Today's Headlines

Bloomberg:

• Papandreou Seeks Accord to Secure Aid Without Referendum. Greek Prime Minister George Papandreou reached out to the opposition about setting up a transitional government, indicating an accord would secure aid and remove the need for a referendum on euro membership. Just hours after saying Greeks need to decide on whether their future is in the euro, Papandreou said the country belongs in the currency bloc. He welcomed support shown by the main opposition New Democracy party for last week’s rescue pact agreed with European Union leaders in Brussels. Finance Minister Evangelos Venizelos said Greece won’t hold a referendum. “We had a dilemma: either real consensus or referendum,” Papandreou told ministers, according to an e-mailed transcript of his statements. “As I said yesterday, coming out of the meeting, if there were consensus we wouldn’t need a referendum. I said if the opposition comes to the table to agree on the loan, there’s no need for a referendum.” Papandreou’s decision to call a referendum divided his ruling party and spurred the EU to halt aid, pushing Greece toward a potential default. The European Central Bank unexpectedly cut interest rates today after fallout from Greece pushed up borrowing costs and forced Europe’s rescue fund to cancel a bond issue for the first time.
• ECB Unexpectedly Lowers Rate to 1.25% as Draghi Signals No Debt Backstops. The European Central Bank unexpectedly cut interest rates at Mario Draghi’s first meeting in charge even as the new president signaled no plans to backstop the region’s most vulnerable nations as the escalating debt crisis threatens to splinter the euro region. “What makes you think that becoming the lender of last resort for governments is what you need to keep the euro region together?” Draghi asked reporters in Frankfurt today. “That is not really in the remit of the ECB. The remit of the ECB is maintaining price stability in the medium term.” ECB officials unanimously lowered the benchmark interest rate by 25 basis points to 1.25 percent, confounding 51 of 55 economists in a Bloomberg News survey.
• Euribor-OIS Spread Increases to 2 1/2-Year High After Rate Cut. A measure of banks’ reluctance to lend to one another in Europe rose to the highest in more than 2 1/2 years after the European Central Bank unexpectedly cut its benchmark interest rate. The Euribor-OIS spread, the difference between the euro interbank offered rate and overnight index swaps, was at 95 basis points as of 1 p.m. in London, from 87 yesterday. That’s the highest since March 2009. The ECB lowered its rate 25 basis points to 1.25 percent. The cost for European banks to fund in dollars rose. The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 118 basis points below the euro interbank offered rate, from minus 105 yesterday, according to data compiled by Bloomberg. That’s the widest since December 2008, when the difference was minus 145. Lenders increased overnight deposits at the European Central Bank. Banks parked 253 billion euros ($349 billion) at the Frankfurt-based ECB yesterday, from 229 billion euros on Nov. 1. That compares with a year-to-date average of 68 billion euros.
• ISM Services Index Falls Slightly. The Institute for Supply Management’s index of non-manufacturing businesses eased to 52.9 in October from 53 a month earlier. A reading above 50 signals expansion. The measure was projected to climb to 53.5, according to the median forecast in a Bloomberg News survey. Estimates from 77 economists surveyed ranged from 52 to 55. The Tempe, Arizona- based group’s index averaged 56.1 in the five years to December 2007, when the last recession began.
• Economy Driving More Americans to Extreme Poverty. At least 2.2 million more Americans, a 33 percent jump since 2000, live in neighborhoods where the poverty rate is 40 percent or higher, according to a study released today by the Washington-based Brookings Institution.
• Abu Dhabi's Economic Ambitions Held Back by Dubai-Style Real Estate Slump. Abu Dhabi, the emirate that bailed out Dubai in 2009, set out to avoid the pitfalls suffered by its Persian Gulf neighbor with a decades-long plan to replace oil revenue with industry and tourism as drivers of growth. Now those plans need to be scaled back as companies behind some of the sheikhdom’s biggest developments cut jobs and postpone projects, said Ghassan Chehayeb, associate director of research at Dubai-based Exotix Ltd. Delays include beach-front apartments, the first office building that makes more energy than it uses and branches of the Louvre and Guggenheim museums. “Abu Dhabi has to face the economic realities,” Chehayeb said. The emirate’s plan “was a little too ambitious and they’re realizing now that many of those projects might not make as much economic sense as they initially thought.”
• India Food Inflation Quickens to Nine-Month High on Vegetables, Milk Costs. India’s food inflation accelerated to the highest level in nine months after prices of vegetables, milk and meat climbed. An index measuring wholesale prices of agricultural products gained 12.21 percent in the week ended Oct. 22 from a year earlier, the commerce ministry said in a statement in New Delhi today. It rose 11.43 percent the previous week. India faces a “very real threat” from food inflation, central bank Deputy Governor Subir Gokarn said yesterday. Still, the Reserve Bank of India has signaled a pause in its monetary tightening as Europe’s debt crisis threatens economic growth, saying past interest-rate increases will slow consumer demand.
• Productivity in U.S. Climbed at a 3.1% Pace. The productivity of U.S. workers rose in the third quarter for the first time this year as companies tried to cut costs following a slowdown in growth. The measure of employee output per hour increased at a 3.1 percent annual rate, following declines in each of the previous two quarters, figures from the Labor Department showed today in Washington. Expenses per employee fell at a 2.4 percent rate after a 2.8 percent gain in the second quarter.
• Limited Brands(LTD), Target(TGT) Sales Trail Oct. Estimates. U.S. retailers’ same-store sales trailed analysts’ estimates in October, the first miss this year, as flagging consumer confidence restrained shoppers at Limited Brands Inc., Target Corp. (TGT) and Saks Inc. (SKS). Sales at Limited, operator of the Victoria’s Secret chain, rose 6 percent, missing the average projection for a 6.7 percent gain from analysts surveyed by Retail Metrics Inc. Target posted a 3.3 percent increase in sales, trailing the 4.2 percent estimate. Abercrombie & Fitch Co. (ANF) shares plunged after reporting a slowdown in European flagship stores. The lowest consumer confidence since March 2009 restrained spending between the back-to-school and holiday shopping periods. Warm weather that reduced purchases of coats and sweaters also contributed to the 3.8 percent sales gain that was less than projections for a 4.4 percent increase.
• Sarkozy Confers With Obama on Transaction Tax. French President Nicolas Sarkozy said that he and President Barack Obama shared a “common analysis’ on the financial transaction tax. Speaking after bilateral talks today at a Group of 20 summit in Cannes, France, Sarkozy said that the summit needs to be ‘‘hand in glove with the U.S.’’ ‘‘We need the leadership of Barack Obama,’’ Sarkozy said.

Wall Street Journal:

• Three-Month Euro Dollar Cross Currency Basis Swap Widens. NEW YORK-(Dow Jones)- Swapping euros into dollars is becoming extremely expensive, according to a leading indicator that is at its widest level since December 2008. The three-month euro/dollar cross-currency basis swap is at minus 118 basis points versus minus 102 basis points on Wednesday. That's still shy of the minus-215 level it reached amid the financial turmoil of October 2008, but the indicator is now trading at levels where bankers say it is flashing warning signals about the functioning of money markets. The debt crisis in Europe has created stronger demand for dollars, making it more pricey to get access to such funding. Banks and other firms that operate globally and need dollars have had limited access to the greenback, as investors have been wary of lending to them, so they have been relying more heavily on the euro-dollar swap market to meet their financing needs. This route has become increasingly more costly for them. "The widening of the cross-currency basis swap has been driven by the rising risk of a Greek default and concerns about potential spillovers to the rest of the periphery," said Brian Smedley, interest rate strategist at Bank of America Merrill Lynch. "It is becoming more expensive to secure dollar funding versus euros through the FX swap market as the market prices in greater risks of a disaster scenario in Europe."
• NY Governor Cuomo to Battle Democrats Against Tax Hike on the Rich. With next year's budget deficit predicted to grow, New York Gov. Andrew Cuomo and his allies are preparing for a turbulent fight with his own party and liberal groups over his opposition to raising state taxes on the wealthy. Emboldened by the Occupy Wall Street movement and President Barack Obama's embrace of a "millionaire's tax," organized labor and their Democratic allies in Albany are getting ready to square off with Mr. Cuomo, a popular Democrat who has so far been insulated from harsh criticism.
• Jefferies(JEF) Moves to Allay Concern Over European Bet. Jefferies Group Inc., seeking to stem another steep drop in its share price, on Thursday provided details of its exposure to European debt, saying it had a net $38 million in short positions or no meaningful exposure. Shares of the midsize investment bank fell as much as 20% Thursday, adding to this week's declines, as investors' concerns about the company's European debt exposure were renewed by a credit rating downgrade of Jefferies by ratings firm Egan-Jones. Jefferies has been under fire this week since the collapse of broker-dealer MF Global Holdings Ltd. as a jittery market has focused on the possibility that other relatively small financial institutions could be brought down by bad sovereign bets and worries that those firms don't have the support of large balance sheets to absorb potential losses.
• U.S. Report Cites 'Persistent' Chinese, Russian Spying for Economic Gain.
  

CNBC.com:

• Groupon IPO Could Price as High as $21.
• White House to Be Subpoenaed for Solydra Documents. A Republican-led House panel has agreed to subpoena White House documents related to Solyndra Inc., the failed California solar company that received a half-billion-dollar federal loan. By a 14-9 vote, a House Energy and Commerce subcommittee authorized Chairman Fred Upton to issue subpoenas to top White House officials. GOP lawmakers say the subpoenas are necessary because the White House has denied or delayed requests for thousands of documents related to Solyndra. The Fremont, Calif., company received a $528 million federal loan before filing for bankruptcy protection and laying off 1,100 workers.

Business Insider:

• Stunning Photos of How Occupy Oakland Took Over The City Last Night.
• Paul Tudor Jones: In 3-4 Years, There Might Be A Once In A Generation Opportunity.
  

Zero Hedge:

• All Fixed in Greece? Not So Fast.
• Europe Closes With Equities Outperforming Credit and Financials Weakest. (graphs)
• Final Tally - Outgoing Freddie CEO Gets $4 Million Bonus to Receive $21 Billion In Bailouts After Massive 3Q Loss.
• Consumer Comfort Index and State of Economy Almost Record Lows. (graph)
  

FINalternatives:

• More Lawsuits Likely In Hedge-Fund Linked CDO Cases. Merrill Lynch and Standard & Poor's may face civil charges over their sale of collateralized debt obligations allegedly structured on behalf of Magnetar Capital. The Securities and Exchange Commission hopes to file the lawsuits in the next few months, the Financial Times reports, ending a probe that has already ensnared Citigroup, Goldman Sachs and JPMorgan Chase. All three banks settled the allegations. But the SEC is still looking into a $1.5 billion CDO set up by Merrill Lynch, now part of Bank of America, for Magnetar, as well as another structured by Mizuho Financial Group and rated by S&P. The latter would be the first such case against a rating agency. "It's fair to say we're not at the end," Kenneth Lench, head of structured and new products enforcement at the SEC, told the FT. "There will be a handful of additional cases, I believe, over the next several months."

Reuters:

• Islamist Jihad Ready for All-Out War With Israel. The Palestinian militant group Islamic Jihad, which traded deadly fire with Israel at the weekend in Gaza, does not expect a subsequent truce to last long and has at least 8,000 fighters ready for war, a spokesman said. Islamic Jihad is the second largest armed group in Gaza, after Hamas, which rules the tiny Mediterranean enclave. The two share a commitment to the destruction of Israel and both are classified as terrorist groups by most Western governments. However, while Hamas has recently spent much of its energy on the business of government, Islamic Jihad has kept its focus firmly on the conflict, gaining in prominence and enjoying significant backing from Muslim supporters, including Iran. "We are proud and honored to say that the Islamic Republic of Iran gives us support and help," Abu Ahmed, the spokesman for Islamic Jihad's armed wing, the Jerusalem Brigades, told Reuters in a rare, long interview. He denied widespread reports that Iran had provided his group with arms and smiled at suggestions it now receives more sophisticated weaponry from Tehran than Hamas. He also declined to comment on rumors that the Jihadists were trained by Iran.

Telegraph:

• Debt Crisis: Live. George Papandreou rejects calls from Greek opposition leader Antonis Samaras to resign, while his plans for a referendum over the bail-out package are scrapped.

CapitalVue:

• Chinese Rare Earth Prices Collapse. The rare earth sector in China, which had seen the two biggest domestic rare earth producers, including Inner Mongolia Baotou Steel Rare Earth Hi-Tech (600111), halting production recently in a failed bid to fight falling prices, is now facing a huge selloff, reports Economic Information. With recent media reports that the government is planning to introduce specialized invoices for the rare earth sector in order to better control industry output, curb illegal sales and smuggling activities, small companies which possess rare earths from unidentified sources had begun to dump their inventory of rare earth minerals on the market. This led to the price of such rare earth minerals plunging to 100,000 yuan per ton, compared with the price of more than 300,000 yuan per ton for rare earth minerals from official sources. Market insiders said there were many companies and individuals conducting private mining and extraction of rare earth minerals in order to take advantage of the surge in prices earlier in the year. Due to the lack of proper surveillance and control measures, the rare earth minerals produced by these companies and individuals flooded the market, accelerating the formation of a bubble. The trend of rising rare earth prices began to reverse in July when orders from downstream customers shrunk by half from the second quarter, while two-thirds of the downstream companies either halted production, or were operating at reduced capacity.
  

Bear Radar

Style Underperformer:

• Large-Cap Value (+1.38%)

Sector Underperformers:

• 1) Restaurants +.29% 2) Insurance +.58% 3) Retail +.59%

Stocks Falling on Unusual Volume:

• GEOY, WFM, FOSL, SNE, ECPG, WBMD, NTRI, NXTM, MWIV, MEAS, USPH, VCLK, LNCE, ZIP, SIMO, TRNX, BRLI, PODD, AMRS, LVLT, PCG, CVD, LNCE, THOR, CPSI, CAR, TGP, XEC, MDC, JEF, ANF, LUK, K and RIG
  

Stocks With Unusual Put Option Activity:

• 1) JEF 2) IBKR 3) RIG 4) FOSL 5) XRT
  

Stocks With Most Negative News Mentions:

• 1) WBMD 2) CECO 3) CBEY 4) F 5) ANF
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-cap Growth (+1.29%)

Sector Outperformers:

• 1) Coal +3.79% 2) Construction +3.19% 3) Education +2.59%

Stocks Rising on Unusual Volume:

• QCOM, ANSS, ARO, AEO, MDVN, MELI, LAMR, QCOM, TSLA, SXCI, QGEN, AKAM, IACI, WTS, EL, VRX, FICO, EXH, GBX, ANR, CLGX, IACI, PPO, SPR, SLE, CTL, FIO, DVA, BIG, LPS and CLR
  

Stocks With Unusual Call Option Activity:

• 1) NWL 2) EL 3) CCJ 4) QCOM 5) DNDN
  

Stocks With Most Positive News Mentions:

• 1) DV 2) MA 3) QCOM 4) AEM 5) LMT
  

Charts:

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

Thursday Watch

Evening Headlines

Bloomberg:

• Greece to Determine Euro Membership in Vote as EU Cuts Aid. European leaders cut off aid payments to Greece and said a referendum in five weeks will determine whether the debt-strapped nation becomes the first to exit the 17-country euro area. Crisis talks ended in the French resort of Cannes late yesterday with German Chancellor Angela Merkel and French President Nicolas Sarkozy withholding 8 billion euros ($11 billion) of assistance and warning Greece it will surrender all European aid if it votes against a bailout package agreed upon only last week. “The referendum will revolve around nothing less than the question: does Greece want to stay in the euro, yes or no?,” Merkel told reporters. Sarkozy said Prime Minister George Papandreou’s government won’t get a “single cent” of aid if voters reject the plan. The hardball tactics opened the door for the first time for a country to leave the 12-year-old currency bloc that its founders declared was “irrevocable.” The move leaves Greece to choose between austerity and default two days after Papandreou shocked investors and Europe’s leaders by announcing he would allow his electorate to vote on the revamped crisis-fighting strategy. The euro weakened after the briefing, sliding 0.4 percent to $1.3691 at 1 a.m. in Cannes. Futures on Standard & Poor’s 500 Index declined 0.4 percent. Papandreou, his hold on power weakening and facing a confidence vote tomorrow, defended his decision to call a referendum, telling reporters at a separate press briefing that Greece “needs a wider consensus” for the bailout terms and expressing confidence it will back staying in the euro.
• Former U.K. Chancellor of the Exchequer Alistair Darling said in an interview with Sky News that the situation with Greece has created a "more serious" potential crisis than that caused by the collapse of Lehman Brothers and Europan leaders must "get a grip, and now." "What's different now from three years ago is that we had a banking crisis then, pure and simple," Darling said to Sky. "We've now got a major economic crisis which has every risk of spilling back into the banking system so we'll have both an economic and a banking crisis," he said. The crisis isn't going to be resolved until there's a "sensible plan" to boost growth, Darling said. The austerity programs being pursued in Europe are going to "strangle growth" and without growth you get "higher borrowing, higher debt and that's why people are so lacking in confidence," he said. China is unlikely to come to Europe's aid, Darling said. "They'll play for the long-term," he said. "They're going to sit back and they'll watch."
• MF Global(MF) Has Customer Shortfall of $633 Million, CFTC Says. MF Global Inc.’s commodity customer funds have a shortfall of $633 million, or about 11.6 percent, out of a segregated fund requirement of about $5.4 billion, the Commodity Futures Trading Commission said. At a hearing today in U.S. Bankruptcy Court in Manhattan, lawyers for the CFTC said the trustee for the bankrupt broker- dealer may recover the shortfall. MF Global’s trustee won permission to transfer 50,000 accounts where customers of the failed brokerage have 3 million positions and over $100 million at stake, saying the move will help avoid liquidations.

Wall Street Journal:

• Italy Skips Key Fiscal Moves. Italian Prime Minister Silvio Berlusconi on Wednesday failed to issue growth-boosting measures demanded by European Union authorities ahead of the Group of 20 summit, raising further doubts about the government's willingness to pass economic reforms aimed at restoring investor confidence in the country. Mr. Berlusconi's cabinet late Wednesday approved a plan to sell state property, slash red tape and roll out infrastructure projects, according to people familiar with the matter, in a bid to cut Italy's €1.9 trillion ($2.6 trillion) debt and revive economic growth. The plan, however, doesn't include measures to address the chronic structural weaknesses—such as costly pension plans, heavy labor regulation and high taxes—that European officials and investors blame for Italy's economic stagnation, the people said. That means Mr. Berlusconi will head to the Group of 20 in Cannes, France, on Thursday without concrete measures to assuage the concerns of EU leaders. It is also unclear whether Mr. Berlusconi can muster the political support to pass in Parliament the meager plan approved Wednesday. Earlier in the day, Italian officials drafted a government decree that would have implemented the measures with immediate effect, said the people familiar with the matter. By the time Mr. Berlusconi's cabinet convened in the evening, however, officials had shelved the draft. Mr. Berlusconi's foot-dragging is likely to erode support for his government and increase tensions with Italy's head of state, President Giorgio Napolitano, who has called for immediate reforms and wields the power to dissolve Parliament.
• Hedge Fund to Shut Down. After more than 40 years as a noted stock-picker and market commentator, Oscar Schafer plans to close down his hedge fund in the next six months, investors said. The decision came as the fund, O.S.S. Capital Management, struggled to recoup steep losses from 2008. By the end of August 2011, the firm's assets under management had dwindled to about $500 million from a peak of almost $2.5 billion, according to investors.

Business Insider:

• BNP Paribas' Emma Sugarman Explains Why More Hedge Funds Will Close Before The End Of 2011.
• Here's Everything You Need To Know To Get Ready For Thursday's Big ECB Meeting.
  

Zero Hedge:

• MF Global(MF) Shines A Light On Monetarism's Incapacity To Enhance The Real Economy.
• Egan Jones Downgrades Jefferies(JEF) On Concerns About Sovereign Exposure Amounting to 77% Of Equity.
• Game Over Berlusconi? Italian Anti-Crisis Bill Fails.
  

CNBC:

• China Steels Itself Over Policy Tightening. After a year of credit tightening and efforts to cool the property sector, Beijing’s restrictive policies are starting to have a visible impact on the real economy. Nowhere is this clearer than in raw materials like steel, cement and copper, which are linked to construction and the cooling property market. China’s steel production dropped in mid-October to its lowest daily level since January, and global prices for iron ore, a key steelmaking ingredient have dropped more than 30 percent in the last month due to weak Chinese demand. “We feel like winter is already here,” said Zhang Changfu, vice-chairman of the China Iron and Steel Association, a government-linked industry body. “There has been a big shift in the market. Order books are drying up.” Mr Zhang points to plummeting new orders for shipbuilding yards — down 43 percent in the first nine months of this year from the same period last year — as evidence of the deteriorating climate.
• Qualcomm(QCOM) Forecasts Double-Digit Sales Growth. Qualcomm forecast double-digit sales growth for this fiscal year as its quarterly results beat Wall Street estimates due to strong demand for its cellphone chips.

NY Times:

• Oakland Protesters Set Sights on Closing City's Shipping Port. Thousands of Occupy Oakland protesters converged on downtown streets here on Wednesday to march, chant, wave placards, picket banks and otherwise try to expand their anti-Wall Street protest across the city, including what they said would be an effort later in the day to close down the city’s port.

Forbes:

• Obama Kick-Back Cronyism - Part 2: Illinois Health and Human Disservices.

Politico:

• Biden Aide Sought Info On Solyndra Investors, Emails Show. A top aide to Vice President Joe Biden sought information about Solyndra’s private investors just days before the Energy Department made the solar company’s loan guarantee more favorable to the financers, new internal emails released Wednesday show.

Rasmussen Reports:

• 17% Say U.S. Heading In Right Direction.

USA Today:

• Taxes on Foreigners Raise Cost of Business in China. A controversial new tax on foreign companies and workers is adding to rising business costs in China. The tax requires foreigners to contribute to China's social welfare system for pension, medical, unemployment, work-injury and maternity benefits. Doing so allows foreigners to access social services in China. But it could end up duplicating benefits that workers retain in their own countries while working in China and saddle employers with thousands of dollars in extra costs each year.

Reuters:

• MF Global(MF) Customers Fume as Funds, Trades Frozen. Joe Ocrant, a veteran livestock trader, is livid. His accounts frozen, unable to trade with his bankrupt broker and denied access to the Chicago trading floor, his frustration over the failure of 230-year-old MF Global was turning to rage as regulators said it may have misappropriated some $600 million in customer funds. Ocrant remained hopeful that somehow his collateral at MF Global would be returned. In the meantime, like so many others, he was left idle, unable to transfer or liquidate his trades. "I am aggravated and upset.... I feel fairly confident my customers will be made whole. The question is how long the feds will tie the funds up so they can't be used," said Ocrant, president of livestock-focused fund Oak Investment Group. It was a common tale across the markets.
• Global Shipping Downturn Worse Than 2008 - China Minister. The global shipping industry is experiencing a downturn that is worse than that seen during the 2008 financial crisis, China's transportation minister said. Speaking at an industry conference on the Chinese island province of Hainan on Thursday, Li Shenglin said there was no end in sight to the ongoing shipping downturn. "The shipping industry is in a downturn, which is worse than the financial crisis in 2008," Li told the conference. "This condition may last for a relatively long period of time." The shipping market had been hit by overcapacity as shipowners ordered large numbers of large vessels when the industry was booming, he said. The supply glut has put freight rates under pressure, while rising fuel and other costs have squeezed the margins of operators.
• Whole Foods(WFM) Key Sales Figure Misses Analysts' Views. Upscale grocer Whole Foods Market Inc said a key sales gauge rose less than analysts had expected, and its shares fell almost 5 percent after hours.
• Spain Bond Costs to Jump as Greece Pressures Periphery. Spain's financing costs will edge higher on Thursday when it returns to debt markets under pressure from a planned Greek referendum over its bailout package and faltering attempts to solve a euro zone crisis.
• US Leaders Must Not Hide Under Fed's Skirts - Fisher. U.S. fiscal authorities have run the country into a financial "cul de sac" and must bring the nation's debt under control by changing their "improvident" ways, a top Federal Reserve official said on Wednesday. "Of course, they could skip the curb and keep on moving in the same direction were the central bank to accommodate them by monetizing their debts," Richard Fisher, president of the Dallas Federal Reserve Bank, said in remarks prepared for delivery at the Bastiat-Hoiles Prize Dinner in New York. Such a path would lead to hyperinflation, said Fisher, who is known as an inflation hawk. Lawmakers "must not, and cannot, hide under the skirts of the Federal Reserve," said Fisher, referring to both Republicans and Democrats. "The central bank must never become an accomplice to feckless government."
• Transocean(RIG) Posts Loss on Rising Costs. Transocean Ltd , the largest offshore drilling contractor, reported on Wednesday an unexpected quarterly loss on a rise in shipyard costs, knocking another 7 percent off its battered shares.

Telegraph:

• Italy's 'Shock Therapy' as Eurozone Manufacturing Buckles. Europe is sliding into a full-blown industrial recession with contraction spreading to Germany and a drastic decline under way in Italy, greatly complicating efforts to contain the region’s debt crisis. Markit’s manufacturing index for Euroland dropped well below the break-even reading of 50 in October. The data for Italy plunged five points to 43.3, the biggest drop since the survey began in the 1990s. “Italy is a serious concern. Total and export new orders collapsed,” said Francois Cabau from Barclays Capital. Italy’s economy is almost certainly in a double-dip recession already, exacerbating the country’s fragile debt dynamics. Manufacturing data for the eurozone as a whole showed the fastest decline since mid-2009 in new orders and export orders. Germany has at last tipped over into contraction as markets cool in Asia. Italy’s premier Silvio Berlusconi was closeted with top ministers on Wednesday night, drawing up “shock therapy” measures in time for Thursday’s G20 summit in Cannes. Italy’s press reported the drastic steps to be pushed through by decree may include levies on bank accounts, as occurred during the ERM crisis in July 1992 as a last-ditch move to save the lira. The hated policy amounted to wealth confiscation and failed to stop Italy being blown out of the system two months later. Plans for some form of property wealth tax have also been mooted. Such one-off moves do nothing to lift Italy out of its stagnation trap. The country is suffering the delayed effects of a 30pc to 40pc loss of labour competitiveness against Germany within EMU, an overvalued euro externally against China, and a 70pc collapse in foreign direct investment (FDI) flows into Italian plant since 2007. Capital flight from Italy has become a grave threat. The central bank reported a €21bn (£18bn) exodus in August, following a €20bn loss in July. “I fear these figures are likely to get worse, “ said Rony Hamaui from Milan’s Catholic University. It is unclear whether Mr Berlusconi’s coalition can hold together if he agrees to EU demands for sweeping pension and labour reform. Northern League leader Umberto Bossi threatened to set off “revolution” if money is taken from pensioners to bail out Rome, a reminder his party began life calling for an independent state of “Padania” in the North. The skirmishes came as president Giorgio Napolitano summoned key party leaders for urgent talks and hinted at the drastic step of appointing a salvation government. “Contagion to Italy is a whole new ball game, so everybody is fixated on Italian yields,” said David Bloom from HSBC. “The idea behind the Greek bail-out is to keep the pin firmly in the grenade.” Irish finance minister Michael Noonan said the European Central Bank (ECB) will have to come to the rescue. “The firewall to prevent contagion spreading to countries like Italy and Spain is not yet in place. They need to go into the market and say they have a wall of money and, no matter how much speculation there is, keep buying Italian bonds. I think they will do that. They don’t have any choice,” he said.
• Nicolas Sarkozy Tells Greece: If You Don't Stick To The Rules, Leave The Eurozone. The break-up of the eurozone has been dramatically placed in the hands of the Greek people as George Papandreou announced that a referendum on the Hellenic Republic’s membership will be held on December 4.
• Debt Crisis: Live.
  

Guardian:

• UK Military Steps Up Plans for Iran Attack Amid Fresh Nuclear Fears. British officials consider contingency options to back up a possible US action as fears mount over Tehran's capability. The Ministry of Defence believes the US may decide to fast-forward plans for targeted missile strikes at some key Iranian facilities. British officials say that if Washington presses ahead it will seek, and receive, UK military help for any mission, despite some deep reservations within the coalition government.

Hamburger Abendblatt:

• German Finance Minister Wolfgang Schaeuble wants to discuss the introduction of a global financial transaction tax at a Group of 20 summit starting today in Cannes, citing an interview. The EU proposed a financial transaction tax that would take effect in 2014 and raise about $78 billion a year.

Evening Recommendations
CSFB:

• Rated (MDT) Outperform, target $45.
• Rated (BSX) Outperform, target $7.50.

Night Trading

• Asian equity indices are -1.50% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 203.50 +2.25 basis points.
  
• Asia Pacific Sovereign CDS Index 155.0 unch.
• FTSE-100 futures -1.15%.
  
• S&P 500 futures -1.15%.
  
• NASDAQ 100 futures -.71%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (NYX)/.70
• (STRA)/1.06
• (CVS)/.67
• (RGLD)/.45
• (DTV)/.72
• (MGM)/-.15
• (SLE)/.17
• (ATK)/2.05
• (ENR)/1.26
• (IACI)/.49
• (ANR)/.04
• (DUK)/.46
• (IRF)/.37
• (APA)/2.79
• (MDRX)/.22
• (RRGB)/.22
• (SBUX)/.36
• (WRC)/1.07
• (CHK)/.66
• (FLR)/.85
• (MCHP)/.46
• (MHK)/.86
• (EL)/1.18
• (K)/.89
  

Economic Releases
8:30 am EST

• Preliminary 3Q Non-farm Productivity is estimated to rise +3.0% versus a -.7% decline in 2Q.
• Preliminary 3Q Unit Labor Costs are estimated to fall -1.0% versus a +3.3% gain in 2Q.
• Initial Jobless Claims are estimated at 400K versus 402K the prior week.
• Continuing Claims are estimated to rise to 3693K versus 3645K prior.
  

10:00 am EST

• ISM Non-Manufacturing for October is estimated to rise to 53.5 versus 53.0 in September.
• Factory Orders for September are estimated to fall -.2% versus a -.2% decline in August.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The ECB rate decision, Fed's Fisher speaking, Fed's Lockhart speaking, EFSF Bond Auction, G-20 Summit, ICSC Chain Store Sales for October, RBC Consumer Outlook Index for November, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (FFIV) investor meeting, (TGI) investor day and the (TAC) investor day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Less Eurozone Debt Angst, Diminishing Financial Sector Pessimism, Short-Covering, Bargain-Hunting

Broad Market Tone:

• Advance/Decline Line: Substantially Higher
  
• Sector Performance: Most Sectors Rising
  
• Volume: Below Average
  
• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• VIX 33.49 -3.68%
  
• ISE Sentiment Index 138.0 +105.97%
  
• Total Put/Call 1.17 -13.33%
  
• NYSE Arms .56 -77.58%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 124.66 -3.48%
  
• European Financial Sector CDS Index 238.28 -2.22%
  
• Western Europe Sovereign Debt CDS Index 336.24 -2.15%
  
• Emerging Market CDS Index 293.51 -2.78%
  
• 2-Year Swap Spread 34.0 unch.
  
• TED Spread 43.0 -2 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 177.0 -2 bps
  
• China Import Iron Ore Spot $120.40/Metric Tonne +.92%
  
• Citi US Economic Surprise Index 14.0 -.5 point
  
• 10-Year TIPS Spread 2.10 +5 bps
  

Overseas Futures:

• Nikkei Futures: Indicating +42 open in Japan
• DAX Futures: Indicating -17 open in Germany

Portfolio:

• Slightly Higher: On gains in my Tech, Retail and Medical sector longs
  
• Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added some back
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 trades near session highs despite Eurozone debt angst, rising global growth worries, less dovish-than-expected FOMC commentary and rising energy prices. On the positive side, Bank, Coal, Energy, Oil Service, I-Bank, Hospital and HMO shares are especially strong, rising more than +2.25%. Small-caps are substantially outperforming. (XLF) has traded well throughout the day. The UBS-Bloomberg Ag Spot Index is down -.34% and copper is gaining +2.24%. Major European equity indices rose 1-2% today. The Germany sovereign cds is falling -7.67% to 88.33 bps, the France sovereign cds is falling -4.57% to 184.33 bps, the Ireland sovereign cds is falling -5.2% to 728.33 bps and the Belgium sovereign cds is falling -5.35% to 285.83 bps. On the negative side, Education, Airline, Biotech, Paper, Oil Tanker and Restaurant shares are lower-to-just slightly higher on the day. Tech shares have underperformed throughout the day. Gold is rising +.9%, lumber is falling -1.52% and oil is jumping +1.45%. The 10-year yield is flat at 2.00% despite sharp equity gains. The Nikkei substantially underperformed the rest of Asia overnight, falling -2.2%, and is down -15.5% ytd. The Japan sovereign cds is rising +3.69% to 118.31 bps, the Hungary sovereign cds is gaining +2.67% to 517.48 bps and the Israel sovereign cds is gaining +2.47% to 162.04 bps. Moreover, the Asia Pacific Sovereign CDS Index is rising +3.9% to 155.27 bps and the Emerging Markets Sovereign CDS Index is gaining +3.8% to 268.50 bps. Rice is still close to its multi-year high, rising +28.0% in about 4 months. Despite European equity gains today, the Italian 10-year yield was flat at 6.19%. The TED spread continues to trend higher and is near the highest since June 2010. The Libor-OIS spread is still very near the widest since July 2010. The 2-Year Euro Swap spread is making another new cycle high today, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -37.25% since February 16th and -33.48% since Sept. 7th. Investors are ignoring negative news today, which is a large positive. However, it appears to me the market is becoming ever more intensely focused on the short-term direction of the euro currency as a guide to developments in the region, which I find suspect. Investors also seem to be developing a level of numbness with respect to market volatility, which is also a negative development. Volume is poor today and few stocks are posting substantial gains on volume given the major averages' sharp gains. The fact that bond yields are at session lows and flat on the day are also a red flags. I expect US stocks to trade mixed-to-lower into the close from current levels on European debt angst, global growth fears, rising energy prices, profit-taking, more shorting and technical selling.

Today's Headlines

Bloomberg:

• Euro-Area Manufacturing Production Contracts. Europe’s manufacturing industry contracted for a third month in October, adding to signs the euro-area economy is edging toward a recession. A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region fell to 47.1 from 48.5 in September, London-based Markit Economics said today. That’s below an initial estimate of 47.3 published on Oct. 24. A reading below 50 indicates contraction. Europe’s economy is showing signs of a deepening slump as its worsening debt crisis erodes the confidence of consumers and executives alike. The Organization for Economic Cooperation and Development on Oct. 31 lowered its euro-region growth projections for this year and next and called on the European Central Bank to lower its benchmark interest rate at its meeting tomorrow.
• EFSF Delays 3 Billion-Euro Bond Sale on Market Volatility. Europe’s bailout fund is delaying a 3 billion-euro ($4.1 billion) bond sale after Greek Prime Minister George Papandreou’s request for a referendum on the rescue pact for his country roiled markets. The European Financial Stability Facility is putting off the 10-year issue “due to market conditions,” according to Luxembourg-based spokesman Christof Roche. The fund may wait for the outcome of the Nov. 3-4 Group of 20 summit in Cannes, France before selling the bonds, according to a person with knowledge of the matter. “The developments around the G-20 in Cannes will have a big impact on the pricing of any issue,” said Christophe Herpet, a Paris-based fund manager at AXA Investment Managers, which oversees about $735 billion of assets. Credit markets whipsawed after Papandreou surprised European leaders with his referendum plan. A benchmark credit- default swaps index soared the most ever yesterday as investors sought to protect their investments.
• EU Bank Recapitalization Plan Has 'Problems': IIF. The European Union’s plan for recapitalizing banks has “serious problems” that will hurt economic growth and make it harder for some nations to borrow, the Institute of International Finance said. There is a “clear need” to restore confidence in Europe’s banks, IIF Managing Director Charles Dallara said today in a letter to the Group of 20 nations on the eve of a summit in Cannes, France. Yet the extra capital requirements at the center of the EU’s strategy will come with “considerable cost” because of a flawed scope and approach, he said.
• German Unemployment Rose First Time in Two Years in October. German unemployment unexpectedly rose for the first time in more than two years in October and manufacturing contracted as pessimism mounted among businesses in Europe’s largest economy. The number of people out of work rose a seasonally adjusted 10,000 to 2.94 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, the median of 31 estimates in a Bloomberg News survey showed. The adjusted jobless rate rose to 7 percent from 6.9 percent.
• European Banks May Need $550 Billion Capital Boost, Neptune Says. Europe’s banks may need to boost capital by as much as 400 billion euros ($550 billion) to provide an adequate cushion against losses on government bonds, four times the increase estimated by the industry, according to Neptune Investment Management Ltd.
  
• Fed Sees 'Downside Risks'; Leaves Policy Unchanged. Federal Reserve policy makers said the economy has picked up while “significant downside risks” remain, and they refrained from taking any additional steps to ease monetary policy. “Economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year,” the Federal Open Market Committee said today in Washington after a two-day meeting. At the same time, it repeated that “there are significant downside risks to the economic outlook, including strains in global financial markets.” The statement may reflect the desire of policy makers led by Chairman Ben S. Bernanke to see if the unconventional policy steps unveiled at their last two meetings help the expansion gain strength before embarking on new initiatives.
• U.S. Companies Add More-Than-Expected 110,000 Workers in October, ADP Says. Companies added workers in October, easing concern the job market is stagnating in the third year of the U.S. recovery, according to a private report based on payrolls. The 110,000 increased followed a revised 116,000 gain the prior month, Roseland, New Jersey-based ADP Employer Services said today. The median forecast of economists surveyed by Bloomberg News called for a advance of 100,000.
• Confidence Among CEOs in U.S. Declines to Lowest in a Year, Survey Shows. Confidence among U.S. chief executive officers declined in the third quarter to the lowest level in more than a year as their outlook for the world’s largest economy weakened, a private survey showed. The Young Presidents’ Organization index of sentiment from July through September fell to 57.7, the weakest since the second quarter 2010, from 61.1 in the prior three months, according to the Dallas-based group. Readings greater than 50 show the outlook was more positive than negative in the survey, which began in July 2009. Thirty percent of the executives said they expected the economy would improve in the next six months, down from 45 percent who gave that response three months ago. Some 25 percent projected the economic outlook will deteriorate, more than double the 12 percent in the prior survey.
• French Magazine Firebombed After Arab Spring Satire, AFP Reports. The offices of Charlie Hebdo, a French satirical magazine that published a special edition featuring the prophet Mohammed as a “guest editor,” were gutted in an overnight firebomb attack, Agence France-Presse reported, citing an unidentified police official. Charlie Hebdo published a special edition today to commemorate the recent Arab Spring uprisings, including a cartoon image of the prophet on the cover. The fire started about 1 a.m. and caused no injuries, the news service reported., Patrick Pelloux, a witness at the scene, told AFP that a Molotov cocktail was thrown through a window and set fire to the computer system.
• MasterCard(MA) Surges as Profit Rises 38%. MasterCard Inc. (MA), the world’s second- biggest payments network, climbed the most since August as an increase in card spending helped the firm’s third-quarter profit beat estimates. The stock gained $24.95, or 7.5 percent, to $359.25 at 11:40 a.m. in New York trading. Net income climbed 38 percent to $717 million, or $5.63 a share, from $518 million, or $3.94, a year earlier, the firm said today in a statement. The average estimate of 29 analysts surveyed by Bloomberg was $4.82.
• Municipal-Bond Tax-Exemption Faces 'Real Threat' From Congress, Kraft Says. The tax-exemption on interest paid by state and local bonds faces a “real threat” from the congressional supercommittee charged with shrinking the U.S. deficit, said John L. Kraft, a municipal-bond attorney. The exemption will be a target for the panel as it seeks to find $1.5 trillion of spending cuts or revenue increases over 10 years, said Kraft, a partner with Lomurro, Davison, Eastman & Munoz Inc. in Freehold, New Jersey. “Tax exemption is not a tax preference for the rich but an opportunity for states to carry out their capital projects in the most cost-effective way,” Kraft said today at the State and Municipal Finance Conference hosted by Bloomberg Link in New York. “Do away with the exemption and you’re imposing on the citizens a tremendous cost.”

Wall Street Journal:

• Riding Dakota Oil Boom. A surge in crude-oil production in North Dakota is fueling a railroad boom in one of the nation's most remote regions, as producers bet that trains will be a quick and lucrative way to break a transportation bottleneck. The steady conveyor belt of jet-black rail cars is just the latest change in this state's western corner. Already clusters of trailers, known as man camps, have popped up in pasture lands outside of small towns like Watford City, N.D., to house oil workers.
• Greece Under Pressure To Hold Referendum As Soon As Possible. Greece is under intense pressure to call a controversial referendum on its bailout package as soon as possible and possible dates include Dec. 4 and Dec. 11, senior G-20 and International Monetary Fund Officials said Wednesday. "Original thoughts that the vote will be held in January are out of the question," an IMF official told Dow Jones Newswires.
• The Bush-Obama Rx Shortages. Critical cancer drugs are in short supply thanks to price controls.
  

CNBC.com:

• BofA(BAC) Employees Flood Bank's Rivals With Resumes.

Business Insider:

• The Oakland Strike Is Getting Huge and Has Already Slowed Down The Nation's Fifth Biggest Port.
• You'll Never Guess What Jon Corzine Did The Night Before MF Global's Disastrous Earnings.
• Europe Is Not a Nation, Therefore the Euro is Doomed.
• China's 'The World' Is The Most Ridiculous Housing Project We've Ever Seen.
• French Yields Just Exploded. (graph)
  

Zero Hedge:

• Fed Slashes Economic Outlook, Raises Inflation and Unemployment Rate Projection.
• The First-Loss Insurance Providing EFSF Is A Truly Unique Vehicle.
  

Rasmussen Reports:

• Obama Full-Month Approval Index in October Dips To Lowest Level Yet. In October, 20% of voters Strongly Approved of the president’s job performance. That’s the lowest level found during the Obama presidency to date and the second time in the last three months that the finding has fallen to a record low. Prior to last month, the number who Strongly Approved of the president’s performance ranged from a low of 21% to a high of 31% since July 2009. By comparison, 43% Strongly Approved of Obama's performance when he assumed office in January 2009.

Reuters:

• Europe Might Force Greek Deal on Creditors - Source. Europe is increasingly likely to force investors to take a cut on their Greek bondholdings if they do not voluntarily sign up to a deal to slash the country's debt burden, a person briefed on the negotiations said on Wednesday. The deal is part of an ambitious plan that was thrown into doubt this week when Greece said in a shock announcement it would vet the three-pronged agreement through a plebiscite.
  
• Foster Wheeler(FWLT) Profit Slips, Shares Drop 9%.
  
• World Manufacturing Stagnates in Oct - PMI. The world's manufacturing economy stagnated in October with the crisis-wracked euro zone by far the worst performing region, according to a business survey that showed new export orders declining at the fastest pace in almost two-and-a-half years.

Telegraph:

• Debt Crisis: Live. IMF warns it could hold back bail-out cash without assurances that Greece will fulfil its commitments, but Papandreou is 'unable to give that', while EC President urges Greece to back eurozone package.

Die Welt:

• European Union Energy Commissioner Guenther Oettinger said Greek Prime Minister George Papandreou's push for a referendum on a new bailout package for the over-indebted country is putting the euro "in even greater danger." The consequences of a Greek rejection would be incalculable and the situation has worsened significantly for euro countries that don't enjoy the highest credit rating, Oettinger said today.

Handelszeitung:

• Georg Fischer AG is not growing as strongly as in the first half of the year, CEO Yves Serra said. A slowdown in growth in China, where the Swiss company gets about one-seventh of its sales, is occurring, he said. The company's China growth will be about half of last year's 20% to 25% rate.

Delo:

• Slovenian banks' bad loans have more than doubled from a year ago to 6.8% of all outstanding loans, citing the Slovenian central bank. A creation of a so-called bank bank is only one of the options to deal with difficulties in the banking system, the central bank said.

Shanghai Daily:

• Shanghai Sees Luxury Home Sales Decline. SALES of luxury houses in Shanghai fell in the first 10 months of this year, with extremely sluggish transactions in September and October, according to a research released yesterday by Century 21 China Real Estate. Between January and October, 1,231 units, or 299,800 square meters, of new residential properties priced at more than 50,000 yuan (US$7,899) per square meter were sold across the city, an annual decline of 22.6 percent and 18.5 percent respectively, said the agency, which operates a local network of more than 300 branches. In September and October, a traditional high season for home sales, only 195 units of luxury homes were traded, a plunge of nearly 65 percent from the same months a year earlier. These homes were sold at an average 71,300 yuan per square meter during the 10 months, up an annual 5.8 percent, Century 21 data showed.