Evening Headlines
Bloomberg:
- Moody's Signals Possible Cut for Europe. Moody’s Investors Service said it’s considering lowering debt ratings for banks in 15 European nations reflecting the potential removal of government support. All subordinated, junior-subordinated and Tier 3 debt ratings of 87 banks in countries where the subordinated debt incorporates an assumption of government support were placed on review for downgrade, the ratings company said in a statement today. The subordinated debt may be cut on average by two levels, while the rest of the debt by one grade, it said. Lenders in Spain, Italy, Austria and France have the most ratings to be reviewed as governments in Europe face limited financial flexibility and the region’s policy makers are considering reducing support to creditors, the rating company said. Moody’s has said that a “rapid escalation” of Europe’s sovereign debt crisis threatens the entire region. “Systemic support for subordinated debt may no longer be sufficiently predictable or reliable to be a sound basis for incorporating uplift into Moody’s ratings,” the company said in the statement.
- France Could Get S&P 'Negative Outlook' in Week, Tribune Reports. Standard & Poor’s Ratings Services may give France a “negative outlook,” La Tribune reported, citing “several sources.” It could make the change on the country’s credit rating within a week to 10 days, La Tribune cited an unidentified diplomatic source as saying. La Tribune cited another unidentified person as saying the announcement could have been made Nov. 25, but was delayed for an unknown reason.
- Italy Set for a ‘Sizeable’ Cost Increase at 8 Billion-Euro Bond Auction. Italy may again be forced to pay above the 7 percent threshold that prompted Greece, Portugal and Ireland to seek aid when it auctions as much as 8 billion euros ($11 billion) in bonds today. The Rome-based Treasury aims to sell as much as 3.5 billion euros of a three-year bond, 2.5 billion euros of 2022 bonds and 2 billion euros in 2020 bonds. Italy had to pay more than 7 percent in debt auctions yesterday and on Nov. 25. Today’s results are due shortly after 11 a.m. Rome time. “The Treasury will experience a sizeable increase in the cost of funding,” said Chiara Cremonesi, a fixed-income strategist at UniCredit SpA in London, noting that a similar- maturity 2014 bond yielded 4.93 percent at a sale on Oct. 28. “We see a risk that the 3-year and the 10-year are issued at roughly the same level.” The auction is competing this week with sales of securities in Belgium, France and Spain of as much as 10 billion euros.
- King Says U.K. Must Have Contingency Plan as Euro Risks Increase. Bank of England Governor Mervyn King said the U.K. is being “increasingly threatened” by the euro- area crisis, and authorities must be ready to act if it continues to escalate. “What we have to do is to be ready and prepared with contingency plans and to make sure that as far as possible our banking system is as robust as possible to withstand whatever shocks that come from the eurozone,” King told lawmakers at a Parliament committee in London yesterday. There are “early signs” of a credit crunch emerging in euro area in the difficulties banks have in accessing funding, he said.
- Goldman Advises Exiting China Stocks on Challenging Outlook. Goldman Sachs Group Inc.(GS) recommended clients exit a bet that Hong Kong-listed companies in China will gain amid concern over a "relatively challenging" outlook in the country. "We are closing our recommended long position in Chinese equities," Goldman Sachs analysts including Noah Weisberger wrote in a report.
- UBS Cuts 2012 Global Economic Growth Estimate on Europe Concerns. UBS AG lowered its estimate for global economic growth next year to 2.7 percent from 3.1 percent as it forecast the Euro area to enter recession. The Euro area will contract by 0.7 percent in 2012 compared with a previous forecast of 0.2 percent growth, with a recession to “formally” begin in the current quarter, Larry Hatheway, an economist at UBS wrote in a report. UBS also lowered its 2012 economic growth estimate for the U.S. to 2.0 percent from 2.3 percent and for China to 8.0 percent from 8.3 percent, according to the report. “The reasons for our more cautious view include the recent sharp deterioration in leading indicators of global growth (e.g., PMI surveys) alongside the deepening crisis in Europe,” the economist wrote.
- Oil Drops From One-Week High on Europe Crisis, Signs of Rising Stockpiles. Crude oil for January delivery fell as much as 74 cents to $97.47 a barrel in electronic trading on the New York Mercantile at was at $97.58 at 12:35 p.m. Sydney time. Hedge-funds and other money managers cut bullish bets on Brent crude by 5,356 contracts in the week ended Nov. 22, London-based ICE said yesterday in its weekly Commitment of Traders report. Net-long bets on West Texas Intermediate, the Nymex contract for crude delivered to the Cushing, Oklahoma, storage hub, fell by 26,387, or 12 percent, to 189,688, CFTC data show. It was the largest drop since the week ended Aug. 2. U.S. crude inventories probably rose 1 million barrels last week, according to the median of seven analyst estimates in a Bloomberg News survey.
- China Halts U.S. Academic Freedom at Classroom Door for Colleges. “You think you’re going to a place that has academic freedom, and maybe in theory you do, but in reality you don’t,” said Stewart, 27, who earned a master’s degree in international studies this year from Hopkins-Nanjing and now works for an accounting firm in Beijing. “The place is run by Chinese administrators, and I don’t think the U.S. side had a lot of bargaining power to protect the interests of its students. At the end of the day, it’s a campus on Chinese soil.”
- Corzine Pushed Fatal Europe Bet to $11.5 Billion as MF Global Board Balked. Jon Corzine bet $11.5 billion on European sovereign debt in his bid to rebuild profits at MF Global Holdings Ltd., almost twice the net amount disclosed to investors, and relied on short-term hedges that left the firm exposed to larger losses if they couldn’t be rolled over. Corzine, who was chairman and chief executive officer of the futures broker before it went bankrupt last month, overcame resistance from directors, senior traders and risk managers to accumulate the bonds, according to two people with knowledge of the situation. He used the hedges, or offsetting trades, to cut the net risk reported to shareholders to $6.4 billion, according to an Aug. 3 regulatory filing by the company.
- Fitch Cuts Its Outlook on U.S. Credit. Fitch Ratings lowered the outlook on its triple-A rating of the U.S. government to negative Monday, citing concern lawmakers aren't prepared to take necessary steps to rein in the nation's ballooning deficit. A negative outlook means there is a slightly higher than one-in-two chance of a downgrade within the next two years. Fitch's move brings its U.S. rating in line with Moody's Investors Service and one notch above Standard & Poor's, which downgraded the country to double-A-plus in August. Fitch said in a statement that its decision reflects its analysts' "declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the U.S. 'AAA' sovereign rating will be forthcoming." The inability of the so-called congressional supercommittee, a group of 12 lawmakers, to reach an agreement on deficit cuts last week "underlines the challenge of securing broad-based consensus on how to reduce the out-sized federal budget deficit," Fitch said. The firm said it kept its top-notch triple-A rating in part because the "dollar's status as the pre-eminent global reserve currency and depth of the U.S. Treasury market render financing risks minimal and underpin a low cost of fiscal funding." Fitch said Monday that, if lawmakers push through a "credible medium-term deficit reduction plan" in 2013, it would make a downgrade less likely. If no such agreement is reached, however, that could trigger a downgrade, Fitch said. Ira Jersey, a U.S. interest-rates strategist at Credit Suisse, said Fitch's statement was "pretty pessimistic" but also leaves "room for Washington to make things better." "The question is: Will the political establishment do that?" he said. Mr. Jersey suspects that, if Congress attempts to decrease the $1.2 trillion of automatic budget cuts imposed through so-called sequestration, that could prompt further action on the U.S. triple-A rating. "I think that would likely push at least Fitch and Moody's over the edge to downgrade the U.S.," said Mr. Jersey. Other strategists picked up on Fitch's highlighting of 2013, indicating that much hinges on events after the election next November. "I think it does reflect what investors and credit analysts outside the ratings agencies really do think about the U.S. debt situation," said Jim Vogel, interest-rate strategist at FTN Financial. "The time that it's going to get the most serious consideration is after the election."
- U.K. to Boost Rate on Bank Levy. The U.K. government will increase the rate of its bank levy in a bid to raise the £2.5 billion ($3.9 billion) the cash-strapped country first targeted with the tax, according to a person familiar with the matter. Treasury chief George Osborne will announce the increased levy in his budget statement on Tuesday. Other new measures set to be announced by Mr. Osborne will include an extension of business-tax relief for small companies, according to that person.
- European Nations Pressure Own Banks for Loans. Some European nations, struggling to find buyers for their bonds, are pressuring their own already-stressed banks to fill the gap by acting as lenders of last resort—in certain cases, pushing the amount of risky European debt on those institutions' books even higher. Italy and Portugal, among other European governments, are leaning on their banks to continue buying—or at least to stop selling—government bonds, according to people familiar with the matter. Meanwhile, in Spain and other European countries, the quantities of loans banks are doling out to local and national governments have been rising sharply.
- Citi(C) Ruling Could Chill SEC, Street Legal Pacts. A decades-old blueprint used by many federal agencies to settle charges of wrongdoing with companies and avoid court was challenged by a U.S. judge, in a ruling that legal experts said could have a significant impact on future law-enforcement efforts against Wall Street firms.
- Facebook Targets Huge IPO. Offering Next Year Could Raise $10 Billion, Valuing Company at $100 Billion.
- The Great Global Warming Fizzle. The climate religion fades in spasms of anger and twitches of boredom.
- Europe's Currency Road to Nowhere. The euro has punished Southern Europe the way China's currency has hurt the United States.
- Australia Cuts Growth Outlook. Australia’s real gross domestic product is now expected to grow by 3.25% in 2011-12 and 2012-13, representing downgrades of 0.75 of a percentage point for 2011-12, and 0.5 of a percentage point for 2012-13.
- Google(GOOG) Up As Citi(C) Discounts Facebook Threat. New competition dismissed; stock is up 12% the past 3 months.
Zero Hedge:
- Is It Finally Japan's Turn? (graphs) Japan is starting to heat up a little in terms of risk and we hope that Noda is watching carefully. While the strengthening trend in USDJPY and JGBs has been a long one, the last few days are starting to worry some traders and most notably, Bloomberg points out that not only are FX options the most USD bullish-biased (JPY-bearish) in seven years, swaptions have screamed to their highest in over seven months at 54bps. The growing concern that the European crisis will spread to Japan is evident in recent underperformance but these option bets support the view that the JPY strength and trade surplus arguments are much less support than they have been recently.
- Complete List Of European Sovereign Events Through The End Of 2011.
- Daniel Yergin: Clock Ticking on Iran's Nuclear Program. Daniel Yergin shared his thoughts with CNBC on some of the hot topics in the energy world. Yergin is the author of the new best-seller "The Quest: Energy Security and the Remaking of the Modern World," the successor to his Pulitzer Prize winning book, "The Prize."
- THL Eyes Buyout of Yahoo's(YHOO) US Business.
- Italian Bond Dispute Illustrates Obsatacles to Triggering C.D.S.
- Crisis in Europe Tightens Credit Across the Globe. Europe’s worsening sovereign debt crisis has spread beyond its banks and the spillover now threatens businesses on the Continent and around the world. From global airlines and shipping giants to small manufacturers, all kinds of companies are feeling the strain as European banks pull back on lending in an effort to hoard capital and shore up their balance sheets. The result is a credit squeeze for companies from Berlin to Beijing, edging the world economy toward another slump.
Politico:
- Elijah Cummings: Quiz Ben Bernanke on Bank Loans. The top Democrat on the House Committee on Oversight and Government Reform is calling on the panel to grill Federal Reserve Chairman Ben Bernanke following a bombshell report Monday that the Fed committed nearly $8 trillion in previously undisclosed loans to prop up the nation’s financial system. Rep. Elijah Cummings (D-Md.), the ranking member of the oversight committee, said in a letter to Chairman Darrell Issa (R-Calif.), that Bernanke, along with officials from the country’s largest financial institutions that reportedly benefitted from the trillions of dollars in loans and other assistance, must answer questions from lawmakers about details of Bloomberg Markets Magazine’s report.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 21% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20 (see trends).
Reuters:
- Slice of Missing MF Global Customer Cash May Be In Britain - NYT. About $200 million in customer funds missing at MF Global may have surfaced at JP Morgan Chase in Britain, the New York Times said, citing people briefed on the matter. During MF Global's last days, it overdrew an account at JPMorgan, the newspaper said, citing a person close to the matter. MF Global transferred roughly $200 million in the days before the firm filed for bankruptcy, the paper reported.
- Seagate(STX) Sees Q2 Revenue Topping Analysts' View. Seagate Technology forecast market-topping revenue for the current quarter and said it expects hard disk drive shipments to rise sequentially in the third quarter, sending its shares up 10 percent in extended trade. Seagate said it expects to ship 43 million hard drives in the October-December quarter and projected revenue of about $2.8 billion. It had previously forecast shipments of 41-45 million hard drives during the quarter. Analysts were looking for revenue of $2.67 billion in the second quarter, according to Thomson Reuters I/B/E/S.
- Hedge Funds See Global Growth Dipping. About 60% of hedge fund managers think there's a "real possibility" Greece will leave the euro in the next two years, while 41% think Italy or Spain will default, citing a survey of more than a third of the world's hedge fund managers conducted by Aksia. The managers see global growth in gdp dropping a full percentage point next year, citing the study.
- Fears Rise of Global Protectionism. EU Trade Commissioner Karel De Gucht said global economic weakness could bring a "second wave of protectionism" on top of the protectionist measures introduced in 2008 and 2009 that "were supposed to disappear" yet are still in force, citing an interview. Only 17% of the short-term protectionist measures put in place in the global financial crisis of 2008 have been reversed, De Gucht said.
- Europe's Shrinking Money Supply Flashes Slump Warning. All key measures of the money supply in the eurozone contracted in October with drastic falls across parts of southern Europe, raising the risk of severe recession over coming months. The three main gauges – M1, M2, and M3 – have each begun to decline in absolute terms after slowing sharply over the Autumn. The broad M3 measure tracked closely by the European Central Bank as an early warning indicator shrank last month by €59bn to €9.78 trillion, a sign that Europe's long-feared credit squeeze is underway as banks retrench to meet tougher capital requirements. "This is very worrying," said Tim Congdon from International Monetary Research. "What it shows is that the implosion of the banking system on the periphery is now outweighing any growth left in the core. We are seeing the destruction of money and it is a clear warning of serious trouble over the next six months." "This is the first sign of an emerging credit crunch," said James Nixon from Societe Generale. Banks cut their balance sheets by €79bn in October, while mortage lending saw the biggest drop since December 2008. Simon Ward from Henderson Global Investors said "narrow" M1 money – which includes cash and overnight deposits, and signals short-term spending plans – shows an alarming split between North and South.
- £50bn black hole as UK seen sliding back into recession. Weak growth has blown a £50bn black hole in the Chancellor's deficit reduction programme, according to the Organisation for Economic Co-operation & Development (OECD).
Shanghai Securities News:
- Shanghai's home prices may fall 20-30% from the highest levels seen in 2009, citing China Real Estate Information Corp's hedge of Shanghai unit Yu Dandan. The property market will remain weak with continued govt. curbs on purchases and credit. Recent remarks of high-ranking officials indicate China's resolve to curb home prices. New home sales were 10% lower than this year's avg. in 8 major cities last week and used home transactions were 29% lower than the 4-week avg. in 5 major cities.
- China may keep its limits on home purchases as current curbs expire by the end of the year, citing Wang Juelin, deputy director of the Ministry of Housing and Urban-Rural Development's policy research department. For home purchase limits to end, support from the "external environment" will be required, Wang said.
- China should raise deposit rates while keeping lending rates unchanged to narrow the spread of interest rates, citing Yu Bin, a researcher from the State Council's Development Research Center. China's growth may slow to 8.5% next year under current policy conditions, Yu said. The country should continue a proactive fiscal policy and prudent monetary policy, Yu said.
Deutsche Bank:
- Rated (LRCX) Buy, target $45.
- Rated (TER) Buy, target $17.
- Asian equity indices are -.25% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 224.0 -7.0 basis points.
- Asia Pacific Sovereign CDS Index 166.25 -6.75 basis points.
- FTSE-100 futures +.29%.
- S&P 500 futures +.58%.
- NASDAQ 100 futures +.50%.
Earnings of Note
Company/Estimate
- (TIF)/.61
- (OVTI)/.32
- (RAH)/1.39
9:00 am EST
- The S&P/CS 20 City MoM% SA for September is estimated to fall -.1% versus a -.05% decline in August.
10:00 am EST
- Consumer Confidence for November is estimated to rise to 44.0 versus a reading of 39.8 in October.
- The House Price Index for September is estimated to fall -.1% versus a -.1% decline in August.
Upcoming Splits
- (SXL) 3-for-1
- The Fed's Kocherlakota speaking, Fed's Lockhart speaking, Fed's Yellen speaking, EU Finance Ministers Meeting, weekly retail sales reports, RW Baird Clean Tech Conference, Piper Jaffray Healthcare Conference, Scotia Mining Conference, Citi Basic Materials Symposium, Goldman Steel Conference and the FBR Investor Conference could also impact trading today.
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