Bloomberg:
- Euro Leaders Face October of Unrest After ECB’s September Rally. Europe faces a month that may decide the success of the European Central Bank’s bid to end the debt crisis as leaders navigate a tougher approach from creditor countries, unrest in Spain and a looming report on Greece. With the first of three summit meetings that European Union President Herman Van Rompuy has called “crucial” taking place in Brussels on Oct. 18-19, investor sentiment toward the euro area that surged in September is on the wane. “People are beginning to look at this in a more sober way” after the ECB bond-buying plan and a German high-court decision releasing bailout financing spurred optimism over the past month, Clemens Fuest, an economist at Oxford University’s Said Business School, said in an interview yesterday. October, which marks the third anniversary of the debt crisis, will showcase euro-area leaders fighting out their differences. The discord underscores the inadequacy so far of ECB President Mario Draghi’s bid to calm the crisis through a pledge on sovereign-debt purchases. Spain’s 10-year bonds fell last week, with the yield rising 18 basis points, amid turmoil in the country. The euro, which surged 4.4 percent in the first two weeks of September, had its second weekly decline against the U.S. dollar last week, sliding 0.4 percent to $1.2860 on Sept. 28. Spanish Prime Minister Mariano Rajoy, under pressure to trigger the ECB’s new financial weaponry by requesting assistance, pleaded over the weekend for national unity as he hit out at nationalists for hampering crisis-fighting efforts.
- As Europe’s South Spirals, North Fiddles and Chaos Looms. Anyone who thought the euro crisis was coming under control might want to think again. Only three weeks after the European Central Bank calmed markets with its open-ended promise to support sovereign bonds and hold down borrowing rates throughout the euro area, harsh reality is reasserting itself: Greece, Spain and other struggling governments are being compelled to stick to austerity measures that are thwarting their economies, while Germany and other core euro countries remain unwilling to do what’s needed to prevent the euro area from breaking up.
- Spain to Borrow $267 Billion of Debt Amid Rescue Pressure. Spain plans to borrow 207.2 billion euros ($266.5 billion) next year, the Budget Ministry said today, as pressure builds for Prime Minister Mariano Rajoy to tap the European rescue fund instead of financial markets. Spain’s debt will widen to 90.5 percent of gross domestic product in 2013 as the state absorbs the cost of bailing out its banks, the power system and euro-region partners Greece, Ireland and Portugal. This year’s budget deficit will be 7.4 percent of economic output, Budget Minister Cristobal Montoro said at a press conference. Spain’s 6.3 percent target will be met because it can exclude the cost of the bank rescue, he said. Spain’s borrowing plans may test investors’ willingness to continue financing the government with the European Central Bank waiting to buy the country’s debt should Rajoy agree to conditions.
- Spain's debt-to-GDP ratio will reach 85.3% this year as the government takes power system debt, townhall bailout fund, rescues of Greece, Ireland, Portugal and the bailout of the banking system onto its book, the Budget Ministry said. Debt-to-GDP jumped 16.8 percentage points from last year.
- China’s Manufacturing Shrinks for 11th Month, HSBC PMI Shows. The purchasing managers’ index from HSBC Holdings Plc (HSBA) and Markit Economics had a final reading of 47.9 for September, compared with 47.6 in August and a preliminary level of 47.8 released Sept. 20. New export orders declined in September at the fastest pace in 42 months and purchasing activity in manufacturing fell for a fifth consecutive month. “The failure of both external and internal demand is weighing heavily on Chinese manufacturing,” said Glenn Maguire, principal at consultant Asia Sentry Advisory Pty and former Societe Generale SA chief Asia economist. “External demand recovery requires a stronger U.S., Japan and Europe - a highly unlikely dynamic in the near term. Internal demand recovery requires greater policy support.” Yesterday’s data also showed that manufacturing output and input prices continued to decline and that employee numbers decreased a seventh straight month. The HSBC and Markit Economics PMI hasn’t had a monthly reading above 50, which would indicate expansion, since October 2011.
- Japan Tankan Sentiment Worsens as Slowdown Hurts Exports. Big Japanese manufacturers became more pessimistic as slowdowns in China and Europe sapped export demand and pushed the nation closer to an economic contraction. The quarterly Tankan index for large manufacturers fell in September to minus 3 from minus 1, the fourth negative reading, the Bank of Japan said today in Tokyo. The median estimate of 18 economists surveyed by Bloomberg News was for minus 4. A negative figure means pessimists outnumber optimists.
- Korea’s Exports Fall for 3rd Month as Global Demand Wane. South Korea’s exports fell for a third month as Europe’s debt crisis and gains in the won damped demand, keeping pressure on the central bank to cut interest rates this month. Overseas shipments fell 1.8 percent in September from a year earlier, after a 6.2 percent decline in August, the Ministry of Knowledge Economy said in a statement today. The median estimate in a Bloomberg News survey of 12 economists was for a 5.5 percent decline.
- Aleppo World Heritage Site in Flames in Syria Fighting. Syrian troops loyal to President Bashar al-Assad fought with rebels in the commercial hub of Aleppo in a deadly battle that set fire to an ancient marketplace that was once a tourist attraction. Fighting in the country’s largest city continued for the third day in what insurgents said would be a “decisive battle” to control Aleppo. Rebels captured four neighborhoods, Al Jazeera reported, citing an interview with a local activist. Syrian government troops killed 104 people yesterday across the country, including 61 in or around the capital Damascus, the opposition Local Coordination Committees said in an e-mailed statement. International efforts to end the 18-month conflict have failed to stop the violence as rebels continue the fight, begun in March 2011, to overthrow Assad. The conflict has killed 30,000 people, according to estimates by the Syrian Observatory for Human Rights, an opposition group.
- US military deaths in Afghanistan hit 2,000. The killing of an American serviceman in an exchange of fire with allied Afghan soldiers pushed U.S. military deaths in the war to 2,000, a cold reminder of the perils that remain after an 11-year conflict that now garners little public interest at home. The toll has climbed steadily in recent months with a spate of attacks by Afghan army and police — supposed allies — against American and NATO troops. That has raised troubling questions about whether countries in the U.S.-led coalition in Afghanistan will achieve their aim of helping the government in Kabul and its forces stand on their own after most foreign troops depart in little more than two years.
- S&P 500 Posts Biggest Weekly Drop Since June on Economy. U.S. stocks fell for the week, as the Standard & Poor’s 500 Index posted its biggest drop since June, on concern Europe’s debt crisis is worsening and stimulus measures may not be enough to boost economic growth. The S&P Supercomposite Homebuilding Index (S15HOME) slid 7.3 percent for the first drop in five weeks amid worse-than-expected housing data. Technology stocks and commodity producers led declines as investors sold shares of companies most tied to economic swings. Apple (AAPL) Inc. posted its biggest drop since May after the release of its iPhone 5. Caterpillar Inc. (CAT) slid 6.2 percent as it cut its earnings forecast (CAT). The S&P 500 erased 1.3 percent to 1,440.67, the biggest weekly slump since June 1.
- U.S. Urged by Advocacy Group to Weigh Drones’ Harm to Civilians. The Obama administration should establish a special task force to evaluate the impact of covert drone operations on civilian communities, a report from the Center for Civilians in Conflict, a Washington-based advocacy group dedicated to protecting civilians, urged.
- Odd Debt Rule to Lose Bite. Adjustments That Whipsaw Bank Earnings Won't Affect Bottom Lines in Future.
- GOP Again Slams Obama on Libyan Attacks. Allies of Republican presidential candidate Mitt Romney intensified charges Sunday that the Obama administration botched its response to the deadly Sept. 11 attacks on a U.S. diplomatic post and a second facility in Libya, fueling domestic political tension around a foreign-policy crisis. Just a month ahead of the presidential election, Republicans accused Mr. Obama and his team of providing muddled explanations of the events and intentionally playing down al Qaeda's role in the attacks, which resulted in the deaths of U.S. Ambassador Chris Stevens and three other Americans.
- Mitt Romney: A New Course for the Middle East. Restore the three sinews of American influence: our economic strength, our military strength and the strength of our values.
Marketwatch.com:
- BHP(BHP) targets copper production growth of 10% a year. BHP Billiton Ltd. is targeting copper production growth of at least 10% a year through mid-2015, confident of long-term demand for the metal driven by China, India and other urbanizing nations.
Fox News:
Business Insider:- The Myriad Broken Promises of Obamanomics. *The stimulus will prevent unemployment from rising above 8%, and will fall to 5.6% by 2012. *Solyndra, “leading the way toward a brighter and more prosperous future.” *”I’m committed to an all-of-the-above energy program." * Obamacare, which “…won’t add another dime to the deficit.” *”Health premiums will go down $2,500 by the end of my first term.” *Under Obamacare “you will keep your health insurance. This law will only make it more secure and more affordable.” *My goal is to strengthen and preserve Medicare.” *"Since my election…you're starting to see some restoration of America's standing in the world." *”If I don’t fix the economy in three years, then I’ll be a one-term president. " To which Mr. Romney can say: “Mr. President, this is one promise I’m determined to help you keep.”
- A Crucial Economic Indicator Just Sank To A Level That Coincides With Recession 100% Of The Time. (graphs)
- CONFIRMED: The US Economy Is Much Weaker Than We Thought. (graphs)
- JIM O'NEILL: China's Days Of Double-Digit Growth Are Over.
- Five Looming Dangers That Could Tear The Eurozone Apart.
- Cronyism Is Destroying Spain's Future.
- DEA: Mexican Cartels In Chicago Are 'Hiding In Plain Sight' As They Run The City's Drug Game.
- LIVE: Thousands Of Companies Around The World Reveal The Truth About The Economy.
- New York's Ultraluxury Office Vacancy Rate Jumps To Two Year High As Financial Firms Brace For Impact.
- Welcome To The Era of 'Ugly' Inflation.
- The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default. The Federal student loan bubble has not only popped, but has all the carbon copy makings of the next subprime crisis. Only when it pops it won't be New Century and Countrywide Financial on the hook: it will be all of America's taxpayers. Remember: these are Federal loans.
- Greek Bad Loans Climb To Record 25% Of Total.
- Presenting The World's Biggest Hedge Fund You Have Never Heard Of.
- Exposing China's Shadow Banking System.
- Key Events In The Weeks Ahead.
- Thousands march in Paris against austerity. Thousands of demonstrators marched peacefully Sunday in Paris to denounce austerity measures in Europe that have sparked violent protests in other EU countries struggling to avert fiscal crises. The march, organized largely by the Left Front party and the Communists, comes before the French parliament's debate this week on a European fiscal treaty. Organizers put turnout at more than 80,000; Paris police declined to provide an estimate.
- As Fiscal Cliff Nears, Markets Ponder a Rougher Ride.
- India Economy Teeters at "Fiscal Precipice" - Government Panel. India is on the edge of a "fiscal precipice" and should urgently slash fuel, food and fertilizer subsidies to curb a budget deficit that could hit 6.1 percent of gross domestic product this fiscal year, a government panel warned.
- GM(GM) recalling 40,859 cars for potential fuel leaks.
- Thousands in Germany Protest for Wealth Tax. Thousands of people across Germany have protested for the introduction of taxes on wealth and financial transactions. Organizers said Saturday around 40,000 people took to the streets in 40 cities to demand a more equal society.
New York Times:
US News:
- Payroll Tax Cut Unlikely to Survive Into Next Year. Regardless of who wins the presidential election in November or what compromises Congress strikes in the lame-duck session to keep the economy from automatic tax increases and spending cuts, 160 million American wage earners will probably see their tax bills jump after Jan. 1. That is when the temporary payroll tax holiday ends. Its expiration means less income in families’ pocketbooks — the tax increase would be about $95 billion in 2013 alone.
- Media Ignore Romney's Strength With Independents. Here's one statistic we don't hear much about: Gallup reports that 22 percent of swing-state voters say they may still change their minds. Those one-in-five who say they might change their minds includes 10 percent who currently say they support Obama and 7 percent who support Romney. In swing states that are within the margin of error, that's huge. And we're not hearing much about that at all.
hedgetracker.com:
Reuters: - Top 300 Hedge Funds see assets jump by 12% year-to-date – Big Gainers Lead the Charge. The Top 300 US Equity Hedge Funds have seen their assets increase by more than $76 billion, or 12%, since the beginning of 2012. Overall, the top U.S. equity hedge funds manage a combined $712 billion in equity assets. On an absolute basis, 49 hedge fund managers on the list have seen their US equity assets surge by more than $500 Million since the beginning of the year. The biggest YTD gainers include Renaissance Technologies Corporation, Citadel Investment Group, D.E. Shaw & Co and Two Sigma Investments.
- U.S. group urges $2 trillion alternative to fiscal cliff "time bomb". The independent watchdog group Taxpayers for Common Sense will unveil a $2 trillion deficit-reduction proposal in hopes of averting an economic debacle at year's end known as the fiscal cliff. On Monday, the group plans to detail about 130 specific deficit-reduction steps the U.S. Congress could take to replace across-the-board spending cuts of $1.2 trillion that are scheduled to take effect on January 2. These would occur just as tax increases for all income groups are due to kick in.
- Analysis: They're back! Yield hunt pushes funds into CLOs, CDOs. Fund managers are increasingly eyeing riskier exotic assets, some of which haven't been in fashion since the financial crisis, as yields on traditional investments get close to rock bottom. In particular, the Federal Reserve's latest move to juice the U.S. economy by purchasing $40 billion of agency mortgage-backed securities every month is forcing some money managers who had previously been feasting on those securities to get more creative. The only problem is they may be getting out of their comfort zones and taking on too much risk. Returns from investments in "junk" bonds, government guaranteed mortgage securities and even some battered euro-zone debt are plunging in the wake of global central bank policies intended to suppress borrowing costs. "I would not be surprised if some managers are reaching outside of their expertise for a few extra basis points," said Bonnie Baha, a portfolio manager for DoubleLine's Global Developed Credit strategy. To keep performance high, credit-focused managers are moving back into some of the risky assets that got tarnished during the financial crisis like collateralized loan obligations, or CLOs, securities cobbled together from pools of corporate loans.
- Venezuela's Chavez would 'vote for Obama'. Venezuelan President Hugo Chavez says that if he were a US citizen, he would vote for President Barack Obama in the November 6 presidential election -- and if Obama were Venezuelan, he'd vote for Chavez. If Obama came from a working-class Caracas neighborhood, he would "vote for Chavez," the Venezuelan president claimed. "Obama recently said something very rational and just: Venezuela is not a threat to the interests of the United States," Chavez said, calling the US president a "nice guy."
- Global Advertising Budgets Cut in Response to Euro Area Crisis. Ad spending growth of 3.8% forecast for this year, compared with expectations in June of 4.3%, and predictions in July 2011 that Olympic Games and U.S. election would lead to 5.9% growth, citing ZenithOptimedia.
- Another domino falls as Hollande pushes France into depression. If French President François Hollande thinks he can assuage the bond markets by dishing out tax-heavy austerity instead of genuine reform, he has been given very bad advice.
- Germany told to 'come clean’ over Greece. German Chancellor Angela Merkel must “come clean at long last” and admit that Greece will need help for another seven or eight years, the German opposition leader said over the weekend.
- Merkel to Propose Common EU Budget at October Summit. The proposal would replace existing structural cohesion funds with a common budget to enable aid to stricken member states, citing European Union sources. The budget is the first priority for Chancellor Angela Merkel at Oct. 18-19 EU summit in Brussels. Funds could flow from national budgets and transaction taxes. France and Spain may see the proposal as a diversion tactic. Germany wants to end the debate over common euro bonds with the proposal.
- ECB Acting Outside Mandate, Says Ex-Board Member Stark. Former European Central Bank Executive Board member Juergen Stark said the ECB is acting beyond its mandate in its new bond-purchase program, citing an interview. Stark said the conditionality attached to the bond-purchase program has undermined the independence of the ECB's monetary policy.
- Poll Shows 55% of Catalans Back Independence. Opinion poll shows 55% support for Catalan independence. Poll shows 84% backing for referendum on independence. Poll shows 43% support for CiU party vs 38.4% won in 2010 regional elections.
- France to Propose EU4b-EU5b in Tax Increases Tomorrow. Proposed increases to be disclosed include doubling levy on beer and raising tax on bank salaries.
Nikkei:
- Japanese domestic sales of new automobiles probably fell in September, the first decline in the past 12 months, and are expected to fall through the rest of the year.
Weekend Recommendations
Barron's:- Made positive comments on (SCS), (AIG), (DLPH), (DVN) and (GS).
- Made negative comments on (OPK).
- Asian indices are -1.0% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 136.50 -.5 basis point.
- Asia Pacific Sovereign CDS Index 115.25 +.5 basis point.
- FTSE-100 futures -.21%.
- S&P 500 futures -.40%.
- NASDAQ 100 futures -.41%.
Earnings of Note
Company/Estimate
- (CALM)/.35
10:00 am EST
- ISM Manufacturing for September is estimated to rise to 49.8 versus 49.6 in August.
- ISM Prices Pad for September is estimated to rise to 55.8 versus 54.0 in August.
- Construction Spending for August is estimated to rise +.5% versus a -.9% decline in July.
- (PAA) 2-for-1
- (CTRX) 2-for-1
- (PZE) 2-for-1
- The Fed's Bernanke speaking, Fed's Evans speaking, Fed's Williams speaking, Eurozone Manufacturing PMI, Spain Manufacturing PMI, Eurozone Unemployment, India Manufacturing PMI, Johnson Rice Energy Conference and the (SIG) investor day could also impact trading today.
