
Washington Post:
- Lawmakers want probe of Petraeus investigation. Senior lawmakers called for an inquiry into the FBI’s handling of the case of CIA Director David H. Petraeus on Sunday as new details and questions emerged about the investigation that led to his resignation last week. Law enforcement sources identified Jill Kelley, 37, of Tampa as the woman whose report of harassing e-mails eventually exposed an extramarital affair between Petraeus and Paula Broadwell, a former Army officer who wrote a biography of the retired four-star general.
- Intel(INTC) will end support for Oregon Boy Scouts over Scouts' policy on gays. They're a casualty of a change in Intel's requirements -- which attaches a nondiscrimination pledge to the donation -- and the Boy Scouts of America's ban on gay members and troop leaders. "We don't have many gifts at that level. So that's going to hurt," said Matt Devore, head of the Scouts' Cascade Pacific Council. "When any political, adult issue gets in the way, where the real pain is is when it affects children."
- Mark Landsbaum: U.S. becoming California becoming Greece. California arguably leads the nation in government dependency, while events in Greece illustrate the ultimate destination of that path.
NRO:
USA Today: - Obamacare Is Still Vulnerable. Now is not the time to go wobbly. Obamacare is still harmful and still unpopular. The presidential election was hardly a referendum, as it pitted the first person to enact Obamacare against the second person to enact it. Since the election, many state officials are reaffirming their opposition to both implementing exchanges and expanding Medicaid. If enough states do so, Congress will have no choice but to reopen Obamacare. With a GOP-controlled House, opponents will be in a much stronger position than they were when this harmful law was enacted.
- Israel drawn into Syria fighting for first time. Israel was drawn into the fighting in neighboring Syria for the first time Sunday, firing warning shots across the border after an errant mortar shell landed near an Israeli military installation in the Golan Heights.
- Don’t fear fiscal cliff, says Democrat. A leading Democratic senator has said her party should be willing to go off the fiscal cliff in order secure tax rises on the wealthy, raising the stakes in year-end budget negotiations. “If the Republicans will not agree with that, we will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year,” said Patty Murray, who was co-chair of last year’s deficit supercommittee, on ABC’s This Week.
- We've been on the back foot with the EU ever since we joined. Can we agree to lead separate lives – or must it be divorce?
- The Ifo Institute for Economic Research President Hans-Werner Sinn says it would be a "foreseeable disaster" if all countries on the ECB's banking supervision body would have equal voting rights, citing an interview with Sinn. Sinn criticized any solution where all countries regardless of size each have one vote on banking supervison board. The majority of Mediterranean countries to be unchallenged in such a solution, meaning those nations can decide what banks would be regarded for aid through ESM guarantees. Form of guarantor's liability for southern Europe banks planned by EU would cost northern European countries billions, Sinn said.
- The troika overseeing Greece's aid package, will only give Greece more money if it guarantees planned job cuts in the public sector, citing government officials. The troika is not satisfied with Greece just providing a number. The troika said that Greece must provide a list with names of the 2,000 people it will make redundant before the end of the year.
- German taxpayers have so far provided EU34.5b in credit and guarantees to Greece, citing figures from Germany's Finance Ministry. Another EU33b for Greece still outstanding.
- German Finance Minister Wolfgang Schaeuble said euro-region finance ministers are unlikely to be able to decide on the next aid tranche for Greece when they meet Nov. 12, citing Schaeuble.
- Amid renewed violence, Israel tells Palestinians to stop statehood bid or funding will be cut. Israel will stop collecting tax revenues for the Palestinian Authority and not hand over any money if President Mahmoud Abbas continues to seek observer state membership of the United Nations, Israel’s finance minister said on Saturday. “If the Palestinians continue to advance their unilateral move they should not expect bilateral cooperation. We will not collect their taxes for them and we will not transfer their tax revenues,” Finance Minister Yuval Steinitz said.
- China October Copper, Iron Ore Imports Fall. China's copper imports dropped 18.5 percent in October to hit its lowest level in 15 months, while iron ore imports also fell to a one-year low, which was partly caused by a week-long holiday at the start of the month. The world's top copper consumer received 321,879 tonnes of anode, refined metal, alloy and semi-finished copper production in October, down 16.1 percent from year ago. The October imports surprised traders who had anticipated importers to have scheduled more term shipments for October as demand rose on infrastructure projects. Inventories at Shanghai's bonded warehouses, the country's largest, have also risen 14 percent from late September to about 800,000 tonnes currently, a sign that some of the scheduled arrivals could have been pushed back to November. Imports of iron ore from the world's top steel consumer fell 13 percent from a month ago to 56.43 million tonnes in October -- the lowest since October 2011. However, on a year on year basis, imports were up 13 percent.
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Iran has rejected a U.S. request to start direct contact with the country, citing Major General Yahya Rahim Safavi, senior military adviser to Iran's supreme leader.
Weekend Recommendations
Barron's:- Made positive comments on (CAR), (FCXM), (VMED), (CKEC), (HRG), (AAPL), (COH), (BBBY), (FDX), (JOSB) and (REV).
- Asian indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 123.50 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 90.75 +3.5 basis points.
- FTSE-100 futures -.20%.
- S&P 500 futures +.16%.
- NASDAQ 100 futures +.25%.
Earnings of Note
Company/Estimate
- (DHI)/.28
- (BZH)/-1.17
- (HOLX)/.36
- (JEC)/.79
- None of note
- None of note
- The Eurozone Finance Ministers Meeting, Germany ZEW Sentiment Index, Japan Industrial Production report, Bank of America Merrill Energy Conference, Goldman Sachs Industrials Conference and the (RAI) investor day could also impact trading today.
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