Today's Headlines

Bloomberg:

• Rajoy Says Spain Needs Austerity for Funding as Yields Climb. Prime Minister Mariano Rajoy said Spain must slash its budget deficit in order to maintain access to financing, as bond yields rose to the highest level since his government came to power four months ago. “The fundamental objective at the moment is to reduce the deficit,” Rajoy told a conference in Madrid today. “If we don’t achieve this, the rest won’t matter: we won’t be able to fund our debt, we won’t be able to meet our commitments.” Rajoy has raised the threat of a bailout to persuade Spaniards to accept spending cuts and tax increases even with the economy shrinking. Economy Minister Luis de Guindos was due to meet investors today in Paris as the 10-year bond yield surged to more than 6 percent. De Guindos will also meet European Central Bank President Mario Draghi tomorrow, a spokeswoman at the ministry said, without giving details. The Frankfurt-based bank, which started buying Spanish bonds in August, should resume those purchases, Jaime Garcia-Legaz, a deputy minister in the economy department, said on April 13. “No one can expect such deeply rooted issues to be resolved in a few weeks,” Rajoy said. Spain is the euro area’s fourth-biggest economy and the government forecasts it’ll contract 1.7 percent this year as it implements the deepest budget cuts in more than 30 years.
• Spain's Austerity Threatens Economy, HSBC Says: Tom Keene. Spain’s efforts to cut its debt burden and calm the fears of lenders are increasing the country’s risk of a deeper recession and financial crisis, HSBC Holdings Plc’s Madhur Jha said. Spain needs more external financial help to “buy time” for its government to implement reforms to its housing market, pension system and labor market, Jha said in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. Credit-default swaps insuring Spanish government debt rose today to a record in London, according to CMA, signaling deterioration in investor perceptions of credit quality. “People are beginning to realize the more and more austerity you impose on an economy, the worse it becomes in terms of growth and also in terms of debt sustainability,” said Jha, an HSBC Bank global economist based in London. “There needs to be more in terms of actual financial support.” Yields on Spain’s 10-year bonds climbed to 6.16 percent today, the highest level since Dec. 1, before trading at 6.07 percent. Credit-default swaps jumped to 521, CMA prices showed. They have jumped from 431 at the start of the month and 380 at the end of 2011.
• Spanish Default Risk Soars to Record on Bets Bailout Is Looming. Spanish debt risk climbed to a record for a second day and signalled a 37 percent chance the nation will default as its borrowing costs surged to levels that prompted its neighbors to seek bailouts. Credit-default swaps tied to Spain’s bonds jumped 19 basis points to 521, according to CMA prices at 11 a.m. in London. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments rose three basis points to 283, while swaps on Italy climbed eight basis points to a three-month high of 443. Spain is due to sell new debt tomorrow before European officials travel to Washington later this week to seek a bigger war chest to battle the financial crisis. The nation’s 10-year bond yield soared to 6.15 percent, the highest since Dec. 1 and approaching the 7 percent level that foresaw the international rescues of Greece, Ireland and Portugal. “The focus is on Spain and contagion,” said Elisabeth Afseth, an analyst at Investec Bank Plc in London. “There isn’t a rescue fund in place sufficient to deal with both Spain and Italy.” The Markit iTraxx Crossover Index of credit-default swaps on 50 European companies with mostly high-yield credit ratings rose 2.5 basis points to 682.5, according to BNP Paribas SA. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers increased 4.25 basis points to 251.25, the highest in almost a week. Swaps on Banco Santander SA, Spain’s biggest lender, rose 12 basis points to 433.
• U.S. Homebuilder Confidence Falls in April to 3-Month Low. Confidence among U.S. homebuilders fell in April to a three-month low, a sign the industry is still trying to gain its footing. The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 25 this month from 28 in March, the Washington-based group said today. Economists projected no change in the index, according to the median forecast in a Bloomberg News survey. Readings below 50 mean more respondents said conditions were poor. “Although builders in many markets are noting increased interest among potential buyers, consumers are still very hesitant to go forward with a purchase,” Barry Rutenberg, chairman of the National Association of Home Builders and a builder from Gainesville, Florida, said in a statement. Estimates in the Bloomberg survey of 48 economists ranged from 27 to 30. A measure of sales expectations for the next six months dropped to 32 from 35 in March, while the gauge of buyer traffic decreased to 18, the lowest this year, from 22. Builders in the Midwest led the April decline, with that region’s index falling 8 points to 23 this month.
• Manufacturing in New York Area Grew at Slowest Pace in 5 Months. Manufacturing in the New York region expanded in April at the slowest pace in five months, a sign the boost to the U.S. expansion from factories may be moderating. The Federal Reserve Bank of New York’s general economic index unexpectedly decreased to 6.6 this month, less than the most pessimistic forecast in a Bloomberg News survey, from 20.2 in March. The median estimate in the survey of economists called for a drop to 18. The Empire State gauge of new orders fell to 6.5 in April from 6.8, while the shipments measure slumped to 6.4 from 18.2 a month earlier.
• Shipping loans declined to their lowest level since at least 2007 during the first quarter, TradeWinds said, citing data from Dealogic. Total lending to the industry fell to about $5.9 billion, a decline of almost 60% compared with a year earlier. That is the lowest quarterly figures since Dealogic began compiling the data in 2007, according to TradeWinds.
• Kim Is Chosen to Head World Bank, Extending U.S. Monopoly. Jim Yong Kim was chosen to be president of the World Bank, becoming the first physician and Asian-American to head the lender after emerging markets failed to rally around a challenger to the U.S. monopoly on the job. The World Bank board of directors said today it chose Dartmouth College President Kim to succeed Robert Zoellick, whose term ends June 30. A specialist in HIV/AIDS with a Ph.D. in anthropology, Kim, 52, faced rival bids from Nigeria and Colombia.
• Apple(AAPL) Falls for Fifth Day on Concern Carriers May Cut Subsidies. Apple Inc. (AAPL) shares fell for a fifth day amid speculation that demand for the iPad may wane and that mobile-phone carriers will cut subsidies for the iPhone, eroding profitability of Apple’s best-selling products.
• Banks Seen Dangerous Defying Obama's Too-Big-To-Fail Move. Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the nation’s credit markets seized up and required unprecedented bailouts by the government. Five banks -- JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. -- held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve. Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did in 2008 with the Fed-assisted rescue of Bear Stearns Cos. by JPMorgan and with Citigroup and Bank of America after the Lehman Brothers bankruptcy, the largest in U.S. history.
• Citigroup(C) Funds at Risk Climb in Spain, Four Other EU Nations. Citigroup Inc. (C), the third-biggest U.S. bank, said its funds at risk rose to $28.6 billion in five European countries including Spain, where the government is seeking to regain investor confidence amid the region’s debt crisis. The figure represents the gross amount of funded and promised loans in the so-called GIIPS countries of Greece, Ireland, Italy, Portugal and Spain at the end of March, according to a presentation posted today on the bank’s website. The amount is 3.6 percent more than the $27.6 billion the firm had disclosed for the end of 2011.
• China Asks Internet Users to Stop Spread of Rumors, Xinhua Says. China’s Internet users should be vigilant against the spreading of false information, Xinhua News Agency reported, citing government officials. The government and Internet operators must make joint efforts to address online rumors, the official news agency said, citing Liu Zhengrong, a senior official with the State Internet Information Office. China has closed 42 websites since mid-March and detained six people as it cracks down on rumor-mongering. Sina.com(SINA) and Baidu.com)BIDU) promised to cooperate with the government, improving self-management and taking effective measures to stop rumors, according to the report.
  

MarketWatch:

• Economy Has Picked Up Pace: Fed's Pianalto.

CNBC.com:

• Prime Brokerages Consolidate After 'Big Bang'. Hedge funds are cutting back on the brokerage accounts they hold as the prime brokerage industry begins to consolidate more than four years after the Lehman Brothers bankruptcy blew the sector wide open.

Business Insider:

• Here Are The Wild Details From The Secret Service's Prostitution Scandal.
• Jeff Neely Just Refused To Answer Any Questions About The Lavish GSA Spending In Vegas.
• Israel is Preparing for a Full Assault on Iran's Nuclear Facilities if Diplomacy Fails.
• Shares in this Energy Company Are Getting Destroyed on Report That It's About to be Nationalized by Argentina.
• US Troops Are Being Forced To Work With Ex-Taliban Fighters Who Killed Their Friends.
• Morgan Stanley: This is What Happened The Last Time The US Economy Faced A 'Fiscal Cliff'.
  

Zero Hedge:

• Anyone Who Bought 10Y Spanish Bonds This Year Is Now Underwater. (graph)
• LTRO Bank Stigma Widest Since LTRO Announcement. (graph)
  

CNN:

• The Terrible Cost The U.S. Pays for Derivatives. Whether they understand them or not, all taxpayers have been sucked into the derivatives virtual reality game, and at great cost.

Reuters:

• Copper Sags to 3-Month Low, China Worries Weigh.
  
• Spain, Italy Slide Further into Euro Zone Crisis. Spain and Italy faced growing market pressure on Monday, stoking fears of a new phase in the euro zone debt crisis as Madrid's budget problems threatened to drag in other southern European economies.

Financial Times:

• Warm Weather Helps US Retail Sales. US retail sales rose in March as construction and garden equipment suppliers benefited from unseasonably warm weather. Retail and food services sales rose 0.8 per cent to $411.1bn, higher than analysts’ forecasts of 0.3 per cent. The figure was 6.5 per cent higher than March 2011, according to a commerce department report.

Telegraph:

• Spain Plans to Strip Regions of Powers in Bid to Calm Markets. Madrid is plotting to strip Spain's regions of their powers in a radical bid to convince global investors that the nation can control its finances.
• Debt Crisis: Live.
  

Cinco Dias:

• The Spanish government is cutting the amount of credits given to strategic industries by 12.5% and plans to charge interest, citing people in the government.
  

Xinhua:

• Shanghai won't soften controls or change existing policies on the property market, citing Mayor Han Zheng.