Tuesday Watch

Evening Headlines 
Bloomberg: 

• Europe Gives Greece 2 More Years to Reach Deficit Targets. Euro-area finance ministers gave Greece two extra years to wrestle down its budget deficit, pledging to plug the resulting financing gaps in order to keep the country in the single currency and prevent a renewed flareup of the debt crisis. Finance ministers granted Greece until 2016 to cut the deficit to 2 percent of gross domestic product. They put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute. In the latest compromise in three years of crisis fighting, creditors led by Germany opted to keep money flowing to Greece instead of risking a default that could lead to the nation’s exit from the euro and stir more turmoil for countries left in it.
• Austerity Backlash Threat to Peripheral Bond Rally: Euro Credit. Spain and Portugal are among the so-called peripheral countries preparing for labor unrest, putting pressure on euro-region leaders to water down the austerity measures that helped power this year's bond-market rally. Spanish Prime Minister Mariano Rajoy faces a general strike tomorrow and Portuguese Premier Pedro Passos Coelho is bracing for social tumult as part of Europe-wide protests against debt-crisis budget tightening. "We've crosses a Rubicon in terms of societies buying into reform programs," said Richard McGuire, a senior fixed-income strategist at Rabobank in London. "Rajoy is walking a tightrope and Portugal is an example of popular unrest diverting or diluting reforms, with the ultimate risk of derailing them." The growing popular backlash against rising unemployment and slumping wages stemming from government efforts to shore up public finances threatens to slow the pace of economic reform. At the same time, the austerity measures are deepening recessions, making deficit goals tougher to achieve and perpetuating the need for additional belt tightening.
• Why French Economy Can’t Delay Its Competitiveness Shock. The government of French President Francois Hollande deserves credit for its decision last week to cut payroll taxes. Unfortunately, by itself, the 20 billion euro ($25 billion) reduction in costs for companies won’t administer the “competitiveness shock” that a dire, government-commissioned study recommended Nov. 5 to revive growth. It certainly won’t allay the concerns of France’s largest trading partner, Germany, whose own economy would be at risk from a meltdown across the Rhine. As Germany’s Council of Economic Experts delivered its annual report to Chancellor Angela Merkel last week, one of its members, Lars Feld, warned that “the largest problem isn’t Greece anymore, or Spain or Italy, but France because France has done nothing to rebuild its competitiveness and is even heading in the opposite direction.” A recent cover line on the daily Bild Zeitung baldly asked: “Will France Be the New Greece?” The French government’s response fails to tackle the more fundamental challenge of curbing out-of-control public spending and easing France’s rigid labor laws, which were identified as the gravest threats to the economy both in the report by former Airbus SAS Chairman Louis Gallois and in a review published the next day by the International Monetary Fund. 
• China Stocks Fall to 7-Week Low on Property Tax, Retail Concerns. China’s stocks fell to the lowest level in seven weeks after the Xinhua News Agency reported the government may expand a property tax trial and Haitong Securities Co. said retailers may post weak sales this month. China Vanke Co. (000002) and Poly Real Estate Group Co. led declines for developers after Xinhua cited the housing minister as saying the government is watching for signs of surging transaction volumes and home prices. Suning Appliance Co. plunged 5 percent as Haitong said November sales for traditional retailers will be hurt by a shift towards online purchases. China Petroleum & Chemical Corp. slumped to the lowest in more than two weeks after the Beijing Times said China may cut gas prices tomorrow. “The economy seems to be stabilizing but there’s no solid evidence that it will pick up further,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Some investors are taking profits ahead of the year-end. Investors should avoid the property sector amid policy uncertainty.” The Shanghai Composite Index (SHCOMP) slid 1.4 percent to 2,050.05 at the 11:30 a.m. local-time break, heading for the lowest level since Sept. 26.
• Empty Offices Loom in Sydney as Building Spree Meets Bank Cuts. Sydney’s office vacancies are set to surge as Lend Lease Group (LLC)’s A$6 billion ($6.2 billion) financial center opens and older buildings are renovated while big tenants including Macquarie Group Ltd. cut jobs. About 400,000 square meters (4.3 million square feet) of space will hit the market in the next five years, including Lend Lease’s Barangaroo redevelopment in the former docklands district, according to UBS AG. That compares with 870,000 square meters added over the past 20 years.
• Consumers Closing Wallets in Japan Add to Noda’s Woes: Economy. Japanese consumers are closing their wallets as the economy’s outlook darkens, making it harder for Prime Minister Yoshihiko Noda to stave off the nation’s third recession in four years. Households are holding the most cash since 2005, shunning risk as they grow gloomier, Bank of Japan data shows. Sliding private consumption contributed to an annualized 3.5 percent decline in gross domestic product in the past quarter, a Cabinet Office report showed yesterday. 
• Carry Trades Lose Most Since ’11 as HSBC Gauge Warns: Currencies. The foreign-exchange market is signaling more pain ahead for currencies that benefit from a sustained global recovery, five years after the onset of the worst financial crisis since the Great Depression. HSBC Holdings Plc’s Global Hazard Indicator, which combines implied volatility readings in options for the dollar, euro and yen, shows wider price swings in currencies over the next year than in the coming three months. If history is any guide, that means the dollar and yen will strengthen and higher-yielding, higher-risk currencies such as the Brazilian real and South African rand will depreciate.

Wall Street Journal: 

• Nursing Homes Said to Overbill U.S. Hundreds of nursing homes overcharge Medicare every year for so-called skilled services, adding $1.5 billion in annual costs to the program, according to a federal report to be released Tuesday. About one-fourth of Medicare bills from facilities examined in the report were incorrect. The majority of these claims involved so-called upcoding, where a nursing home or other provider inflates the cost of its bill to Medicare by claiming more intensive services were done than actually performed. In other cases, nursing homes provided treatments that were inappropriate.
• FBI Agent in Petraeus Case Under Scrutiny. A federal agent who launched the investigation that ultimately led to the resignation of Central Intelligence Agency chief David Petraeus was barred from taking part in the case over the summer due to superiors' concerns that he had become personally involved in the case, according to officials familiar with the probe. New details about how the Federal Bureau of Investigation handled the case suggest that even as the bureau delved into Mr. Petraeus's personal life, the agency had to address questionable conduct by one of its own—including allegedly sending shirtless photos of himself to a woman involved in the case.
• Afghan Women Fear Rights Will Erode as U.S. Leaves. Rokhshana, a 14-year-girl, has been behind bars here since March. She is serving a yearlong adultery sentence after what she describes as rape by her adult cousin, who remains a free man. "I love my country, but there's no justice here," says Rokhshana at Herat's juvenile prison, her arms bearing the signs of beatings. 
• McGurn: Sex, Lies and Gmail. Did David Petraeus's personal troubles influence what he said to Congress about Benghazi?

MarketWatch.com: 

• Concern China banks under-reporting bad loans. Lenders could be giving some toxic debts generous reclassifications.

CNBC:

• Trouble Brewing for Euro as Greece Worries Grow. The euro, which hit a two-month low against the dollar on Tuesday as hopes that Greece would receive essential aid soon faded, faces further losses as concern about Greece’s future grow, currency analysts warn. 
• Could the Petraeus Scandal Scuttle a 'Fiscal Cliff' Deal?
• Fear of 'Fiscal Cliff' Taxes Puts Chill on Dividend Stocks. 
• Wealthy Dump Assets Amid Worries About Going Over 'Cliff'.
• ‘Social Risk’ Test Ordered By China for Big Projects.

Zero Hedge: 

• The Gini Is Out Of The Bottle: Did China "Outcapitalism" The US, Or Did America "Outcommunism" China?
• Post-Election Performance: Dip-Buyer's Dream Or Valuation Slump.
• Kerry, John Kerry: Defense Secretary.

Business Insider: 

• Microsoft(MSFT) Just Lost Its Most Important Executive.
• The Scene At The Rockaways Is Still Surreal, Weeks After Being Devastated By Sandy. (pics)
• Why Liberals Are Furiously Trying To Rename The Fiscal Cliff.
• Paula Broadwell's Father: 'This Is About Something Else Entirely, And The Truth Will Come Out'.
• China Is 'Actively Studying' An Expansion Of An Experimental Property Tax.
• NBCUniversal Is Laying Off 450 Workers.
• GLENN BECK TO REPUBLICANS: The Tea Party Is 'Doubling Down'.

The Blaze:

• Odd? Romney Got ZERO Votes In 59 Precincts in Philly, and 9 Precincts in Ohio. What if there are parts of the country where Romney not only got zero percent of the vote (a possibility in the case of vote totals so small that rounding renders them null), but actually got literally zero votes? For the nominee of a major party, that would be truly extraordinary – so extraordinary, in fact, that it would strain credulity. And seeing as this highly unlikely turn of events happened not in one or two precincts, but in over 59 in Philadelphia, and 9 in Cleveland, that credulity can be safely said to be completely strained, if not broken. From the Philadelphia Inquirer:

Telegraph: 

• Angela Merkel sticks to austerity script in Portugal as revolt builds. German Chancellor Angela Merkel braved hostile crowds in Portugal on Monday to show unflinching support for the country’s austerity ordeal and plead for patience as social cohesion frays.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.5% to -.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 124.0 +.5 basis point.
• Asia Pacific Sovereign CDS Index 89.25 -1.5 basis points.
• FTSE-100 futures -.43%.
• S&P 500 futures -.62%.
• NASDAQ 100 futures -.56%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (HD)/ .70
• (DKS)/.37
• (SKS)/.12
• (TJX)/.61
• (CSCO)/.46

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for October is estimated to rise to 93.0 versus 92.8 in September.

2:00 pm EST

• The Monthly Budget Deficit for October is estimated to widen to -$113.0B versus -$98.5B in September.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Yellen speaking, Eurozone Non-Farm Payrolls/Current Account, European/UK inflation data, Italy bill auction, Germany ZEW Sentiment Index, weekly retail sales reports, CSFB Healthcare Conference, Lazard Healthcare Conference, Stephens Investment Conference, Morgan Stanley Consumer/Retail Conference, Barclays Automotive Conference, Bank of America Merrill Banking/Financial Services Conference, (SWI) analyst day, (HUM) investor day and the (BBY) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.