Today's Headlines

Bloomberg:

• EU's Treaty Plans Are Far From Done Deal, Handelsblatt Says. German- and French-led plans to amend European Union rules to help combat the debt crisis face misgivings from the European Commission and potentially from some other member states, the Handelsblatt newspaper said. German Chancellor Angela Merkel favors one accord to accommodate both the setting-up of a permanent bailout fund and to usher in new stringent budget constraints on euro-region countries, while the commission wants two separate treaties, the newspaper reported, citing EU President Herman van Rompuy. At the same time, it is not certain that all of the 26 states that provisionally agreed to make treaty changes at last week’s Brussels summit will finally ratify those changes, the newspaper said, without citing a source.
• Italy Sells Debt at Record Yields as Monti Rushes Budget Plan. Italy had to pay the most in 14 years to sell five-year bonds as Parliament rushes to pass a 30 billion-euro ($39 billion) budget plan that Prime Minister Mario Monti says will bring down record borrowing costs. The Rome-based Treasury sold 3 billion euros of the bonds, the maximum for the sale, to yield 6.47 percent, the most since May 1997 and up from 6.29 percent at the last auction on Nov. 14. Demand was 1.42 times the amount on offer, compared with 1.47 times last month. Monti’s Cabinet approved a sweeping budget plan on Dec. 4 aimed at raising revenue and boosting Italy’s anemic growth to persuade investors Italy can tame the region’s second-biggest debt and avoid a bailout. Parliamentary committees signed off on the amended plan last night, paving the way for a vote this week in the lower house. Monti has warned that failure to approve it could lead to Italy’s “collapse” and threaten the survival of the single currency. “Italy’s predicament is dire: it has become a proxy for euro-zone risk at a time when its funding requirements are about to balloon,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in an e-mail. “Every bond auction in January and February is going to be scrutinized for signs that Italy is having trouble maintaining market access.”
• Sovereign Bond Risk Nears Record as Cracks Emerge in Euro Pact. The cost of insuring against default on European sovereign bonds approached a record on concern cracks are emerging in last week’s agreement to resolve the region’s debt crisis. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed three basis points to 382 at 10 a.m. in London, near the record 385 set Nov. 25. An increase signals deterioration in perceptions of credit quality. German- and French-led plans to amend European Union rules and create closer fiscal union face misgivings from the European Commission and potentially from some the 26 member states that agreed to the changes, the Handelsblatt newspaper said. Italy’s borrowing costs rose at a bond sale today. “The euro leadership thought they could get away with telling markets what markets want to believe,” said Bill Blain, a strategist at broker Newedge Group in London. “Unfortunately, markets want to see tangible things happen.” Swaps on Italy rose nine basis points to 578, according to CMA. The government sold five-year bonds at an average yield of 6.47 percent, up from 6.29 percent on Nov. 14, the Bank of Italy said. Credit-default swaps on Belgium increased six basis points to 333, France climbed 4.5 to 238, Germany was up two at 239 and Spain was three higher at 447, CMA prices show. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers jumped eight basis points to 328 and the subordinated index was 14 higher at 581.5, according to JPMorgan Chase & Co. Both are nearing records set Nov. 25. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 15 basis points to 802.5, JPMorgan prices show. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose three basis points to 187.5 basis points.
• Maersk Line, the container shipping unit of A.P. Moeller-Maersk A/S, doesn't expect the worldwide crisis in container business to ease in 2012, Capital magazine reported, citing an interview with the unit head Eivind Kolding. Kolding expects the situation to deteriorate further before prices recover, he said.
• Merkel FDP Coalition Official Resigns as Euro Bailout Exacerbates Strains. The general-secretary of Chancellor Angela Merkel’s Free Democratic coalition partner stepped down today, exposing party divisions that threaten to distract the German leader as she focuses on euro-area rescue efforts. Christian Lindner, 32, resigned two years after taking the job as party members squabble over an internal vote seeking to reject the permanent bailout fund, the European Stability Mechanism. Lindner is an ally of Economy Minister and Vice Chancellor Philipp Roesler, who replaced Foreign Minister Guido Westerwelle as FDP party chief in April amid slumping support. “I don’t think it could get worse for the party,” Oskar Niedermayer, a professor of political sociology at Berlin’s Free University, said in an interview on N-TV. Merkel’s pro-business coalition partner has been skeptical about financing European bailout funds to aid indebted governments such as Greece, Ireland and Portugal.
• The 1-Year EUR/USD Cross-Currency basis swap is falling -9.2 bps to -106 bps, the lowest since Dec. 2, 2008 on a closing basis, after increased take-up in the ECB's 7-day tender suggested further funding needs in Europe. "It's a combination of everything," says Stone & McCarthy analyst Andrew Brodsky. "The central bank liquidity swaps were a step in the right direction, but banks are fearful of sovereign exposure so they're not willing to lend to each other".
• China Affirms Property Curbs Amid 'Grim' Outlook. China’s leaders affirmed they will stick next year with a campaign to bring down property prices even as a “very grim” global outlook threatens growth in the second-largest economy. The nation will target “basically stable” consumer prices and “unswervingly” implement real-estate curbs, according to a statement after an annual economic planning meeting in Beijing.
• China Money-Supply Growth at Weakest Pace in Decade Shows Slowdown Risks. China’s lending slowed in November and money supply grew the least in a decade, highlighting the risk of a deeper slowdown in the world’s second-biggest economy. New local-currency lending was 562.2 billion yuan ($88 billion), the People’s Bank of China said on its website today. That compares with 587 billion yuan in October. M2, a measure of money supply, rose 12.7 percent, the least since May 2001.
• China to Impose Duties on Large-Engine Cars Imported From U.S. China announced plans to impose anti-dumping duties on some vehicles imported from the U.S. after failing to block a U.S. tariff on Chinese tires. Punitive duties will be as high as 12.9 percent for autos from General Motors Co. (GM) and 8.8 percent for Chrysler Group LLC, China’s commerce ministry said today on its website. The U.S. units of Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI) will face duties of 2 percent and 2.7 percent respectively, it said. “The move shows that China is always capable of intervening politically in its markets,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “The automobile industry is very dependent on China for growth, and there’s doubts about the pace of future expansion.” Auto sales in China are rising at the slowest pace in 13 years, putting pressure on local Chinese producers to consolidate as GM and other foreign carmakers post gains.
• Gold Tumbles Most in 11 Weeks as Fed Shuns Additional Stimulus. Gold tumbled the most in 11 weeks as the Federal Reserve refrained from taking more stimulus measures and as a stronger dollar curbed demand for alternative assets. Silver plunged more than 7 percent. The dollar rose to an 11-month high against the euro as Italian borrowing costs increased at a debt auction. The Standard & Poor’s GSCI index of 24 commodities dropped as much as 2.7 percent. The Federal Reserve yesterday said the U.S. economy is maintaining its expansion and refrained from taking new action to bolster the economy. “There is turbulence across the commodity market because of the strength in dollar,” Jochen Hitzfeld, an analyst at UniCredit SpA in Munich, said in a telephone interview. “No further stimulus from the Fed is bearish for the market.” Gold futures for February delivery dropped 3.2 percent to $1,609.50 an ounce at 10:31 a.m. on the Comex in New York, heading for the biggest slide since Sept. 23. Earlier, prices slumped to $1,602.40, the lowest since Oct. 5.
• Crude Oil Declines From One-Week High As OPEC Boosts Output Ceiling. Oil fell from a one-week high in New York as the Organization of Petroleum Exporting Countries agreed to raise its production ceiling, moving the group’s supply target nearer to current output levels. Futures declined as much as 1.8 percent, after surging 2.4 percent yesterday in the biggest gain in almost four weeks. OPEC agreed to a production limit of 30 million barrels a day, Venezuela’s Energy Minister Rafael Ramirez said at the group’s meeting in Vienna today. U.S. crude supplies rose last week and gasoline consumption decreased, the industry-funded American Petroleum Institute said yesterday. Crude extended its declines as equities fell and the euro reached its weakest level against the dollar since January. “The production cap seems quite neutral, since demand is likely to be held back by weaker growth in the first half of next year,” said Filip Petersson, commodity strategist at SEB AB in Stockholm. “Bullishness from yesterday is dissipating.” Gasoline inventories slid 12,000 barrels last week, the API report showed. The Bloomberg survey indicated supplies may have increased 1.2 million barrels. Implied demand for the fuel fell 2.1 percent to the lowest since August, the API said.
• Copper Falls Most in Six Weeks on Mounting Europe Debt Concern. Copper fell the most in six weeks on mounting concern that Europe’s debt crisis will erode demand for industrial metals. Aluminum slumped to the lowest since July 2010. German Chancellor Angela Merkel said there is no “simple and fast” solution to the region’s crisis. The Federal Reserve yesterday refrained from taking new measures to spur growth. Before today, copper dropped 23 percent this year, as Europe’s debt woes escalated and demand weakened in China and the U.S., the world’s largest metals buyers.
• Loophole in Global Warming Accord Augurs Clash. The deal struck by United Nations envoys this week to fight climate change gives the biggest polluters three options for a wider agreement by 2015, setting the stage for renewed discord between rich and poor countries. Negotiators from more than 190 nations agreed Dec. 11 to spend as long as four years drafting a “protocol, legal instrument or an agreed outcome with legal force” to take effect by 2020. While the European Union says that calls for a treaty to limit fossil-fuel emissions in all countries, two of the biggest polluters, China and India, signaled they expect to be assigned looser limits in the final accord. “The phrase ‘agreed outcome with legal force’ is new,” Lou Leonard, a lawyer and director of WWF’s climate change program in Washington, said in an interview. “They just made it up. We don’t know what it means.” With a dose of ambiguity, envoys now embark on years of more talks on how to get all nations to curb emissions, aiming to eventually regulate multinational polluters from U.S. Steel Corp. (X) to China Petroleum & Chemical Corp. (386) Negotiations failed in Copenhagen in 2009 after the U.S., China, India and the EU got bogged down in divisions over a new treaty’s legal form.

Wall Street Journal:

• First Solar's(FSLR) Chief Technologist Steps Down. First Solar Inc. Chief Technologist Markus Beck and other members of his Santa Clara, Calif.-based team are leaving the solar panel company as it tightens its focus on its core solar technology amid a decline in the market, according to a person familiar with the situation. Mr. Beck joined First Solar in 2008 after serving as chief technologist in the early period of development at Solyndra Inc., a start-up that has recently been embroiled in a political firestorm after burning through a large federal loan and then filing for bankruptcy.
  
• Greece's 2011 Budget Deficit Seen At Around 10% of GDP: Senior Govt. Official. The Greek government's budget deficit is expected to be equivalent to around 10% of gross domestic product this year, above an already revised target of around 9% of GDP, a senior government official said Wednesday. He added that the economy could shrink by more than 6% this year, against a government estimate of 5.5%.
• UK FSA Will Meet Banks on Euro-Zone Breakup Planning. The Financial Services Authority will meet banks over contingency planning.
• Sandler Chops Its Estimates for Goldman(GS), Morgan Stanley(MS). Analysts keep taking the ax to their estimates for Wall Street. Sandler O’Neill became the latest. The firm chopped its fourth-quarter estimates for Goldman Sachs and Morgan Stanley today to reflect “persistently subdued activity levels.”
  

MarketWatch:

• Schwab, E-Trade Stocks Drop as Trading Slows. Discount brokerages Charles Schwab Corp. SCHW -4.25% and E*Trade Financial Corp. ETFC -5.65% experienced steep monthly declines in trading activity as market volatility remained high and asset values have stayed under pressure.

CNBC.com:

• CEOs Worry About Inflation: Fewer Will Add Jobs: Survey. U.S. chief executives' view of the economy was little changed in the fourth quarter, though they are growing concerned about the risk of inflation in raw material prices, according to a survey released on Wednesday. Of the Business Roundtable CEOs polled, 35 percent said they expected to add jobs in the U.S. over the next six months, down from 36 percent who expected that in October.
• Consumers Plan to Spend Less This Holiday Season: Fratto. We think today’s (Tuesday's) tepid retail sales report confirms what we’ve suspected from our own survey data: as in 2010, Americans took advantage of Black Weekend sales incentives, but aren’t likely to carry through their purchasing pace through the holidays. The latest HPS/CivicScience survey of American consumers shows that while 22 percent say they expect to spend more, 36 percent expect to spend less — with nearly 20 percent saying they expect to spend “a lot less”.

Business Insider:

• The CBO Shows Exactly Why The Tobin Tax Is A Terrible Idea.
• 25 Unforgettable Pictures From The Past Year.
• This Is The Jim Chanos Presentation That Nailed The Collapse Of First Solar(FSLR).
• The Story of France, And Why Everyone Thinks It's Going to Lose Its AAA Rating.
• The Ultimate Fear Is That Europe Is Turning Itself Into AIG Circa 2008.
• The Government Could Shut Down As Soon As Friday, And It May Be Demorats' Fault This Time.
  

Zero Hedge:

• Abysmal Liquidity and Other Things to Watch.
• Kyle Bass On Rehypothecation and Other Keynesian Endgame Scenarios.
• Greek Bankruptcy Imminent?
• Euro Rebounds as S&P Leaks It Has Not Leaded An Imminent French Downgrade.
• RIP Fed Dollar Swap Intervention: Central Bank Liquidity Injection Half Life Two Weeks. (graphs)
  

Real Clear Politics:

• Obama: "Where Congress Is Not Willing To Act, We're Going To Go Ahead And Do It Ourselves". (video)

Reuters:

• Joy Global(JOYG) Warns of Slowing Sales Growth in 2012. Joy Global Inc said a sluggish economy is preventing its mining customers from embarking on new projects, and warned of slowing demand and sales growth in 2012. Shares of the mining equipment maker, which also reported a lower-than-expected fourth-quarter profit, fell as much as 13 percent to $73.67 on Wednesday on the New York Stock Exchange. "The industry will be cautious and measured," Chief Executive Officer Michael Sutherlin said on a conference call with analysts. "Existing projects will proceed... However, they will probably be slowing the projects entering the pipeline until the macros provide a clearer positive direction."
• India Economic Gloom Deepens as Rupee Fuels Inflation. India's economic gloom deepened on Wednesday as figures showed a record low rupee is adding to the central bank's inflation headache and an adviser to the prime minister said there was little that could be done to check the currency's slump. An 18 percent slide in the value of the rupee since July is adding to a growing worry of economic crisis in the country as stubbornly high inflation ties the hands of the central bank from easing policy to try to turn a grim economic outlook. A worsening fiscal picture means the government's financial firepower is also limited.
• Agrium(AGU) to Spend $1.5 Billion to Raise Potash Capacity. Agrium Inc plans to spend about $1.5 billion to increase its potash production capacity by 50 percent, as it looks to gain from continued strength in crop prices.
• AAA Loss Would Not Be A Disaster - French Minister. France's foreign minister said in an interview published on Wednesday that decisions by rating agencies were "sometimes subjective and political", and that any a loss of France's top-notch AAA rating would be regrettable but not disastrous.

Telegraph:

• Christmas Market Attacks: Belgian Gunman Nordine Amrani Had 'Grudge Against Society'. It emerged early on Wednesday morning that Amrani, 33, killed a 45-year old woman before carrying out his grenade and assault rifle attack that killed three people in Liege, including a 17-month old baby boy. The Belgian, of Moroccan origin, was on parole and had been summoned to police, where he feared being arrested and being returned to prison because his car number plate had been seen at the scene of an "immoral act". With previous convictions and jail terms for possession of arms, he would have known that the police would have raided his properties where he had a new stash of heavy weapons, including grenades and assault rifles.
• China Police Blockade Village After Protests. Police surrounded a village in southern China, cutting off supplies of food and water after protests forced local Communist Party officials to flee. For the first time on record, the Chinese Communist party has lost all control, with the population of 20,000 in this southern fishing village now in open revolt. The last of Wukan’s dozen party officials fled on Monday after thousands of people blocked armed police from retaking the village, standing firm against tear gas and water cannons. Since then, the police have retreated to a roadblock, some three miles away, in order to prevent food and water from entering, and villagers from leaving. Wukan’s fishing fleet, its main source of income, has also been stopped from leaving harbour. The plan appears to be to lay siege to Wukan and choke a rebellion which began three months ago when an angry mob, incensed at having the village’s land sold off, rampaged through the streets and overturned cars. Although China suffers an estimated 180,000 “mass incidents” a year, it is unheard of for the Party to sound a retreat.
• Debt Crisis: Live.
  

Ansa:

• The IMF will send a team of inspectors to Rome next week to begin its review of Italy's efforts to balance its budget and reduce debt, citing IMF officials in Washington.

La Tribune:

• Greece lacks the capacity to put in place measures to fix the nation's problems, particularly tax collection, said Horst Reichenbach, head of the European Union task force helping advise the country.

Bear Radar

Style Underperformer:

• Mid-Cap Growth (-2.32%)

Sector Underperformers:

• 1) Oil Service -4.01% 2) Alt Energy -3.84% 3) Gold & Silver -3.2%

Stocks Falling on Unusual Volume:

• IOC, GDP, MSTR, TIBX, SU, AAPL, MXWL, LHO, CVA, SGI, FSLR, SPRD, EDMC, QDEL, ALLT, ACOM, GOLD, ZIP, FRAN, RGLD, SPSC, GMCR, YNDX, CTCT, PAAS, NILE, AMZN, CONN, PXQ, CH, GLD, IAU, SLV, TEF, GTU, IEO, WBC, SIL and PNR
  

Stocks With Unusual Put Option Activity:

• 1) BCS 2) ARMH 3) FSLR 4) DO 5) NG
  

Stocks With Most Negative News Mentions:

• 1) TOL 2) DHI 3) KSS 4) FSLR 5) SLV
  

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value (-.90%)

Sector Outperformers:

• 1) Airlines +.68% 2) REITs +.18% 3) Insurance -.13%

Stocks Rising on Unusual Volume:

• BRLI, BRCM and AVP
  

Stocks With Unusual Call Option Activity:

• 1) GDXJ 2) BPAX 3) AMD 4) TSO 5) UPL
  

Stocks With Most Positive News Mentions:

• 1) AGU 2) AVP 3) CAT 4) PPS 5) VRTX
  

Charts:

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

Wednesday Watch

Evening Headlines

Bloomberg:

• Euro Crisis Shows Dutch Converge With Germany at French Expense. When it comes to fighting the European crisis, the Netherlands may as well be a part of Germany. “The Dutch are often a mainstay for the Germans, and as such, play a bigger role then justified by their economy,” said Sylvester Eijffinger, a professor of financial economics at Tilburg University, 69 miles south of Amsterdam. It’s good for Germany because “it never wants to be accused of going it alone,” he said. As European leaders have struggled for more than two years to tame their financial crisis, the Dutch government has sided with neighboring Germany in pushing austerity and central bank independence, underscoring differences between northern and southern Europe in seeking solutions.
• Crook: EU Pact Could Be Germany's Nightmare. The remedy for the European Union’s financial crisis, EU leaders have decided, is “fiscal union.” But if the agreement they reached last week ultimately leads, in the fullness of time, to a real fiscal union, the country most likely to be unhappy is Germany, its original leading proponent.
• Save Europe by Saying No to Bank Borrowing: Laurence Kottlikoff. The euro crisis threatening the global economy is not about countries going broke. It’s not even about saving the euro. It’s about saving the banks, for the second time in three years. The banks need saving not because they bought toxic assets such as subprime mortgages or the government debts of Greece, Ireland, Italy, Portugal or Spain, and not because they are too large, overrated or under-regulated. They are in trouble because they bought risky securities with other people’s money, and they have to pay it back. They borrowed to gamble, lost yet another fortune and are facing a massive run. A run in, say, Italy would force the Italian government to bail out banks. The country can’t print euros, so it would have to go back to its own money to do so -- that is, abandon the common currency. Why not let the banks fail? Because they control the financial highways that connect borrowers and lenders, savers and investors. Consider the analogy of actual highways: If gas stations had to close down because of gambling losses, the economy would shut down, too. The longer-term solution is for the government to prohibit gambling by systemically important facilitators of trade, whether they are gas stations or banks. But how? Simple: Tell banks they can no longer borrow to invest in risky assets while promising creditors full -- and often immediate -- repayment. Nor can they borrow to invest in “safe” assets, such as government bonds. In fact, they can’t borrow in any way, shape or form. Instead, limit them to their sole legitimate purpose: intermediation.
• Risk Rising of Deeper China Slowdown, Conference Board Says. A Chinese leading indicator fell, fueling concern that the world’s second-biggest economy faces a deeper slowdown as Europe’s debt crisis hits exports and home sales slide. The index declined 0.1 percent to 160.1 in October, The Conference Board said in a statement today, citing a preliminary reading. The gauge captures prospects for the next six months, the New York-based research organization says. In September, it rose 0.4 percent. “The risk of a more substantive slowdown in China’s economic growth than anticipated so far is rising,” Andrew Polk, an economist at The Conference Board, said in the statement. “Targeted loosening of credit markets” should give some help to companies “but the pass through from previous policy tightening measures will continue to act as a brake on the economy,” he said. First published in May 2010, the gauge has successfully signaled turning points in China’s economic cycle if plotted back to 1986, The Conference Board says.
• JPMorgan(JPM) Actions as MF Global Lender Likely to Be Probed. The liquidator of the MF Global Inc. brokerage said that “certain” actions of JPMorgan Chase & Co., a lender to the broker-dealer’s parent, “are likely to be the subject of investigation.” The trustee, James Giddens, said he would “act with the respect to” those actions to recover money for brokerage customers if necessary. If the bank received so-called preferential payments before the brokerage went into liquidation, or other payments, he would deal “appropriately” with the transfers or other issues, he said. “HHR may threaten or bring an action against JPM in the context of a potential dispute between” the bank and the brokerage, he said in a court filing yesterday.
• California Revenue Shortfall to Trigger $1 Billion of Cuts. California Governor Jerry Brown will cut $1 billion in spending from the current budget, saying the economy won’t produce revenue he built into the plan in June, triggering automatic reductions. Brown said he will eliminate a $250 million busing subsidy, take $230 million from aid to public universities, trim $200 million in programs that help the elderly and disabled, and make smaller cuts in child care, library and prison spending. “These cuts to the universities, in-home supportive services, to schools, to prosecution -- they’re not good,” Brown said at a press conference in Sacramento. “This is not how we want to run California.” Brown took action as his finance office predicted revenue for the fiscal year that began in July will fall $2.2 billion below budgeted levels. The governor is seeking a ballot measure to raise income taxes on individuals making more than $250,000 a year and boost the sales levy.
• Egypt's Salafis Shun Extremist Label as Vote Enters Second Round. Campaigning in the towns and villages of Menoufiya in Egypt’s Nile Delta, Salafi preacher Salah Abdel Maboud says he regularly confronts voter fears about Islamization of the country, answering questions such as: Will your party force women to cover their faces, or stay at home? These concerns were spurred by the success of Abdel Maboud’s bloc in the first phase of parliamentary elections, as well as comments by some prominent Salafi Islamists. One accused the novels of Egypt’s Nobel laureate Naguib Mahfouz of encouraging vice, and said Pharaonic statues should be covered with wax because they are un-Islamic. The Nour party of the Salafis still won 24 percent of votes, to place second behind the more moderate Muslim Brotherhood as the contest enters its next round in Menoufiya and eight other provinces today. Abdel Maboud blames local media for spreading the idea that “Salafis in parliament will impose all sort of things, from veils for women to beards for men, so the people are afraid.” He says he replies by telling voters: “We cannot impose religion by force. We have to direct people to what’s right through persuasion.”
• Hollywood Said to Court Amazon(AMZN) in Bid for Online Film Sales. Hollywood studios, working to spur purchases of films and TV shows, are in talks to bring Amazon.com Inc. back into their online system called UltraViolet, people with knowledge of the situation said. Discussions between Amazon and studios including Sony Corp. and Time Warner Inc.’s Warner Bros. center on plans to roll out the shared method for storing and watching films on products such as the Kindle Fire tablet and Blu-ray players, said one of the people, who wasn’t authorized to speak publicly.
• Corzine Knew MF Used Client Accounts: Duffy. MF Global Holdings Ltd. Chief Executive Officer Jon Corzine knew that the company made a loan out of segregated customer accounts before it went bankrupt, CME Group Inc. chairman Terrence Duffy told the Senate today. Duffy, whose company is MF Global’s regulator and principal exchange, faced questions about a shortfall of some $1.2 billion in missing customer funds. CME and Commodity Futures Trading Commission staff had been told a discrepancy existed in the customer funds, which by law are required to be kept separate from company funds. On Oct. 31, the day MF Global filed the eighth-largest bankruptcy in U.S. history, “a CME auditor also participated in a phone call with senior MF Global employees, wherein one employee indicated that Mr. Corzine knew about the loans that it had made for the customer -- from the customer segregated accounts,” Duffy said today.
• Oil Trades Near One-Week High as OPEC Said to Leave Production Unchanged. Oil traded near a one-week high in New York on signs the Organization of Petroleum Exporting Countries may set an output ceiling similar to current levels at its meeting in Vienna today. Futures were little changed after climbing the most in almost four weeks yesterday. OPEC members agreed they should set a limit for the first half of next year of 30 million barrels a day, said a delegate who declined to be identified. Gasoline inventories slipped 12,000 barrels, the API data shows. They are likely to rise 1.2 million barrels, according to the median of 12 analyst estimates in the Bloomberg survey before the Energy Department report. Distillate supplies, including diesel and heating fuel, gained 1.2 million to 142 million barrels, the API said. Gasoline implied demand fell 2.1 percent last week to the lowest since August while distillates products supplied slumped 6.8 percent to the least since September, API data showed.
• Goldman(GS) Loses at Least 37 Partners in Weakest Year Since 2008.
  

Wall Street Journal:

• Legal Uncertainty Imperils EU Agreement. Senior European officials said on Tuesday that it could be difficult to convert last week's summit accord for tougher budget discipline among euro-zone governments into a watertight legal pact, emphasizing the agreement's path to fruition could be tough. As the reassessment continued of the results of last week's summit of European Union leaders, the euro sank further against the dollar, following Monday's sharp declines. Stock markets reversed early gains, amid continued nervousness that Standard & Poor's would deliver its verdict on the summit with a downgrading of some top-rated governments, including France.
• Five Indicted in German Money-Laundering Case. German prosecutors indicted five men, including four German banking executives, on charges of laundering $150 million for a former Russian telecommunications minister in one of the highest-level criminal probes of a Russian official outside Russia. The indictments follow a six-year investigation into allegations that four current or former Commerzbank AG executives and a Danish lawyer assisted former Russian telecommunications minister Leonid Reiman in selling telecommunications assets he allegedly secretly controlled in offshore companies, while concealing who the true owner was.
• Official Says Air Quality In Beijing Is at 'Crisis' Level. Beijing is facing its third air-pollution crisis of recent years and needs to crank up its efforts to cut emissions, a city environmental official said, acknowledging a big metaphorical cloud hanging over the city. Beijing faced air-quality crises in 1998 and ahead of the 2008 Olympics, and it now faces another that it needs to address by cutting emissions, said Du Shaozhong, deputy head of the Beijing Environmental Protection Bureau.
• Euro at 11-Month Low. The euro tumbled to its lowest level against the dollar in nearly a year Tuesday amid mounting concerns about Europe's economy and doubts about the latest government efforts to contain the continent's debt crisis. In the past two days the currency has dropped 2.6% to $1.3037, a level not seen since January. The euro is down 12% from its 2011 high in May.
• GE(GE) Braces for European Chill. General Electric Co. is gearing up for a tougher 2012 in Europe, a weak spot in a year when the company expects to see double-digit profit growth on the strength of sales to emerging markets. The conglomerate plans to restructure some of its industrial operations to prepare for a European recession that could hit a number of its business lines, like health care and lighting.
• Regulation for Dummies. The White House says its rule-making isn't costly or unusual. The evidence shows otherwise. The White House is on the political offensive, and one of its chief claims is that it isn't the overregulator of business and Republican lore. This line has been picked up by impressionable columnists, so it's a good time to consider the evidence in some detail.

MarketWatch:

• Westpac Says Credit Availability May Reduce. Westpac Banking Corp. warned Wednesday that Europe's debt woes will continue to impact the price and possibly even the availability of credit to Australia's banking sector.

Business Insider:

• Reality Check: This New Poll Has Some Terrible News For Ron Paul Supporters.
• An Eerie Tour Of The Knockoff Disney World That China Abandoned A Decade Ago. (pics)
• This Is What It Looks Like When US Money Completely Abandons Europe.
• Google's(GOOG) Street View Car Just Drove Through Tsunami-Ravaged Japan.
  

Zero Hedge:

• Was The "Collapse" of MF Global Premeditated? A Conspiracy Theory Thought Experiment. If Corzine and a few of his buddies set up a sting as noted above, as far as they are concerned, they did not loose 1. something billion dollars for MFG and MFG's clients, what they did was they transferred 1. something billion dollars to themselves through a shell global trading company(s). In most cases when a sting like this plays out it is not just one shell company used to play the other side of the coin, usually it is spreed out between ten or more shell trading companies. A government and media cover up would just focus on MFG's loss. A true and open investigation would be focused on "who" took the other side of the coin; the profit.
• "To Have And Have Not" - Complete Jeff Gundlach Presentation.
  

CNBC:

• More Young People Are Shunning Facebook.
• Limited Policy Options May Prolong India's Slowdown. If Indian policymakers are hoping the country's slowing economy can rebound largely the same way it did from the 2008 global financial crisis, they are dreaming. The reason is the government cannot wield some of the tools it could the last time the world picture was gloomy. This time, India's strained government finances and high inflation leave little room for the strong doses of fiscal and monetary stimulus that supported consumer demand and shielded the economy three years ago.
• Realtors: We Overcounted Home Sales for Five Years. Data on sales of previously owned U.S. homes from 2007 through October this year will be revised down next week because of double counting, indicating a much weaker housing market than previously thought.
• Most Economists Now Expect Another Global Recession. So acute are the risks that few economists are now willing to bet heavily against another global recession in 2012. By common consent, the world economic outlook is much darker today than it appeared in the early autumn.

Forbes:

• 6 Big Internet Trends To Watch For In 2012.

Boston Herald:

• Around France, Unions Hold Anti-Austerity Protests. France’s leading unions are staging nearly 200 protests nationwide against austerity measures aimed at reducing huge debts amid Europe’s worsening economic troubles. Five unions organizing the protests say in a statement that the austerity measures, notably reductions in social benefits, will lead to recession and "deepen inequalities and plunge thousands of families in economic difficulty."

GamesBeat:

• YouTube Now Available On The Xbox 360.

The Hill:

• Dem Lawmaker Blasts 'Professor Obama' as Arrogant, Alienating. After observing President Obama for the last three years, it has become obvious to me that the president might prefer to be a university professor rather than do the job he holds today. While he might not realize that he feels this way, the evidence is very clear to those who work with or watch him closely.
  

Rasmussen Reports:

• Election 2012: Generic Republican 47%, Obama 42%.

Reuters:

• State Medicaid Spending Soars. Spending by U.S. states on Medicaid, the healthcare program for the poor, soared last year and will likely continue growing despite measures to contain costs, according to a report released on Tuesday. Total Medicaid spending, excluding administrative costs, likely reached $398.6 billion in fiscal 2011, which ended in June for most states. That was up 10.1 percent from the year before, when spending rose 6 percent, the National Association of State Budget Officers reported. Medicaid was nearly one-quarter of all state expenditures in fiscal 2011, compared to elementary and secondary education, which accounted for 20 percent of all spending.
• Gunman Turns Belgian Christmas Market Into Bloodbath. A lone gunman brought carnage to the Belgian city of Liege on Tuesday, spraying bullets at Christmas shoppers and hurling a grenade at people waiting for a bus, killing four people including a girl of 17 months before shooting himself dead. The attack, in which another 125 people were wounded, paralysed the centre of Belgium's fifth city, with workers trapped in offices as police sealed off the area, helicopters circled, and ambulances poured in from as far away as the Netherlands. Witnesses said 33-year-old Nordine Amrani had begun his rampage at about 12:30 p.m. near a bus stop at Place Saint Lambert, site of Liege's bustling Christmas market and its main courthouse. Shoppers scattered to flee the bullets. Gaspard Grosjean, a journalist for a local newspaper, was in the square moments after the attack. "We saw people with bullet wounds in their shoulders, their hands," he said, adding that he had seen one body. "I see people completely scared, people are crying, everyone is on their phones." Police said the dead were two boys of 15 and 17, a 75-year-old woman, and a toddler of just 17 months whom hospital doctors fought for hours to save. By evening, Place Saint Lambert, whose Christmas market of around 200 stalls attracts over 1.5 million visitors each year, was still sealed off, covered with shattered glass and pools of blood, and there was still no indication of Amrani's motive. A spokesman for Belgium's crisis response centre also said there was no indication that it had been a terrorist attack. It was not clear whether Amrani was Belgian.
• Italy Bond Costs Set to Mark New Record at Auction. Italy's five-year borrowing costs are expected to rise further above 6 percent on Wednesday, to mark a new euro lifetime high, at an auction that will provide a first test of bond market sentiment towards the euro zone after last weekend's EU summit.

Financial Times:

• Study Finds Fund Managers See EU Company Profits Worsening. Seventy-two percent of fund managers expect euro-area corporate profitability to worsen, cites study by Bank of America Merrill Lynch. "Key indicators of market sentiment" measured in the poll show "parallels with the credit crunch months of early 2009," Bank of America Merrill Lynch says. Nearly two-thirds of those polled expected an additional downgrade of U.S. sovereign debt by 2013.
• EU Treaty Hopes Come Under Strain. Franco-German hopes for a sweeping new treaty to bind the region’s economies more closely came under strain on Tuesday as several European Union leaders warned of difficulties pushing a far-reaching pact through their national parliaments. The pressure was particularly acute in non-eurozone countries, where at least four governments warned that the precise legal text would determine whether they could sign up to the treaty or otherwise join the UK on the sidelines.

Telegraph:

• Forget David Cameron's Veto, Another Eurozone Crisis Is Only Weeks Away. You wouldn’t believe it to listen to the fulminating indignation directed at the UK from across the Channel, but David Cameron did the eurozone’s political leaders a favour last weekend. By refusing to sign up, he managed to create a convenient Aunt Sally for Europeans to throw stones at, and divert attention from the summit’s failure to come up with anything remotely credible to address either the single currency’s existential crisis or the gathering economic slump. The latest in a long line of self-styled “make or break” summits, it was in truth no more momentous than any of the others. What was agreed was some minor strengthening of the Maastricht framework for governing monetary union, though some aspects of the original “stability and growth pact” have actually been watered down.

The Guardian:

• Banks Use Accounting Loopholes to Inflate Profits and Bolster Bonuses. Banks use accounting loopholes to inflate their profits and bolster staff bonuses, according to a report published on Wednesday that calls for changes to the international accounting rules. According to the paper by the Adam Smith Institute, banks are able to use complex financial products such as credit default swaps to report profits that they might not otherwise be able to. Gordon Kerr, a former banker who wrote the report, said the blame lies with the International Financial Reporting Standards (IFRS) rules that allows banks to recognise their expectations of future income as current profits. "The accounting regulation system needs radical reform so that banks are not encouraged to invest in risky assets to make themselves seem more profitable than they really are. Honest balance sheets are the cornerstone of a healthy financial system – right now, we don't have the transparency we desperately need to avoid a repeat of 2008," Kerr said.

Passauer Neue Presse:

• Germany's Economy Minister and Free Democrat leader Philipp Roesler said his party will remain a "stable partner and driving force" for crisis management of the euro-area's debt crisis while rejecting joint euro bonds, citing an interview.

Xinhua:

• China will fine-tune and take preemptive monetary policy, according to the statement released by the official Xinhua News Agency after China's economic work conference. China will take measures to prevent prices from rebounding, the report says.
• China's growth faces downward pressure, according to a statement released by officials after China's economic work conference. China faces upward pressure on consumer prices, the report said. China faces an extremely complex world economy next year, it said.
  

Economic Information Daily:

• The China Banking Regulatory Commission will postpone the implementation of new rules on banks, citing an unidentified official from the regulator. The new rules were scheduled to start from Jan. 1, 2012. Banks' pressure for capital may be eased if the new rules are postponed, the report said, citing Zong Liang, a deputy head at Bank of China's financial research institute.

Shanghai Securities News:

• Zhang Xiaopu, a deputy director at the China Banking Regulatory Commission's research department, says that China needs to take more measures to strengthen risk supervision and control of shadow banking and off-balance sheet businesses.
• China's economy is shifting away from its traditional dependence on money supply as part of its economic transition, Yang Chengzhang, chief economist at Shenyin & Wangguo Securities Co., says in a commentary published today. China has been relying on the fast pace of money supply growth to push economic growth and this leads to asset bubbles and inflation, Yang says.
  

Al Alam:

• Closing the Strait of Hormuz to shipping is not on Iran's agenda, the country's state-run news channel reported, citing the Iranian Foreign Ministry.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 212.0 +6.0 basis points.
  
• Asia Pacific Sovereign CDS Index 155.75 +.75 basis point.
• FTSE-100 futures -.50%.
  
• S&P 500 futures +.24%.
  
• NASDAQ 100 futures +.19%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JOYG)/1.86
• (PAY)/.51
• (NDSN)/.81

Economic Releases
8:30 am EST

• The Import Price Index for November is estimated to rise +1.0% versus a -.6% decline in October.

10:30 am EST

• Weekly crude oil inventories are estimated to fall by -2,500,000 barrels versus a +1,336,000 barrel increase the prior week. Distillate supplies are estimated to rise by +1,000,000 barrels versus a +2,533,000 barrel gain the prior week. Gasoline inventories are estimated to rise by +1,200,000 barrels versus a +5,147,000 gain the prior week. Finally, Refinery Utilization is estimated unch. versus a +3.1% gain the prior week.
  

Upcoming Splits

• (ROST) 2-for-1
  

Other Potential Market Movers

• The Fed's Lockhart speaking, 30-Year Treasury Bond Auction, China HSBC Manufacturing PMI, weekly MBA mortgage applications report, (ABC) investor day, (BRCM) analyst day, (AVT) analyst day and the (FSLR) update could also impact trading today.
  

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

Stocks Reversing Lower into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Rising Energy Prices, Financial/Tech Sector Pessimism

Broad Market Tone:

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

Equity Investor Angst:

• VIX 25.83 +.62%
  
• ISE Sentiment Index 117.0 +82.81%
  
• Total Put/Call 1.17 +32.95%
  
• NYSE Arms 1.66 -24.63%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 124.68 -1.06%
  
• European Financial Sector CDS Index 309.67 +1.16%
  
• Western Europe Sovereign Debt CDS Index 382.73 +.93%
  
• Emerging Market CDS Index 301.54 -.60%
  
• 2-Year Swap Spread 46.0 +1 bp
  
• TED Spread 54.0 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -140.55 -12.75 bps
  

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.
  
• Yield Curve 172.0 -7 bps
  
• China Import Iron Ore Spot $137.30/Metric Tonne -.72%
  
• Citi US Economic Surprise Index 75.0 -2.8 points
  
• 10-Year TIPS Spread 2.01 -4 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -70 open in Japan
• DAX Futures: Indicating -52 open in Germany

Portfolio:

• Slightly Higher: On gains in my index hedges and emerging markets shorts
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is very bearish, as the S&P 500 reverses morning gains and trades to session lows on rising Eurozone debt angst, rising global growth fears, some earnings jitters, technical selling, profit-taking, more shorting and rising energy prices. On the positive side, Utility and Drug shares are slightly higher on the day. Gold is down -2.2%. Weekly retail sales rose +3.0% this week, which is still ok, but down from a weekly average of +4.6% gains in October. On the negative side, Coal, Alt Energy, Oil Service, Steel, Semi, Networking, Bank, I-Bank, Hospital, Construction, Homebuilding, Retail, Education, and Airline shares are under substantial pressure, falling more than -2.0%. (XLF) and (XLK) have traded poorly throughout the day. Cyclical and small-cap shares are substantially underperforming. Copper is falling -2.1%, the UBS-Bloomberg Ag Spot Index is rising +.7%, oil is gaining +1.4% and Lumber is dropping -1.4%. The 10-year yield is falling -6 bps to 1.95%. The Italy sovereign cds is rising +.6% to 568.17 bps, the France sovereign cds is rising +2.44% to 234.33 bps, the Japan sovereign cds is gaining +2.72% to 132.61 bps, the German sovereign cds is gaining +.37% to 103.83 bps. Moreover, the European Investment Grade CDS Index is rising +1.94% to 177.76 bps. The Western Europe Sovereign CDS Index is making another new all-time high today. The TED spread continues to trend higher and is at the highest since June 2009. The 2Y Euro Swap Spread is near the highest since Nov. 2008. The 3M Euribor-OIS spread is the highest since February 2009. The 3M EUR/USD Cross-Currency Basis Swap is falling -10.01% to -140.55 bps, which is now back to Nov. 25th levels. The Libor-OIS spread is very near the widest since May 2009, which is also noteworthy considering the equity surge off the recent lows. China Iron Ore Spot has plunged -28.5% since February 16th and -24.1% since Sept. 7th. The Citi Asia-Pacific Economic Surprise Index fell another -.2 point today to -25.50, which is the worst since April 2009. Asian equities continue to trade very poorly. The Shanghai Composite fell another -1.9% overnight to the lowest level since March 2009 and is now down -20.0% ytd. Major European equity indices reversed morning gains and finished in negative territory near session lows. European credit gauges are still performing very poorly given that the European debt crisis “can-kicking” solution is supposedly at hand. Trading still had an overall complacent feel this morning given the action overseas. This afternoon's sharp reversal lower in stocks, after any Fed catalyst failed to materialize, may indicate that investors are shifting from a year-end performance chase mentality to "risk-off mode" again, given how badly some key credit gauges in Europe are deteriorating and intensifying worries over global growth. I still remain very cautious on the intermediate-term. I expect US stocks to trade modestly lower into the close from current levels on rising Eurozone debt angst, rising global growth fears, financial/tech sector pessimism, profit-taking, technical selling, rising energy prices and more shorting.

Today's Headlines

Bloomberg:

• Euro Weakens to 11-Month Low Versus Dollar. The euro fell to an 11-month low against the dollar on concern European leaders won’t agree on ways to expand the region’s rescue capacities as debt-strapped nations struggle to fund their deficits. The 17-nation currency dropped against most of its major counterparts after Chancellor Angela Merkel told German coalition lawmakers that the 500 billion euro ($654 billion) cap on Europe’s planned permanent bailout fund will stay in place, two officials with knowledge of the discussion said. The dollar declined against the yen before the Federal Reserve holds a meeting today amid speculation officials will maintain their pledge to keep borrowing costs at almost zero. “You continue to see strains within the euro group,” said John McCarthy, managing director of currency trading at ING Groep NV (INGA) in New York. “A division means a lower euro. The euro was already a little weaker and once we got convincingly through $1.3170, it dropped more.” The euro dropped 0.7 percent to $1.3094 at 1:32 p.m. in New York, touching $1.3057, the lowest level since Jan. 12.
• The 1-Year EUR/USD Cross-Currency Basis Swap is falling -7.1 bps to -96.0 bps, the lowest since Nov. 29 on a closing basis, amid lingering concerns about interbank funding. "The ECB allocated $51B last week and it doesn't seem like anything has changed," says TD funding strategist Mike Lin. "I'm concerned about the one-week auction tomorrow. I see a pick-up as something's going on."
• RBS Says Buy German CDS in 'Talismanic' Trade as Crisis Deepens. Royal Bank of Scotland Group Plc advised investors to buy insurance on German government debt, betting that Europe's financial woes will deepen in 2012. Investors should bet the cost to protect German bonds for five years will increase to 200 basis points from 98 basis points, the strategists wrote.
• Greece's Budget Deficit Widens to $27.1 Billion in First 11 Months of Year. Greece’s state budget deficit widened 5 percent in the first 11 months of the year, better than a revised target for the period. The gap, which excludes outlays by state-owned institutions and companies, rose to 20.5 billion euros ($26.5 billion) from 19.5 billion euros a year earlier, according to preliminary figures received by e-mail from the Finance Ministry. The figure came in below a target of 21 billion euros set in the 2012 budget, it said. Final figures are due later this month. Ordinary budget revenue declined 3.1 percent in the first 11 months as Greece’s recession weighed on tax collection. Spending rose 3 percent, or by 3.7 billion euros, boosted by a 20 percent increase in debt-servicing costs that added 2.6 billion euros to the bill, the Athens-based ministry said. Efforts to trim the shortfall have deepened the recession, now in its fourth year. The Organization for Economic Cooperation and Development expects the economy to contract 6.1 percent this year, more than the 5.5 percent forecast in the government’s budget.
• Retail Sales in U.S. Climbed Less Than Forecast. Retail sales rose in November at the slowest pace in five months, indicating American consumers were trying to live within their means heading into the holiday shopping season as wages dropped. The 0.2 percent gain in purchases fell short of the 0.6 percent median forecast of economists surveyed by Bloomberg News and followed increases in the prior two months that were larger than previously estimated, according to data from the Commerce Department today in Washington. Other reports showed inventories climbed in October and job openings fell.
• Treasuries Advance After $21 Billion 10-Year Auction Draws Strong Demand. Treasuries gained for a second day after the U.S. sale of $21 billion in 10-year notes attracted higher-than-average demand, bolstered by concern Europe’s sovereign-debt crisis is far from a resolution. The securities drew a yield of 2.020 percent, compared with a forecast of 2.050 percent in a Bloomberg News survey of seven of the Federal Reserve’s 21 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of debt offered, was 3.53, the strongest level since April 2010.
• Oil Surges on Speculation of Supply Disruption, U.S. Stimulus. Oil surged above $100 a barrel on speculation supplies will be disrupted after a report that Iran will hold drills to close the Strait of Hormuz and that the Federal Reserve may announce additional stimulus measures. Crude advanced as much as 3.6 percent after the state-run Fars news agency reported the military maneuvers will be “soon,” citing Parvis Sorouri, a member of the parliament’s national security and foreign policy committee. “I saw the Iran story yesterday but those headlines seem to have got traction this morning. There are also rumors for further action by the Fed, but where they come from I don’t know. In this electronic world things can jump quickly and trigger stops.” Crude for January delivery gained $1.91, or 2 percent, to $99.68 a barrel at 11:07 a.m. on the New York Mercantile Exchange. Crude pared gains after an Iranian Foreign Ministry spokesman said the Strait of Hormuz isn’t closed. The comments on the strait were made by people who don’t have an official title, said Ramin Mehmanparast, the spokesman.
• Oil-Tanker Glut Seen Expanding for Fourth Consecutive Week. A surplus of crude-oil tankers competing to collect crude from ports in the Persian Gulf expanded for a fourth consecutive week, according to Bloomberg. There are 20% more VLCCs for hire over the next 30 days than there are probable cargoes, according to the median survey of four brokers and two owners. The excess was 19% a week ago and 13% on Nov. 22.
• Record Aluminum Glut as Traders Seen Betting on Price Slump. Aluminum stockpiles rose to a record and orders to withdraw metal from warehouses fell to a 15-month low amid speculation traders are adding to bets the commodity will extend its biggest slump since the global recession. Inventories monitored by the LME rose 2% to 4.81 million metric tons today, enough to supply China, the biggest consumer for about 3 months. Canceled warrants fell 2.6% to 152,350 tons, the lowest since September 2010, bourse data show. Open interest, or contracts outstanding, rose 54% since mid-July, at a time when prices were falling, suggesting traders were adding to short positions, VTB Capital said in a report.
• Fitch Sees China Home Slowdown as Officials Hold Planning Session: Economy. Fitch Ratings said China faces slower growth in home sales and construction next year and UBS AG predicted stagnant exports as top officials meet in Beijing for an annual conference to map out economic policies. Lending to developers will remain tightly controlled as the government prolongs a campaign to stabilize property prices, Fitch said in a report today. The slowdown in trade may add pressure for monetary and fiscal easing, UBS said separately.
• China-Based Hacking of 760 Firms Reflects Global Cyber War. Google Inc. (GOOG) and Intel Corp. (INTC) were logical targets for China-based hackers, given the solid-gold intellectual property data stored in their computers. An attack by cyber spies on iBahn, a provider of Internet services to hotels, takes some explaining. iBahn provides broadband business and entertainment access to guests of Marriott International Inc. and other hotel chains, including multinational companies that hold meetings on site. Breaking into iBahn’s networks, according to a senior U.S. intelligence official familiar with the matter, may have let hackers see millions of confidential e-mails, even encrypted ones, as executives from Dubai to New York reported back on everything from new product development to merger negotiations. More worrisome, hackers might have used iBahn’s system as a launching pad into corporate networks that are connected to it, using traveling employees to create a backdoor to company secrets, said Nick Percoco, head of Trustwave Corp.’s SpiderLabs, a security firm.

Wall Street Journal:

• Banks in Push for Pact. Five large lenders could be forced to make concessions worth roughly $19 billion as bank representatives and government officials push to put the finishing touches on a settlement of most state and federal investigations of alleged foreclosure improprieties. Housing and Urban Development Secretary Shaun Donovan and state officials hope to reach a deal as soon as this week, though any agreement could be delayed by unresolved issues including the naming of a monitor to oversee the agreement.
• Greece, Private Creditors At Odds Over 50% Haircut: Sources. The Greek government is at odds with its private creditors over a 50% haircut in the value of bonds they own, two people with direct knowledge of the negotiations said Tuesday.
• OIL DATA: IEA Cuts 2011, '12 Demand By 0.2M B/D On Economic Woes. Global oil demand is set to fall in 2012 on the worsening global economic backdrop and persistently elevated oil prices, the International Energy Agency said Tuesday in its monthly oil market report. The Paris-based energy watchdog also trimmed its oil demand growth forecasts for the next five years in its medium-term outlook led by assumptions of slower economic growth in North America and Europe. A lower baseline figure for 2011 due to economic turmoil in the euro zone has also impacted the forecasts for this year and next, the IEA said.
  

Dow Jones:

• Merkel Rejects Raising ESM Limit, Lawmaker Says. German Chancellor Angela Merkel Tuesday at a party meeting reiterated her rejection to raise the EUR500 billion lending limit for the planned future European Stability Mechanism, or ESM, a government coalition official said. The euro after Merkel's comment continued its slide, falling to $1.3061 from $ 1.3186 before her comment. Countering fears that Germany's overall contribution to euro zone rescues may rise further, Merkel during a meeting with lawmakers of the Christian Democrats stressed that a planned increase of funds to the International Monetary Fund by Germany's Bundesbank was independent of government commitments to the ESM, the coalition official said.
  

CNBC.com:

• Europe May Be Preview Of What Is Happening In The US. (video)

Business Insider:

• FED HOLDS RATES STEADY, SAYS ECONOMY 'EXPANDING MODERATELY'.
• This Abandoned Theme Park On The Edge Of Shanghai Is Only The First Sign Of A Major Crash.
  

Zero Hedge:

• S&P Warns of Increased Corporate Bond Downgrade Risk Following Sovereign Action.
• Who Gave Permission To A Bankrupt MF Global To Sell Italian Bonds To JPM(JPM) At A 5% Discount To Market Value?
• Greek Bank Run Hits Record: Unprecedented €6.8 Billion In Deposits Pulled From Greek Banks In October. (graph)
  

The Detroit News:

• Muslims Consider Lowe's(LOW) Boycott. Local Muslim and Arab-American leaders from across the country were considering a national boycott against Lowe's after the home improvement retailer pulled its ads from the cable reality show "All-American Muslim." The move comes as Lowe's defended its position. Dawud Walid, the executive director of the Council on American-Islamic Relations Michigan, said Monday the issue has "invoked outrage in our community like I haven't seen in a while."

Hedgeweek:

• Hedge Fund Redemptions More Than Triple in October. Hedge fund redemptions in October totalled USD9 billion, more than triple September’s USD2.59 billion outflow, according to figures released by BarclayHedge and TrimTabs Investment Research. Industry assets decreased to USD1.66 trillion in October from USD1.73 trillion in September, the third straight monthly decline.

CNN:

• Best Buy's(BBY) Results Serve as a Holiday Warning. Electronics retailer Best Buy reported a large drop in quarterly earnings Tuesday, as weak sales in the months leading up to Thanksgiving cast a shadow on the all-important holiday season. Shares of Best Buy (BBY, Fortune 500) tumbled $3.23, or 11.6%, to $24.83 in early trading. Shares are now down more than 27% since the start of the year. Investors fretted the company's future even though Best Buy confirmed its full fiscal-year earnings guidance.

LA Times:

• NTSB Recommends Ban On All Driver Cell Phone Use. States should ban all driver use of cell phones and other portable electronic devices, except in emergencies, the National Transportation Board said Tuesday. The recommendation, unanimously agreed to by the five-member board, applies to both hands-free and hand-held phones and significantly exceeds any existing state laws restricting texting and cellphone use behind the wheel.

Reuters:

• Exclusive: Steve Cohen Calls Insider Trading Rules "Vague".
• Italian, Spanish Yields Rise as Ratings Threat Looms. Italian bond yields rose on Tuesday as the risk of sovereign rating downgrades across the euro zone kept markets on edge after steps towards fiscal integration failed to ease the debt crisis in the short term.Longer-dated Spanish bonds also rose as riskier assets suffered due to the risk that rating agency Standard and Poor's could act on its warning over the region's debt ratings. Measures to strengthen budget discipline agreed at a European Union summit last week were not seen as sufficient to ease immediate market worries over sovereign debt -- something only a huge financial backstop provided by the European Central Bank was seen likely to achieve. "Clearly investors have reassessed the EU agreement and the response of the sovereign ratings is at the forefront of investors' minds," said Nick Stamenkovic, strategist at RIA Capital Markets in Edinburgh. "Against that backdrop investors continue to shift away from the likes of Italy and Spain."

AP:

• Corzine Says He Never Authorized "Misuse" of Money. Jon Corzine has told a Senate panel that he never told anyone to "misuse" customer money that vanished when MF Global collapsed this fall. An estimated $1.2 billion in client funds are missing. Senators are demanding Corzine and two other executives at the securities firm explain who authorized the transfer of money in the days before the firm collapsed in the eighth-largest bankruptcy in U.S. history. "I never gave any instruction to anyone at MF Global to misuse customer funds," Corzine testified at a hearing of the Senate Agriculture Committee on Tuesday. Corzine, a former Democratic New Jersey senator and governor, resigned as CEO of the securities firm last month.

Financial Times:

• European Banks 'need tons of money', says GMO's Grantham. In a note released on Tuesday, GMO, the global asset management firm headed by Jeremy Grantham, writes that ”European banks need tons of money” to correct capital shortfalls. This much, we know.
• Meet The Credit Derivative "end-users".
  

Telegraph:

• Debt Crisis: Live.
  

Il Sole 24 Ore:

• Italy's government may delay until 2013 measures in its emergency budget plan to open up some closed professions and liberalize some businesses.

Xinhua:

• China Reasonable Home Price Fall Won't Cause Crisis. China property investment growth will slow in 2012 with falling home prices, citing Wang Yiming, director of the investment research institute under the planning body.
• China Needs 'Tight Controls' on Homes, Researcher Says. Even a "slight" change in curbs on property prices may cause a "dramatic price rebound", citing Wang Yulin, vice director of the housing ministry's policy research center. The government has set a clear tone on controlling home prices. Prices may drop 15-20% in 2012, citing Zhao Xiao, a professor at the University of Science and Technology in Beijing.