Chancellor of the Exchequer George Osborne detailed the deepest budget cuts ever in Britain, eliminating almost 500,000 public-sector jobs and imposing a levy on banks to extract the “maximum sustainable” revenue.

“Today’s the day when Britain steps back from the brink,” Osborne told lawmakers in the House of Commons in London today as he outlined plans to virtually eliminate a 156 billion-pound ($245 billion) budget deficit. It’s “a day of rebuilding when we set out a four-year plan to put our public services and welfare state on a sustainable footing.”

At stake is Britain’s top credit rating, a fragile recovery from its longest recession on record and the future shape of the postwar welfare state. Investors said they’re concerned Osborne, 39, the youngest chancellor since 1886, will have difficulty delivering on the promises, which include a cut of 7 billion pounds from the welfare bill.

By reducing departmental spending by an average of 19 percent instead of the 25 percent he first estimated, Osborne relied more on trimming welfare, Hetal Mehta, an economist at Daiwa Capital Markets Europe Ltd. and a former U.K. Treasury official said. “Unlike more easily identifiable spending cuts such as a naval ship or a new school, reducing welfare payments is traditionally more difficult to both achieve and forecast.”

via Osborne to Slash Jobs, Tax Banks in U.K. Budget Cuts – Bloomberg.

(Reuters) – Apple Inc CEO Steve Jobs unveiled the latest improvements to the company’s Mac software as it looks to increase market share gains against Microsoft Windows-based PCs.

Executives outlined the newest version of the popular “iLife” multimedia software suite and said the Mac user base now spans 50 million people.

The company is expected to tout on Wednesday a new version of its high-end ultra-thin MacBook Air laptop, sporting a smaller screen and better battery life.

In the quarter that just ended, Mac revenue was $4.9 billion, less than a quarter of Apple’s overall revenue.

Apple shares rose 1 percent to $312.25 in afternoon trading on the Nasdaq

via Apple unveils new Mac software | Reuters.

(Reuters) – Morgan Stanley reported a surprising third-quarter loss, suggesting the bank is losing hard-won ground in the battle with Goldman Sachs for Wall Street supremacy.

The firm’s $91 million loss, on weak volumes during one of the most difficult trading quarters in recent memory, came a day after Goldman overcame those same conditions to beat Street estimates with a $1.9 billion profit.

Despite results that could have spooked Wall Street a few quarters ago, Morgan Stanley shares were unchanged at midday and the broader market was higher, the latest sign of a decoupling of banks from wider investment sentiment.

“Morgan Stanley is a caterpillar in metamorphosis. It’s either going to turn into a beautiful butterfly or get eaten by a robin,” said Brad Hintz, an analyst with Sanford C. Bernstein.

via Morgan Stanley falls further behind Goldman | Reuters.

(Reuters) – Stocks bounced back on Wednesday on strong corporate earnings and raised outlooks, while a decline in the U.S. dollar lifted shares of materials companies.

Delta Air Lines (DAL.N) and US Airways Group (LCC.N) jumped after they reported strong profits, while Boeing Co (BA.N) buoyed the Dow after it boosted its full-year forecast.

Materials shares led the broad market higher, with Freeport-McMoRan Copper & Gold (FCX.N) gaining 3.4 percent to $95.89 and the S&P materials index .GSPM rose 2.4 percent. Commodities gained as the U.S. dollar dropped to a near 15-year low against the yen.

Equities and the greenback have seen a strong inverse relationship of late with the weaker dollar boosting companies tied to resources and with businesses overseas.

via Stronger earnings, weak dollar lift Wall Street | Reuters.

(Reuters) – Boeing Co (BA.N) reported a quarterly profit that beat expectations, and raised its full-year forecast, helped by a recovery in the commercial airplane market.

The world’s largest aerospace and defense company’s order backlog rose, especially on the commercial side of its business, helped by more Middle East and Asia orders.

Shares of Boeing, a Dow component, gained 2.4 percent to $70.69 in afternoon trading on the New York Stock Exchange.

“So far, the increase in the commercial side is more than compensating for the softening defense business,” said Wedbush Securities analyst Kenneth Herbert, referring to concerns that budget pressures will lead countries such as the United States and Europe to scale back weapons spending.

“Airlines are starting to significantly order jets again after essentially taking 18 months off,” he added.

via Boeing profit beats on commercial plane recovery | Reuters.

Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.

A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.

Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.

“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview. Recoveries for her clients, who own at least 25 percent of so-called voting rights in the deals, may reach “many billions of dollars,” she said.

via Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages – Bloomberg.

U.S. stocks tumbled, dragging benchmark indexes to their biggest drop since August, amid concern banks will be forced to buy back soured mortgages and after Apple Inc. forecast profit that missed analyst estimates.

Bank of America Corp. slid 4.5 percent after people familiar with the matter said Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking seek to make it buy loans that were packaged into $47 billion of bonds. Apple retreated 2.7 percent. International Business Machines Corp. lost 3.4 percent following a drop in new contracts. Exxon Mobil Corp. led energy companies lower as crude oil prices slipped.

The S&P 500 Index lost 1.6 percent to 1,165.89 at 4:03 p.m. in New York, the biggest decline since Aug. 19. The Dow Jones Industrial Average slid 165.07 points, or 1.5 percent, to 10,978.62, while the Nasdaq-100 Index, of which Apple makes up 21 percent, dropped 1.6 percent to 2,069.73.

“Wall Street is measuring in real time lenders’ loan losses from the mortgage crisis,” said Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus, which oversees $90 billion. “This additional overhang from the housing debacle is going to keep the financial stocks at bay for a long period of time.”

Stock futures extended losses after China’s central bank lifted one-year lending and deposit rates by 25 basis points. The increases come as the fastest-growing major economy seeks to prevent real-estate bubbles.

via U.S. Stocks Tumble on Mortgage Concerns, Apple Outlook – Bloomberg.

(Reuters) – Yahoo Inc delivered tepid third-quarter revenue growth and forecast weaker-than-expected sales in the fourth quarter as it continues to lose market share to rivals like Google Inc.

Yahoo, the No. 2 U.S. search engine behind Google, projected fourth-quarter revenue, excluding traffic acquisition costs, of $1.125 billion to $1.225 billion. Analysts were looking for revenue of $1.26 billion, according to Thomson Reuters I/B/E/S.

Net income in the three months ended September 30 was $396.1 million, or 29 cents a share, compared with $186 million, or 13 cents a share, in the year-ago period. But it said its earnings included a 13 cent benefit from the sale of its “HotJobs” Web service. Analysts had expected 15 cents a share.

via Yahoo disappoints on revenue forecast | Reuters.

(Reuters) – China’s central bank surprised on Tuesday with its first increase of interest rates in nearly three years, a move that reflects concern about resurgent asset prices and could mark the start of a more aggressive phase of monetary tightening in the world’s fastest-growing major economy.

The People’s Bank of China said it was raising benchmark rates by 25 basis points, taking one-year deposit rates to 2.5 percent and one-year lending rates to 5.56 percent.

If there was ever any doubt about China’s role in driving the stuttering global economic recovery, the impact was felt by markets across the board. Oil and gold prices tumbled, stocks turned negative in Europe and the dollar jumped.

“The interest rate rise is entirely outside of market expectations,” said Zhu Jiangfang, chief economist at CITIC Securities in Beijing.

“The recent rise in headline inflation has put the real rate into negative territory. And I think that’s why the central bank needs to raise interest rates in such a hasty way,” he said.

Some analysts said the rate increase also suggested a deal was in place between China and the United States to strengthen the yuan and put an end to worries about a currency war of competitive devaluations ahead of upcoming Group of 20 meetings.

via China surprises with first rate rise since 2007 | Reuters.

Perplexing market action on Tuesday’s left investors trying to determine if the rally was out of steam or just taking a pause.

Stocks sold-off in the morning but later pared losses with beleaguered bank stocks including market bellwether Goldman Sachs [GS  156.72    3.02  (+1.96%)   ] leading the charge.

However, Street favorites such as Freeport [FCX  92.72    -3.58  (-3.72%)   ] — as well as the materials names [XLB  33.85    -0.89  (-2.56%)   ] broadly — were the worst performers in the S&P after China said it will raise its benchmark one-year lending and deposit rate by 25 basis points, effective Wednesday.

S&P 500 INDEX(.SPX)

1165.90     -18.81  (-1.59%%)

INDEX

“The rally has shown a lot of resilience, and this is an interesting test of people’s conviction,” says Eric Kuby, chief investment officer at North Star Investment in a Reuters interview.

What should you be watching? How should you position now?

Instant Insights with the Fast Money traders

Tuesday was reversal day, Steve Cortes. What I mean by that is things that were working in September and most of October – things like energy [XLE  58.19    -1.18  (-1.99%)   ] and gold [GCC1  1335.1    -36.10  (-2.63%)   ] — were not working on Tuesday; that’s telling.

via CNBC’s Fast Money: Halftime: Key Reversals ‘Sell’ Signal For Resources? – CNBC.