Today's Headlines

Bloomberg: 

• Kerry Calls Talks Constructive With No Breakthrough Seen. U.S. Secretary of State John Kerry reported a “constructive” start to talks with Russia over Syria’s chemical weapons, while giving no sign of a breakthrough in negotiations. “We would both agree that we had constructive conversations regarding that, but those conversations are continuing,” Kerry said in Geneva today after initial meetings with Russian Foreign Minister Sergei Lavrov. Obstacles included a U.S. refusal to take military options off the table, a Russian official said under condition of anonymity. For its part, the U.S. has demanded that Syria be held to tight timelines in putting its chemical warfare agents under international control.

• Portugal’s 10-Year Bonds Decline for Fourth Day as Italy’s Drop. Portugal’s 10-year bonds fell for a fourth day before European Union and International Monetary Fund officials begin two reviews next week on how the nation is meeting the terms of its financial aid program. Italy’s 10-year government bonds declined for the first time in three days as euro-area leaders voiced concern that political instability could threaten economic reforms. Italian three-year borrowing costs rose to the most since October at an auction yesterday. German (GDBR10) bonds rose after a report showing U.S. retail sales climbed less than economists forecast boosted demand for safer assets before the Federal Reserve decides whether to slow the pace of bond purchases next week. 

• Merkel Warns Against German Tax Rises as Euro Crisis Not Over. German Chancellor Angela Merkel said she’s opposed to any tax rise for Europe’s biggest economy as the 17-nation euro bloc remains in crisis. “If the first thing we do is raise taxes for those who are successful, then it could be they won’t want to create any more jobs,” Merkel said at an election rally of her Christian Democrats in the western city of Osnabrueck today. “Therefore, tax increases are wrong.” 

• Crude Poised for Biggest Weekly Drop Since July on Syria. WTI for October delivery slid 75 cents, or 0.7 percent, to $107.85 a barrel at 1:20 p.m. on the New York Mercantile Exchange. Prices are down 2.4 percent this week, heading for the biggest loss since the five days ended July 26. The volume of all futures traded was 35 percent less than the 100-day average.

• Canada Household Debt Ratio Rises to Record in 2nd Qtr. The ratio of Canadian household debt to disposable income rose to a record in the second quarter on increased mortgage borrowing after policy makers took steps to curb its growth. Credit-market debt such as mortgages rose to 163.4 percent of disposable income, compared with a revised 162.1 percent in the prior three-month period, Statistics Canada said today in Ottawa. Mortgage borrowing rose 1.7 percent to C$1.11 trillion ($1.08 trillion).

• Factory Rebirth Fizzles in U.S. as Work Shipped Overseas. Randy Webb sees scant evidence of a U.S. manufacturing rebound in the Ohio plant where he’s fixed aircraft electronics for 25 years. Honeywell International Inc. (HON) is closing the shop in 2014 as it expands such work overseas. Webb is among 80 employees poised to lose their jobs in Strongsville, Ohio, outside Cleveland, near where General Electric Co. (GE) will shut a lighting factory in favor of production in Hungary. Delphi Automotive Plc (DLPH) is sending parts assembly to Mexico from Flint, Michigan, and Eaton Corp. (ETN) will make extra-large hydraulic cylinders in the Netherlands, not Alabama. 

• ViroPharmaVPHM) Said to Hire Goldman Amid Interest From Sanofi. ViroPharma Inc. (VPHM), a producer of drugs that treat rare diseases, has attracted interest from suitors including European drugmakers Sanofi (SAN) and Shire Plc (SHP), said people with knowledge of the process. ViroPharma’s shares surged.

Wall Street Journal:

• Poll Finds Republicans Gain Favor on Key Issues. The Republican Party is gaining a public-opinion edge on several key issues ahead of the 2014 elections, as Americans question President Barack Obama's leadership on Syria and worry about the country's overall direction, a new Wall Street Journal/NBC News poll shows. Republicans are now rated higher than Democrats on handling the economy and foreign policy, and the GOP's lead has strengthened on several other issues, including dealing with the federal deficit and ensuring a strong national defense.

Zero Hedge:

• Retail Sales Miss, Ex-Auto Virtually Unchanged; Building Materials, Clothing Sales Decline. (graph)

• CBOE Breaks (Again).

• Something Is Wrong With This Picture: Record Restaurant Workers, Sliding Restaurant Sales. (graph)

• Benghazi, One Year Later.

• Consumer Confidence Collapses - Biggest Miss On Record. (graph)

• PIIGS Bonds Get Slaughtered At Close. (graph)

• TEPCO Official Admits Fukushima "Out Of Control".

Business Insider:

• 11 Images From Boulder, Colorado Flooding That Are Heartbreaking And Surreal.

New York Times:

• Qaeda Leader Urges Muslims to Boycott and Attack U.S. In an audio speech a day after the 12th anniversary of the attacks of Sept. 11, 2001, Ayman al-Zawahiri, the leader of Al Qaeda, called on Muslims to launch a “a few disparate attacks” on American soil and to “bleed America economically,” according to a translation on the American SITE monitoring service on Friday.

Forbes:

• The Behind The Scenes Cronyism That Helped Plant The Seeds Of The Financial Crisis.

Valor Economico:

Restructuring: Flowers slams Europe over inaction


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• Brazil Risk of Downgrade Affects Fiscal Policy. Finance Minister Guido Mantega's decision to order Caixa to cut lending to large cos. aimed to address IMF's concerns about Brazilian fiscal policy discussed in Aug. report. IMF reported increased concern in govt's economic team about possibility of downgrade of Brazil's sovereign credit rating. Rating downgrade would put more pressure on BRL, potentially harming infrastructure investment, and may cause problems for President Dilma Rousseff in her re-election campaign next year.

Echoing fears that European policymakers remain in a state of cognitive dissonance – recognizing the need for root-and-branch overhaul of peripheral banks, but backtracking on joint liability plans – Christopher Flowers, the legendary FIG investor who now runs the £2.3 billion ($3.5 billion) private equity group JC Flowers, sounded the alarm over the negative sovereign-bank feedback loop. In a shot across the bows of market bulls, who cite the return of capital flows to weaker eurozone states, Flowers issued a stark warning: "There is a scenario where we have a Lehman-type event: we wake up some Thursday and a big country is in trouble. "And the ECB will have to decide to support banks x, y, z. And then the ECB will, in fact, decide to own bank x, y, z.


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El Economista:

• Spain May Bring Forward Tax Increases to 2013. Spain may bring forward to 2013 some tax increases planned for 2014, citing people familiar with the matter.