Today's Headlines

Bloomberg:

• Production Stalls on Autos, Housing Starts Fall. Industrial production in the U.S. unexpectedly stalled in April and housing starts dropped, posing hurdles to a rebound from the first quarter’s economic slowdown. Output at factories, mines and utilities was unchanged after a 0.7 percent gain in March, figures from the Federal Reserve showed today, led by a drop in auto production after parts supplies were disrupted by the earthquake and tsunami in Japan. Work began on 523,000 houses at an annual pace, down 11 percent, as tornadoes and floods in the South shut down construction sites.
• Spain May Have Billions of Euros of 'Hidden' Public Debt. Spain's regional and local administrations have "hidden" debt, not included in the official accounts, amounting to about $37 billion, according to research by Freemarket Corporate Intelligence, a consulting firm. The latest figures from the Bank of Spain show that the country's 17 autonomous regions have almost doubled their public debt, to 115 billion euros, since 2008, while municipal and provincial debt has risen to 35 billion euros and central government debt stands at 488 billion euros. However, public companies owned by local and regional governments also have substantial debt, and in many cases it doesn't have to be included in the figures under European Union guidelines. This "hidden" debt is likely to be revealed by new regional and local administrations to be elected on May 22.
• Investors Stick With Stocks as Hedge Funds Borrow, Merrill Says. Equities remained the asset class of choice for investors this month as hedge funds raised the level of borrowed money invested in stocks to a 3 1/2-year high, a BofA Merrill Lynch Global Research survey showed. A net 41 percent of 284 respondents, who together manage $814 billion, were “overweight” equities. That compares with 50 percent in April. A net 44 percent were “underweight” bonds in May, 6 percent overweight cash and 12 percent overweight commodities, which halved from April. An index of risk appetite slipped to 43 from 45, though remained above the long-term average of 40, the brokerage said.
• China Swaps Near 10-Week High on Risk of Further Tightening. China’s one-year swap rate was near a 10-week high on speculation further monetary tightening is planned after this year’s fifth increase in reserve-ratio requirements takes effect tomorrow. The yuan was little changed. “The impact of the latest reserve-ratio hike is already priced in, but we expect more tightening to come,” said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong. Cheung. “It’s not likely that inflation will ease until the third quarter.”
• The Baltic Dry Index, a measure of commodity-shipping costs, had a sixth consecutive fall on fleet expansion and weaker demand to haul grain cargoes. The index fell 1.3% to 1,274 points today. That's the lowest since April 28.The "grain season is starting to wane out of South America," Peter Norfolk, an analyst at Freight Investor Serviced Ltd. in London, said. There's a "relentless" supply of capesizes being delivered to owners and insufficient iron-ore cargoes to match it, he said.
• Greece Default Risk Rising With IMF Turmoil: El-Erian. The probability of Greece defaulting or restructuring its debt has increased since the arrest of International Monetary Fund head Dominique Strauss-Kahn, Pacific Investment Management Co.’s Mohamed El-Erian said. “Don’t underestimate how important Dominique Strauss-Kahn was in coordinating action” among European nations, El-Erian, the chief executive officer of Pimco, said in a Bloomberg Television interview on “In the Loop” with Betty Liu. “It’s the worst possible time to lose your general. You need the IMF to coordinate this global healing.”
• Oil Falls as Decline in U.S. Housing Starts Damps Economic Growth Optimism. Oil fell for a second day as U.S. housings starts dropped and industrial output stalled in April, damping optimism about the economic and fuel-demand outlook. Crude slipped as much 2.4 percent after the Commerce Department said work began on 523,000 houses at an annual pace, down 11 percent from March.
• California Cash Crisis May Loom Even as Brown Adds $6.6 Billion to Budget. California Governor Jerry Brown’s revised budget with $6.6 billion more revenue may not avert a cash crisis looming in July that may force the most-populous U.S. state to pay bills with IOUs for the first time since 2009. Brown yesterday proposed asking lawmakers to keep $9.1 billion of taxes and fees from expiring, then having a referendum to validate the extension in November or later, when a statewide ballot can be arranged. The state won’t be able to borrow cash from Wall Street in July or August with that validation vote pending unless Brown and lawmakers agree on spending cuts that would be activated if voters turn down the tax plan, Treasurer Bill Lockyer said.
• Syrians Protest in Capital After Report of Mass Grave Denied by Government. Syrian protesters kept up demonstrations, gathering in the suburbs of the capital and the central city of Homs, following reports of the discovery of a mass grave containing the bodies of anti-government activists. The Ministry of Interior in Damascus denied accounts of the burial ground in the southern city of Daraa, saying the allegation was part of a “campaign of provocation and baseless falsehoods,” state television reported today.
• Apple iPad Poised to Lead Tablet Sales Surge: Chart of the Day. Apple Inc. (AAPL)’s iPad and other tablets will cannibalize personal-computer sales “to an extent greater than we can currently envision,” according to Jefferies & Co. The CHART OF THE DAY depicts the firm’s annual sales estimates for tablets through 2014, along with last year’s total. The figures were provided in a report today by Peter Misek, an analyst at Jefferies. Sales will almost quadruple to 70 million devices this year, according to Misek. In the following three years, the annual total will more than triple to 246 million.

Wall Street Journal:

• Pressure Grows on Head of IMF. International pressure mounted Tuesday against International Monetary Fund Managing Director Dominique Strauss-Kahn, who is being held without bail in New York's Rikers Island jail on sexual-assault charges, as French broadcast authorities and politicians urged restraint in rushing to judgment. Several top French and European officials also urged fellow leaders to hold back on quick judgment against Mr. Strauss-Kahn, who was arrested by New York police on Saturday and charged with sexually assaulting a housekeeper in his suite at the Sofitel Hotel near Times Square.
• Fox Shifts How It Sells Online Video Ads. Fox Broadcasting plans to increase its load of online-video ads, and start combining its online and TV audiences when selling commercials to advertisers, as media companies race to boost revenue from Internet viewing of their TV shows.
• LinkedIn Hikes IPO Price Range by 30%.
• European Commission Raids Shipping Companies. The European Commission raided the offices of shipping lines in a probe of possible price fixing, the first step in an investigation that could lead to fines totaling more than a billion dollars.

MarketWatch:

• Gold, Silver Fall in Commodities Selloff.

CNBC.com:

• Kids' Book With 'F' Word in Title is No.1 on Amazon(AMZN).

Business Insider:

• Get Ready For The Mother Of All Commodity Paradigm Shifts, Which No One Sees Coming. People who are staring at a tsunami of demand for commodities from the developing world and predicting a doomsday of $400 oil and $4000 gold are missing the longer-term retreating tide of demand as citizens of the developed world actually demand decreasing amounts of energy, large goods, and heavy infrastructure.
• The Maid's Brother Speaks Out, As DSK Accuser Described as "Shy, Religious" Immigrant From West Africa.
• UBS' Andy Lees: "You Cannot Prepare To Deal With a Loan Situation as Bad as China's". Earlier we brought you the latest note from Art Cashin, who highlights mounting concerns in China. Cashin was riffing off his colleague UBS colleague Andy Lees, who has one of the gloomier notes about China we've seen in a long time.
• Art Cashin On The Worrisome China Situation That Everybody Needs To Watch.
  

Zero Hedge:

• TEPCO Provides Complete Fukushima Status Update And "Roadmap to Recovery".

New York Times:

• Agreement Between BP(BP) and Russian Oil Giant Collapses.
• Battered Dollar's Decline May Be Starting to Reverse. Could the dollar’s long slide be over?

Washington Post:

• U.S. Speeds Up Direct Talks With Taliban. The administration has accelerated direct talks with the Taliban, initiated several months ago, that U.S. officials say they hope will enable President Obama to report progress toward a settlement of the Afghanistan war when he announces troop withdrawals in July.
  

FINalternatives:

• BlueGold Down 26% in May's First Days. The first week of May is getting worse and worse for BlueGold Capital Management with each new report. The London-based commodity hedge fund, which was originally reported to have suffered “double-digit” losses, later quantified to a 20% drop during the week’s oil rout, actually lost 26%—twice as much as oil dropped during the week. The collapse comes little more than a year after the US$2.3 billion firm was forced to deny liquidation rumors after losing 11% during 2010’s first few weeks.

agrimoney.com:

• Goldman(GS), Not Hedge Funds, To Blame for Pricey Food. Banks such as Barclays and Goldman Sachs appear the villains of the potentially "irresponsible" wave of money which has driven food prices to record highs – and not hedge funds or speculators, anti-hunger campaigners have said. Institutional investors such as pension funds have played an "unwitting" role in directing of billions of dollars into commodity investments, and indices that "so far [have] always delivered a return". The wall of money from fund managers "more or less [guaranteed]… a profit in commissions" from investing in commodity indices may have distorted markets' response to supply and demand fundamentals, the charity said. "It may be that some of the more prudent financial actors, institutional investors including pension funds, are responsible for helping drive up food prices globally."

Politico:

• Rep. Paul Ryan: Health Reform Already Hurting Economy. House Budget Committee Chairman Paul Ryan framed health care costs and the president’s health law as key drivers of the nation’s economic and fiscal problems Monday, while warning that the president’s plan could lead to waiting lists for today’s seniors.

Reuters:

• Retailers See Consumers Hit By Higher Prices. Higher costs for gasoline, food and clothing are crimping the fledgling U.S. economic recovery, especially for lower-income consumers, earnings reports from several retailers showed on Tuesday.
• US Senators Want Price-Fixing Probe on Refiners.
  

Valor Economico:

• Brazil doesn't rule out employing capital controls to slow the inflows of foreign currencies that are helping stoke inflation, citing a government official. Dollar inflows are fueling the expansion of credit in the domestic market and inflation.
• Brazil's central bank is worried about companies' ability to repay dollar-denominated debt if the real depreciates sharply, citing a government official. The central bank plans to meet the threat by continuing to moderate credit growth and debts in foreign currencies, and by strengthening its defenses against a currency crisis.
  

Globe and Mail:

• Could U.S. Target Another Giant Hedge Fund? The dramatic conviction of hedge-fund kingpin Raj Rajaratnam on insider trading charges last week raises the question of where the long-running investigation will turn next. Although the answer to that question remains unclear, there are some signs that U.S. authorities have been sniffing around a big target. Various strands of their ongoing probe into illegal insider trading have turned up connections to SAC Capital Advisors, the mammoth hedge fund firm founded by Steven Cohen.

Shanghai Daily:

• Chinese Platinum Demand Falls. CHINESE demand for platinum jewelry fell to 51.3 tons in 2010, down 21 percent from a record year of 2009, specialty chemicals company Johnson Matthey said in a report. A combination of higher metal prices, adequate levels of manufacturers' stock and a greater focus on producing gold jewelry contributed to the decline in 2010.