Today's Headlines

Bloomberg:

• Merkel Backs Firewall Increase for First Time Amid Concern Over Spain Debt. Chancellor Angela Merkel gave her first indication that she is prepared to allow an increase in the debt-crisis firewall, saying that Germany could let the temporary and permanent rescue funds run in parallel. Merkel cited “fragility” in Spain and Portugal as she revealed Germany’s position on addressing the future financial backstop. Agreement among euro-area governments this week “could be the basis” for the International Monetary Fund to channel more resources to help fight the turmoil, she said. Germany holds to its stance that the permanent rescue fund should be capped at 500 billion euros ($663 billion), she told reporters in Berlin today. “But in order for us to have the full 500 billion at our disposal, we could imagine that we let the programs that have already been disbursed run in parallel.” Merkel’s comments prepare the ground for Germany to drop its opposition to proposals to expand the 17-nation region’s financial backstop at a meeting of euro-area finance ministers in Copenhagen on March 30.
• EU Ratings Rotation Plan Said to Face Possible Rejection. European Union finance ministers may scrap plans to force companies to rotate the credit-ratings companies they use on concerns that the measure may harm investor confidence and increase market volatility.
• Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt fell, according to BNP Paribas SA. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 6.5 basis points to 591.5 basis points. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.5 basis points to 116.75. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell two basis points to 208 and the subordinated index declined 3.5 to 324.5.
• Hedge Funds Capitulating Buy Most Stocks Since 2010. Hedge funds trailing the Standard & Poor’s 500 (SPX) Index for the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years. A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 48.6 last week from 42 at the end of November 2011, the biggest increase since April 2010, according to data compiled by the International Strategy & Investment Group. The Bloomberg aggregate hedge fund index gained 1.4 percent last month, lagging behind the Standard & Poor’s 500 Index by 2.65 percentage points. Money managers struggling to catch up with the gains have contributed to the rally that pushed the S&P 500 up 27 percent since October as economic reports beat estimates. Market bulls say they are a continuing source of cash that can move stocks higher. Bears say capitulating hedge funds are further evidence that equities have risen too far, too fast as economic growth remains sluggish, warning that the pool of potential buyers is being depleted.
• Bernanke Says Accommodative Policy Needed to Reduce Unemployment. Federal Reserve Chairman Ben S. Bernanke said while he’s encouraged by the unemployment rate’s decline to 8.3 percent, continued accommodative monetary policy will be needed to make further progress. The drop in unemployment may reflect “a reversal of the unusually large layoffs that occurred” in 2008 and 2009, and this process may now be over, Bernanke said in a speech today in Arlington, Virginia. Reducing the jobless rate further will probably require a quicker expansion of business production and consumer demand, which “can be supported by continued accommodative policies,” he said.
• Pending Sales of US Existing Homes Fall in February. The index of pending home purchases fell 0.5 percent to 96.5 after a 2 percent increase the prior month, the National Association of Realtors said today in Washington. January’s reading of 97 was the highest since April 2010. The median forecast of 41 economists surveyed by Bloomberg News called for a 1 percent rise. Three of four regions saw a decrease in pending home sales, today’s report showed. That included a 3 percent decline in the South and a 2.6 percent drop in the West. The Midwest climbed 6.5 percent.
• Goldman(GS) Traders Knopman, Ha Said to Depart for Hedge Funds. Goldman Sachs Group Inc. credit traders Matthew Knopman and Philip Ha are leaving for hedge funds after the fifth-biggest U.S. bank by assets cut jobs and pay last year.
• China to Ban Public Purchases of 'High-End' Alcohol, Cigarettes. Chinese Premier Wen Jiabao pledged to ban the use of public funds to buy cigarettes and “high- end” alcohol, warning that corruption may endanger the ruling Communist Party’s survival. Wen spoke at a State Council meeting yesterday, according to a statement on the government’s Website. He also said state- owned enterprises and agencies must “strictly control” funds used to renovate “luxury” office buildings or buy artwork. “Corruption is the biggest danger facing the ruling party,” Wen said, according to the statement. “If not dealt with properly, the problem may change the nature of, or terminate, the political regime.”

Wall Street Journal:

• Former China Banking Regulatory Commission Chairman Liu Mingkang said yesterday the nation's bank lending may continue its weak trend during the first half.
• Coalition Launched to Work for NY Fracking Ban. Dozens of grassroots environmental groups are joining forces to launch a coordinated campaign to ban natural gas development using high-volume hydraulic fracturing in New York state. The effort launched Monday comes as the state Department of Environmental Conservation works to complete a four-year review of whether shale gas development using the controversial technology known as "fracking" can be done safely under strict regulations. Gov. Andrew Cuomo has said a decision on whether to permit fracking in New York is likely in several months.
• Economics Survey: Fed Should Hold Back From QE3 This Year. The Federal Reserve shouldn’t undertake a new round of bond buying this year, an overwhelming majority of a group polled by the National Association for Business Economics said in a survey released Monday.
• Gold Takes Shine to Bernanke. Gold futures gained as Federal Reserve chief Ben Bernanke signalled support for the central bank's easy-money policies, sending investors looking for alternatives to the U.S. dollar. Such accommodative monetary policy can boost gold's appeal as a currency hedge by raising concerns that the value of paper currencies might take a hit. The most actively traded gold contract, for April delivery, was up $18.70, or 1.1%, at $1,681.10 a troy ounce on the Comex division of the New York Mercantile Exchange. In comments on Monday to the annual conference of the National Association for Business Economics, Mr. Bernanke said further significant improvements in the U.S. unemployment rate will require faster economic growth, "a process that can be supported by continued accommodative policies." The dollar pulled back after the release of Mr. Bernanke's prepared remarks, and gold gained $15 an ounce in the span of about 15 minutes.

CNBC.com:

• Housing Hype: Recovery Turns to Relapse? Housing was charging back. Spring sprung early. Sentiment among home builders doubled in six months. Any talk that the fundamentals might not be supporting the sentiment was met with harsh criticism. And then suddenly it wasn’t.
• Pain at Gasoline Pump Cutting Into Consumer Spending. Drivers are feeling the pinch. Gasoline prices added another 11 cents over the past two weeks, putting the national average price at $3.93 a gallon, according to the Lundberg Survey.

Business Insider:

• George Zimmerman: Trayvon Martin Decked Me And Was Pounding On My Head.
• Make No Mistake... Institutional Investors Are All In. (graphs)
  

Zero Hedge:

• Leveraged ETFs - Why Do We Have Them?
• Dallas Fed Misses Expectations. (graph)
• Quadruple Dip: Housing Relapses As "March Is Turning Out To Be The Weakest Month Since Last October Re: Buyer interest".
• EU Gas Now Over $10: Charting The Global Gas Pump Price Shock.
  

New York Times:

• Anger at Goldman(GS) Still Simmers. In his testimony, Mr. Cohodes said he and his partners at Copper River had even come to wonder if Goldman had in fact borrowed the shares for the firm. Without the shares, Copper River faced losses, while Goldman could have come under regulatory scrutiny.

FINalternatives:

• BofAML Index Rises .14% In March. Hedge funds were up 0.14% as of March 21, according to the Bank of America Merrill Lynch investable composite index, with event driven funds leading the way. Event-driven funds were up 0.57% for the month followed by merger arbitrage funds, up 0.43%. The worst performers were market neutral funds, down 1.19%. According to BofAML analyst Mary Ann Bartels, market neutral funds sold market exposure to neutral from 3% net long and equity long/short funds bought market exposure to 31% from 23% net long.

Engadget:

• Apple's(AAPL) New iPad Gains Chinese Certification, Could Head to Retail Soon.

Rasmussen Reports:

• 57% Favor Use of 'Fracking' to Find More U.S. Oil and Gas. Despite challenges by the Obama administration and environmental groups, most Americans favor use of the so-called “fracking” process to produce more domestic oil and natural gas. A new Rasmussen Reports national telephone survey finds that 57% of American Adults favor the use of hydraulic fracturing to drill for oil and natural gas in shale oil reserves. Just 22% oppose the process, while nearly as many (21%) are unsure about it. (To see survey question wording, click here.)

Reuters:

• German Coalition Strikes Compromise on Solar Cuts - Sources. Leaders of the lower house of parliament in German Chancellor Angela Merkel's centre-right coalition have reached a compromise agreement on cuts in solar power incentives with the upper house after weeks of negotiations, sources told Reuters on Monday.
• India's Sensex Hits 2-Month Low On Foreign Tax Uncertainty. The BSE Sensex fell 1.8 percent to its lowest close in nearly two months, as uncertainty over short-term capital gain taxes for some derivative products sold to foreign investors sparked fears over widespread selling. Brokers warned on Monday certain provisions in the 2012/13 budget announced earlier this month raised the prospect the government could tax so-called participatory notes, or P-Notes, under a provision of the General Anti-Avoidance Rule (GAAR) intended to crack down on tax evasion. P-Notes are derivative products that allow foreign investors to invest into Indian equities via countries such as Mauritius that have tax treaties with India.

Yonhap News Agency:

• South Korea Vows to Intercept Errant North Korean Rocket Booster. South Korean said Monday it will deploy two Aegis destroyers in the west coast to shoot down a North Korean rocket booster if it veers off its planned trajectory. The move came amid escalating international pressure on the communist country to call off next month's rocket launch.

Haaretz.com:

• Poll: Most Jewish Israelis Say Iran Strike Less Risky Than Nuclear Threat.