Today's Headlines

Bloomberg: 

• European Stocks Decline for a Third Day; AB InBev Falls. European stocks declined for a third day as investors speculated that economic fundamentals don’t justify current stock valuations and Alcoa Inc. (AA) cut its forecast for global aluminum demand. Anheuser-Busch InBev NV slipped 1.2 percent after a report that the U.S. may block its $20 billion takeover of Grupo Modelo SAB. BAE Systems Plc (BA/) fell after abandoning plans to merge with European Aeronautic, Defence & Space Co. Imagination Technologies Group Plc (IMG) lost 9.4 percent as analysts recommended selling the shares. The Stoxx Europe 600 Index (SXXP) dropped 0.6 percent to 268.71 at the close of trading, the lowest level since Sept. 28.
• Merkel Ally Michelbach Rejects IMF Demands to Cut German Surplus. Hans Michelbach, lawmaker from Angela Merkel's coalition partner the CSU, says the IMF demand to limit Germany's trade surplus is reminiscent of a planned economy policy that should be part of the past, according to an e-mailed statement. Michelbach says the IMF focused only on European debt crisis and "completely ignores" inflationary risks from liquidity expansion by U.S. central bank.
• Lagarde Signals IMF Role in Europe Rescues May Not Need Cash. The International Monetary Fund doesn’t need to lend money to Spain to help the country tackle its fiscal crisis, Managing Director Christine Lagarde indicated in an interview today. “Some people say unless you have skin in the game, meaning money, you are not really respected, you are not heard,” Lagarde said in a Bloomberg Television interview with Sara Eisen in Sendai, Japan. “I am not so focused on that as I am on the monitoring. I think we would rather act in our framework, use one of the tools that is frequently used, but as I said we can be flexible.” 
• Dimon Says Bond-Market Turn Assured on U.S. Budget Impasse. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said bond markets would spurn U.S. debt if lawmakers fail to reach an agreement to address the nation’s deficit. “It’s virtually assured” that markets would react that way, Dimon said today in Washington at an event held by the Council on Foreign Relations. “The question is when and how.” 
• Turkey Threatens Even Stronger Response to Syrian Fire. Turkey’s top general warned of a tougher response if Syrian shells continue to land on Turkish soil following six days of retaliatory barrages by his forces against President Bashar al-Assad’s army. General Necdet Ozel, chief of the Turkish general staff, made the comments today as he inspected troops in Akcakale as well as the border town of Suruc in Sanliurfa province, CNN-Turk television said. Ozel observed Syrian territory through a thermal camera before speaking to soldiers in a foxhole in Suruc, the state-run Anatolia news agency said.
• Fed Says Economy Grows ‘Modestly’ as Housing, Autos Improve.
• Record Heating Bills Seen in U.S. as Colder Winter Forecast. U.S. households that use heating oil will face record prices this winter as weather forecasters predict colder temperatures in the Northeast that will drive up demand, according to a government report. The Energy Information Administration, which tracks and analyzes energy data, projects households will spend 19 percent more on average for heating oil and 15 percent more for natural gas from Oct. 1 to March 31, the period covered in its short- term energy and winter fuels outlook released today.
• Drought Cuts U.S. Crops Below Demand First Time in 38 Years. Drought damage to corn and soybean fields in the U.S., the world’s top grower and exporter, is eroding supplies of the nation’s two largest crops to below year-earlier consumption levels for the first time since 1974. 
• Gold Best of Biggest ETFs as Traders Seek Haven: Riskless Return. Exchange-traded funds tracking gold and inflation-protected Treasuries provided the best risk- adjusted returns of the biggest ETFs in the past five years as record stimulus by the Federal Reserve sent investors searching for inflation havens.

Wall Street Journal: 

• BAE-EADS Merger Collapses. Aerospace and defense companies BAE Systems BA.LN -1.38% PLC and European Aeronautic Defence & Space Co. EAD.FR +5.29% called off their planned merger after the U.K., France and Germany failed to agree on how much influence they should have over the combined entity.  
• Romney Takes Lead in Poll Benchmark. Mitt Romney has inched ahead of President Barack Obama for the first time in a year in a widely watched benchmark – the aggregation of national polls developed by Real Clear Politics website. Mr. Romney’s breakthrough came Tuesday, when he ended the president’s unbroken general-election lead in the aggregate, which the website compiles by averaging recent national polls. As of Wednesday morning, Mr. Romney was ahead 48% to 47.2%. 
• U.S. Scaled Back Libya Security Before Attack. The State Department scaled back security in Libya in the months leading up to the deadly Sept. 11 attack in Benghazi that killed four Americans, including Ambassador Christopher Stevens, a former security official told Congress on Wednesday. At the start of a contentious hearing on the assault, Lt. Col. Andrew Wood told lawmakers that diplomatic security teams were gradually withdrawn from the country earlier this year, despite concerns that threats to Westerners were on the rise. 
• China IMF Cancellations Raise Concerns. Souring relations between Japan and China, which suffered another blow Wednesday when China's central-bank governor and finance minister pulled out of a high-profile gathering of global finance chiefs in Tokyo, are starting to cause serious economic damage that could deepen if passions stay high, investors, analysts and politicians here warned. The revelation that China's two highest-level delegates had withdrawn from the annual meeting of the International Monetary Fund and World Bank in Tokyo amid an escalating dispute between Asia's two biggest economies, sent stocks to a two-month low and heightened worries about real-world impacts. 
• Wall Street Jobs May Shrink Further. Wall Street has cut 1,200 jobs since the beginning of 2012 and could contract further over the remainder of the year, while the securities industry's cash-bonus pool is expected to decline for the second consecutive year, according to a report released by New York State Comptroller Thomas DiNapoli.
• China Car Sales Fall Amid Japan Tensions.

Zero Hedge:

• JOLTS Drop Un-Confirms BLS 'Reality' (graph)  
• Two Charts To Strike Fear In The Heart Of Euro Bulls. 
• Europe Ends Red With Sovereigns Seeing Selling-Pattern Seven Days-In-A-Row. (graphs)  
• Is The IMF Now Recommending Capital Controls...?

Business Insider:

• CHART OF THE DAY: Corporate Profit Margin Expectations Are Out Of Control. 
• Joe Biden's Image Has Sunk Dramatically In The Past Four Years.  
• Walmart(WMT) Workers Are Threatening To Strike On Black Friday. 
• All Evidence Points To Obama Raising Middle Class Taxes By $4,000 A Year. 
• Here's What Actually Went Down During The US Consulate Last Month In Benghazi. 
• 'The Debt Super-Cycle Goes Into Orbit'. (graph) 
• Global Food Crisis Risk Is Soaring [MAP]. 
• The Horrific, Worst-Case Scenario For Spain.  
• DYLAN GRICE: This Keynes Quote Sums Up Our Worst Fears About Easy Monetary Policy. 
• DAVID ROSENBERG: Here's Your Big Red Flag That We Could Be Heading For Recession. (graph) 
• The China-Japan Dispute Isn't Getting Any Better, And Now Taiwan Is Jumping Into The Fray. 

Telegraph: 

• Angela Merkel's visit to Greece: what the papers say. "Disgusting" protests, "outrageous" support from Germany's left wing leader for his Greek counterpart and "relief and satisfaction" is some of the media reaction following Angela Merkel's meeting with Antonis Samaras on Tuesday.

Rheinische Post:

• Germany Sees Significant Economy Downside Risks. German economy "developing with noticeably subdued dynamic," citing economy ministry's report for October. Sentiment among entrepreneurs has continued to deteriorate. The increase in employment has stalled for first time in 2 years.

Onda Cero radio:

• Almunia Says Catalan Independence Would Mean EU Exit. Catalonia would cease to be a member of the EU if it became independent from Spain, European Competition Commissioner Joaquin Almunia was quoted as saying in an interview.

IIFL:

• S&P sees significant chance of India rating downgrade. S&P says that India's rating downgrade is likely if growth prospects dim, external position deteriorates, political climate worsens or fiscal reforms slow.

Bear Radar

Style Underperformer:

• Large-Cap Value -1.02%

Sector Underperformer:

• 1) Disk Drives -4.0% 2) Energy -2.03% 3) Computer Hardware -1.98%
  

Stocks Faling on Unusual Volume:

• END, WNR, CLMT, PCS, CVX, BMA, EQIX, SIMO, MNST, LLY, AMCX, VIAB, HDB, PHT, RCS, PCN, PTY, WMC, AVT, WPC, HELE, ESE, MTGE, AMTG, AGNC, CMI, DAR, AMRN, SIMO, LPI, LINE, HRB, ARW, WBC, NXPI, EXPR, CELG, TSO, DAR, SKYW and PHK
  

Stocks With Unusual Put Option Activity:

• 1) MBI 2) BBY 3) CTSH 4) COF 5) FDX
  

Stocks With Most Negative News Mentions:

• 1) OC 2) CVX 3) DO 4) RDC 5) THI
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.03%

Sector Outperformers:

• 1) Restaurants +1.68% 2) Homebuilders +1.39% 3) Gold & Silver +.77%
  

Stocks Rising on Unusual Volume:

• TRLG, YUM, FDX, COST and QLIK

Stocks With Unusual Call Option Activity:

• 1) FDX 2) WMT 3) CIEN 4) QLIK 5) COST
  

Stocks With Most Positive News Mentions:

• 1) DLTR 2) SFLY 3) CLR 4) YUM 5) PGR

Charts:

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

Wednesday Watch

Evening Headlines
Bloomberg:

• IMF Says European Banks May Sell $4.5 Trillion in Assets. The International Monetary Fund said European banks may need to sell as much as $4.5 trillion in assets through 2013 if policy makers fall short of pledges to stem the fiscal crisis, up 18 percent from its April estimate. Failure to implement fiscal tightening or set up a single supervisory system in the timing agreed could force 58 European Union banks from UniCredit SpA (UCG) to Deutsche Bank AG (DBK) to shrink assets, the IMF said. That would hurt credit and crimp growth by 4 percentage points next year in Greece, Cyprus, Ireland, Italy, Portugal and Spain, Europe’s periphery. “Intensification of the crisis has manifested itself in capital outflows from the periphery to the core at a pace typically associated with currency crises or sudden stops,” the IMF wrote in its Global Financial Stability Report released today. “Restoring confidence among private investors is paramount for the stabilization of the euro area.”
• ‘Titanic’ Defaults Loom on Restructured India Bank Debt.
• Apple(AAPL) Choice of IPhone Aluminum Said to Slow Down Output. Apple Inc. (AAPL)’s iPhone 5 supply shortfall is being exacerbated by a quality-control crackdown at Foxconn Technology Group that’s designed to cut the number of devices shipped with nicks and scratches, according to a person familiar with the matter.
• Ambassador Died in Smoke While Agents Searched for Him. On the last day of his life, U.S. Ambassador Chris Stevens retired to his room in the American diplomatic compound in Benghazi, Libya at about 9 p.m. after a quiet day. Forty minutes later, security agents heard gunfire and explosions near the front gate of the compound, which recently had been reinforced with nine-foot walls and concrete Jersey barriers, two State Department officials told reporters yesterday. Their narrative of what happened on the night of Sept. 11 is the first detailed account of how Stevens died, and it contradicts the Obama administration’s initial contention that the attack began as a spontaneous protest over an anti-Islamic video clip. The officials also offered the first detailed description of the compound’s and Stevens’ security, which are the focus of a hearing today by the House Oversight and Government Reform Committee.  
• Facebook(FB) Fought SEC to Keep Mobile Risks Hidden Before IPO.

Wall Street Journal:

• Jack Welch: I Was Right About That Strange Jobs Report. The economy would need to be growing at breakneck speed for unemployment to drop to 7.8% from 8.3% in the course of two months. Imagine a country where challenging the ruling authorities—questioning, say, a piece of data released by central headquarters—would result in mobs of administration sympathizers claiming you should feel "embarrassed" and labeling you a fool, or worse. Soviet Russia perhaps? Communist China? Nope, that would be the United States right now, when a person (like me, for instance) suggests that a certain government datum (like the September unemployment rate of 7.8%) doesn't make sense. Unfortunately for those who would like me to pipe down, the 7.8% unemployment figure released by the Bureau of Labor Statistics (BLS) last week is downright implausible. And that's why I made a stink about it.  
• U.S., Japan Face Risks As Havens, IMF Warns. The world's two largest advanced economies, the U.S. and Japan, face growing long-term risks from investors fleeing trouble spots around the world, the International Monetary Fund warned Wednesday. Safe-haven flows into the U.S. and Japan are pushing interest rates down and lulling investors and policy makers into complacency, the fund said in a report on financial-stability risks released ahead of its fall meeting here. The IMF's warning is part of its broader global effort to sound the alarm about government deficits and debt across advanced economies, hoping to spur governments to take action before those economies potentially plunge into crisis.  
• U.S. Sues Wells Fargo(WFC) for Faulty Mortgages.
• New York Ranked Last on Taxes. New York imposes a more onerous tax burden on businesses than any other state, according to a new study. The Tax Foundation, a nonpartisan research group in Washington, D.C., ranked New York last among the 50 states in its annual "business climate" analysis of local tax regimes. The group reviewed individual and corporate income-tax structures, as well as sales, property and unemployment insurance taxes on the state and local levels.
• Jeans Maker for Sale. True Religion(TRLG) Seeks Buyer as Denim Brand's Cachet Fades.

Fox News: 

• Romney makes gains in battleground, national polls. In a national Gallup poll released Tuesday, Romney was leading 49-47 percent among likely voters. A Reuters-Ipsos national poll showed the candidates tied. The RealClearPolitics average of polling now shows Romney leading by less than 1 percentage point in Florida, and Obama leading by the same airtight margin in Ohio. Obama was well ahead in those states just days ago. Further, Romney's post-debate surge appears to have all but wiped out Obama's once double-digit lead among women voters. A Pew Research Center survey released Monday depicted a remarkable swing in the numbers, with Romney pulling even among women in polling late last week. In September, the same polling outfit showed Obama leading by 18 points among women. Among all likely voters surveyed, Romney climbed from an 8-point deficit last month to a 4-point lead. 

Barron's:  

• Yum Brands(YUM) Rising after Beat, Wider Margins.

MarketWatch.com: 

• HSBC emerging-market growth index falls in Q3. Emerging-market economies continued to expand in the third quarter, but the pace of that expansion is looking "feebler by the day," according to an HSBC report released Tuesday. During the quarter, a moderate expansion in the services sectors of these economies came as there was a decline in manufacturing, according to HSBC's data. Despite the service sector's expansion, the longer-term outlook for services fell to its lowest level since the survey began in 2005. The HSBC Emerging Markets Index fell to 52.1 in the third quarter of 2012, from a revised 53.2 in the second quarter of the year. "The end result is disappointment in the emerging world, in particular China, which continues to surprise to the downside," said Murat Ulgen, HSBC's chief economist for Central and Eastern Europe and sub-Saharan Africa, in the firm's report. In China, output rose only marginally, and in Brazil, private-sector manufacturing stagnated. The weakness in manufacturing is also spilling into other sectors of the economy. Poor manufacturing weighs on incomes and profits, thereby reducing broader consumption and investment. Until recently, the services sector had seemed immune from slowing global growth. But in the third quarter, services output expanded at its slowest pace this year. In Brazil, services output stagnated--its worst performance since the global crisis.
• A costly ticket to ride for China subway projects. Despite Beijing’s approvals, local governments need means to pay.
• Spain could opt out instead of getting a bailout. Commentary: Leaving the euro isn’t so far-fetched.

CNBC: 

• Chevron(CVX) Forecasts Lower Profit Ahead. Chevron, the second-largest U.S. oil company, said on Tuesday that its third-quarter profit would be substantially lower than the previous quarter as a weak performance from its oil and gas production arm got no help from the refining side. 
• Middle East Trouble Could Steal Focus From Growth Concerns. A sudden bubbling up of oil prices has shifted market focus to the Middle East, heading into Wednesday’s session.

Zero Hedge: 

• The ECB-Driven Toxic Debt Loop At The Heart Of Europe's Misery. 
• The Unstimulus.
• Everything You Need To Know About Resolving The Fiscal Cliff But Were Afraid To Ask.  
• NFIB - Small Businesses Don't Agree With BLS. 

Business Insider:

• Alcoa(AA) Cuts Global Demand Forecast, Blames China. 
• A Firm Has Taken Responsibility For Today's Violent Stock Swings, But What Happened Is Still Weird. 
• Rand Paul Is Launching A Brutal Ad Campaign To Destroy Democrats Over Foreign Aid. (video)
• STEVE WYNN: What The Federal Reserve Is Doing Is What Bernie Madoff Went To Jail For. (video)
• SHEILA BAIR: Here's How The Obama Administration Screwed Up The Wall Street Bailout. (video)
• ANALYST: Solar Power Will Never Work For The Vast Majority Of The World.

Forbes: 

• China Economy Remained Weak In Third Quarter. China’s economy likely remained weak in the third quarter ending in September, the state owned Industrial Bank said on Wednesday. “It is hard to say when China’s economic recovery will be in sight,” Lu Zhengwei, chief economist at the Industrial Bank told China Daily in the Wednesday edition of the paper. “We expected the economy to stabilize in the third quarter, but the weak performance in the past few months has dashed our expectations.”
  

Rasmussen Reports:

• Daily Swing State Tracking Poll. Swing State Tracking: Romney 49%, Obama 47%.

Reuters:

• Cummins(CMI) lowers sales forecast, to cut up to 1500 jobs. U.S. engine maker Cummins Inc lowered its 2012 forecast for the second time this year, citing delays in customer spending due to a weakening global economy, and said it would cut up to 1500 jobs. Cummins now expects full-year sales of $17 billion, down $1 billion from its prior view. "Investors expected a guidance cut from Cummins this quarter but this does look to be a bit more than expected," William Blair & Company analyst Lawrence De Maria said. Chief Executive Tom Linebarger said Cummins had lowered its full-year revenue forecast for several markets, with the most significant changes made in the North America heavy duty truck and the international power generation markets. "Demand in China has weakened in most end markets and we have also lowered our forecast for global mining revenues," Linebarger said. Cummins shares were trading down 4 percent at $87.10 in extended trade, after closing at $90.84 on the New York Stock Exchange.  
• FSA eases bank rules to support lending - FT. Britain's Financial Services Authority has relaxed capital and liquidity rules on banks in an effort to stimulate lending and use bank regulation to moderate the economic cycle, the Financial Times reported on Wednesday.  
• Philippine August Exports Drop -9.0%, Steepest Drop in 8 Months. 
• China to send deputy finance minister to IMF Tokyo meet amid island spat. China's delegation to the annual meetings of the IMF and the World Bank in Tokyo will not be led by its most senior finance officials, a report from state news agency Xinhua said on Tuesday, in what looked like a deliberate snub of Japan. According to Chinese protocol, only the most senior officials usually lead such trips, but the report said China's deputy central bank governor and vice finance minister would be leading the central bank's delegation later this week instead. 
• ECB's Visco: talk of euro breakup reflects doubts on crisis efforts.
• Euro slips near 200-day average as risk sentiment hurt. The euro dropped to its lowest since the start of month against the d ollar and the yen on Wednesday, as investors shied away from risk on concerns about weak earnings in the United States due to a slowdown in global growth. Asian shares followed a drop on Wall Street overnight, when technology stocks fell on brokerage downgrades of Intel and other major companies, as worries mounted about third-quarter U.S. earnings, which firms began reporting on Tuesday. The euro slipped 0.3 percent to $1.2840, its lowest since Oct 1 and coming close to an important technical support of its 200-day average at $1.2822. Some traders say the market is likely to test that level to trigger more stop-loss orders. "If the 200-day average is broken, there will be selling from model players. I feel the market is likely to test that level," said Takahiro Suzuki, vice president of forex at Nomura Securities.
• Moody's warns of downgrades to California cities. Moody's Investors Service said on Tuesday it placed under review for downgrade lease-backed obligation and general obligation ratings of several California cities and downgraded the pension obligation bonds of eight cities and one pooled financing in state. The moves affect $14.3 billion of debt and come amid concerns among some credit rating analysts about California's economy and the willingness of financially distressed cities in the most populous U.S. state to pay their debts.

Financial Times:   

• Hedge funds reap gains from MBS. Hedge funds are reaping some of their biggest profits from the securitised mortgage market since 2007, when mispricings in complex debt securities led to huge windfalls for savvy traders such as John Paulson and the near-collapse of the global banking system. While the average hedge fund has made just 4.6 per cent so far this year, funds dabbling in US mortgage-backed bond markets have reaped far bigger gains, in some cases running into the hundreds of millions of dollars, investors say.
  

The Standard:

• Record Home Prices Raise Bubble Specter. Home prices and rents rose to a record high in August, the latest Hong Kong government data showed yesterday, raising the specter of a worsening of 1997 housing bubble. The primary index for measuring private property prices rose for the seventh consecutive month to 210.6 in August, up 2.2 percent from July. It now stands at 21.8 percent higher than the 1997 peak of 172.90, the Rating and Valuation Department said. The rental index also gained, rising 1.24 percent from July to a record high of 145.50 - compared to 139.20 in 1997. Andy Kwan Cheuk-chiu, a member of the Long Term Housing Strategy Steering Committee, said he sees risks building in the market that are similar to 1997, when Hongkongers engaged in panic-buying amid soaring prices.

Evening Recommendations  
Piper Jaffray:

• Raised (RL) to Overweight, target $182.
• Raised (ANF) to Overweight, target $40.

Night Trading

• Asian equity indices are -1.75% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 134.0 +3.75 basis points.
• Asia Pacific Sovereign CDS Index 111.0 +1.75 basis points.
• FTSE-100 futures -.30%.
• S&P 500 futures -.01%.
• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (COST)/1.31
• (PGR)/.26
• (HST)/.20
• (RT)/.07

Economic Releases
10:00 am EST

• Wholesale Inventories for August are estimated to rise +.4% versus a +.7% gain in July.

2:00 pm EST

• Fed's Beige Book.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Fisher speaking, Fed's Tarullo speaking, Fed's Kocherlakota speaking, Italian auction/industrial production data, 10Y T-Note auction, weekly MBA mortgage applications report, JOLTs Job Openings for August, Australian unemployment rate and the US Commerce Dept. decision on China solar dumping could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and automaker shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Falling into Final Hour on Rising Global Growth Fears, Rising Eurozone Debt Angst, Increasing Mid-East Unrest, Tech/Homebuilding Sector Weakness

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 16.16 +6.95%
• ISE Sentiment Index 76.0 -32.14%
• Total Put/Call 1.05 +25.0%
• NYSE Arms .81 -23.08%

Credit Investor Angst:

• North American Investment Grade CDS Index 97.73 bps +2.62%
• European Financial Sector CDS Index 185.50 bps +1.64%
• Western Europe Sovereign Debt CDS Index 140.79 bps +1.08%
• Emerging Market CDS Index 224.71 bps +4.77%
• 2-Year Swap Spread 12.0 -2.25 basis points
• TED Spread 25.5 unch.
• 3-Month EUR/USD Cross-Currency Basis Swap -24.25 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .10% unch.
• Yield Curve 145.0 -3 basis points
• China Import Iron Ore Spot $117.20/Metric Tonne +6.16%
• Citi US Economic Surprise Index 42.60 -.8 point
• 10-Year TIPS Spread 2.55 -2 basis points

Overseas Futures:

• Nikkei Futures: Indicating -91 open in Japan
• DAX Futures: Indicating -7 open in Germany

Portfolio:

• Slightly Higher: On gains in my index hedges and emerging markets shorts
• Disclosed Trades: None
• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:

• Draghi Says No Alternative to Austerity as Economies Shrink. European Central Bank President Mario Draghi said there is no alternative to austerity as Italian and Spanish officials balk at asking for bailouts that may impose more budget cuts. “It’s without doubt that the process of fiscal consolidation has depressed output in parts of the euro area,” Draghi told lawmakers in testimony to the European Parliament in Brussels today. “But what’s the alternative? We need to do that, we need to do that in the best possible way, as effective and as short as possible, complying with basic grounds of social justice.” European officials are pushing debt-strapped nations across southern Europe for more cuts despite the risk that they will worsen recessions gripping the region. 
• Merkel Urges Greece to Maintain Austerity to Stay in Euro. German Chancellor Angela Merkel used her first visit to Athens in five years to maintain pressure on Greek Prime Minister Antonis Samaras to meet austerity pledges, proclaiming her desire to keep the country in the euro. The two leaders stood side by side at a press conference as protesters massed outside the Parliament building in a capital on virtual lockdown. Merkel has become the face of austerity in a country suffering a fifth year of recession, which many Greeks blame on German-led conditions attached to emergency loans. “I want Greece to remain in the euro,” Merkel told reporters today halfway through her six-hour visit. “A lot has been done, much remains to be done.”  
• U.K. Factory Output Declines More Than Forecast, Exports Plunge. U.K. manufacturing fell more than economists forecast in August and the trade gap widened, indicating the economy may struggle to regain strength. Factory output dropped 1.1 percent from July, when it rose 3.1 percent, the Office for National Statistics said today in London. The median forecast of 25 economists in a Bloomberg News survey was for a decline of 0.7 percent. Overall industrial output fell 0.5 percent, matching economists’ forecasts. The goods-trade deficit widened as exports fell. In a separate report, the goods-trade deficit widened to 9.84 billion pounds ($15.8 billion) in August from 7.34 billion pounds in July. Exports plunged 4 percent and imports rose 4.5 percent.
• Financial Job Losses Surpass 30,000 in Western Europe. Financial job losses in western Europe surpassed 30,000 this year as firms including Royal Bank of Scotland Group Plc and UBS AG cut positions amid the sovereign debt crisis. While the 33,437 reductions are less than half of the 76,654 made in region during the same period a year ago, analysts expect the cuts to increase. Financial firms have announced more than 60,000 cuts globally so far this year, data compiled by Bloomberg Industries show.
• Steel Use in Europe Seen Down 10% as Budget Cuts Curb Building. Europe's apparent steel consumption slid 10% in this year's first seven months as budget cuts curbed construction projects and car sales stalled, the European Steel Association said. Demand for rebar, reinforced steel bars used by builders, slumped 47% in the period from five years earlier, Jeroen Vermeij, director of market analysis and economic studies at the European Steel Association, said today at the 7th EU Iron Ore Conference in Vienna. Any improvement in Europe's steel market will only come in the middle of 2013, Vermeij said. Regional consumption is unlikely to return to 2007 rates and mills have excess production capacity estimated at 60 million metric tons, according to Eurofer, as the association is known. "We will never get back to these levels again," Vermeij said. "This will be the new normal. If your're a rebar producer, your're in for difficult times."
• European Stocks Retreat as EU Finance Ministers Meet. European stocks declined for a second day as the region’s finance ministers gathered in Luxembourg to discuss the sovereign-debt crisis. Bankia SA (BKIA) led the decline, falling to a two-month low. Alcatel-Lucent (ALU) SA dropped to the lowest in at least 23 years as Credit Suisse Group AG said weakness should continue into the third quarter. Vedanta Resources Plc led mining companies higher, limiting losses in Europe.
• Oil Rises as Middle East Tension Counters IMF Growth. Oil advanced for the first time in three days as increasing tension in the Middle East countered concern that a global economic slowdown will curb demand. Crude rose as much as 3.5 percent as Turkey sent more tanks and missile defense systems to the Syrian border yesterday. The International Monetary Fund cut its global growth forecasts today as the euro area’s debt crisis escalates. The spread between West Texas Intermediate oil traded in New York and Brent from the North Sea reached the highest level in almost a year. Crude oil for November delivery increased $2.93, or 3.3 percent, to $92.26 a barrel at 12:14 p.m. on the New York Mercantile Exchange. The contract rose as much as $3.09 to $92.42 today. Brent oil for November settlement gained $2.56, or 2.3 percent, to $114.38 a barrel on the London-based ICE Futures Europe exchange.  
• Baidu(BIDU) Leads ADR Drop as IMF Cuts Global Outlook: China Overnight. Chinese stocks in New York slid to a two-week low as the International Monetary Fund reducing its global growth estimates clouded the outlook for the world’s largest exporter. Baidu Inc. (BIDU), owner of China’s most-popular search engine, sank to a three-month low after Credit Suisse Group AG became the third bank to cut its rating this month. China Eastern Airlines Corp. (CEA) fell for the first time in six days to trade at the biggest discount to its Hong Kong stock in two weeks.
• Iron Ore Seen Dropping Back to $100 on Worldwide Slowdown. Iron ore may fall back to $100 a dry metric ton or lower next year as the global economic slowdown hurts demand while output increases, according to the China Metallurgical Industry Planning & Research Institute. "The economic situation in the world and China isn't good enough to support a sustained price rebound," said Li Xinchuang, president of the Beijing-based company, which advises the Chinese government and steel mills. The target from Li, who's also executive vice secretary-general of China Iron & Steel Association, is 9.4% below yesterday's price. "New production capacity is coming out a lot" as current iron ore prices remain above the output costs at so-called major mining companies, Li said today. Production costs at the top five mining companies are about $40 a dry ton, implying prices could go lower as demand weakens, said Li. Stockpiles at major Chinese ports including Tianjin and Qingdao have risen to about 100 million tons from about 94 million tons at the end of June, Li said. 
• Toyota-Led Slump May Drag China Car Sales Growth to 8-Month Low. Chinese passenger-vehicle sales probably rose at their slowest pace in eight months as a territorial dispute with Japan turned consumers away from buying cars made by Toyota Motor Corp. (7203) to Nissan Motor Co. (7201) The state-backed auto association will probably say deliveries increased 2 percent to 1.35 million units last month, based on the average estimate of nine analysts surveyed by Bloomberg. Toyota and Nissan yesterday reported their biggest drops in China sales since at least 2008, while Honda Motor Co. (7267)’s sales were the lowest since May 2011, according to monthly data compiled by Bloomberg.
• Wheat Climbs as U.S. May Cut Supply Estimates; Soy, Corn Gain. Wheat futures rose for the second straight day on speculation that the U.S. may lower its forecasts for global supplies as dry weather damages crops from Russia to Australia. Soybeans and corn also gained. 
• Confidence Among Small U.S. Businesses Cooled in September. Confidence among U.S. small businesses cooled in September as fewer companies said they planned to hire or invest in new equipment, a survey found. The National Federation of Independent Business’s optimism index fell to 92.8 from an August reading of 92.9. Four of the 10 components that make up the gauge decreased, the Washington- based group said. The fourth decline in the past five months for the measure showed business leaders may be putting off some of their hiring and investment decisions because of a lack of clarity on tax and regulatory policy.
• Treasuries Gain by Most in Three Weeks After IMF Cuts Forecasts. Treasury 10-year notes rose the most in three weeks after the International Monetary Fund cut its economic forecasts and said there is an “alarmingly high” risk of a steeper slowdown. The gains pushed 30-year bond yields down from almost the highest level in more than two weeks as investors sought the securities as a haven. U.S. debt was also buoyed as European Union ministers prepared to meet in Luxembourg amid a lack of clarity about whether Spain will ask for external financial aid. The U.S. plans to sell three-year notes today, the first of three auctions of coupon-bearing Treasuries this week totaling $66 billion. 
• U.S. Charges 530 in Mortgage Probe With $1 Billion in Losses. The U.S. charged 530 people with targeting homeowners in mortgage schemes that cost the victims more than $1 billion, Attorney General Eric Holder said today. More than 73,000 homeowners around the country were affected, the Justice Department said in a statement. The cases, brought over the past year, included “foreclosure rescue schemes” that take advantage of those who have fallen behind on payments, according to the statement.  
• Owens Corning(OC) cuts full-year earnings forecast. Owens Corning trimmed its earnings forecast for the year due to weakness in its roofing and composites businesses. Shares of the construction and industrial-materials company dropped more than 7 percent in premarket trading Tuesday. Owens Corning now anticipates adjusted earnings before interest and taxes between $280 million and $310 million. It previously predicted $360 million to $420 million. The Toledo, Ohio, company previously announced that there was weakness in the U.S. roofing shingle market late in the second quarter. That trend continued into the third quarter. The company says shipments fell after a price hike in the middle of September and are not expected to get better for the rest of the year. The company says composites demand in the second half of 2012 will be hurt by softness in the U.S. roofing market and lower industrial production, particularly in Europe. Owens Corning cut its 2012 global glass fiber market demand growth estimate to about 3 percent. The long-term average growth rate historically is 5 percent.

MarketWatch.com: 

• Intel(INTC) falls to 52-week low, leading tech retreat. Intel downgraded on pricing worries; Netflix(NFLX) also downgraded.

CNBC:

• Is Housing Recovering as Much as Everyone Thinks? "While we have seen many dramatic headlines touting the housing recovery over the last 3.5 years, these headlines and the analysts who author them have been over- predicting changes in the housing market (versus what actually occurred)." said Laurie Goodman of Amherst Securities in a new report. "Recoveries, with attendant price increases, were anticipated in the spring and summer of 2009, 2010 and 2011; by the fall and winter the predictions of price changes were amended to reflect further price declines. In actuality, after netting out the seasonal factors, home prices have been little changed in the past few years."  
• Prepping for Obamacare, Chain Cuts Workers' Hours. The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting the impact of looming health coverage requirements.  
• Latest Casualty of Mixed Economic Outlook: Business Travel. With more questions than answers about what to expect with the U.S. and European economies for the rest of this year and early next year, companies are pulling back on business travel. 
• Langone Takes Welch’s Side: Jobs Numbers ‘Don’t Square’. Government numbers showing the unemployment rate has fallen under 8 percent for the first time in nearly four years don't reflect actual business conditions, venture capitalist Ken Langone said on CNBC.

Zero Hedge: 

• Turkey Deploys 25 F-16s To Syria Border.
• Santelli Slams 'Surprise' Unemployment Data In Epic Screamfest.
• What Will Benefit From Global Recession? The US Dollar.

Business Insider: 

• Obama Is Crumbling In Two Previous 'Safe' States.
•  We've Heard From Two Separate People That This Iran Nuclear Story Is Spooking Traders Today. 
• These Stunning Charts Show Some Of The Wild Trading Activity That Came From A Dark Pool This Morning. 
• Mitt Romney Gives An Inspirational Speech In The Pouring Rain. 
• Taliban Shoots Little Girl Who Dared Speak Out Against Them. 
• China Announces Plans To Reform Labor Camp System After Another Huge Controversy Spreads Online. 

New York Times:

• Japanese Car Sales Plummet in China. Toyota announced on Tuesday that its sales to dealerships in China dropped 49 percent in September from the same month a year ago, while Honda said that its sales had fallen 40 percent and Nissan said that sales were down 35 percent. Mazda said last week that its sales had fallen 35 percent last month. 

Gallup: 

• Romney 49%, Obama 47% Among Likely Voters.

Reuters:  

• US Treasury watchdog probes solar tax grant program. The Treasury Department's inspector general is investigating a popular stimulus program that allowed rooftop solar panel projects to turn tax credits into cash grants.The Treasury's internal watchdog is looking at how the department managed the program and is searching for "possible misrepresentations" about the fair market value of solar systems that received grants, one large installer of solar panels disclosed in a filing with U.S. regulators. The inspector general issued subpoenas to SolarCity Corp and other big players in the market, working with the Justice Department's civil division, San Mateo, California-based SolarCity said in a filing late last week.
• S&P sees lower 2013 growth for US state and local govts. Standard & Poor's Ratings Services said on Tuesday it expected state and local governments in the United States to grow less in 2013 than previously forecast. Cuts in public sector workforces as well as a focus by families on fixing their budgets instead of spending are key factors in the reduced growth expectations, S&P said in a report.
• Spanish yields rise as bailout prospects dim. Spanish bond yields rose on Tuesday when investors trimmed expectations of a swift solution to Madrid's debt problems while the country's politicians resist seeking a bailout. 
• Eleven euro states back financial transaction tax. Eleven euro zone countries agreed on Tuesday to press ahead with a disputed tax on financial transactions aimed at making traders share the cost of fixing a crisis that has rocked the single currency area.

Financial Times:

• Syrian massacre is veiled in silence. The Syrian forces told Um Mohammed they would be back in an hour with her husband and sons, along with the other men they snatched from the basement shelter in the Damascus suburb of Daraya. Instead, she said, they shot them all.

Telegraph:

• Riot police clash with protesters during Angela Merkel's Athens visit: in pictures.

Les Echos:

• France's wealth tax should include artworks, Christian Eckert, the National Assembly's rapporteur on budget affairs, said in an interview.

ShanghaiDaily.com:

• Shanghai's Consumer Confidence Drops. WEAKER internal and external demand as well as less willingness to spend have dented Shanghai's consumer confidence in the third quarter, a survey showed yesterday. The Index of Consumer Sentiment dropped 4.4 points quarterly to 100.6 in the three months ended September 30, the first fall since the second quarter of last year, according to studies conducted by Shanghai University of Finance and Economics. A reading above 100 indicates optimism and the contrary points to a lack of confidence. The Index of Consumer Expectations shed 4.4 percent from the earlier three months to 98.6 points as the dismal global economic outlook has created uncertainties and reduced consumers' hopes about the future. Of the 1,000 consumers surveyed by the university, 72.8 percent considered it a bad time to buy a home in the next six months on wide expectations that home prices may fall.