Melancholy start to Q4. Greece's admission that it will miss its budget-deficit targets roiled markets Monday as stocks kicked off Q4 on a sour note, with the S&P falling 2.85% to a 13-month low of 1,099.23, led by weakness in bank stocks. Morgan Stanley (NYSE:MS) fell 7.6% and Bank of America (NYSE:BAC) dived 9.6% as traders worried about counterparty risk if Europe continues to deteriorate. Futures are near session lows at 7:00, with benchmark S&P -0.8% to 1078, reflecting broader losses across Europe.
Europe double-dip? S&P dropped its 2012 outlook for Europe growth - for the second time in five weeks - to 1.1% from 1.5%, and now pegs the risk of a double-dip recession at 40%. Recent data "point to a fresh deterioration in the business climate," S&P said, not only in debt-strapped countries, "but also in the core countries of the eurozone and in the U.K." In a report today, Goldman said it now expects the eurozone to sink into a mild recession in Q4.
Deutsche Bank scraps profit target. Deutsche Bank (NYSE:DB) said this morning it would not reach its 2011 profit target, predicting a €250M Q3 impairment on Greek sovereign debt. DB will also reduce headcount by another 500 "in response to the significant and unabated slowdown in client activity." While most banks have marked down Greek debt, Dexia (OTCPK:DXBGY), BNP Paribas (OTCQX:BNPQY) and SocGen (OTCPK:SCGLY) have not - a decision analysts say is contributing to the downdraft in their share prices. Shares of DB were recently -5.8% in Frankfurt.
UBS sees modest Q3 profit. UBS (UBS) said this morning it expects to turn a "modest net profit" in Q3, despite the recent $2.3B rogue trading loss. But if you factor out €2.2B in 'adjustments,' UBS's modest profit is likely to fall well short of the €1.5B Street consensus, likely due to ongoing poor performance at its I-bank. UBS was recently +0.1% in Zurich.
Dexia props. French and Belgian FMs pledged to guarantee financing raised by teetering Dexia (OTCPK:DXBGY), and said they'll intervene if necessary to protect account holders and creditors. Dexia needs about €5B to achieve its required 9% Tier I ratio. Shares fell Tuesday as much as 32% to an all time low, and are down 59% since June (PR). In a throwback to 2008, a French government source today insisted Dexia "has a problem of liquidity, not of solvency."
Google forges ahead with YouTube TV. Sources say Google (NASDAQ:GOOG) is in late-stage talks with superstars and media outlets (TWX, NWS) to produce YouTube-only content, a first step to becoming "a next-generation cable provider that oversees dozens of free online channels with professional-grade shows." GOOG is forking over than $100M in advances to secure the exclusive shows.
A backstop for the Greece backstop. Eurozone FMs - including Finland - agreed on a deal to provide collateral for loans to Greece. The deal is available to all eurozone members; other member nations had vetoed an earlier bilateral deal between Greece and Finland.
AMR crash alert? American Airlines parent AMR (AMR) dove 33% Monday on renewed fears the third-largest U.S. carrier may be forced to seek bankruptcy protection. Fueling the speculation are concerns AMR has burned through its cash reserves, and reports that more than 200 pilots have retired from its central hub over the last two months, compared with a typical monthly dozen. AMR denied the reports, saying a bankruptcy filing is "not our goal or preference," but conceded that "we need to improve our results." Peer impact: LCC -16%, UAL -12%, DAL -11%, LUV -9%.
McGraw-Hill sells broadcasting business for $212M. McGraw-Hill (MHP) unloaded its nine-station broadcasting group to E.W. Scripps (NYSE:SSP) for $212M, cashing in on a "non-strategic asset" as it works toward completing its split into two "pure play" companies.
Next up, $15T. The U.S. government ended its fiscal year with an unprecedented debt of $14.79T, including $95B tacked on in the final day.
China lashes out at U.S. yuan bill. In a veiled threat of a trade war, China expressed "deep regret" over a proposed bill - approved yesterday by the Senate - designed to pressure Beijing on its currency policy, saying it "seriously violates rules of the WTO and obstructs China-U.S. trade ties." The PBOC maintains that after factoring in inflation, the yuan is now close to a balanced level. House Republicans remain skeptical of the bill and the White House hasn't endorsed it.
IPO weakness not echoed in PE markets. In further evidence of the chill that's descended over the IPO scene, only 5 venture capital-backed companies went public in Q3, the lowest number since late 2009. On the other hand, 101 VC-backed companies were bought out; the dollar amount for deals with disclosed terms at its highest level since Q4 2009.
Asia: Japan -1.1%. Hong Kong -3.4%. China closed. India -1.8%.
Europe at midday: London -2.2%. Paris -2.4%. Frankfurt -3%.
Futures at 7:00: S&P -0.7%. 10-yr -0.04%. Euro +0.07% vs. dollar. Crude -1.76% to $76.25. Gold +0.71% to $1669.45.
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