Monday Watch

Weekend Headlines
Bloomberg:

• OECD’s Padoan Sees Euro Area as Biggest Threat to Growth. The euro area remains the biggest threat to global growth as imbalances still need to be addressed, Organization for Economic Cooperation and Development Chief Economist Pier Carlo Padoan said. “The weaknesses of the euro area are still a source of concern,” Padoan said in a Bloomberg Television interview today in Cernobbio, Italy. “We can have a way out in Europe having reforms taking place not only in the debt countries but in all of the countries, including Germany, which should invest and open more.” European finance ministers agreed yesterday in Copenhagen to boost a firewall against the region’s debt crisis by 500 billion euros ($667 billion) on top of the 300 billion euros already committed. Europe is counting on those funds, plus the European Central Bank’s extra lending and bond-buying programs. The decision to increase the firewall “provides time, but more needs to be done, especially by governments in sensitive countries, to carry on the reform programs,” Padoan said.
• Spain Record Home Price Drop Seen With Bank Pressure: Mortgages. Spanish home prices are poised to fall the most on record this year, leaving one in four homeowners owing more than their properties are worth, as the government forces banks to sell real-estate holdings. Home prices will decline 12 percent to 14 percent, according to research and advisory company R.R. de Acuna & Asociados, after Economy Minister Luis de Guindos in February gave lenders two years to make 50 billion euros ($67 billion) of additional provisions and capital charges for losses linked to real estate. That’s the most since the National Statistics Institute started tracking values in 2007. Standard & Poor’s forecasts borrowers with negative equity may rise to 25 percent this year from 8 percent in 2010, based on an analysis of 800,000 mortgages. “There will be more serious price drops this year because of the government decree,” said Fernando Rodriguez de Acuna Martinez, a partner at the Madrid-based firm. “Banks are now prepared to incur big losses on real estate to shift all they can.”
• Europe Eyes Bigger IMF War Chest as Firewall Tops $1 Trillion. European governments called for a bigger global financial emergency fund after engineering a firewall to fight the region’s debt crisis that tops the symbolic $1 trillion mark. Euro-area finance ministers decided yesterday that 500 billion euros ($667 billion) in fresh money would go along with 300 billion euros already committed to create an 800 billion- euro defense against the two-year-old turmoil. Europe is counting on those sums, plus the European Central Bank’s extra lending and bond-buying programs, to demonstrate that it is on the road back to stability and encourage Group of 20 economies to bulk up the International Monetary Fund’s anti- crisis coffers at an April 19-20 meeting. “Europe is aware of its responsibility for the international economy,” German Finance Minister Wolfgang Schaeuble told reporters today after a two-day meeting of European finance officials in Copenhagen. “If the IMF takes precautions to prevent possible contagion or threats to the world economy, then Europe for its part will make a decisive contribution.”
• Schaeuble Condemns Discord 'Nonsense' Following Euro Spat. German Finance Minister Wolfgang Schaeuble condemned as “nonsense” a breakdown in communication that caused a meeting of euro-area finance ministers to descend into confusion with a spat between Luxembourg and Austria. Schaeuble said the abrupt cancellation of a press conference in Copenhagen yesterday by the meeting’s chairman, Luxembourg Prime Minister Jean-Claude Juncker and the following apology of Austrian Finance Minister Maria Fekter over her pre- announcement to reporters that the group had limited new bailout lending to 500 billion euros ($667 billion) could have the effect of uniting decision makers. “This is nonsense,” Schaeuble told reporters after the meeting ended today. “If we want to calm markets, if we want to win back lost trust that we’re making with the right decisions, we have to implement them rather than continuing to feed more and more speculation.”
• China Arrests Six for Web Rumors; Microblogs Ban Comments. China closed 16 websites and detained six people for spreading rumors that military vehicles were entering Beijing, as microblogging websites disabled their comment features for three days. The authorities detained the six for “fabricating or disseminating online rumors,” the state-run Xinhua News Agency reported today, citing city police and the State Internet Information Office, without naming the detainees. The websites were closed for spreading rumors that “something wrong” was going on in Beijing, Xinhua said. Speculation of a coup spread on the Internet on March 20, helping spark the biggest jump in credit-default swaps for Chinese government bonds in four months. The Communist Party holds a congress later this year to pick the next generation of leaders who may run China for the next decade and the lack of a transparent process may escalate the risk and impact of rumors. Sina Corp.(SINA) started a 72-hour suspension of the commenting function on its popular microblogging site today, citing a need to clear up rumors and illegal information, the company, whose Twitter-like service has more than 300 million registered users, said in a statement. Users opening Tencent Holding Ltd. (700)’s microblog site saw a similar notice.
• Roche May Abandon its Bid for Illumina(ILMN), SonntagsZeitung Reports. Roche Holding AG (ROG), a Basel, Switzerland-based drugmaker, may drop its $6.6 billion bid for Illumina Inc., SonntagsZeitung reported, citing an unidentified person close to Roche’s board. San Diego, California-based Illumina, a diagnostics company, can’t rely on Roche’s continuing participation in negotiations, the person said, adding that for Roche, Illumina is a “nice-to-have,” not a “must-have,” the Swiss newspaper reported.
• Iran Says Russia Relations to See ‘Leap’ With Putin at Kremlin. Iran’s relations with Russia will witness a “leap” with Vladimir Putin’s return to the Kremlin, the Fars reported, citing Iranian Foreign Ministry spokesman Ramin Mehmanparast. Russia and Iran have “multiple grounds for cooperation,” Mehmanparast said in an interview with state-run news agency. The “horizon of relations with Russia will be bright” and the level of relations will rise considerably, he said.
• Groupon(GRPN) Reports 'Material Weakness,' Restates Quarterly Revenue. Groupon Inc. (GRPN), the largest provider of daily deals online, reported a “material weakness” in its financial controls and said fourth-quarter results were worse than previously stated because of higher refunds to merchants. The revisions reduced revenue in the period by $14.3 million to $492.2 million, the Chicago-based company said yesterday in a regulatory filing. Groupon had reported $506.5 million last month.
• Facebook(FB) Valued at $102.8 Billion in Final Auction on SharesPost. Facebook Inc. (FB)’s implied valued rose 8.9 percent to $102.8 billion yesterday in what was expected to be the last auction of its stock on SharesPost Inc.’s exchange before the social-networking company’s initial public offering. SharesPost completed the auction at a price of $44.10 for 150,000 units, the firm said in an e-mailed statement. That’s up from an auction earlier this month with a price of $40.50 a share, valuing the company at $94.4 billion, based on a share count of 2.33 billion.
• Egypt's Muslim Brotherhood Nominates President Candidate. Egyptian military judges dropped convictions against Muslim Brotherhood presidential candidate Khairat el-Shater, clearing the nominee of the nation’s dominant political party to run in the election, the group’s lawyer said. “We have taken administrative, legal and judicial measures before the military judiciary and based on this, all convictions have been dropped,” Abdel Monem Abdel Maqsoud said in a phone interview in Cairo yesterday. “All legal obstacles have been removed, and el-Shater now has the right to fully exercise all his political rights,” he said.
  
• South Korean Exprts Fall 1.4% on Weakness in Global Demand. South Korea’s exports were less than analysts forecast in March, sliding 1.4 percent from a year earlier on weakness in global demand. Imports fell 1.2 percent, leaving a trade surplus of $2.3 billion, the Ministry of Knowledge Economy said in an e-mailed statement today. The median estimate in a Bloomberg News survey of 13 economists was for a 1.3 percent gain in exports.
• Why Are the Fed and SEC Keeping Wall Street's Secrets? Getting what should be public information about major Wall Street firms can be maddeningly difficult. Bloomberg News discovered this in its ultimately successful effort to get information on the $1.2 trillion in “secret loans” the Fed doled out during the financial crisis. And I’ve had no small experience of it myself.
• Japan Tankan Confidence Not Improving, Threatens Rebound. Sentiment among Japan’s largest manufacturers failed to improve in March as executives predicted the yen will rebound against the dollar, hurting exporters' sales and profits. The quarterly Tankan index was unchanged from minus 4 in December, the Bank of Japan said today in Tokyo. That was less than the median estimate of 25 economists surveyed by Bloomberg News for a reading of minus 1.

Wall Street Journal:

• EU Lenders Kick Troubles Down Road. Even as the European banking crisis shows signs of easing, lenders across the Continent are engaging in a variety of maneuvers to avoid, or at least delay, coming to terms with potential problems lurking on their books. Some banks are concocting unorthodox structures designed to improve all-important capital ratios, without raising new capital or moving unwanted assets off their balance sheets. Others are engaging in complex transactions with struggling customers to help temporarily avoid loan defaults—but possibly exposing the lenders to future problems.
• Inside Elite Chinese Circle, Brit Came to Fear for His Life. Neil Heywood, the Briton whose death in China is at the center of a Chinese political crisis, told friends he feared for his safety because he had fallen out with the wife of a senior Communist Party leader, according to people familiar with the matter. Mr. Heywood had claimed to be part of the small inner circle of Bo Xilai, a former political rising star whose sacking as party chief of the city of Chongqing this month set off one of the biggest upheavals in Chinese politics since the Tiananmen Square crackdown on demonstrators in 1989.
• Investors Dip Into Riskier Waters. After a Solid First Quarter, Market Trends Take Turn Toward Normal; 'It's Too Early to Declare Victory'. Full-fledged optimism is in short supply, but compared to the start of the year, investors are at least feeling safe enough to poke their heads out of their bunkers. The euro zone has stepped back from the brink of collapse, the U.S. economy is showing continued signs of life, particularly on the employment front, and central banks have extended efforts to support economic growth.
• Oil Boom Sparks River Fight. The oil boom in North Dakota is sparking a high-stakes legal battle over land few people would think to fight for: the muddy banks of the Missouri River. As energy companies race to lock up every available oil-producing acre, the state of North Dakota has been leasing mineral rights to the land beneath and along the river. Now, landowners say they deserve a share of the tens of millions of dollars in proceeds, because the state is including shoreline areas they believe belong to them.
• Obama and the Eisenhower Standard by Fouad Ajami.
  

Business Insider:

• Goldman Sachs Frantically Unloads Its Stake In A Company With Ties To Sex Trafficking.
• Massive Bond Purchases By The ECB Are The Worst Kind Of Bailout.
• Bernanke Is Rewriting History and Making the Same Mistakes Again.
  

Zero Hedge:

• The Spanish Riotcam Has Arrived.
• The Eye Of The Hurricane Passes: Full List Of European Known Knowns As The New Quarter Begins.

CNBC:

• There Obama Goes Again: He Hates Fossil Fuel, and He Hates Success.
• China Big Factories Busy in March, Small Ones Struggle. China's big factories were surprisingly busy in March as a stream of new orders lifted activity to an 11-month high, but credit-constrained smaller manufacturers struggled, suggesting that the economy is still losing steam.

Wall Street All-Stars:

• Indicator Update: Can We Find New Jobs?
  

NY Times:

• Police Are Using Phone Tracking as a Routine Tool. Law enforcement tracking of cellphones, once the province mainly of federal agents, has become a powerful and widely used surveillance tool for local police officials, with hundreds of departments, large and small, often using it aggressively with little or no court oversight, documents show. The practice has become big business for cellphone companies, too, with a handful of carriers marketing a catalog of “surveillance fees” to police departments to determine a suspect’s location, trace phone calls and texts or provide other services. Some departments log dozens of traces a month for both emergencies and routine investigations.

The Telegraph:

• Germany's Reluctant Hegemony and Misguided Calvinism. If the purpose of monetary union is to tie down a "European Germany" with silken cords, the Kohl-Mitterrand legacy has gone horribly wrong.

WirtschaftsWoche:

• The Group of 20 nations and the European Union are pressuring Germany to avoid reducing its budget deficit too fast so that the country can continue being Europe's "engine of growth," citing German Deputy Finance Minister Steffen Kampeter.
  

Weekend Recommendations
Barron's:

• Made positive comments on (UNP), (BIG), (RGR), (AVII) and (FITB).

Night Trading

• Asian indices are -.50% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 156.0 -6.0 basis points.
• Asia Pacific Sovereign CDS Index 126.75 -7.0 basis points.
• FTSE-100 futures +.10%.
  
• S&P 500 futures +.32%.
• NASDAQ 100 futures +.38%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PBY)/.12

Economic Releases
10:00 am EST

• Construction Spending for February is estimated to rise +.7% versus a -.1% decline in January.
  
• ISM Manufacturing for March is estimated to rise to 53.0 versus a reading of 52.4 in February.
• ISM Prices Paid for March is estimated to rise to 63.0 versus 61.5 in February.
  

Upcoming Splits

• (ASNA) 2-for-1
  

Other Potential Market Movers

• The Fed's Pianalto speaking, Eurozone Unemployment Rate, Eurozone Manfacturing PMI and the (NYX) Investor Day could also impact trading today.
  

BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.