- EU Bids to Defend Euro, Tighten Rules in Greek Crisis. European leaders sought to restore confidence in the euro as Greece’s escalating debt crisis threatened to engulf Portugal and Spain, testing the stability of the 11-year-old currency and rattling financial markets worldwide. Leaders of the 16 countries sharing the euro plan to endorse a 110 billion-euro ($140 billion) aid package for Greece and mull ways of capping budget deficits to strengthen the management of the $12 trillion economy at a summit in Brussels tonight. “We have to accelerate the regulation of the financial markets,” German Chancellor Angela Merkel told reporters before the summit. “We also have to take steps to secure the stability of the euro overall, that means a firm commitment by all that it is our common currency but also internally that we stiffen the Stability and Growth Pact including possible treaty changes.”
- Market Fragmentation May Get Review After Stock Drop. Federal regulators reviewing yesterday’s stock plunge will try to determine if the fivefold increase in the number of American equity exchanges has left them unable to manage the biggest surges in volume. Almost 1.3 billion shares traded on U.S. markets in a 10- minute span starting at 2:40 p.m., six times the average, sending prices lower on platforms from New York to Kansas City. Nasdaq OMX Group Inc. said it canceled transactions in 286 stocks where swings grew too wide. Federal agencies began inquiries after more than $700 billion in value was erased in an eight-minute span. “Markets aren’t supposed to work this way,” said Jamie Selway, managing director of White Cap Trading LLC in New York and a former chief economist at NYSE Arca, a unit of NYSE Euronext. “There was a mad rush for the exits. We just don’t know whether it was accidental or intentional.”
- South Korea Concludes That North Korea Sank Ship, Chosun Says. South Korea has concluded that North Korea sank one of its warships in March close to their disputed border with the loss of 46 lives, Chosun Ilbo newspaper reported. The finding may hamper a resumption of nuclear disarmament talks with Kim Jong Il’s regime as public ire builds in South Korea, said Kim Yong Hyun, a professor of North Korean studies at Seoul’s Dongguk University. Kim Jong Il reaffirmed his commitment to denuclearization in a meeting with Chinese President Hu Jintaothis week, Xinhua News reported today. Confirmation of a North Korean attack may pressure South Korean President Lee Myung Bak to coordinate an international response, shifting focus away from resuming nuclear negotiations.
- German Role in Greek Aid Is Challenged at Top Court. German participation in the 110- billion euro ($140 billion) aid package for Greece was challenged in a lawsuit by five men who say the rescue violates their constitutional rights and European Union treaties. The group of economists and university professors are seeking an emergency ruling blocking German approval for the package as part of a complaint at the Federal Constitutional Court in Karlsruhe. The men argue the aid package violates the “no bailout-clause” in EU governing treaties. “The EU is on the way to a liability union which will turn into an inflation union,” economist Joachim Starbatty told reporters in front of the court today. “This isn’t a rescue for Greece, this is help for the banks, where the money will go immediately.”
- U.S. Economy: Payrolls Jump by Most in Four Years. Payrolls in the U.S. surged by the most in four years in April, led by gains in private employment that indicate the economy is weaning itself from government support. The 290,000 increase in employment exceeded the median estimate of economists surveyed by Bloomberg News and followed a 230,000 gain in March that was larger than initially estimated. The jobless rate rose to 9.9 percent from 9.7 percent as thousands of jobseekers entered the workforce, a Labor Department report in Washington showed today. The April gain included 66,000 temporary workers hired by the government to help conduct the 2010 census and a 231,000 rise in private payrolls. A government boost to hiring is already under way at the Census Bureau. The agency said it will take on about 970,000 temporary workers from April through June to conduct the population count that occurs every 10 years. The government program may have the biggest impact on payroll figures in April and May, when the bulk of the hiring will take place, and will then subtract from the job count the following months as employees are dismissed after the work is done. While the economy added jobs, incomes were little changed. Average hourly earnings rose to $22.47 in April from $22.46 in March, today’s report showed. The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 17.1 percent from 16.9 percent. The report also showed an increase in long-term unemployed Americans. The number of people unemployed for 27 weeks or more rose as a percentage of all jobless, to a record 45.9 percent.
- GE Asset Management Inc., a unit of General Electric(GE) overseeing $120 billion, started accepting money from external investors into its commodities fund. The $200 million Active Commodities Strategy fund was created in 2006 as a part of the U.S. GE Pension Fund. It trades listed metals, energy and agriculture, as well as exchange-traded funds.
- Copper, Aluminum Slump, Crude Oil Set For Worst Week Since 2009. Copper fell, heading for its worst week since January, and aluminum declined to the lowest level since February on concern that Europe’s debt crisis may slow the global economic recovery. Copper for three-month delivery fell as much as 2.7 percent to $6,760 a metric ton in London and aluminum lost 2.5 percent to $2,050 a ton, the lowest since Feb. 15. Oil, rebounding from an 11-week low in New York yesterday, has lost 9.8 percent this week, the worst performance since July 2009. The S&P GSCI Commodity Index of 24 raw materials lost 7 percent this week, the most since July 2009. U.S. inventories of gasoline are 7.6 percent above their seasonal norm as the country’s peak driving season approaches, according to the Energy Department.
- IPOs Derailed by Market Plunge as Americold, Ryerson Pull Sales.
- Libor Jumps Most in 16 Months on Greek 'Fear Trade'. The rate banks say they pay for three- month loans in dollars rose the most in almost 16 months as lending sputtered amid concern financial institutions are holding too many assets of Europe’s most indebted nations. The London interbank offered rate, or Libor, for three- month loans climbed 5.5 basis points to 0.428 percent today, the highest level since Aug. 17, according to data from the British Bankers’ Association. It was the biggest increase since Jan. 16, 2009, and the 13th straight gain. “There is clearly a fear trade starting to stalk the market,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. “Questions are being asked about certain counterparties. It’s a question of what people have on their books and whether they are vulnerable to big losses.” The spread between three-month Libor and the overnight indexed swap rate, a gauge of banks’ reluctance to lend, rose more than 6 basis points to 18.5 basis points, the most since Aug. 26. “Banks simply don’t trust each other, just like in the aftermath of Lehman Brothers,” said Jens-Oliver Niklasch, a fixed-income strategist at Landesbank Baden-Wuerttemberg in Stuttgart.
- Bank Risk Soars to Record, Default Swaps Overtake Lehman Crisis. The cost of insuring against losses on European bank bonds soared to a record, surpassing levels triggered by the collapse of Lehman Brothers Holdings Inc., as the sovereign debt crisis deepened. The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers soared as much as 40 basis points to 223, according to JPMorgan Chase & Co. The index closed at 212 basis points March 9, 2009. “Financials are caught in a really bad place right now,” said Aziz Sunderji, a London-based credit strategist at Barclays Capital. “Investors are selling bonds, not just hedging with CDS. It shows investors are repositioning portfolios and there’s a more long-term repricing of peripheral risk.” Markit’s financial gauge was trading at 198 basis points at 2:30 p.m. in London, according to JPMorgan. Contracts on Spanish and Portuguese banks rose to records, according to CMA DataVision prices. Portugal’s Banco Comercial Portugues SA increased 53 basis points to 579 and Spain’s Banco Santander SA rose 12 basis points to 253. In the U.K., swaps on Royal Bank of Scotland Group Plc jumped 41 to 229 after Britain’s biggest government-owned bank posted the only first-quarter loss among British rivals. Swaps on Greece surged 75 basis points to 1,008 before the advance was pared to 950. before dropping to 227 and Spain increased 14 to 288 before trading at 246, CMA prices show. Portugal climbed 42 to 502 before falling to 430 and Italy rose 24 to 255.5Contracts on the U.K. rose 8 basis points to 99, according to CMA. The cost of insuring against losses on corporate bonds also rose. Contracts on the Markit iTraxx Crossover Index linked to 50 companies with mostly high-yield credit ratings increased as much as 74 basis points to 625, JPMorgan prices show, the highest since September. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed as much as 29.5 basis points to 152.5, JPMorgan prices show, the highest since April 2009.
- Nokia(NOK) Sues Apple(AAPL) Over Technology Used in iPhone, iPad. Nokia Oyj, the world’s biggest maker of mobile phones, filed a patent-infringement lawsuit against Apple Inc. in its latest salvo over the
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- Hedge Funds Oppose Limits on Non-EU Funds in Legislation. Hedge funds have asked European lawmakers to reject a proposal that could bar European Union investors from sending money to funds based in some offshore tax havens.
- Fed Officials Develop Plan to Shrink Central Bank's Mortgage Portfolio. Federal Reserve officials have agreed to sell some of the central bank's $1.1 trillion of mortgage-backed securities at some point, but have been unable to reach a firm consensus on how soon or how aggressively to do that, according to several people familiar with the matter. Many Fed officials want to wait until after the central bank has started to raise short-term interest rates and tighten financial conditions, which could be many months away, but a minority is eager to move sooner. The internal debate about the Fed's mortgage portfolio is important to households and investors because sales of mortgage securities could push down prices of the securities and push up mortgage borrowing costs.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 27% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -13 (see trends).
- HSBC Warns of New Credit Crunch From Tough Bank Regulation. HSBC warned regulators that they could cause a new credit crunch if they forced through tougher rules to regulate the banking system too quickly.
- Banks in Spain are seeing an increasing number of clients asking how to send money abroad because of the economic situation in Spain.
- The Greek crisis may undermine the euro's survival, Nobel-prize winning economist Joseph Stiglitz wrote. Europe should implement structural reforms, including a common fiscal strategy to avoid a failure of the euro.