- Draghi Says ECB Won’t Hesitate to Fail Banks in Stress Tests. European Central Bank President Mario Draghi said officials won’t hesitate to fail banks in its stress test next year as the ECB sets out to prove its vigilance in its new role of banking supervisor. “Banks do need to fail” to prove the credibility of the exercise, Draghi said in a Bloomberg Television interview with Francine Lacqua in Frankfurt, after the ECB published plans for its bank-asset check. “If they do have to fail, they have to fail. There’s no question about that.”
- Coutts Cutting Japan Stocks on Concern About Third Arrow. Coutts & Co., the wealth management unit of Royal Bank of Scotland Group Plc, is cutting holdings of Japanese shares on concern Prime Minister Shinzo Abe won’t pass the structural reforms needed to boost the economy.
- ECB's AQR Prompts 'Buy Sub CDS' on Italian Banks at Threadneedle. Investors should buy protection on subordinated debt of Italian and Portuguese banks, as well as on Commerzbank, Paul Smillie, an analyst at Threadneedle, says in an interview. An accurate assessment of European bank balance sheets will find capital shortfalls in Italy, Germany, Portugal and potentially Spain.
- European Stocks Retreat as Orange, STMicro Sales Decline. European stocks declined, following the longest rally for the region’s equities in 40 months, as companies from Orange SA to STMicroelectronics NV (STM) reported lower quarterly sales. Orange retreated the most in more than two years as France’s largest telecommunications company also posted earnings that dropped in the third quarter. STMicroelectronics slid the most in three months after Europe’s biggest semiconductor maker also reported a $142 million quarterly net loss. The Stoxx Europe 600 Index retreated 0.6 percent to 318.99 at the close of trading.
- Crude Falls to Three-Month Low After Supply Report. WTI for December delivery slid $1.52, or 1.6 percent, to $96.78 a barrel at 12:23 p.m. on the New York Mercantile Exchange after falling to $96.16, the lowest level since July 1. The volume of all futures traded was 38 percent more than the 100-day average for the time of day.
- China Moves to Help Local Governments Roll Over Debt. Change Will Allow More Short-Term Debt Issues. China took a significant step Wednesday to deal with an explosion of borrowing among local governments by allowing more of them to issue short-term debt to help pay off maturing bonds and loans, according to a person with direct knowledge of the matter. Economists estimate local governments may have borrowed as much as $5 trillion in recent years to fund projects and keep the economy humming as Beijing scaled back the stimulus efforts it had undertaken following the global financial crisis. Concerns are rising that the buildup of debt has been too rapid and that local governments will be unable to pay the money back. Beijing has warned, too, about the potential risks, and is trying to understand and contain any potential problem.
- Boeing(BA) Boosts Outlook Amid 12% Profit Growth. Boeing’s profit jumped 12% in the third quarter, as the aerospace giant’s commercial aircraft unit outweighed softness at its defense business. The company also said Wednesday it raised its per-share earnings guidance to between $6.50 and $6.65, up from a previous estimate of $6.20 to $6.40. Boeing reaffirmed its outlook for revenue.
- Earnings Reality In One Chart. (graph)
Mish's Global Economic Trend Analysis:
- New Rules for Italy Banks "I'll Guarantee Your Derivatives If You Guarantee Mine". The leverage of European banks to their own sovereign debt is enormous. This mutual guarantee agreement encourages banks to continue the leverage party. Another opportunity to rein in moral hazards just flew out the window. Every bank in Europe will do the same.
- HealthCare.gov pricing feature can be off the mark. CBS News has uncovered a serious pricing problem with HealthCare.gov. It stems from the Obama administration's efforts to improve its health care website. A new online feature can dramatically underestimate the cost of insurance. The administration announced it would provide a new "shop and browse" feature Sunday, but it's not giving consumers the real picture. In some cases, people could end up paying double of what they see on the website, CBS News' Jan Crawford reported Wednesday on "CBS This Morning."
- ObamaCare's Other Tech Disaster. Dr. Nicholas DiNubile, a Philadelphia orthopedic surgeon, has a timely reminder for everyone encountering the federal health-care-exchange meltdown: “If you think signing up for ObamaCare is a nightmare, ask your doctor how the EMR [electronic medical records] mandate is going.”
- Caterpillar(CAT) posts lower results, cuts outlook again. Caterpillar Inc posted a lower-than-expected quarterly profit on Wednesday and cut its full-year forecast for the third time as weak demand from mining customers continued to bedevil the heavy equipment maker. The Peoria, Illinois-based company also provided its first forecast for 2014 sales, saying it expects essentially flat results to up or down 5 percent compared with 2013. Caterpillar said it had eliminated 3,000 jobs during the third quarter and warned that further workforce reductions were possible.
- U.S. chip stocks drop as widespread weak demand worries investors. Shares of semiconductor
companies slumped on Wednesday after a host of underwhelming
quarterly revenue forecasts left Wall Street concerned about
lackluster demand in markets from industrial to smartphones.
The Philadelphia Semiconductor Index was down 3.3 percent, with PC chipmaker Intel Corp falling 1.7 percent and mobile heavyweight Qualcomm Inc down 2.1 percent.
- METALS-Copper falls on worries over China tightening. Copper slid more than 2 percent on Wednesday as fears of tighter monetary policy in top metals user China outweighed speculation that tepid U.S. jobs data will deter the Federal Reserve from tapering its stimulus this year.
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