Evening Headlines
Bloomberg:
- Obama to Set Limits on U.S. Nuclear-Weapon Use, Official Says. President Barack Obama has decided to limit the circumstances under which the U.S. would use nuclear weapons as part of a revision of the nation’s policy for such armaments, an administration official said. Obama will emphasize non-proliferation while reducing the role of nuclear weapons in the national security strategy for the U.S., the official said on the condition of anonymity before the release tomorrow of the Nuclear Posture Review. The review also will call for cutting the number of weapons in the U.S. nuclear arsenal, the official said. “We are going to want to make sure that we can continue to move towards less emphasis on nuclear weapons,” Obama said today in an interview with the New York Times. Obama has called for the abolition of nuclear weapons. The review provides the policy and strategic framework to further that goal for the next 10 years. A new U.S. treaty with Russia that calls for cutting the two countries’ nuclear arsenals by almost a third will be signed by Obama and Russian President Dmitry Medvedev in Prague on April 8.
- Euro Declines on Concern Greece Will Struggle to Raise Funds. The euro fell for a second day against the yen amid concern Greece and other European countries will struggle to raise funds to repay maturing debt. The euro weakened versus 14 of 16 major counterparts after the Financial Times cited an unidentified official as saying Greece plans to sell bonds in the U.S. as the European nation struggles to fund the trading bloc’s widest fiscal gap. “People are concerned that it’s not just Greece, there are some definite sovereign debt issues in the region,” said Phil Burke, chief dealer for global foreign exchange and rates at JPMorgan Chase & Co. in Sydney. “The market is still bearish on the euro overall and still wants to sell on rallies.”
- Massey(MEE) Blast Kills Six, West Virginia Official Says. Massey Energy Co. reported an explosion underground at the Upper Big Branch coal mine in West Virginia. Six miners were killed and at least 21 are unaccounted for, the Associated Press and the Charleston Gazette reported state Mining Director Ron Wooten as saying.
- California's Cap-Trade Law Faces Fall Ballot Challenge. The energy industry and an antitax group are challenging California's plan to cap greenhouse-gas emissions, saying the effort would lead to job losses and raise energy prices if it goes into effect in 2012. These groups are collecting signatures to put an anti-cap measure before voters in November; the proposition would postpone any carbon limit until the economy rebounds. Backers of the cap think the measure is almost certain to make the ballot, and they are raising money from technology companies to persuade voters to reject it. Both sides are already raising hundreds of thousands of dollars.
- Apartment Rents Rise as Sector Stabilizes. Apartment rents rose during the first quarter, ending five straight quarters of declines and signaling the worst may be over for the hard-hit sector. Nationally, the apartment vacancy rate stayed flat at 8%, the highest level since Reis Inc., a New York research firm, began its tally in 1980.
- Traders Beat Wall Street CEOs in Pay. Many Wall Street chief executives took a big pay cut for 2009. But their real value may have been in deflecting attention from their troops—who enjoyed the largest collective payday on record. Across Wall Street, leading firms paid out $140 billion in compensation and benefits, the highest number in history, based on a final tally of the pay disclosures at 38 financial-services firms. That figure, which was projected earlier by The Wall Street Journal, represented an increase from $123 billion earned by financial professionals in 2008 and $137 billion in 2007.
- Shortfall Awaits California's Big Pension Funds. A study released Monday by Stanford University estimates that California's three largest state-operated, public-employee pension funds—the California Public Employees' Retirement System, California State Teachers' Retirement System and University of California Retirement System—currently face a total shortfall of more than $500 billion.
- Tanker Rates Sinking 35% Amid Refinery Cutbacks From Idle Ships. The most profitable supertanker market in more than a year is heading for a 35 percent slump as oil refineries from Japan to the U.K. shut for maintenance and leave a surplus of vessels. Shipping costs will fall to an average of $28,758 a day this quarter from $44,576 on April 1, according to the median estimate in a Bloomberg survey of 13 analysts, traders and shipbrokers.
- Citigroup(C): The Case for Continued Growth. Shares in the shaken financial services giant are up nearly 29% this year. Some analysts expect further gains.
- Will an AIDS Pill a Day Keep the Virus Away? Drugmaker Gilead(GILD) is betting the one-pill PrEP treatment will slow the virus' spread—as are some of the world's top health agencies and philanthropists.
- Einhorn Down in March, Lags Equities in First Quarter. This year hasn't started so well. Einhorn lost roughly 1.5% in March, leaving Greenlight Capital Re's portfolio down 1.9% in the first quarter of 2010, according to a disclosure on the company's Web site. The Standard & Poor's 500 Index jumped 5.9% in March, which left the benchmark equity index up 4.9% in the first quarter.
NY Times:
- Financial Crisis Inquiry Wrestles With Setbacks. The panel established by Congress to investigate the causes of the has been hobbled by delays and internal disagreements and a lack of focus, according to interviews with a majority of its members and government officials briefed on its work.
Business Insider:
Forbes:
- ObamaCare's First Victim: Physician-Owned Specialty Hospitals. Big community hospitals supported the president's health overhaul. In exchange they are getting something they have desperately wanted for years: a ban on new competition.
- A Grim Assessment of L.A.'s Finances. City Controller Wendy Greuel declares an 'urgent financial crisis' and says the only way to continue paying bills in the short term is to begin draining the city's already limited emergency reserve. The city's top financial official issued a grim assessment of the escalating budget crisis Monday, warning that Los Angeles could be unable to pay its bills in just over four weeks.
- Nevada Senate: Reid Still Struggling. Senate Majority Leader Harry Reid attracts just 39% to 42% of the Nevada vote when matched against three Republican opponents. Two of his potential opponents now top the 50% level of support. The latest Rasmussen Reports national telephone survey in the state also shows that 62% of Nevada’s voters support repealing the recently passed health care law.
- Issa Aims to Unmask Health Care Deals. A top House Republican is investigating the legislative deals the White House and Democratic leadership cut with special interest groups while crafting the new health care reform law. And California Rep. Darrell Issa is not happy with the American Medical Association’s terse response to his questions. Issa, the ranking Republican on the House Oversight Committee, sent letters to five special interest groups, most of which supported reform and cut deals with the Democrats. “Contrary to the president’s oft-stated goal of transparency, the rank-and-file members of the Democratic Caucus and the entire Republican Conference have not had the opportunity to participate in the negotiations between the Democratic leadership, the White House and health care stakeholders. This is troubling to members of Congress who value transparency in government,” Issa wrote to the AMA, AFSCME, the U.S. Chamber of Commerce, the American Hospital Association and PhRMA.
- For Some, A Low Profile on Health Vote. Before Congress left town for the spring recess, Speaker Nancy Pelosi urged rank-and-file Democrats to return home and tout the benefits of the landmark health care bill. But instead of barnstorming their districts celebrating their historic accomplishment, some have been content to remain beneath the radar, reluctant to advertise their role in passing the centerpiece of President Barack Obama’s domestic policy agenda. Rep. John Boccieri, who represents this conservative area in northeast Ohio, is one of them. Boccieri is not alone. He’s one of a number of House Democrats who’ve kept a low profile over the recess, a group largely defined by the level of political jeopardy they face this fall. Like Boccieri, they tend to represent highly competitive seats. One of them, Rep. Earl Pomeroy (D-N.D.), has not held any events in Republican-oriented North Dakota to talk about health care, his staff acknowledged. This week, he’ll talk about Social Security. The offices of other endangered members, ranging from veterans such as Reps. Alan Mollohan (D-W.Va.) and Allen Boyd (D-Fla.) to junior members such as Reps. Ann Kirkpatrick (D-Ariz.) and John Salazar (D-Colo.), did not return messages asking about how they had promoted health care last week.
- IRS Could Tap Refunds for Health Insurance Penalties. The Internal Revenue Service could tap individual tax returns to collect fines against people who fail to buy health insurance as required under recently enacted healthcare legislation, the U.S. tax commissioner said on Monday. Most individuals are required to get health insurance under the new law, or face penalties that would be phased in over time. By 2016, people without coverage could see fines of 2 percent of their income.
- BlackRock(BLK) Warns on Banks' Distressed Mortgages. BlackRock, a leading US bond investor, says banks will have to take their share of losses on distressed mortgages before it resumes large-scale purchases of new “private-label” mortgage bonds, which are sold without government backing. The position taken by Curtis Arledge, chief investment officer for fixed income at BlackRock, who oversees $580bn of investments, marks the latest development in an ongoing tussle over who should bear the costs of the US mortgage meltdown. The return of private investors to the US mortgage market, now mostly financed through government-backed agencies, could have a big effect on mortgage rates and the speed of the housing recovery. Efforts to restore confidence among investors have so far failed.
- Banks Urged to Rethink OTC Trading. The world’s biggest banks will have to get used to making less money trading over-the-counter derivatives if regulators are to succeed in reducing risk in the opaque markets, the head of the world’s biggest futures brokerage has warned. In an interview with the Financial Times, Patrice Blanc, chief executive of Newedge, said efforts to move OTC derivatives – seen by many as exacerbating the financial crisis – to central clearing houses would only succeed if the banks, that are the biggest dealers, ceded some of the profits of the business to clearing.
- Greece to Target US Investors With Bond. Greece will this month launch a multibillion-dollar bond in the US in its hunt for new investors, selling itself for the first time as an emerging market country as demand for its debt dwindles in Europe. Morgan Stanley(MS) is being considered to handle the deal after Goldman Sachs’(GS) plans to sell Greek bonds to US and Asian investors this year fell through amid rumours that the Chinese had shunned Athens’ debt. Greece is seeking $5bn to $10bn from US investors to help cover its May borrowing requirement of about €10bn to roll over maturing debt and meet interest payments. The issuance is Greece’s first in the US in nearly two years.
- Japanese Rail Chief Hits at Beijing. The chairman of Central Japan Railway, operator of Japan’s busiest bullet train link, has denounced China’s high-speed rail industry for “stealing” foreign technology and compromising safety. Central Japan Railway, or JR Central, runs the Shinkansen high-speed link between Tokyo and the western city of Osaka, and is competing with China’s state railways for overseas business. “The difference between China and Japan is that in Japan, if one passenger is injured or killed, the cost is prohibitively high,” Yoshiyuki Kasai told the Financial Times. “It’s very serious. But China is a country where 10,000 passengers could die every year and no one would make a fuss.” The competition between the companies is most intense in the US, where the Obama administration has earmarked $8bn for high-speed rail as part of its stimulus effort. JR Central is targeting projects in Florida and Texas, as well as a proposed link between Los Angeles and Las Vegas that has drawn a Chinese bid. JR Central designs and runs its own trains, though construction is contracted to engineering companies such as Kawasaki Heavy Industries. Mr Kasai’s wariness of China’s rail industry is shared by other foreign executives. Alstom of France has complained that Chinese companies are competing for export contracts using foreign technology. Alstom and other manufacturers, such as Siemens of Germany, have piled into a domestic Chinese market where railway-related spending is expected to average $50bn a year between 2009 and 2013. Foreign manufacturers must operate through local joint ventures, allowing, in some cases, their Chinese partners to absorb their technology.
- S&P Warns on European CLOs. European structured loan investments are still dependent on the health of a narrow group of companies, leaving a wide range of funds at risk should just a handful default. A study to be released on Tuesday by Standard & Poor’s shows that about half of the region’s collateralised loan obligations have links to the debt of just 30 companies, leaving a swath of structured investments exposed should one of those 30 names stumble. S&P studied 206 CLOs, with investments totalling €90bn, for the report. Of those, the top three companies were held by at least 85 per cent of the funds. “Relatively high overlap in the European CLO sector means deterioration among a few key corporate obligors could continue to affect a large number of CLO transactions,” said the analysts at S&P.
- Greek Banks Hit by Wealthy Citizens Moving Their Money Offshore. Greek banks are being hit by a wave of redemptions as the country's most wealthy citizens and corporations look to move their money offshore or to international financial institutions perceived as safer homes for their assets. Wealthy Greeks and companies have been clamouring to move their cash deposits to banks such as HSBC or France's Société Générale, which operate large branches in the country. They are among those to have received several billion euros of new money in recent weeks. HSBC's private banking in the country is understood to have been flooded with business, while the local operations of several other major international banks have already seen large inflows of money.
- IMF Targets Banks With 'Excess Profits Tax'. The International Monetary Fund is poised to recommend an unprecedented new "excess profits tax" on banks worldwide. The Fund is expected to suggest the tax – which is effectively on banks' cashflow – as one of the best ways governments can raise significant amounts from banks without drastically distorting the financial system. The tax will be announced alongside the Obama-style banking levy, which the IMF will also rubber-stamp in its report, to be published at its spring meetings this month.
Citigroup:
- Reiterated Buy on (GLW), target $24.
- Rated (EBAY) Overweight, target $34.
- Asian indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 93.50 -1.0 basis point.
- S&P 500 futures -.19%
- NASDAQ 100 futures -.15%
Earnings of Note
Company/Estimate
- None of note
2:00 PM EST
- Minutes of FOMC Meeting
- None of note
- The Fed's Kocherlakota speaking, weekly retail sales reports, Treasury's $40B 3-Year Note auction, weekly API energy inventory report and the ABC Consumer Confidence reading could also impact trading today.
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