Today's Headlines

Bloomberg:

• Ireland Swaps Surge to Record on Anglo Irish Bailout Cost Wager. The cost of insuring against default on Ireland’s government debt surged to a record as Standard & Poor’s said the price of bailing out nationalized lender Anglo Irish Bank Corp. could exceed $47 billion. Credit-default swaps tied to Irish bonds jumped as much as 33 basis points to 521.5 after more than doubling in the past two months, and were at 493 basis points as of 4 p.m. in London, according to data provider CMA. Contracts on Anglo Irish rose 4 basis points from yesterday’s record high closing price to 940, implying a 56 percent probability of default within five years. Investors are speculating the ballooning cost of rescuing Dublin-based Anglo Irish will force the nation’s government to choose between fully repaying senior bondholders and tackling the region’s biggest budget deficit. “It’s a key test for the market,” said Greg Venizelos, a credit strategist at BNP Paribas SA in London. “The cost of the Anglo Irish bailout is too high for Ireland to afford without jeopardizing its fiscal position.” The speculation about Ireland weighed on sentiment in the region, driving up credit-default swaps on other governments and banks. The Markit iTraxx SovX Western Europe Index of default swaps on 15 governments rose 5 basis points to 165, according to CMA. Credit-default swaps on Portugal increased 19 basis points to 449.5, approaching the record-high closing price of 461, while Greece climbed 2.5 basis points to 818.5 and Italy was up 5.5 basis points at 202, CMA prices show. Spain added 8 basis points to 235.5. Irish two-year government notes slumped, sending yields to the highest level since Bloomberg began collating the data in 2003. The yield on Ireland’s two-year government note rose as much as 52 basis points to 4.76 percent, Bloomberg generic data show. Credit-default swaps on financial-company debt rose, with the Markit iTraxx Financial Index of 25 banks and insurers rising 3 basis points to 149 and an index of their riskier subordinated debt climbing 1 basis point to 218, according to JPMorgan Chase & Co. Gauges of corporate risk also jumped. The Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated European companies climbed 6.5 basis points to 523.4, according to Markit Group Ltd.
• U.S. Consumer Confidence Fell More Than Forecast. Mounting gloom over the outlook for jobs and wages caused American consumers to lose confidence in September, indicating spending will take time to recover. The Conference Board’s sentiment declined to 48.5 this month, lower than the indexmedian forecast of economists surveyed by Bloomberg News and the weakest level since February, according to figures from the New York-based private research group today. Household purchases, which account for about 70 percent of the world’s largest economy, may be constrained by a jobless rate this is projected to average more than 9 percent through 2011. Consumers “certainly are worried about jobs,” said David Sloan, a senior economist at 4Cast Inc. in New York. They “are facing considerable headwinds.” The Conference Board’s measures of present conditions and expectations for the next six months both dropped, today’s report showed. Fewer respondents thought more jobs would become available and the share of those who expected incomes to rise fell to the lowest since February.
• U.S. Household Income Falls for 2nd Straight Year, Census Says. U.S. median household income fell 3 percent in 2009 to $50,221, the second straight annual drop, the Census Bureau said.
• China Rare Earth Says Japan Exports Halted on Lack of Government Permits. China Rare Earth Holdings Ltd., which exports 30 percent of its products to Japan, said shipments to the nation were halted from last week after a local branch of the Chinese trade ministry stopped issuing licenses. “We couldn’t get export licenses to Japan,” John Jiang, a sales manager in charge of exports at China Rare Earth, said by phone from Yixing, Jiangsu province. “They cited system failure.”
• Corn, Soybean Futures Fall on Bets Favorable Weather to Boost U.S. Harvest.
• Gold Futures Surge to Record $1,308.90 on Demand by Investors, Jewelers.
• Suburban Voters Sour on Obama, Threatening Democrats' Hold on U.S. House.
• Endo Pharmaceuticals(ENDP) Agrees to Acquire Qualitest for $1.2 Billion in Cash. Endo Pharmaceuticals Holdings Inc. agreed to buy U.S. generic-drugmaker Qualitest Pharmaceuticals for about $1.2 billion from private-equity firm Apax Partners LLP. Endo’s shares rose to their highest value in three years.
• Dollar Is 'One Step Nearer' to Crisis on Burgeoning Debt Burden, Yu Says. The U.S. dollar is “one step nearer” to a crisis as debt levels in the world’s largest economy increase, said Yu Yongding, a former adviser to China’s central bank. Any appreciation of the dollar is “really temporary” and a devaluation of the currency is inevitable as U.S. debt rises, Yu said in a speech in Singapore today. “Such a huge amount of debt is terrible,” Yu said. “The situation will be worsening day by day. I think we are one step nearer to a U.S.-dollar crisis.”
• Fewer U.S. CEOs Project Gains in Sales, Employment. Chief executive officers in the U.S. turned less optimistic in the third quarter as fewer projected sales and hiring will improve, a survey showed. The Business Roundtable’s economic outlook index fell to 86 in the July-to-September period, the first decrease since the beginning of 2009 when the gauge dropped to a record-low of minus 5, the Washington-based group said today.

Wall Street Journal:

• More Americans Expect Recovery Will Take Years. The American public has arrived at the same dismal conclusion as many economists: We’re in for a long and painful economic recovery. A new survey by AlixPartners LLP, a business-advisory firm, showed a growing share of Americans think it will take years for the economy to recover to “normal times.” Some 46% said it will be 2013 or later before that happens. A smaller 36% predicted a recovery sometime before 2013.
• Banks Face the Killing Yields. The financial-services industry is built for speed. But while superlow interest rates are meant to be high-octane fuel for the economy, they are gumming up financial engines. The problem for many banks, insurers and fund managers is that their cost of borrowing can't fall below zero. Yet returns from a number of businesses or products continue to decline with already near-record low bond yields. That compresses margins and threatens to make some business lines uneconomic.
• Assets of California Commodity Pool Frozen Amid Alleged Fraud.
  

CNBC:

• Bonds Hit Session Highs After 5-Year Note Auction.

MarketWatch:

• Nine Dragons Paper Shares Slip as Analysts Diverge on Prospects. Nine Dragons Paper Holdings Ltd. slipped in Hong Kong trading Tuesday, a day after the company released results that led analysts to different conclusions about the outlook for the shares of China’s largest containerboard manufacturer.

Business Insider:

• George Soros Conspiracy Theorists Rejoice As "Self-Hating Jew" Group Admits Lying About Soros Donations.
• Entire Stock Market Recovers As Apple(AAPL) COO Tim Cook Says He's Not Leaving For HP(HPQ).
• Marriage Rate Hits All-Time Low As Americans Put Jobs Before Love.
• Goldman Sachs(GS) Turns Even More Bearish, Sees Bigger Risk Of Worst-Case Scenario.
  

Forbes:

• The Myth and Mistake of Quantitative Easing. Now that fair-value accounting rules have been corrected, there is no further justification for it.

The Detroit News:

• Union Rejects Concessions at GM Plant in Indianapolis. A months-long battle to save a General Motors Co. stamping plant here that pitted rank-and-file UAW members against top union officials over whether autoworkers should accept pay cuts to keep jobs ended bitterly today. Addison, Ill.-based JD Norman Industries said it is dropping its effort to buy the factory after an announcement late Monday that United Auto Workers members had voted 457-96 against accepting the concessions. That means the 80-year-old plant will close next year, and the city and county will lose one of their biggest tax revenue generators. At least one state politician has charged that the vote also means more layoffs at other area auto suppliers.

AppleInsider:

• Ad Requests From Apple's(AAPL) iPad See 76% Month-Over-Month Increase.

Real Clear Politics:

• ObamaCare & the Costs of the Welfare State.

Politico:

• Insider Likely to Replace Rahm Emanuel. President Barack Obama hasn’t yet picked a permanent replacement for chief of staff Rahm Emanuel — but he’s leaning toward someone already inside the Obama bubble rather than an outsider who would shake up the West Wing, people close to him say.
• Foreign Firms: Quit Bashing Us. On the campaign trail, President Barack Obama elicits cheers when he rails against tax loopholes that he says benefit foreign companies that have operations in this country. It’s a sound bite that seems eminently fair to average voters, particularly those suffering through today’s tough economic times. But representatives of some of those firms are coming to Washington on Tuesday for a series of quiet meetings at the White House and on Capitol Hill to offer a counterargument — that the combination of tough presidential rhetoric and draconian administration policy could drive their firms away and, with them, thousands of jobs that the economy desperately needs if there is going to be a real recovery.

AP:

• FBI Investigates Prominent Labor Leader Andy Stern. The FBI and the U.S. Labor Department are investigating prominent labor leader Andy Stern in their probe of corruption at the Service Employees International Union, according to two people who have been interviewed by federal agents.

Reuters:

• Position Limits Keep Market Diverse - CFTC's Gensler. Position limits would guard against excessive concentration in the energy futures market, the chief U.S. futures regulator said in a speech to natural gas officials on Tuesday. Chairman Gary Gensler of the Commodity Futures Trading Commission said the financial crisis last fall showed the risk posed by "large concentrated actors on the financial stage". "I believe we should consider setting position limits to guard against excessive concentration in the energy futures market," said Gensler at a luncheon held by the Natural Gas Roundtable, a nonprofit organization. The CFTC is weighing whether to set position limits -- a maximum market share -- for oil and other energy products.

Telegraph:

• OECD Calls For More Austerity in Portugal. Portugal must brace for fresh austerity to bring the budget deficit under control and stem capital flight, despite signs that political consensus is unravelling.

Handelsblatt:

• Carl Heinz Daube, the head of Germany's Federal Finance Agency, said a restructuring of Greek debt could have "devastating consequences" for the German covered bond market. In a worst case scenario, interest and redemption payments of Pfandbriefe wouldn't be completely secured, Daube said. So-called haircuts on Greek debt would also have consequences for life insurers holding the bonds and may create new problems for other peripheral euro-region economies, he said.

Xinhua:

• China's government will subsidize as much as 70% of the cost of essential equipment for trial solar-power projects, citing a government statement.
• China yesterday started a crackdown against pornography, pirated products and "illegal publications" in preparation for the National Day holiday break that starts Oct. 1.