October Consumer Price Index fell 0.1 percent, a little lighter than expected, core CPI up 0.1 percent, in-line with expectations. Headline inflation now up 3.5 percent year over year (2.1 percent ex-food and energy), but the big worry: U.S. crude over $100 a barrel. Headline CPI will not be so tame if that continues.
Prime Minister-designate Mario Monti confirmed that he was able to form a new government, rumors of which were a factor in yesterday's midday rally.
Italian yieldshave declined to 7.06 percent, but only after traders reported aggressive European Central Bankbuying. The euro has continued to decline and is at its lowest level in a month against the dollar.
Bundesbank Executive Board Member Rudolf Böhmler reiterated his opposition to leveraging the European Financial Stability Facility (EFSF), and also purchases of Italian and Spanish debt by the ECB. The Bundesbank is the lead organization for the fiscal conservatives in Europe, but they are looking increasingly isolated.
German Chancellor Angela Merkel has again rejected eurobonds, again because they remove incentives for countries to have a solid fiscal policy. At the same time, she said she was willing to "cede a bit of national sovereignty" to stronger centralized institutions. Not clear what this means, but some say she is arguing both sides, toeing the conservative line while opening the door a crack for eurobonds. It's a delicate dance.
The Irish, the Italians, and the Spanish. Merkel made the comments after meeting with the Irish prime minister, praising Ireland as an "outstanding example" of a country that got a bailout and has fulfilled the terms of its bailout.
Hmm. The Italians and the Spanish should pay attention. By most reckoning, Irish wages have dropped some 20 percent in the past couple years. That's what it has taken to start to make Ireland more competitive. Will the Italians, Spaniards, and Greeks stand for that?
And remember: Ireland was a banking crisis, not a sovereign debtcrisis. The banks went out and lent billions of euros (borrowed from other European investors) for property development in Ireland. The Irish people then turned around and guaranteed the debt of all the banks (and there is only really three of them). No haircuts for Irish debtholders!
You know Monti, you know Papademos, now meet...Rajoy. Mariano Rajoy is the head of the Spanish Popular Party, the odds-on winner of the Spanish national elections scheduled for this Sunday. With markets turning to Spain, everyone wants to know what his plan is. It's not entirely clear. The Financial Times has noted Spain is largely governed by autonomous regional communities, making deficit reduction...challenging (impossible?).
1. Abercrombie & Fitch shares plunge 10 percent to a 9.5 month low after missing estimates (57 cents a share vs. 71 cents a share consensus). Same-store sales rose 7 percent, but the teen retailer saw margins drop as it was unable to significantly raise prices ahead of the holiday season.
2. Targethandily topped estimates at 82 cents a share vs. 74 cents a share consensus. Results were helped by a 4.3 percent rise in same-store sales and improving credit quality conditions at its credit card unit. Guidance for the current quarter of $1.43 a share to $1.53 a share is in line with the $1.48 a share consensus.
3. Food distributor Sysco announced a 4 percent dividend hike to 27 cents a share and increased its stock buyback program by 20 million shares.
4. ConocoPhilllips is selling its stakes in two U.S. pipeline assets to Caisse de Depot et Placement du Quebec and Ennbridge Holdings for about $2 billion. The deals to sell its stake in the Colonial Pipeline and Seaway Crude Pipeline are expected to close in the next few months.
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