Today's Headlines

Bloomberg:

• French-German Yield Spread Widens to Most Since 1992 on Moody's. France’s 10-year bond yield climbed to the highest compared with Germany’s in almost 20 years after Moody’s Investors Service said the nation’s Aaa credit rating is under pressure due to the regional debt crisis. French securities also fell along with those from Greece and Spain after reports showed China’s economic growth slowed and German investor confidence worsened, fueling speculation the global recovery is losing momentum. France’s financial strength has waned because of the financial crisis, New York-based Moody’s said yesterday. The euro-area’s second-largest economy is a guarantor of the European Financial Stability Facility regional bailout fund. “If the EFSF is expanded, it would increase the contingent liabilities for Aaa guarantor states like France and Germany, which would be good for the periphery but not necessarily that good for stronger euro countries,” said Elwin de Groot, senior market economist at Rabobank Nederland in Utrecht, Netherlands. “You can see the market’s concern in the spreads.” France’s 10-year yield rose eight basis points, or 0.08 percentage point, to 3.14 percent at 4:51 p.m. London time. The 3.25 percent bond due October 2021 fell 0.705, or 7.05 euros per 1,000-euro ($1,367) face amount, to 100.960. The German bund rate dropped eight basis points to 2.01 percent. The difference between the two yields expanded by as much as 18 basis points to 114 basis points today, the widest since 1992 based on Bloomberg generic prices. Greek bonds led losses among the securities of Europe’s most indebted nations, with the yield on its 4 percent note due in August 2013 rising 161 basis points, or 1.61 percentage points, to 76.42 percent, leaving the price at 38.61. Two-year yields in Spain rose 13 basis points to 3.88 percent and in Italy they climbed seven basis points to 4.45 percent. Irish two-year rates increased by 15 basis points to 7.83 percent.
• Merkel Said to Say Crisis Plan Moving by Millimeter. German Chancellor Angela Merkel told lawmakers that a European Union summit in five days will mark an important step, though not the final one, in solving the euro- area debt crisis, a participant at the meeting said. Officials from the 17-nation euro are moving millimeter by millimeter, the official told reporters in Berlin today on condition of anonymity because the talks were held in private. The comments by Merkel to a gathering of her Christian Democrat caucus marked the second time in two days that she sought to lower expectations that the European crisis-fighting effort would climax at the Oct. 23 meeting in Brussels, as international officials are advocating. “It is far from clear that the summit will deliver a package that is viewed as broad and deep enough,” David Mackie, chief European economist at JPMorgan Chase & Co (JPM), said in a note today. “Indeed, comments out of Germany appear to be trying to dampen expectations of what the summit will deliver.” Merkel said bank recapitalization will be discussed at the EU summit and permanent surveillance similar to the so-called troika of the International Monetary Fund, European Central Bank and European Commission is conceivable to oversee countries that tap the euro rescue fund, the official said. The euro declined 0.4 percent to $1.3689 at 5:25 p.m. in Frankfurt, reversing earlier gains of as much as 0.4 percent. France’s 10-year bond yield climbed to the highest compared with Germany’s in almost 20 years after Moody’s Investors Service said the nation’s Aaa credit rating is under pressure due to the region’s debt crisis.
• Bank Bond Risk Rises in Europe Amid Crisis Resolution Concern. The cost of insuring against default on European bank bonds rose on concern politicians are struggling to agree to a solution to the region’s debt crisis as the economy slows. The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 banks and insurers rose four basis points to 249, the highest in more than a week, while a gauge of subordinated risk climbed 13 basis points to 483, according to JPMorgan Chase & Co. prices at 4 p.m. in London. “The issues at hand are substantial and the amount of resources around to fix them are limited,” Anke Richter, a strategist at Mizuho International in London, wrote in a note. “Either way you slice or dice the cake, it is unlikely it will come even close to a big bazooka.” The cost of innsuring sovereign bonds also increased. Credit-default swaps on Belgium climbed eight basis points to 305, France jumped 10 to 192 and Germany rose four to 97, while Ireland was up six basis points at 755, CMA prices show. Italy increased nine basis points to 453, Portugal was two higher at 1,112 and Spain was up four basis points at 384. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments increased 0.5 basis point to 334 basis points. An increase signals worsening perceptions of credit quality. Swaps on Hannover Re increased nine basis points to 122, Commerzbank AG jumped 27 to 232 and Deutsche Bank AG climbed 15 to 191, according to CMA. Legal & General Group Plc rose 13 basis points to 183. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 10 basis points to 750, JPMorgan prices show. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was up 3.75 at 178.5 basis points.
• Euro Risks Break-Up if France AAA-Rating Lost, Handelsblatt Says. The euro risks breaking up if France should lose its triple-A rating, the Handelsblatt reported, citing the opinion of Berlin’s DIW institute’s chief macro- economic forecaster Ansgar Belke. Financial-market confidence in the ability of the euro- region to solve the debt crisis rests in part on the top rating of its biggest economies, Belke is cited as saying. France is the second biggest underwriter of the euro’s rescue fund’s guarantees, implying that a ratings downgrade would be transmitted to the fund, impairing the work of a key tool to tackle the crisis and raising the specter of a break-up of the currency in a worst-case scenario, Belke said.
• Euribor-OIS Spread Widens for Second Day to Highest in 2 Weeks. Banks in Europe are the most reluctant in two weeks to lend to one another, according to a money markets indicator. The Euribor-OIS spread, the difference between the euro interbank offered rate and overnight index swaps, was 76.5 basis points as of 12 p.m. in London, from 75.5 yesterday. That’s the biggest gap since Oct. 5 and compares with 89 basis points on Sept. 23, when the measure was its widest since March 2009. The cost for European banks to convert euro interest payments into dollars rose. The one-year basis swap was 66 basis points under the euro interbank offered rate, from 65 yesterday, according to data compiled by Bloomberg. The three-month cross-currency basis swap was 90.5 basis points below Euribor from 91. Overnight deposits at the European Central Bank rose. Banks parked 165 billion euros ($226 billion) at the Frankfurt-based ECB yesterday, up from 136 billion euros on Oct. 14. That compares with a year-to-date average of 60 billion euros. Three-month Euribor -- the rate banks say they pay for three-month loans in euros -- rose to 1.579 percent from 1.578 percent yesterday. One-week Euribor fell to 1.166 percent from 1.171 percent. The three-month dollar London interbank offered rate, or Libor, rose for the 28th day to 0.409 percent from 0.406 percent, according to the British Bankers’ Association. That’s the highest since Aug. 6, 2010. The TED spread, or the difference between what lenders and the U.S. government pay to borrow for three months, was little changed at 38.5 basis points.
• Papandreou Presses Austerity as Strikes Hold Greece 'Hostage'. Greek Prime Minister George Papandreou vowed to push through a further round of austerity measures in the face of public anger, appealing to European leaders to help cut Greece’s debt burden at a weekend summit. Opening a parliament debate in Athens on the government’s latest tax increases and cuts to pensions and wages, Papandreou said that a planned 48-hour walkout by workers in schools, hospitals and on public transport “will not help Greece,” contrasting the strikers with his government’s efforts to help the country back to economic growth. “Greece is being held hostage by strikes and protests,” Papandreou told lawmakers today. “This government has been fighting for two years to save the country and still has much work ahead,” he said. “We will give battle and we will win."
• Inflation in U.K. Accelerates More Than Forecast to Match 5.2% Record High. U.K. inflation accelerated to match a record high in September, a surge Bank of England policy makers set aside as they shifted their focus to combating the threat of another recession. Consumer prices rose 5.2 percent from a year earlier, compared with 4.5 percent in August, the Office for National Statistics said in London today. That matched the record high reached in September 2008, which was the highest since comparable records began in 1997. The median estimate of 35 economists in a Bloomberg News survey was 4.9 percent.
• Copper Falls Most in Two Weeks As Slowing China Growth Signals Weak Demand. Copper fell the most in two weeks as economic growth slowed to a two-year low in China, the world’s largest metals consumer. Gross domestic product in China rose 9.1 percent in the third quarter from a year earlier, the slowest pace since 2009, figures from the statistics bureau showed. Prices also retreated as investor confidence in Germany, the third-biggest copper consumer, reached the lowest level in almost three years. “Investors sense that accelerating Chinese metal demand that was so prevalent in prior years may now give way to decelerating demand, something that may not support a scenario of higher metals prices over the medium-term,” Edward Meir, a senior commodity analyst at MF Global Holdings Ltd. in Darien, Connecticut, said in a report. Copper futures for December delivery slid 2.7 percent to $3.288 a pound at 10:08 a.m. on the Comex in New York. A close at that level would be the biggest loss since Sept. 30. Yesterday, the price dropped 0.9 percent after Germany said European Union leaders won’t provide a quick fix to the region’s debt crisis. The metal slumped 26 percent in the three months ended Sept. 30, the biggest quarterly loss since the end of 2008, as Europe’s debt crisis threatened global growth.
• Wholesale Prices in U.S. Rise More Than Economists Estimated on Food, Fuel. Wholesale prices in the U.S. rose more than forecast in September, boosted by gasoline, food and trucks, indicating inflationary pressures continue to bubble up the production line. The producer price index climbed 0.8 percent, the most in five months, after no change in August, Labor Department figures showed today in Washington. Economists projected a 0.2 percent gain, according to the median of 71 estimates in a Bloomberg News survey. The so-called core measure, which excludes volatile food and energy, gained 0.2 percent, also more than predicted.
• Rise in U.S. Homebuilder Sentiment Tops Forecast. Homebuilders in the U.S. were less pessimistic than forecast in October as near record-low borrowing costs and price decreases raised hopes the market will turn for the better over the next six months. The National Association of Home Builders/Wells Fargo sentiment index climbed to 18, the highest level since May 2010, from 14 in the prior month, data from the Washington-based group showed today. Economists surveyed by Bloomberg News projected the measure would rise to 15, according to the median forecast. Readings below 50 mean more respondents said conditions were poor.
• Crude Oil Rises to One-Month High on Bank of America(BAC) Earnings Results. Crude oil rose to the highest level in one month as U.S. stocks rallied after Bank of America Corp. (BAC) reported better-than-estimated results, raising hopes that economic growth will stabilize. Oil climbed as much as 2.6 percent as the Standard & Poor’s 500 Index reversed losses after Bank of America, this year’s worst performer in the Dow Jones Industrial Average, reported a third-quarter profit versus a loss a year earlier. Crude fell as much as 1 percent earlier as data showed China’s economy grew at the slowest pace in two years.
• Obama Finds Economy Makes Policies Hard Sell. Lisa Hensley was excited to meet President Barack Obama when he unexpectedly showed up yesterday at the Countryside Barbeque in Marion, North Carolina, a town of about 8,000 along the Blue Ridge Mountains. The accountant even echoed the president’s message: “We need to be for America, not just for Democrats or Republicans,” she said. Yet, Hensley, 50, a registered Democrat, said she won’t be voting for Obama next year. “Not unless something changes dramatically,” she said. “It would have to be something monumental.”
• Los Angeles, Wooed by Occupy Protest, May Face Higher Debt Costs. Los Angeles faces tens of millions of dollars in additional borrowing costs after the City Council told anti-Wall Street protesters it intends to cut ties with banks involved in financial wrongdoing, Administrative Officer Miguel Santana said. The city may have to pay $27.8 million in termination fees and replacement costs if it's prohibited from doing business with banks providing letters of credit for just one infrastructure program, Santana said yesterday in a memo to Mayor Antonio Villaraigosa. Debt service would climb $14.9 million a year if it has to refinance commercial paper into long-term debt at higher rates, Santana said in a telephone interview.
• Hatch Urges Obama to Drop Plan to Cap Charitable Deductions. Limiting tax deductions for charitable contributions would undermine churches and other nonprofit community groups, Utah Senator Orrin Hatch said at a Senate Finance Committee hearing today. Hatch urged the Obama administration to back away from a proposal to cap at 28 percent itemized deductions, including the one for charitable contributions, for individuals earning more than $200,000 a year and married couples earning more than $250,000. Such deductions now are capped at the top marginal tax rate of 35 percent. “I am deeply concerned that the current deduction for charitable giving is under quiet assault,” said Hatch, the panel’s top Republican, at a hearing examining possible changes to the tax treatment of charities. The proposal for the 28 percent cap on deductions for high earners was included in President Barack Obama’s $447 billion jobs package unveiled last month. Senator Max Baucus, a Montana Democrat and the Finance Committee’s chairman, said taxpayers at varying income levels tend to give to different types of charities. Higher-income households contribute more often to health causes, he said, while lower-income families tend to give more to religious or basic-needs charities.

Wall Street Journal:

• Europe Could Reconsider Climate Approach. In what could herald a significant shift in policy for a region that has been in the forefront of advocating action to combat climate change, the European Union is for the first time clearly questioning whether it should press ahead with plans to cut greenhouse-gas emissions if other countries don't follow suit.
• Hedge Fund Investor Jen Sees Broad Rally In USD; Euro to Tumble. U.S. dollar bears beware. Stephen Jen, a high-profile currency market investor, expects the U.S. currency to rally broadly in coming months against many of its rivals including the euro, the Australian dollar, the South Korean won and the Brazilian real. "My three favorite currencies to buy? dollar, dollar, dollar," said Jen, managing partner at hedge fund SLJ Macro Partners LLP and former currency research head at Morgan Stanley, in an interview Tuesday. "The support in the U.S. for large Keynesian stimulus is no longer there, and Europe is in full fiscal retrenchment mode," said Jen. "The policy stance in the U.S. and Europe is now very different from that a year or two years ago. Meanwhile, the euro zone's crisis is far from resolved even if policymakers thrash out a broad plan in coming weeks, said Jen. "The underlying problems remain the same," said Jen. "Greece is insolvent but the Eurocrats don't want to admit that it is insolvent. The European banks are over-leveraged and are vulnerable to all sorts of shocks. European growth will likely disappoint." Jen flagged one issue facing European banks--they have exceptionally high loan-to-deposit ratios of 1.2, which he terms as "excessive leverage," compared with a 0.7 ratio for American and Japanese banks. Should the bank recapitalization plan move forward, European banks will likely experience market and regulatory pressures to reduce their cross-border loans, which would lead to a credit squeeze in the euro zone and hurt the region's economic growth, said Jen. "If we assume European banks, over the course of several years, reduce their LTD ratio toward that of the U.S., some $7 trillion in loans will need to be curtailed, assuming deposits don't rise," said Jen.

CNBC.com:

• US to Crack Down on Commodity Traders; Will It Stick? The United States is poised on Tuesday to push through the toughest measures yet to curtail speculation in commodity markets, likely shifting the focus of a fierce four-year debate from the regulators to the courts.

Business Insider:

• Twitter's CEO Just Confirmed An $8 Billion Valuation.
• Steve Eisman Is Launching A New Hedge Fund Called Emrys Partners.
• Long/Short Equity Hedge Fund Managers Are Experiencing The Worst Drawdowns In 20 Years As Of The End Of September.
• Here's Why It's A Big Deal That The 'Wenzhou Model' Is Crashing Hard.
• Apple(AAPL) Earnings: Everything You Need To Know.
  

Zero Hedge:

• And Once Again, German, French Discord Threatens to Scuttle European Bailout Reports AP.
• S&P Downgrades Over 20 Italian Banks, Says Difficult Climate Is Neither "Transitory" Nor "Easily Reversed".
• There Is No Bailout Spoon: The Math Behind The Re-Revised EFSF Reveals A "Pea Shooter" Not A "Bazooka".
  

Gallup:

• Obama Job Approval: Disapprove 54%, Approve 38%. (graph)

Reuters:

• US Gasoline Prices Rise, Weigh on Demand - Mastercard. Demand dropped 3.1 percent year-on-year after prices at the pump climbed 2 cents a gallon from the previous week.

AP:

• Debt Crisis Hobbles China's Factory Hub. "Do anything, but not manufacturing in China!" exclaimed Yang Guanghua, boss of a Wenzhou electroplating factory. Unable to collect from customers who themselves have no money, Yang said he stopped paying salaries two months ago. Wenzhou's private entrepreneurs, scrappy survivors in an economy ruled by state industries, once thrived on a formula of cheap back street loans and low-cost manufacturing.Now, they're at the center of what some have dubbed China's own subprime debt crisis, a festering mess of borrowings gone sour that has become one of the weakest links in the economy.

BNR Radio:

• ABN Amro Group NV CEO Gerrit Zalm said making banks share the costs of rescuing Greece may not be sensible as lenders may shun investing in other countries' debt as a consequence. Additional writedowns by banks "raise doubt on whether states will meet their obligations," Zalm said in an interview.

Bear Radar

Style Underperformer:

• Small-Cap Growth (+.89%)

Sector Underperformers:

• 1) Computer Services -3.41% 2) HMOs -1.21% 3) Gold & Silver -1.20%

Stocks Falling on Unusual Volume:

• HOG, IM, PII, UNH, IBM, WLP, LO, CHK, CROX, APEI, JAZZ, REGN, NUAN, TECD, ITRI, NEOG, HAS, AKAM, FMCN, DECK, CSTR, CTRP, DISH, FOSL, NWPX, HSP, EDU and CS
  

Stocks With Unusual Put Option Activity:

• 1) MOO 2) SHLD 3) STT 4) CTXS 5) CAKE
  

Stocks With Most Negative News Mentions:

• 1) WHR 2) CHK 3) BMI 4) HD 5) LULU
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Value (+1.29%)

Sector Outperformers:

• 1) Homebuilders +2.87% 2) Banks +2.78% 3) Hospitals +1.69%

Stocks Rising on Unusual Volume:

• STT, C, HGSI, LNCR, FSLR, PTI, PH, BRO, DVA, SWK, VMW and EMC
  

Stocks With Unusual Call Option Activity:

• 1) CROX 2) HGSI 3) CREE 4) KOG 5) PPDI
  

Stocks With Most Positive News Mentions:

• 1) EDU 2) DVA 3) PEP 4) CAKE 5) HAL
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Tuesday Watch

Evening Headlines

Bloomberg:

• France Risks AAA on Bulked Up ESFS Bailout Fund: Euro Credit. Proposals to beef up Europe’s bailout fund by offering to guarantee portions of the debt owed by the region’s weaker governments threaten to trash France’s top credit rating. The nation’s 10-year notes are the third-worst performers this quarter -- behind only Greece and Belgium -- as traders speculate the European Financial Stability Facility will be used to insure the first portion of losses in the event of a sovereign default. Investors now demand to be paid a record 93.2 basis points more to hold French bonds rather than German notes, up from 29 basis points in April. “France is the key factor here,” said Bob McKee, chief economist at Independent Strategy Ltd. in London. “Offering insurance increases France’s contingent liability and that puts pressure on its rating. If France loses its AAA status, that in turn increases the pressure on Germany.” French bonds are being hurt as policy makers consider using the guarantee to ensure Italy, the world’s third-largest bond issuer, and Spain can continue to access markets as contagion spreads from Greece. A downgrade of France will also limit the EFSF’s ability to hold a top grade, according to Moody’s Investors Service. The cost of insuring French bonds using credit-default swaps has soared to 183 basis points, from an average of about 84 in the first half of the year. “Looking at the numbers, France is no longer a AAA credit,” said Nicola Marinelli, who oversees $153 million in funds at Glendevon King Asset Management in London. “They’re talking about guaranteeing trillions of euros of bonds but if France isn’t a AAA then even guaranteeing one more euro might not be sustainable.” “The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook of the government’s Aaa debt rating,” Moody’s said in a report late yesterday. “The French government now has less room for manoeuvre in terms if stretching its balance sheet than it had in 2008.” Moody’s said it will monitor and assess its “stable” outlook on the nation’s debt over the next three months. French banks tumbled in the past three days with BNP Paribas SA, the biggest of the nation’s lenders, dropping more than 12 percent and Societe Generale SA down almost 14 percent on concern they would be downgraded along with the government. “Given the sheer size the French banking system it may end up being singled out as the most vulnerable country to a rating agency downgrade,” said Marchel Alexandrovich, an economist at Jefferies International in London.
• Euro Rescue Is Hard Sell for Poorest Members. Estonia and Slovakia, the euro area's two poorest members, will contribute the most to the bailout system relative to the size of their economies, giving leaders opposed to helping richer states ammunition to stall future euro-stability programs. Estonia's share in the newly expanded EFSF equals 13.9% of GDP, compared with 8.5% for Germany, the largest guarantor in nominal terms. Slovakia, the second-poorest euro country, ranks second with a share amounting to 11.7% of GDP.
• Euro Leaders' Crisis Campaign Bogs Down as Divisions Flare. Europe’s options for overcoming the debt crisis narrowed as Germany doused expectations of a breakthrough at this weekend’s summit and central bankers balked at extended bond purchases. European stocks and the euro reversed initial gains yesterday, slumping after German Chancellor Angela Merkel’s office knocked down what it called “dreams” that the Oct. 23 summit will be the last word in taming the crisis. Christian Noyer, head of France’s central bank, ruled out a ramping up of the European Central Bank’s bond-buying program as part of a multi-pronged strategy to shield countries like Italy. While Group of 20 finance ministers and central bankers pressed European Union leaders to set out a strategy by the end of the week, divisions flared over an emerging plan to avoid a Greek default, bolster banks and curb contagion. “We’re really in a bind here,” Carl Weinberg, founder and chief economist at High Frequency Economics, said in an interview with Betty Liu on Bloomberg Television’s “In the Loop.” “We have a lot of egos, a lot of national interests, a lot of political considerations, and that’s just hampering us from getting to a solution.” The ECB said yesterday it bought 2.2 billion euros ($3 billion) of bonds last week, the least since it restarted the market support program in August over the objections of Germans on its council. While looking to exit the bond-buying business, the ECB also opposes the use of its balance sheet to boost the government-financed 440 billion-euro rescue fund with enough firepower to do that job. “We don’t see how the EU officials will be able to present a solution by the weekend which will remotely approach the current expectations,” Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt, said in a research note yesterday.
• China Will Write Off $3 Trillion, Says Das of 'Extreme Money'. If Satyajit Das is right, China will end up writing off its $3.2 trillion in foreign reserves. Europe is shambling toward Japanese-style growth. And a day of reckoning is at hand for creditors and debtors alike.“Europeans are going to have to recapitalize their banks,” Das said as we discussed the sovereign-debt crisis and his new book, “Extreme Money,” over coffee in a Brussels hotel. “You have made bad loans; you’re going to have to write them off. That is the one axiomatic law of making a bad loan.” Das, 54, is the puckish derivatives specialist who lampooned banking excesses in “Traders, Guns & Money.” He was in town to brief members of the European Parliament on the crisis. Looking relaxed in a black V-necked sweater and black shirt, he talked about Germany’s fling with Greece, China’s unpaid loans and what Angela Merkel can learn from Winston Churchill. We began with Dexia SA’s second bailout.
• China Banking Crisis Possible. (video) Patrick Chovanec, a professor at Tsinghua University in Beijing, talks about China's economy. Chovanec speaks with Susan Li on Bloomberg Television's "First Up."
• GE(GE) Redeems $3.3 Billion Stake Buffett Bought Amid 2008 Crisis. General Electric Co. paid $3.3 billion today to repurchase preferred stock sold to Warren Buffett’s Berkshire Hathaway Inc. as financial markets froze in October 2008.
• IBM(IBM) Q3 Revenue Misses Estimates on Slow Demand. International Business Machines Corp. (IBM), the biggest computer-services company, reported third- quarter sales that missed analysts’ estimates on slowing revenue growth at its software, hardware and services businesses. Sales climbed 7.8 percent to $26.2 billion, Armonk, New York-based IBM said today in a statement. Analysts predicted $26.3 billion, the average of estimates compiled by Bloomberg. Chief Executive Officer Sam Palmisano is focusing on areas such as business analytics, emerging markets and cloud computing to boost sales amid sluggish economic expansion. “Because they didn’t beat, the stock’s going to trade down; the expectation is pretty high for this name,” said Josh Olson, an analyst with Edward Jones & Co. in Des Peres, Missouri, who has a “buy” rating on the stock. A slowdown in hardware revenue growth is occurring “sooner than I expected.” IBM fell as much as 4.1 percent to $179.02 in extended trading after closing at $186.59 in New York today.
• VMware(VMW) Braces for 'Difficult' 2012 as Corporations Cut Technology Spending. VMware Inc. (VMW), the biggest maker of programs that let computers run multiple operating systems, said it’s bracing for a “difficult” 2012 because corporations may slow spending on technology, including the company’s software. On a conference call today to discuss quarterly earnings, Chief Financial Officer Mark Peek said next year will be “challenging.” Net income in the third quarter more than doubled to $177.5 million, or 41 cents a share, from $84.6 million, or 20 cents, VMware said. Excluding some costs, profit was 53 cents, compared with the 49-cent average estimate of analysts surveyed by Bloomberg. “It will be a year of challenging revenue comparables and considerable investments,” Peek said on the conference call.

Wall Street Journal:

• Yahoo(YHOO) Vexed by Weak Sales. As Yahoo Inc. shops itself to potential buyers, its core advertising business is weakening. That trend is evident through Craig Atkinson's ad agency.
• New Mortgage Plan Floated. Underwater Borrowers Current on Payments Would Get Help. State and federal officials are pushing a plan that could help some "underwater" borrowers get refinancing assistance in the latest government bid to break a legal impasse with big banks over alleged foreclosure abuses and ease problems in the housing market. The proposal was raised in a meeting last week between government negotiators and giant lenders as part of an effort to settle allegations of questionable foreclosure practices. Discussions are still fluid and any final outcome is uncertain. Talks between government officials and the banks are expected to continue this week.
• Traders Warn of Market Cracks. Amid the wild swings of the past few weeks, cracks are appearing deep in the workings of the stock market that some professional investors say are making the market treacherous to trade. Hedge-fund traders and mutual-fund managers say it has become increasingly tough to trade an individual stock without causing a big swing in its price. That's led many large investors to step back from the market instead of risking being stung by the trading difficulties.
• Polling The Occupy Wall Street Crowd by Douglas Schoen. In interviews, protesters show that they are leftists out of step with most American voters. Yet Democrats are embracing them anyway. President Obama and the Democratic leadership are making a critical error in embracing the Occupy Wall Street movement—and it may cost them the 2012 election.
• A New Spending Record. Washington had its best year ever in fiscal 2011. Maybe it's a sign of the tumultuous times, but the federal government recently wrapped up its biggest spending year, and its second biggest annual budget deficit, and almost nobody noticed. Is it rude to mention this?

MarketWatch:

• Chanos: China's Hard-Landing Has Already Begun. China is heading into an economic storm, and the much-feared hard-landing of the world’s second-largest economy has already started, warned celebrated hedge-fund manager and China-bear Jim Chanos of Kynikos Associates on Monday. “The numbers are falling faster than we thought,” said Chanos during an exclusive interview with MarketWatch on the sidelines of the 7th Annual New York Value Investing Congress.
• Fed's Lacker: Twist Will Boost Prices Not Growth. Richmond Federal Reserve Bank President Jeffrey Lacker said Monday that he does not support the central bank's Operation Twist move to help to recovery. "My sense is that the main effect will be to raise inflation somewhat rather than increase growth," Lacker said in a speech to a business group in Salisbury, Md. Lacker said he was more worried than most economists about inflation, saying he doubts it will fall much below 2% for a sustained period. Lacker also said he did not support the Fed's decision to reinvest proceeds from maturing agency mortgage-backed securities into the agency MBS market. Previously, the Fed had reinvested the proceeds into Treasurys. "It is simply inappropriate, in my view, for a central bank to channel credit toward some economic sectors and away from others," Lacker said.

Business Insider:

• Credit Card Delinquencies Rise As Issuers Offer More Cards To Subprime Borrowers. Last week, Citigroup analysts warned that improving credit metrics, like falling delinquency rates, were at an "inflection point." And it looks like they were right. Earlier today, Bank of America said delinquencies rates rose in September, the first increase in a year. In fact, five of the six largest credit card issuers reported higher delinquency rates. According to Eileen Connelly of AP, this is the first time since February 2009 that this many major credit card issuers reported rising delinquency rates.
• Former Sales Rep: Groupon And LivingSocial 'Absolutely' Inflate Regular Prices (And It's Going To Get Worse).

Zero Hedge:

• Moody's Announces That France's Debt Metrics Have Deteriorated And Are Now The Weakest Of All Aaa-Rated Peers. Full note:
• Chinese GDP Prints at 2-Year Low as Inflation Still Persists. (graph)
  

IBD:

• Finish Line(FINL) Kicks Its Running-Shoe Biz Up A Notch.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 20% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -23 (see trends).

Reuters:

• Crocs(CROX) Cuts Outlook on Sales Slowdown, Shares Dive. Shoemaker Crocs Inc (CROX.O) lowered its outlook for the first time in three years as it faces softening sales at its stores, amid a weak economy in Europe and shaky consumer confidence in the United States. The dim outlook sparked a sell-off in the Crocs' stock, wiping out nearly 40 percent of the company's market value in extended trading. They were trading at $17.08 in after-market trade, after closing at $26.64 on Monday on Nasdaq.

Financial Times:

• Companies Expect More Lawsuits. A boom in corporate litigation is expected in the US and UK due to increased regulation and whistleblower complaints, a transatlantic survey of top in-house lawyers by the law firm Fulbright & Jaworski has found. More than 90 per cent of US companies and 85 per cent of UK companies are expecting lawsuits to stay the same or rise next year, and stricter regulation was the top reason for the predicted increase, according to the survey of 405 companies.

Telegraph:

• A Leveraged EFSF Is Pure Poison. Big snag. If Europe’s leaders do indeed leverage their €440bn bail-out fund (EFSF) to €2 trillion or €3 trillion through some form of "first loss" insurance on Club Med bonds – as markets now seem to assume – the consequences will be swift and brutal. Professor Ansgar Belke, from Berlin's DIW Institute, said any leveraging of the EFSF would be "poisonous" for France’s AAA rating and would set off an uncontrollable chain of events. "It counteracts all efforts made so far to stabilize the eurozone debt crisis, which are premised on the AAA rating of a sufficiently large number of strong economies. In extremis, it would probably cause the break-up of the eurozone", he told Handlesblatt.

Rheinische Post:

• The structure of the European rescue fund would be undermined if France were to lose its AAA credit rating, citing Lueder Gerken, head of the Centre for European Policy, a Freiburg, Germany-based think tank. A cut in the rating would decrease the capacity of the European Financial Stability Facility by 35%, citing calculations by the CEP. Germany would have to increase its guarantees to the EFSF to 317 billion from 211 billion euros.

Yonhap News Agency:

• North Korean Official Threatens War with South Korea. A senior North Korean official, who is on a rare trip to the United States, said Monday the security condition on the Korean Peninsula is so unstable that a war may occur again anytime. Rhee Jong-hyuk, a ranking member of the all-powerful Workers' Party of the communist nation, blamed the conservative government of South Korea, claiming Pyongyang remains committed to peace on the peninsula.
  

China Daily:

• Former Vice Chinese Commerce Minister Wei Jianguo said the possibility of a full year trade deficit in 2012 "cannot be ruled out." Demand for Chinese exports in September and October, usually peak times for contracts ahead of holiday seasons in Europe and the U.S., is down "sharply" this year, citing Wei.
• An appreciation of the Chinese currency may have "complicated negative effects" on the global economy such as raising prices of industrial products and may worsen inflation in many countries including the U.S., Xing Susu, a researcher at the Chinese People's Institute of Foreign Affairs, wrote in a commentary today. The U.S.'s quantitative easing and other "beggar-thy-neighbor" policies have increased the risk of inflation, especially in developing nations, Xing said.
• China's public road projects have stalled because of a lack of funding over the last two or three months in some provinces, citing research by the Ministry of Transport. Road completion may be about 20% below plan. Public road construction may face greater funding pressures in Q4.
• Reports by 16 provincial authorities showed they owed a combined $199 billion for the construction of toll roads. Only 4 provinces and municipalities including Beijing recorded profits from toll roads, according to the report.
  

China Business News:

• Chinese rail projects are being halted on cash shortages. Over 10,000 km of building work has been halted, citing Wang Mengshu, a China Railway Group engineer.
• Coal stockpiles at five major Chinese power companies rose to more than 60m tons as of the end of September, citing a person from one of the companies. Average daily coal consumption fell as much as 16% to about 3.3m tons.
  

Evening Recommendations
Sterne Agee:

• Rated (HAL) Buy, target $48.
• Rated (BHI) Buy, target $71.
• Rated (CAM) Buy, target $57.
• Rated (NOV) Buy, target $81.
• Rated (WFT) Buy, target $20.
  

Night Trading

• Asian equity indices are -3.0% to -1.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 209.50 +11.5 basis points.
  
• Asia Pacific Sovereign CDS Index 154.50 +4.5 basis points.
• FTSE-100 futures -.50%.
  
• S&P 500 futures +.17%.
  
• NASDAQ 100 futures +.31%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STT)/.89
• (GPC)/.94
• (KO)/1.01
• (HOG)/.75
• (PH)/1.69
• (UNH)/1.12
• (PII)/.85
• (OMC)/.70
• (BAC)/.21
• (EMC)/.36
• (JNJ)/1.21
• (GS)/-.11
• (GWW)/2.33
• (FRX)/.99
• (CREE)/.25
• (AAPL)/7.31
• (LLTC)/.49
• (MANH)/.49
• (CSX)/.43
• (ISRG)/2.76
• (YHOO)/.72
• (INTC)/.61
• (JNPR)/.28
• (WERN)/.40
• (DPZ)/.33
  

Economic Releases
8:30 am EST

• The Producer Price Index for September is estimated to rise +.2% versus unch. in August.
• The PPI Ex Food & Energy for September is estimated to rise +.1% versus a +.1% gain in August.
  

9:00 am EST

• Net Long-Term TIC Flows for August are estimated to widen to -$20.0B versus $9.5B in July.

10:00 am EST

• The NAHB Housing Market Index for October is estimated to rise to 15.0 versus 14.0 in September.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, weekly retail sales reports and the Spain/Greece T-Bill Auctions could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Falling Into Final Hour on Rising Global Debt Angst, Global Growth Fears, Technical Selling and Profit-Taking

Broad Market Tone:

• Advance/Decline Line: Substantially Lower
  
• Sector Performance: Every Sector Declining
  
• Volume: Below Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 32.58 +15.37%
  
• ISE Sentiment Index 81.0 -41.73%
  
• Total Put/Call 1.09 +10.10%
  
• NYSE Arms 1.75 +159.64%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 133.17 +2.64%
  
• European Financial Sector CDS Index 226.45 +1.35%
  
• Western Europe Sovereign Debt CDS Index 340.33 -1.4%
  
• Emerging Market CDS Index 309.42 +4.16%
  
• 2-Year Swap Spread 39.0 unch.
  
• TED Spread 39.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .02% +1 bp
  
• Yield Curve 188.0 -9 bps
  
• China Import Iron Ore Spot $153.40/Metric Tonne -2.60%
  
• Citi US Economic Surprise Index 2.0 -.2 point
  
• 10-Year TIPS Spread 1.95 -3 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -90 open in Japan
• DAX Futures: Indicating -40 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech, Biotech and Medical sector longs
  
• Disclosed Trades: Added to my (QQQ)/(IWM) hedges and to my (EEM) short, then covered some of them
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 rolls over at the upper end of its 2-month range on rising global debt angst, rising global growth worries, profit-taking, more shorting, rising financial sector pessimism and technical selling. On the positive side, Utility shares are higher on the day. Major Asian equity indices finished 1-2% higher overnight. Oil is falling -1.15%, lumber is gaining +2.08%, gold is down -.5% and the UBS-Bloomberg Ag Spot Index is falling -.64%. The Spain sovereign cds is falling -6.53% to 355.17 bps and the Israel sovereign cds is falling -10.1% to 150.12 bps. On the negative side, Coal, Oil Tankers, Computer, Disk Drive, Bank, Alt Energy, Oil Service, Steel, Networking, Construction, Homebuilding and Education shares are especially weak, falling more than 3.0%. Cyclicals and small-caps are substantially underperforming. (XLF) has traded poorly throughout the day. Copper is falling -1.4%. Rice is still close to its multi-year high, rising +30.5% in about 14 weeks. The Brazil sovereign cds is gaining +1.2% to 154.3 bps, the France sovereign cds is rising +1.0% to 184.67 bps and the US Muni CDS Index is climbing +1.0% to 208.0 bps. The Libor-OIS Spread is still at 32.0 bps, which is the highest since July 2010. As well, the TED, 2-Year Euro Swap and 2-Year swap spreads are still very close to their recent highs, which is also noteworthy considering the recent strong equity advance. The Western Europe Sovereign CDS Index, the European Financial Sector CDS Index and the Asia-Pacific Sovereign CDS Index are still near their records and trending higher despite their recent pullbacks. India's Sensex fell -.34%, despite gains in the rest of Asia overnight, and is now down -17.0 ytd. Major European equity indices fell 1-2% today. Brazil's Bovespa fell -2.1% today and is now down -22.3% ytd. China Iron Ore Spot continues to pick up downside steam, falling -20.1% since February 16th. The accumulation of bad news over the last few days finally caught up with equity investors. (IBM) reports after the close today. Given the stock is right near all-time highs, the tech sector's recent relative strength and their exposure to Europe, I will closely monitor the stock's reaction to the report as a tell for the broad market. I expect US stocks to trade mixed-to-lower into the close from current levels on rising global debt angst, rising financial sector pessimism, global growth fears, more shorting, profit-taking and technical selling.

Today's Headlines

Bloomberg:

• Germany Shoots Down 'Dreams' of Swift Crisis Fix. Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit. German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.” Group of 20 finance ministers and central bankers concluded weekend talks in Paris endorsing parts of Europe’s emerging plan to avoid a Greek default, bolster banks and curb contagion. Providing a week to act, they set the Oct. 23 meeting of European leaders in Brussels as the deadline. On the summit agenda is how any recapitalization of Europe’s banks “might be carried out in a coordinated way” and how to make the European Financial Stability Facility, the EU’s rescue fund for indebted states, as effective as possible, Seibert said. The leaders will also discuss aid for Greece and ways to tighten economic and financial policy, he said. The euro retreated as much as 1 percent to $1.3739 from a one-month high against the dollar after Seibert’s comments. The currency last week had its biggest gain in more than two years on speculation that policy makers were moving closer to stemming the crisis. German 10-year bonds rallied and the Stoxx Europe 600 Index reversed an advance of as much as 1.5 percent and was down 1.4 percent at 4.45 p.m. in Frankfurt.
• German Ministry Open to Discuss Separation of Investment Banking. Proposals to separate investment and retail banking are “interesting approaches” for international talks about financial-market regulation, German Finance Ministry spokesman Johannes Blankenheim said. “These ideas, these suggestions should be discussed intensively at the international level, especially to solve open questions such as the definition of the retail and investment business and the repercussions on the real economy,” Blankenheim said when asked by reporters today in Berlin about demands by Germany’s opposition Social Democratic Party to impose a separation.
• BOE New Stimulus May Not Be Enough as U.K. Outlook Worsens, ITEM Club Says. Ernst & Young LLP’s ITEM Club cut its U.K. growth forecast and said the Bank of England should lower its key interest rate as its new stimulus earlier this month is unlikely to be enough to revive economic growth. Gross domestic product will increase 0.9 percent in 2011 and 1.5 percent in 2012, compared with July projections of 1.4 percent and 2.2 percent respectively, the research group said in an e-mailed report in London today.
• U.S. Banks Fall as Wells(WFC), Citi(C) Revenue Slump. U.S. banks fell after Citigroup Inc. (C) and Wells Fargo & Co. (WFC), the nation’s third- and fourth-largest lenders, said quarterly revenue dropped amid economic weakness and market turmoil linked to Europe. Wells Fargo slid 7.3 percent, the most since Aug. 10, to $24.72 at 12:49 p.m. in New York trading, leading a 3 percent decline in the 24-company KBW Bank Index. (BKX) Citigroup slipped 1.3 percent to $28.02.
• U.S. Bank Credit Risk Increases as Wells Fargo(WFC) Revenues Decline. The cost to protect U.S. bank debt climbed after third-quarter revenue at Wells Fargo & Co. (WFC), the largest U.S. home lender, declined. Credit-default swaps on Wells Fargo, based in San Francisco, added 7 basis points to 152 basis points at 11 a.m. in New York, according to data provider CMA. Those tied to Goldman Sachs Group Inc. (GS) climbed 22.5 basis points to 361. A benchmark gauge of U.S. corporate credit risk also rose after a German government spokesman damped expectations for a swift resolution to the region’s debt crisis. Credit swaps on General Electric Co. (GE)’s finance arm General Electric Capital Corp. increased 17 basis points to 287. Contracts linked to Morgan Stanley, which pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt, added 21 basis points to 412, and those tied to Bank of America Corp. (BAC) increased 18.5 to 383.5, according to CMA. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, gained 3.4 basis points to a mid- price of 133.4 basis points as of 11:19 a.m. in New York, according to index administrator Markit Group Ltd.
• EU Said to Be Close to Deal for Curbs on Naked Sovereign CDS. The European Union is close to an agreement to insert an optional ban on naked credit-default swaps on sovereign debt into a draft law on short selling, under plans to be discussed by government officials and lawmakers tomorrow, according to two people familiar with the talks.
• U.S. Industrial Production Barely Increases. Industrial production in the U.S. advanced in September on growing demand for automobiles and computers after stalling the prior month, a sign manufacturers are contributing to growth. Output at factories, mines and utilities increased 0.2 percent, in line with the median estimate in a Bloomberg News survey, after being little changed in August, figures from the Federal Reserve showed today. Factory production, which makes up 75 percent of the total, climbed for a third month. Capacity utilization, which measures the amount of a plant that is in use, increased to 77.4 percent from 77.3 percent in August. The gauge compares with the average of 79.5 percent over the past 20 years.
• Manufacturing in New York Region Shrinks More Than Economists Forecast. Manufacturing in the New York region contracted in October at a faster pace than forecast, reflecting a lack of confidence in the U.S. recovery that failed to be confirmed by measures of orders and sales. The Federal Reserve Bank of New York’s general economic index rose to minus 8.5 from minus 8.8 in September. Economists projected an improvement to minus 4, based on the median of 53 forecasts in a Bloomberg News survey.
• Oil Slips From One-Month High as Germany Cools Optimism on Europe Rescue. Crude oil slipped from the highest level in a month after Germany said European Union leaders won’t provide a complete fix to the region’s debt crisis, damping hopes for a quick rescue plan. Oil fell as much as 1.1 percent after climbing above $88 a barrel as Chancellor Angela Merkel said expectations that rescue plans to be announced at an Oct. 23 summit will speedily address Europe’s problems were “dreams.” Prices also weakened as data showed manufacturing in the New York region contracted in October at a faster pace than forecast. “People started to accept that Europe is going to take awhile to recover and there is no quick fix,” said Carl Larry, director of energy derivatives and research with Blue Ocean Brokerage LLC in New York. Crude for November delivery fell 46 cents, or 0.5 percent, to $86.34 a barrel at 11:20 a.m. on the New York Mercantile Exchange. Earlier it gained as much as 1.6 percent to $88.18 a barrel, the highest since Sept. 16, on forecasts that China may say tomorrow its economy grew more than 9 percent last quarter. Brent oil for December settlement fell $1.33, or 1.2 percent, to $110.90 a barrel on the London-based ICE Futures Europe exchange.

Wall Street Journal:

• Chinese Company Scandals Are Spurring Due Diligence In Hong Kong - Hong Kong Exchange Exec.
• Tokyo Lowers Assessment of Economy. The Japanese government lowered its assessment of the economy in October, saying in its monthly economic report that the recovery from the March disaster is losing steam, as the global slowdown drags on exports and production while the strong yen and energy constraints continue to cloud the outlook. "The Japanese economy is still picking up, although the pace of recovery is decelerating, as difficulties due to the Great East Japan Earthquake persist," the cabinet office said in the report, released Monday. The government curbed its view of exports, industrial production and personal consumption, and said the adverse effects of deflation still threaten the economy. It also reiterated concerns about the strong yen, which makes imports less expensive but is negative overall for the export-driven economy.
• Bearish Bets Fall at NYSE, Nasdaq. Short-selling declined at the New York Stock Exchange and the Nasdaq Stock Market during the second half of September. In the exchanges' latest twice-a-month statistics, this time for the period ended Sept. 30, the number of short-selling positions at the NYSE not yet closed out, known as short interest, decreased 4.62%. The positions stood at 14,946,055,365 shares from a revised 15,669,413,241 shares in the period ended Sept. 15.
  

CNBC.com:

• Bank Fees Push Consumers to Put Money Elsewhere.

Business Insider:

• Hedge Fund Manager Gets All Fired Up Over The Likelihood People Who Bet On A Greek Default Will Not Get Paid.
• Obama: Congress Is Apparently Too Stupid To Understand My Jobs Bill, So We're Going To Simplify It For Them. President Barack Obama took a shot at Congress on Monday, saying they might have had difficulty wrapping their heads around his 200-page jobs bill. "We're going to break up my jobs bill. Maybe they [Congress] couldn't understand it all at once," he said in Asheville, North Carolina — the first stop of his three-day bus tour promoting the American Jobs Act.
• SocGen Strategist Has A Near Fit On Bloomberg TV: 'The Financial Blogosphere Is Really, Really Out Of Control'. (video)
• Now The Nazi and Communist Parties Are Throwing Their Support Behind 'Occupy Wall Street'.
  

Zero Hedge:

• Mall Vacancies Hit Record High. (graph)
• Waffle-Bund Spread Hits All-Time High. (graph)
  

NY Post:

• New York's Marxist Epicenter by Charles Gasparino.

New York Times:

• New Test for Down Syndrome Raises Hopes and Questions.

TickerSense:

• Blogger Sentiment Poll: Bullish 54.84%, Bearish 22.58%.

Rasmussen Reports:

• 2012 Presidential Matchup: Cain 43%, Obama 41%.

Reuters:

• Germany's Schaeuble Warns Summit Won't Bury Euro Crisis. Expectations of the October 23 summit have steadily built up since Chancellor Angela Merkel and France's Nicolas Sarkozy promised in bilateral talks on October 9 to unveil a comprehensive new euro zone crisis package, including an agreement on how to recapitalize Europe's banks. German Finance Minister Wolfgang Schaeuble warned on Monday against unrealistic expectations that this weekend's European Union summit can come up with a "definitive solution" to the euro zone's sovereign debt crisis. "We won't have a definitive solution this weekend," the German minister told reporters in Duesseldorf. But Schaeuble's comments that the summit would not draw a line under the crisis once and for all -- remarks echoed by an aide to Merkel -- put paid to a euro rally against the U.S. dollar and brought German Bund futures back from early losses. "The chancellor has pointed out that the dreams building up that this package will mean everything will be solved and over by Monday cannot be fulfilled," said Merkel's spokesman Steffen Seibert.
• ECB Has Reached Limits of Crisis Response - Stark. Heaping more responsibility on the European Central Bank to help solve the euro zone debt crisis would overburden it, ECB policymaker Juergen Stark said on Monday, putting the onus on the bloc's governments to act. Stark's comments echoed remarks last week from outgoing ECB President Jean-Claude Trichet, who said the bank had done "all it could" to fight the crisis.

Telegraph:

• Debt Crisis: Live.

Der Spiegel:

• The Next Domino? Top Economists Warn of France Downgrade. Top German economists are warning that France's AAA rating could be in danger should additional measures become necessary to prop up indebted euro-zone members or to save ailing banks. With debt relief for Greece under discussion, it may be a question of when, not if.
• Europe's Politicians Side With Protesters. Hundreds of thousands took to the streets in Europe and around the world this weekend to protest against the global banking system. Politicians in Europe, engaged in their own dispute with the banks, stood firmly on the side of the demonstrators.
• Europe Deeply Divided Ahead of Make-or-Make Summit. The head of Deutsche Bank is raging against politicians, Berlin is raging against Paris and the north is raging against the south. The world expects the upcoming euro summit to produce decisive results, but the Europeans remain split. Will German Chancellor Angela Merkel finally take the lead?

Helsingin Sanomat:

• The haircut investors will take as part of the second Greek bailout will be bigger than earlier agreed, Finland's Finance Minister Jutta Urpilainen said. "We're talking about a bigger cut" than the 21% agreed in July, Urpilainen said.

Jornal de Negocios:

• The Portuguese government forecasts the economy will contract more than previously estimated next year. The government's 2012 budget proposal forecasts gross domestic product will contract between 2.5% and 3% next year.

Shanghai Daily:

• Shanghai's Growth in Trade Slows Sharply. SHANGHAI'S growth in trade weakened sharply in September due to a stronger yuan, a moderating local economy and stubbornly high inflation, the Shanghai Statistics Bureau said yesterday. The city's exports expanded 11.1 percent from a year earlier to US$17.8 billion last month, while imports rose 18.7 percent on an annual basis to US$20.1 billion. But both figures slowed from August when exports jumped 21.7 percent and imports surged 27.1 percent. Yan Jun, a spokesman for the bureau, said the weaker-than-expected growth mirrored a larger trend of a slower pace of expansion for China's trade. "Shrinking external demand, uncertainties about the direction of the Chinese currency, together with a moderating economy in the city, may lead to slower trade growth in the months to come," Yan said. Shanghai's trade with the United States and the European Union, two regions hard hit by economic crises, grew by single digit last month, a sharp drop from the average growth rate of 15 percent previously.
  

Legal Evening News:

• Banks in 14 Chinese cities including Shanghai and Guangzhou increased interest rates on mortgages for first homes by as much as 50%. In Changchun in the northeast, some banks increased mortgage rates to 10.58%, 50% more than the central bank's benchmark lending rate.