Evening Headlines
Bloomberg:
- Euro Falls Before Greece Auctions Bills Amid Debt Restructuring Concern. The euro fell to a six-week low against the yen before Greece sells Treasury bills today amid speculation the nation will need to restructure its debt. The 17-nation currency dropped against 11 of its 16 major counterparts after Standard & Poor’s fourth downgrade of Greece since April 2010 rekindled concern the region’s debt crisis is escalating. Australia’s dollar slid before Treasurer Wayne Swan releases his budget today amid assurances of spending cuts. New Zealand’s dollar dropped after the International Monetary Fund said the currency may be as much as 20 percent overvalued. “The markets now view a restructuring of Greece’s debt as a possibility, whereas they hadn’t previously,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a foreign-exchange margin company. “The euro is likely undergoing a downward correction. We may see risk aversion, which would probably benefit the yen.” Greece is scheduled to sell 1.25 billion euros ($1.79 billion) in an auction of 182-day bills today.
- China Has Bigger-Than-Forecast $11.4 Billion Trade Surplus. China reported a more-than-estimated $11.4 billion trade surplus for April as U.S. officials pushed at talks in Washington for faster gains in the yuan. Today’s number, released by the customs bureau, compared with a surplus of $140 million the previous month and $1.68 billion a year earlier.
- Google's(GOOG) YouTube Adding 3,000 Rentals, Challenging Netflix(NFLX). Google Inc. (GOOG)’s YouTube website will add “The King’s Speech,” “Inception” and about 3,000 other titles to its movie-rental service, accelerating its shift into Hollywood entertainment and stepping up competition with Netflix Inc (NFLX). YouTube is adding films from Sony Corp. (6758), Time Warner Inc.’s Warner Bros., Comcast Corp.’s Universal Pictures and Lionsgate, according to a statement today. The additions will push YouTube’s total movie rentals available to more than 6,000. Most of the newer titles will cost $3.99 and up to rent.
- China Money-Supply Jump Potential 'Time-Bomb': Chart of the Day. The growth of China's M2 money supply, which has exceeded the U.S. total, signals further declines in commodities and stocks as it boosts prospects for more interest-rate increases, according to investor Marc Faber. Money supply in China, including money in circulation and deposits, is increasing even after the central bank raised borrowing costs four times and increased banks' reserve requirements seven times since mid-October. "The next time-bomb could be detonated by some adverse economic developments in China," said Faber. "When everybody thinks alike, I become very defensive," said Faber. "I'm deferring any new purchases of the beneficiaries of the inflation trade, except for gold," he said.
- Copper imports by China, the largest consumer, fell 14% in April from the previous month as ample domestic supplies weighed down local prices, curbing demand for more expensive foreign shipments. Inbound movements of copper and products dropped to 262,676 metric tons from 304,299 tons in March, the General Administration of Customs said on its Web site today. The imports were 40% lower than 436,345 tons in April 2010.
- Greek Woes Fuel Fresh Fears. A cut to Greece's credit rating sparked a selloff in the bonds of highly indebted euro-zone countries, fueling concerns that Europe's debt crisis is coming to the boil once more.
- Papademos on What Greece Must Do to Address Debt Crisis.
- Floodwaters Spill Into Memphis. Levees Hold as the Swollen Mississippi Nears Record Height, but Some Neighborhoods Are Inundated. The swollen Mississippi River rose to its highest level in nearly 75 years near Memphis, Tenn., Monday, inundating low-lying neighborhoods and acres of farmland and pushing up wholesale gasoline prices as fuel terminals along the waterway closed.
- A Venture-Capital Newbie Shakes Up Silicon Valley. As a newly minted venture capitalist, Marc Andreessen, co-founder of Netscape, aimed for nothing less than big. "Whale" size, as he puts it. Like other investors here, he'd been eying Web companies with explosive growth and global star power. But acquiring shares in tech titans like Facebook is tricky. Most are closely held and don't trade on a public stock market. Interlopers can't simply waltz in. So Mr. Andreessen set out to make his own rules—maneuvering his way into hot private deals at huge cost. Some of his more established rivals weren't amused.
- Andrew Hall, the $100 Million Man, Loses Big on Oil and Silver. Investors are trying to locate the biggest losers from the recent commodity-price meltdown. From the sound of a letter sent by well-known trader Andrew Hall to clients days before the tumble began, he would appear to be a prime candidate. And Reuters reported his flagship commodities fund posted declines of 12% last week as oil prices tumbled. But on May 2, Hall, the former star Citigroup trader who now runs Astenbeck Capital Management LLC and also trades for Occidental Petroleum unit Phibro, sounded remarkably bullish about oil, gold and silver – just days before each commodity began tumbling in price. “Some pundits have postulated that the rise in oil prices is sowing the seeds of its own demise” by reducing energy demand, he wrote. “We think not.”
- Paulson Plays the Lehman Bust. Hedge Fund Poised to Score Big on Doomed Bank's Bonds; a 78% Return? Hedge-fund manager John Paulson made $4 billion betting against subprime mortgages, the market that ultimately helped destroy Lehman Brothers Holdings Inc. Now, his fund is poised to make hundreds of millions picking through the investment bank's remains. Mr. Paulson's fund has been snatching up Lehman debt at steep discounts since the day the investment bank collapsed, betting prices would rise while panicked investors fled. Now, as Lehman's estate prepares to wind down, Mr. Paulson's fund could reap profits between $350 million and $726 million on the Lehman trades.
- Military Draws Up Afghan Exit Plan. U.S. military officers in Afghanistan have drawn up preliminary proposals to withdraw as many as 5,000 troops from the country in July and as many as 5,000 more by the year's end, the first phase of a U.S. pullout promised by President Barack Obama, officials say. The proposals, prepared by staff officers in Kabul, are likely to be the subject of fierce internal debate in the White House, State Department and Pentagon—a discussion influenced by calculations about how Osama bin Laden's death will affect the Afghan battlefield.
- Reports of Mortgage Fraud Reach Record Level. Reports of mortgage fraud, which have been increasing since the housing boom, rose to their highest level on record in 2010, Treasury Department figures showed. The Financial Crimes Enforcement Network, a Treasury agency, reported 70,472 "suspicious activity reports" related to suspected mortgage fraud, up from 67,507 in 2009, or a 5% increase. That's the highest number recorded by the government since tracking began in 1996. At the height of the U.S. housing boom, in 2006, more than 37,000 fraud reports were recorded. In 2001, before the housing market heated up, there were 4,695 reports of suspected mortgage fraud.
- Boehner's Debt-Limit Marker. Ah, but what about the bond markets—won't they panic as the debt limit draws near and Treasury predicts disaster? We doubt it. Bond holders want above all to know they'll be repaid, preferably in uninflated dollars, and the best guarantee of repayment will be evidence that Washington has finally donned a fiscal straightjacket. The real path to default is to keep raising the debt limit as if the Treasury can borrow more forever. Ask the Greeks (see below) how that's working out.
- Dennis Gartman: Early Stages Of EU Falling Apart? Though it may sound dramatic, investors are honestly starting to wonder if the financial situation in Europe is about to cause another crisis.
Zero Hedge:
- Greece: What's Next? Restructuring. When? Sooner Than You Think.
- And Here They Go For Round Two: CME(CME) Hikes Brent, Crude Margins by 25%, First of Many Such Moves.
- House Financial Services Committee Goes Digital. The House Financial Services Committee, which oversees Wall Street and its regulators, caught up with the digital age on Monday as it unveiled a revamped Web site and a blog entitled The Bottom Line.
- Stop Demonizing Drug Companies Over Pay-To-Delay Deals. Drug companies have done their share of sinning over the past decade, but that’s no reason to turn every controversy over drug development into a morality play in which Big Pharma is a villain.
- Wallace to Donilon: If Shooting Bin Laden Is OK, 'Why Can't You Do Waterboarding?' Wallace: We'll stipulate -- I think we'll all stipulate -- that bin Laden was a monster, but why is shooting an unarmed man in the face legal and proper while enhanced interrogation, including waterboarding of a detainee under very strict controls and limits -- why is that over the line?
- PIMCO Raises Bet Against U.S. Government Debt. PIMCO's Bill Gross, the manager of the world's largest bond fund, raised his bet against U.S. government-related debt in April to 4 percent from 3 percent, according to the company's website on Monday.
- "Frothy" U.S. Farmland Values Sideline Some Investors. Rising prices for farmland in the U.S. Midwest and fears that values may be creating an artificial bubble are driving some investors to the sidelines, though strong farm balance sheets are sustaining interest in many sectors, investment experts said on Monday. Surging prices for key row crops, such as corn, soybeans and wheat, are helping support rising values that jumped more than 10 percent in the U.S. Midwest last year and have continued to climb. But if crop prices should plummet, land values could fall rapidly. Farmland values have jumped more than 50 percent above their 2000 levels in inflation-adjusted terms, with investors competing against farmers for accumulation of high-quality land.
- US Republicans Press For Results From US - China Talks. Congressional Republicans on Monday urged the Obama administration to hold China's feet to the fire over currency and industrial policies they said are hurting American companies. "The U.S.-China relationship is critically important. But much work needs to be done to strengthen that relationship and improve U.S. market access into China," Republican members of the House of Representatives Ways and Means Committee said. They put their message in a letter to U.S. Treasury Secretary Timothy Geithner and Secretary of State Hillary Clinton, who hosted Chinese officials beginning on Monday two days of high-level talks on economic and geopolitical concerns.
- Dutch Fund Among Hardest Hit by Commodities Rout - Source. Dutch hedge fund Transtrend, owned by Rabobank NV, was one of the biggest losers in last week's commodities slide, an industry source told Reuters on Monday. An official at the fund confirmed it was a "very bad week". The fund's $6 billion flagship portfolio suffered a loss of around 9 percent, according to a fund manager who has seen its reports to client.
- Greece Angered by S&P Rating Cut. At the same time, the rating agency cut Greece's credit rating from BB- to B, dragging its debt further into junk territory to reflect its more gloomy views. Greece hit back at the downgrade, angrily denying any imminent restructuring. The Greek finance ministry said that there have been "no new developments or decisions since the last rating action" by S&P a month ago so the agency's views were "not justified." In a statement, the ministry added: "Decisions by ratings agencies must be based on objective data, policy makers' announcements and realistic assessments on the conditions facing an economy... When such decisions are based simply on rumours, their validity is seriously cast in doubt".
- China's economic development faces a "bottleneck period" as the government acts to slow growth, cooling inflationary pressures and a "frenetic" real estate market, Zhang Monan, a researcher with the State Information Center, wrote. China's "high-speed growth" of the past 10 years is not expected to last as the country faces pressure from global competition in exports, rising wages and resources prices, and yuan appreciation, Zhang said.
- China's expanding credit by banks raises the risk of a property bubble and constitutes a "huge" risk to the financial system, Yi Xianrong, a researcher with the Chinese Academy of Social Sciences, wrote in a commentary.
Citigroup:
- Rated (MDVN) Buy, target $35.
- Reiterated Buy on (BEN), target $163.
- Rated (APO) Outperform, target $23.
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 113.50 -.75 basis point.
- S&P 500 futures -.22%.
- NASDAQ 100 futures -.08%.
Earnings of Note
Company/Estimate
- (MDC)/-.44
- (WEN)/.02
- (DF)/.06
- (FOSL)/.66
- (NUAN)/.31
- (DIS)/.57
- (GMR)/-.30
- (PEGA)/.17
- (MDR)/.28
- (EBIX)/.37
- (CVLT)/.23
8:30 am EST
- The NFIB Small Business Optimism Index for April is estimated to fall to 91.8 versus 91.9 in March.
- The Import Price Index for April is estimated to rise +1.8% versus a +2.7% gain in March.
- Wholesale Inventories for March are estimated to rise +1.0% versus a +1.0% gain in February.
- (ACGL) 3-for-1
- The weekly retail sales reports, IDB/TIPP Economic Optimism Index for April, Jefferies Tech/Internet/Media/Telecom Conference, Interop Las Vegas, BofA Merrill Health Care Conference, Wells Fargo Industrials/Construction Conference, UBS Financial Services Conference, BofA Merrill Lynch Smid Cap Conference, BofA Metals/Mining Conference, Robert Baird Growth Stock Conference, (JKHY) analyst day, (XRX) investor conference and the (CE) investor meeting could also impact trading today.
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