Evening Headlines
Bloomberg:
- Greek Referendum to Hinder IMF, EU Aid Payment, De Jager Says. A Greek referendum on its latest bailout package will hinder the next installment of aid funds by the International Monetary Fund and the European Union, Dutch Finance Minister Jan Kees de Jager said. “This hinders the planning of the IMF and the euro zone. It creates a problem for the whole sixth tranche,” De Jager told parliament in The Hague late last night. “I can imagine that it will be very difficult for the IMF if there is uncertainty about the sustainability.” The new round of political turmoil throws into doubt Greece’s ability to access the emergency funding that’s keeping its finances afloat. The IMF’s executive board was due to meet in mid-November to decide on paying its part of the sixth bailout tranche, which is worth a total of 8 billion euros ($11 billion). The Netherlands and euro-zone countries including Germany and France seek to minimize the damage from a “very unfortunate” referendum called by Greek Prime Minister George Papandreou, Dutch Prime Minister Mark Rutte told parliament. France and Germany are “also searching for a way out that minimizes the damage from what has happened in Greece,” Rutte told parliament, adding the Netherlands and other euro-area states are putting pressure on Greece to cancel the referendum.
- EU Leaders Hold Pre-G-20 Crisis Talks. European leaders racing to prevent their week-old debt crisis strategy from unravelling convene emergency talks today to tell Greece there is no alternative to the budget cuts imposed in the bailout plan. Greek Prime Minister George Papandreou, his hold on power weakening, was summoned to Cannes on the eve of a Group of 20 summit where he will hear from French President Nicolas Sarkozy that the “only way to resolve Greek debt problems” is through a deal hammered out last week in a six-day crisis-management marathon. Papandreou triggered the latest upheaval in the two-year- long crisis by abruptly announcing on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on the rescue pact. Global stocks, the euro and bonds of debt-strapped countries tumbled yesterday as concern of a disorderly Greek default mounted. “Uncertainty and fear is palpable,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co. in New York, said by e-mail. “The political cost of the economic austerity does not appear fully appreciated by policy makers or investors.”
- Referendum Will Confirm Greece in Euro: Papandreou. Greek Prime Minister George Papandreou said a referendum on Europe’s rescue package will confirm the nation’s membership of the euro as he stuck to plans to hold the vote amid signs his government may collapse. “The referendum will be a clear mandate and strong message within and outside Greece on our European course and our participation in the euro,” Papandreou told his ministers in Athens early today, according to an e-mailed transcript. It will “ensure this course in the most decisive way.” The cabinet voted unanimously to endorse the plan. Papandreou will fly to France today to face European leaders surprised by his decision to put the bailout plan to a national vote and call a confidence vote in parliament. His grip on power weakened after a lawmaker from his socialist Pasok party defected, leaving him with 152 deputies in the 300-seat chamber, while another, Vasso Papandreou, called for the formation of a national unity government. Another four lawmakers have criticized the plans for the referendum, stopping short of defection, and six members of the party called on the premier to resign in a joint letter, Athens News Agency said yesterday. Opposition parties have ramped up calls for elections. After a nine-hour meeting, Papandreou secured the unanimous support of his Cabinet for the plan.
- Goldman Sachs(GS) Gets 24 Subpoenas From Lehman on Derivatives. Goldman Sachs Group Inc. got 24 subpoenas from bankrupt Lehman Brothers Holdings Inc. as part of a probe into derivatives claims against the defunct firm that were as much as $22 billion, according to a person at Lehman who declined to be named. Goldman Sachs Asset Management LP was told to deliver documents needed for the investigation to Lehman’s law firm, Jones Day in New York, by Nov. 28 at 5 p.m., according to a court filing. Other subpoenas mostly went to funds, including the Goldman Sachs SMC Credit Opportunities 2008 Fund LP, the Goldman Sachs Quantitative Commodities Master Fund LLC and the Goldman Sachs Mortgage Credit Opportunities Offshore Fund LP.
- Top Gold Forecasters See Bullion Rallying to Record by March: Commodities. The most accurate forecasters say gold will rebound from its biggest monthly plunge since 2008 and reach a record by March because economic growth is stagnating and Europe’s debt crisis is unresolved. Futures traded in New York may rise 14 percent to $1,950 an ounce by the end of the first quarter, according to the median of estimates compiled by Bloomberg. The predictions are from eight of the top 10 analysts tracked by Bloomberg over the past eight quarters. Two declined to give forecasts. Holdings in exchange-traded products backed by bullion rose the most in three months in October, and the most-widely held option gives owners the right to buy gold at $2,000 by Nov. 22.
- Oil Drops a Fourth Day Amid Concern Greek Referendum Raises Default Risk. Oil fell in New York for a fourth day, the longest losing streak in three months, on concern a Greek referendum on Europe’s rescue plan will worsen the region’s debt crisis and curb economic growth. Futures dropped as much as 1.3 percent after Greek Prime Minister George Papandreou pledged to put Europe’s financing package to a vote. U.S. manufacturing was close to stagnating last month, a report showed yesterday. The Energy Department may today say U.S. crude stockpiles rose last week, according to the median estimate in Bloomberg News survey. “The euro-zone issue remains a key factor driving both financial markets and oil markets,” said Victor Shum, a senior principal at Purvin & Gertz Inc., a consultant in Singapore. “Economic uncertainties are going to put pressure on oil.” Oil for December delivery fell as much as $1.22 to $90.97 a barrel in electronic trading on the New York Mercantile Exchange. It was at $91.73 at 9:44 a.m. Singapore time.
- China Says No Talking Tibet as Confucius Funds U.S. Universities. When a Beijing organization with close ties to China’s government offered Stanford University $4 million to host a Confucius Institute on Chinese language and culture and endow a professorship, it attached one caveat: The professor couldn’t discuss delicate issues like Tibet. “They said they didn’t want to be embarrassed,” said Richard Saller, dean of Stanford’s school of humanities and sciences. Stanford refused, citing academic freedom, and Chinese officials backed down, Saller said. The university plans to use the money for a professorship in classical Chinese poetry, far removed from the Tibet dispute. China is expanding its presence on U.S. campuses, seeking to promote its culture and history and meet a growing global demand to learn its language. Hanban, a government-affiliated group under the Chinese education ministry, has spent at least $500 million since 2004 establishing 350 Confucius Institutes worldwide and about 75 in the U.S., four times the number in any other country, according to its annual reports and website.
- Tepco Detects Possible Nuclear Fission at Fukushima Reactor. Tokyo Electric Power Co. detected signs of possible nuclear fission at its crippled Fukushima atomic power plant in northern Japan, raising the risk of more radiation leaks. The company, known as Tepco, began spraying boric acid on the No. 2 reactor at 2:48 a.m. Japan time in an attempt to prevent accidental chain reactions. Tepco said it may have found xenon, which is associated with nuclear fission, while examining gases taken from the reactor, according to an e-mailed statement today.
- Nomura May Cut Japan Jobs After Quarterly Loss. Nomura Holdings Inc. (8604), Japan’s largest brokerage, said it will consider eliminating jobs at home as part of a plan to triple cost cuts to $1.2 billion following its first quarterly loss in more than two years. While most of the expense reductions will be in Europe, “we’ll also target Japan, focusing on the wholesale business,” Chief Financial Officer Junko Nakagawa told reporters yesterday in Tokyo. The company posted a 46.1 billion yen ($590 million) loss for the three months ended Sept. 30, wider than the 35 billion yen average estimate among analysts surveyed.
- Call for Greek Vote Unsettles Europe. Euro Slides and Stocks Drop as Government Leaders, en Route to Cannes Summit, Try to Contain Fallout From New Twist.
- PrimeX Index Tracking Residential Mortgage Bonds Drops Again. PrimeX, the derivatives index that some hedge funds and other investors have used to express bearish views on the prime residential mortgage market, fell for a second straight session Tuesday as confidence in those securities continue to fade. The index was down about a point or more across its four sub-indexes, according to its administrator Markit, having rallied hard last week. On Monday, it was down between a point and half a point, reflecting uneasiness over the European rescue plan and the impact of an economic downturn on the ability of homeowners to repay their mortgage loans. A sub-index that tracks adjustable-rate mortgages fell to 98.625 cents on the dollar as of the close Tuesday from 99.750 cents Monday. It closed over full value--at 100.521 cents--on Friday. Markit's PrimeX indexes predominantly reference non-agency, prime mortgage bonds backed by jumbo loans, which when the deals were first originated meant a loan size of more than $417,000. A report out Tuesday by Moody's Investors Service suggesting that risk in prime, jumbo residential mortgage bonds is greater than in other sectors didn't help PrimeX, and may have contributed to its decline. "Although it has by far the fewest delinquencies among outstanding loans, the jumbo sector has the potential for the highest volatility in losses going forward," Moody's wrote.
- Apple(AAPL) in His Own Image. Tim Cook promised that Apple Inc. wouldn't change when he took over the company's helm from Steve Jobs in August. But the low-key Mr. Cook has already put his operational mark on Apple in ways that suggest the company won't be entirely the same as under its intense and tempestuous co-founder.
- Worry Builds for Deficit-Panel Deal. Time Crunch, Gulf Over Taxes Has Lawmakers Concerned the Supercommittee Won't Strike Pact on $1.2 Trillion in Cuts.
- Why We Can't Escape the Eurocrisis. EU and U.S. debt are interlinked through the banking system. When is a bailout not a bailout? When the bailor is short of funds. The recently announced debt plan in the European Union comes up short in almost all respects.
- The Inevitable Has Happened: Occupy Foreclosures. Last night Occupy Oakland's General Assembly did something that is likely to catch on with occupations across the country. They voted to encourage the occupation of foreclosed properties across their city.
- Bloomberg: This Could Mean Potentially Serious Charges For Jon Corzine.
- US Food Stamp Usage Hits New Record. (graph)
- Keeping Up With The Korzines In The Kooler: FBI To Investigate MF Global's Theft Of Client Money.
- Fed Trapped by Inflation. Today, with inflation currently approaching 4% on a year-over-year basis the Fed is not only outside its inflation mandate of 1-3% but any further cost pressures on the consumer is going to drive the economy into a recession.
- Morgan Stanley(MS) On What Happens Next In Greece, And Why It Is All Very Euro Negative.
NY Times:
Forbes:
Arizona Republic:
- Solar Firms' Loans Could Be At Risk. Tempe-based First Solar Inc.(FSLR) could be in jeopardy of losing more than $2billion in federal loan support for California power plants that will use its solar panels, according to an analyst who tracks the company's stock. And federal support for the Mesquite Solar plant west of Phoenix being built by Sempra Generation and using panels from Suntech Power Holdings Co., some of which will come from its Goodyear factory, also could be in trouble, according to Axiom Capital Research analyst Gordon Johnson. Johnson said that a White House review of federal loans spurred by the collapse of loan recipient Solyndra Inc. in California could prompt some of the other Energy Department loans to get revoked.
Reuters:
- OpenTable(OPEN) Q3 Revenue Misses as Diner Growth Rate Slows. OpenTable Inc reported weaker-than-expected quarterly revenue as North American seated-diner growth slowed for the fifth straight quarter, sending the online restaurant reservation service provider's shares down 14 percent after the bell.
- Greek Vote Sets Off 'Pandemonium', Engulfs Italy. Greece's startling decision to call a referendum on last week's EU summit deal has set off wild tremors across the eurozone, pushing Italy to the brink of a perilous downward spiral. The country's ruling Pasok party appeared to be splintering on Tuesdsay night, leaving it unclear whether the governent of premier George Papandreou can survive a parliamentary vote of confidence on Friday. Signs that the EU's pain-stakingly negotiated Grand Plan is unravelling within days has been a profound shock to confidence. A frantic search for safe havens led to the second biggest one-day fall ever recorded in Europe's AAA bond yields. Ten-year German Bund yields tumbled 25 basis points to 1.77pc, with similar moves in non-EMU Swedish and Danish debt. British Gilt yields fell to 2.2pc. Italy took the brunt of the punishment. Spreads over Bunds spiked to a crisis-high of 459 basis points before the European Central Bank came to the rescue. Spanish spreads reached 384. Andrew Roberts from RBS said Italy's debt stress is "dangerously close to a level that could cause pandemonium in financial markets". The point of no return - judging from the sequence in Greece, Ireland and Portugal - would most likely be if LCH Clearnet imposed higher margin requirements. This trigger is 450 points over a basket of AAA benchmark bonds. The spread reached 388 on Tuesday. "We're two more days of violence from this point, but we're not there yet," he said. The Greek move - denounced by France's Elysee as "irrational and dangerous" - raises the serious possibility that a euro member could soon be forced out of the monetary union, setting a precedent with explosive ramifications for other states in trouble. Mr Juncker said a "no" vote by Greek citizens would set in motion events that could lead to bankruptcy and threaten Greece's foothold in Europe. "If the Greek people say no to everything that has been agreed so far, then I don't see either how we can continue with the Greeks on good terms," he said. It is far from clear how Greeks might vote. A Kappa Reserach poll found that 80pc oppose the EU-IMF "Memorandum", but far less would vote against it, and 70pc want to stay in the euro. The EU's haircut deal leaves Greece with debt of 120pc of GDP in 2020 - if all goes well - after nine years of austerity and slump. While it is likely that the Greeks would vote "yes", the referendum ensures weeks or months of eurozone chaos and calls into question every component of the EU rescue package.
- Italy a Bigger Threat to UK Than Greece, Warns FSA Chairman Lord Turner. Italy's debt problems pose an even greater risk to the British economy than a Greek default, according to Lord Turner, the chairman of the Financial Services Authority.
- Companies in China face paying £14,000 a year for every non-chinese member of staff. Foreign businesses in China have attacked new legislation requiring them to pay as much as £14,000 a year for each non-Chinese member of staff.
- JLL: Bank Lending to Real Estate at Tightest Level Since Lehman Brothers Collapse (UK). Lending to real estate has dropped to £188 billion (approx. €218 billion); a 22% decrease on levels seen a year ago as shown in the latest Bank of England quarterly lending figures.
- Toyota will cut production because of the slowdown in the European economy, citing a report from Toyota to its parts suppliers.
- China is studying plans to punish publicly listed companies for issuing fake reports on their internal controls including intentionally hiding flaws in their internal control system, citing Jia Wenqin, chief accountant of the China Securities Regulatory Commission.
Morgan Stanley:
- Rated (AGCO) Underweight, target $42.
- Rated (DE) Underweight, target $74.
- Rated (ST) Overweight, target $38.
- Rated (MTW) Overweight, target $16.
- Rated (CAT) Overweight, target $125.
- Asian equity indices are -1.50% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 201.25 +18.25 basis points.
- Asia Pacific Sovereign CDS Index 155.0 +5.5 basis points.
- FTSE-100 futures +1.02%.
- S&P 500 futures +.24%.
- NASDAQ 100 futures +.39%.
Earnings of Note
Company/Estimate
- (FCN)/.60
- (TDW)/.35
- (RRD)/.51
- (DVN)/1.45
- (STE)/.55
- (CTSH)/.75
- (MMC)/.23
- (H)/.07
- (PWR)/.26
- (BDX)/1.42
- (WCG)/1.30
- (TRW)/1.40
- (KFT)/.55
- (KCP)/.22
- (TWX)/.75
- (AOL)/.10
- (NWSA)/.29
- (WBMD)/.16
- (QCOM)/.78
- (CVD)/.70
- (RGR)/.40
- (JLL)/1.12
- (CUZ)/.11
- (VMC)/.06
- (WFM)/.41
- (TSO)/1.98
- (GGC)/.78
- (CXW)/.36
- (CAR)/.98
- (IPI)/.36
- (PRU)/1.53
- (VNO)/1.13
- (CMCSA)/.40
- (DNDN)/-.70
- (MA)/4.82
- (JOE)/-.09
- (CLX)/.94
- (ICE)/1.77
- (MUR)/1.19
8:15 am EST
- The ADP Employment Change for October is estimated at 100K versus 91K in September.
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000,000 barrels versus a +4,735,000 barrel gain the prior week. Distillate supplies are estimated to fall by -1,750,000 barrels versus a -4,275,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -800,000 barrels versus a -1,353,000 barrel decline the prior week. Finally, Refinery Utilization is estimated unch. versus a +1.7% gain the prior week.
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
- None of note
- The Challenger Job Cuts report for October, weekly MBA mortgage applications report, EFSF Bond Auction, Goldman Sachs Industrials Conference, Stifel Nicolaus Bank Conference and the (NTGR) Analyst Day could also impact trading today.