Moody's skeptical about eurozone debt deal. Moody's isn't buying the eurozone's latest world-saving deal, saying it still expects to review its ratings on all EU sovereign credit in Q1 2012. "In substance," the agreement "offers few new measures, and does not change our view that risks to the cohesion of the euro area continue to rise," Moody's said. Meanwhile, S&P Chief Economist Jean-Michel Six said the pact was a significant step, but more fiscal and monetary action is needed and time is running out.
FSA slams RBS and regulators over ABN Amro acquisition. In a long-awaited report, the U.K. Financial Services Authority has criticized RBS (NYSE:RBS) and regulators over RBS's near-collapse in 2008 following its €72B ($96B) takeover of ABN Amro in partnership with two other banks. The watchdog listed six reasons for RBS's failure, including an over-reliance on risky short-term wholesale funding and weaknesses in the bank's capital position. The FSA now wants automatic sanctions for senior executives for bank failures, and increased oversight of financial mergers.
Fed may be unaware of final bank borrowers in lending scheme. Under the Fed's currency-swap plan, which has become a key tool to fight the eurozone crisis, the bank may not know who the final borrowers are. With the program, the Fed lends money to other central banks and they then confidentially loan it to local banks. Last week, the ECB's three-month dollar lending through swap lines surged to $50.7B.
EU faces Lehman event with huge CDS sales. The EU could be in for some Lehman-style chaos if there is a sovereign default: banks in the region have sold €178B ($238B) worth of CDSs on GIIPS bonds to each other and tried to hedge this by buying €169B worth. At least 38 banks have sold the instruments, with Deutsche Bank (NYSE:DB) selling €37.4B and buying €34.5B.
Yields fall in latest Italian auction. Despite the skepticism of Moody's and others about the eurozone fiscal union deal, Italy's yields fell in its latest auction. The country sold €7B in 12-month bills, with the average yield dipping to 5.952% from 6.087% prior. However, the bid-to-cover ratio slipped to 1.92 from 1.99 prior, and in the secondary market, Italian 10 year BTPs were 42 bps higher at 6.78% at midday in Europe; those of Spain were +32 bps to 6.07%.
OECD nations will need to raise $10.5T next year. The gross borrowing needs of OECD governments will rise to $10.5T next year from $10.4T this year, with the share of short-term debt issuance 44%. This means that governments will have to regularly face the "animal spirits" of the market just as some, such as Italy and Spain, no longer enjoy a "risk-free" status.
Fannie and Freddie fees eyed to pay for payroll tax cut. Democrats and Republicans are considering boosting the fees that Fannie (OTCQB:FNMA) and Freddie (OTCQB:FMCC) collect from lenders as a way to finance the payroll tax cut. The idea could raise up to $38B over 10 years, but critics say the costs would be passed onto borrowers, while others don't like the precedent of using the mortgage giants as a "slush fund" for Congress and the administration.
Lehman looks to keep Archstone out of Equity's clutches. Lehman's (OTC:LEHMQ) bankruptcy estate is preparing to match Equity Residential's (NYSE:EQR) $1.33B bid to buy 26.5% of Archstone from Bank of America (NYSE:BAC) and Barclays (NYSE:BCS), The Wall Street Journal reports. Equity and Lehman want to gain control of all of the apartment company, with the latter already owning 47% and looking to eventually take it public.
SEC demands information over Iran, Syria sales. The SEC has told at least 12 U.S.-listed firms, including American Express (NYSE:AXP) and Caterpillar (NYSE:CAT), to disclose their activities with Syria, Iran and other "state sponsors" of terror, The Financial Times reports. Sales to these nations have dropped due to sanctions, although Sony (NYSE:SNE) and others have used middle-men in Dubai to keep the supply lines open.
Zynga the standout in busy week for IPOs. This week marks the busiest for IPOs since March, with eleven companies seeking to raise up to $3.8B via offerings on U.S. exchanges. The standouts are online gaming company Zynga (ZYNG), which wants to obtain as much as $1B, and luxury-clothing designer Michael Kors (NYSE:KORS), which is aiming for $792M.
California to cut $2.5B. California Governor Jerry Brown is expected to announce up to $2.5B in budget cuts following an estimated revenue shortfall of $3.7B, The Wall Street Journal reports. The savings could include a seven-day reduction of the school year, projected to save $1.5B.
Public early retirement packages under scrutiny. With people living longer and municipalities struggling to pay pension bills, critics question whether early retirement packages for public workers are sustainable. CNBC highlights one former public servant who will receive over $174,000 a year after retiring at 59. Defenders of the situation argue that attractive pensions help draw in and keep people in vital jobs such as teaching and fire-fighting.
Regulator seeks changes to Deutsche Boerse, NYSE deal. Deutsche Boerse's (OTCPK:DBOEY) regulator, the state of Hesse, has legal reservations about the exchange operator's takeover of NYSE Euronext (NYSE:NYX) and has submitted suggested amendments to the deal.
In Asia, Japan +1.4% to 8654. Hong Kong -0.1% to 18576. China -1.0% to 2292. India -2.1% to 15870.
In Europe, at midday, London -0.6%. Paris -1.1%. Frankfurt -1.6%.
Futures at 7:00: Dow -0.6%. S&P -0.7%. Nasdaq -0.5%. Crude -1.3% to $98.13. Gold -2% to $1682.50.
Monday's economic calendar:
1:00 PM Results of $32B, 3-Year Note Auction
2:00 PM Treasury Budget
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