- Greece Risks Trade Constraints as Insurers Cut Export Coverage. Euler Hermes SA (ELE), the world’s biggest credit insurer, said it will no longer cover new shipments of goods to Greece because of the risks of the nation leaving the euro currency and customers defaulting on payments. The insurer, a unit of Allianz SE (ALV), took the decision because exporting to Greece has become “significantly more risky,” Paris-based Euler Hermes said in an e-mailed statement yesterday. The insurer is still working under the assumption Greece will remain in the euro zone, it said. “We will still cover those shipments under way and internal commercial transactions,” spokeswoman Bettina Sattler said by telephone today. Future shipments to the country won’t be covered, she said. The lack of export insurance, which pays companies if a client defaults, raises the prospect that certain goods will no longer reach Greek companies and stores.
- Moody’s Downgrades Danske Bank, Eight Other Danish Lenders. Moody’s Investors Service downgraded the ratings of nine Danish financial institutions, including the country’s biggest bank, Danske Bank A/S, saying loan books have deteriorated and debt refinancing has become harder. Danish banks suffer from “a weak operating environment, pressurized asset quality and poor profitability,” the rating company said late yesterday in a statement published out of London. Danske Bank’s deposit rating was cut two steps to Baa1 from A2, after Standard & Poor’s earlier yesterday cut the Copenhagen-based bank’s long-term rating to A- from A. The bank said in a separate statement that it “does not understand Moody’s very negative view” of the Danish banking industry. It had also questioned the reasoning for S&P’s downgrade. “We have had a close dialog with Moody’s in recent months,” Henrik Ramlau-Hansen, Danske’s chief financial officer, said. “We are certain that Moody’s has heard our arguments, but we do not think they are reflected in the rating the bank has received.”
- Euro Approaches Two-Year Low on Spanish Banks Concern. The euro fell to the lowest level in almost two years against the dollar as Spain struggled to rescue its troubled banks, adding to signs the European debt crisis is spreading to the region’s larger economies. The 17-nation currency slid for a seventh day versus the yen, the longest losing streak in four months, after Italy sold less than its maximum target at a debt auction. The yen and dollar strengthened as investors sought safer assets after a European report showed economic confidence dropped more than economists estimated in May. Asian currencies weakened, pushing the Bloomberg-JPMorgan Asia Dollar Index to the lowest level since September 2010.
- JPMorgan(JPM) CIO Swaps Pricing Said to Differ From Bank. The JPMorgan Chase & Co. (JPM) unit responsible for at least $2 billion in losses on credit derivatives was valuing some of its trades at prices that differed from those of its investment bank, according to people familiar with the matter. The discrepancy between prices used by the chief investment office and JPMorgan’s credit-swaps dealer, the biggest in the U.S., may have obscured by hundreds of millions of dollars the magnitude of the loss before it was disclosed May 10, said one of the people, who asked not to be identified because they aren’t authorized to discuss the matter.
- Oil Enters Bear Market on Europe Debt Crisis, Slow U.S. Economy. Oil entered a bear market in New York as it headed for the biggest monthly drop in more than three years on speculation Europe’s worsening debt crisis and a slowing U.S. economy will reduce fuel demand. Futures today are 20 percent lower than their highest settlement this year, a definition of a bear market. New York futures slumped 3.2 percent yesterday. Prices slipped as economic confidence in the euro area fell more than forecast in May to the lowest since October 2009 and costs to protect Spanish government debt with default swaps climbed to a record. A report yesterday showed pending U.S. home sales in April slid the most in a year. Oil gained earlier in 2012 on concern that tension with Iran will disrupt global supplies. “We’re seeing demand destruction across the board,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin, a commodity-markets newsletter in Sydney. “I was looking for a Middle Eastern premium to be built in, but Spain’s concern seems to be overriding that and filtering through the whole commodity complex. People are scared to spend.”
- India Policy Freeze Saps Funds as Greek Fallout Threatens Growth. Posco, the world’s third-largest steelmaker, took seven years to gain permission to build a mill in India, only to have the environmental approval suspended by a tribunal in March. Bahrain Telecommunications Co. (BATELCO) may sympathize after selling its share of mobile-phone operator STel Pvt. following the Indian Supreme Court’s revocation of 122 licenses in a corruption probe. Star India Pvt. Ltd., a unit of New York-based News Corp., waited even longer than Posco, finally exiting an eight-year television channel venture after the government failed to relax rules on news media ownership. The reversals reflect policy paralysis in Prime Minister Manmohan Singh’s administration that leaves India risking deeper damage from any global crisis now than it experienced during the 2008-09 turmoil.
- Korean Washer Exporters to Pay U.S. Duties as High as 71%. The U.S. Commerce Department proposed duties of as much as 71 percent on large, residential washing machines made in South Korea, concluding that government subsidies for the goods undercut U.S. producers. The agency announced a preliminary finding yesterday after Whirlpool Corp. (WHR) of Benton Harbor, Michigan, said in a Dec. 30 complaint that LG Electronics Inc. (066570) and Daewoo Electronics Corp., both based in Seoul, and Samsung Electronics Co. (005930) of Suwon, South Korea, sell washers in the U.S. for less than production costs.
- Fed’s Fisher Says Europe Drives U.S. Interest Rates Down. Federal Reserve Bank of Dallas President Richard Fisher said Europe’s debt crisis has done more to lower U.S. interest rates than the Fed’s maturity-extension program, known as Operation Twist.
- Facebook(FB) IPO Review Finds No Listing Violations. Regulators probing Facebook Inc.'s listing on the Nasdaq Stock Market haven't found any evidence of industry rule violations and view the botched offering as a technical failure, according to a person familiar with the matter. Members of Congress, regulators and state officials are looking for foul play nearly two weeks after one of the largest initial public offerings fizzled during its first day on Nasdaq, leading to an estimated $100 million in initial trading losses. Yet so far, federal regulators have found no clear-cut signs that securities laws or industry rules were broken.
- U.S. Firms Challenge Web-Oversight Proposals. Few issues unite AT&T Inc., Google Inc., Microsoft Corp. and Intel Corp., but the idea of new international regulation of the Internet has managed to do so. Those companies and many others are backing a U.S. effort to block a United Nations agency from extending its powers to the Internet. They say new regulation could increase costs for U.S. corporations offering online services abroad.
- Exchanges Aim New Flash-Crash Fixes For February Launch. U.S. stock-exchange operators aim to roll out a new system designed to shield investors from massive price swings next February as part of an expanded plan that would give brokers a greater say in administering the plan.
- Turmoil Frays Ties Across Continent. Amid Europe's intensifying debt crisis, a spat between banking authorities in Germany and Italy shows how Europe's carefully nourished financial ties are fraying. The row kicked up last fall when German banking regulators ordered Italian bank UniCredit SpA to stop borrowing billions of euros from its German subsidiary. They wanted to protect their banking system from being infected by the weaker one to the south. The move angered Italy's central bankers and sent relations between financial authorities into a nose dive.
- Henninger: Church Is Still Not State. Catholics are being told to substitute state belief for their religious belief.
- Citi's(C) Emerging Markets Risk Underestimated. Investors are underestimating the risks posed by Citigroup Inc.'s push into faster-growing emerging markets, according to a research report to be published Thursday. Gimme Credit, a fixed-income research company based in New York, said it expects debt issued by the third-biggest U.S. bank by assets to perform less well over the next six months than bonds issued by the company's peers. The report comes amid investor fears that once-thriving developing economies such as China and Brazil are facing a slowdown. About two-thirds of Citigroup's revenue comes from outside the U.S., primarily Latin America and Asia.
- SODA BAN IS COMING: Mike Bloomberg Is Going To Take Away Your Big Gulp.
- This Chart Shows How Insanely Fast Chinese Censors Can Take Something Off The Internet.
- Wisconsin Democrats Are Totally Desperate In Scott Walker's Recall Election.
- A few more questions on JP Morgan and the London Whale.
- Spain: Bankia Down, Who Is Next?
- Spain Is The Most 'Over-Banked' Nation In Europe.
- Biderman & Santschi On Europe's Delusions And Money-Printing Illusions.
- Brazil Cuts Rates to Record Low as Economy Stalls. Brazil's central bank cut interest rates on Wednesday for the seventh straight time to a record low 8.50 percent, moving into uncharted territory in a bid to shield a fragile recovery from a gloomy global outlook. President Dilma Rousseff has made lower interest rates one of the top priorities of her government which is struggling to steer the economy back to the 4 percent-plus growth rates that made Brazil one of the world's most attractive emerging markets in the last decade. The central bank's monetary policy committee, known as Copom, voted unanimously to lower the benchmark Selic rate 50 basis points from 9 percent, in line with market expectations.
- Europe Fears Bailout of Spain Would Strain Its Resources. As Spain’s deepening financial problems make a European bailout a more distinct possibility, a looming question is where the money will come from. Spain is the euro zone’s fourth-largest economy, after Germany, France and Italy, and the cost of a rescue would strain the resources of Europe’s new 700 billion euros ($867 billion) bailout fund that is to become available this summer. That would leave little margin for any additional bailouts. Spanish and European officials hope a bailout will not be needed. But each day, financial turmoil mounts over the government takeover of the giant Spanish mortgage lender Bankia, the flight of money to safer borders and a worsening recession. Compounding Spain’s problems has been an outflow of foreign capital from the country, meaning the Spanish banks in recent months have been the only major buyers of its government bonds needed to finance the nation’s budget deficits. With those bonds now plummeting in value, the fate of Spain’s banks and government are intertwined in a financial tailspin.
- European Officials Caution France and Warn of Challenging in Spain. The European Commission urged euro zone countries on Wednesday to move toward greater fiscal integration, even as it prodded national governments to live up to their existing budget promises.
- Apple(AAPL) Stores Busy With Secretive Activity Ahead Of WWDC Keynote. Some Apple retail employees will be working late nights ahead of the upcoming Worldwide Developers Conference, while a handful of stores recently had surprise visits from workers out of Apple's corporate headquarters, AppleInsider has learned.
- Fisker May Never Build Electric Cars in U.S. The luxury carmaker Fisker Automotive continues to signal it could ditch plans to build its next generation hybrid electric vehicle in the United States, despite the nearly $200 million in Obama administration loan money it has already received. Fisker received federal funds in part to help purchase a shuttered General Motors plant in Delaware, where it predicted it would one day employ 2,000 auto workers to assemble the clean-burning gas-electric family car, known as the Atlantic.
- States Crack Down on Prescription-Drug "doctor shopping".
- Euro Collapse Could Halve Luxury London Home Prices. Prices of the best central London homes could halve if the euro zone breaks up, as the safe-haven appeal of sterling disappears and weaker European currencies give rise to bargains elsewhere, research showed. An ensuing collapse in global equity prices would also force buyers to seek cheaper alternatives, the report from British developer Development Securities said. Luxury London house prices have rocketed in recent years as economic turmoil in Europe and political uprisings across north Africa and the Middle East prompted investors to shield their wealth by buying property in the UK capital.
- US Q1 pre-foreclosure sales at 3-year high -report. Sales of U.S. homes in default jumped in the first quarter to the highest level in three years as steeper price discounts were offered, a report from RealtyTrac said on Thursday. Known as pre-foreclosure or short sales, the first three months of the year saw such sales jump 16 percent to 109,521 homes compared to the fourth quarter of 2011. That was an increase of 25 percent compared to the year before and the highest level since the first quarter of 2009.
- Japan industrial output gains slow, stirring recovery doubts.
- Stock funds see big outflows in latest week -ICI.
- Spain faces 'total emergency' as fear grips markets. Spain is facing the gravest danger since the end of the Franco dictatorship as the country is frozen out of global capital markets and slides towards an epic showdown with Europe. “We’re in a situation of total emergency, the worst crisis we have ever lived through” said ex-premier Felipe Gonzalez, the country’s elder statesman. The warning came as the yields on Spanish 10-year bonds spiked to 6.7pc, pushing the “risk premium” over German Bunds to a post-euro high of 540 basis points. The IBEX index of stocks in Madrid fell 2.6pc, the lowest since the dotcom bust in 2003.
- China Overseas Says Worst Not Over for China Home Market. Funding for developers may continue to be "tight" in the second half of this year, citing Chairman Kong Qingping. The government's policy fine-tuning for the property market isn't enough to stimulate the industry, Kong said.
- Foreign direct investment in China will be "unpredictable" in the months ahead, citing Liu Yajun, director of the Ministry of Commerce's foreign investment administration. China FDI fell for a sixth consecutive month in April. The drop in FDI has been mainly because of a "sluggish" global economy, Liu said.
- A survey of 4,000 people in eight Chinese cities finds that more than 73% believe the nation's food is unsafe. Of those respondents who said they believed food was unsafe, about 27.8% said they believed food was "extremely unsafe."
- China's Hunan Says It Didn't Study Relaxing Property Curbs. The Development and Reform Commission of Hunan province has never studied measures to rescue the property market, citing Tian Yongjun, deputy director at the information center of the provincial agency.
- China Big 3 Banks Lend 86B Yuan in First 28 Days of May. The Bank of China extended least net loans among 3 biggest lenders excluding AgriBank, citing a person familiar with the matter. The Central government didn't order banks to increase lending, citing Bank of China President Li Lihui.
- Upgraded (ALTR) to Overweight, target $40.
- Rated (SNDK) Overweight, target $45.
- Asian equity indices are -1.50% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 203.0 +10.0 basis points.
- Asia Pacific Sovereign CDS Index 160.50 -.25 basis point.
- FTSE-100 futures -.31%.
- S&P 500 futures -.03%.
- NASDAQ 100 futures -.10%.
Earnings of Note
8:15 am EST
- ADP Employment Change for May is estimated at 150K versus 119K in April.
8:30 am EST
- 1Q GDP is estimated at +1.9% versus a prior estimate of a +2.2% increase.
- 1Q Personal Consumption is estimated at +2.9% versus a prior estimate of a +2.9% gain.
- 1Q GDP Price Index is estimated to rise +1.5% versus a prior estimate of a +1.5% gain.
- 1Q Core PCE is estimated to rise +2.1% versus a prior estimate of a +2.1% gain.
- Initial Jobless Claims are estimated at 370K versus 370K the prior week.
- Continuing Claims are estimated to fall to 3250K versus 3260K prior.
9:45 am EST
- Chicago Purchasing Manager for May is estimated at 56.8 versus 56.2 in April.
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000,000 barrels versus an +883,000 barrel gain the prior week. Distillate supplies are estimated unch. versus a -309,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,000,000 barrels versus a -3,299,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.35% versus a -.2% decline the prior week.
- None of note
Other Potential Market Movers
- The Fed's Pianalto speaking, Ireland Fiscal Treaty referendum, China PMI, ICSC Chain Store Sales for May, Challenger Job Cuts report for May, weekly Bloomberg Consumer Comfort Index, NAPM-Milwaukee for May, RBC Consumer Outlook Index for June, All Things Digital Conference, (FLEX) analyst day, (PRXL) investor day and the (CLX) analyst day could also impact trading today.