Bear Radar

Style Underperformer:

• Mid-Cap Value (+.01%)

Sector Underperformers:

• 1) Road & Rail -1.73% 2) Oil Tankers -1.47% 3) Education -1.12%

Stocks Falling on Unusual Volume:

• ERTS, QSFT, BEXP, VQ, FAST, RBCN, ACOR, GPN and FLO
  

Stocks With Unusual Put Option Activity:

• 1) AVP 2) GME 3) EWY 4) CX 5) S
  

Stocks With Most Negative News Mentions:

• 1) HOS 2) MT 3) WWE 4) YUM 5) BX
  

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.03%)

Sector Outperformers:

• 1) Disk Drives +.73% 2) Gaming +.72% 3) Internet +.60%

Stocks Rising on Unusual Volume:

• RNOW, ARUN, FNF, NVS, TRGL, CHK, SNP, AA, ININ, RNOW, MOTR, WYNN, GMCR, UFPI, AMSC, SBUX, AMAG, WCRX, CTXS, ANSS, FFIV, CCME, CHKP, MYGN, GOOG, TRMB, BCSI, KG, AVP, SCX, SHI and URI
  

Stocks With Unusual Call Option Activity:

• 1) AVP 2) SBUX 3) EUO 4) CHS 5) AGU
  

Stocks With Most Positive News Mentions:

• 1) GOOG 2) AAPL 3) JCI 4) BA 5) GPS

Tuesday Watch

Evening Headlines
Bloomberg:

• Leveraged Loan Issuance Doubles on Narrower Spread to Junk: Credit Markets. Leveraged loan issuance is accelerating to the most in three years, enabling companies to slash borrowing costs, as the gap in yields between the debt and junk bonds hovers at about the narrowest in 10 months. Reynolds Group Holdings Inc. and Tomkins Plc boosted loans in the past month at the expense of secured junk bonds, according to data compiled by Bloomberg. High-yield bonds yield 0.8 percentage point more than leveraged loans, about the narrowest since December, and down from a gap of 1.65 in April.
• Baby Boomers Pushing Surge in Therapies to Sharpen Blurring Eyesight. The number of older Americans getting help for fading eyesight almost tripled by 2007 from a decade earlier as the nation aged and treatment improved with approaches such as Roche Holding AG’s Lucentis.
• GM Defends Volt While Critics Say It's Not a Real Electric Car. General Motors Co., the largest U.S. automaker, is disputing accusations that its low-emission Chevrolet Volt is a hybrid and not a true electric vehicle a month before the car goes on sale. Auto critics Edmunds.com, Motor Trend and Popular Mechanics have said that during heavy acceleration the Volt uses its gasoline engine to power an electric generator which helps turn the wheels, similar to how hybrids run.
• OPEC May Maintain Oil Output in Vienna on Uneven Economic Growth. OPEC may leave oil production quotas unchanged when it meets Oct. 14 in Vienna after Saudi Arabian Oil Minister Ali al-Naimi described the market as “very well- balanced” between the interests of consumers and producers. “Everyone is happy with the market,” al-Naimi said late yesterday when asked, as he arrived at his hotel, whether the Organization of Petroleum Exporting Countries should boost supplies this year. “Consumer, producer, everyone is happy.” Oil futures touched a five-month high of $84.43 a barrel last week in New York, well above the $70 to $80 price level that al-Naimi reiterated is “ideal.” Prices have settled above $80 for the past seven days, the longest stretch since August.
• Crude Oil Futures Decline in N.Y. as Dollar Strengthens Against Euro, Yen. Crude oil fell for a second day after the dollar rose against the euro and yen, reducing the appeal of commodities as an investment. “The dollar is so heavily sold at the moment, creating the opportunity for a bit of strength in the dollar and softness in oil,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said by phone. “You would be leaning toward a softer oil price this week.” “The market’s not that strongly supported by fundamentals, so people are watching things like the currency,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The dollar’s still low, but maybe people think we’re close to the bottom.” Total petroleum supplies in the U.S. were 1.14 billion barrels in the week ended Oct. 1, 5 million barrels below a record set in the week ended Sept. 17, according to figures from the Energy Department released last week. Fuel consumption dropped 6.4 percent to 18.5 million barrels a day in the week ended Oct. 1, the biggest weekly decline since Feb. 27, 2004, according to the department.
• Euro to Retreat to $1.35 as Fed Easing Snaps Momentum: Technical Analysis. The euro may retreat to $1.35 as a technical indicator suggests its 11 percent gain in the past month has been too rapid, according to Ueda Harlow Ltd. The shared currency’s 14-day relative strength index against the dollar has remained above 70 since Sept. 28, the longest stretch since March 2008 and exceeding the level some traders see as a sign an asset’s price is poise to change direction.
• China Bank-Ratio Rise May Signal Officials Divided on Policy, Goldman(GS) Says. Chinese policy makers may be divided over the pace of credit growth with inflation picking up even as there are “downside” risks to economic growth, according to Goldman Sachs Group Inc.

Wall Street Journal:

• States to Probe Mortgage Mess. Attorneys General Hope Lenders Will Re-Write Loans With Troubled Documents. A coalition of as many as 40 state attorneys general is expected Wednesday to announce an investigation into the mortgage-servicing industry, an effort some of them hope will pressure financial institutions to rewrite large numbers of troubled loans.
• Wall Street Pay: A Record $144 Billion. Financial Overhaul Has Affected Structure but Not Level; Revenue-to-Compensation Ratio Stays Flat. Pay on Wall Street is on pace to break a record high for a second consecutive year, according to a study conducted by The Wall Street Journal. About three dozen of the top publicly held securities and investment-services firms—which include banks, investment banks, hedge funds, money-management firms and securities exchanges—are set to pay $144 billion in compensation and benefits this year, a 4% increase from the $139 billion paid out in 2009, according to the survey. Compensation was expected to rise at 26 of the 35 firms.
• Vulture Funds Struggle. Funds that snap up the cheap debt of troubled companies—often referred to as vulture funds—expected to have a field day during a financial crisis that took down several banks and depressed asset prices. But now some private-equity managers are forecasting their demise, in part because banks have been able to resist the pressure to sell asset at fire-sale prices, thanks to government bailouts and a prolonged period of low interest rates.
• Wal-Mart(WMT) Lands Agreement to Sell iPad. Wal-Mart Stores Inc. said it will start selling Apple Inc.'s iPad on Friday at hundreds of stores throughout the U.S.
• Boehner's 'Plan B' for ObamaCare. Hearings can be used to sell market-friendly fixes.
• Business Backlash Grows. Rick Woldenberg runs an educational-products company from a suburban Chicago office stacked with brightly colored toys. He supported President Barack Obama in 2008. But he has turned on Democrats this year.
• Farm Belt Bounces Back. Major agricultural commodities continued their extended run-up in price, underscoring how much of America's farm belt is booming even as the overall economy continues to struggle.
• More Balk at Cost of Prescriptions. Growing numbers of Americans with health insurance are walking away from their prescriptions at the pharmacy counter, the latest indication that efforts to contain costs may be curbing health-care consumption. A review of insurance-claims data shows that so-called abandonment—when a patient refuses to purchase or pick up a prescription that was filled and packaged by a pharmacist—was up 55% in the second quarter of this year, compared with four years earlier. The phenomenon coincides with rising co-payments for many drugs and increasing enrollment in high-deductible insurance plans that require patients to pay hundreds or thousands of dollars out of pocket before insurance kicks in. Patients are deserting prescriptions for the most expensive drugs most often, according to the review by Wolters Kluwer Pharma Solutions, a health-care data company. For instance, nearly one in 10 new prescriptions for brand-name drugs were abandoned by people with commercial health plans in the quarter, up 88% from four years earlier, when the data were first tracked and before the recession began. Abandonment of generic drugs was higher, too, according to the data.
• New ETFs for Metals May Push Prices Higher. Metals markets are about to get some insatiable new customers with the launch of exchange-traded funds that will target industrial resources like copper, aluminum and tin. Like the $55 billion SPDR Gold Shares, these new funds will buy actual metal, creating a conundrum for markets where supplies are already struggling to meet the demands of China's booming economy.
• The 2010 Spending Record. In two years, a 21.4% increase. Perhaps you missed it, but then so did the Washington press corps. Late last week the Congressional Budget Office released its preliminary budget tallies for fiscal year 2010, and the news is that the U.S. government had another fabulous year—in spending your money.
• Goldman Sachs(GS) Raises 12-Month Gold Price Target to $1,650/oz.
  

CNBC:

• Short Interest Eased in Late September as US Stocks Rose. Bearish bets on major U.S. exchanges declined in the second half of September, suggesting investors abandoned positions as the market closed out its best month since April 2009. Short interest on the Nasdaq saw the bigger drop, falling 1.2 percent in the second half of September, the exchange said on Monday. Short bets on NYSE inched down just 0.04 percent.

Business Insider:

• WHOA: FINRA Paid Mary Schapiro $9 Million in 2008. Some people think it's a good idea for regulatory officials to receive pay like the Wall Streeters they're supposed to reign in. Turns out at least one of them already has - Mary Schapiro, who's now the head of the SEC. In 2008, FINRA paid Schapiro almost $9 million.

Zero Hedge:

• Van Hoisington On Why QE2 Will Be Either a Small or Massive Failure.

American Spectator:

• California's Green Nightmare. It's hard to know where the fairy tale of "green jobs" first came from. It was probably a clever marketing scheme by radical environmentalists who realized that their anti-growth climate change agenda wasn't going to sell among the American electorate if workers realized how many jobs would be eviscerated by the new taxes and regulation. So, from somewhere out of Madison Avenue or K Street, the left devised the green jobs story line: we can impose a $1 trillion new tax on the U.S. economy over the next decade, and it will save jobs, as hundreds of thousands of Americans begin assembling windmills and solar paneling. If we want to see how green policies work in the real world, we don't have to look any further than America's left coast. California has become the poster child of green jobs.

Reuters:

• Not Many Early Bonuses for Wall St Banks - Experts. Large Wall Street banks are unlikely to accelerate bonus payouts, even if doling out bonuses in December would cut the tax bills of employees, compensation experts said. Paying out bonuses early would likely be a public relations disaster for a sector already blamed for the economic downturn, they said.
• Japan Kaieda: Rapid Yen Rise Undesirable for Economy. Japanese Economics Minister Banri Kaieda said on Tuesday that the yen's rapid rise is undesirable for achieving a self-sustainable recovery in the Japanese economy and beating deflation, and the government will take decisive action in the currency market if necessary. Kaieda also said that Japan gained a certain understanding at the latest Group of Seven meeting on its explanation of its currency intervention.

Financial Times:

• Blow to Bank Crisis Plans. Regulators are struggling to create a global mechanism that could wind down a big financial institution without the disruption caused by Lehman Brothers’ collapse in 2008. The US is due on Tuesday to propose its own so-called “resolution” regime that would allow officials to stabilise a big, distressed bank, sell off assets over time and force creditors to take a discount on the value of their debt, without taxpayer money or market disruption. But policymakers attending meetings around the International Monetary Fund and Institute of International Finance criticised the US regime and cast doubt on whether anything but a modest set of principles could be agreed at the Group of 20 meeting in Seoul next month.

Telegraph:

• Jobless America Threatens to Bring Us All Down With It. A depression may have been averted, but nothing has been fixed. This is the depressingly downbeat message that came across loud and clear from last weekend's annual meeting of the International Monetary Fund. The destructive trade and capital imbalances of the pre-crisis era are back, banking reform appears stuck in paralysing discord, public debt in many advanced economies remains firmly set on the road to ruin, and the spirit of international co-operation that saw nations come together to fight the crisis has largely disappeared. This was not where we were meant to be in tackling the underlying causes of the crisis and returning the world to sustainable growth. The US has no strategy for the jobless and no strategy for rolling back debt. Little wonder that a renewed sense of gloom has settled on international policy makers.

China Daily:

• China should set up a forward market for rare-earth elements to help boost prices, Guo Chaoxian, a researcher at the Institute of Industrial Economics of the Chinese Academy of Social Sciences, wrote. The government should also set up a mechanism to purchase and store rare-earth commodities to "strike a balance between demand and supply," Guo wrote. The Chinese government should encourage mergers of rare-earth companies with the goal of setting up an oligarchy of three to five "giant enterprises," Guo said.
• The China Insurance Regulatory Commission found "big" problems in the management of property insurers, citing an official from the regulator. Some property insurers faked business fees and didn't pay claims in time. Corruption and misuse of premiums was also discovered.
  

Economic Daily News:

• Apple's(AAPL) iPad has received approval from Taiwan's National Communications Commission and will be available for sale as early as this month, citing an official at the commission.

Evening Recommendations
Citigroup:

• Rated (APEI), (BPI), (CPLA), (DV) and (LOPE) Buy.
• Reiterated Buy on (NKE).
• Reiterated Buy on (BEN), boosted target to $143.

BMO Capital:

• Rated (CIEN) Outperform, target $20.

Night Trading

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 100.0 -4.0 basis points.
  
• Asia Pacific Sovereign CDS Index 94.25 -3.0 basis points.
  
• S&P 500 futures -.42%.
  
• NASDAQ 100 futures -.39%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (FAST)/.50
• (INTC)/.50
• (LLTC)/.60
• (CSX)/1.04

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for September is estimated to rise to 89.6 versus 88.8 in August.
  

2:00 pm EST

• Minutes of FOMC Meeting.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Hoenig speaking, weekly retail sales report, ECB's Trichet speaking, $32 Billion 3-Year Treasury Notes Auction, IBD/TIPP Economic Optimism Index and the weekly ABC Consumer Confidence report could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

Stocks Slightly Lower into Final Hour on Profit-Taking, Rising US Housing Concerns, More Shorting

Broad Market Tone:

• Advance/Decline Line: Slightly Higher
  
• Sector Performance: Mixed
  
• Volume: Light
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.87 -8.88%
  
• ISE Sentiment Index 131.0 -16.56%
  
• Total Put/Call .79 -7.06%
  
• NYSE Arms 1.52 +57.67%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 95.80 bps -1.25%
  
• European Financial Sector CDS Index 100.83 bps -8.21%
  
• Western Europe Sovereign Debt CDS Index 148.33 bps -1.11%
  
• Emerging Market CDS Index 198.70 bps +.04%
  
• 2-Year Swap Spread 17.0 unch.
  
• TED Spread 17.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .11% unch.
  
• Yield Curve 204.0 unch.
  
• China Import Iron Ore Spot $147.90/Metric Tonne +1.79%
  
• Citi US Economic Surprise Index +1.20 +3.0 points.
  
• 10-Year TIPS Spread 1.98% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +57 open in Japan
• DAX Futures: Indicating +10 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech, Ag and Retail long positions
  
• Disclosed Trades: None
  
• Market Exposure: 100% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades near session lows despite overseas gains and falling sovereign debt angst. On the positive side, Gaming, HMO, Disk Drive, Semi, Computer Ag, Alt Energy and Coal shares are especially strong, rising 1.0%+. Small-caps are outperforming. Gaming sector leaders (LVS) and (WYNN) continue to soar. The S&P GSCI Ag Spot index is jumping again, rising +1.56% today, lumber is gaining +.90% and copper is rising +.32%. The Spain sovereign cds is falling -2.31% to 213.65 bps, the Portugal sovereign cds is losing -2.67% to 388.08 bps, the US sovereign cds is declining -5.2% to 44.02 bps and the UK sovereign cds is declining -3.74% to 58.31 bps. The -17.4% plunge over the last 5 days in the Euro Financial Sector CDS Index is a major positive. On the negative side, Airline and I-Banking shares are under mild pressure, falling more than .5%. (XLF) has been underperforming throughout the day. Gold is rising +.4%. As a result of rising QE2 expectations, total commodity net speculative longs(.CCLOSH Index on Bloomberg) are at a new record +1,525,795 contracts, which is up from +499,416 in mid-June and eclipses the record set during the peak of the commodity bubble in Feb. 2008, which was +1,370,021 contracts. This leaves most commodities vulnerable to any meaningful US dollar reversal higher. However, if the Fed succeeds in re-inflating the commodity bubble it will have dramatically negative consequences for the US economy and stocks longer-term. Today's light volume mild pullback should be seen as a healthy consolidation of recent gains. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, falling sovereign debt angst, buyout speculation and tax policy/election optimism.

Today's Headlines

Bloomberg:

• Greece Leads Drop in Sovereign Debt Risk as IMF May Extend Loan. Credit-default swaps on Greece fell to the lowest level in four months after the International Monetary Fund said it may be willing to extend bailout loans. Contracts on Greek bonds dropped 36 basis points to 695, according to data provider CMA. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments declined 3 basis points to 143, the lowest in six weeks. IMF managing director Dominique Strauss-Kahn said the $154 billion of aid to Greece could be extended beyond 2013 as long as European governments that took part in the bailout agree and the nation sticks to budget deficit cuts. Chancellor Angela Merkel’s administration opposes any move to grant Greece more time, the German Finance Ministry said today. Investors demand a yield premium of 729 basis points to lend to Greece for 10 years rather than Germany, the most of any country in the euro zone. That’s compared with 754 basis points on Friday and down from a euro-era record of 973 basis points on May 7. Credit-default swaps of other so-called peripheral euro- zone nations also fell. Portugal dropped 9 basis points to 387, while Spain was 7.5 basis points lower at 209, according to CMA. The cost of insuring against losses on corporate bonds also fell with the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declining 8 basis points to 459, according to JPMorgan Chase & Co. in London. The Markit iTraxx Europe index of 125 companies with investment-grade ratings dropped 3 basis points to 98.75.
• Title Insurers Are in Talks on Creating Foreclosure Warranties, Group Says. Title insurers, banks and regulators are in talks to create warranties under which lenders assure they followed proper procedures before selling foreclosed homes, said Kurt Pfotenhauer, head of the insurers’ trade group. “Everyone sort of sees the same risks, and that’s the good part,” Pfotenhauer, chief executive officer of the American Land Title Association, said today in a telephone interview. “You just have to craft a solution that’s acceptable to all the parties, and we’re making progress.”
• Gymboree(GYMB) to Be Bought by Bain Capital for About $1.8 Billion. Gymboree Corp., the San Francisco- based children’s clothing retailer, agreed to be bought by Bain Capital LLC for about $1.8 billion, giving the buyout firm a business whose free cash flow has tripled since 2008. The acquisition price is $65.40 a share, the companies said today in a statement. That’s 57 percent more than Gymboree’s closing price on Sept. 30, when reports of a takeover surfaced. Gymboree may seek acquisition proposals from third parties through Nov. 20, according to the statement. The purchase is the largest leveraged buyout in the retail- apparel sector worldwide over the past three years by more than $1 billion.
• Commodities Rise to Highest Level in Two Years, Led by Agriculture Futures. Commodities rose to the highest in two years, led by agriculture futures, after a U.S. Department of Agriculture report last week showed corn production in the country would decline more than expected by analysts. The Standard & Poor’s GSCI Index of 24 raw materials rose as much as 1.3 percent to 571.4810, the highest level since Oct. 3, 2008. Corn futures gained as much as 8.5 percent and soybeans jumped to a 16-month high.
• CNOOC to Pay $1.08 Billion for Stake in Texas Shale Gas Project. Cnooc Ltd. will pay $1.08 billion for a one-third stake in Chesapeake Energy Corp.’s Eagle Ford shale project in Texas, in the biggest acquisition of a U.S. oil and gas asset by a Chinese company. Cnooc, listed in Hong Kong, plans to buy 33.3 percent of Chesapeake’s 600,000 oil and gas leasehold acres in Eagle Ford, the companies said in separate statements. Cnooc will also pay $1.08 billion of Chesapeake’s drilling costs in the basin, Chief Executive Officer Aubrey McClendon said in an interview. The sale gives Cnooc its first energy asset in the U.S., five years after it dropped an $18.5 billion bid for Unocal Corp. amid political opposition. China’s third-largest oil company has spent at least $3.8 billion on overseas acquisitions in the past year as the nation’s energy demand surges.
• Lower Temperatures Expected in U.S. East at End of October. The last two weeks of October may see temperatures in the eastern U.S. drop to below normal, forecasters said. The forecast for Oct. 18 to Oct. 24 calls for below-normal temperatures from Texas to Maine, according to the U.S. Climate Prediction Center in Camp Springs, Maryland. The cold snap may extend into November, said Jim Rouiller, senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania. “There is a chance of a major pattern change in the later half of the month,” Rouiller said. “The potential is there for a significant cold-weather event.”

Wall Street Journal:

• Hedge Funds Saw August Inflows of $11.3 Billion - TrimTabs/Barclays.

CNBC:

• Fed Certain to Act in November In a Big Way: Survey. Following Friday’s disappointing jobs report, market participants are now virtually certain that the Federal Reserve will announce that it will resume buying assets at the conclusion of its November meeting and do so in a sizeable way, according to an exclusive CNBC Fed Survey. Nearly 93 percent of the 70 respondents, including economists, fund managers and traders, believe the Fed will boost the size of its portfolio, up from 69 percent in the survey two weeks ago. Of those who expect the Fed to move, 86 percent look for an announcement in November, up from 38 percent in the last survey. Market participants forecast that the Fed will announce plans to purchase $500 billion in assets at the conclusion of the upcoming meeting, the first time the question has been asked. Despite the $500 billion average, expectations for the November announcement span a range from $100 billion to as high as $1.5 trillion. But the larger numbers are outliers, with 83 percent of respondents saying they expect the Fed to announce incremental targets for its portfolio size on a monthly or quarterly basis, rather than a single, so-called “shock and awe” strategy as it did in 2009.

Business Insider:

• Here's Why Quantitative Easing 2 Will Fail Spectacularly.

Zero Hedge:

• 60 Minutes Brings High Frequency Trading to the Mainstream, As CFTC Refutes HFT Liquidity-Provisioning Argument.

New York Times:

• Paris Hints at Willingness to Bend on Hedge Fund Rules in Europe. The French economy minister, Christine Lagarde, has rebuffed U.S. criticism that demands for tough new European rules on hedge funds are protectionist, but she also has signaled her readiness to compromise on the issue of Europe-wide licensing, a letter showed.

CNNMoney:

• Economists Lower Already Bearish Outlook. The recovery is sputtering and the outlook for the rest of the year isn't looking much brighter, according to a new survey of leading economists. Economists surveyed by the National Association for Business Economics have cut their growth forecasts for both this year and next, the report released Monday showed. The panel of 46 economists expects gross domestic product, the broadest measure of the economy, to grow at a pace of 2.6% in both 2010 and 2011, down from the group's previous prediction of 3.2%. About 37% of survey respondents expect the recovery to remain "subpar as severe wealth losses and onerous debt burdens inhibit spending and lending."

Rasmussen Reports:

• 55% Favor Repeal of Health Care Law. The majority of U.S. voters continue to favor repeal of the new national health care law but are slightly less emphatic about the impact the law will have on the country. A new Rasmussen Reports national telephone survey finds that 55% of Likely U.S. Voters at least somewhat favor repeal of the new health care law. Only 39% oppose repeal. These figures include 41% who Strongly Favor repeal and 32% who are Strongly Opposed.

Reuters:

• China has raised reserve requirements by 50 basis points for six large commercial banks. The increase, which takes the required reserve ratios to 17.5%, is a temporary measure and will be in place for two months.
• China Invites North Korea's New Leaders to Visit. Chinese President Hu Jintao has invited North Korea's aged ruler, Kim Jong-il, and his new leadership circle, including implicitly the son set to succeed him, to visit, Xinhua news agency said on Monday. Zhou stressed how much effort China has poured into shoring up ties with its much smaller neighbour while Kim crafts succession plans likely to give Kim Jong-un the top job. Beijing is the North's sole major economic and diplomatic backer. "This year has been one of high-points for Chinese-North Korean relations," Zhou told Kim on Monday, Xinhua reported. Zhou said Beijing wanted to work with Pyongyang to "scrupulously protect and constantly develop the friendship and cooperation between China and North Korea." In recent years, China has sought to strengthen relations and increased aid and investment to its poor neighbour, which it sees as a strategic buffer against the U.S. and its regional allies.
• Al Qaeda Offers to Free French if Burqa Ban Ended. Al Qaeda's north African arm wants a repeal of a ban on the Muslim face veil in France, the release of militants and 7 million euros to free hostages who include five French, Al Arabiya TV said on Monday. Al Qaeda in the Islamic Maghreb (AQIM) is holding seven foreigners in the Sahara desert after kidnapping them last month.

La Tribune:

• France may consider scrapping its wealth tax together with a fiscal shield that limits the proportion of a person's income that can be paid in tax, citing remarks by President Nicolas Sarkozy.