Evening Headlines
Bloomberg:
- Rehn Sees Greek Solution in Bond Rollovers, Cuts. The European Union’s top economic official said a solution to keeping Greece solvent is combining bold deficit cuts reminiscent of Belgian sacrifices in the 1990s and willingness by lenders to roll over expiring bonds, adapting what was done in Eastern Europe two years ago. “Belgium is a relevant example” in showing Greece what is “feasible and doable” in primary surplus goals, and the “Vienna initiative has mostly given us positive lessons,” Olli Rehn, the EU’s economic and monetary affairs commissioner, said in an interview yesterday at Bloomberg headquarters in New York. “The basic idea would be that banks maintain their exposure on a voluntary basis.”
- Australia GDP Falls Most Since 1991. Australia’s economy shrank in the first quarter by the most in 20 years as floods hurt exports, even as stronger business investment underscored the central bank’s forecast for a rebound in the second half of the year. Gross domestic product fell 1.2 percent from the previous three months, when it rose a revised 0.8 percent, the Bureau of Statistics said in Sydney today. Exports slumped 8.7 percent, subtracting 2.1 percentage points from GDP growth, today’s report showed, while machinery and equipment spending jumped 6 percent, adding 0.4 point.
- John Edwards Probe Turns on Purpose of Payoff. As we noted last week, former Senator John Edwards faces a possible indictment over the more than $1 million that was allegedly paid to keep quiet an affair that he was having during his 2008 run for president. Over at WSJ’s Washington Wire blog, Evan Perez takes a closer look at the probe, which could yield an indictment as soon as today, according to people familiar with the matter.
- Promising Returns Lure Back U.S. Hotel Buyers. The rebound of U.S. hotels and resorts is drawing in buyers who stepped back from the industry prior to the recession, as the hospitality sector once again promises high returns. Among those now marshalling billions of dollars to acquire hotels is KSL Capital Partners LLC, the former hospitality investing arm of KKR Financial Holdings LLC led by Vail Resorts Inc. veterans. KSL is expected to disclose Wednesday that it has finished raising a $2.1 billion fund targeting distressed resorts.
- NYSE Euronext to Announce 'Cloud' Platform for Traders. NYSE Euronext (NYX) plans to announce on Wednesday a new venture with EMC Corp. (EMC) and VMware Inc. (VMW) that will allow financial institutions direct access to NYSE's services through the fast-growing technology trend known as cloud computing.
- SAC Faces Probe of Biotech Trading. SAC Capital Advisors LP, one of the nation's most successful hedge funds, is a focus of a Securities and Exchange Commission investigation into whether traders used inside information to profit from the $15 billion takeover of biotechnology firm MedImmune Inc. in 2007, people familiar with the matter say.
- As Currency Swings Bash Big Bets, Hedge Funds Play It Safe. May has been a messy month for currency-focused hedge funds. Their new M.O.? Tone down the trading. As of Thursday, hedge funds that bet on currencies and other economic data were down 2.75% on average in May.
- Lehman Presses Big Banks on Derivatives Settlement. Lehman Brothers Holdings Inc. is proposing a wide-ranging settlement of its unresolved derivatives trades with more than a dozen of its largest counterparties—including some of Wall Street's biggest banks—in a move the investment bank says could help speed the resolution of its bankruptcy case.
- Mideast Uses Western Tools to Battle the Skype Rebellion.
- House Soundly Rejects Increase in Debt Ceiling. The House on Tuesday soundly rejected a bill to increase the federal borrowing limit by $2.4 trillion—a symbolic vote that House GOP leaders said demonstrated that Congress will not increase the debt ceiling unless it is linked to a deficit-reduction plan. The vote was 318-97. All Republicans who voted and 82 Democrats opposed the bill. Seven Democrats voted "present.''
- Red Ghost Over China. Maoism makes a comeback as economic and political reform ebb.
Business Insider:
- OUCH! Only 29% of Microsoft(MSFT) Employees Approve of Steve Ballmer.
- Why May 2011 Was A Huge, Pivotal Month For Hedge Funds.
- 11 Things You Should Know About The U.S. Postal Service Before It Goes Bankrupt.
- IT BEGINS: China to Do 2-3 Trillion Yuan Bailout of Indebted Local Governments. Little by little, this notion that China is a rock of financial stability (at least compared to the US) is being chipped away. Reuters (via hedgefundinvest) is reporting that the central government in Beijing is about to shift 2-3 TRILLION yuan ($308-$463 billion) in local debt to the Federal books. Basically, local governments have borrowed like crazy, and there's been a fear of a massive wave of defaults, especially as revenue from real estate dries up. Also there's no local bond market, so these are debts owed to banks, meaning that this bailout of localities is also a bank bailout (surprise!). The expert on this issue is Northwestern poli-sci professor Victor Shih, who points out that China has been able to maintain the illusion of growth without government debt precisely through these local authorities. Others have likened local governments to the infamous SIVs from the US financial crisis -- pockets of leverage hidden from public view. That this is happening now is potentially a big moment. Remember, throughout the US crisis, there were a series of bailouts that, at first blush, would have appeared to put a halt to things. If history is any guide, this kind of big bailout is closer to the beginning of the story.
- This Brand New $105 Million High School in Riverside, California is Too Broke to Hold Any Classes.
- Now That The Banker Bailout Plan Is Set, Here Are The Greek Islands About To Hit eBay and Fund Another Record Wall Street Bonus Season.
- Here Is Your Chance to Demand Answers From The Fed's General Counsel, Scott Alvarez.
- CME LOWERS ES, SP, YM Margins, Despite an INCREASE in Realized Vol.
The Blaze:
Reuters:
- Iraqis Charged in U.S. With Trying to Help al Qaeda. Two Iraqi men were arrested and charged in Kentucky with trying to help al Qaeda militants in their home country and one of the suspects was also charged for attacks on U.S. troops there, the Justice Department said on Tuesday. Waad Ramadan Alwan, 30, was accused of taking part in roadside bomb attacks on U.S. troops between 2003 and 2006, linked in one such instance by fingerprints obtained by U.S. forces from a device that did not detonate. He and a second Iraqi, Mohanad Shareef Hammadi, also were charged in a 23-count indictment for allegedly trying to provide support and weapons to an al Qaeda affiliate in Iraq, in a sting operation subsequently run by U.S. authorities.
- US Arms Makers Said Bleeding Secrets to Cyber Foes. Top Pentagon contractors have been bleeding secrets for years as a result of penetrations of their computer networks, current and former U.S. national security officials say. The U.S. Defense Department, which runs its own worldwide eavesdropping, spying and code-cracking systems, says more than 100 foreign intelligence organizations have been trying to break into U.S. networks. Some of the perpetrators "already have the capacity to disrupt" U.S. information infrastructure, Deputy Defense Secretary William Lynn, who is leading remedial efforts, wrote last fall in the journal Foreign Affairs.
- Phillips-Van Heusen Q1 Beats; Raises FY View. Phillips-Van Heusen Corp raised its full-year outlook and posted first-quarter earnings that beat market expectations as revenue more than doubled on strong sales in its Tommy Hilfiger and Calvin Klein businesses. The apparel maker's shares rose 2 percent in extended trade to $67.42, having closed at $65.97 on Tuesday on the New York Stock Exchange. "As we look forward to the balance of 2011, we believe that the momentum of the Calvin Klein and Tommy Hilfiger brands around the world will continue to drive our revenue and profitability growth," Chief Executive Emanuel Chirico said in a statement.
- Big Investors Urge Hedge Funds to Open Up. Pension funds and endowments are sending hedge fund managers a friendly message -- let us sit in the front seat with you, please. As hedge funds take on a growing role in institutional investment portfolios, large investors, including the California Public Employees Retirement Scheme (Calpers) and the British Airways Pension Investment Management, have written a guide to help managers better understand exactly what they want. "If it is our capital, we should have more of a voice in how it is managed and to be able to take control of our assets when we deem it necessary," said Kurt Silberstein, a senior portfolio manager at Calpers.
- A New Greek Deal With Troika Imminent. The government and visiting officials of the European Commission, European Central Bank and the International Monetary Fund - collectively known as the troika - have made significant progress in ongoing talks and are expected to finalize the details of the government’s midterm fiscal plan and privatization program by Wednesday night or Thursday morning.
Xinhua:
- China will suspend approval for new projects in cities and provinces where heavy-metal pollution cases are reported, citing Environmental Protection Minister Zhou Shengxian.
- China may increase the yuan's trading band, interest rates and banks' reserve requirement ratio in June to curb inflation, citing market participants.
- Communist Propaganda Pushes Out Hollywood. Hollywood blockbusters including Transformers 3 and Cars 2 have been pushed back on mainland cinema schedules to make way for the Communist Party's latest propaganda film. The Founding of a Party, set to premiere across the mainland on June 15, marks the 90th anniversary of the Communist Party on July 1.
- China's industrial output growth may slow this year because of power shortages, rising costs and growing inventories, citing a Ministry of Industry and Information Technology report. Overall borrowing costs have increased at least 13% for small companies and inventories of vehicles, steel and textiles rose more than 20% in the first four months from a year earlier due to inflation and slowing demand.
- China's central bank may raise interest rates this month to combat inflation, citing analysts. Consumer prices probably rose 5.3% to 5.5% in May on port and seafood costs, citing a China Intl. Capital Corp. report. High home prices and drought may delay slower inflation, it said, citing Li Huiyong, an analyst at Shenyin Wanguo Securities Co.
RBC Capital:
- Rated (C) Outperform, target $52.
- Rated (NFLX) Overweight, target $315.
- Rated (GOOG) Overweight, target $675.
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.0 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 113.50 -1.75 basis points.
- S&P 500 futures +.25%.
- NASDAQ 100 futures +.33%.
Earnings of Note
Company/Estimate
- (ESL)/1.09
- (CPRT)/.70
- (DG)/.50
8:15 am EST
- The ADP Employment Change for May is estimated at 175K versus 179K in April.
- Construction Spending for April is estimated to rise +.3% versus a gain of +1.4% in March.
- ISM Manufacturing for May is estimated to fall to 57.1 versus 60.4 in April.
- ISM Prices Paid for May is estimated to fall to 81.8 versus 85.5 in April.
- Total Vehicle Sales for May are estimated to fall to 12.4M versus 13.14M in April.
- (FFIN) 3-for-2
- (CHD) 2-for-1
- (FTNT) 2-for-1
- The Fed's Pianalto speaking, Challenger Job Cuts report for May, weekly MBA mortgage applications report, 1-Year T-Bill Aucition, weekly retail sales reports, Sanford C. Bernstein Strategic Decisions Conference, Cowen Tech/Media/Telecom Conference, Citi Power/Gas/Coal/Alt Energy Conference, KeyBanc Industrial/Automotive/Transport Conference, Lazard Alt Energy Summit, DA Davidson Tech Forum, BofA Merrill Tech Conference and the (ALL) analyst day could also impact trading today.
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