Today's Headlines

Bloomberg:   

• Draghi’s Deflation Risk Complicates Recovery: Euro Credit. A price slowdown could turn into a negative spiral that derails the recovery in the euro region. While the 17-nation economy exited six quarters of recession in the three months through June, it still has record unemployment and shrinking bank lending. 

• Ukraine Rating Cut to Greek Level by S&P as Devaluation Seen. Ukraine’s debt rating was cut to the same junk level as Greece by Standard & Poor’s, which said the government is struggling to weather a shortage of foreign currency, increasing the likelihood of a hryvnia devaluation. The rating company lowered Ukraine’s long-term sovereign credit rating one step to B-, six levels below investment grade, with a negative outlook, according to a statement released today. That leaves the eastern European nation on par with Greece and Belize, both of which have restructured debt in the past several years. 

• RBS Sees ‘Substantial’ Full-Year Loss, Creates Bad Bank. Royal Bank of Scotland Group Plc expects to post a “substantial” full-year loss after transferring 38.3 billion pounds ($61 billion) of its worst loans to an internal bad bank under government pressure. Britain’s biggest publicly owned lender expects to log as much as 4.5 billion pounds of writedowns in the fourth quarter as it starts to sell the loans, Edinburgh-based RBS said in a statement today. It will also speed up plans to sell its Citizens Financial Group Inc. unit to bolster capital. 

• European Stocks Drop, Paring Fourth Weekly Advance. European stocks dropped, paring a weekly gain, as Royal Bank of Scotland Group Plc and Renault SA fell, while investors weighed the U.S. manufacturing data to gauge the outlook for the Federal Reserve’s stimulus program. RBS slid 7.5 percent after predicting a “substantial” annual loss because of writedowns. Renault declined 5 percent after its partner Nissan Motor Co. cut its full-year profit forecast. Vodafone Group Plc rose to the highest price in 12 1/2 years after people familiar with the matter said AT&T Inc. is exploring a takeover of the company. The Stoxx 600 lost 0.3 percent to 321.5 points.

• Commodities Tumble to Four-Month Low as Crude, Gold Lead Losses. Commodities dropped to a four-month low, paced by declines in crude oil and gold, on signs of climbing supplies of raw materials at a time when the prospect of reduced Federal Reserve stimulus may cut demand. The Standard & Poor’s GSCI Spot Index of 24 raw materials lost 1.2 percent to 615.14 at 11:54 a.m. in New York, after touching 614.12, the lowest since July 1. West Texas Intermediate fell below $95 a barrel for the first time since June. Gold reached a two-week low, while coffee extended its longest slump since at least 1972. Cotton fell to the lowest since January.

• China Home Prices Jump by Most This Year as Demand Defies Curbs. China’s new home prices jumped by the most this year in October as homebuyers defied the government’s property curbs and developers offered more high-priced apartments to tap demand. The average price surged 10.7 percent last month from a year earlier to 10,685 yuan ($1,753) per square meter (10.76 square feet), SouFun Holdings Ltd. (SFUN), the nation’s biggest real estate website owner, said in a statement after a survey of 100 cities. Prices rose 1.24 percent from September, the 17th consecutive month of increases.

• Japan Denies Disrupting Chinese Military Exercises in Pacific. Japan denied disrupting recent Chinese military exercises in the west Pacific Ocean that prompted an official protest, the latest friction between Asia’s two biggest economies embroiled in a territorial dispute.

• Fed to Test Banks Against Interest Rate Rise, Housing Collapse. The Federal Reserve said it will examine how the biggest banks might react to a jump in long-term interest rates and another housing crash as it released the next round of stress-test scenarios designed to monitor the ability of the U.S. financial system to withstand economic shocks. The central bank in two adverse scenarios will measure the impact from rising prices in some U.S. property markets and tightening spreads on high-yield, high-risk loans and bonds, according to a release by the Fed today in Washington.

• Plosser Sees Inflation as Risk When Fed Unwinds Balance Sheet. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said inflation will be a concern as the Fed unwinds its balance sheet following unprecedented asset purchases. “We have created over $2 trillion of excess reserves that are sitting on the balance sheets of the banks, it’s just sitting there, it’s not inflationary,” Plosser said today on CNBC television. “It will be inflationary when that starts to flow out of the banking system, that’s when we’ll have to start worrying about inflation.”  

• Health Consumers Finding Out They Were Sold a Lemon by Megan McArdle.

• Dollar Rises for Sixth Day as Treasuries, Commodities Retreat. The dollar rose for a sixth day and Treasuries slumped as faster-than-forecast growth in manufacturing fueled speculation the Federal Reserve will taper stimulus. The S&P GSCI Index of commodities dropped to a four-month low. The Bloomberg U.S. Dollar Index climbed 0.4 percent as of 2:10 p.m. in New York. Ten-year Treasury yields added seven basis points to 2.62 percent, the highest level in two weeks.

Wall Street Journal:

• 'Several' Injured After LAX Shooting; Suspect in Custody. FAA Curtails Planes Following Incident. A gunman opened fire at Los Angeles International Airport Friday morning, hitting several people and causing the shutdown of at least one terminal before being taken into custody, police said.

• Bubble Trouble for Tesla(TSLA). Tesla's stock carries an extraordinarily high valuation and turns over rapidly—two characteristics of irrational investor exuberance. That hissing sound? It’s the air coming out of Tesla Motors’ shares. The electronic-car maker’s stock fell 17.3% in October, registering its first monthly decline since February, and the worst since 2010. Even so, it is up 372% so far this year, a performance that marks it out as a potential bubble. 

• Obama's Health Care Woes Continue. (video)

• Large Banks to Be Tested on New Standard.

• Auto Makers Report Strong October Sales. Gains Show U.S. Consumers Willing to Make Big Purchases Despite Government Shutdown.

Fox News:

• Gunman in LAX shooting wounded, in custody, 3 injured, officials say. The gunman in a shooting Friday at Los Angeles International Airport was wounded and taken into custody after prompting authorities to evacuate a terminal and stop flights headed for the city from taking off from other airports, officials say. A law enforcement source tells Fox News that the suspect may be a former or current TSA employee.

CNBC:

• Balance sheet shows US $16 trillion in the hole. Anyone who ran a company with a balance sheet that looked like the U.S. probably wouldn't have a company anymore. The picture painted by the federal balance for fiscal year 2012 shows a nation with a negative net worth of more than $16 trillion, according to the Treasury Department's year-end reports and calculations from banking analyst Dick Bove.

Zero Hedge: 

• Bubblespotting With Jim Bullard.

• Manufacturing ISM Prints At Highest Since April 2011; "No Impact From Government Shutdown". (graph)

• GM "Stuffs Channels" At Fastest Pace In Its Post-Bankruptcy History; Volt Sales Plunge 32%. (graph)

• Nasdaq Options Market Halted For Over An Hour.

• Bank Of America(BAC): "It's Getting Frothy, Man".

Business Insider: 

• Here's Everything You Need To Know About The Growing Investigation Into Rigging The Global Currency Market.

• CHART OF THE DAY: The 'Forward-ISM' Is Sending A Troubling Signal.

Reuters:

• Reduce QE3 given labor market rebound, Fed's Lacker says. A top Federal Reserve official repeated on Friday that the U.S. labor market has recovered enough in the last 14 months to allow the central bank to reduce its bond-buying stimulus. "On a number of different dimensions for me personally it looks like labor force conditions have improved pretty significantly" since the latest round of quantitative easing (QE3) was launched in September, 2012, said Richmond Fed President Jeffrey Lacker, a hawkish policymaker. "The cumulative fall in the unemployment rate, the cumulative increase in employment are the key things," he added at a Philadelphia meeting of the Global Interdependence Center.

La Stampa:

Restructuring: Flowers slams Europe over inaction


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true

• Letta Says Populist Movements Risk Destroying Europe. Italian premier says next Eruopean Parliament risks becoming "the most anti-European" in its history because of gains by populist movements.

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.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true