Tuesday Watch

Evening Headlines 
Bloomberg: 

• Europe Gives Greece 2 More Years to Reach Deficit Targets. Euro-area finance ministers gave Greece two extra years to wrestle down its budget deficit, pledging to plug the resulting financing gaps in order to keep the country in the single currency and prevent a renewed flareup of the debt crisis. Finance ministers granted Greece until 2016 to cut the deficit to 2 percent of gross domestic product. They put off until Nov. 20 a decision on how to cover additional Greek needs of as much as 32.6 billion euros ($41 billion) and left unclear whether the International Monetary Fund will continue to contribute. In the latest compromise in three years of crisis fighting, creditors led by Germany opted to keep money flowing to Greece instead of risking a default that could lead to the nation’s exit from the euro and stir more turmoil for countries left in it.
• Austerity Backlash Threat to Peripheral Bond Rally: Euro Credit. Spain and Portugal are among the so-called peripheral countries preparing for labor unrest, putting pressure on euro-region leaders to water down the austerity measures that helped power this year's bond-market rally. Spanish Prime Minister Mariano Rajoy faces a general strike tomorrow and Portuguese Premier Pedro Passos Coelho is bracing for social tumult as part of Europe-wide protests against debt-crisis budget tightening. "We've crosses a Rubicon in terms of societies buying into reform programs," said Richard McGuire, a senior fixed-income strategist at Rabobank in London. "Rajoy is walking a tightrope and Portugal is an example of popular unrest diverting or diluting reforms, with the ultimate risk of derailing them." The growing popular backlash against rising unemployment and slumping wages stemming from government efforts to shore up public finances threatens to slow the pace of economic reform. At the same time, the austerity measures are deepening recessions, making deficit goals tougher to achieve and perpetuating the need for additional belt tightening.
• Why French Economy Can’t Delay Its Competitiveness Shock. The government of French President Francois Hollande deserves credit for its decision last week to cut payroll taxes. Unfortunately, by itself, the 20 billion euro ($25 billion) reduction in costs for companies won’t administer the “competitiveness shock” that a dire, government-commissioned study recommended Nov. 5 to revive growth. It certainly won’t allay the concerns of France’s largest trading partner, Germany, whose own economy would be at risk from a meltdown across the Rhine. As Germany’s Council of Economic Experts delivered its annual report to Chancellor Angela Merkel last week, one of its members, Lars Feld, warned that “the largest problem isn’t Greece anymore, or Spain or Italy, but France because France has done nothing to rebuild its competitiveness and is even heading in the opposite direction.” A recent cover line on the daily Bild Zeitung baldly asked: “Will France Be the New Greece?” The French government’s response fails to tackle the more fundamental challenge of curbing out-of-control public spending and easing France’s rigid labor laws, which were identified as the gravest threats to the economy both in the report by former Airbus SAS Chairman Louis Gallois and in a review published the next day by the International Monetary Fund. 
• China Stocks Fall to 7-Week Low on Property Tax, Retail Concerns. China’s stocks fell to the lowest level in seven weeks after the Xinhua News Agency reported the government may expand a property tax trial and Haitong Securities Co. said retailers may post weak sales this month. China Vanke Co. (000002) and Poly Real Estate Group Co. led declines for developers after Xinhua cited the housing minister as saying the government is watching for signs of surging transaction volumes and home prices. Suning Appliance Co. plunged 5 percent as Haitong said November sales for traditional retailers will be hurt by a shift towards online purchases. China Petroleum & Chemical Corp. slumped to the lowest in more than two weeks after the Beijing Times said China may cut gas prices tomorrow. “The economy seems to be stabilizing but there’s no solid evidence that it will pick up further,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Some investors are taking profits ahead of the year-end. Investors should avoid the property sector amid policy uncertainty.” The Shanghai Composite Index (SHCOMP) slid 1.4 percent to 2,050.05 at the 11:30 a.m. local-time break, heading for the lowest level since Sept. 26.
• Empty Offices Loom in Sydney as Building Spree Meets Bank Cuts. Sydney’s office vacancies are set to surge as Lend Lease Group (LLC)’s A$6 billion ($6.2 billion) financial center opens and older buildings are renovated while big tenants including Macquarie Group Ltd. cut jobs. About 400,000 square meters (4.3 million square feet) of space will hit the market in the next five years, including Lend Lease’s Barangaroo redevelopment in the former docklands district, according to UBS AG. That compares with 870,000 square meters added over the past 20 years.
• Consumers Closing Wallets in Japan Add to Noda’s Woes: Economy. Japanese consumers are closing their wallets as the economy’s outlook darkens, making it harder for Prime Minister Yoshihiko Noda to stave off the nation’s third recession in four years. Households are holding the most cash since 2005, shunning risk as they grow gloomier, Bank of Japan data shows. Sliding private consumption contributed to an annualized 3.5 percent decline in gross domestic product in the past quarter, a Cabinet Office report showed yesterday. 
• Carry Trades Lose Most Since ’11 as HSBC Gauge Warns: Currencies. The foreign-exchange market is signaling more pain ahead for currencies that benefit from a sustained global recovery, five years after the onset of the worst financial crisis since the Great Depression. HSBC Holdings Plc’s Global Hazard Indicator, which combines implied volatility readings in options for the dollar, euro and yen, shows wider price swings in currencies over the next year than in the coming three months. If history is any guide, that means the dollar and yen will strengthen and higher-yielding, higher-risk currencies such as the Brazilian real and South African rand will depreciate.

Wall Street Journal: 

• Nursing Homes Said to Overbill U.S. Hundreds of nursing homes overcharge Medicare every year for so-called skilled services, adding $1.5 billion in annual costs to the program, according to a federal report to be released Tuesday. About one-fourth of Medicare bills from facilities examined in the report were incorrect. The majority of these claims involved so-called upcoding, where a nursing home or other provider inflates the cost of its bill to Medicare by claiming more intensive services were done than actually performed. In other cases, nursing homes provided treatments that were inappropriate.
• FBI Agent in Petraeus Case Under Scrutiny. A federal agent who launched the investigation that ultimately led to the resignation of Central Intelligence Agency chief David Petraeus was barred from taking part in the case over the summer due to superiors' concerns that he had become personally involved in the case, according to officials familiar with the probe. New details about how the Federal Bureau of Investigation handled the case suggest that even as the bureau delved into Mr. Petraeus's personal life, the agency had to address questionable conduct by one of its own—including allegedly sending shirtless photos of himself to a woman involved in the case.
• Afghan Women Fear Rights Will Erode as U.S. Leaves. Rokhshana, a 14-year-girl, has been behind bars here since March. She is serving a yearlong adultery sentence after what she describes as rape by her adult cousin, who remains a free man. "I love my country, but there's no justice here," says Rokhshana at Herat's juvenile prison, her arms bearing the signs of beatings. 
• McGurn: Sex, Lies and Gmail. Did David Petraeus's personal troubles influence what he said to Congress about Benghazi?

MarketWatch.com: 

• Concern China banks under-reporting bad loans. Lenders could be giving some toxic debts generous reclassifications.

CNBC:

• Trouble Brewing for Euro as Greece Worries Grow. The euro, which hit a two-month low against the dollar on Tuesday as hopes that Greece would receive essential aid soon faded, faces further losses as concern about Greece’s future grow, currency analysts warn. 
• Could the Petraeus Scandal Scuttle a 'Fiscal Cliff' Deal?
• Fear of 'Fiscal Cliff' Taxes Puts Chill on Dividend Stocks. 
• Wealthy Dump Assets Amid Worries About Going Over 'Cliff'.
• ‘Social Risk’ Test Ordered By China for Big Projects.

Zero Hedge: 

• The Gini Is Out Of The Bottle: Did China "Outcapitalism" The US, Or Did America "Outcommunism" China?
• Post-Election Performance: Dip-Buyer's Dream Or Valuation Slump.
• Kerry, John Kerry: Defense Secretary.

Business Insider: 

• Microsoft(MSFT) Just Lost Its Most Important Executive.
• The Scene At The Rockaways Is Still Surreal, Weeks After Being Devastated By Sandy. (pics)
• Why Liberals Are Furiously Trying To Rename The Fiscal Cliff.
• Paula Broadwell's Father: 'This Is About Something Else Entirely, And The Truth Will Come Out'.
• China Is 'Actively Studying' An Expansion Of An Experimental Property Tax.
• NBCUniversal Is Laying Off 450 Workers.
• GLENN BECK TO REPUBLICANS: The Tea Party Is 'Doubling Down'.

The Blaze:

• Odd? Romney Got ZERO Votes In 59 Precincts in Philly, and 9 Precincts in Ohio. What if there are parts of the country where Romney not only got zero percent of the vote (a possibility in the case of vote totals so small that rounding renders them null), but actually got literally zero votes? For the nominee of a major party, that would be truly extraordinary – so extraordinary, in fact, that it would strain credulity. And seeing as this highly unlikely turn of events happened not in one or two precincts, but in over 59 in Philadelphia, and 9 in Cleveland, that credulity can be safely said to be completely strained, if not broken. From the Philadelphia Inquirer:

Telegraph: 

• Angela Merkel sticks to austerity script in Portugal as revolt builds. German Chancellor Angela Merkel braved hostile crowds in Portugal on Monday to show unflinching support for the country’s austerity ordeal and plead for patience as social cohesion frays.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.5% to -.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 124.0 +.5 basis point.
• Asia Pacific Sovereign CDS Index 89.25 -1.5 basis points.
• FTSE-100 futures -.43%.
• S&P 500 futures -.62%.
• NASDAQ 100 futures -.56%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (HD)/ .70
• (DKS)/.37
• (SKS)/.12
• (TJX)/.61
• (CSCO)/.46

Economic Releases
7:30 am EST

• The NFIB Small Business Optimism Index for October is estimated to rise to 93.0 versus 92.8 in September.

2:00 pm EST

• The Monthly Budget Deficit for October is estimated to widen to -$113.0B versus -$98.5B in September.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Yellen speaking, Eurozone Non-Farm Payrolls/Current Account, European/UK inflation data, Italy bill auction, Germany ZEW Sentiment Index, weekly retail sales reports, CSFB Healthcare Conference, Lazard Healthcare Conference, Stephens Investment Conference, Morgan Stanley Consumer/Retail Conference, Barclays Automotive Conference, Bank of America Merrill Banking/Financial Services Conference, (SWI) analyst day, (HUM) investor day and the (BBY) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Slightly Lower
  
• Sector Performance: Mixed
• Volume: Light
• Market Leading Stocks: Underperforming

Equity Investor Angst:

• VIX 16.93 -9.03%
• ISE Sentiment Index 93.0 -23.3%
• Total Put/Call .97 -17.09%
• NYSE Arms 1.02 +24.36%

Credit Investor Angst:

• North American Investment Grade CDS Index 106.74 bps +.12%
• European Financial Sector CDS Index 182.55 bps +1.99%
• Western Europe Sovereign Debt CDS Index 120.91 bps +6.63%
• Emerging Market CDS Index 239.09 bps -.21%
• 2-Year Swap Spread 11.75 unch.
• TED Spread 21.75 unch.
• 3-Month EUR/USD Cross-Currency Basis Swap -26.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
• Yield Curve 135.0 unch.
• China Import Iron Ore Spot $122.10/Metric Tonne unch.
• Citi US Economic Surprise Index 60.80 +.1 point
• 10-Year TIPS Spread 2.43 unch.
  

Overseas Futures:

• Nikkei Futures: Indicating +23 open in Japan
• DAX Futures: Indicating +8 open in Germany

Portfolio:

• Slightly Lower: On losses in my Tech and Retail sector longs
• Disclosed Trades: None
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg: 

• European Stocks Fall to Two-Week Low on Greek Meeting. European stocks fell to a two-week low as euro-area finance ministers met to discuss Greek aid and concern grew that impending U.S. tax increases and spending cuts will harm the world’s biggest economy. Alpha Bank (ALPHA) SA led Greek banks lower as the nation’s creditors said the country may face a 15 billion-euro ($19 billion) financing gap. Cobham Plc (COB) slid 9.7 percent after the world’s largest maker of airborne-refueling equipment forecast weaker revenue and profitability. 
• EU May Scrap Plan to Hand ECB Sole Power on Bank Licenses. The European Union may scrap plans to give the European Central Bank sole power to grant and withdraw banking licenses in the euro area as nations tussle over the details of setting up a single supervisor. Some EU countries insist “that the key issue of access to and removal from the market should remain within the remit of national authorities,” for at least as long as the EU does not have a central system to handle failing banks, according to a document on the bloc’s website. The concerns mean current proposals must be revised, according to the document prepared by Cyprus, which holds the rotating presidency of the EU. Because setting up the new supervisor is so complex, EU finance ministers also may decide to lengthen the period over which the ECB would assume its new powers.
• Goldman Sachs(GS) Says Beware Europe Peripheral Stocks. European companies most dependent on revenue from Spain, Italy, Greece and Portugal are rising in the stock market at the fastest pace in five years, providing chances for short sellers after two earlier rallies fizzled. Similar rallies for companies serving so-called peripheral countries heralded losses of as much as 44 percent through November 2010 and July 2012, data compiled by Bloomberg show. 
• Faurecia to Cut 3,000 Jobs as Growth Focus Shifts Outside Europe. Faurecia (EO), Europe’s largest maker of car interiors, plans to cut about 3,000 jobs in its home region, or 7.5 percent of the workforce, by the end of next year as it retrenches in lackluster European markets.
• Obama Seeks Outside Support for Fiscal Cliff Negotiations. President Barack Obama is working to enlist outside support for his position that high-income people pay more taxes as he heads into negotiations with House Speaker John Boehner on how to avoid the so-called fiscal cliff. Obama will hold separate meetings with labor and business leaders at the White House this week ahead of his Nov. 16 meeting with Boehner, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell. Obama will host labor leaders tomorrow and business leaders on Nov. 14, according to a White House official who asked for anonymity.
• Americans Say Europe’s Austerity Lesson Means Act Now. When the housing bubble burst in 2006, U.S. policy makers looked to Japan for clues about what to do -- and not do -- in response. Now their attention is shifting to Europe as America gets set to follow that region with a concerted attack on its budget deficit.
• Baby Boomers Blunt Fed Easing While Saving for Retirement.
• India Industrial Output, Exports Decline as Economy Falters. Indian industrial production unexpectedly fell in September and the trade deficit widened to a record last month as exports declined, adding to signs that Asia’s third-largest economy is struggling. Output at factories, utilities and mines dropped 0.4 percent from a year earlier after a revised 2.3 percent gain in August, the Central Statistical Office said in a statement in New Delhi today. The median of 28 estimates in a Bloomberg News survey was for a 2.8 percent increase. Manufacturing dropped 1.5 percent in September from a year earlier, while capital goods output decreased 12.2 percent, today’s data showed. India’s exports merchandise shipments fell 1.6 percent in October from a year earlier to $23.3 billion in October, while imports climbed 7.4 percent to $44.2 billion, according to the Commerce Ministry. Consumer prices rose 9.75 percent in October from a year earlier, after a previously reported 9.73 percent gain in September, a report showed today.
• Russian Third-Quarter GDP Grew at Slowest Since 2010 Rebound. Russia’s economy expanded in the third quarter at the slowest pace since it began recovering at the start of 2010 as a drought hurt agricultural output and stuttering global growth curbed demand for commodities exports. 
• China Solar Giants Likely to Get State Bailouts: Experts. China’s $20 billion solar industry is avoiding loan defaults and mergers by taking aid from local governments, preserving jobs at money-losing companies such as LDK Solar Co., the world’s second-biggest maker of solar cells.
• Gasoline Fluctuates on Tight Supplies and Debt Crisis Concern. Gasoline fluctuated as supplies around New York Harbor tightened after Hurricane Sandy and on concern that the European debt crisis will linger, curtailing economic growth and fuel demand.

Wall Street Journal:

• Fiscal Cliff: Live Stream.
• Need More Pessimism Before ‘Good Bottom’ For Stocks. 
• Syrian Jet Bombs Area Near Turkish Border. Turkey said Monday that a Syrian war plane had bombed a rebel-held town just meters from the border, shattering windows in a nearby Turkish town and sending scores of Syrian refugees fleeing across the neighbors' shared frontier.
• IEA Pegs U.S. as Top Oil Producer by 2020. A shale-oil boom means the U.S. will overtake Saudi Arabia as the world's largest oil producer by 2020, a radical shift that could profoundly transform not just the world's energy supplies but also its geopolitics, the International Energy Agency said. In its closely watched annual World Energy Outlook, the IEA, which advises industrialized nations on their energy policies, said the global energy map "is being redrawn by the resurgence in oil and gas production in the United States." 
• Leucadia to Acquire Jefferies.
  

CNBC: 

• Wave of Evictions Leads to Homeless Crisis in Spain. 
• Greece's 'Monster' Debt Problem Haunts Europe. Euro zone finance ministers meeting in Brussels on Monday won't make a final decision on aid for Greece, despite Athens passing a new austerity budget. But one former European Central Bank (ECB) official has told CNBC that Europe must give Athens more time.

Zero Hedge:

• Israel Continues Shelling Of Syrian Targets For Second Consecutive Day. 
• "Fiscal Cliff" Soars After Obama Win. (graphs) 
• Elmo Puppeteer On Leave Following Child Molestation Accusations. 
• Greek Banks Slump, Spanish Bonds Dump, Juncker 'Fist Pump'. (graphs) 
• The UK's Most Disturbing Number: Total Unfunded Pension Obligations = 321% Of GDP. 
• October Hedge Funds Performance Update: Mixed.

Business Insider:

• Chris Christie Said Nothing About A Massive Inmate Escape During Sandy. 
• An International War In Mali Could Take Place Sooner Than Anyone Realizes. 
• FACEBOOK(FB) LOCKUP RELEASE: An Astounding 777 Million Shares Become Available On Wednesday. 
• Morgan Stanley(MS) Has The Best Summary Of The State Of The World We've Seen Yet. 
• Neither Hillary Clinton Nor David Petraeus Will Testify At Benghazi Hearings. 
• Here's Goldman's(GS) Prediction For What The Fiscal Cliff Deal Ultimately Looks Like. The key ideas: The payroll tax cut will expire, taxes on the rich will rise, and rather than a 3.5% GDP drag, the effect will only be 1.4%. Most managements do not expect the business environment in 2013 will be materially different from today. In that case, the biggest economic risk from the fiscal cliff may not be going off it completely, but rather embracing growth-limiting austerity through too much compromise.
• China's Leadership Transition Doesn't Look Good If You're A Foreign Businesses. 
• Mysterious Explosion In Indianapolis Drives 200 People Out Of Their Homes. (pics)
• Google(GOOG) Will Have To Make A Deal If It Doesn't Want To Get Sued By The US.
• 8 Middle Class Tax Breaks That Might Be On The Chopping Block. 
• Iran Launches Massive Air Drill As 'Warning' To Enemies.
  

Reuters: 

• Celgene(CELG) stock soars on promising pancreatic cancer drug data. Shares of Celgene Corp rose as much as 9.7 percent on Monday after a late-stage clinical trial showed its drug Abraxane improved survival in patients with pancreatic cancer. Celgene, which unexpectedly reported the results late on Friday, did not give details of the extent of the improvement, saying it would do so at a medical meeting in January. Abraxane is already approved to treat breast and lung cancer and the company will apply for approval from regulators to market the drug to treat pancreatic cancer as well.
• Troika sees Greek debt at 144 pct/GDP in 2020 - sources. International lenders are reaching a consensus that Greece's debt burden will fall to 144 percent of gross domestic product in 2020 and roughly 10 percentage points lower two years later if current policies do not change, several officials told Reuters on Monday.

Telegraph:

• Debt crisis: No report on Greece as Troika can't agree on who pays - live. Greece's international lenders are split over how to deal with Greece not making a debt “sustainability” target of 120pc of GDP by 2020 and cannot agree on how much Greece is going to cost or who should pay.
• S&P and Fitch accused of market manipulation in Italy. Italian prosecutors have filed charges against Deven Sharma, the former president of Standard & Poor’s, and six other credit rating officials for issuing downgrades that destablised the country and fuelled the debt crisis. 
• Greece will need €32.6bn if Troika agrees to bailout extension. Greece's international creditors will have to find €32.6bn if they agree to extend its debt bailout by two years to 2016, as it wants, according to a draft report.

  ABC:

• Spanish bnaks may have to reduce their workforce by 30%, or about 70,000 people, through the end of 2014 as they need to cut costs, boost efficiencies, citing people close to govt.

Bear Radar

Style Underperformer:

• Small-Cap Value -.16%

Sector Underperformers:

• 1) Homebuilders -2.21% 2) Disk Drives -1.52% 3) Computer Hardware -1.41%
  

Stocks Faling on Unusual Volume:

• NIHD, ELP, CPN, NVR, SD, BBEP, CLVS, LUK, BZH, NS, NSH, STRA, DTSI, BNNY, PER, PEGA, JCP, IMH, SDT, PAA, NRP, SFUN, DDD, APU, PSE, KYE, VNR, EPD, ROYT, TRGP, DHI, EBIX, GORO, PNK and ET

Stocks With Unusual Put Option Activity:

• 1) MRO 2) BBD 3) UTX 4) EWJ 5) HD
  

Stocks With Most Negative News Mentions:

• 1) XEL 2) SD 3) DUK 4) JCP 5) BZH
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth -.21%

Sector Outperformers:

• 1) Biotech +1.40% 2) Oil Tankers +.87% 3) Coal +.79%
  

Stocks Rising on Unusual Volume:

• GILD, INFI, TI, TIE, CXS, JEF, CELG, PCP, SHW, KRO, SRPT, MDVN, RHP and CHMT

Stocks With Unusual Call Option Activity:

• 1) LEAP 2) GME 3) DVAX 4) WFT 5) JEF
  

Stocks With Most Positive News Mentions:

• 1) KLAC 2) DRQ 3) XOM 4) WSM 5) ABX

Charts:

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

Monday Watch

Weekend Headlines 
Bloomberg: 

• Europe Finance Chiefs Seek Greek Pact as Economy Gloom Grows. European finance chiefs will seek a program to maintain Greek solvency today after the country’s parliament approved a raft of austerity measures, even as the currency union confronts the prospect of a worsening economy. Finance ministers from the 17-member group will meet at 5 p.m. in Brussels following the Nov. 8 agreement by Greek lawmakers to make cuts in pensions and benefits. While the ministers are unlikely to finalize an updated aid package, a European official said Nov. 9 that they’ll find a way to overcome a gap in the country’s financing this week. “We remain confident that European support will be agreed on by the end of November, or early in December,” Erik Nielsen, London-based chief global economist at UniCredit SpA, wrote in a note to clients yesterday.While a two-month-old European Central Bank bond-buying plan has helped ease borrowing costs for euro-area countries, leaders including Chancellor Angela Merkel are confronting an additional challenge as economic malaise reaches Germany, whose indicators last week showed growth grinding to a halt. With the threat that a showdown over the U.S. budget could compound a slowdown in global growth, ECB President Mario Draghi said Nov. 8 the outlook for the euro area is worsening.  
• German Bonds Advance as Reports Show European Slowdown Deepening. Germany’s government bonds rose for a third week as data showed the economic slowdown is spreading to Europe’s largest economies, underpinning the case for the region’s central bank to cut interest rates to boost growth. Ten-year bund yields dropped to the lowest level in two months yesterday as data showed industrial production slumped in France, Italy and Finland. European Central Bank President Mario Draghi said the euro-area economy was expected to “remain weak” after policy makers kept the main refinancing rate at a record low of 0.75 percent on Nov. 8. German two-year note yields were below zero every day this week. Spain’s bonds fell as optimism waned that the nation will ask for a bailout. “The data, particularly industrial production, was disappointing, which is causing concern that Germany is being dragged down toward recession,” said Nick Stamenkovic, a fixed- income strategist at RIA Capital Markets Ltd. in Edinburgh. “Accordingly, 10-year yields have dropped.”
• European Central Bank Should Open Its Chamber of Secrets. The European Central Bank wields more power now than at any point in its 14-year history. If it wants to use that power responsibly, it needs to be a lot more open with the people whose well-being it aims to ensure. Thanks in large part to its lead role in fighting the euro area’s festering debt crisis, the ECB is taking on vast new duties. It has become a lender of last resort, supporting governments in their battles with skeptical markets. It will soon supervise the entire currency union’s banking system. All this comes on top of its regular job as maker of monetary policy for the 17 countries that use the euro. At the same time, the central bank shares less information with the public than its counterparts in the U.S. and U.K. do.
• Spain Prime Minister to Halt Evictions Following Suicide. Spanish Prime Minister Mariano Rajoy will temporarily halt evictions of the most vulnerable families as the government devises measures to help people stay in their homes after a woman killed herself in Baracaldo. The Spanish people are experiencing “terrible things and inhumane situations,” the premier said at an election rally in Lerida, Catalonia last night. The government “will defend the most vulnerable families affected by the evictions and act with seriousness, sensitivity and great humanity,” he said.  
• Japan Contraction Piles Pressure on Noda, Central Bank: Economy. Japan’s economy shrank last quarter as exports tumbled and consumer spending slumped, putting pressure on the central bank to add stimulus and hurting Prime Minister Yoshihiko Noda’s record as he prepares for elections. Gross domestic product fell an annualized 3.5 percent, the most since the earthquake and tsunami in early 2011, Cabinet Office data showed today in Tokyo. The median of 23 estimates in a Bloomberg News survey was for a 3.4 percent decline. Shipments to Asia, Europe and the U.S. all slid, as did capital spending. With analysts also seeing a GDP decline this quarter, according to a Bloomberg survey last week, Japan faces the risk of its third textbook-definition recession since 2008. The deterioration may undermine plans by Noda to implement the nation’s first sales-tax rise in more than a decade, and raises the stakes of a political impasse that’s left the government running out of cash. 
• Japan Curbing China Investment as Feud-Weary Firms Flee. After anti-Japan protesters in China smashed cars and torched dealerships, Koito Manufacturing Co. (7276) suspended a plan to triple output in the country. With a new factory half-built, Koito -- a Toyota Motor Corp. (7203) supplier -- reasoned that it may no longer need it. “Demand from automakers is unclear, so we don’t know how long we will have to freeze the project,” said Shinji Karasawa, spokesman for the Tokyo-based headlight maker. Along with Koito, Japanese parts-makers including Sumitomo Electric Industries Ltd. (5802) and Toyo Tire & Rubber Co. are rethinking plans to expand in China, where Toyota’s sales plunged 41 percent in September as demonstrations over disputed East China Sea islands flared.
• Dimon Says Banks Need Truce With Washington to Revive Economy. JPMorgan's (JPM) Jamie Dimon, who once publicly challenged Federal Reserve Chairman Ben S. Bernanke’s judgment and said Paul Volcker didn’t understand capital markets, called today for U.S. officials and corporate chiefs to halt “antagonistic behavior” and work together. “Let’s just start collaborating, let’s get this country working again and stop fighting each other, because that’s not going to get us anywhere,” Dimon, the bank’s chief executive officer, said today in an interview on CNBC television. President Barack Obama’s win of a second term in the White House helped propel the KBW Bank Index to its worst drop in five months on Nov. 7.
• Israel Warns of ‘Painful’ Response to Bombings From Gaza, Syria. Israeli leaders vowed to escalate military operations against the Gaza Strip after two days of Palestinian rocket attacks and warned Syria that additional cross-border fire would bring a “painful” response. Prime Minister Benjamin Netanyahu said Israel won’t “sit idly by” after more than 65 missiles fired from Gaza yesterday caused property damage and injuries in neighboring Israeli communities. Defense Minister Ehud Barak raised the prospect of a new ground offensive, the first since Israeli troops withdrew from Gaza in 2009 after a three-week military assault that left more than 1,100 Palestinians dead. “If we have to re-enter to strike Hamas and provide security for Israeli citizens, we won’t hesitate,” Barak said, speaking at an international defense industry conference in Tel Aviv.
• Apple(AAPL) Settles HTC Patent Suits Shifting From Jobs’ War. Apple Inc. (AAPL) settled all global lawsuits with HTC Corp. (2498), signaling a new willingness to resolve patent disputes without resorting to the “thermonuclear war” stance favored by co-founder Steve Jobs.

Wall Street Journal: 

• White House Plans Public Appeal on Deficit. Counting on the Election's Momentum, President Obama Will Try to Marshal Support for Tax Increases, Spending Cuts. The White House plans an aggressive public campaign to build support for its approach to reduce the deficit through tax increases and spending cuts, a sharp contrast to its private talks with Republicans that faltered last year. President Barack Obama will meet with labor leaders Tuesday and a number of chief executives on Wednesday, in an effort to solidify backing for his proposals. 
• Shifting Landscape Threatens China's Banks. China's banks are likely to face pressure to adjust their business models as the country looks to rebalance its economy toward more consumption and away from bank-fueled investment, which has enriched lenders.
• Organic Food To Be Tested Periodically. The U.S. Department of Agriculture said Friday it would require periodic tests of organic food starting next year to help ensure producers aren't using prohibited pesticides, genetically modified organisms or other nonorganic substances.
• Weekend gas lines ease up in NY, but may return. At least for one day, drivers in the New York region seem to be getting a break from spending hours in gas lines after Superstorm Sandy. Around New York City, they still waited longer than usual Saturday at stations. But the lines that stretched a dozen Manhattan blocks earlier in the week at some stations were far shorter. Many were closed — for lack of fuel or taking a break. In Brooklyn, drivers waited about 20 minutes at most — much less than in previous days. But on Staten Island, the few open stations were busier, with about 20 cars lined up on one street amid stalled traffic.
• Investors Turn Cautious on Crude. Hedge-fund managers are losing faith that persistently strong crude-oil prices will hold amid a fragile macroeconomic backdrop, both in the U.S. and globally, and an adequate oil supply. Their shift in positions, seen in two recent surveys, could signify that oil prices, which have been declining since hitting a peak in mid-September, could drop further. Money managers, including hedge funds, cut their wagers that Brent crude prices would rise in the week ended Oct. 30 to 91,462 contracts, the lowest number since early August, according to figures reported Nov. 5 by derivatives exchange IntercontinentalExchange Inc.
• No Individual Charges In Probe of J.P. Morgan(JPM). The top U.S. securities regulator doesn't intend to charge any individuals in its planned enforcement action against J.P. Morgan Chase & Co. for the allegedly fraudulent sale of mortgage bonds, according to people close to the investigation. The largest U.S. bank by assets will pay a significant financial penalty under the proposed deal, which has been approved by Securities and Exchange Commission staff but not by the agency's five commissioners, said the people close to the probe.
• The Hard Fiscal Facts. Individual tax payments are up 26% in the last two years. Even if Mr. Obama were to bludgeon Republicans into giving him all of the tax-rate increases he wants, the Joint Tax Committee estimates this would yield only $82 billion a year in extra revenue. But if growth is slower as a result of the higher tax rates, then the revenue will be lower too. So after Mr. Obama has humiliated House Republicans and punished the affluent for the sheer joy of it, he would still have a deficit of $1 trillion. Most of our readers know all this, but we thought you'd like some new evidence to rebut the kids who voted for your taxes to go up when they return from college for Thanksgiving. Maybe they'll figure it out when they have a job, if they can find one.

CNBC:

• 'Fiscal Cliff' Mess Is a 'Grand Canyon': Bill Gross. Two of the most influential market prognosticators today — Pimco’s Bill Gross and Goldman Sachs’s Jim O’Neill — both warned clients over the weekend of the perils of the coming "fiscal cliff," when tax increases and spending cuts kick in at the end of the year. “U.S. fiscal cliff (is) deeper than advertised,” said Gross, whose firm oversees $1.9 trillion, in a tweet. “It’s a Grand Canyon. Washington will defer entitlement cuts & raise revenues only marginally.” O’Neill, chairman of Goldman Sachs Asset Management, warned clients in a note that market momentum was quickly turning down on fears of policy gridlock. “The world and the U.S.’s own people need Washington, D.C. to be sensible,” wrote O’Neill. “We had a rehearsal of life without a fiscal package in August 2011, and it wasn’t very pleasant.”

Zero Hedge:

• The Most Important Chart To Consider For The Weekend (Or Tom Lee's Nightmare).
• Reading Between The Lines. One of the great faults with paying attention to Europe is to take what they tell you as factual. It is going to be either “debt forgiveness” or “more money” or “brute force” and there are quite serious consequences for many nations and many governments whichever path is chosen. 
• If The Greek Elections Were Held Today.
• Spot The Start Of The End Of The Keynesian Dream. (graph)
• Austerity Farm: Where Cuts For Some Are More Equal Than Cuts For Others.
• Visualizing The Impotence Of Bernanke's Wealth Transmission Channel.

Business Insider:

• Petraeus' Resignation Will Stop Him From Testifying About Benghazi.
• Rail Traffic Takes A Turn For The Worse. (graph)
• President Obama Has Drawn A Dangerous Line In The Sand. The headlines make it seem like B&O are ready to work together, and achieve the necessary compromises to avoid falling off a cliff. I think the press has it wrong. We’re headed into a bitter fight; in part, because the President has drawn a very dangerous line in the sand.
• China’s New Loans Fall 14% Raising Questions About Its Recovery.

Wall Street All-Stars:

• Indicator Update: Cliff Diving Edition.

Chicago Tribune:

• Coal miner blames President Obama's energy policies for layoffs of 156 workers in Utah, Ill. A coal producer owned by a longtime critic of President Barack Obama's energy policies is laying off nearly 160 workers at Illinois and Utah mines in the wake of the president's re-election. In a statement, Murray Energy blames what it calls the Obama administration's "war on coal" for the pink slips being given to 102 workers at its West Ridge Mine in Utah and 54 at its operation in the southern Illinois town of Galatia.

Washington Post: 

• Lawmakers want probe of Petraeus investigation. Senior lawmakers called for an inquiry into the FBI’s handling of the case of CIA Director David H. Petraeus on Sunday as new ­details and questions emerged about the investigation that led to his resignation last week. Law enforcement sources identified Jill Kelley, 37, of Tampa as the woman whose report of harassing e-mails eventually ­exposed an extramarital affair ­between Petraeus and Paula Broadwell, a former Army officer who wrote a biography of the retired four-star general.

OregonLive:

• Intel(INTC) will end support for Oregon Boy Scouts over Scouts' policy on gays. They're a casualty of a change in Intel's requirements -- which attaches a nondiscrimination pledge to the donation -- and the Boy Scouts of America's ban on gay members and troop leaders. "We don't have many gifts at that level. So that's going to hurt," said Matt Devore, head of the Scouts' Cascade Pacific Council. "When any political, adult issue gets in the way, where the real pain is is when it affects children." 

 The Orange Country Register: 

• Mark Landsbaum: U.S. becoming California becoming Greece. California arguably leads the nation in government dependency, while events in Greece illustrate the ultimate destination of that path.

NRO: 

• Obamacare Is Still Vulnerable. Now is not the time to go wobbly. Obamacare is still harmful and still unpopular. The presidential election was hardly a referendum, as it pitted the first person to enact Obamacare against the second person to enact it. Since the election, many state officials are reaffirming their opposition to both implementing exchanges and expanding Medicaid. If enough states do so, Congress will have no choice but to reopen Obamacare. With a GOP-controlled House, opponents will be in a much stronger position than they were when this harmful law was enacted.

USA Today: 

• Israel drawn into Syria fighting for first time. Israel was drawn into the fighting in neighboring Syria for the first time Sunday, firing warning shots across the border after an errant mortar shell landed near an Israeli military installation in the Golan Heights.

Financial Times: 

• Don’t fear fiscal cliff, says Democrat. A leading Democratic senator has said her party should be willing to go off the fiscal cliff in order secure tax rises on the wealthy, raising the stakes in year-end budget negotiations. “If the Republicans will not agree with that, we will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year,” said Patty Murray, who was co-chair of last year’s deficit supercommittee, on ABC’s This Week.

Telegraph:

• We've been on the back foot with the EU ever since we joined. Can we agree to lead separate lives – or must it be divorce?

WirtschaftsWoche: 

• The Ifo Institute for Economic Research President Hans-Werner Sinn says it would be a "foreseeable disaster" if all countries on the ECB's banking supervision body would have equal voting rights, citing an interview with Sinn. Sinn criticized any solution where all countries regardless of size each have one vote on banking supervison board. The majority of Mediterranean countries to be unchallenged in such a solution, meaning those nations can decide what banks would be regarded for aid through ESM guarantees. Form of guarantor's liability for southern Europe banks planned by EU would cost northern European countries billions, Sinn said. 

Der Spiegel:

• The troika overseeing Greece's aid package, will only give Greece more money if it guarantees planned job cuts in the public sector, citing government officials. The troika is not satisfied with Greece just providing a number. The troika said that Greece must provide a list with names of the 2,000 people it will make redundant before the end of the year.

Focus:

• German taxpayers have so far provided EU34.5b in credit and guarantees to Greece, citing figures from Germany's Finance Ministry. Another EU33b for Greece still outstanding.

Welt am Sonntag:

• German Finance Minister Wolfgang Schaeuble said euro-region finance ministers are unlikely to be able to decide on the next aid tranche for Greece when they meet Nov. 12, citing Schaeuble.

National Post:

• Amid renewed violence, Israel tells Palestinians to stop statehood bid or funding will be cut. Israel will stop collecting tax revenues for the Palestinian Authority and not hand over any money if President Mahmoud Abbas continues to seek observer state membership of the United Nations, Israel’s finance minister said on Saturday. “If the Palestinians continue to advance their unilateral move they should not expect bilateral cooperation. We will not collect their taxes for them and we will not transfer their tax revenues,” Finance Minister Yuval Steinitz said.

Business Recorder:

• China October Copper, Iron Ore Imports Fall. China's copper imports dropped 18.5 percent in October to hit its lowest level in 15 months, while iron ore imports also fell to a one-year low, which was partly caused by a week-long holiday at the start of the month. The world's top copper consumer received 321,879 tonnes of anode, refined metal, alloy and semi-finished copper production in October, down 16.1 percent from year ago. The October imports surprised traders who had anticipated importers to have scheduled more term shipments for October as demand rose on infrastructure projects. Inventories at Shanghai's bonded warehouses, the country's largest, have also risen 14 percent from late September to about 800,000 tonnes currently, a sign that some of the scheduled arrivals could have been pushed back to November. Imports of iron ore from the world's top steel consumer fell 13 percent from a month ago to 56.43 million tonnes in October -- the lowest since October 2011. However, on a year on year basis, imports were up 13 percent. 

IRNA:

• Iran has rejected a U.S. request to start direct contact with the country, citing Major General Yahya Rahim Safavi, senior military adviser to Iran's supreme leader.

Weekend Recommendations

Barron's:

• Made positive comments on (CAR), (FCXM), (VMED), (CKEC), (HRG), (AAPL), (COH), (BBBY), (FDX), (JOSB) and (REV).

Night Trading

• Asian indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 123.50 +2.5 basis points.
• Asia Pacific Sovereign CDS Index 90.75 +3.5 basis points.
• FTSE-100 futures -.20%.
• S&P 500 futures +.16%.
• NASDAQ 100 futures +.25%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (DHI)/.28
• (BZH)/-1.17
• (HOLX)/.36
• (JEC)/.79 

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Finance Ministers Meeting, Germany ZEW Sentiment Index, Japan Industrial Production report, Bank of America Merrill Energy Conference, Goldman Sachs Industrials Conference and the (RAI) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly 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 mixed. The Portfolio is 50% net long heading into the week.