Bear Radar

Style Underperformer:

• Mid-Cap Growth (-3.41%)

Sector Underperformers:

• 1) Coal -6.01% 2) I-Banks -5.45% 3) Homebuilders -5.22%

Stocks Falling on Unusual Volume:

• BCS, DB, MBT, ADSK, ADBE, PHG, TI, SFLY, ROVI, NILE, TRNX, PSMT, RBCN, DIOD, ATVI, PERY, MYRG, FSYS, SGI, NTES, PAAS, THOR, TWTC, CTCT, MEOH, OPNT, MFB, IWZ, PAA, IXG, ASH, MLR, OCN, MRX, CSC, JKI, WTW, IWV, FEU, CNK, ITT, PAA, CLNY, ATVI, RL, SGI, WTW, FIO, JEF, GM, HSC, AH, NOG, FSYS and MFB
  

Stocks With Unusual Put Option Activity:

• 1) NTES 2) VIA/B 3) TSLA 4) MMM 5) ADBE
  

Stocks With Most Negative News Mentions:

• 1) SMG 2) NILE 3) NVDA 4) ANF 5) RBCN
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value (-2.09%)

Sector Outperformers:

• 1) Gold & Silver +.07% 2) Biotech -1.01% 3) Telecom -1.05%

Stocks Rising on Unusual Volume:

• BBY, AEM, ALLT, KITD, SODA, PANL, SLXP and DMND
  

Stocks With Unusual Call Option Activity:

• 1) SODA 2) HDY 3) NOG 4) PXD 5) APOL
  

Stocks With Most Positive News Mentions:

• 1) SINA 2) ROVI 3) HRB 4) AMLN 5) QSII
  

Charts:

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

Wednesday Watch

Evening Headlines

Bloomberg:

• Berlusconi Resignation Shifts Italy's Focus. Prime Minister Silvio Berlusconi’s offer to resign leaves Italy struggling to produce a new regime stable enough to implement painful austerity measures in a country that has averaged almost a government a year since World War II. Berlusconi last night said he’d step down as soon as parliament passed austerity measures pledged to European Union allies in a bid to convince investors Italy can curb record borrowing costs. The text of the measures, which the government has yet to present, is due to be approved by parliament in the coming weeks. The euro strengthened and U.S. stocks rose for a second day after last night’s announcement, bolstering optimism a new leader will better be able to tame the euro-region’s second- biggest debt. Europe’s inability to contain the region’s sovereign crisis led to a surge in Italian bond yields in recent weeks that further frayed Berlusconi’s fractious coalition. “While the news could set a positive market tone, that could be short lived,” said Silvio Peruzzo, euro-area economist at Royal Bank of Scotland Group Plc. “Investors will look at the post-Berlusconi and see an option on two outcomes: new elections and a technocratic government. We believe the latter would be strongly preferred and could help the crisis resolution process in Europe.”
• Italian Crisis Ambushes Ireland After Greek Escape: Euro Credit. After convincing investors and the European Central Bank that it’s not Greece, Ireland may find it harder to escape the fallout from Italian turmoil. Irish bonds have declined almost 3.6 percent since the end of September, eroding the highest returns in the world since June. Since falling to an eight-month low on Oct. 4, the yield on two-year Irish notes has jumped to about 75 basis points above its average of the past two months, according to data compiled by Bloomberg. Borrowing costs for Ireland, which announced additional austerity measures last week, have risen as Italian Prime Minister Silvio Berlusconi struggles to cut the region’s second- biggest debt load and Greek premier George Papandreou tries to form a unity government under a new leader. “If the disaster scenario happens, I’m sure they’ll get hit with the same kind of contagion again,” said Haig Bathgate, chief investment officer at Turcan Connell, an Edinburgh-based manager of 1 billion pounds ($1.6 billion) for mainly wealthy clients. Current levels are “probably as good as it’s going to get until the rest of periphery Europe is dealt with,” he said.
  
• Bank Stress Veers From Stocks as Italy Yields: Credit Markets. Measures of bank stress are diverging from the stock market, showing that credit markets remain concerned that Europe's debt crisis may still engulf Italy and threaten the global financial system. A gauge of bank reluctance to lend in dollars, known as the Libor-OIS spread, reached the highest level since July 2009 yesterday, according to Bloomberg. An index that measures instability for lenders from Milan-based UniCredit SpA to Paris-based BNP Paribas SA ended October at about the same level as the months following the failure of Lehman Brothers Holdings Inc., the Bank of Italy said in a report. Concern is mounting that sovereign-debt strains will spiral into a broader crisis for a global financial system that is more linked than ever and where half of Europe's bank bonds are held by other lenders in the region.
  
• Ackman to Lose 'Lot of Money' on Hong Kong Bet, Tsang Says. William Ackman, founder of hedge fund Pershing Square Capital Management LP, will “lose a lot of money” on his bet that Hong Kong will amend its currency peg to the dollar, city Chief Executive Donald Tsang said. Ackman, who netted more than $1 billion on a six-year short bet against the bond insurer MBIA Inc., said in September that he is buying Hong Kong dollar call options. The wagers will make money if Hong Kong changes its three-decade long linkage to the U.S. dollar and allows the currency to rise or if option prices increase before maturity. “I think he’s going to lose a lot of money on that,” Tsang, 67, said in a Bloomberg Television interview in New York yesterday. The peg is a “very important anchor underpinning Hong Kong growth and Hong Kong’s monetary stability and we are not going to change,” he said.
• Aluminum Slump Means 25% of Smelters Losing Money: Commodities. The biggest decline in aluminum prices since the global recession means at least 25 percent of the world’s smelters may be unprofitable. The metal fell 23 percent to $2,135.50 a metric ton on the London Metal Exchange since May 1 and energy costs gained 16 percent in the past month. Twenty-five percent of production loses money below $2,350 and 50 percent under $2,000, according to estimates by Bloomberg Industries. About 10 percent of output may be shut by the first quarter, said Jochen Hitzfeld, the analyst at UniCredit SpA in Munich ranked by Bloomberg as the most-accurate price forecaster over two years.
• Oil Gains a Sixth Day in New York on Iran Nuclear Risk. “This current supply-shock potential that the markets are looking at with Iran has pushed the price well above our outlook,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who had forecast oil to trade from $80 to $90 a barrel. Crude oil for December delivery gained as much as 52 cents to $97.32 a barrel in electronic trading on the New York Mercantile Exchange and was at 97.18 at 12:30 p.m. Sydney time. The contract yesterday advanced $1.28, or 1.3 percent, to $96.80, the highest settlement since July 28. Prices are 6.3 percent higher the past year. Brent oil for December settlement gained 59 cents, or 0.5 percent, to $115.59 a barrel on the London-based ICE Futures Europe exchange.
• Ackman Said to Recommend Lowe's(LOW) Shares at Investment Conference. Pershing Square Capital Management LP’s Bill Ackman recommended at a conference that investors buy shares of Lowe’s Cos., according to a person who attended the presentation who declined to be identified. The home-improvement retailer has fallen 9.2 percent in 2011 after rallying two straight years. It rose 2.1 percent to $22.77 today, extending gains after 3 p.m. New York time.
• Consumer Reports Recommends iPhone After Apple(AAPL) Fixes Antenna. Consumer Reports is recommending the new iPhone 4S after Apple Inc. fixed an antenna glitch that left the magazine unwilling to endorse the previous model.
• Hong Kong Won't Relax Housing Curbs, Chief Executive Tsang Says. The Hong Kong government plans to keep curbs on the housing market even after the value of home sales halved last month from a year earlier, Chief Executive Donald Tsang said. “You can see a soft landing, which is quite nice, but we are not going to retract or retrench some of the measures we have taken,” Tsang said in an interview at Bloomberg LP’s head office in New York today. “The market will not totally collapse. But over time, we’ll see a moderation in prices, which is exactly what we want.”

Wall Street Journal:

• Rajaratnam Ordered to Pay Record SEC Penalty. Raj Rajaratnam, the former hedge-fund manager sentenced to more than 11 years in prison for insider trading, was ordered to pay a record financial penalty of more than $92.8 million in a related civil case brought by the Securities and Exchange Commission.
• Ohio Voters Reject Public-Union Limits. Voters on Tuesday defeated by a wide margin a law that would have restricted the powers of unions representing teachers, police officers and other public-sector workers. The law would have stripped the state's 350,000 public employees of most of their collective-bargaining rights and forced workers to pay at least 15% of their health-care costs. With 88% of precincts reporting, about 61% of voters in a referendum voted against the Republican-backed law, known as Senate Bill 5, while 39% supported it.
• Europe's Entitlement Reckoning. From Greece to Italy to France, the welfare state is in crisis. In the European economic crisis, all roads lead through Rome. The markets have raised the price of financing Italy's mammoth debt to new highs, and on Tuesday Silvio Berlusconi became the second euro-zone prime minister, after Greece's George Papandreou, to resign this week. His departure may keep the world's eighth largest economy solvent for the time being, but it hardly addresses the root of the problem.

Dow Jones:

• Deutsche Bank(DB) CEO: Restructuring Greek Debt Sets Risky Precedent For Banks - FT. Agreeing to a 50% cut in value on Greek sovereign debt holdings could set a risky precedent for banks and other bond holders, the chief executive of Deutsche Bank AG said, according to a Financial Times report Tuesday. "If you open up the Pandora's box, then who is willing to invest in sovereign risk?" Josef Ackermann told the newspaper. "The violation of a risk-free asset class will have long-term consequences." Ackermann did insist that the deal on Greece's sovereign debt should be an "exception," the FT cited him as saying.

MarketWatch:

• Adobe(ADBE) to Cut 750 Jobs, Shares Fall. Adobe Systems on Tuesday said it is cutting about 750 jobs, mainly in North America and Europe, as part of an effort to restructure of the company. Shares of Adobe ADBE -9.04% fell more than 8% in after-hours trading, as the software maker also lowered its earnings target for the quarter ending Dec. 2, to reflect a charge related to the restructuring.
• China’s BYD veers off entrepreneurship road. Shenzhen-based BYD Co. is a private auto maker. It’s also a company heavily reliant on government support.

Business Insider:

• Report: The Number Of Potential Victims In The Penn State Scandal Has DOUBLED In The Last 24 Hours. The number of alleged victims in the Jerry Sandusky child-molestation case has more than doubled since Monday, FOX29 in Philadelphia reports. Eight victims were named the intial grand jury report against Sandusky, but now that number is closer to 20, the TV station was told.
• Riot Police Are Out At Penn State As Students Fill The Streets In Support Of Joe Paterno.
• With The Nord Stream Pipeline, Russia And Europe Are Slowly Becoming Completely Interdependent.

Zero Hedge:

• As Geithner Says Supercommittee "Holds Key To Rebuiling Confidence" Supercommittee Says "Trillions Of Dollars Apart".
• Barclays Says Italy Is Finished: "Mathematically Beyond Point Of No Return".
• ECB 'Inaction' Succeeds In Doing What Nobody Has Achieved In Decades! Sending Risk Soaring. (graphs)
  

CNBC:

• China October Inflation Easses. China's annual inflation rate eased to 5.5 percent in October, a third straight month of decline from July's three-year peak.
• For Her: Trendiest Holiday Gifts, 2011.
  

Mediaite:

• Jon Stewart Skewers Former NJ Gov. Jon Corzine For Risky Bank Bets. (video)

Rasmussen Reports:

• Election 2012: Generic Republican 46%, Obama 42%.

Reuters:

• Caterpillar(CAT): China Price Pressure Due In 2012. Caterpillar Inc's head of emerging markets said on Tuesday the company expects to see pressure on pricing in China as early as next year as machinery manufacturing capacity could grow beyond demand levels. Rich Lavin, who also heads Caterpillar's construction industries business, said that "there will be overcapacity" in China into 2012 and 2013, and "that could create downward pressure on pricing." Caterpillar has been among a chorus of companies warning that the global economy is headed for slow growth in 2012. Lavin was speaking at a Robert W. Baird & Co investor conference in Chicago.
• Fannie Mae Taps Taps $7.8 Billion From Treasury, Loss Widens. Fannie Mae , the biggest source of money for U.S. home loans, on Tuesday said it needed a further $7.8 billion in federal aid to stay afloat as a shaky housing market widened its third-quarter loss to $5.1 billion. The government-controlled firm also attributed the deeper cash drain to losses on derivatives used to hedge its exposure to interest-rate swings and on expenses related to home loans made prior to the 2008 financial collapse. In the year-earlier quarter it had a loss of a $1.3 billion. Fannie Mae has now drawn $112.6 billion in bailout funds from the Treasury Department since being seized by the government in 2008 as mortgage losses mounted.
• IMF Chief Warns World Economy Risks "Lost Decade". The head of the International Monetary Fund warned on Wednesday that Europe's debt crisis risked plunging the global economy into a "lost decade" and said it was up to rich nations to shoulder the burden of restoring growth and confidence. Christine Lagarde told a financial forum in Beijing that European plans to bolster a rescue package for Greece were a "step in the right direction," but that the outlook for the world economy remained dangerous and uncertain. "There are clearly clouds on the horizon," Lagarde said. "Clouds on the horizon particularly in the advanced economies and particularly so in the European Union and the United States." "Our sense is that if we do not act boldly and if we do not act together, the economy around the world runs the risk of downward spiral of uncertainty, financial instability and potential collapse of global demand... we could run the risk of what some commentators are already calling the lost decade."
• Sina(SINA) Swings to Q3 Loss, Cautious on 2012 Ad Spend Outlook. Sina Corp , the operator of China's largest Internet portal, swung to a third-quarter loss on steep investment losses and said it doesn't expect a significant increase in advertising spending next year. Sina shares were down nearly 4 percent in extended trade after closing at $86.94 on Tuesday on Nasdaq.
• Italy Faces Limbo After Berlusconi Agrees To Go. Italy looks set for lengthy political uncertainty after Prime Minister Silvio Berlusconi's pledge to resign, with his centre-right party calling for elections and the main opposition for a national unity government.
• Papademos candidacy for Greek PM hitting snags - sources. A plan for former European Central Bank vice-president Lucas Papademos to lead a Greek coalition government has run into trouble, sources from the Socialist and Conservative parties said on Wednesday, delaying a resolution to the country's political limbo. "The Papademos candidacy has hit problems that have to do with both parties," one of the sources told Reuters on condition of anonymity. The parties are looking at other options for the new prime minister, the sources said. Greek media have mentioned parliament speaker Filippos Petsalnikos and socialist PASOK party MP Apostolos Kaklamanis but both have denied the reports that they had been picked.
• US Senate Bill Would Clear Way For Online Sales Tax. State governments would be able to collect online sales taxes under a bill due to be introduced in the U.S. Senate on Wednesday, said sources familiar with the bill.
• Blue Nile(NILE) Forecasts Weak FY, CEO Resigns. Blue Nile Inc forecast weak full-year earnings and said its Chief Executive Diane Irvine has resigned, sending its shares down 15 percent after the bell.

Telegraph:

• Italy Still at Risk as Silvio Berlusconi Delays Departure. Silvio Berlusconi has given a "commitment to resign" but defied calls to step down immediately, prolonging a political deadlock that has pushed Italy's borrowing costs to danger levels.
• ECB Stymied On Debt Crisis Without Fiscal Union. Germany's top banker has vehemently rejected demands from David Cameron and other world leaders for drastic action by the European Central Bank to stop the eurozone crisis spiraling out of control.

China Daily:

• The migration of China's wealthy abroad to the U.S. and other nations will hurt the Chinese economy and prevent the creation of an "olive-shaped" society with a large middle class, Zhang Monan, a researcher with the State Information Center, wrote in a commentary today. Only by making China more attractive can the nation keep its wealthy from leaving, Zhang writes. "Skyrocketing" living costs, pollution, poor social welfare and a growing tax burden are contributing to the move by wealthy Chinese abroad, Zhang said.

Economic Observer:

• The eastern Chinese province of Jiangsu banned lending between companies to prevent risk from spreading to state-owned companies from private enterprises, citing a notice from the local government. Many state-owned companies, with easy access to funds, have acted as "shadow banks," lending money to small companies and real estate developers.

Shanghai Securities News:

• The China Insurance Regulatory Commission has banned insurers from private lending on concern of risk, citing a notice from the regulator. The regulator last month ordered a nationwide investigation into whether insurance companies have taken part in informal lending.
• China May Limit Power Use in 17 Provinces, Cities. Guizhou, Hunan and 15 other Chinese provinces and cities may limit the use of electricity this winter, citing the State Electricity Regulatory Commission. Rising coal costs are to blame for the possible limits on power usage, citing Li Zhaolin, a coal industry researcher. China's Bohai-Rim steam-coal price index is at 853 yuan a ton, the highest level in more than a year, according to the report.
  

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 193.50 -2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 148.25 -2.0 basis points.
• FTSE-100 futures +.76%.
  
• S&P 500 futures -.31%.
  
• NASDAQ 100 futures -.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GGP)/.22
• (WEN)/.04
• (DF)/.15
• (LIZ)/-.04
• (GM)/.96
• (RL)/2.24
• (CSC)/.68
• (MBI)/.30
• (GMCR)/.47
• (RKT)/.56
• (AAP)/1.18
• (CSCO)/.39
• (PEGA)/.31
• (M)/.16
• (PSMT)/.54

Economic Releases
10:00 am EST

• Wholesale Inventories for September are estimated to rise +.5% versus a +.4% gain the prior week.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +500,000 barrels versus a +1,826,000 barrel gain the prior week. Distillate supplies are estimated to fall by -2,200,000 barrels versus a -3,575,000 barrel decline the prior week. Gasoline inventories are estimated to rise by +1,000,000 barrels versus a +1,356,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.35% versus a +.5% gain the prior week.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Tarullo speaking, ECB's Stark speaking, 10-year Treasury Note Auction, weekly MBA mortgage applications report, USDA Crop Report, Sandler O'Neill Financial Services Conference, (CY) Analyst Meeting, (ADBE) Analyst Meeting, (HAS) Investor Day, (LOGI) Investor Day, (AA) Investor Day, (CBI) Investor Day, (BDX) Analyst Day and the (OWW) Investor Day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Surging into Final Hour on Euro Bounce, Short-Covering, Less Financial Sector Pessimism, Technical Buying

Broad Market Tone:

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

Equity Investor Angst:

• VIX 28.31 -5.13%
  
• ISE Sentiment Index 90.0 +1.12%
  
• Total Put/Call 1.23 +26.80%
  
• NYSE Arms .78 +6.95%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 124.09 -.31%
  
• European Financial Sector CDS Index 236.79 +3.37%
  
• Western Europe Sovereign Debt CDS Index 338.0 +1.09%
  
• Emerging Market CDS Index 283.59 -.91%
  
• 2-Year Swap Spread 36.0 unch.
  
• TED Spread 44.0 -1 bp
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 183.0 +6 bps
  
• China Import Iron Ore Spot $122.90/Metric Tonne +1.04%
  
• Citi US Economic Surprise Index 23.60 +2.0 points
  
• 10-Year TIPS Spread 2.13 -1 bp
  

Overseas Futures:

• Nikkei Futures: Indicating +89 open in Japan
• DAX Futures: Indicating +89 open in Germany

Portfolio:

• 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: 75% Net Long

BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 builds on yesterday's reversal higher despite rising Eurozone debt angst, global growth worries and rising energy/food prices. On the positive side, Oil Tankers, Oil Service, Paper, Networking, Bank, Hospital, Homebuilding and Airline shares are especially strong, rising more than +1.50%. (XLF) has traded very well throughout the day. Gold is falling -.76% and Copper is gaining +.34%. Weekly retail sales have held up very well during this entire market pullback. They have averaged about a +4.5% gain over the last 4 months, which was one of the tells that the US economy was not plunging into recession even as investors were beginning to price this during Aug./Sept. However, this week sales rose +3.1%, which was down from a +4.7% gain the prior week and the weakest since the week of April 5th. This is only one week, but it warrants close attention, especially given the recent spike in energy prices. On the negative side, Biotech and Gaming shares are lower on the day. Oil is rising +.9%, the UBS-Bloomberg Ag Spot Index is rising +.9% and Lumber is falling -1.2%. The Nikkei fell -1.3% overnight and is now down -15.4% ytd. Brazilian equities are not participating in today's rally and are down -14.8% ytd. The Germany sovereign cds is up +2.69% to 89.50 bps, the France sovereign cds is rising +1.52% to 184.50 bps, the Italy sovereign cds is up +3.14% to 522.67 bps, the Spain sovereign cds is gaining +1.54% to 401.0 bps, the Ireland sovereign cds is gaining +2.21% to 729.0 bps, the Belgium sovereign cds is up +2.4% to 293.33 bps and the Israel sovereign cds is up +.6% to 170.0 bps. Rice is still close to its multi-year high, rising +26.0% in about 4 months. The Italian 10-year yield jumped +11 bps to 6.77% today, which is the highest since Aug. 1997. The Italian/German 10-Year Yield Spread is jumping another +9.13 bps to 496.78 bps, which is another new all-time high. The TED spread continues to trend higher and is near the highest since June 2010. The Libor-OIS spread is now at the widest since July 2010. The 2-Year Euro Swap spread is making a new cycle high today, which is also noteworthy considering the recent strong equity advance. China Iron Ore Spot has plunged -34.20% since February 16th and -30.2% since Sept. 7th. It is noteworthy that various Eurozone credit gauges are not confirming today's equity optimism over Berlusconi's apparent departure. While China's upcoming inflation readings will likely show deceleration, I doubt that any meaningful policy easing is in store. Emerging market inflation is still a larger problem than perceived, in my opinion. Moreover, the recent surge in energy prices is becoming a concern and could pose another major threat to the global economy on any further spike higher. Despite many negative headwinds, the broad US equity market still trades well and looks higher in the short-term on fund year-end performance-chasing, perceptions that Europe is moving in the right direction, seasonality and better US economic data. However, I still think the rapidly deteriorating fundamentals in Europe will likely mute upside traction and eventually weigh meaningfully on the major averages again over the coming months. As of today, I am posting further commentary on the new Wall Street All-Stars site in the Platinum Conversation section on the front page. Please stop by and check it out. I expect US stocks to trade mixed-to-higher into the close from current levels on fund performance-chasing, short-covering, bargain-hunting, less financial sector pessimism, seasonality, a bounce in the euro and technical buying.

Today's Headlines

Bloomberg:

• Berlusconi Lacks Majority in Budget Vote. Prime Minister Silvio Berlusconi failed to muster an absolute majority in a routine parliamentary ballot, fueling further calls for him to resign as Italy struggles to convince investors it can fund itself. Berlusconi won 308 votes in the 630-seat Chamber of Deputies. The lower house had failed to pass the measure in an initial ballot last month, prompting a confidence motion that the premier won on Oct. 14. Since then, Berlusconi has faced defections that threaten to bring down his government. “The government doesn’t have a majority,” Pier Luigi Bersani, leader of the main opposition Democratic Party, said as he called on the premier to resign after the vote. “We all know that Italy runs the real risk of not being able to access the financial markets in the next few days.”
• Italian Bonds Fall on Berlusconi Vote, Margin Charge Speculation. Italy's bonds fell after Prime Minister Silvio Berlusconi won a routine vote without an absolute majority, casting doubt on the nation's ability to enact austerity measures under his leadership. Italian 10-year yields climbed to a euro-era record amid speculation LCH Clearnet Ltd., Europe's largest clearing house, will raise its margin charge on the debt, a rumor denied by the company. German government bonds pared a decline after European Central Bank council member Jens Weidmann said the bank can't bail out nations by printing money. "The problem is that he hasn't gone," said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, referring to Berlusconi. "The other big problem is there's a lot of talk going around the market that LCH are going to revise the margins on Italian debt. A lot of people will have to jettison their positions" under such a move, he said. Italy's 10-year bond yield rose 11 basis points, or 0.11 percentage point, to 6.77 percent at 5:07 p.m. London time, the most since the introduction of the 17-member currency in 1999. The difference in yield, or spread, over similar-maturity German securities widened to a record 497 basis points.
• UniCredit's $10 Billion Fundraising Jeopardized as Contagion Strikes Italy. UniCredit SpA (UCG), Italy’s biggest bank, will decide this week whether to proceed with a 7 billion-euro ($10 billion) stock sale as Prime Minister Silvio Berlusconi fights to remain in power and the country’s debt crisis worsens. Chief Executive Officer Federico Ghizzoni is considering announcing the share sale as soon as Nov. 14, when the Milan- based lender reports third-quarter earnings, four people with knowledge of the talks said. The bank is preparing to hire six to eight underwriters to manage the sale, which may raise 5 billion euros to 7 billion euros, the people said.
• Weidmann: ECB Can't Print Money for Financing. European Central Bank council member Jens Weidmann said the ECB cannot bail out governments by printing money. “One of the severest forms of monetary policy being roped in for fiscal purposes is monetary financing, in colloquial terms also known as the financing of public debt via the money printing press,” Weidmann, who heads Germany’s Bundesbank, said in a speech in Berlin today. The prohibition of monetary financing in the euro area “is one of the most important achievements in central banking” and “specifically for Germany, it is also a key lesson from the experience of hyperinflation after World War I,” he said.
• Iran Worked to 'Miniaturize' Weapon Design. Iran sought to design a nuclear weapon to fit on the Persian Gulf country’s missile warheads and continued working to raise an atomic explosions yield as late as 2010, the United Nations inspectors reported today, citing “credible” intelligence from more than 10 countries. Iran carried out “work on the development of an indigenous design of a nuclear weapon including the testing of components,” the International Atomic Energy Agency said today in a 15-page restricted document obtained by Bloomberg News. “Some activities relevant to the development of a nuclear explosive device continued after 2003” and “some may still be ongoing.” The document, drawing on eight years of collected evidence, shows that Iran worked to re-design and miniaturize a Pakistani nuclear-weapon design by using a web of front companies and foreign experts, according to the report and an international official familiar with the IAEA’s investigation. The IAEA’s conclusion that Iran continued weapons work until at least 2010 clashes with U.S. intelligence estimates that Tehran’s government stopped pursuing a nuclear bomb in 2003. Until now, atomic inspectors had only voiced concerns publicly about the “possible existence” of weapons work in Iran. The new analysis is likely to heighten public pressure on Iran. The IAEA report “could increase the risk of a military attack on Iran’s nuclear facilities” and therefore “justified a certain risk premium on the price of oil,” Commerzbank wrote today in a research note.
• Gold Futures Advance in New York as Europe Crisis Spurs Investor Demand. Gold futures topped $1,800 an ounce for the first time in almost seven weeks as concern that European leaders will be unable to contain the region’s debt crisis spurred demand for the precious metal. “The turmoil in Europe has brought the fear trade back to gold,” Lance Roberts, the chief executive officer of Houston- based Streettalk Advisors, said in a telephone interview. “Also, a renewed wave of policy easing by central banks is helping gold.” Gold futures for December delivery rose 0.6 percent to $1,801.20 an ounce at 12:58 p.m. on the Comex in New York. Prices earlier reached $1,804.40, the highest since Sept. 21.
• Negative Deposit Rates Pose Risk to Funding of China's Banks, Moody's Says. China’s negative interest rates may hinder banks from increasing deposits and weaken the nation’s ability to cope with shocks from the global financial crisis, Thomas Byrne, a senior vice president at Moody’s Corp. said. “It’s important to eliminate negative interest rates as it runs the risk of undermining the deposit bases banks use to fund themselves,” Byrne said in an interview in Beijing yesterday. Having “dependable” funding “can reduce lots of vulnerabilities” for China’s banking system, he said. Deposits in China’s banking system rose the least in almost four years in the third quarter, data from the People’s Bank of China show. Savings rates have lagged behind inflation for 20 months, encouraging money to seek higher returns in areas such as property and informal lending, where interest is as high as 70 percent a year, according to Dong Tao, a Hong Kong-based economist with Credit Suisse AG.
• U.S. Plans Lease Sales in Gulf of Mexico, Offshore Alaska. President Barack Obama’s administration plans 15 offshore oil-lease sales from 2012 to 2017, keeping the Atlantic and Pacific seaboards off-limits for drilling. The government will hold 12 lease sales in the Gulf of Mexico and 3 off of Alaska’s coast, the Interior Department said today in an e-mailed statement announcing its proposed five-year oil and gas leasing program.
• Job Openings in U.S. Rise to Three-Year High. The number of positions waiting to be filled in the U.S. rose in September to the highest level in more than three years, indicating some companies are preparing for an improving economy. Job openings increased by 225,000 to 3.35 million, the most since August 2008, a month before the collapse of Lehman Brothers Holdings Inc. intensified the financial crisis, Labor Department data showed today in Washington. Hiring advanced by 185,000 to 4.25 million, and firings also climbed. Payrolls grew by 80,000 workers in October, and gains in the prior two months were revised up, Labor Department figures showed last week. At the same time, hiring is short of the pace needed to reduce unemployment hovering around 9 percent.

Wall Street Journal:

• Berlusconi to Resign After New Budget Is Approved. Italy's prime minister Silvio Berlusconi promised to the country's head of State Giorgio Napolitano he will resign after the 2012 budget bill is approved, Italy's president office said in a statement. Mr. Berlusconi's move came after his centre-right government failed to muster a majority in a key vote in the lower house of Parliament Tuesday. According to the statement, Mr. Berlusconi expressed worries over "the urgent necessity to provide precise answers" to Italy's European partners with the approval of the 2012 budget bill, to which growth-boosting measures required by the EU should be attached. After Mr. Berlusconi resignation, President Napolitano said he will start consultations with all the political parties on the possible future options.
• JPMorgan(JPM) One of Several Banks Doubting Bailout Leverage Plans - Sources. J.P. Morgan Chase & Co. (JPM) is one of several global banks that have recently voiced doubts to euro-zone officials about plans they are considering to leverage the bloc's sovereign rescue fund, people familiar with the discussions said Tuesday. Doubts from large financial institutions are among the main obstacles facing euro-zone governments as they try to boost the bloc's lending capacity to prevent Italy from being sucked into the crisis. Drawing in private investors with promises of guarantees from the rescue fund, the European Financial Stability Facility, will be crucial to these efforts. The euro zone is focusing on two major leverage options, and Klaus Regling, the EFSF chief executive, has been sounding out financial market participants around the world to understand whether the options are feasible. The first option would be to use the EFSF to guarantee part of new bonds issued by euro-zone governments. The second would create "co-investment funds" that would use EFSF money to absorb first losses on sovereign debt purchased by the funds. J.P. Morgan has expressed doubts that the fund will be able to raise the large amounts of money that will be needed to boost the bloc's lending capacity to around EUR1 trillion, these people said. The EFSF will only have around EUR260 billion of its EUR440 billion lending capacity left over for Italy and Spain, so that is nearly EUR750 billion in funds that will need to come from the private sector to backstop those two countries, a daunting amount in an environment where even the EFSF is facing higher borrowing costs.
• Exxon(XOM) Sees Global Shale Boom. Exxon Mobil Corp. is confident the shale boom that has changed the U.S. energy landscape will spread across the globe, resulting in increased oil and natural-gas supplies, a top executive said. "We do believe there is potential for unconventional oil development from shale resources globally," Mark Albers, Exxon Mobil senior vice president, said in an interview. "We are pursuing that not only in a number of the countries where we have unconventional gas potential but also here in the U.S."

MarketWatch:

• Third Appeals Court Upholds Health-Care Law.

CNBC.com:

• Is Spain the Next Domino to Fall? (video)
  

Business Insider:

• Greek Shipper: 'The World Does Not Appreciate The Extent Of Social Deterioration In This Country.
• Eric Holder Total Botched His Senate Testimony On 'Fast & Furious' Gun Smuggling Scandal.
• The Daily Names The Cain Accuser, And She Works In The Obama Administration.
  

Zero Hedge:

• Greek Bank Deposits Plunge By €5.5 Billion In September: Biggest Monthly Drop Ever. (graph)
• L'orrore, L'orrore... In Three Quick Charts.
• Iran to Israel: "We'll Show You Hell".
  

Politico:

• Bill Clinton: Let Presidents Serve Three Terms.

Reuters:

• Gloomy Outlook For China Exporters As Factory Closure Wave Looms. Up to a third of Hong Kong's 50,000 or so factories in China could downsize or shut by the end of the year as exporters get hit by cost rises and darkening global demand for Chinese goods, a major Hong Kong industrial body said on Tuesday. The Federation of Hong Kong Industries, which represents around 3,000 industrialists running factories in China, said it expected orders in the second half of this year and the first half of 2012 to fall between 5-30 percent. The European debt crisis and a fragile U.S. economy have depressed this year's Christmas orders, Stanley Lau, deputy chairman of Hong Kong's leading industrial promotion body, told a news briefing. He said a consolidation was on the cards, with around a third of Hong Kong's 50,000 or so factories in China likely to scale down operations or close by year-end. "We feel that this is not an overestimate," said Lau, who is also the owner of a Hong Kong watch factory in China, citing higher raw material costs and rising factory worker wages, which had already risen up to 20 percent this year. "Many (factory owners) can't see when the market will have a rebound so they are trying to cut their losses by closing, before all their money is gone," Lau said. One additional risk on the near horizon, however, was the specter of yet another round of expected minimum wage hikes from between 18-20 percent on January 1 in a number of key factory regions in southern China, Lau warned. "If we continue to see labor costs keep increasing, in the future the Hong Kong industries operational pressures will become more and more severe," he told reporters. A Reuters on-the-ground survey at Asia and China's largest trade event, the Canton Fair in southern China, found that many factory owners were now bracing for another severe round of factory closures given a sharp drop in orders from Western customers, primarily in the major market of Europe.
• Oil Up On Iran Buy Italy Uncertainty Limits Rise. Oil prices rose on Tuesday on geopolitical concerns about Iran's nuclear program and seasonal demand from the Northern hemisphere's winter. Crude pared gains after a budget vote in Italy and the possibility the prime minister will resign. A U.N. International Atomic Energy Agency report due this week is expected to show recent activity in Iran aimed at developing nuclear bombs, Western diplomats said. ICE Brent December crude rose 40 cents to $114.96 a barrel by 11:18 a.m. (1618 GMT), having traded from $114.20 to $116.48. U.S. December crude rose 35 cents to $95.87 a barrel, after reaching $96.87.
• McDonald's(MCD) Key October Sales Top Expectations.
  

USA Today:

• Sarkozy, Obama Rip Netanyahu (in private). Beware the open mike. President Obama and French counterpart Nicolas Sarkozy forgot that lesson last week, and got caught questioning the honesty of a major ally, Israel Prime Minister Benjamin Netanyahu. "I cannot bear Netanyahu, he's a liar," Sarkozy told Obama before the two made joint statements during last week's G-20 summit in Cannes, France, Reuters reported. "You're fed up with him, but I have to deal with him even more often than you," Obama replied, according to the French interpreter, per Reuters. Both leaders were unaware that the microphone was already turned on and French reporters could hear the private conversation.

Financial Times:

• EFSF: A Circular, Counterproductive, And Creative Cannibal. On Monday, Nomura strategists released a useful note explaining the two new aspects of the EFSF — the special purpose investment vehicle (SPIV) and the credit insurance option — along with their pros and cons. The cons list is longer and, in aggregate, suggests that in spite of its aesthetic values, the revamped EFSF is riddled with too many contradictions to do much to help Italy and/or Spain.
• EFSF: A Circular, Counterproductive, And Creative Cannibal. (continued)
  

Telegraph:

• Debt Crisis: Live.
• Once Greece Goes, The Whole Euro Project Will Unravel.
  

Bear Radar

Style Underperformer:

• Mid-Cap Growth (+.07%)

Sector Underperformers:

• 1) Gaming -.65% 2) Biotech -.63% 3) Road & Rail -.33%

Stocks Falling on Unusual Volume:

• DSW, URBN, DISH, TM, LPSN, ALLT, LGND, TWGP, SNHY, VRTX, FOSL, CRZO, SFLY, VRUS, TWIN, ECPG, IPHS, CBOE, SYNA, ETP, TGI, IFF, WMS, PXD, HOS, TLP, SMG, BWA, WAC and LXU
  

Stocks With Unusual Put Option Activity:

• 1) FMCN 2) ATVI 3) HYG 4) EWJ 5) FOSL
  

Stocks With Most Negative News Mentions:

• 1) RIMM 2) EXPE 3) OVTI 4) ITW 5) JPM
  

Charts:

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