Evening Headlines
Bloomberg:
- Draghi Scotches ECB Exit Talk as Spain Keeps Crisis Alive. European Central Bank President Mario Draghi quashed talk of an early exit from emergency stimulus measures as Spain struggled to borrow in financial markets, a reminder of the risk that the region’s debt crisis could flare again. Speaking just hours after Spanish Prime Minister Mariano Rajoy warned his country faces “extreme difficulty,” Draghi said yesterday that talk of the ECB starting to withdraw its support for euro-area banks is “premature.” At the same time, in a nod to growing inflation concerns in Germany, he said the ECB won’t hesitate to counter price risks if needed. Policy makers left their benchmark rate at a record low of 1 percent. The ECB has expanded its balance sheet by about 30 percent since Draghi took office in November, pumping more than 1 trillion euros ($1.3 trillion) into the banking system in a bid to stem the debt crisis. Pressure to unwind the emergency measures is rising in Germany, where workers are winning some of the biggest pay increases in two decades, threatening to stoke inflation. “Premature Bundesbank calls for an ECB exit strategy have now triggered a new round of market wobbles, with a focus on Spain,” said Holger Schmieding, chief economist at Berenberg Bank in London. “The risk of a new irrational market panic remains serious.”
- Spain Not Greece Is The Real Test For The European Union. The decisive test of the euro area’s plans for economic recovery was never Greece but Spain, and the European Union shows every sign of failing it. The Spanish government’s new austerity plan hasn’t won investors’ confidence, and this creates a threat not just to Spain but to the whole EU. Europe’s governments need to change course before it’s too late. An auction of Spanish bonds on Wednesday was the first verdict on Spain’s new budget. It didn’t go well. Demand was poor and prices fell. The country’s borrowing costs rose with 10 year bond yields in the secondary market hitting 5.7 percent, the highest since the beginning of the year. The premium over German government bonds increased to nearly four percentage points, the highest since November. The problem is not that Spain’s new austerity plan is too timid. Just the opposite: Under EU orders, Spain is promising what might be the tightest fiscal squeeze that it or any other European economy has ever faced. The new plan calls for the budget deficit to fall from 8.5 percent of gross domestic product to 5.3 percent this year. Since the economy is already shrinking, this requires a discretionary fiscal tightening of roughly 4 percent of GDP -- with the unemployment rate already standing at about 23 percent.
- World Bank Needs Capital Injection, Ocampo Says in FT Op-Ed. Jose Antonio Ocampo, a former Colombian finance minister and one of three candidates to become the next World Bank president, said the lender needs a capital increase. “The institution is a very successful, indeed profitable, global financial co-operative,” Ocampo wrote in an op-ed piece published in the Financial Times. “But its recent response to the global financial crisis, in the absence of a substantial capital injection, has diminished its lending capacity.” The bank needs a capital injection that is based on “a clear, shared set of priorities,” he wrote.
- JPMorgan(JPM) Awards CEO Dimon $23M Pay Package. JPMorgan Chase & Co. (JPM), the largest and most profitable U.S. bank, gave Chairman and Chief Executive Officer Jamie Dimon $23 million in pay and bonuses for 2011, about the same as the previous year. Dimon’s base salary was raised to $1.5 million beginning in March 2011 from $1 million and he received $17 million in restricted stock and options for his performance in 2011, down from $17.4 million the previous year, the New York-based company said today in a proxy statement. His cash bonus was $4.5 million, down from $5 million in 2010, the bank said. The CEO took a salary of $1 million for 2009 and gave up bonuses that year and in 2008 after receiving $49.9 million in total compensation for 2007. Dimon and his wife control almost 5.2 million shares valued at more than $209 million as of March 2, when his total holdings were last disclosed.
- President Scapegoat Can't Stop Picking on Big Oil by Caroline Baum. Obama has elevated scapegoating to a new level.
- Dimon Letter Derides Contrived Financial Rules. Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co. (JPM), used his annual letter to shareholders to rail against “contrived” and confusing financial rules that he said may stymie lending. U.S. and international officials “made the recovery worse than it otherwise would have been,” Dimon wrote in the letter released yesterday. They almost botched the U.S. debt-ceiling vote, constrained bank leverage “at precisely the wrong time” and adopted bad and uncoordinated policy, he wrote. Dimon, 56, defended a banking industry that has been besieged by new rules and public contempt after lax mortgage lending contributed to the worst economic slump since the Great Depression. He championed the use of derivatives and the right of banks to lobby lawmakers, and hailed the U.S. economy and corporations as engines of job growth. “We have hundreds of rules, many of which are uncoordinated and inconsistent with each other,” Dimon said in the 38-page letter, his longest since becoming CEO in December 2005. “Complexity and confusion should have been alleviated, not compounded.” Dimon called a cap on debit-card transaction fees, a provision of the Dodd-Frank Act, “price-fixing by the government that will have the unfortunate consequence of leaving millions of Americans unbanked.” Stricter capital rules will make it “prohibitively more expensive” for banks to lend to consumers with subprime credit scores, about 40 percent of all Americans, he said.
- Probe of Insurers Gains Steam. New York's top financial regulator is expanding an investigation of insurers that force homeowners policies on borrowers after turning up evidence that consumers were charged too much, according to people familiar with the situation. Benjamin M. Lawsky, superintendent of the New York Department of Financial Services, is issuing new subpoenas and formal document requests to several insurers, demanding justification for how their rates and loss ratios were calculated, these people said.
- As Carbon Prices Sink, Unease Rises. The market for carbon emissions is running out of gas. Prices of emission allowances, which award the holder the right to release carbon dioxide into the atmosphere, have tumbled this week to a record low. They are down 11% from the start of the year and now trade at less than one-fourth of their July 2008 value.
- Henninger: The Supreme Court Lands in Oz. Like the original wizard, Barack Obama doesn't want anyone to look behind the curtain.
- Taiwan Stocks Plunge in Latest Tax-Driven Sell-Off. Taiwan stocks returned from a one-day holiday to plunge in Thursday morning trade. The benchmark Taiex was down -2.8%, putting its losses for the week at -4.9%. Taiwan is considering reviving a capital-gains tax, with the possibility sparking across-the-board selling by both foreign and domestic investors. Among some of the market's better-known names, Acer Inc. and Formosa Plastics Corp. each fell 2.2%, while China Airlines Ltd. swooned 4.7% lower.
- Goldman's(GS) Gloomy Outlook In One Huge Slide.
- The Trailer Is Out For Frontline's New Documentary On The Financial Crisis — And It's EPIC. (video) "Here we are three years plus after, and nothing has changed," said one commenter. It's like they're inside our brains!
- Retail Celebrates Highest Stock Prices Since 2007 With Biggest Redemptions Of 2012. (graph)
- Corzined Marvell Muppets Sue Vampire Squid.
- Facebook's(FB) Final Private Trade Values Company at $109 Billion. Facebook’s highly-anticipated final private market transaction has priced on SecondMarket at $43.50 (a record for the private market exchange), according to people familiar with the trade. That final trade values Facebook at roughly $109 billion.
- Exclusive: Falcone Mulls Voluntary Bankruptcy For LightSquared. Hedge fund manager Philip Falcone said in an interview on Wednesday he is "seriously considering" filing a voluntary bankruptcy for LightSquared, the struggling telecom startup in which his Harbinger Capital Partners is the majority owner.
NY Times:
Institutional Investor:- Ken Griffin's Citadel, Dan Loeb's Third Point Gain in First Quarter. An initial picture of hedge fund results for the first quarter is emerging. Hedge funds performed pretty well in the first quarter, but still lagged the S&P 500 and Nasdaq Composite, which had their best quarters in years. Ken Griffin’s Citadel has picked up where it left off last year. The Chicago-based hedge fund manager is up more than 8 percent in the first three months after posting a nearly 3 percent gain in March alone. Dan Loeb of Third Point, who is currently waging a proxy fight with Yahoo, posted a 6.5 percent gain in the first quarter.
- Exclusive: Bernanke Breaks Bread With Top Bankers. After completing a series of public lectures in Washington, D.C. last week, Federal Reserve Chairman Ben Bernanke quietly slipped into New York City for a private luncheon on Friday with Wall Street executives. Fortune has learned that attendees included Jamie Dimon (J.P. Morgan), Bob Diamond (Barclays), Brady Dougan (Credit Suisse), Larry Fink (Blackrock), Gerald Hassell (Bank of New York Mellon), Glenn Hutchins (Silver Lake), Colm Kelleher (Morgan Stanley), Brian Moynihan (Bank of America), Steve Schwarzman (Blackstone Group) and David Vinar (Goldman Sachs).
- Car Prices At Record Highs - And Rising.
- The Chickens Are Coming Home To Roost by Ed Koch. The chickens are coming home to roost in the Middle East. The experts who supported the removal of President Hosni Mubarak of Egypt, e.g., The New York Times’ Tom Friedman and many others, are perhaps now wondering if they were right to do so. Mubarak was a loyal friend of the United States, a guarantor of the rights of minority Egyptians such as Coptic Christians, and a protector of the peace agreement negotiated by Egyptian President Anwar Sadat and Israeli Prime Minister Menachem Begin under the auspices of President Jimmy Carter at Camp David.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).
- New Foreclosure Wave to Hit 'Everyday' Borrowers. Subprime loans caused first crisis, now job losses, economy will cause a bigger run. A painful part two of the slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.
- One-Fifth of U.S. Adults Read E-Books As Market Booms - Survey. One in five American adults read an electronic book in the last year, as gift-giving sped the shift away from the printed page, a Pew Research Center survey showed on Wednesday.
- Paulson Hedge Funds Mixed in First Quarter. Closely tracked hedge fund manager John Paulson's oldest fund rose and his Enhanced fund scored double-digit gains in the first quarter but his Advantage funds remained in the red, a source familiar with the numbers said on Wednesday. The firm's oldest portfolio, Paulson Partners, gained 6.6 percent during the quarter while the Paulson Enhanced fund jumped 13.3 percent. Both funds' returns were fueled by the Express Scripts Medco acquisition and gains at Delphi Automotive. The Paulson Advantage fund fell 3.96 percent in March to stand 1.05 percent lower for the year while its Paulson Advantage Plus fund fell 5.45 percent in March and was off 2.23 percent for the quarter. Last year these funds suffered double-digit losses.
- Detroit Avoids State Takeover, More Oversight Looms. Detroit avoided a takeover by the state of Michigan on Wednesday after both a review team and the city council approved a consent agreement that will put the city's struggling finances under stricter control.
- For Some Prominent US Hedge Funds, A Strong 1st Quarter. A handful of prominent hedge fund managers reported strong first quarter results after the industry recorded dismal returns in 2011, but only a few managed to top the performance of the rallying U.S. stock markets.
- Bed Bath & Beyond(BBBY) 4th-qtr beats estimates, shares up. Bed Bath & Beyond Inc reported quarterly results that beat Wall Street expectations as shoppers spent more to spruce up their homes, sending the retailer's shares up more than 4 percent after the bell.
- Ruby Tuesday(RT) 3rd-qtr sales misses, sees weak FY. Ruby Tuesday Inc's quarterly revenue missed Wall Street expectations hurt by a fall in same-store sales, and the casual dining chain forecast full-year adjusted earnings below analysts' estimates. Shares of the company fell 10 percent in extended trade.
- Morgan Stanley(MS) Tries to Stave Off Ratings Cut. James Gorman, Morgan Stanley’s chief executive, has been in discussions with Moody’s in an attempt to maintain its credit ratings and stave off a downgrade that could diminish the bank’s ability to buy the rest of Citigroup brokerage Smith Barney, according to people familiar with the matter.
- JPMorgan's(JPM) Practices Bring Scrutiny. Three times a pallbearer, never a corpse – that is JPMorgan Chase’s experience of the brutal financial markets of the past few years. At the demise of Bear Stearns, Lehman Brothers and, most recently, MF Global, the bank has been deeply involved: in a rescue bid for Bear and in a complex network of relationships with Lehman and MF Global. Its unrivaled reach raises inevitable questions about its role.
- Portugal May Need Bailing Out Within A Year, Warns Olli Rehn. Political leaders should be ready to provide a further bail-out for Portugal within the next year, Europe's economic and financial affairs commissioner Olli Rehn has warned.
- None of note
- Asian equity indices are -1.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 159.50 +5.0 basis points.
- Asia Pacific Sovereign CDS Index 128.75 +.5 basis point.
- FTSE-100 futures +.48%.
- S&P 500 futures +.12%.
- NASDAQ 100 futures +.16%.
Earnings of Note
Company/Estimate
- (STZ)/.39
- (SCHN)/.32
- (KMX)/.40
- (PIR)/.48
8:30 am EST
- Initial Jobless Claims are estimated to fall to 355K versus 359K the prior week.
- Continuing Claims are estimated to rise to 3350K versus 3340K prior.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Bullard speaking, ICSC Chain Store Sales for March, Challenger Job Cuts report for March, BoE Rate Announcement, RBC Consumer Outlook Index for April, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
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