Today's Headlines

Bloomberg:

• European Unemployment Rate Rises to Highest in Almost 15 Years. Euro-region unemployment rose to the highest in almost 15 years and manufacturing contracted for a ninth month, adding to signs the economy continues to weaken. The jobless rate in the 17-nation euro area increased to 10.9 percent in March from 10.8 percent in February, the European Union’s statistics office in Luxembourg said today. That’s the highest since April 1997, when the rate reached a record high, according to Bloomberg News data going back to 1990. A manufacturing gauge in the region fell to 45.9 in April from 47.7 in March, Markit Economics said. Spain had the region’s highest unemployment rate in March, at 24.1 percent, with Greece at 21.7 percent, the report showed.
• Spanish Stocks Plunge to Three-Year Low as Banks Tumble. Spanish stocks plunged, pushing the IBEX 35 Index (IBEX) to its lowest level in more than three years, as a selloff in banks sent the benchmark measure tumbling. Banco Santander SA (SAN), the country’s largest lender, lost more than 3 percent as Moody’s Investors Service prepared to concluded its review of the euro area’s banks. Sacyr Vallehermoso SA (SYV) dropped 4 percent as a report showed manufacturing in Spain contracted. Red Electrica Corp. slid 2.2 percent as Bolivia seized the company’s local assets. The IBEX 35 dropped 2.6 percent to 6,831.9 at the close in Madrid, its lowest level since March 2009. The gauge has sunk 20 percent this year, the worst performance of 24 developed markets tracked by Bloomberg, as the Spanish economy entered its second recession since 2008. “The euro-zone debt crisis has become center stage once more with Spain the focus of attention,” said Ted Scott, director of global strategy at F&C Asset Management in London, in a note to clients. Spanish bond yields “reflect the diminishing effect of the European Central Bank’s liquidity program and increasing concerns about the Spanish economy and especially its banking sector.” Spain’s benchmark 10-year bonds fell today, pushing yields eight basis points higher to 5.85 percent.
• Hollande Envoys Said to Brief ECB Officials on His Economic Plan. Aides to French Socialist presidential candidate Francois Hollande have had contacts with top European Central Bank officials to brief monetary policy makers on his economic plans, four advisers to Hollande said. Hollande’s team has spoken to at least two members of the ECB’s executive board, said the advisers, who declined to be named because the discussions were confidential. An ECB spokeswoman denied any such contacts have taken place. She spoke on condition of anonymity, in line with ECB policy. The meetings and telephone conversations, which began last year and have carried on as Hollande’s campaign progressed, underscore concern that a change in government in Europe’s second-largest economy risks upsetting efforts to quell the region’s financial crisis.
• Sovereign, Company Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, according to BNP Paribas SA. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed 3.5 basis points to 277.5 at 9:15 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped 12.5 basis points to 640.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose two to 138.5. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased two basis points to 236 and the subordinated index rose 0.5 to 392.5.
• Madness in Spain Lingers as Ireland Chases Recovery. From atop the stone walls of Avila, Spain, a medieval city an hour’s drive northwest of Madrid, beyond the parking lots and empty playgrounds and thousands of vacant new apartments, a construction crane can be seen moving on the horizon as building continues. “Avila isn’t an exception,” said Jesus Encinar, co- founder of Madrid-based Idealista, Spain’s largest property website, and an Avila native. “It’s a small-scale example of the madness that gripped the whole real estate industry.” In the stages of death of a real estate boom, Spain is still in denial.
• ECB Immunity on Greek Debt Blunts Bond-Buying Tool: Euro Credit. European Central Bank President Mario Draghi’s insistence on shielding his institution from losses on Greek debt risks blunting his crisis-fighting tools. Investors forgave about 100 billion euros ($132 billion) of Greek debt in March in the biggest sovereign restructuring ever, swapping existing bonds for new securities with clauses making future overhauls easier. The ECB’s holdings, however, were excluded from both the losses and the new terms.
• Payroll Survey Signals U.S. Jobs Slowing as Factory Orders Drop: Economy. Companies in the U.S. added fewer workers last month, according to data from a private survey, pointing to a cooling in the job market, as the Commerce Department also reported a decline in factory orders in March. Private employment increased by 119,000, the smallest gain in seven months, after rising by 201,000 in March, Roseland, New Jersey-based ADP Employer Services said. Orders to factories fell 1.5 percent following a 1.1 percent gain in February.
• Oil Drops From Five-Week High on U.S., European Jobs. Oil fell after the U.S. Energy Department reported that crude inventories surged to the highest level in more than 21 years and production and imports climbed. Futures dropped as much as 1.2 percent after the department said supplies rose 2.84 million barrels to 375.9 million last week, the most since September 1990. Output increased 8,000 barrels a day to 6.12 million, the highest level since November 1999. Crude also decreased as U.S. employers added fewer jobs than forecast in April and factory orders decreased in March. Crude oil for June delivery fell 78 cents, or 0.7 percent, to $105.38 a barrel at 12:39 p.m. on the New York Mercantile Exchange. Oil traded at $105.54 a barrel before release of the inventory report at 10:30 a.m. The price dropped as low as $104.91. Futures have declined 7.2 percent in the past year. Brent oil for June settlement dropped $1.28, or 1.1 percent, to $118.38 a barrel on the London-based ICE Futures Europe exchange.
• Wealthy Americans Renouncing US Citizenship Rises 700% in 4 Years on Tax Concerns. Rich Americans renouncing U.S. citizenship rose sevenfold since UBS AG (UBSN) whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion four years ago. About 1,780 expatriates gave up their nationality at U.S. embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva’s Overseas American Academy, citing figures from the government’s Federal Register. The embassy in Bern, the Swiss capital, redeployed staff to clear a backlog as Americans queued to relinquish their passports.
• Chinese Legal Activist Chen Leaves Beijing U.S. Embassy. Hours after the deal was announced, the Associated Press reported that Chen said by phone that he now wants to leave China with his family. Chen said a U.S. official relayed a threat by Chinese authorities to beat his wife to death if he stayed in the U.S. embassy, according to the AP. An American official, who spoke on condition of anonymity because of the sensitivity of the issue, denied that any U.S. official passed on such a threat.
• Dimon Cites ‘Give and Take’ After Bank Chiefs Meet at Fed. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said there was “give and take” when bank leaders met with Federal Reserve officials to discuss industry oversight in New York today. Dimon, who said “everything” was a potential topic as he and other CEOs entered the New York Fed’s offices, declined to elaborate on the talks as he left. Top executives were scheduled to meet with Fed Governor Daniel Tarullo today, four people familiar with the meeting said earlier this week.
• Egypt Clashes Kill 9; Presidential Hopefuls Suspend Campaign. Clashes between Egyptian protesters and unknown assailants left at least nine people dead, as the worst street violence in Cairo this year added to the unrest in the country three weeks before slated presidential elections. The violence that erupted around dawn near the Defense Ministry prompted two leading presidential candidates to announce they were suspending their campaigns in protest. Mohamed Mursi, who was fielded for the presidency by the Muslim Brotherhood’s Freedom and Justice Party, put the blame primarily on the ruling military.

Wall Street Journal:

• France Poll: Hollande 53.5%, Sarkozy 46.5% In 2nd Round - BVA. French Socialist Party presidential candidate Francois Hollande narrowed his lead over incumbent President Nicolas Sarkozy in the latest poll, released five days before the second round of presidential elections. The poll, published Tuesday and carried out April 30 and May 1 by BVA, shows 53.5% of potential voters would choose Hollande if elections were held now, while 46.5% of them would pick Sarkozy. Hollande lost one percentage point since the last poll under one week ago, while Sarkozy gained one percentage point. Among the voters who chose to support far-left candidate Jean-Luc Melenchon in the first round of elections, 87% said they would vote for Hollande in the second round, while only 4% plan to vote for Sarkozy, said Harris Interactive. As for supporters of far-right candidate Marine Le Pen and centrist candidate Francois Bayrou, Sarkozy was backed by 36% of Bayrou's supporters and 57% of Le Pen's, the poll showed. Hollande drew 36% of Bayrou's supporters and 21% of Le Pen's. In the first round of French presidential elections held last Sunday, Hollande garnered 28.6% of votes, while Sarkozy got 27.2%. They move on to the next round on May 6. Le Pen came in third with 17.9%, Melenchon drew 11.1% and Bayrou 9.1%. Five other candidates shared the remaining votes.
• Honeywell(HON) Chairman: Foreign Firms Scared of India Now. The chairman of Honeywell International Inc. warned that India's labyrinthine bureaucracy and aggressive regulation and tax policies are spooking foreign investors and will divert investment to China and elsewhere. "Foreign companies are starting to become scared here," said David M. Cote, 59 years old, in an interview in India's financial capital. "They are starting to say, 'What am I doing here?'"
• Iran's Oil Production at Lowest Level in 20 Years - Consultant.
• Microchip Tech(MCHP) to Buy Standard Microsystems(SMSC) for $939M. Microchip Technology Inc. (MCHP) agreed to acquire semiconductor-equipment and circuit maker Standard Microsystems Corp. (SMSC) for about $939 million as the analog chip company seeks to expand into the automotive, industrial and other markets.
• U.S. Charges 107 People With Medicare Fraud. Federal authorities charged 107 doctors, nurses and social workers in seven cities with Medicare fraud Tuesday in a nationwide crackdown on alleged scams that bilked the taxpayer-funded program of $452 million—the highest dollar amount in a single Medicare bust in U.S. history.
  

MarketWatch:

• Retailers' Sales Expected to Slow in April. After warmer weather and the timing of Easter boosted retailers’ sales in March, colder weather along the East Coast toward the end of the month likely slowed sales in April, analysts said. Ahead of retailers’ same-store sales reports on Thursday, analysts expect sales in April to rise 1.5%. That compares with an 8.7% gain in the year-earlier period, Retail Metrics data showed.

CNBC.com:

• Legendary Energy Trader John Arnold to Retire. John Arnold, the billionaire manager of the Houston hedge fund Centaurus Advisors, told investors and employees Tuesday that he plans to retire, according to people familiar with the matter. The energy trader, who is in his late 30s, told associates he plans to devote his time to philanthropic pursuits, said one person familiar with the matter, and that he’ll return assets to investors.
• What's This 'Fiscal Cliff' Anyway? Do I Need to Worry? "Fiscal cliff" is a term you'll be hearing much more often between now and the end of the year. That's when a half-trillion dollars worth of tax cuts and spending boosts go by the wayside, possibly dragging the U.S. economy into the abyss of another recession.

Business Insider:

• 10 Hedge Funds Losing Big On Chesapeake Energy(CHK).
• 15 Stocks That Traders Are Shorting Like Crazy.
  

Zero Hedge:

• China's Unsustainable PMI. (graph)
• Hugh Hendry on Europe "You Can't Make Up How Bad It Is".
• Global April PMI Summary. (table)
• Europe's Scariest Chart Just Got Scarier-er. (graph)

Reuters:

• Copper Slips on Weak Euro, China Demand Concerns.
• Special Report: Inside Chesapeake(CHK), CEO Ran $200 Million Hedge Fund. As chairman and CEO of Chesapeake Energy Corp, Aubrey McClendon has been a powerhouse in the vast U.S. natural gas market, directing the company's multibillion dollar energy-trading operation and setting output targets for America's second-largest producer. Behind the scenes, a Reuters investigation has found, McClendon also ran a lucrative business on the side: a $200 million hedge fund that traded in the same commodities Chesapeake produces.
• Spain Sounding Out Investment Banks On Crisis Options. Spain is sounding out investment banks including Credit Suisse, Goldman Sachs and UBS as it seeks a credible fix for its banks roiled by a collapse in real estate prices and now threatening the creditworthiness of Spain itself, sources familiar with the matter said.
• Fed's Lacker: High Inflation Target "Dangerous". It would be "very dangerous" for the Federal Reserve to adopt a higher inflation target to spur growth in the hopes that it could bring inflation down later when it needed to, a top Federal Reserve official said on Wednesday. "I don't think it would be easy to temporarily adopt a higher target and then successfully return to a lower inflation," Richmond Federal Reserve President Jeffrey Lacker told reporters after a speech. "In fact, I think it would be very dangerous."

Financial Times:

• Playing the CDS-Bomb Basis. After holding our heads in our hands and getting over a wave of nausea, FT Alphaville looked up and realised that yes, we really were looking at a trade idea involving credit default swaps that takes a view on the likelihood of an Israeli missile strike on Iran. It’s a ugly world.

Telegraph:

• The Eurozone Crisis is Back With a Bang. The data on the eurozone labour market and manufacturing sector as a whole is appalling, with the recession now manifestly metastasising out from the euro area periphery to the core. Even the German unemployment rate is now rising.
• Debt Crisis: Live. Poor manufacturing data from Italy, Spain, France and Germany erodes early gains on European markets, while eurozone unemployment hits a record high of 10.9pc.

Shanghai Daily:

• Home Buyers in Short Supply as Sales Decline 23.5%. HOME sales fell in Shanghai last month, according to the latest market research. Sales of new homes, excluding government-funded affordable housing, dropped 23.5 percent from March to 610,900 square meters in April, ending a two-month rally since February, according to a Shanghai Deovolente Realty Co report. New homes were selling at an average of 22,566 yuan (US$3,600) per square meter, an increase of 2.3 percent from March. "Purchases of new homes costing less than 20,000 yuan per square meter fell nearly 30 percent from March while those with a price tag of between 20,000 yuan and 50,000 yuan a square meter only climbed about 10 percent, giving rise to a quite notable decrease in volume," said Lu Qilin, a researcher at Deovolente.