FHA could need bailout next year. The Federal Housing Administration faces a 50% risk that it could require a government bailout next year, as a rising number of mortgage defaults and falling prices have caused the agency's reserves to drop to just $2.6B, The Wall Street Journal reports, citing an annual audit. Any rescue and its scale would depend on house prices - a fall of over 5.6% would force the FHA to seek help. The audit comes with Congress set to increase the maximum size of loans that the agency can insure.
Contagion spreads as Italian yields pass 7% again. Italian 10-year bond yields have again climbed past 7% despite reported buying from the ECB, while Spanish yields have been moving in that direction as well, with the contagion also spreading to more high-rated countries such as Austria and Holland. The turmoil has increased the pressure on Mario Monti to form a cabinet as soon as possible after he failed to do so yesterday.
Germany, France drive eurozone growth in Q3. The rise in eurozone bond yields comes despite the economies of Germany and France improving in the third quarter, with German GDP rising an annualized 2.6% and France showing a quarterly 0.4% growth after contracting in Q2. The performances helped eurozone GDP expand an annual 1.6%. However, a report by the Lisbon Council ranked France 13th out of 17 in the eurozone for its overall health.
Agreement reached on new pipeline route. TransCanada (TRP) has forged a tentative deal with the Nebraska state senate to move the proposed route of its Keystone XL pipeline away from the environmentally sensitive Sandhills region. However, despite this attempt to hasten the slowed-down approval process, the State Department reiterated earlier estimates that an environmental assessment of the new route would take 12-18 months, leaving a decision until after the presidential election.
Buffett turns techie. After staying away from tech stocks, Warren Buffett has broken the habit of a lifetime and disclosed that Berkshire Hathaway (BRK.A) has not only bought a 5.5% stake in IBM (IBM), it has also acquired 9.3M shares in Intel (INTC). Could Buffett be late to the party, though? IBM has traded in a range of 11x-13x forward earnings during 2011 vs. 10x-12x in 2010.
Congress set to extend funding for agencies. For once not leaving it to the 11th hour, Congressional negotiators last night agreed to extend funding for various government agencies until mid-December or until the end of the fiscal year in September 2012, thereby avoiding a shutdown this weekend. Agencies whose operations will be extended for the fiscal year will receive $7B less than last year and $98B less than what President Obama requested. The House and the Senate must approve the deal.
Report clears Sino-Forest of being a Ponzi scheme. Sino-Forest (OTC:SNOFF) said an independent report has verified the company's timber assets, cash balances, book values and revenue, thereby refuting claims from short seller Muddy Waters, which accused Sino-Forest of being a "near total fraud" and a "Ponzi scheme." One wonders whether John Paulson and other investors will contact their lawyers, with the stock plunge that followed the allegations costing them at least C$3.3B ($3.25B).
IMF warns China over its financial system. China's banking system "could be severely impacted" if a variety of risks, such as asset quality and off-balance sheet activities, were to cause problems at the same time, the IMF has warned. While the organization praised China for progress on reforms, it recommended further changes. KGI Asia's Ben Kwong said Beijing needs to balance the IMF's concerns and maintaining growth.
Dell seen steady in Q3 but Thai floods pose a risk. Dell's (DELL) Q3 results are due out after the bell, when it is expected to report that EPS rose 4% to $0.47 and revenue 1.6% to $15.66B. With a large proportion of Dell's revenues coming from corporate customers, the company is expected to be somewhat shielded from the slowdown in consumer PC sales. However, cutbacks by governments and the Thai floods pose a risk going forward.
UBS confirms Ermotti as permanent CEO. UBS (UBS) has appointed interim CEO Sergio Ermotti to the post permanently to replace Oswald Gruebel, who quit in late September because of the $2B losses by a rogue trader. Former Bundesbank head Axel Weber will be proposed as Chairman to take over from Kaspar Villiger, who will stand down in May.
Harrisburg misses deadline over debt. Harrisburg, the capital of Pennsylvania, last night missed a final deadline to come to an agreement with creditors over $318M of debt related to its incinerator and thereby avoid a state takeover. The council will now go before a federal judge next week for a hearing about whether a bankruptcy case can proceed.
In Asia, Japan -0.7% to 8542. Hong Kong -0.8% to 19348. China flat at 2530. India -1.4% to 16883.
In Europe, at midday, London -1.3%. Paris -1.9%. Frankfurt -2.2%.
Futures at 7:00: Dow -0.9%. S&P -1.1%. Nasdaq -1%. Crude -0.6% to $97.59. Gold -0.8% to $1764.40.
Tuesday's economic calendar:
7:45 ICSC Retail Store Sales
8:30 Producer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
8:55 Redbook Chain Store Sales
10:00 Business Inventories
Earnings Results: Companies that beat EPS expectations last night and today include Assured Guaranty (AGO), Home Depot (HD).
Those that missed forecasts include Wal-Mart (WMT).