Today's Headlines

Bloomberg:

• Europe's Capital Flight Betrays Currency's Fragility. The euro area’s financial troubles appear to be flaring up again, as this week’s gyrations in the Spanish bond market show. In reality, they never went away. And judging from the flood of money moving across borders in the region, Europeans are increasingly losing faith that the currency union will hold together at all. In recent months, even as markets seemed calm, sophisticated investors and regular depositors alike have been pulling euros out of struggling countries and depositing them in the banks of countries deemed relatively safe. Such moves indicate increasing concern that a financially strapped country might dump the euro and leave depositors holding devalued drachma, lira or pesetas.
• Spain Banks Boost Borrowing From ECB by 50% in March. Spanish banks’ borrowings from the European Central Bank jumped by almost 50 percent in March, reaching the most on record, as lenders tap emergency loans and channel some of it into sovereign debt purchases. Average net borrowings by Spanish banks climbed to 227.6 billion euros ($300 billion) last month from 152.4 billion euros in February, the Bank of Spain said on its website today. Spanish lenders took 29 percent of the total long-term loans offered to euro-region banks, the data showed. That includes the three-year long-term refinancing operation loans known as LTRO.
• Spanish Risk at Record High as Rajoy Struggles to Avoid Bailout. The cost of insuring against a Spanish default jumped to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout. Credit-default swaps on Spain rose 17 basis points to 498 as of 4 p.m. in London, surpassing the previous all-time high closing price of 493, according to CMA. The contracts are up from 431 at the start of the month and 380 at the end of 2011, signalling a deterioration in investor perceptions of credit quality. “Spain is viewed as the next most likely to be in need of a financing program,” said Brian Barry, an analyst at Investec Bank Plc in London. “It’s not surprising to see CDS widening.” The rate on Spain’s 10-year note rose 17 basis points today to 5.99 percent, 21 basis points up from a week ago. Royal Bank of Canada said in a note that rising borrowing costs increased the chances that the country will seek some sort of external aid, such as having a European Union bailout fund buy up its debt. Sovereign insurance costs also rose elsewhere, with the Markit iTraxx SovX Western Europe Index of default swaps on 15 governments climbing four basis point to 278.5. The gauge was at 265.5 basis points on April 3.
  
• Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt rose, according to BNP Paribas SA. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped 14 basis points to 656 at 9:51 a.m. in London, and is heading for a fourth weekly rise. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.5 basis points to 136.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased six basis points to 242 and the subordinated index climbed 5.5 to 390.5.
• Italians Rally in Rome Against Monti's Pension-Revamp Gap. Italy’s main labor unions took to the streets of Rome today to protest Prime Minister Mario Monti’s pension-system overhaul, saying it traps hundreds of thousands of workers in a legal limbo without retirement pay. Tens of thousands of people marched through the streets of central Rome this morning before a rally where union leaders criticized the government for underestimating the extent of the problem. Last night the Labor Ministry said there are 65,000 Italians who may be left without support between when they leave work and when their pension kick in as the higher retirement age delays their payout. Unions say the figure is about five times that amount.
• Greece Euro Exit Would Trigger Chain Reaction, Schulz Tells FAZ. A decision by Greece to give up the euro would trigger a chain reaction that would force Spain and Portugal out of the common currency, European Parliament President Martin Schulz said in an interview with Frankfurter Allgemeine Zeitung in which he warned against such a step. A failure of the euro would risk reversing European economic integration as currency depreciations and appreciations would prompt countries to set up trade barriers, Schulz said in an interview.
• European Stocks Drop on Debt Fears, Slower China Growth. European stocks fell, for the longest streak of weekly losses since August, as concern resurfaced about the euro-area’s debt crisis and China’s economic growth slowed last quarter more than forecast. UniCredit SpA and Banca Popolare di Milano Scarl (PMI) led European banks lower. Banco Santander SA, the biggest Spanish lender, fell 3.2 percent. Cap Gemini (CAP) SA dropped 5.1 percent.
• Consumer Sentiment in U.S. Eases as Employment Growth Diminishes: Economy. Confidence among U.S. consumers cooled in April from a one-year high, a sign the moderation in job growth may limit the biggest part of the economy. The Thomson Reuters/University of Michigan’s preliminary index of sentiment dropped to 75.7 from 76.2 last month. The measure was projected to be unchanged, according to a median forecast in a Bloomberg News survey of economists. Tempered optimism follows the slowest month of job growth since October and a drop in weekly earnings that may restrain household purchases that account for about 70 percent of the economy. Tempered optimism follows the slowest month of job growth since October and a drop in weekly earnings that may restrain household purchases that account for about 70 percent of the economy. The Michigan index of current conditions, which reflects Americans’ perceptions of their financial situation and whether it’s a good time to buy big-ticket goods like cars, declined to a four-month low of 80.6 in April from 86 a month earlier.
• Consumer Prices in U.S. Increased at a Slower Pace in March. The consumer-price index climbed 0.3 percent, matching the median forecast of economists surveyed by Bloomberg News, after increasing 0.4 percent the prior month, Labor Department data showed today in Washington. The so-called core measure, which excludes more volatile food and energy costs, rose 0.2 percent.
• Wells Fargo(WFC), JPMorgan(JPM) Label More Junior Home Loans as Bad Assets. Wells Fargo & Co. (WFC) (WFC) and JPMorgan Chase & Co. (JPM) (JPM) labeled $3.3 billion of junior liens as bad assets after regulators pushed the nation’s biggest banks to rethink the value of second mortgages whose collateral has vanished. Wells Fargo classified $1.7 billion of junior liens as nonperforming in the quarter, leading to an increase in overall soured loans, and JPMorgan gave that designation to $1.6 billion of such loans, according to their first-quarter presentations today.

Wall Street Journal:

• Moody's Decides On Possible Italian Bank Downgrades Next Week.
• China Strains to Contain Buzz Around Bo Xilai. China's propaganda machine has gone into overdrive following the removal of top Communist Party leader Bo Xilai and a murder investigation into his wife, reflecting insecurities within the leadership amid the worst political crisis in a generation. A strongly worded editorial emphasizing the need for party discipline was splashed across the front pages of newspapers across the country on Friday.
  

MarketWatch:

• Utica Shale Bringing Jobs to Eastern Ohio.

CNBC.com:

• Is The World's Biggest Economy in Danger of Disintegrating? It is the world's biggest economy, China's largest export market and the top contributor to the International Monetary Fund (IMF). And while its politicians and citizens may feel some sense of belonging to the European Union, the sovereign debt crisis has shown that when the going gets tough, few people identify with Europe.
• Flurry of Fed Comments Suggest Less Chance of Easing.
  

Business Insider:

• Egyptians Are Terrified The Military Is Going To Take Over The Country.
• Obama is Slammed For 'Jetting Around' On Vacation And Being Out Of Touch.
  

Zero Hedge:

• Steinhardt On The Fed's Failure And The End Of Wall Street As We Know It.
• Spain CDS Notional Update.
• Austerity, Social Unrest, And Europe's 'Lose-Lose' Proposition.
  

NY Post:

• New York Times(NYT) Journalist Says Sulzberger 'Piloting Ghost Ship'. The mood is turning uglier inside the New York Times, where publisher and acting CEO Arthur Sulzberger Jr. has again been ripped for his globe-trotting ways, this time by a veteran newsman who, in an e-mail to more than 150 friends, accuses the boss of piloting a “ghost ship.”

New York Times:

• German Maker of Robots Gains as Chinese Wages Rise.

Pragmatic Capitalism:

• Rail Traffic Continues to Soften. (graph)

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 24% 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 -17 (see trends).

Reuters:

• Fitch: U.S. Housing Not Keeping Pace With Improving Investor Sentiment.
• Exclusive: G20 May Boost IMF Resources by $400-500 Billion: Officials. The world's 20 biggest economies are likely to agree to increase the resources of the International Monetary Fund by between $400 and $500 billion, rather than the $600 billion initially sought by the IMF, Group of 20 officials have told Reuters. The extra money is to give the IMF, which is a lender of last resort to governments, more firepower to fight the sovereign debt crisis, triggered by unsustainable policies in euro zone countries such as Greece, Portugal and Ireland.
• Exclusive - Iran Ships "off radar" as Tehran Conceals Oil Sales. Iran is concealing the destination of its oil sales by disabling tracking systems aboard its tanker fleet, making it difficult to assess how much crude Tehran is exporting as it seeks to counter Western sanctions aimed at cutting its oil revenues. Most of Iran's 39-strong fleet of tankers is now "off-radar" after Tehran ordered captains in the National Iranian Tanker Co (NITC) to switch off the black box transponders that are used in the shipping industry to monitor vessel movements, oil industry, trading and shipping sources said.
• Copper Falls Below $8,000, China Data Disappoints.
• China March Crude Steel Output Hits Record. China's crude steel output hit a monthly record of 61.58 million tonnes in March, up 10 percent from February, data from the National Bureau of Statistics showed on Friday. Daily crude steel output reached 1.986 million tonnes, its highest since June last year.
• Goldman Sachs(GS) CEO Gets $16.2 Million Pay Package. Goldman Sachs Group Inc Chief Executive Lloyd Blankfein's compensation increased 14.5 percent to $16.2 million in 2011 despite a sharp decline in profits and share price during the year, leaving the bank open to more attacks on its pay policies.
• Obama Orders Oversight Group On Shale Gas.
  

Telegraph:

• Debt Crisis: Live. Spanish shares tumble 3pc after the country's borrowing costs rose again on worries over its banks, triggering sell-offs in European and US markets as slowing growth in China added to fears for the world economy.