Evening Headlines
Bloomberg:
- Asia Risks Overheating, Bubbles on Capital Inflows, IMF Says. Asia’s economic recovery that’s outpacing the rest of the world is attracting capital inflows that may cause the region to overheat and lead to the formation of asset bubbles, the International Monetary Fund said. Expectations of Asian exchange-rate appreciation may be boosting carry trade flows, where investors borrow cheaply in one currency and use the funds to invest in others, the Washington-based lender said in a report today. More flexible currencies and some capital controls can help limit the impact of investment flows, it said.
- Junking Greece May Be Beginning of End for Euro: Mark Gilbert. Greece cheated its way into the single-currency club, lied about its deficit for years, and now brings the shame of becoming the first junk-rated member after losing investment-grade status at Standard & Poor’s this week.
- Democratic National Committee to Spend $50 Million on Midterms. The Democratic National Committee plans to spend $50 million on November’s midterm elections, Chairman Tim Kaine said today. “We are very committed to holding on to strong majorities” in both the U.S. House and Senate, Kaine told reporters in Washington.
- Apple(AAPL) to Charge a Premium to Put Ads in Mobile Apps. Setting a high bar for its debut in the advertising business, Apple Inc. aims to charge close to $1 million for ads on its mobile devices this year and perhaps even more to be among the first, ad executives say.
- Goldman(GS) Shows It Can Still Lobby Hard. Goldman Sachs Group Inc. is lobbying hard to kill a provision in financial industry overhaul legislation requiring big banks to sell off their derivatives-trading businesses, and rival banks are welcoming the help, shrugging off attacks on the firm by lawmakers and securities regulators. Goldman's lobbying could put Democrats and the White House, which is lukewarm on the provision, in a difficult position. With congressional elections looming in November, lawmakers don't want to appear supportive of Goldman or Wall Street. But Goldman's leadership is less concerned about politics than the provision itself, known as "section 106."
- Senate Ends Financial-Bill Standoff.
- The Insurance Mandate in Peril. First Congress said it was a regulation of commerce. Now it's supposed to be a tax. Neither claim will survive Supreme Court scrutiny.
CNBC.com:
Business Insider:
Zero Hedge:
- No Wonder the Eurozone is Imploding.
- The Client Always Comes First at Goldman(GS)... Except When He Doesn't, Which is Also Always.
- Republican Party Demands Health Cost Probe. House Republicans on Wednesday demanded an investigation into whether the health care overhaul plan would increase national health spending, following a recent report from the Centers for Medicare and Medicaid Services that showed cost increases, at least in the first decade. They asked the Democratic chairmen of four committees to hold hearings before Memorial Day to allow Richard Foster, CMS’s chief actuary, to testify about the analysis. “Throughout the health care debate, the president promised Americans that his policies for reform would bend the health care cost curve down and decrease the deficit. Recent analysis from the administration’s own chief actuary, Richard Foster, suggests otherwise,” Republicans on the Budget Committee said in a letter to Chairman John Spratt (D-S.C.) The report was released by the nonpartisan experts at CMS last week. It found that the overhaul would cover more people than anticipated, but also cost more.
- Obama to Tap Yellen, Others for Fed on Thurs - Sources.
- U.S. Deficit Serious, Action Needed - Policymakers. U.S. deficit woes are not as dire as the fiscal problems of Greece and other nations, but a quick, credible action plan is still needed to avoid a future crisis, economists and policymakers said on Wednesday.
- Goldman(GS) Pressed for CDO Loss Settlement. Goldman Sachs is in talks over a potential settlement with an investor that claims that it lost money and went out of business after buying into a $1bn (€760,000) mortgage-backed security that was later privately criticised by a senior executive at the bank. Basis Yield Alpha Fund, a hedge fund, is seeking compensation over its $100m investment in Timberwolf, a complex security, say several people familiar with the matter. Timberwolf plummeted in value months after it was launched in March 2007, at a time when Goldman had already decided to cut its exposure to the housing market. The talks are at a preliminary stage and there is no certainty they will lead to a settlement.
- CDO Fees Flow to Ratings Agencies. Credit rating agencies are still being paid millions of dollars a year to report on the performance of collateralised debt obligations that have lost most of their value despite having been issued in many cases with triple A stamps of approval. The fees, known as “ratings surveillance” payments, are paid to the agencies ahead of any payments to investors under the terms of the CDO contracts – and without regard to how accurate the original ratings were.
- Business Leaders Warn Next Government: Either Shrink the State or Risk Economic Ruin. One of Britain's most powerful trade bodies has warned that the winner of the next election must be prepared to reduce the size of the Government immediately or risk economic problems for a decade. The Institute of Directors used its annual conference in London to criticise all of the political parties for failing to produce policies that will adequately tackle Britain's economic problems. Speaking ahead of Thursday's crucial televised debate on the economy, Miles Templeman, director general, said: "We're a week from the General Election but we're still years from bringing the deficit and the size of the Government under control. If the truth be told, no political party is advocating the scale of spending and deficit reduction we need, not just for the next few years, but for the next decade.
- EMU Domino Fears as Spain Downgraded, Germany Drags Feet on Rescue. German leaders have agreed in principle to a rescue package of up to €135bn for Greece in emergency talks with EU and IMF officials, but failed to offer any clarity on the conditions for such aid. Hopes for a respite for Southern Europe's battered bond markets were quickly dashed as Standard & Poor’s downgraded Spain. Rainer Brüderle, Germany’s economy minister, said the Greek bail-out would be much larger than first thought, acknowledging that Greece cannot hope to tap the private debt markets for three years. The heads of the European Central Bank and the International Monetary Fund made a joint pilgrimage to Berlin, pleading with lawmakers in the Bundestag to throw their full weight behind rescue efforts before the chain-reaction spreads to Portugal and the rest of the EMU periphery. Their presence as supplicants in Berlin marks the symbolic moment when Germany appears the undisputed master of Europe. Dominique Strauss-Kahn, the IMF’s chief, said the stability of the eurozone itself is in danger. "We need to act swiftly and strongly,” he said. German Chancellor Angela Merkel once again refused to give concrete assurances, leaving the markets as wary as ever over the real intentions of Berlin. "This is about the stability of the euro overall, and we won't avoid this responsibility. But the challenge is for Greece to accept an ambitious program," she said. “Europe risks the biggest coordination failure in modern history,” said David Simmonds, research chief at RBS. The Berlin talks are as vague as ever. “We believe that markets will remain very sceptical.” UBS said it was disturbed by signs of counterparty fears among European banks that replicate events in credit derivatives before the financial crisis in late 2008. “Investors will need to be on their guard,” it said.
- Greece won't be in a position to service its debt, and restructuring the debt would "make sense," Michael Fuchs, the Christian Democratic Union's deputy leader in the German parliament, said in an interview. Fuchs "fears" that Greece will need aid "for years," citing the interview.
- 28 Kindergarten Children Stabbed in East China. Twenty-eight children and three adults were injured when a man with a knife attacked them at a kindergarten in east China Thursday. Five of the children are critically ill in hospital after the attack in Taixing City, Jiangsu Province, said city government and police sources.
Citigroup:
- Upgraded (AKAM) to Buy, target $44.
- Reiterated Buy on (S), target $6.
- Asian indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 104.50 -6.0 basis points.
- S&P 500 futures -.07%.
- NASDAQ 100 futures -.02%.
Earnings of Note
Company/Estimate
- (HOT)/.02
- (WM).43
- (WY)/-.21
- (IP)/.03
- (CME)/3.60
- (BG)/.75
- (BKC)/.29
- (STRA)/2.58
- (TBL)/.28
- (EK)/.90
- (AET)/.72
- (MOT)/.00
- (COP)/1.36
- (K)/.94
- (APA)/2.20
- (MXIM)/.24
- (IRF)/.18
- (KLAC)/.35
- (MWW)/-.15
- (MET)/.98
- (DLB)/.63
- (OSK)/2.54
- (BDX)/1.23
- (BWA)/.41
- (PG)/.82
- (FO)/.39
- (BMY)/.51
- (SWY)/.30
- (XOM)/1.41
- (WYNN)/.17
- (MHK)/.18
- (CL)/1.15
- (REV)/.24
- (EXPE)/.22
- (OXY)/1.37
- (MFE)/.63
- (NBL)/.72
- (HGSI)/-.20
- (CELG)/.61
- (VIA/B)/.37
8:30 am EST
- The Chicago Fed Nat Activity Index for March is estimated to rise to -.20 versus -.64 in February.
- Initial Jobless Claims for last week are estimated to fall to 445K versus 456K the prior week.
- Continuing Claims are estimated to fall to 4618K versus 4646K prior.
- (SHOO) 3-for-2
- The Barclays Retail and Restaurant Conference could also impact trading today.
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