Trade the News Market Internals Update at 14:00ET

Dow -308 S&P -30 NASDAQ -68

***Economic Data***

– (PD) Poland Oct Sold Industrial Output M/M: -2.4% v -2.0%e; Y/Y: 6.5% v 7.2%e
– (PD) Poland Oct Producer Prices M/M: 0.1% v 0.3%e; Y/Y: 8.5% v 8.3%e
– (CA) Canada Sept Wholesale Sales M/M: 0.3% v 0.7%e
– (US) Oct Chicago Fed Nat Activity Index: -0.13 v +0.19e
– (US) Oct Existing Home Sales: 4.97M v 4.80Me
– (EU) ECB completed €8.0B in weekly settlements v €4.5B prior in Gov’t Bond Buying Program (SMP); To drain €194.5B in next 7-day Term Deposit v €187.0B prior

– Markets are extremely tense this morning as Europe teeters and the Congressional supercommittee appears to be close to announcing that it has failed to do its job. In Europe, there is a general sense that European officials are helpless to staunch contagion as investors continue to yank money away from the continent. Moodys warned that higher borrowing costs would be credit negative for France, Goldman Sachs warned that sovereign risk is “spreading like wildfire” and Germany’s BdB Banking Association warned that even German local governments are already having trouble financing themselves. In Spain, Banco de Valencia failed and has been taken over by the government bank rescue fund FROB. In US data, the October Existing Home sales data was more or less flat on a sequential basis, further reinforcing the sense that the housing market is bouncing along the bottom. In one positive point from the report, the NAR said that in some areas, the organization is hearing about shortages of foreclosure inventory in lower price ranges with strong bidding on more desirable properties. Spot gold continues to float lower in the liquidating environment, dropping around $30 in this morning’s trade to test below $1,700. Crude continues to come off the strength seen last week, dropping approx $2 to trade around $95.60. Treasury paper is in demand again as safe haven flows push Bund, Gilt and US Treasury bonds higher.

– Two notable acquisitions were announced this morning. Biotech firm Pharmasset agreed to be acquired by Gilead Sciences for $137/shr in cash, an 89% premium to the firm’s closing price on Nov 18th. The transaction is valued at $11B. Pharmasset is conducting clinical trials on promising hepatitis C medicines. Property and casualty insurer Alleghany signed a definitive deal to acquire reinsurer Transatlantic Holdings for $3.4B in cash and stock, for an implied deal value of $59.79/shr. This new offer values Transatlantic at nearly $5 more per share than Validus’ latest offer, which may help Transatlantic prevent Validus’ hostile takeover. Back in August, Berkshire Hathaway offered $52/shr for Transatlantic, which the firm rejected.

– The US session started out with some consolidation of the risk aversion flows that dominated the early part of the European session. Dealers again saw key support in EUR/USD pair at 1.3390 with solid bids under 1.3430 to just under the 1.3400 level. 1.3390 corresponded to lower hourly channel support developed over the last month and held numerous attacks last week. By mid-morning, European yields of peripherals and semi-core and core countries again edged higher led by French and Spanish 10-year instruments.

***Looking Ahead***

– 11:00 (US) Fed to sell $8.00-8.75B in Notes
– 11:30 (US) Treasury to sell 3-Month and 6-month Bills
– 13:00 (US) Treasury to sell 2-Year Notes
– 14:00 (AR) Argentina Q3 Unemployment Rate: 7.1%e v 7.3% prior
– 14:30 (US) Fed’s Lockhart to speak on Economy in Brazil
– 18:00 (EU) Greece PM Papademos to meet EU’s Juncker in Luxembourg

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