- Spanish Bonds Risk Forced Selling as Rating Approaches Junk. Spanish government bonds are facing a selloff by investors concerned that the nation’s credit rating will be cut to non-investment grade after Standard & Poor’s lowered its ranking for the debt to one level above junk. Spain’s two-year notes fell for a fourth day, the longest run of declines in six weeks, after New York-based S&P said yesterday it had cut the rating two levels to BBB-. While data compiled by Bloomberg News shows that about half the time government bond yields move in the opposite direction suggested by new ratings, a potential cut to junk may prompt selling by investors who use bond indexes to determine their holdings of fixed-income assets. Moody’s Investors Service is studying a possible downgrade for Spain from its current Baa3 level, its lowest investment- grade rank, and Fitch Ratings scores the country BBB, two steps above junk.
- Schaeuble Clashes With IMF, Rejects Government Writeoffs. German Finance Minister Wolfgang Schaeuble said European governments can’t accept losses on Greek debt holdings, clashing with the International Monetary Fund. “At the International Monetary Fund, there are indeed considerations that if the total Greek debt was reduced by means of a haircut borne by public creditors, the gap would be easier to close” in terms of Greece’s debt sustainability, Schaeuble said in Tokyo today before a meeting of finance chiefs.
- Spain Downgrade Undermines ESM's Credit Rating: Chart of the Day. Spain's downgrade threatens to undermine the European Stability Mechanism by accelerating the slide in collective ratings of nations backing the bailout fund. The debt crisis has dragged the average grade almost three steps lower since the fund was given the go ahead in 2010 to the border of single A, compared with the top ranking the ESM holds. Spain's downgrade increases the amount nations backing the bailout fund may have to pay, meaning "they are more likely to be cut and the ESM gets downgraded," said Stuart Thomson, who helps oversee about $120 billion at Ignis Asset Management in Glasgow, Scotland.
- Goldman’s Cohn Sees ‘Small’ Chance Euro Area Will Stick Together. Goldman Sachs Group Inc. (GS) President and Chief Operating Officer Gary D. Cohn sees a “small” probability that the euro area will stick together, saying it’s more likely that some countries will exit to pursue growth. “In federalism, you create a unified Europe, where the countries that are thriving because of the currency subsidize the countries that are contracting because of the currency,” Cohn said in an interview in Tokyo today. “I would put a relatively small probability of that happening.”
- Italian Yields Rise at Auction as Concern on Spain Mounts. Italy’s borrowing costs rose at an auction of three-year debt today on concern that Spain’s reluctance to request a bailout will weigh on Italian bonds. The Rome-based Treasury sold 3.75 billion euros ($4.8 billion) of its benchmark three-year bond to yield 2.86 percent, more than the 2.75 percent at the last auction of the same securities on Sept. 13. Investors bid for 1.67 times the amount offered, up from 1.49 times last month.
- China’s Banks Said to Resist Cutting Lending Rates. China’s biggest banks are resisting government pressure to lower borrowing costs amid an economic slowdown as they seek to maintain the profitability of their lending operations, officials at the top four lenders said. The banks are limiting discounts for their best corporate clients to 10 percent of the benchmark lending rate, the officials said, asking not to be identified as they’re not authorized to speak publicly. The central bank in July began allowing lenders to offer credit at 30 percent less than the benchmark rates. Keeping borrowing costs high may blunt efforts to revive growth that has decelerated for six straight quarters in the world’s second-largest economy. Credit expansion is also limited by the central bank’s loan quotas, the officials said, highlighting the conflicting efforts within China to curb loan defaults while boosting funding for infrastructure projects.
- Iron-Ore Swaps Extend Decline as Chinese Buying Seen Weakening. Iron-ore swaps fell for a second day on speculation Chinese demand weakened for the commodity used to make steel while higher prices drew more cargoes. Fourth-quarter contracts dropped 2.6% to $110.50 a dry metric ton as of 1:37 pm in London. Higher physical prices drew miners to offer more cargoes as buying slowed, said Kerry Deal, head of iron-ore and bulk derivatives at Jfferies Hong Kong Ltd.
- Trade Deficit in U.S. Widened in August as Exports Dropped. The U.S. trade deficit widened in August as slower global growth reduced demand for American exports. The gap grew 4.1 percent to $44.2 billion from $42.5 billion in July, Commerce Department figures showed today in Washington. Exports decreased to the lowest level since February. A separate report showed the cost of goods shipped to the U.S. rose more than forecast in September. A stagnant Europe and slower growth in China and other emerging markets may curtail demand for American products, which had been a source of strength for U.S. manufacturers earlier this year. At the same time, the pickup in energy costs may push up the nation’s import bill, keeping the trade gap elevated. “For the first time, the U.S. economy is gradually feeling the impact from the global growth slowdown,” said Harm Bandholz, chief economist at UniCredit Group in New York, who forecast the deficit would widen to $44 billion. “In the third quarter, the weaker global economy will leave its mark also on the U.S.”
- Corn Surges to Three-Week High as USDA Sees Smaller World Supply. Corn futures jumped to a three-week high after a government report showed global inventories will drop more than expected as the worst U.S. drought in more than 50 years cuts output by the most since 1996. Worldwide inventories on Oct. 1 will be 117.27 million metric tons, down from 123.95 million predicted a month ago and 131.54 million estimated this year, the U.S. Department of Agriculture said today. Reserves as a percent of consumption will fall to 13.7 percent, the lowest since 1974, USDA data show. Stockpiles in the U.S., the largest grower and exporter, will fall 37 percent to 15.73 million tons, from last year. “This report signals there is absolutely no supply cushion,” Dale Schultz, the buyer-relations manager for AgWest Commodities LLC in Holdrege, Nebraska, said in a telephone interview. “We have to raise prices and reduce demand immediately to prevent a real shortage.” Corn futures for December delivery rose 4.7 percent to $7.715 a bushel at 10:32 a.m. on the Chicago Board of Trade, heading for the biggest gain since Sept. 28. The price earlier touched $7.7425, the highest since Sept. 17.
- Biden-Ryan Debate Likely to Be Combative. Joe Biden and Paul Ryan arrived in Kentucky for a Thursday night debate that has potential to either accelerate or stall the momentum gathering behind Mitt Romney's come-from-behind presidential bid. The debate, to be broadcast nationally at 9 p.m. ET from Centre College in Danville, is expected to be more combative than last week's faceoff between the Republican candidate and President Barack Obama, whose lackluster performance disappointed his supporters.
- U.S. Growth Is Expected To Be Slow Into 2013.
- Greek unemployment rate hits 25.1 percent in July as recession heads for sixth year. Unemployment in Greece hit a record high of 25.1 percent in July as the country's financial crisis continues to exact its heavy toll, official figures showed Thursday. All indications are that unemployment in Greece will continue to rise. The economy has shrunk by around a fifth since the recession started in 2008 and youth unemployment has pushed way above 50 percent. The economy is expected to enter a sixth year of recession next year. "This is a very dramatic result of the recession," said Angelos Tsakanikas, head of research at Greece's IOBE economic research foundation.
- US Nears Fiscal Disaster: ‘Washington Doing Nothing’
- Is a Larger Middle East War Inevitable?
- ‘Only Half-Time’ in Euro Debt Crisis: Evercore's Altman.
- Why Jobless Claims May Not Be as Good as Market Thinks.
- S&P Will Downgrade France And Italy Next, CDS Implies. (graph)
- Charting The 'Housing Recovery' Subsidy: Foreclosures Slide To Five Year Lows.
- NASSIM TALEB: 'The European Union Is A Horrible, Stupid Project'.
- GALLUP: ROMNEY MOVES BACK INTO THE LEAD. Republican Mitt Romney has retaken the lead over President Barack Obama in Gallup's daily tracking poll Thursday and now has a 48-47 edge over the president among likely voters.
- California independents switch to Romney. While no one expects President Barack Obama to lose California on Nov. 6, former Gov. Mitt Romney is gaining on him. Romney
has gained 8 points in California over the past month, according to a
poll released Thursday by Survey USA. Obama now leads Romney 53-39, as
opposed to 57-35 a month ago. “Obama carried California by 24 points in
2008, “ the pollster said,
“so today Obama is running 10 points weaker than he ran 4 years ago, 8
points weaker than he ran 4 weeks ago. Among Independents, Obama led by
14 in September, trails by 9 in October, a 23-point right turn among the
most coveted voters.” Independent voters prefer Romney 44-35 percent, according to the poll.
What makes Romney’s gain impressive is that only nominal amounts of money have been spent in California because it has not been considered friendly territory, and it has made more strategic sense to spend campaign dollars elsewhere.
- Worker's injury casts harsh new light on Foxconn and China. Apple Inc's(AAPL) largest contract manufacturer has been pushing for a Chinese worker left brain-damaged in a factory accident to be removed from hospital in a case that throws a harsh new spotlight on labour rights in China.
- Plosser worries US Fed could face losses on assets.
- Brazil stocks feel impact of intervention. Brokers trying to hawk Brazilian shares to international fund managers in New York and London have had a tough time of it recently. Many joke they have been almost forcibly ejected from the offices of the top “buyside” houses, who are smarting after seeing the share prices of many large Brazilian companies plunge on the back of government intervention.
- Global spat erupts over power of developing countries at IMF. A spat has broken out between developing countries and the US over Washington’s refusal to sign off a deal struck two years ago that would give the smaller nations greater influence at the International Monetary Fund.
- Spain keelhauled by Germany and AAA chicanery.
- Top German Economists Say Greece Is Lost. Several top German economic institutes on Thursday warned that German growth is slowing as the country continues to be hampered by the ongoing euro-zone debt crisis. And Greece, they say, will be unable to "free itself from its debt burden" and will need another haircut.
- Haaretz poll: Netanyahu beats election rivals, right-wing bloc grows stronger. Poll shows that support for Netanyahu is even stronger than it was in the previous poll some two weeks ago.