(BN) Stocks, Commodities Slump as European Bond Risk Climbs to Record on Crisis

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Stocks, Commodities Slump as European Bond Risk Climbs to Record

Nov. 23 (Bloomberg) -- Stocks sank, dragging the Standard & Poor's 500 Index lower for a sixth straight day, and costs to insure European government debt rose to a record after a German bund auction fueled concern the debt crisis is worsening. Treasuries erased losses after a record-low yield at an auction.

The S&P 500 lost 2.2 percent to 1,161.79 at 4 p.m. in New York, while the MSCI Emerging Markets Index extended its longest slide since 2009. Oil lost 1.9 percent. The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments reached an all-time high of 381, while the euro weakened to a six-week low after Germany failed to find buyers for 35 percent of the bonds offered at an auction. Ten-year German yields climbed 23 basis points and France's rose 16 points.

Concern that turmoil in European bond markets is threatening the global economic recovery was amplified by data showing European services and manufacturing output shrank for a third month, while a preliminary gauge indicated China's manufacturing contracted by the most since March 2009, according to reports by Markit Economics and HSBC Holdings Plc showed. In the U.S., durable goods orders fell and jobless claims topped forecasts.

"Evidence is slowly mounting that 'containment' is a pipe dream," Peter Cecchini, head of institutional equity derivatives strategy at Cantor Fitzgerald LP in New York, said in a note to clients. "We continue to see downside in the U.S. equity markets to 1,000 on the S&P."

November Tumble

The S&P 500 extended its November tumble to 7.3 percent and is trading 10 percent below 1,293, the average year-end forecast of Wall Street strategists. Stocks in the index are valued at less than 12 times estimated earnings, compared with 14.7 times at the end of last year. The index ended today's session down 15 percent from a three-year high at the end of April and 26 percent below its record in 2007. The benchmark gauge of U.S. equity has rebounded 5.7 percent from its 2011 low in October, trimming a gain of as much as 17 percent.

Financial shares in the S&P 500 have fallen 13 percent as a group to lead the market's November slide, with Goldman Sachs Group Inc. and Bank of America Corp. trading at their lowest prices since the bear-market bottom in March 2009.

Financials, commodity producers and technology companies led losses among the 10 main industries today, losing at least 2.4 percent. Bank of America and Alcoa Inc. slid more than 4 percent to lead the Dow Jones Industrial Average stocks down 236.17 points to 11,257.55. Deere & Co. rallied 3.9 percent as the largest farm-equipment maker reported profit that topped analysts' projections.

Bank Stress Tests

The KBW Bank Index 3.4 percent retreated to a seven-week low as all 24 of its stocks fell. The Federal Reserve told the 31 largest U.S. banks to test loan portfolios and trading books against a recession and a European market shock to ensure they have enough capital to withstand losses. The most severe test scenarios include a jobless rate of 13 percent, an 8 percent drop in GDP and a 21 percent plunge in home prices.

"By taking these draconian views of what could happen in the market, if they in fact force the banks to defense themselves against the outlook that they've put up, they'll cause a recession," Richard Bove, analyst at Rochdale Securities LLC in Lutz, Florida, said in an interview on Bloomberg Television.

Stocks slipped yesterday after the government revised third-quarter economic growth to a 2 percent annual rate from an earlier 2.5 percent estimate.

Economic Data

Reports today showed durable goods orders fell 0.7 percent last month, less than forecast, after a 1.5 percent drop in September that was more than twice as large as first reported. Consumer spending rose less than forecast in October, increasing 0.1 percent, while the 0.4 percent gain in personal income topped the median economist estimate. Initial jobless claims totaled 393,000, more than the 390,000 average estimate.

Jim Chanos, founder of the Kynikos Associates Ltd. hedge fund, said that while the chances of a recession may be increasing, the U.S. economy is the "best house in a bad neighborhood" and American banks were through most of their problems.

"The too-big-to-fails are too big to fail, and we know that," he told Bloomberg Television's "In the Loop" program. "The moral persuasion that the Fed is trying to put out there right now, under the rubric of Dodd-Frank, is let's alter our behavior, guys. Let's make sure a lot of value does not go out to equity holders or bondholders when we should be retaining capital," he said of the Fed stress tests.

Record 7-Year Auction

Ten-year Treasuries erased losses after the U.S. sold $29 billion of seven-year securities at a record low yield of 1.415 percent, wrapping up $99 billion of note sales this week. Ten- year yields fell four basis points to 1.88 percent after climbing as much as four points earlier. The rate is up from a record low of 1.67 percent on Sept. 23.

U.S. Treasuries maturing in seven to 10-years have returned 14 percent this year, outperforming a 9.3 percent return for the broader Treasury market, according to Bank of America Merrill Lynch indexes, as of yesterday.

Crude fell 1.9 percent to $96.17 a barrel in New York. Gold for December delivery lost 0.4 percent to $1,695.90 an ounce as the stronger dollar decreased demand for the precious metal as an alternative investment, while copper futures retreated 1.7 percent. The S&P GSCI Index lost 1.5 percent as natural gas and hogs had the only gains among 24 commodities tracked by the index.

JPMorgan Chase & Co. downgraded commodities to "underweight," saying "policy failures in the U.S. and Europe have darkened the six-month outlook." Analysts Colin Fenton and Jonah Waxman wrote in a report dated yesterday that the U.S. congressional supercommittee's failure to agree on plans to cut the deficit damages confidence in the "U.S. seriousness of purpose."

'Such Pressure'

The yield gap between Belgian 10-year notes and benchmark German bunds widened to a euro-era record of 343 basis points before paring its gain and trading at 334. The yield on Spain's 10-year bonds increased four basis points to 6.65 percent. Credit-default swaps insuring French government bonds rose 10 basis points to 250, Belgium's were 29 basis points higher at 380 and contracts tied to Spanish debt climbed eight basis points to 493, all records, CMA prices show.

Luxembourg Finance Minister Luc Frieden said talks on the rescue plan for Dexia SA are "continuing intensively."

"The costs of Dexia's guarantee are putting Belgium's finances under such pressure that France may have to take a larger slice of the losses, which some analysts feel could be the straw that may break the back of France's credit rating," Bill Blain, a strategist at Newedge Group in London, wrote in a research note. "Concerns on U.S. debt, economic performance and rising China fears contribute to the miserable background."

'Larger Slice'

Bond-market turmoil that began more than two years ago in Greece and infected Ireland, Portugal, Italy and Spain is threatening France and Belgium and risks engulfing Germany, the region's biggest economy. The region's leaders are struggling to find a fix for the crisis. German Chancellor Angela Merkel's coalition is no longer categorically ruling out the issuance of a joint euro-region bond, Reuters reported, citing a report by German daily Bild in advance of an article to appear in tomorrow's edition.

Germany's 10-year bond yield surged 23 basis points to 2.15 percent today, the highest in almost a month. The government failed to get sufficient bids at an auction of benchmark 10-year bunds today to reach its maximum sales target of 6 billion euros ($8.1 billion).

Italian 10-year bond yields rose 15 basis points to 6.97 percent even as the ECB bought the nation's debt, according to three people with knowledge of the transactions, who declined to be identified because the trades are confidential. A spokesman for the ECB in Frankfurt declined to comment today.

Funding Pressures

The cost for European banks to fund in the U.S. currency reached the highest level since December 2008. The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, widened to 139 basis points below the euro interbank offered rate.

The dollar strengthened against all 16 major peers and the Dollar Index, a gauge of the currency against six major counterparts, rose 0.9 percent to 79, the highest on a closing basis since Oct. 4.

The euro weakened against 10 of 16 major peers, falling 0.6 percent against the yen and slipping for a fourth straight day versus the Swiss franc, the longest run of declines in more than two months.

Euro Bets

Goldman Sachs Group Inc. recommended investors end a money- losing bet that the euro will gain against the dollar after Greece and Italy got new governments.

Policymakers are unlikely to do enough in coming days to appease investor concern about a possible breakup of the euro, Valentin Marinov, a Citigroup Inc. foreign-exchange strategist in London, wrote in a note to clients. The shared currency will probably underperform the dollar and yen and the slowdown in Europe may lead to the relative underperformance of the Swiss franc, pound and Nordic currencies, Marinov wrote.

The pound declined 0.6 percent to $1.5538 as Bank of England minutes from this month's meeting showed policy makers were unanimous in their decision to keep the target for asset purchases this month, as some officials said an increase in stimulus may be needed in the future. British bonds advanced, pushing 10- and 30-year gilt yields to record lows.

European Stocks

Six shares fell for every one that gained in the Stoxx 600 as HSBC Holdings Plc lost 1.2 percent to pace a retreat in 39 of 50 banks. Man Group Plc, the biggest publicly traded hedge-fund manager, tumbled 6 percent. Mining shares retreated after Australia's lower house of parliament passed legislation for a tax on coal and iron-ore profits. Rio Tinto Group declined 2.3 percent

The MSCI Emerging Markets Index lost 2.8 percent, declining for a seventh day, the longest slump since 2009. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong retreated 2.8 percent. Benchmark gauges in India, South Korea and Taiwan lost more than 2 percent. The Turkish lira retreated 1 percent after Turkey's outlook was cut to "stable" from "positive" by Fitch Ratings.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net Michael P. Regan in New York at mregan12@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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(BN) Wall Street Unoccupied as 200,000 Job Cuts Bring ‘Darkest Days’

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Wall Street Unoccupied as 200,000 Job Cuts Bring 'Darkest Days'

Nov. 22 (Bloomberg) -- John Brady, co-head of MF Global Inc.'s Chicago office, was having a vodka cocktail at the Ritz- Carlton in Naples, Florida, overlooking the Gulf of Mexico, on the day his company reported its largest-ever quarterly loss.

"Wow, the sun just set," Brady said to his wife and two colleagues attending a conference with him, he recalled in an interview. "I hope it doesn't set on MF Global."

A week later, on Oct. 31, the firm led by former Goldman Sachs Group Inc. co-Chief Executive Officer Jon Corzine collapsed. Brady and 1,065 colleagues joined a wave of firings that has washed away more than 200,000 jobs in the global financial-services industry this year, eclipsing 174,000 in 2009, data compiled by Bloomberg show. BNP Paribas SA and UniCredit SpA announced cuts last week, and the carnage likely will worsen as Europe's sovereign-debt crisis roils markets.

"This is something very different," said Huw Jenkins, a former head of investment banking at UBS AG who's now a London- based managing partner at Brazil's Banco BTG Pactual SA. "This is a structural change. The industry is shrinking."

Wall Street rebounded from the financial crisis of 2008 with the help of unprecedented government support, including loans from the U.S. Federal Reserve. Goldman Sachs posted record profit the following year, and bonuses paid to securities-firm employees in New York City rose 17 percent to $20.3 billion, according to New York State Comptroller Thomas DiNapoli.

'Nothing There'

Now, faced with higher capital requirements, the failure of exotic financial products and diminished proprietary trading, the industry is undergoing what Steven Eckhaus, chairman of the executive-employment practice at Katten Muchin Rosenman LLP, called "a paradigm shift." The New York attorney, whose clients have included former Lehman Brothers Holdings Inc. Chief Financial Officer Erin Callan, said he has stopped giving his "spiel" about inherent talent leading to new work.

In interviews, a dozen people who have lost jobs at firms including Societe Generale SA, Royal Bank of Scotland Group Plc and Jefferies Group Inc. described a grim banking landscape that also includes Occupy Wall Street protests against unemployment stuck above 9 percent and income inequality.

"These are by far my darkest days," said Scott Schubert, 49, who was dismissed in late 2008 as a mergers-and-acquisitions banker at Jefferies, a New York-based securities firm, and has been unemployed since. "It's harder and harder to look for a job and feel that there's nothing there."

HSBC, BNP Paribas

Banks, insurers and asset managers in Western Europe have been hardest hit, announcing about 105,000 dismissals this year, 66 percent more than the region's losses in 2008 at the depths of the financial crisis, Bloomberg data show. The 50,000 job cuts in North America this year are more than twice last year's and fewer than the 175,000 in 2008.

Almost every week since August has brought news of firings by the world's biggest banks. HSBC Holdings Plc, Europe's biggest lender, announced that month it would slash 30,000 jobs by the end of 2013. In September, Bank of America Corp., the second-largest U.S. lender, said it would cut the same number of jobs. Both banks are trimming about 10 percent of their employees. Last week, BNP Paribas, France's largest bank, said it will cut about 1,400 jobs at its corporate and investment- banking unit, and UniCredit, Italy's biggest, said it plans to eliminate 6,150 positions by 2015.

"It's a once-in-a-generation challenge," said John Purcell, founder of London-based executive search firm Purcell & Co. "Everyone who has worked in the City since 1985 will have no idea of how to cope with this level of dislocation."

Panic Attacks

Neil Brener, a psychiatrist whose patients work in London's City and Canary Wharf financial districts said the stress is contributing to panic attacks, binge drinking and chest pains.

"Because there are fewer jobs, people are unhappy about being stuck," Brener said. "They don't have options about moving, and there is a sense of feeling trapped."

London hiring could be frozen next year, according to the Centre for Economics and Business Research Ltd. Headcount in the City and Canary Wharf may fall to 288,225 by the end of the year, 27,000 fewer than in 2010 and the lowest since at least 1998, when there were 289,666 jobs, according to the London- based research firm.

Wall Street won't regain its lost jobs "until about 2023," Marisa Di Natale, an economist at Moody's Analytics in West Chester, Pennsylvania, said in an e-mail.

Second Time

That's not encouraging for Michael Reiner, 44, who lost his job in June as a credit strategist in New York for Societe Generale, France's second-largest bank, whose shares are down 60 percent this year. When he called his wife to tell her the news, she was home watching "The Company Men," a film about corporate downsizing, he said.

It wasn't the first time Reiner had lost a job on Wall Street. He worked at Bear Stearns Cos. for 14 years until the firm collapsed in March 2008 and was taken over in a fire sale by JPMorgan Chase & Co. He said he was happy to have some time off with his family and go to Little League baseball games.

When he began looking for a job, he "wanted to find a place for the next 14 years," he said. A recruiter brought him to Paris-based Societe Generale. It didn't last that long.

It's harder to talk about losing a job the second time, Reiner said. "There are a lot of people I haven't told."

Opportunities for employment "evaporated" as the European debt crisis escalated, he said. Now he spends his time going to his daughter's field hockey games and managing his investments. He's planning to make maple syrup from the trees in the backyard of his home in Briarcliff Manor, New York.

'Fruitless' Search

For Schubert, the former Jefferies banker in his third year looking for work, the longer he's out of a job, the harder it is for him to tell his 10-year-old son to do his homework, he said.

"It might seem outwardly to him that I've given up," he said in an interview this month from his four-bedroom home in Glen Ridge, New Jersey. "I can't come to the table and say, 'Well, when you were five, I worked nonstop.'"

Schubert, who received a master's degree in business administration from New York University in 1989 and was a managing director specializing in middle-market M&A deals at Jefferies, said he wasn't surprised when he lost his job in 2008 during the financial crisis. He thought unemployment would last 12 months at most.

"The first year out was fruitless," he said. "There wasn't much hiring going on at all."

By the middle of 2010, more potential employers seemed interested, and he felt "something was imminent," he said. Nothing happened.

This year, he has become increasingly disheartened by bad news on Wall Street, and it's more difficult to stay in touch with former colleagues as time goes by, he said.

Hurricane Irene

On the August weekend of Hurricane Irene, training to coach his son's soccer team alongside younger fathers, being "overly competitive for a man of my age," Schubert twisted his right knee, he said. He aggravated the injury doing yard work and worries how much his health insurance will help, he said.

While his investment choices haven't been "too terrible," he will consider selling his house if he doesn't find a job. "God, I hope it's in the next six months," he said.

Hetal Patel, 44, a foreign-exchange trader who worked at London-based Lloyds Banking Group Plc for more than 20 years until last month, said he doesn't plan to look for work until early next year, "when budgets become clearer and perhaps conditions improve."

Shares of his former company, controlled by the British government since a bailout in 2008, have fallen 64 percent this year, and the bank has posted a pretax loss of 3.86 billion pounds ($6 billion) in the first nine months. It announced 15,000 job cuts in June.

RBS Cuts

Another lender backed by the U.K., Edinburgh-based RBS, has announced about 30,000 job cuts, including 2,000 this year, since receiving the world's biggest government bailout in 2008. Its shares are down 50 percent in 2011, and CEO Stephen Hester said Nov. 4 the investment bank "will have to shrink further."

Tim Leary, 29, a director in high-yield and distressed trading, lost his job there on Nov. 7. After he got the news, he called his wife to say he'd see her and their 4-month-old son for breakfast.

He drove back to Manhattan from his office in Stamford, Connecticut, and put together a resume for the first time in years. He said he plans to spend "a fair amount of time figuring out what the landscape is" before starting his search.

Falling Bonuses

"Unfortunately, the industry always seems to get it wrong and they over-hire," said Philip Keevil, 65, a former head of investment banking at S.G. Warburg & Co. and now a partner at New York-based advisory firm Compass Advisers LLP. "They are over-optimistic and then periodically throw large numbers out."

Morale on Wall Street and London is "probably as bad, if not worse" than it has been in decades, said Keevil.

Wall Street bonuses are expected to fall in 2011 from the $128,530 average last year, DiNapoli, the state comptroller, said in October. Even so, when Goldman Sachs set aside 24 percent less to pay employees in the first nine months than in the same period last year, the amount, $10 billion, was equal to $292,836 for each of its 34,200 workers as of Sept. 30. That's nearly six times the median household income in the U.S., where 49.1 million live in poverty, according to Census Bureau data.

Quitting for Quito

Wyatt Laikind, 26, made three times as much in his first year out of college working at Citigroup Inc. as his single mother earned when he was growing up in western Massachusetts.

"It was like winning the lottery to get that job," said Laikind, who worked as an associate on the New York-based bank's high-yield credit-trading desk.

He got a job on Wall Street because he "was under the impression that it was a more meritocratic environment," and "my hard work and intelligence would be paid off," he said.

At first, he liked the excitement, he said. Then, after financial regulations curtailed proprietary trading, the job became "less appealing." He said he didn't like smiling at clients while having to figure out how to profit from them.

In July, after a vacation, he called his boss to quit, he said in an interview from Quito, Ecuador, where he is now working for Equitable Origin LLC, a start-up that offers a certification system for oil exploration. His salary is less than 5 percent of what he made at Citigroup, he lives with intermittent hot water, and he was robbed at knifepoint last month, he said.

"I feel happier on a daily basis," Laikind said.

Sagging Mattress

His tone was different in a later e-mail.

"I wasn't brought up in luxury, so I like to think I can tough it out," he wrote, describing the sagging mattress he slept on in jeans and a hooded sweatshirt to stay warm. "But I may have to give it up and try going back to finance soon."

If he does, it won't be easy.

"Until now, at many firms, a lot of investment bankers have been convinced that we are living now in a limited period where things are a bit more difficult and afterwards the old world will come back," Kaspar Villiger, 70, chairman of Zurich- based UBS said in an interview this month. "This illusion has now vanished."

Increased capital requirements agreed to by the Basel Committee on Banking Supervision will limit banks' use of borrowed funds to boost profit, lower their return on equity and likely reduce executive compensation, analysts say. High leverage "was the juice in the system," said Ilana Weinstein, CEO of New York-based search firm IDW Group LLC. "It's gone."

Boxer Shorts

For Brady, 42, the vanishing point at MF Global arrived after he returned to Chicago from Florida. He thought the New York-based futures brokerage would "weather the storm," even as Moody's Investors Service cut its rating and shares plunged, he said. He got word that another company would buy the firm while at a Talking Heads cover-band concert and celebrated with a friend by drinking Anchor Steam beer and shots of Jameson.

He woke on Oct. 31 at 4:40 a.m. and searched for deal reports on his phone while standing in his boxer shorts with an electric toothbrush in the other hand. He didn't find any.

The acquiring firm, Interactive Brokers Group Inc., pulled out of the deal after a discrepancy in client accounts surfaced, and MF Global filed for bankruptcy later that day.

At first, Brady thought his company would survive, he said. His wife thought he was in denial. His mood changed when he was sitting in the home office adjoining his bedroom, looking at the value of his holdings.

"My Fidelity account looks like my bar tab from just a week ago," Brady said.

All Fired

On Nov. 11, a human resources executive asked colleagues on Brady's floor to gather by his desk, which looks out on the Willis Tower, the tallest building in the U.S. They were all fired. She told them to show receipts for large personal belongings to the plainclothes security guards by the elevators, and that checks would be sent in the mail, Brady said. Someone asked if the checks would bounce. She said she didn't know.

Brady, who said he wasn't aware of the size of the bets MF Global made on European sovereign debt, wrote to clients this month saying he's looking to join a firm that believes "integrity and honesty are the single most important ingredients to success." He said last week he is optimistic.

To contact the reporters on this story: Max Abelson in New York at mabelson@bloomberg.net Ambereen Choudhury in London at achoudhury@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net Edward Evans at eevans3@bloomberg.net

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(BN) No Profit Recession in Europe as Analysts Predict 10% Growth

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No Profit Recession in Europe as Analysts Predict 10% Growth

Nov. 21 (Bloomberg) -- As Europe's debt crisis raises the risk of a recession, companies in the region show no signs of slowing with earnings growth poised to top their U.S. rivals.

Net income for companies in the Stoxx Europe 600 Index will rise by 10.5 percent in 2012 after increasing 11 percent this year, led by carmakers such as Porsche SE and retailers including Burberry Group Plc, according to more than 12,000 analyst estimates compiled by Bloomberg through last week. The gauge is headed for four straight years of income growth exceeding 10 percent, the longest streak since 1998, data show.

Bulls say the 16 percent tumble in European stocks since December has created bargains because profit growth will exceed the 10.1 percent estimated for U.S. companies, even though the economy in the 17-nation euro zone is expanding at one-third the pace, according to economists surveyed by Bloomberg. Bears have no confidence in the earnings forecasts when sovereign borrowing costs are reaching records on concern Greece may default.

"Companies are in a lot healthier position going into a downturn than in 2008," said Luke Stellini, who helps oversee $636 billion at Invesco Ltd. in Henley-on-Thames, England. "The debate is how north the recession in Europe may spread, but I'd argue that equity valuations take account of most scenarios already."

International demand will help push net income up more than 10 percent next year at mining companies, retailers and builders, analysts say. As much as 54 percent of sales in the Stoxx 600 comes from outside Europe, according to data compiled by Royal Bank of Scotland Group Plc. Earnings in the Stoxx Banks Index may gain 23 percent in 2012, the data show.

Fourth Year

Analysts' predictions for 2012 imply a fourth year of growth topping the 8 percent average since 1981, data from Bank of America Corp.'s Merrill Lynch division show. The forecast for this year's expansion in Stoxx 600 earnings has dropped to 11 percent from 21 percent in January. Projections for 2012 fell 3.5 percent in October, the most since March 2009.

The Stoxx 600 lost 3.2 percent to 224.76 today. The European gauge slid 3.7 percent to 232.17 last week as government bond yields rose. The index ended last week at 9.2 times 2012 profit forecasts, compared with a median of 10.3 times over the past five years, data compiled by Bloomberg show. The Standard & Poor's 500 Index in the U.S. slipped 3.8 percent to 1,215.65, bringing its ratio to 11.1 times 2012 estimates.

"European markets are a mess and there is a debt crisis, but if you look at specific companies, they are doing fine," Herbert Perus, who helps oversee about $36 billion as head of global equities at Raiffeisen Capital Management in Vienna, said in a phone interview. "No one believes in it at the moment, but I don't think it is unrealistic that earnings will grow again."

Greek Contagion

Yields on Greek two-year notes climbed to a record 115.49 percent last week while borrowing costs in Spain and Italy rose to euro-area records this month as the debt crisis spread. Economists have lowered projections for the euro zone's 2012 GDP growth to 0.7 percent from 1.8 percent in January, according to the median estimate of 21 respondents in a Bloomberg survey. U.S. GDP is poised to expand 2.2 percent.

Greece and Portugal will contract this year, according to European Commission forecasts. A report on services and manufacturing in the region on Nov. 4 showed output decreased more than initially estimated in October.

2008 Crisis

GDP in the euro zone declined from the third quarter of 2008 through the second quarter of 2009, the only recession since European Union data began in 1995. Earnings tumbled 57 percent in 2008 amid the financial crisis that peaked with the collapse of Lehman Brothers Holdings Inc. in September of that year, according to data compiled by Bloomberg.

Profits retreated an average 31 percent in four contractions since 1980, data from Bloomberg and Charlotte, North Carolina-based Bank of America show.

"Politicians have missed their opportunity to prevent a European credit crunch," said Azad Zangana, a London-based economist at Schroders Plc, which oversees $345 billion. "Many euro-zone banks are already on life support. We are now forecasting a serious recession in the euro-zone in 2012, which is also likely to result in recessions in the wider European region."

German investor confidence fell to a three-year low, a report on Nov. 15 showed. Retail sales in the region decreased 0.7 percent in September, more than economists predicted, data released Nov. 7 show. The European Union's statistics office said Nov. 14 industrial production slipped the most in 2 1/2 years in September.

Earnings Sources

"This highlights how much of an effect the sovereign debt crisis has had on corporate confidence and capital expenditures," said James Butterfill, who helps oversee $63 billion as global equity strategist at Coutts & Co. in London. "It is difficult to see where earnings growth will come from."

Profit fell 11 percent on average between 1991 and 1993, Merrill Lynch data show, after the U.S. savings-and-loan crisis curbed global growth. Profits declined 27 percent in 1981 as rising interest rates shrunk the U.S. economy.

Companies see no such reversal in 2012. Anglo American Plc, the London-based mining company that analysts expect will boost earnings by 15 percent next year, has dropped 29 percent in 2011. Chief Executive Officer Cynthia Carroll said Sept. 29 her industry has a "very, very solid" outlook as China expands.

Cheapest Carmaker

Carroll spent $5.1 billion in cash on Nov. 4 to buy the Oppenheimer family's 40 percent stake in De Beers, the world's largest diamond miner. Anglo American trades at 6.13 times next year's estimated earnings, near the lowest since the bull market started in March 2009.

Porsche is the fourth-cheapest stock among 49 car and auto parts companies in the MSCI World Index after falling to 4.9 times 2012 estimates, about half its valuation at the start of the year. The company said Oct. 28 nine-month profit at its carmaking unit rose 25 percent on demand for the Cayenne sport- utility vehicle.

Porsche expects sales to reach a record in 2012, a person with knowledge of the matter said Oct. 13. Porsche in Stuttgart, Germany may boost profit by 46 percent next year, according to analysts surveyed by Bloomberg.

Burberry, the U.K.'s largest luxury-goods maker, said Nov. 15 it can weather Europe's sovereign-debt crisis by focusing on wealthy clients in cities such as New York and Hong Kong. The 155-year-old maker of leather bags and trench coats gets more than half of sales in 25 "very strong" city markets with high net-worth individuals and tourists, Chief Executive Officer Angela Ahrendts said on a conference call that day.

Edmund Shing, a strategist at Barclays Plc in London, says stocks have fallen too far. Profits growth may be as high as "mid-single digits" next year, he said.

"We don't believe it is time to throw in the towel and abandon the European equities ship," said Shing. "Weather-worn and creaking though it may be."

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net Adria Cimino in Paris at acimino1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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(BN) Deutsche Bank Could Transfer Financial Contagion: Simon Johnson

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Deutsche Bank Could Transfer Financial Contagion: Simon Johnson

Nov. 21 (Bloomberg) -- You've probably never heard of Taunus Corp., but according to the Federal Reserve, it's the U.S.'s eighth-largest bank holding company. Taunus, it turns out, is the North American subsidiary of Germany's Deutsche Bank AG, with assets of just over $380 billion.

Deutsche Bank holds a large amount of European government and bank debt; it also has considerable exposure to lingering real estate problems in the U.S. The bank, therefore, could become a conduit for risk between the two economies. But which way is Deutsche Bank more likely to transmit danger -- to or from the U.S.?

By any measure, Deutsche Bank is a giant. Its assets at the end of September totaled 2.28 trillion euros (according to the bank's own website), or $3.08 trillion. In the latest ranking from The Banker, which uses 2010 data, Deutsche was the second- largest bank in the world by assets, behind only BNP Paribas SA.

The German bank, however, is thinly capitalized. Its total equity at the end of the third quarter was only 51.9 billion euros, implying a leverage ratio (total assets divided by equity) of almost 44. This is up from the second quarter, when leverage was about 36 (assets were 1.849 trillion euros and capital was 51.678 euros.)

Even by modern standards, this is very high leverage. JPMorgan Chase & Co. has a balance sheet about 20 percent smaller than Deutsche Bank's, but more than twice as much Tier 1 capital, an important indicator of a bank's financial strength. Bank of America Corp., whose weakness is a serious worry in the U.S. today, has twice Deutsche's capital. (These comparisons use The Banker's ranking of the top 25 banks.)

Healthy Capital Ratio

Globally, Deutsche's capital ratios are relatively healthy, judging by the banking industry's standard measures. At the end of the third quarter, its Tier 1 capital ratio was 13.8 percent (up from 12.3 percent at the end of 2010) and its core Tier 1, which excludes hybrid debt that can convert into equity, was 10.1 percent.

How does such a highly leveraged bank become "well- capitalized"? The answer is that "risk-weighted assets" were 337.6 billion euros as of Sept. 30. But what is a low risk- weight asset in the European context today? Incredibly, it is sovereign debt, which of course is far from riskless at the moment.

Perhaps Deutsche Bank holds mostly German government debt, which still has safe-haven value. But it's likely that Deutsche also holds a significant amount of Italian and French government bonds.

Still, the bigger risks are probably in the U.S. Deutsche Bank is a significant trustee for mortgages, having been heavily involved in the issuance and distribution of mortgage-backed securities during the housing bubble. Yves Smith, writing on the nakedcapitalism.com blog, says Deutsche Bank is one of the U.S.'s four biggest securitization trustees. Many questions on whether paperwork was done properly and whether the rights of investors have been protected hang over these trusts.

Let's take a look just at Taunus Corp., named after a range of mountains outside the parent bank's Frankfurt headquarters. The latest figures (from the Fed data, using the consolidated financial statement at the end of the third quarter) show Taunus with total equity capital of just $4.876 billion. This implies an eye-popping leverage ratio of around 78.

Why would the Federal Reserve and the new council of regulators known as the Financial Stability Oversight Council allow Deutsche Bank to operate in the U.S. with sky-high leverage -- with its huge implied risk to the rest of the financial system? Presumably, in the past, U.S. authorities have taken the view that Deutsche Bank had a strong enough balance sheet worldwide that more capital could be provided to its American subsidiary, if needed.

Troubling Questions

Such a presumption now seems questionable, at best. Earlier this year, Bloomberg News reported that Taunus needed almost $20 billion of additional funds to meet U.S. capital standards, and that Deutsche Bank was trying to declassify Taunus as a bank- holding company to avoid capital requirements entirely. It's unclear where this process now stands, but it's also not obvious how declassification would help U.S. or global financial stability. Financial reform advocates hopefully will press hard on this issue.

All of this raises troubling questions. Have U.S. bank supervisors really satisfied themselves, through onsite inspections, that Deutsche Bank's risk weights accurately reflect market conditions and the increasing structural weakness of the euro area? Can U.S. regulators document their satisfaction beyond the materials produced for the European Banking Authority, which earlier this year oversaw stress tests that pronounced now-collapsed Dexia as well-capitalized? (Actually, Dexia had stronger capital ratios than Deutsche Bank.)

In their prescient, pre-crisis book, "Too Big To Fail" (not to be confused with the more recent Andrew Ross Sorkin book of the same title), Gary H. Stern and Ron J. Feldman, in 2004 nailed the incentive distortions that encouraged risk-taking and brought the financial sector to its knees. No one else came close to them in getting this right. Included in their analysis are examples of banks that could have been regarded as having moral hazard issues because of their size. Deutsche Bank is No. 4 on their list of large, complex banking organizations by asset size.

This dog did not bark during the 2008 crisis, partly because most foreign governments were seen as having strong enough balance sheets to back their banks' worldwide operations. But this is no longer necessarily true for euro-area governments.

Even in 2008-2009, this may have been illusory. According to published reports, Deutsche Bank received considerable assistance from the Federal Reserve, including $11.8 billion through the American International Group bailout and $2 billion through the Fed's discount window. Deutsche was the second- largest discount-window borrower and the largest user of the Fed's Term Asset-Backed Securities Lending Facility during the crisis.

Asking for Trouble

Deutsche Bank and, if necessary, the German government should be required to inject substantially more capital into Taunus. Allowing business as usual is asking for trouble, particularly as Deutsche wants to remain focused on relatively risky investment banking. Recently it named as chairman Paul Achleitner, the finance director at Allianz SE, the German insurance company, and an ex-Goldman Sachs executive, worrying even some of its shareholders.

This would be a good time for Congress to dig more deeply into the risks that Deutsche Bank poses to financial stability in the U.S. and around the world.

(Simon Johnson, who served as chief economist at the International Monetary Fund in 2007 and 2008, and is now a professor at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics, is a Bloomberg View columnist. The opinions expressed are his own.)

To contact the author of this column: Simon Johnson at sjohnson@mit.edu .

To contact the editor responsible for this column: Paula Dwyer at pdwyer11@bloomberg.net .

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(BN) Stocks Fall, Treasuries Rise on Outlook for Deficit Talks; Euro Pares Loss

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Stocks Slump as Treasuries Rise on U.S. Budget; Euro Trims Loss

Nov. 21 (Bloomberg) -- Stocks sank, extending last week's drop, and Treasuries rose amid concern the U.S. government will be forced to submit to $1.2 trillion in automatic spending cuts if lawmakers fail to agree on a deficit plan. Commodities fell, while the euro trimmed its earlier decline versus the dollar.

The Standard & Poor's 500 Index lost 2.1 percent to a six- week low of 1,190.69 at 3:10 p.m. in New York. The MSCI All- Country World Index sank 2.4 percent in its first six-day slump since August. Yields on 10-year Treasury notes fell five basis points to 1.96 percent, while the cost of insuring against default on European government debt approached a record high. The euro slipped 0.3 percent to $1.3491 after earlier weakening as much as 0.7 percent. Oil fell for a third day.

The U.S. deficit-cutting congressional supercommittee is expected to say today it failed to reach agreement on at least $1.2 trillion in savings, a Democratic aide said, setting the stage for automatic cuts. Germany's Finance Ministry said the country's expansion has gotten "noticeably slower," while Moody's Investors Service said France's rising financing costs are increasing the nation's fiscal challenges.

"The global selloff in risk assets reflects concerns about the inability of policymakers to catch up with unsettling economic and financial realities, particularly in Europe and America," Mohamed A. El-Erian, the chief executive officer at Pacific Investment Management Co. in Newport Beach, California, said in an e-mail. His firm runs the biggest bond fund.

Market Leaders

The S&P 500 extended last week's 3.8 percent decline, its worst drop in two months. Stocks maintained losses even after the National Association of Realtors said sales of previously owned homes in the U.S. unexpectedly rose 1.4 percent to a 4.97 million annual rate, a sign falling prices may be luring buyers into the market.

Indexes of financial, industrial and technology companies lost at least 2.1 percent to lead declines in all 10 of the main groups in the S&P 500, with Bank of America Corp., Hewlett- Packard Co. and Caterpillar Inc. dropping more than 3.4 percent to pace the retreat.

Today's decline pushed the S&P 500 below levels representing the top of a so-called trading range that prevailed in the two months after the U.S. was stripped of its AAA credit rating by S&P on Aug. 5. Rallies after the downgrade brought the S&P 500 to closing highs of 1,204.49 on Aug. 15, 1,218.89 on Aug. 31 and 1,216.01 on Sept. 16, data compiled by Bloomberg show.

'Reflect Poorly'

Failure among the supercommittee to reach an agreement could send the S&P 500 down 9.5 percent from last week's closing level to 1,100, according to Goldman Sachs Group Inc. equity strategist David Kostin.

The failure would "reflect poorly on Congress," Kostin wrote in a report dated Nov. 18. "It would showcase -- as was the case in August -- the inability of elected officials to act in the long-term best interest of all Americans."

Today is the panel's deadline to receive a Congressional Budget Office analysis of the effects of any proposal on the deficit. The law requires that the estimates be available for 48 hours before the panel votes, and the supercommittee has a Nov. 23 target date for reaching a deal.

"The bigger problem is that a deal in the supercommittee was expected to pave the way to extend the stimulus that is in the system," said Barry Knapp, the New York-based head of U.S. equity strategy at Barclays Plc, said in a telephone interview. "If you don't get a deal, which is probable, you get a big hit to the economy in the first quarter right at the point when the economic fallout from the European debt crisis is hitting."

The failure to reach an agreement isn't likely to trigger a downgrade of the U.S. credit rating, according to BlackRock Inc.'s Eric Pellicciaro and ING Bank NV's Chief International Economist Rob Carnell.

'Cuts Nonetheless'

"In the end, there's still $1.2 trillion in cuts that are going to come through," Pellicciaro, the head of global rates investments at BlackRock, said in an interview with Sara Eisen and Michael McKee on "Bloomberg On the Economy" on Bloomberg Radio. "They may not be exactly the way politicians want to see it, but they're cuts nonetheless."

The yield on the two-year Treasury note fell one basis point to 0.27 percent. A U.S. auction of $35 billion in two-year notes drew record demand. The notes drew a yield of 0.280 percent, compared with a forecast of 0.287 percent in a Bloomberg News survey of seven of the Federal Reserve's primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 4.07, compared with an average of 3.32 for the previous 10 sales.

European Stocks

The Stoxx Europe 600 Index sank 3.2 percent, extending last week's 3.7 percent decline, as almost 45 stocks dropped for every one that rose. All 19 industries in the benchmark measure retreated more than 1.8 percent, with mining stocks falling 6.1 percent to lead the drop.

Spain's benchmark IBEX 35 Index of stocks slumped 3.5 percent to a two-month low. Spanish Prime Minister-elect Marian Rajoy faced mounting pressure to unveil his cabinet and plans for reducing the euro-area's third-largest deficit as borrowing costs neared records after the People's Party yesterday ousted the ruling Socialists, winning the biggest parliamentary majority in a Spanish election in almost 30 years.

Spain's yield increased 17 basis points to 6.55 percent and the gap between Spanish and German borrowing costs widened 23 basis points to 464 basis points, near a euro-era record.

Bond Yields

France's 10-year bond was up less than one basis point at 3.47 percent. The Italian yield advanced two basis points, leaving the difference in yield with benchmark German bunds seven basis points wider at 474 basis points. The French-bund spread rose 5.5 basis points to 156 as 10-year bund yields decreased five basis points to 1.92 percent.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose 9 basis points to 361, compared with an all-time high of 362 reached on Nov. 15.

The cost for European banks to fund in the U.S. currency climbed to the highest since December 2008. The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, increased to 139 basis points below the euro interbank offered rate, from 130 at the end of last week.

Copper sank 2.9 percent, zinc tumbled 2.5 percent and lead retreated 3.2 percent as all but six of 24 commodities tracked by the S&P GSCI Index declined, sending the gauge down 1.1 percent. West Texas Intermediate oil for January delivery slipped 0.6 percent to $96.79 a barrel in New York.

The MSCI Emerging Markets Index sank 2.6 percent, headed for its lowest close since Oct. 20. Russia's Micex Index slid 4.8 percent and the Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong lost 2.3 percent. India's Sensex fell 2.6 percent.

Egypt's benchmark EGX 30 Index slumped 4 percent to the lowest intraday level since Oct. 10 after clashes between protesters and security forces in several cities.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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(BN) Democrats Disagree With Republicans on Taxes to Cut Deficit (1)

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Democrats Disagree With Republicans on Taxes to Cut Deficit

Nov. 19 (Bloomberg) -- A House Democratic leader said a U.S. deficit-cutting agreement can't include the extension of Bush-era tax cuts, while an influential Republican said his House colleagues won't back a deal calling for new tax revenue.

The disagreement underscores the crux of the problem facing a congressional panel seeking to meet a Nov. 23 deadline to trim at least $1.2 trillion from the deficit over the next decade.

Representative Jim Jordan, head of the Republican Study Committee, which pushes for deeper spending cuts, said any deficit-cutting proposal that includes a tax increase is unlikely to clear a majority of the House's Republicans.

Representative James Clyburn, a Democratic member of the supercommittee, said if Republicans demand an extension of the tax cuts won by President George W. Bush in 2001 and 2003 the chances of an agreement are dim.

"It would be difficult" to win passage of a supercommittee plan that includes more taxes, said Jordan, of Ohio, on Bloomberg Television's "Political Capital with Al Hunt," airing this weekend.

"If it's a net tax increase, this is the most fundamental principle within the Republican Party," Jordan said. "This is a sacred trust I think we as Republicans have with voters."

As members of the bipartisan supercommittee negotiate over possible spending cuts and revenue increases, for which some Republicans have voiced support, Jordan said it's "anyone's guess" whether the group will agree on a proposal.

'Big' Deal Unlikely

"The word is today that they may not get to some kind of agreement," Jordan said in the interview, taped yesterday. "What I'm most concerned about, though, is we should not have any type of tax increase in this proposal. The last thing we need for our economy is to increase the tax burden on job- creators."

Clyburn, in a separate "Political Capital" interview airing on the same program, said a large deal approaching $4 trillion isn't likely. He said he sees a chance of a smaller package as long as Republicans agree to revenue increases.

"I've kind of given up on big and bold, but I'm never going to give up on balance," said Clyburn, of South Carolina.

If Republicans insist on extending Bush tax cuts for the wealthy "then we probably won't get a deal," he said.

Clyburn, the third-ranking House Democrat, said he hopes President Barack Obama won't relent as he did last year and allow the tax cuts of his predecessor to continue again.

"I have no idea whether he will or not," Clyburn said. "I hold out hope that the president will hold fast."

Obama, winding up his nine-day trip to Pacific Rim nations, hasn't been in contact with congressional leaders on the supercommittee talks, according to spokesman Jay Carney. Carney said the president has been in "regular contact with his staff in Washington, including those who are monitoring" the deficit-reduction talks.

Republicans on the supercommittee have offered to increase tax revenue by $300 billion, which was seen by some lawmakers as a breakthrough given the party's resistance to higher taxes.

Trigger Looms

Democrats are pushing for a larger increase in tax revenue, while Republicans want the plan to tackle long-term growth in spending on Medicare and other federal entitlement programs, creating an 11th-hour deadlock in talks.

Failure by Congress to enact a plan by year's end that would cut at least $1.2 trillion over the next decade would force that amount in automatic spending cuts beginning in 2013.

Jordan said he's not persuaded by several previous bipartisan proposals for deficit reduction, including one by the chairmen of Obama's Simpson-Bowles fiscal commission and one by a group of six senators, which called for a mix of revenue increases and spending cuts.

"The taxes always get raised, and the spending cuts never happen," he said. "Americans aren't going to go for this. They say, 'We are tired of these games, we don't trust them to come through with the spending cuts.'"

Bush Tax Cuts

Republicans would be open to a proposal by Obama to expand a payroll tax break set to expire at the end of the year to foster job growth, Jordan said.

"If that's part of a tax package that doesn't increase the overall burden, I think you could get Republicans to look at it," he said.

Jordan said he's confident Republicans will prevail in efforts to extend the tax cuts enacted under President George W. Bush, which are set to expire at the end of 2012.

"We kept them in place just a year ago when Democrats controlled all of government and we got the president to go along," he said.

Obama relented and allowed the Bush tax cuts to continue last year, Jordan noted, and if Republicans gain full control of the government next year they will support an extension.

The 2012 elections will likely result in Republicans keeping the House majority won last year and winning control of the Senate, he said. He also hopes to see a Republican in the White House, defeating Obama's bid for re-election.

"And then I'm confident we can extend the Bush tax cuts," he said. "Some of those have been in place for 11 years. That is tax policy."

To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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(BN) JPMorgan, Goldman Sachs Are Sued Over Alleged Misstatements on MF Global

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JPMorgan, Goldman Sachs Sued for Alleged MF Global Misstatements

Nov. 19 (Bloomberg) -- JPMorgan Chase & Co. and Goldman Sachs Group Inc. units were sued by two pension funds over claims they made misleading statements about the exposure of MF Global Holdings Ltd. securities to European sovereign debt.

As a result of the misstatements, MF Global's stock traded at "artificially inflated prices," the funds said in the complaint filed yesterday in federal court in Manhattan. "While the extent of MF Global's exposure to European sovereign debt was concealed, the defendants were able to raise some $900 million in the offerings."

MF Global Holdings, which was run by former Goldman Sachs Group Inc. co-chief executive officer Jon Corzine, filed for bankruptcy Oct. 31 after making bets on sovereign debt and getting margin calls. The New York-based company listed debt of $39.7 billion and assets of $41 billion in Chapter 11 papers. The broker-dealer is being liquidated separately.

Other companies named as defendants in the complaint were Bank of America Corp.'s Merrill Lynch unit, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBS Securities Inc. and Jefferies & Co. Corzine and MF Global officers were also named as defendants.

The complaint was filed by IBEW Local 90 Pension Fund and the Plumbers & Pipefitters' Local #562 Pension Fund. The funds seek to represent other shareholders in a class-action, or group suit.

David Wells, a spokesman for New York-based Goldman Sachs, declined to comment. Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, and Joseph Evangelisti, a spokesman for New York-based JPMorgan, didn't immediately return calls after regular business hours seeking comment on the lawsuit.

Separate Liquidation

The broker-dealer unit of MF Global Holdings is being liquidated separately. The trustee liquidating MF Global Inc. said yesterday distributions of collateral in customers' accounts are "dependent upon assets available and there is no assurance of a 100 percent return."

The trustee, James Giddens, got court permission Nov. 17 to transfer $520 million in assets to about 23,300 accounts. While planning a third transfer to include a "few hundred" accounts that haven't had distributions so far, Giddens said the assets available for segregated commodities accounts are "substantially less" than his estimate of claims that will be allowed.

Shortfall, Remedy

"Efforts are ongoing to analyze the cause of the shortfall and to seek to remedy it in coordination with multiple regulators and law enforcement officials," he said in a statement yesterday.

The broker-dealer's bankrupt parent moved hundreds of millions of dollars from its futures client accounts to other accounts before its bankruptcy filing, according to a person familiar with the audit of the company, who declined to be identified because the discussions are private.

MF Global Holdings was required to segregate funds posted as collateral by futures clients. The company filed the eighth- largest U.S. bankruptcy after making a $6.3 billion bet on Eurobonds and getting margin calls.

Giddens, whose first transfer of assets was almost $1.6 billion, said the third payment might be a bulk transfer to bring the value of collateral to 60 percent of the net equity in the accounts of all claimants, including those who have received nothing yet. A bulk transfer depends on finding futures brokers to receive the assets, he said.

Multiple Probes

The Commodity Futures Trading Commission, Securities and Exchange Commission and Federal Bureau of Investigation are investigating cash movements at the firm before the bankruptcy filing. The CFTC has been probing about $600 million in futures client funds that disappeared as the firm prepared for bankruptcy. Regulators said they haven't located the money.

In a separate matter, a federal judge yesterday said he will approve a $90 million settlement of investor claims stemming from a 2008 wheat-trading loss incurred at MF Global's commodity brokerage.

U.S. District Judge Victor Marrero in Manhattan also said he would approve attorney fees of $16.2 million. A class of investors, led by four public pension funds, claimed losses of $1.1 billion on MF Global shares after the firm disclosed that a broker in its Memphis, Tennessee, office lost $141 million in a few hours in unauthorized trades.

Defendants in that case include MF Global; Man Group, its former owner; underwriters of MF Global's initial public offering in July 2007; and some former and current officers and directors. The suit claimed MF Global deceived investors by misrepresenting its risk management measures.

Settlement Share

MF Global's $2.5 million contribution to the settlement will be fully reimbursed, the company said in a court filing earlier this month.

The case is IBEW Local 90 Pension Fund v. Corzine, 11-8401, U.S. District Court, Southern District of New York. The bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-cv-7750, and the wheat-trading case is Rubin v. MF Global, 08-cv-02233, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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