Today's Headlines

Bloomberg:

• Merkel Stands Firm on Crisis Austerity, CDU Ally Altmaier Says. German Chancellor Angela Merkel won’t budge from her insistence on budget austerity in Europe as unavoidable to resolving the debt crisis, a senior lawmaker in her party said. “The chancellor is pretty resistant to pressure,” Peter Altmaier, the chief whip of Merkel’s Christian Democratic Union, said in an interview today in Berlin. France’s presidential vote and the Dutch government’s fall don’t change the fact “there’s no money in Europe, only deficits everywhere you look.” Socialist challenger Francois Hollande, who leads President Nicolas Sarkozy in polls for France’s runoff election on May 6, said yesterday that austerity measures across Europe are leading to “desperation” and that he will refocus the euro area’s second-biggest economy on growth. Altmaier warned that Hollande risked alienating investors if he were to divert from the course of austerity. “If Mr. Hollande were to say that he wants to increase government spending and save less, he’ll lose the confidence of the financial markets,” Altmaier said. “The same financial markets that say they’re concerned about austerity will say, ‘My God, this is not serious,’ if Hollande stops austerity and does deficit spending.” Merkel will await the election outcome in France and then “try to come to an understanding with the new government, regardless of who leads it,” Altmaier said. “We will stick to our fundamental principles because there’s really no alternative.’”
  
• Hollande Meets German Resistance in Anti-Austerity Push. French Socialist presidential candidate Francois Hollande’s campaign pledge to reverse Europe’s austerity drive met German resistance, pointing to tension between the region’s two biggest economies. Hollande has repeated his criticism of the German-advocated austerity and said the European Central Bank needs to do more to support Europe’s growth, comments that may put him at odds with France’s neighbor and Europe’s biggest economy. He says he’ll seek to add growth and investment measures to the fiscal treaty signed by its European partners. “We’re not saying that saving solves all problems,” German Chancellor Angela Merkel said at a conference in Berlin today. Still, “you can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this.”
• Italian Borrowing Costs Rise at Auction on Crisis Concerns. Italy was forced to pay 1 percentage point more than a month ago to sell zero-coupon bonds in the first auction since Prime Minister Mario Monti’s government moved back its balanced-budget target. The Treasury sold 2.5 billion euros ($3.3 billion) of the zero-coupon 2014 debt to yield 3.355 percent, up from 2.352 percent at the previous auction on March 27. Investors bid for 1.80 times the amount offered, down from 1.86 times last month. The Rome-based Treasury also sold 943 million euros of inflation-linked bonds due in 2017 and 2019 to yield 3.88 percent and 4.32 percent, respectively. The auction’s maximum target was 3.5 billion euros. Italy’s 10-year bond, which initially rose after the auction, pared the gains to yield 5.74 percent at 12:09 p.m. Rome time, pushing the difference or spread with similar- maturing German debt to 407 basis points. That compares with 372 basis points the day before Monti announced new budget forecasts on April 18.
• Greek Economy May Contract Near 5% of GDP in 2012, Ta Nea Says. Greece’s central bank forecasts the country’s economy will contract by almost 5 percent of gross domestic product this year, which is higher than a 4.5 percent estimate made last month, Ta Nea reported, without saying where it got the information. Unemployment in 2012 is expected at 19 percent, Ta Nea reported.
• Sovereign, Corporate Bond Risk Falls, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt fell, according to data compiled by Bloomberg. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 3.5 basis points to 281 at 9:40 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 13 basis points to 678. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 3.5 to 146 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers declined six basis points to 257 and the subordinated index dropped 7.5 to 414.5.
• German Windmill Makers Suffering Similar Fate to Solar, FTD Says. German windmill makers such as Nordex SE are suffering a similar fate to solar companies as Chinese firms push into the market, Financial Times Deutschland said, citing Manfred Bayerlein, chief executive officer of wind power certification company TUEV Rheinland. While China’s technology is a few years behind, their products are already economical, Bayerlein said, according to the German newspaper. Chinese companies entering the market has contributed to a 25 percent drop in prices since 2008, FTD said. German solar companies such as Solon SE (SOO1), Solar Millennium AG (S2M) and Q-Cells SE (QCE) have filed for insolvency, while China has built up an industry with more than 400 companies, some of which are market leaders, FTD said.
• U.S. Lost AAA Rating on Danger of Liquidity Crisis, S&P's Kraemer Says. The U.S. lost its top credit grade in August because of the imminent danger of a “real liquidity crisis,” and Standard & Poor’s made no errors in its analysis, said Moritz Kraemer, managing director of sovereign ratings. “Last summer, the U.S. government got extremely close to a real liquidity crisis because the Washington establishment could not agree on the way forward that would have been required to raise the debt ceiling,” Kraemer told lawmakers on the U.K. Parliament’s Treasury Committee today in London.
• Consumer Confidence in U.S. Little Changed as Outlook Cools. Confidence among U.S. consumers was little changed in April as expectations over the outlook tempered increased optimism about the present. The Conference Board’s confidence index was at 69.2 com- pared to a revised 69.5 in the prior month, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called for a reading of 69.6. The gauge of expectations for the next six months declined to 81.1 from 82.5. The share of consumers who said jobs are currently plentiful decreased to 8.4 percent from 9 percent. The percent of respondents expecting more jobs to become available in the next six months decreased to 16.9 from 17.4 the previous month. The proportion who expect their incomes to rise over the next six months declined to 14 percent from 15.5 percent. The share of households planning to buy a car dropped to the lowest level since comparable records began in November 2010. Consumers also cut back on plans to buy houses and take vacations.
• El Nino May Cool Summer, Cutting US Electric Need. The possibility of an El Nino, a warming of the mid-Pacific Ocean, has forecasters predicting lower temperatures across the U.S. this summer, which may mean less electricity will be needed to run air conditioners.
• China Tire Demand Slows as Economy Decelerates, Bridgestone Says. Tire demand in China, the largest rubber consumer, is growing at a slower pace than last year as the nation’s economic expansion is decelerating, said an executive at Bridgestone Corp. (5108), the biggest tiremaker.

Wall Street Journal:

• Greece Risks Euro Exit if Reforms Stall. Greece's central bank governor Tuesday warned the country's politicians that any deviation from strict austerity targets after May 6 general elections would risk forcing the country out of the 17-member euro currency bloc, even as the central bank signaled that the economy would contract by a worse-than-expected 5% this year. In an unusually blunt warning that cut through much of the lofty rhetoric coming from candidates, George Provopoulos said Greece faced a stark and historic choice between overhauling its economy as a member of the currency bloc, or turning back the clock on decades of economic progress and eventual exit from the euro. "There is no easy way out of the crisis. The adjustment must be pursued with determination," Mr. Provopoulos said in a speech. "If, after the elections, there is any question about the will of the new government and society to implement the program..the country will then be at risk of finding itself very quickly in a particularly adverse situation." "What is at stake is the choice between an orderly, albeit painstaking, effort to reconstruct the economy within the euro area, with the support of our partners; or a disorderly economic and social regression, taking the country several decades back, and eventually driving it out of the euro area and the European Union," he said.
• IBM(IBM) Boosts Dividend 13%; Adds $7 Billion to Buyback Program. International Business Machines Corp.'s (IBM) board approved a 13% increase in the technology heavyweight's quarterly dividend and authorized an additional $7 billion to buy back shares as the company looks to return more of its rising cash levels to shareholders.
• Wall Street Promotes Junk Bonds as Europe Erupts. Morgan Stanley (MS), JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) are recommending junk bonds as Europe’s sovereign-debt crisis flares and concern mounts over the strength of the U.S. recovery. Morgan Stanley said last week that U.S. high-yield obligations were in a “sweet spot” as borrowers cut their debt loads. JPMorgan said junk yields will fall more than half a percentage point by year-end. Bank of America favors debentures rated in the middle tier of speculative grade.
• A Need to Know Basis: Apple(AAPL) Earnings Preview.
  

MarketWatch:

• Oil Futures Gain as Euro-Zone Worries Recede. Crude-oil prices advanced Tuesday, buoyed by better market sentiment regarding Europe and also garnering some support from a weaker dollar. Concerns about excess supply ahead of U.S. inventory data weighed negatively, however, as did mixed housing data. Crude oil for June delivery CLM2 +0.44% added 63 cents, or 0.6%, to $103.73 a barrel on the New York Mercantile Exchange.

Business Insider:

• How 9 Banks Are Exposed to $200 Trillion Worth of Derivatives.
• Soros: Europe's Social, Economic, And Moral Crisis Could Result In A Soviet-Union Like Collapse.
• GM(GM) is Planning a Massive Chinese Expansion.
• Facebook(FB) IPO Could Be Delayed.
• Former BP Engineer Arrested Over Oil Spill.
• Sorry, Facebook(FB) Fans, These Latest Numbers Just Aren't That Impressive. (graph)
  

Zero Hedge:

• Case Shiller Misses Expectations, Unadjusted Home Prices Lowest In A Decade. (graph)
• G-10 Macro Data Plunges to Worst in Six Months, Turns Negative. (graph)
• Europe's Risk-ually Transmitted Disease.
• It's The Euro Repatriation Stupid.
  

New York Times:

• Cost of Spain's Housing Bust Could Force a Bailout. Since the frenzy drove Spanish home prices to a peak in 2007, they have fallen by at least one-fourth, and the bottom seems nowhere in sight. As Spain endures its second recession in three years and unemployment nears 25 percent, an increasing number of debt-heavy Spaniards can no longer meet monthly payments on the mortgages that their banks were all too eager to give. With a rising portion of Spain’s 663 billion euros, or $876 billion, in home mortgages at risk of default, many economists say it is only a matter of time before some of Spain’s biggest banks will need a bailout. And the Spanish government, staggering under its own debt and budget deficit burdens, may not have the money to come to the rescue. The implications of all this for the rest of Europe were a prime topic at last weekend’s meetings of the International Monetary Fund and the World Bank in Washington. The big fear is that the European Union will need to step in with a Spanish bailout — one much bigger than any of those already extended to Ireland, Greece and Portugal.

Washington Post:

• Home Prices Remain Near Post-Crisis Low; New-Home Sales Fall 7%. The latest survey from S&P/Case-Shiller noted basically stagnant prices from January to February. Adjusted for seasonal variations in sales, prices rose slightly in February after several months of decline. Without adjusting for seasonal differences, the survey of prices in 20 metropolitan areas fell to its lowest level since the housing market downturn began.

The Detroit News:

• GE(GE) CEO Defends Tax Rate After Protesters Disrupt Speech. General Electric CEO Jeff Immelt defended the company's payment of income taxes after protesters interrupted his speech here at the SAE World Congress.

CNN:

• Watch Out! Is The Fed Pushing Us Into Another Bubble? by Sheila Bair.
  

Reuters:

• Exclusive: North Korea's Nuclear Test Ready "Soon". North Korea has almost completed preparations for a third nuclear test, a senior source with close ties to Pyongyang and Beijing told Reuters, which will draw further international condemnation following a failed rocket launch if it goes ahead.
• Maybe No Housing Rebound for a Generation: Shiller. The Housing market is likely to remain weak and may take a generation or more to rebound, Yale economics professor Robert Shiller told Reuters Insider on Tuesday. Shiller, the co-creator of the Standard & Poor's/Case-Shiller home price index, said a weak labor market, high gas prices and a general sense of unease among consumers was outweighing low mortgage rates and would likely keep a lid on prices for the foreseeable future."I worry that we might not see a really major turnaround in our lifetimes," Shiller said. The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.2 percent in February on a seasonally adjusted basis, the first uptick in prices in 10 months. But Shiller called it "a very mixed bag." Nine of the 20 cities recorded falling or flat prices on the month.He said suburban areas in particular might endure further price declines as high gas prices increase demand for "walkable cities."
• High Gas Prices Dampen US Gasoline Demand. U.S. gasoline demand fell last week as prices held higher than levels seen a year ago, MasterCard said in its weekly Spending Pulse report on Tuesday. Gasoline demand fell 6.1 percent from a year earlier as a gallon of the fuel at the pump cost 1.3 percent more than it did last year, MasterCard data showed.
• US 'Fiscal Cliff' Makes US Fed Queasy. Federal Reserve policymakers are sounding the alarm over a "fiscal cliff" at the end of this year, when scheduled U.S. tax hikes and spending cuts could pose a big threat to the fragile economic recovery. Along with its official mandate of watching unemployment and inflation, the U.S. central bank is keeping a close eye on a potentially debilitating political fight over how to fix the budget deficit.
• US Senate Democrats Close Ranks to Fight Keystone Oil Pipeline. U.S. Senate Democrats closed ranks on Tuesday to block quick approval of the Keystone XL oil pipeline as they begin negotiations with House of Representatives Republicans on a compromise job-creating transportation construction bill.

Telegraph:

• Debt Crisis: Live. Far-right leader Geert Wilders says Dutch budget decisions are a choice between ordinary citizens or unelected bureaucrats, as MPs reject strict budget rules enshrined in a new European fiscal pact.
• Britain's National Debt Rises Above £1 Trillion. (graph) The Government met its full-year target of £126bn because of downward revisions to previous months, but the national debt rose above £1 trillion - it is now 66pc of GDP and the highest since records began in 1993.
• ARM(ARMH) Shares Drop 6% on Electronic Sales Slowdown. Shares in ARM Holdings have tumbled more than 6pc despite a sharp hike in profits, as the Cambridge-based chip designer admitted that flooding in Thailand and a slowdown in sales of consumer electronics had put the breaks on its royalty income.