Monday Business Edition

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• Greek gloom rocks markets, troubles lenders
  
  By Harry Papachristou and Jan Strupczewski
  
  ATHENS | Mon Oct 3, 2011 12:14pm EDT

  (Reuters) – Greece’s admission that it will miss its deficit target this year despite harsh new austerity measures sent stock markets reeling on Monday and raised new doubts over a planned second international bailout.

  The gloomy news from Athens brought the specter of a debt default closer and will weigh on talks among euro zone finance ministers in Luxembourg later on Monday on the next steps to try to resolve the currency area’s sovereign debt crisis.

• Greek economy stuck in recession, complicates fiscal efforts
  
  By Harry Papachristou and Ingrid Melander
  
  ATHENS | Mon Oct 3, 2011 10:59am EDT

  (Reuters) – Greece will remain trapped in recession next year, threatening the country’s efforts to cut deficits and claw its way out of a debt crisis shaking the euro zone, budget figures showed on Monday.

  The economy will suffer a fourth consecutive year of contraction, shrinking by 2.5 percent in 2012 after an expected 5.5 percent slump this year, according to the 2012 budget draft submitted to parliament after talks with international lenders.

• Wall Street flat as data offsets Greece
  
  By Ryan Vlastelica
  
  NEW YORK | Mon Oct 3, 2011 12:28pm EDT

  (Reuters) – Stocks were little changed on Monday as positive U.S. economic data helped to offset fears Greece may require increased euro zone financial assistance after news it will exceed its deficit targets.

  Wall Street began the new quarter with choppy trading after falling on Friday to end its the weakest quarter since 2008. The decline was sparked in part by worries over the financial crisis in Europe and the threat of recession that could drag down economies around the world.

• Treasury 30-Year Bonds Advance on Fed Debt Buying, European Fiscal Crisis
  
  By Susanne Walker – Oct 3, 2011 1:04 PM ET

  Treasury 30-year bonds rose after the biggest quarterly rally since 2008 as the Federal Reserve bought $2.5 billion of longer-term debt and European fiscal concern overshadowed U.S. economic reports. Yields on 10-year notes touched a one-week low after briefly paring their drop on a report from the Institute for Supply Management showing manufacturing unexpectedly accelerated. The extra yield for holding long bonds instead of five-year notes was the narrowest in almost two years after the Fed started the program known as Operation Twist.

• U.S. Company Credit Risk Benchmark Rises to Highest Level Since May 2009
  
  By Zeke Faux – Oct 3, 2011 12:55 PM ET

  A benchmark gauge of U.S. corporate credit risk rose to the highest level since May 2009 as Europe’s finance chiefs strove to prevent a Greek default and the country signaled bigger budget deficits than forecast.

  The Markit CDX North America Investment Grade Index added 1.9 basis points to a mid-price of 146.1 basis points as of 12:33 p.m. in New York, according to index administrator Markit Group Ltd. Swaps on Morgan Stanley jumped 33.6 basis points to 523.8, the highest since November 2008, and those on Bank of America Corp. rose 9.3 to 433.2 as of 12:04 p.m. in New York, according to data provider CMA.

• Euro at Decade Low Versus Yen as Ministers Disagree About Fund Capacity
  
  By Allison Bennett and Keith Jenkins – Oct 3, 2011 12:24 PM ET

  The euro fell to more than a decade low against the yen as European finance ministers clashed about expanding the capacity of the European Financial Stability Facility.

  The 17-nation currency slid to an eight-month low against the dollar as incoming European Central Bank President Mario Draghi said a lack of confidence may be among the reasons for lenders’ “funding problems.” The yen rose against all its major counterparts as Japan’s biggest manufacturers remained below levels seen before a record earthquake in March. Canada’s currency rose after manufacturing unexpectedly accelerated in the U.S., its largest export market.

• Construction Spending in U.S. Unexpectedly Rose in August on Local Outlays
  
  By Shobhana Chandra – Oct 3, 2011 10:00 AM ET

  Construction spending in the U.S. unexpectedly rebounded in August, propelled by the biggest jump in state and local government outlays in more than two years.

  The 1.4 percent gain reversed the revised 1.4 percent drop in July, Commerce Department figures showed today in Washington. The median estimate of 52 economists surveyed by Bloomberg News called for a 0.2 percent decline. The industry was up 1.4 percent from August 2010 before adjusting for seasonal variations, the first positive reading this year.

• Pimco’s Total Return Fund Has 16% in Treasuries
  
  By Daniel Kruger and Cordell Eddings – Oct 3, 2011 9:49 AM ET

  Eight months ago Bill Gross, manager of the world’s biggest bond fund, said Treasuries “may need to be exorcised” and cleaned them out of his $245 billion Total Return Fund. The company then used derivatives to bet against the debt in March.

  Now the Pacific Investment Management Co. fund has 16 percent of its assets in U.S. government securities as the debt posted the highest quarterly returns in almost three years.

• Greece Approves $8.8 Billion in Spending Cuts Before Scrutiny by EU, IMF
  
  By Marcus Bensasson and Maria Petrakis – Oct 3, 2011 9:15 AM ET

  The Greek government said it passed a new budget backed by its international creditors, including larger deficits than previously forecast, as the country moves closer to securing an 8 billion-euro ($10.7 billion) aid payout needed to avoid default.

• Manufacturing sector grows faster in September
  

  (Reuters) – Factory activity expanded at a faster pace than expected in September as production and hiring increased, suggesting that manufacturing should help keep the economy out of recession.

  The Institute for Supply Management said on Monday its index of national factory activity rose to 51.6 last month from 50.6 in August.

• Manufacturing may help fight off new recession
  
  By Lucia Mutikani
  
  WASHINGTON | Mon Oct 3, 2011 12:48pm EDT

  (Reuters) – Factories grew more quickly in September as production and hiring increased, suggesting that manufacturing would help keep the economy from slipping into a new recession.

  Other data on Monday offered more good news for the troubled U.S. economy, with strong demand for new motor vehicles putting sales on track to surpass August’s rate, and construction spending unexpectedly rebounding in August.

• Europe, Asia September factory activity slumps
  
  By Jonathan Cable and Emily Kaiser
  
  LONDON | Mon Oct 3, 2011 6:23am EDT

  (Reuters) – Factory activity in Europe and Asia slumped in September to levels not seen since the depths of the financial crisis as export demand dropped, surveys showed on Monday, reinforcing fears of a return to recession.

  Corresponding figures for the United States due later on Monday are expected to underscore the gloomy outlook for the global economy.

• Tim Cook’s time to shine with new Apple iPhone
  
  By Poornima Gupta
  
  SAN FRANCISCO | Mon Oct 3, 2011 8:03am EDT

  (Reuters) – Tim Cook finally gets his chance to stride out from under Steve Jobs’ shadow, and he could not have picked a better time or device to mark his unofficial debut as Apple Inc’s CEO.

  The latest generation of the iPhone — still the smartphone industry’s gold standard after four years — is expected to see the light of day this Tuesday, just in time for the holidays.

• Insight: Brokers point fingers over “naked access” rule
  
  By Jonathan Spicer
  
  NEW YORK | Mon Oct 3, 2011 5:25am EDT

  (Reuters) – Broker-dealers are taking very different approaches to a new rule that requires them to scrutinize customers’ credit positions and block reckless orders before trades are executed, setting off finger-pointing and new challenges for regulators.

  Some firms are accusing rivals of casually interpreting a Securities and Exchange Commission rule that bans giving clients “naked” access to the marketplace, according to interviews with more than a dozen Wall Street officials and regulators.

• Grand jury indicts 55 for $250 million in tax scams
  

  (Reuters) – A grand jury has indicted 55 people for participating in scams that tried to bilk the government out of more than $250 million in undeserved tax refunds, prosecutors in California said on Monday.

• American Airlines shares tumble 18 percent on outlook
  

  Reuters) – Shares of American Airlines parent AMR Corp (AMR.N) fell more than 18 percent on Monday as analysts debated the prospects for a bankruptcy filing for the third- largest U.S. airline, which lags its industry peers.

  Airline stocks were down broadly on concerns that a weak economy will drain travel demand and hit fares this autumn.