Weekend Headlines
Bloomberg:
- Italy Rating Review Fuels Contagion Risk From Greece's Deepening Debt Woes. Standard & Poor’s threat that it may cut Italy’s credit rating risks fanning contagion among debt- laden European countries as Greece fends off speculation that it’s headed to a restructuring. Italy’s Treasury said two days ago that it will “intensify” structural changes and push ahead with measures to balance the budget by 2014 after S&P said its A+ debt rating was at risk of a downgrade. Greek Prime Minister George Papandreou is set to brief his Cabinet today on added budget cuts and asset sales to keep the aid pipeline flowing. More than a year after European policy makers approved a 750 billion-euro ($1.1 trillion) bailout blueprint to stem the sovereign crisis, bond yields in debt-laden peripheral countries are at record highs and officials are floating plans to extend Greek repayments. Hours before the S&P warning about Italy, Fitch Ratings cut Greece three grades and said it would consider an extension of maturities as a default. “In isolation this is not a major event and under normal circumstances I would not expect it to have a significant impact upon the market,” said Gary Jenkins, head of fixed-income at Evolution Securities Ltd. in London. “However, these are not normal times.”
- Merkel's Party Drops to Third in Bremen Elections Won by Social Democrats. German Chancellor Angela Merkel’s party slumped to third place in a state election in Bremen and blamed the result on having to shoulder Europe’s debt crisis, as the main opposition Social Democrats were re-elected.
- Zapatero's Socialists Routed as People's Party Takes 38% of Vote in Spain. Spain’s Socialists suffered their worst electoral defeat in more than 30 years as voters punished Prime Minister Jose Luis Rodriguez Zapatero’s party for soaring unemployment and spending cuts that aimed to shield the country from Europe’s debt crisis.
- Lagarde is Front-Runner to Head IMF as Carstens Enters Race. Support mounted for French Finance Minister Christine Lagarde to head the International Monetary Fund as Mexico offered its central bank governor as an emerging- market candidate to challenge Europe’s 65-year hold on the job. U.K. Chancellor of the Exchequer George Osborne said in a May 21 statement his nation will back her to become the first woman to head the Washington-based lender. German Chancellor Angela Merkel said consensus was emerging in Europe for her to get the post, Deutsche Presse-Agentur reported two days ago. With nations from Australia to Brazil urging a selection determined by “merit” rather than nationality, Banco de Mexico Governor Agustin Carstens offered a veteran IMF candidate for emerging markets to rally around. Developing countries have so far shown little evidence of coordination, with Thailand, Russia and South Africa supporting policy makers from their own region.
- Egyptian Groups Call for Second Round of 'Rage' Protests on Lack of Change. Egyptian pro-democracy groups are calling for a second round of so-called “rage” protests on May 27 because of a lack of political progress and perceived failure to prosecute members of former President Hosni Mubarak’s regime. The protests are proposed by several groups including Six of April Youth, which helped organize the first of a series of protests on Jan. 25 that led to Mubarak’s departure in February. Demonstrators will demand speedy trials for members of the former regime, the dissolution of municipal councils and establishment of a 50-member committee to advise Egypt’s ruling military council, Mohamed Adel, spokesman for the group, said. “We see the need to continue the revolution because the real symbols of the former regime have not been held accountable yet,” Adel said. “We also want the military to approve forming a committee that represents groups like us for consultation on governance in order to add a civil element that keeps the revolution’s goals in sight.”
- Egypt is 'Disintegrating' as Tourism Drop Cripples Economy, ElBaradei Says. Egypt is disintegrating socially and its economy “is bust,” said Mohamed ElBaradei, the former director of the International Atomic Energy Agency and possible candidate for the Egyptian presidency. “Right now, socially, we are disintegrating,” ElBaradei said on CNN’s “Fareed Zakaria GPS,” scheduled to air today. “Economically we are not in the best state. Politically it’s -- it’s like a black hole. We do not know where we are heading.”
- Russia is seeking to "de-stimulate" foreign borrowing by state-run companies and may introduce tax measures to help reduce their overseas debt plans, Deputy Finance Minister Sergei Storchak said.
- Syrian Forces Kill Mourners at Funeral. Syrian forces killed 12 people in a funeral procession for anti-government activists, raising the two-day civilian death toll to at least 62, activists said. The mourners were killed yesterday during the burial ceremony in Homs of 11 people killed the day before by security forces in the central city, Mahmoud Merhi, head of the Arab Organization for Human Rights said.
- Australia's Carbon-Tax Policy May Discourage Investment, TRUenergy Says. Australia’s carbon-tax policy is discouraging investment in the nation’s power industry, resulting in possible shortages in as little as five years, electricity supplier TRUenergy Holdings Pty said.
- Twisters Rip Midwest. Tornadoes killed at least two people in the Midwest over the weekend, as twisters touched down in Kansas, Missouri and Minnesota, including one that struck a hospital. In Joplin, Mo., St. John Regional Medical Center was evacuating nearly 100 patients after the hospital took a direct hit Sunday from a tornado, said Cora Scott, a spokeswoman there, according to the Associated Press. Patients were being taken to other hospitals. Ms. Scott said she didn't yet have confirmation of deaths or injuries at the hospital.
- China Rare-Earth Exports Rise. China's exports of rare-earth ores and metals rose 33% in the first four months to 18,614 metric tons from a year earlier, quoting customs data obtained from Hong Kong's Economic Information & Agency. The increase defied the government's orders to cut such exports.
- Falun Gong Practitioners Sue Cisco(CSCO). A group of Chinese Falun Gong practitioners is accusing Cisco Systems Inc. in a lawsuit of aiding and abetting torture and other human-rights violations by the Chinese government against members of the religious movement. The suit, filed by the Human Rights Law Foundation and the law firm Schwarcz, Rimberg, Boyd & Rader, alleges that Cisco was closely involved in the design and maintenance of a surveillance system in China called "Golden Shield" that was used to track and target Falun Gong followers and dissident groups.
- Afghan Taliban Boost Violent Offensive. Taliban insurgents expanded their summer offensive on Sunday by storming a government building in eastern Afghanistan and killing six people during a protracted battle that required support from U.S military forces in the area. The assault by insurgents wearing military uniforms came one day after a suicide bomber hit Kabul's largest military hospital and killed six in the Afghan capital. Taliban insurgents are escalating their destabilizing campaign as American strategists debate how many U.S. troops should be brought home this year and the U.S.-led coalition begins to transfer security control to the Afghan government.
- Options Trading in SAC Probe. Congressional investigators are broadening an early-stage stock-trading probe into SAC Capital Advisors, with plans to examine any suspicious trading by the hedge-fund giant in the options market, another arena where investors wager on the prospects of companies and deals, according to people familiar with the matter.
- Election Picture Sharpens for GOP. The race for the Republican presidential nomination gained some long-awaited clarity Sunday when Indiana Gov. Mitch Daniels ended months of speculation with an early-morning email alerting supporters that he won't run. Former Minnesota Gov. Tim Pawlenty, meanwhile, announced his candidacy in a video Sunday night and said he plans to begin his campaign with a speech in Iowa on Monday.
- Republicans and Mediscare. Paul Ryan's GOP critics are ObamaCare's best friends.
- China May Flash Manufacturing Activity Slips: HSBC.
- China's Ship Builders Face Grim Outlook. China’s shipbuilding industry is expected to face choppy seas this year amid rising costs from labor, raw materials and yuan appreciation, the China Association of National Shipbuilding Industry (CANSI) said in a report on May 19.
- QE2 Was a Bust. Economic Data is Worse Than Before. It‘s cost $600 billion of your money. And it was supposed to rescue the economy. But has Ben Bernanke’s huge financial stimulus package, known as “Quantitative Easing 2,” actually worked as planned? QE2 is being wound down in the next few weeks. Fed Chairman Ben Bernanke has said it has left the economy “moving in the right direction.” But an analysis of the real numbers tells a very different story. Turns out the program has created maybe 700,000 full-time jobs — at a cost of around $850,000 each. House prices are lower than before QE2 was launched. Economic growth is slower. Inflation is higher.
- States Seeking New Registries for Criminals. Lawmakers around the country are pushing for online registries, like those used for sex offenders, to track the whereabouts of people convicted of a wide variety of crimes, from arson and drunken driving to methamphetamine manufacturing and animal abuse.
- Promise of Arab Uprisings Is Threatened by Divisions. In the past weeks, the specter of divisions — religion in Egypt, fundamentalism in Tunisia, sect in Syria and Bahrain, clan in Libya — has threatened uprisings that once seemed to promise to resolve questions that have vexed the Arab world since the colonialism era.
- Store Swiping Back!. Banks may be losing ground in the $15 billion battle on Capitol Hill against major retailers over debit-card fees.
- Militants Stage Huge Terrorist Attack On Karachi Base Used by Americans.
- Video: SNL's Amazing Strauss-Kahn Eurozone Crisis Opener.
- Goldman Sachs(GS) Aligns Itself Against US, UK, And Europe, Alonside China in Choice for Next IMF Head.
- US-Iran Escalation: Iran Arrests 30 US Spies as It Builds Venezuelan Missile Base; America Sends a Third Aircraft Carrier to Persian Gulf.
- As Greece Has Less Than Two Months of Cash Left, An Insolvent ECB Sees a Widening Rift With Germany.
- As Spain's Socialists Lose Local Elections, The Bond Vigilantes Stir.
Crain's Chicago Business:
- Citadel's Griffin Spends Big in Bid to Influence Policy. After spreading his bets among Democrats and Republicans, Citadel LLC's Kenneth Griffin is veering to the right. Mr. Griffin says U.S. government spending is digging the country into a financial hole that is hurting its ability to provide educational and employment opportunities to its citizens. "The frustration today with the Obama administration is that we have taken the spending levels of the Bush era and multiplied them," he told attendees this month at the SkyBridge Alternatives Conference in Las Vegas. "I speak to a number of people who are leaders within this industry, and we are all gravely concerned about the fiscal instability of the United States of America over the next decade."
- German Finance Minister Wolfgang Schaeuble said the maturities of Greek government debt could only be extended if private creditors such as banks took part and the IMF and the European Central Bank agreed. Schaeuble also said that there are no grounds for fear of inflation as the euro and prices will remain stable, citing an interview with the minister.
- The Brazilian economy is close to "overheating" and an increase in interest rates and "budget consolidation" are desirable, the International Monetary Fund's Olivier Blanchard said. Brazil needs to be prepared for negative shocks, such as a drop in raw material prices, Blanchard said in an interview. The economist also said it's reasonable to adopt certain measures to limit the appreciation of the real, such as reserve accumulation and capital controls.
- Beijing's government will guide rental prices in certain areas and increase supply to curb inflation, citing a statement from the city government.
- China must try to prevent stagflation as the nation faces inflationary pressure and a possible slowdown, citing a Peking University report on the country's 2011 economic growth.
- China's negative real interest rates are prompting people to withdraw money from banks to invest in higher-yielding wealth management products, citing analysts. The trend may push the central bank to focus on pricing tools in adjusting monetary policy.
- China Banking Regulatory Commission Chairman Liu Mingkang said the country could introduce taxes to curb hot money inflows, based on measures used by countries including Brazil and South Korea. Measures that may be considered include "unremunerated reserve requirement", income tax on international investments and financial transaction levies, he said.
Barron's:
- Made positive comments on (EMC).
- Made negative comments on (LNKD).
- Asian indices are -2.0% to -.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 113.0 -.5 basis point.
- S&P 500 futures -.55%.
- NASDAQ 100 futures -.54%.
Earnings of Note
Company/Estimate
- (TECD)/1.05
- (CPB)/.52
- (SOLR)/.35
8:30 am EST
- The Chicago Fed Nat Activity Index for April is estimated to fall to .2 versus a reading of .26 in March.
- None of note
- The Fed's Bullard speaking, 3-Month/6-Month T-Bills Auctions, UBS Oil and Gas Conference, Barclays Americas Conference, Janney Montgomery Consumer Conference, (AZPN) investor day and the (DNR) analyst meeting could also impact trading today.
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