Today's Headlines

Bloomberg:

• U.S. Payrolls Grew 244,000 in April; Unemployment Jumps to 9%. American employers in April added more jobs than forecast and the labor market in the prior two months was stronger than initially estimated, indicating the world’s largest economy is weathering the impact of higher fuel prices. Payrolls expanded by 244,000 last month, the biggest gain since May 2010, after a revised 221,000 increase the prior month, the Labor Department said today in Washington. The jobless rate climbed to 9 percent, the first increase since November, a separate survey of households showed. Employment was forecast to grow by 185,000 last month, according to the median estimate of economists surveyed by Bloomberg News.
• Al-Qaeda Confirms Bin Laden's Death, Threatens Retaliatory Attack on U.S. Al-Qaeda confirmed the death of Osama bin Laden and threatened to retaliate “soon” against the U.S. Bin Laden’s blood “is too valuable to us and to every Muslim to let it go in vain,” said a statement attributed to al-Qaeda, dated May 3 and posted on websites that have carried confirmed jihadist statements in the past. “We will continue to hunt the Americans and their operatives inside and outside their country,” the group said. “Soon by God’s help, their happiness will be turned to grief and their tears will be mixed with their blood.”
• Bank Bond Risk Rises in Europe on Concern Recovery is Faltering. Financial companies led an increase in the cost of insuring European debt on concern an employment slowdown may add to evidence the recovery is faltering. The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 banks and insurers rose 2.5 basis points to 135, and the subordinated index was up 8 at 233.5, according to JPMorgan Chase & Co. at 10:30 a.m. in London. Sovereign risk also rose, with the Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbing 2 basis points to 192, according to CMA. Swaps on Spain jumped 10 basis points to 247, Portugal climbed 7.5 to 638.5, Ireland increased 7.5 to 660, Italy was up 6 at 155 and Greece rose 12.5 to 1,320.
• Silver Futures Head for Biggest Weekly Plunge Since 1975. Silver futures fell, heading for the biggest weekly plunge since at least 1975, on mounting sales by investors following increases in Comex margin requirements. This week, silver has tumbled 26 percent after CME Group Ltd., the Comex owner, boosted the cash amount needed for a speculative position by 84 percent in two weeks. Yesterday, holdings of the metal in exchange-traded products dropped the most in three years. “At the close of business on Monday, silver’s got another bump in margins,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. The minimum amount of cash that must be deposited when borrowing from brokers to trade will rise to $21,600 a contract after May 9, CME Group said on May 4. That’s an increase of $11,745 from two weeks ago. “The higher cash-margin requirements simply cannot be met by all participants, and when a trader can’t make margin, the underlying security is often liquidated,” Lachlan Shaw, a commodity analyst at Commonwealth Bank of Australia (CBA), said in a report. “Further silver price falls are possible.” Silver assets held in ETPs tumbled 3.6 percent to 14,546.99 metric tons yesterday, the biggest decline since Jan. 2, 2008, while gold holdings fell 0.7 percent to 2,057.08 tons, the biggest drop in three months, according to data compiled by Bloomberg.
• China Paying 'Close Attention' to U.S. Debate on Increasing Debt Ceiling. China, the biggest foreign holder of Treasury notes, is closely watching the debate over raising the U.S. debt ceiling and wants the Obama administration to do more to curb the deficit, Vice Finance Minister Zhu Guangyao said. “We are paying close attention to the domestic discussion in the U.S. on debt and deficits,” Zhu told reporters in Beijing today. “We hope the U.S. can take effective measures toward fiscal reorganization just as President Obama suggested.” His comments came days before about 30 top Chinese officials travel to Washington for an annual meeting on economic and military cooperation. Geithner has said the U.S. can borrow until Aug. 2 after reaching the $14.29 trillion debt limit this month. The U.S. has to take deficit-reduction measures “in order to improve the U.S. fiscal condition and to build a solid fiscal foundation for the long term sustainable growth of the U.S. economy,” Zhu said. China held $1.15 trillion in Treasuries as of the end of February, more than any other country. “Reduced U.S. fiscal spending may lead to a higher possibility of the U.S. dollar appreciation, therefore it helps China to maintain the value of the U.S. debt it holds,” said Li Jun, a Shanghai-based strategist at Central China Securities Holdings.
• Trichet's Dollar Comments Hint at Motivation for ECB Rate Move Restraint. The euro may have helped European Central Bank President Jean-Claude Trichet decide against a June interest-rate increase, economists said.
• Goldman(GS) BRIC Fund Among Most Hurt by 'Panic' Selling in Commodities Market. Emerging-markets funds managed by Goldman Sachs Group Inc. (GS) and Franklin Resources Inc. (BEN) were among the U.S.-registered mutual funds that fell the most in this week’s commodities selloff. The $831 million Goldman Sachs BRIC Fund (GBRAX) and the $825 million Templeton BRIC Fund (TABRX), which focus on Brazil, China, India and Russia, both dropped 5.7 percent in the week ended yesterday. The funds, from New York-based Goldman Sachs and Franklin Resources in San Mateo, California, were the biggest losers among diversified equity funds with more than $500 million in assets and at least 20 percent in energy or basic materials stocks, according to data compiled by Bloomberg. Commodities plunged yesterday as investors accelerated sales following year-to-date gains through April of more than 23 percent for silver, oil, gasoline and coffee. The Standard & Poor’s GSCI index of 24 commodities sank 6.5 percent in the biggest one-day drop since January 2009, bringing its loss this week to 9.9 percent. “It was a train wreck waiting to happen,” Michael Mullaney, portfolio manager at Boston-based Fiduciary Trust, said in a telephone interview. Speculation drove commodity prices well above reasonable levels, “and we are going to see it shake out some more before we get back to normal prices,” said Mullaney, who helps manage $9.5 billion.
• Syrians Take to Streets in Defiance of Army's Crackdown, Activist Arrests. Syrians staged protests in several cities today in defiance of an army crackdown in the southern region of Daraa and the arrest of hundreds of activists in the capital, Damascus. UN Secretary-General Ban Ki-Moon is dispatching an assessment team this weekend to check on the humanitarian needs in Daraa, scene of the most violence as Syrian President Bashar al-Assad has tried to crush opposition. Ban is sending the team after Assad agreed to permit it during their May 4 telephone call, according to UN spokesman Farhan Haq. Aid from Red Cross and Red Crescent began arriving in Daraa yesterday, he said. As many as 10 people were killed in Homs, Ammar Qurabi, head of Syria’s National Organization for Human Rights, said by phone. Snipers are on rooftops and seven tanks were deployed in the city, Razan Zaitouneh, a Damascus-based human-rights lawyer and activist, said on her Facebook page. Security forces fired live ammunition in Latakia and tear gas in Hama, she said. Al Arabiya, citing witnesses and activists, put the death toll at 15 in Homs and six in Hama. About 1,500 people gathered in the port city of Latakia, said Mahmoud Merhi, the head of the Arab Organization for Human Rights, in a phone interview from Syria.
• Restaurants Lift Prices as Inflation Hawks See Fed Behind Curve. Dining out will cost more this year as U.S. restaurants take advantage of the nearly two-year long expansion to boost prices on food and drinks. Higher-priced menus reflect growing confidence by eateries that consumers can afford to pay more to eat out. Restaurants are emboldened in part by the success of U.S. airlines, which have raised fares almost 10 percent since a year ago, according to Dean Maki, chief U.S. economist at Barclays Capital in New York. “The fact that the airline industry was able to pass along cost increases signals that the pricing environment has become somewhat more favorable than it was during the heart of the recession,” Maki said. “It’s more likely restaurants will be able to pass along price increases now relative to the last few years.”

Wall Street Journal:

• Portugal BES CEO Says Portugal Bailout Tough For Banks. Portugal's EUR78 billion bailout will be tough for banks, which will have to raise their capital ratios as part of the pact with the European Union and the International Monetary Fund, Banco Espirito Santo SA's (BES.LB) head said Friday. According to Chief Executive Ricardo Salgado, the bank wasn't expecting to be told to raise its Core Tier 1 ratio to 9% by the end of the year and 10% in 2012. "The justification they gave us was that Europe was heading toward a Core Tier 1 ratio of 10% under Basel III requirements," he said in a televised event. Portugal's main banks are all close to or above a Core Tier 1 of 8%. Under Portugal's EUR78 billion bailout, Portuguese banks will also have to meet deleveraging targets so they can reduce their reliance on funding from the European Central Bank. Of the package, EUR12 billion will be set aside for the banking system, in case institutions need help raising capital. Portugal's banks have been relying heavily on the ECB for liquidity, having borrowed EUR39.1 billion from the Bank in March. Loan-to-deposit ratios are on average around 150%. Contrary to Ireland, Portugal's banking system hasn't seen its lending portfolio deteriorate with the crisis, mostly because the real-estate sector never faced the boom and bust that other countries did. Instead its banks are suffering from liquidity constraints caused by uncertainty over Portugal's ability to pay its own debt.
• The New Class of Billionaires. Giant initial public offerings and a surge in mergers and acquisitions are spawning a new generation of billionaires and millionaires.
• Bipartisan 'Do Not Track' Bill Released.
• Environmental Suits Threaten Gulf Drilling. As oil and gas exploration in the western Gulf of Mexico resumes following the Deepwater Horizon oil spill, companies and federal regulators are facing a new reality: Environmentalists are gearing up for a legal fight. Though federal regulators have revamped safety regulations following the spill, environmental groups say they are not satisfied with the changes, signaling that even drilling plans approved under a new federal regime could face legal delays.

CNBC.com:

• Global 3D TV Market to Grow 5-Fold in 2011: iSuppli. The global 3D television market will grow more than 5-fold to account for 11 percent of flat-screen TV sales this year, as prices fall sharply and manufacturers add the function as an add-on feature, research firm IHS iSuppli predicted on Friday. It projected 3D TV shipments would rise to 23.4 million units this year from last year's 4.2 million units, gaining further to 159 million units in 2015. By that time, iSuppli said, 3D TVs would account for more than half of global flat-panel shipments.

Business Insider:

• Carl Levin: "No Doubt" Pakistani Officials Knew Where Bin Laden Was Hiding.
• Why Obama's Plan to Tax Cars By The Mile Is Wrong.
• Employee Costs Could Bankrupt San Francisco In Five Years: Mayor.
• Pakistan Arrests 40 In Abbottabad With Possible al-Qaeda Connections.
• Portfolio Manager on Goldman Sachs(GS): "We're One Headline Away From This Stock Getting Clobbered".
• Large Companies Stop Caring About The US Economy. (graph)
  

Zero Hedge:

• Deutsche Bank(DB) Put Volume Surges on Greek News.
• As People Not In Labor Force Hit New Record, Those Who "Want A Job Now" Jump By 232,000 In One Month. (graph)
• JPM Reports Global Economic Growth Slowest Since August 2009. (graph)
• Bill Gross Says May Change Mind On Shorting US Treasuries If Potential For Another Recession.
  

Insider Monkey:

• 10 Hedge Funds Hammered By The Decline in Commodities.

AppleInsider:

• Rumor: Apple(AAPL) Plans to Move Laptops From Intel(INTC) to ARM(ARMH) Processors.

Reuters:

• High-Frequency Aura Lifts a Year After US 'Flash Crash'.

Der Spiegel:

• Greece Considers Exit From Euro Zone. Athens Mulls Plans for New Currency. The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night. Greece's economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency. Alarmed by the attempt, the European Commission has called together a crisis meeting in Luxembourg on Friday night. In addition to Greece's possible flight from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles. Given the tense situation, the meeting in Luxembourg has been declared highly confidential, with only the euro zone finance ministers and senior staff members permitted to attend. Sources told SPIEGEL ONLINE that Schäuble intends to seek, however he can, to prevent Greece from leaving the euro zone. He will carry with him to the meeting in Luxembourg an internal paper prepared by the experts at his ministry warning of the possible dire consequences if Athens were to drop the euro. "It would lead to a considerable devaluation of the domestic currency against the euro," the paper states. According to German Finance Ministry estimates, the loss on exchange could be as high as 50 percent, leading to a drastic increase in Greek national debt. Schäuble's staff experts have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt. It remains disputable whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. At the same time, it is questionable whether other members of the currency union would actually refuse to accept a unilateral exit from the euro zone by the government in Athens. What is certain, according to the assessment of the German Finance Ministry, is that the measure would have a disastrous impact on the European economy. "The currency conversion would lead to capital flight," they write. And Greece might see itself as forced to implement controls on the transfer of capital to stop the flight of funds out of the country. "This could not be reconciled with the fundamental freedoms instilled in the European internal market," the paper states. In addition, the country would also be cut off from capital markets for years to come. In addition, the withdrawal of a country from the common currency union would "seriously damage faith in the functioning of the euro zone," the document continues. International investors would be forced to consider the possibility that further euro-zone members could withdraw in the future. "That would lead to contagion in the euro zone," the paper continues. Moreover, should Athens turn its back on the common currency zone, it would have serious implications for the already wobbly banking sector, particularly in Greece itself. The change in currency "would consume the entire capital base of the banking system and the country's banks would be abruptly insolvent." Banks outside of Greece would suffer as well. "Credit institutions in Germany and elsewhere would be confronted with considerable losses on their outstanding debts," the paper reads. The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to "write down a significant portion of its claims as irrecoverable." In addition to its exposure to the banks, the ECB also owns large sums of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) "Given its 27 percent share of ECB capital, Germany would bear the majority of the losses," the paper reads.

Die Welt:

• Christian Lindner, General Secretary of Germany's Free Democratic Party, said the likelihood that Greece may have to restructure its debt is "only a question of time and conditions." Lindner, whose party is in coalition with Chancellor Angela Merkel's Christian Democrats, said creditors should first be asked to take a haircut on their bonds before any further aid is offered to euro-area states, citing an interview.

Market News International:

• European Central Bank council member Michael Bonello said policy makers take decisions on monetary policy "step by step." "The situation is surrounded by a lot of uncertainty," Bonello, who heads the central bank of Malta, told reporters. "Trying to predict things that far into the future is these uncertain times, I think would be foolhardy. It's just a matter of taking it month by month." He also said that he has "no idea" when the ECB will next start using the wording of "strong vigilance" on inflation risks, signaling a rate increase.

Times Live:

• US Drones Kill 17 in NW Pakistan; Protests Over Bin Laden. Four drones took part in the first such attack since US special forces killed the al Qaeda leader on Monday not far from Islamabad, further straining ties between the strategic allies whose cooperation is needed to stabilise neighbouring Afghanistan. Facing relentless suicide bombings by Islamic militants and struggling with a stagnant economy, Pakistan’s leaders now face criticism from all sides on bin Laden. Both Islamists and ordinary Pakistanis are questioning how their leaders can just stand by while the United States sends commandos deep inside the country into a garrison city to eliminate the al Qaeda chief. “The country’s political and military leadership should immediately resign as they have failed to ensure the country’s integrity,” said Fareed Ahmed Paracha, a senior leader of the biggest Islamist political party, Jamaat-e-Islami, at a rally in the eastern city of Lahore. About 1,500 Islamists demonstrated near the city of Quetta, capital of Baluchistan province in the southwest, saying more figures like bin Laden would arise to wage holy war against the United States. “Jihad (holy war) against America will not stop with the death of Osama,” Fazal Mohammad Baraich, a cleric, said amid shouts of “Down with America”. “Osama bin Laden is a shaheed (martyr). The blood of Osama will give birth to thousands of other Osamas.” In Abbottabad, where the US operation took place, dozens of Islamists marched through streets calling on the United States to stay out of Pakistan and Afghanistan. “America is the world’s biggest terrorist,” read one placard. Small protests were also held in the cities of Multan, Hyderabad and Abbottabad. Anti-American sentiment runs high here, despite billions of dollars in US aid for nuclear-armed, Pakistan. Pakistan has denied any knowledge of his whereabouts and the army threatened on Thursday to cut intelligence and military cooperation with the United States if it mounted more attacks.