Evening Headlines
Bloomberg:
- French Candidates Clash on How to Emulate Germany to Create Jobs. French President Nicolas Sarkozy and Socialist Francois Hollande clashed in their only campaign debate over everything from how to emulate German employment gains and euro bonds to the role of the European Central Bank. In heated exchanges, marked by the candidates calling each other a liar, Sarkozy and Hollande elaborated on differences over how to rekindle growth with joblessness in France at the highest level in 12 years. “Unemployment has increased,” Hollande said to Sarkozy. “In Germany they make room for social partners, unlike in France.” For his part, Sarkozy said, “after criticizing Germany, it suddenly inspires you.” He said Germany raised sales taxes to help finance lower social charges and unions backed a balanced budget rule that Hollande opposes. The war of words between the two candidates came as Sarkozy fought for his last chance to turn the tide against Hollande before the May 6 runoff. The challenger led with 53.5 percent to 46.5 percent, according to a survey of voting intentions published by BVA today. There was no margin of error published.
- Greeks Reveal Euro or No in First Election Since Downturn. “This crisis has meant a 180-degree turn, a somersault in everyone’s lives, old, young, rich, poor,” says Paschia, 35, who will vote for the anti-immigrant Golden Dawn party instead of the two main parties of Pasok or New Democracy on May 6. “We need new, different voices in parliament.” For the first time since their country became the byword for the European debt crisis, Greeks will have their say at the ballot box rather than in street protests about the economic pain they are enduring for a third successive year in the battle to retain membership of the euro. Faced with the prospect of more budget cuts to keep international funds flowing, many voters are backing small anti- bailout parties that promise an end to austerity measures. While polls show most people don’t want a return to the drachma, opponents warn that could tilt the balance in favor of rejecting the bailout terms and threaten Greece’s membership in the euro.
- Traders Tap German Default Swaps at Record Pace: Credit Markets. Credit traders are accumulating protection on Germany's debt at a record pace, with yields on the nation's bonds at all-time lows and speculation rising that it will bear a greater burden toward resolving Europe's sovereign-debt crisis. The net amount of credit-default swaps outstanding on German bunds surged by $671 million last week to $19.8 billion, just shy of the $19.9 billion peak on Nov. 18, and poised to surpass Italy for the first time, according to the Depository Trust & Clearing Corp.
- Merkel Is Cast as Thatcher’s Austerity Goddess. Three decades ago, U.K. Prime Minister Margaret Thatcher was confronted with a nation bordering on irrelevance, a stagnant economy and a set of entrenched beliefs about the relationship between government and the people. Thatcher faced down striking coal miners and forced through a series of free-market reforms that unshackled Britain’s economy and made it vibrant once again. To the chorus of accusations that she was killing the economy, she replied: “There is no alternative.”
- New Europe Ports Seen Unprofitable With Slump Deepening: Freight. Europe’s top container ports face a glut in capacity that’s set to crimp profit margins as new terminals ordered prior to the 2008 slump open for business. Harbors in northern Europe including Antwerp, Hamburg and Rotterdam, the continent’s top three, will increase annual capacity 21 percent to 62.2 million standard 20-foot containers by 2015, according to data compiled by M.M. Warburg & Co.
- EU Ministers Fail to Reach Deal on Bank Capital Rules. European Union finance ministers failed to reach an agreement to toughen bank capital rules in the face of British resistance and now aim for a deal at their next meeting on May 15.
- Chen in Reversal Seeks to Leave China, Criticizes U.S. Officials. Chinese legal activist Chen Guangcheng is being treated in a Beijing hospital after leaving the U.S. embassy under a deal that quickly started to unravel and now threatens to derail annual cabinet-level talks between the two nations. Chen said that, fearing for the safety of his family, he changed his mind about staying in China under the U.S.-brokered deal and now wants to leave with his family, according to interviews with the Associated Press and CNN. He told CNN that felt pressure to leave the embassy, where he was given refuge, and he appealed for help from U.S. Secretary of State Hillary Clinton, who is in Beijing for the China talks. "The embassy kept lobbying me to leave and promised to be with me at the hospital," he told CNN, according to a transcript. "But this afternoon soon after we got here, they were all gone. I'm very disappointed at the U.S. government." Chen's criticism may open President Barack Obama to attacks from Republicans and human rights advocates for failing to support a leading Chinese rights activist.
- Chesapeake(CHK) Bonds Drop After Cash-Flow Estimates Are Cut. The cost to protect against losses on the debt of Chesapeake Energy Corp. (CHK) (CHK) jumped to the highest since September 2009 as the driller, which reported an unexpected first-quarter loss, said it may run out of money next year. Credit-default swaps (CHK) on the company jumped 3.3 percentage points to 7.4 percent upfront as of about 12:30 p.m. in New York, according to CMA, which is owned by CME Group Inc. The driller’s $1.3 billion of 6.775 percent bonds due in March 2019 dropped by 4.1 cents to 94.9 cents on the dollar at 12:20 p.m., the lowest level on record, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
- Obama’s Afghan Partnership Puts Symbolism Over Substance. Perhaps the biggest surprise of President Barack Obama’s appearance in Kabul, Afghanistan, on Tuesday wasn’t the trip itself, but his use of the occasion to make a head-scratching speech and sign a strategic partnership accord that raises more questions than it answers. “Over the last three years, the tide has turned,” the president said. “We broke the Taliban’s momentum.” This triumphant note jars against a Pentagon report released this week, which warned that “the insurgency remains a resilient and determined enemy and will likely attempt to regain lost ground and influence this spring and summer.” Obama can be forgiven for wanting to put the best spin on the situation to Americans, but the Afghans present were probably not convinced about the tide’s turning. Civilian casualties have risen in the last year, and within hours of Obama’s departure, a suicide attack in Kabul killed at least seven.
- Dimon Meets Tarullo as Banks Lobby Fed on Softer Rules. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon led Wall Street bosses in a closed-door meeting to personally lobby Federal Reserve officials about softening proposed reforms that might crimp their profits. The contingent, which included Bank of America Corp. (BAC)’s Brian T. Moynihan, 52, and Goldman Sachs Group Inc. (GS)’s Lloyd C. Blankfein, 57, pressed the Fed on rules they said would overstate trading risks and harm financial markets, the central bank said today in a statement. They also discussed what they see as flaws in Fed stress tests designed to gauge the strength of the nation’s largest lenders.
- Wells Fargo(WFC) Dominates Home Lending as BofA Retreats: Mortgages. Wells Fargo & Co., already the largest U.S. home lender, won the biggest market share ever recorded as competitors led by Bank of America Corp. pulled back after suffering more than $65 billion in combined mortgage losses. Wells Fargo made 33.9 percent of the $385 billion of mortgages originated in the first quarter, up from 30.1 percent in the preceding three months, according to Inside Mortgage Finance. That’s more than triple the share of the closest competitor, JPMorgan Chase & Co., with 10.6 percent. U.S. Bancorp moved into third place from fifth, with 5.2 percent, ahead of Bank of America, with 4.2 percent.
- Whole Foods(WFM) Profit Jumps on Demand for Organic Foods. Whole Foods Market Inc. (WFM), the largest U.S. natural-goods grocer, posted second-quarter profit that topped analysts’ estimates on increased demand for organic foods. Net income climbed 31 percent to $117.7 million, or 64 cents a share, from $89.9 million, or 51 cents, a year earlier, the Austin, Texas-based company said today in a statement. Excluding some items, profit was 64 cents a share. Analysts projected 59 cents, the average of 23 estimates compiled by Bloomberg.
- As ECB Convenes, France Is the Wild Card. The European Central Bank meets Thursday in Barcelona, but changing Gallic winds may chill the proceedings. The ECB is unlikely to unveil further easing measures, despite Spain's slide into recession and Wednesday's report of record euro-zone joblessness, though it may open the door to future action. Annual euro-zone inflation is 2.6%, above the ECB's 2% target, limiting its room for maneuver for now.
- South Pacific Fund Has Sinking Feeling. The Northern Mariana Islands, a U.S. territory in the Pacific Ocean, managed to recover from brutal World War II battles, but its public pension fund couldn't recover from the financial crisis. The islands' retirement system on April 17 became the first U.S. public pension fund to seek bankruptcy protection.
- Visa(V) Profit Surges; Justice Probes Debit Strategy. The U.S. Justice Department is probing Visa Inc.'s (V) fee changes made in response to new federal regulations that affect debit-card processing, which are already eating into the card giant's dominant debit-market share.
- Carlyle Prices IPO at Lower Range. Facing pushback from some investors, private-equity company Carlyle Group reduced the price for its widely anticipated public offering, a possible sign of the skepticism some investors harbor toward the business.
- CNN Feels Heat on Ratings.
- What ObamaCare May Mean for Taxes. Bischoff: The Obama health-care law includes changes for next year -- unless the Supreme Court acts.
- Henninger: Memo to the Youth Vote. In 2008, he reeled them in with promises of hope and change. In 2012 he's offering cash, promising to protect 3.4% interest on their college loans. We're about to find out if it's true that when you're young, hope springs eternal.
Business Insider:
- The State Leading America's Wind Farm Charge Sits On An Ocean Of Oil.
- 'The Scream' Just Sold For A Record-Breaking $119 Million.
- Green Mountain(GMCR) Slashes Guidance and Shares Collapse.
- 3 Likely Triggers Of The Next Recession.
- Name The Country: 101.5% Debt/GDP And... 1.7% Effective Interest Expense.
- US Complacency Near 9 Year High Versus Europe. (graphs)
IBD:
NY Times:
- Progress Is Seen in Advancing a Final Volcker Rule. A major new rule that has drawn the ire of Wall Street is on track for completion sooner than some bankers had expected, dashing the hopes of financial industry lobbyists, who have pressed for a delay.
- ECB to Hold Fire in Crisis-Hit Spain. The European Central Bank will resist pressure to do more to fight the euro zone crisis when it meets in Barcelona on Thursday, holding fire despite calls to restart its bond-buying programme to shield austerity-hit Spain from further pain. Financial markets are clamouring for the ECB to step up its efforts to fight the two-year-old crisis by buying the sovereign bonds of Spain, which is in recession and has come under intense market pressure since loosening its deficit target for 2012. But ECB policymakers, decamping to the Catalonian capital this week, are more likely to pay homage to Spain's austerity drive than to signal any fresh policy action like restarting the bond-buy programme, or Securities Markets Programme (SMP). The bank has left the plan dormant for the last seven weeks despite a rise in Spain's yields to 6 percent. A break above that, to 7 percent, is considered an unsustainable price to pay for refinancing.
- CEOs rank Texas tops for business, California worst. Texas remains the top state for business and California still holds the title for the worst, according to an annual ranking of states by Chief Executive magazine released on Wednesday. Chief Executive each year surveys CEOs and asks them to grade states in which they do business. This year 650 responded, giving Texas high marks "foremost for its business-friendly tax and regulatory environment," a report on the survey and ranking said on the magazine's website. "Texas easily clinched the No. 1 rank, the eighth successive time it has done so," the report said. "California earns the dubious honor of being ranked dead last for the eighth consecutive year." California "appears to slip deeper into the ninth circle of business hell," the report said. "Each year, the evidence that businesses are leaving California or avoid locating there because of the high cost of doing business due to excessive state taxes and stringent regulations, grows." New York was ranked just ahead of California.
- Pro-Gay Stance Cost Goldman(GS), Says Blankfein. Lloyd Blankfein told a group of Wall Street gay activists that Goldman Sachs had lost at least one client because of its stance in favour of gay marriage.
- The Euro Crisis Just Got A Whole Lot Worse. With Europe plunging back into recession and unemployment soaring, Francois Hollande, the French presidential candidate, is calling for growth objectives to be reprioritised over the chemotherapy of austerity. Angela Merkel, the German Chancellor, has meanwhile continued to insist that on the contrary, Europe must persist with the hairshirt. What's needed is political courage and creativity, not more billions thrown away in fiscal stimulus. Stick with the programme, she urges, as the anti-austerity backlash reaches the point of outright political insurrection. Hollande and Merkel are, of course, both wrong. What Europe really needs is a return to free-floating sovereign currencies. Only then will Europe's seemingly interminable debt crisis be lastingly resolved. All the rest is just so much prancing around the goalposts, or an attempt to make the fundamentally unworkable somehow work.
China Daily:
- Housing Prices Decline by .7% in Big Cities in April. Average home prices in 100 Chinese cities fell 0.71 percent year-on-year in April, the first year-on-year drop since June 2011, the country's largest real estate website said on Wednesday. The prices fell 0.34 percent month-on-month, the eighth consecutive fall, according to the China Real Estate Index System, which is affiliated with SouFun Holdings Ltd. "That indicates a further cooling down in the country's real estate market amid persisting tightening measures," said He Tian, director of research at China Index Academy, a Beijing-based real estate research institute. "As property developers' cash flow further tightens, we believe property prices in key cities such as Beijing and Shanghai will slide 5 to 10 percent this year, while second- and third-tier cities may see a drop of more than 10 percent," He added.
- ICBC's Shanghai branches stopped giving 15% discounts on loans to first-home buyers from May, citing loan service agents.
- None of note
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 165.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 134.75 -.75 basis point.
- FTSE-100 futures +.43%.
- S&P 500 futures -.04%.
- NASDAQ 100 futures -.05%.
Earnings of Note
Company/Estimate
- (SLE)/.25
- (ATK)/1.69
- (VIAB)/.89
- (CVC)/.18
- (COCO)/.16
- (EP)/.28
- (ANR)/-.06
- (HCA)/.97
- (GM)/.85
- (LEA)/1.20
- (CXW)
- (PWR)/.17
- (CI)/1.30
- (CAH)/.88
- (AMT)/.74
- (H)/.08
- (SEE)/.21
- (APA)/3.07
- (DNR)/.38
- (KFT)/.56
- (FLR)/.87
- (AIG)/1.13
- (MHK)/.55
- (CF)/4.95
- (CEC)/1.80
- (PSA)/1.42
- (DRIV)/.29
- (JOE)/-.02
- (WRC)/.93
- (FSLR)/.48
- (LNKD)/.09
- (WYNN)/1.42
8:30 am EST
- Preliminary 1Q Non-farm Productivity is estimated to fall -.6% versus a +.9% gain in 4Q.
- Preliminary 1Q Unit Labor Costs are estimated to rise +2.7% versus a +2.8% gain in 4Q.
- Initial Jobless Claims are estimated to fall to 379K versus 388K the prior week.
- Continuing Claims are estimated to fall to 3311K versus 3315K prior.
10:00 am EST
- ISM Non-Manufacturing for April is estimated to fall to 55.3 versus 56.0 in March.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Plosser speaking, Fed's Williams speaking, ECB rate decision, ECB's Draghi speaking, Challenger Job Cuts report for April, ICSC Chain Store Sales for April, RBC Consumer Outlook Index for May, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (TXN) investor meeting, (JBL) analyst meeting could also impact trading today.
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