Today's Headlines

Bloomberg: 

• Bipartisan House Group Offers Compromise to End Shutdown Impasse. A bipartisan group of lawmakers is proposing to House Republican and Democratic leaders a compromise to end the government shutdown by repealing a medical device tax and maintaining across-the-board spending cuts. 

• European Stocks Decline Second Day on U.S. Shutdown, ISM. European stocks declined for a second day, as a shutdown of the U.S. government continued and a gauge of service-industry activity in the world’s biggest economy fell more than forecast. Gerresheimer AG lost 2 percent as Credit Suisse Group AG lowered its recommendation on the shares. Schneider Electric SA fell 3.2 percent. Aviva Plc advanced 1.4 percent as the insurer said it generated $2.6 billion from the sale of its U.S. business. BP Plc rose 1.1 percent after a U.S. appeals court ordered a reconsideration of key terms of a settlement in the 2010 Gulf of Mexico oil spill case. The Stoxx Europe 600 Index slipped 0.4 percent to 309.55 at the close of trading, the lowest level since Sept. 9.

• Copper Falls as U.S. Shutdown Fuels Demand Concerns. Copper futures have dropped 1.8 percent this week. Copper futures for December delivery slumped 1.4 percent to settle at $3.2685 a pound at 1:06 p.m. on the Comex in New York.

Wall Street Journal: 

• On Third Day, Finger-Pointing Continues on Shutdown. Republicans and Democrats remained locked for a third day in a battle over the terms for reopening the federal government, and both sides continued to blame the other for the lack of negotiations toward a solution. President Barack Obama, speaking at a Maryland construction company, urged House Republicans to move legislation to reopen the entire government. 

• Budget Battle: Streaming Coverage.

• Gensler to Step Down as CFTC Chairman. Exit Would Cap Tumultuous Tenure as Leader of Financial Regulator.

• Global Economy Headed for Code Red Crisis. The world is headed for yet another financial crisis, according to financial maven and author John Mauldin. In his new book, “Code Red: How to Protect Your Savings from the Coming Crisis,” Mr. Mauldin talks about the reasons why the crisis will happen and hints at some ways to avoid being sucked into the painful vortex. The book is slated to be released at the end of October. For Mr. Mauldin, the massive injection of monetary stimulus launched by central banks across the developed world are creating a pool of inflated assets as investors attempt to seek alternative investments in a low-yield world. While Mr. Mauldin won’t pinpoint the date of the impending economic disturbance, he warns that monetary accommodation must end one day, and when it does, he warns that the global economy will suffer greatly.

• How to Look Under a Hedge Fund's Hood. Seven questions investors should ask before investing.

Fox News: 

• Dr. Ben Carson says IRS targeted him for his anti-Obama comments.  

• US Capitol in lockdown, reports of shots fired outside. The U.S. Capitol is in lockdown, after sources say shots were fired outside. According to U.S. Capitol Police, officers are injured. One person could be seen being carried off in a stretcher. Sirens are going off in the Capitol, and people on the Hill are being told to "shelter in place."

CNBC: 

• Wall Street wonders if Obama wants a selloff. President Barack Obama's best friend could be Wall Street's worst nightmare. A little market crisis—not enough to crash the economy into recession but enough to stir public fear that would push Republicans to the negotiating table—could be just what settles the impasse in Washington and reopens the government, according to investing pros and market observers.

Zero Hedge:

• Meet The Monster Of The Housing Market: Presenting "Vampire REOs" Where Half Of Americans Live Mortgage-Free.

• Non-Manufacturing ISM Tumbles, Worst Print Since June, Employment Index Has Biggest Drop Since 2009. (graph)

• The 3 Rising Risks To The Markets. (graph)

• Is This The Reason For The Annual September Fake Economic Bounce?

• California Admits Obamacare Interest Was Inflated By Almost 8 Times.

• The Shutdown Political Game: Inflict Maximum Pain To Score Cheap Points.

Business Insider:

• Europe's Youth Unemployment Crisis In One Grim Map.

• RED OCTOBER ARRIVES: A Look At The Geopolitical Risks That Could Shake Markets.

• The New Head Of The SEC Is Thinking Of Putting A Major Leash On Stock Exchanges.

Reuters: 

• Fed's Fisher says he feels "angst" about Fed's balance sheet. When the time comes for the Federal Reserve to reduce its massive balance sheet, one of the big worries is the potential volatility and instability that paring those assets could bring to financial markets, a top Fed official said on Thursday. "When you are on the buy side things look great," Dallas Fed President Richard Fisher said at a conference on uncertainty at the regional Fed bank. "When you are on the sell side, when we get to that point, things look different." The Fed's bond-buying program has swollen the central bank's balance sheet to more than $3.5 trillion. Fisher, who has opposed the bond-buying, said that he and his colleagues feel "angst" at size of the balance sheet and the potential challenges when it comes time for the Fed to reduce it.

• Abusive trading patterns involve multiple exchanges, FINRA says. Wall Street's securities regulator said on Thursday more than two-fifths of the abusive trading patterns detected by its new cross-market surveillance system involved more than one exchange and multiple participants.

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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The Globe and Mail:

• 'Zero' Risk Weighting on Euro Zone Debt is a Charade. The rules encourage banks to load up on debt from the weakest sovereigns, which lets those governments spend beyond their means. The risk of overspending is universal, but most of them can introduce enough inflation to keep away nominal default. Euro zone members do not have that escape route. But the more euro zone debt banks hold, the more damage any government default will do to their balance sheets – and the greater the temptation will be for a euro zone bailout of troubled states and banks. It is an unsatisfactory arrangement.