Evening Headlines
Bloomberg:
- Fed Presidents Far From Unanimous on Need for Further Easing. Regional Federal Reserve presidents showed they’re far from unanimous on whether the central bank should try to boost flagging U.S. growth with a second round of unconventional monetary easing. Policy makers have the tools to act and should respond “vigorously, creatively, thoughtfully and persistently” to a slow recovery, Boston Fed President Eric Rosengren said in a New York speech today. He spoke minutes after Philadelphia Fed President Charles Plosser said in New Jersey that the central bank would put its credibility at stake by taking actions such as buying more securities that may fail to reduce unemployment. The range of views shows that if Chairman Ben S. Bernanke aims to restart Treasury purchases in November, as some economists project, he may have to do so over the objections of several central bank officials.
- Portugal Yields Hit 13-Year High to Spain as Deficits Diverge: Euro Credit. Portugal’s budget stalemate is driving the nation’s bond yields to the highest levels in at least 13 years relative to neighboring Spain, which has been more successful in tackling its budget deficit. Investors demand 223 basis points more in yield to lend to Portugal for 10 years than to Spain. That’s more than 20 times the level at the start of this year as Portuguese leaders failed to agree on a plan to cut the European Union’s fourth-largest deficit. The gap between Portuguese bonds and those of Germany, the European benchmark, reached a euro-era record of 441 basis points on Sept. 28. “If you combine the lagging deficit with the situation between the opposition and the government, the result is depicted in the spreads,” said Ioannis Sokos, a London-based interest-rate strategist at BNP Paribas SA.
- U.S. House Passes Measure Pushing China on Yuan Value. The U.S. House of Representatives passed legislation prodding China to raise the value of the yuan, as Democratic lawmakers pressed election-season proposals they said would increase factory employment. The measure on China’s currency passed 348-79, with 99 Republicans joining Democrats.
- CFTC Said to Propose 20% Limit on Bank Ownership of Swaps Clearinghouses. The Commodity Futures Trading Commission is considering limiting the ownership stakes that banks and investors have in swaps clearinghouses, exchanges and trading systems to 20 percent, people familiar with the matter said. The CFTC, which is presenting its first proposed rules Oct. 1 for the $615 trillion over-the-counter derivatives market, may not grant exemptions for existing entities, said the people, who declined to be identified because the deliberations haven’t been made public. For clearinghouse stakes, no group of bank holding companies, non-bank financial firms, major swaps users or dealers will be allowed to own more than 40 percent of the entities, the people said.
- Ireland Said to Weigh Taking Majority Stake in Allied Irish. The Irish government is in talks with Allied Irish Banks Plc, the nation’s second-largest lender, that may result in the state taking majority ownership of the bank, said two people with direct knowledge of the discussions. The talks revolve around whether Allied Irish, already 18.7 percent owned by the government, needs to raise more than the 7.4 billion euros ($10.1 billion) Ireland’s financial regulator directed it to raise in March, people briefed on the matter said today. The talks may last through the night and a decision is set to be announced before European markets open tomorrow, one of the people said.
- Debt Markets Bifurcate as Banks Hoard, Bond Funds Flourish: Credit Markets. Record-low borrowing costs for the biggest U.S. companies such as Microsoft Corp. are failing to trickle down to Mel Hodges’s five-person computer consulting firm in Pennsylvania.
- Pentagon Losing Control of Bombs to China Neodymium Monopoly. A senior manager at a company that churns out metals routinely used in U.S. smart bombs pauses in mid-sentence when his phone rings: a Wall Street stockbroker looking for information. He makes a note to have an assistant call back -- someone who is fluent in English, not just Chinese. “It’s a seller’s market now,” says Bai Baosheng, 43, puffing a cigarette in his office in Baotou, China, where his company sells bags of powder containing a metallic element known as neodymium, vital in tiny magnets that direct the fins of bombs dropped by U.S. Air Force jets in Afghanistan. A generation after Chinese leader Deng Xiaoping made mastering neodymium and 16 other elements known as rare earths a priority, China dominates the market, with far-reaching effects ranging from global trade friction to U.S. job losses and threats to national security.
- JPMorgan(JPM) Asks Judges to Delay Rulings as It Reviews Foreclosure Documents. JPMorgan Chase & Co. , the third- largest U.S. servicer of mortgages, said it’s asking judges to postpone rulings in pending foreclosure cases while the bank reviews and possibly resubmits statements. JPMorgan began to “systematically re-examine” foreclosure filings after learning that employees may have signed affidavits without personally reviewing underlying records, said Thomas Kelly, a spokesman for the New York-based firm.
- Ambac Sues Bank of America(BAC) Over Countrywide Bonds. Ambac Assurance Corp. sued Bank of America Corp. over $16.7 billion of mortgage-backed securities, saying the bank’s Countrywide Financial Corp. unit fraudulently induced Ambac to insure bonds backed by improperly made loans. Ambac found that 97 percent of 6,533 loans it reviewed across 12 securitizations sponsored by Countrywide didn’t conform to the lender’s underwriting guidelines, according to the complaint filed yesterday in New York state Supreme Court. Many of the loans were made to borrowers with limited or no ability to meet their payment obligations, Ambac said.
- Japan Factory Output Unexpectedly Fell in August, Adding to Signs of Slump. Japan’s industrial production unexpectedly fell in August, adding to concerns the nation’s export-led recovery is slowing. Factory output decreased 0.3 percent from July, the third monthly decline, the Trade Ministry said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg News was for a 1.1 percent gain. Signs of diminished global demand and the yen’s appreciation are threatening earnings of companies from Murata Manufacturing Co. to Nissan Motor Co. Exports grew the least this year in August and the Bank of Japan’s Tankan survey yesterday showed companies forecast pessimists will outnumber optimists by year-end. “This number was pretty disappointing,” said Mari Iwashita, chief market economist at Nikko Cordial Securities in Tokyo. “It clearly shows decelerating overseas demand is weighing on output.”
- BHP(BHP), Rio Tinto(RTP) May Re-Evaluate Mining Venture. BHP Billiton and Rio Tinto executives are evaluating revisions to or a postponement of their proposed $116 billion iron-ore venture in Australia in the face of stiff regulatory hurdles, according to people familiar with the matter.
- Interactive Brokers(IBKR) Reconsidering Market-Making Role - CEO. The head of Interactive Brokers Group Inc. (IBKR) said that his firm's market-making unit may withdraw from some options markets or even convert into a high-frequency trading firm because of what the company views as an unfair regulatory regime.
- The Only Policy Left: Growth. The GOP needs leaders willing to do what's necessary to get it.
- European Police Probe Terror Plot. European police are searching for a suspected hit team believed to be operating in Europe, and possibly planning a shooting spree in an urban center, according to a senior intelligence official. The investigation, driven by U.S. intelligence, is focusing on a man of unknown age and background known only as "Mauritani," the official said. The threat reports are too broad for specific action, intelligence officials say, although the strongest intelligence suggests that the group may be preparing an attack against an unprotected target or targets in the U.K., France or Germany.
- Infighting Besets Financial-Oversight Council. Some of the country's top financial regulators are clashing over turf just days before a crucial meeting designed to kick off a new oversight council, a centerpiece of the financial-regulation bill, according to people familiar with the matter.
- Democrats and the Health-Reform Albatross. By making so many misleading claims, the president created an army of opposition.
- McDonald's(MCD) May Drop Health Care. McDonald's Corp. has warned federal regulators that it could drop its health insurance plan for nearly 30,000 hourly restaurant workers unless regulators waive a new requirement of the U.S. health overhaul. The move is one of the clearest indications that new rules may disrupt workers' health plans as the law ripples through the real world. Trade groups representing restaurants and retailers say low-wage employers might halt their coverage if the government doesn't loosen a requirement for "mini-med" plans, which offer limited benefits to some 1.4 million Americans.
- Finally, Some Hope. Republicans show that they're serious about curbing runaway government. How big has the government grown under the Obama administration? "The average level of U.S. government spending as a percentage of GDP from the end of World War II to the present is 19.6 percent," observes the Heritage Foundation. "In the past two years that level has exploded, reaching 24.7 percent in 2009 and an estimated 25.4 in 2010. . . . Without urgent action the U.S. is on course for national bankruptcy."
- US Foreclosure 'Mess' Will Unfold State by State. An outcry over questionable foreclosures by GMAC Mortgage and other lenders is likely to hit some states more than others because of major differences in real estate law across the nation.
- Bombshell at Yahoo(YHOO) as 3 Senior Execs Quit, Board May Dump Carol Bartz.
- If Brazil's So Strong, Why Is It Using An Accounting Trick To Hit Its Budget Goals? Brazil is hot (especially it's currency), but unlike with China you almost never hear any chatter about it being on an unsustainable path. That alone is probably reason to pay close attention.
- The Second Big Round of Chinese Monetary Tightening Has Begun. For the first time since the spring, Beijing has taken serious measures to curb the country's booming property market. Deutsche Bank describes the measures:
- Philip Manduca Says There Has Never Been An Empire So Willing To Give Its Wealth And Power Away Like America. Philip Manduca of ECU Group spoke to CNBC this afternoon about the dollar's decline, the rise in gold, and the failure in decision making by the U.S. government.
- Mark Pittman Wins: Fed to Disclose Emergency Lending Details by December 1. Mark Pittman's last valiant effort to bring some transparency to the most destructive organization in the history of mankind has succeeded. According to testimony to be delivered to the House tomorrow, "under a framework established by the act, the Federal Reserve will, by December 1, provide detailed information regarding individual transactions conducted across a range of credit and liquidity programs over the period from December 1, 2007, to July 20, 2010. This information will include the names of counterparties, the date and dollar value of individual transactions, the terms of repayment, and other relevant information.
Real Clear Politics:
Rasmussen Reports:
Politico:
- Landrieu Won't Drop Hold on Lew. Sen. Mary Landrieu (D-La.) will not lift her hold on Office of Management and Budget director nominee Jack Lew, putting increased pressure on the White House to either meet her demand to lift a ban on deepwater drilling or use a recess appointment for the budget chief.
- Obama Rules May Require 60 MPG Average by 2025. Automakers are barely into the run-up to a government-required 35.5 miles per gallon in 2016 and they're about to be staring at a 60-mpg standard, it appears.
- U.S. Senate Votes to Extend GSE Loan Limits. The U.S. Senate on Wednesday approved a one-year extension of increased loan limits on mortgages backed by the government, paving the way for final action in the House of Representatives. The Senate voted 69-30 to approve a stopgap spending bill to keep the government running through mid-December.
- Citi(C) Critic Mayo Questions Bank's Capital Spending Cuts. Citigroup Inc (C) reduced its capital spending by almost 75 percent since 2007, risking the long-term upkeep of its infrastructure, prominent bank analyst and Citigroup critic Mike Mayo wrote in a report on Wednesday.
- Europe's Austerity Anger Grows. More than 100,000 marchers converged on Brussels from across the EU to protest austerity measures on Wednesday, while Spanish unions took the extraordinary step of breaking ranks with Spain's socialist government by launching a general strike. "Workers are on the streets today with a clear message to Europe's leaders," said John Monks, head of the European Trade Union Confederation. "There is a great danger that workers are going to pay the price for the reckless speculation that took place in financial markets. You have to reschedule these debts so that they are not a huge burden and cause Europe to plunge down into recession," he said, reflecting growing bitterness among ordinary people that they are bearing the brunt of austerity while bondholders have been shielded from losses.
- Anglo Irish Failure Would 'Bring Down' Ireland: Minister. Ireland's finance minister has warned the failure of Anglo Irish Bank would "bring down" the country, as regulators prepared to reveal Thursday the cost of bailing out the stricken lender. "Any Anglo failure would bring down the sovereign," the finance minister was quoted as saying in the FT. "It is systemically important not because of any intrinsic merit in the bank. But because of its size relative to the national balance sheet. "No country could contemplate the failure of such an institution." Ireland will disclose Thursday the total cost of the state bailout of Anglo Irish.
- The Bank of Japan may cut its assessment of the economic outlook at a meeting scheduled for Oct. 28. The central bank may cut its forecast for fiscal 2010 growth in real gross domestic product to between 2% and 2.5%, compared with its current 2.6% estimate. The bank may also cut its outlook for fiscal 2011.
- Japan may budget measures to secure supplies of rare earths after China curtailed exports of the minerals, citing Japanese trade minister Akihiro Ohata.
- None of note
- Asian equity indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 116.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 111.0 -1.5 basis points.
- S&P 500 futures -.18%.
- NASDAQ 100 futures -.19%.
Earnings of Note
Company/Estimate
- (MKC)/.59
- (LWSN)/.09
8:30 am EST
- 2Q GDP is estimated to rise +1.6% versus a prior estimate of a +1.6% gain.
- 2Q Personal Consumption is estimated to rise +2.0% versus a prior estimate of a +2.0% increase.
- 2Q Core PCE is estimated to rise +1.1% versus a prior estimate of a +1.1% gain.
- Initial Jobless Claims are estimated to fall to 460K versus 465K the prior week.
- Continuing Claims are estimated to fall to 4473K versus 4489K prior.
- Chicago Purchasing Manager for September is estimated to fall to 55.5 versus a reading of 56.7 in August.
- None of note
- The Fed's Bernanke speaking, Fed's Pianalto speaking, NAPM-Milwaukee Index, Bloomberg FCI Sept. reading, (VCI) Investor Conference, (MMC) Analyst Meeting, (WU) Investor Day, weekly EIA natural gas inventory data, Oppenheimer Industrials Conference and the Wells Fargo Consumer Conference could also impact trading today.