Tuesday, May 08, 2012

Today's Headlines

Posted by Gary .....at 3:02 PM

Bloomberg:
  • Greek Default Risk Returns as Bond Maturity Nears. Two months after forcing through the biggest-ever sovereign bond restructuring, Greece once again faces the prospect of becoming the first developed nation to default on its debt. The government taking office after this weekend’s election has 30 days to decide whether to make today’s interest payment on 20 billion yen ($250 million) of 4.5 percent notes maturing in 2016, or default. Then, by May 15, officials must decide if they’re going to repay the 436 million euros ($555 million) due on a floating-rate note issued a decade ago. “This poses a real challenge to the Greek government,” said Mario Blejer, vice chairman of Banco Hipotecario SA in Buenos Aires, who ran Argentina’s central bank in the aftermath of his country’s default. “If they pay, the new emerging government will be fiercely criticized for paying the foreigners in full after imposing huge losses on small domestic savers. If they don’t pay, they can expect much litigation, as we have experienced here in Argentina.”
  • Greece Likely to Exit Euro This Year, FX Concept's Taylor Says. Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation, according to John Taylor of hedge fund FX Concepts LLC. “This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker and Sara Eisen. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”
  • European Stocks Retreat Amid Greece Government Concern. European stocks dropped after the leader of Greece’s biggest political party failed to reach an agreement on a new government following the weekend’s elections. National Bank of Greece SA led a selloff in banks, falling 8.4 percent. Spain’s Bankia SA (BKIA) dropped 4.8 percent. Taylor Wimpey Plc (TW/) led U.K. builders lower after a gauge of house prices fell to a six-month low. Royal KPN NV surged 17 percent after America Movil SAB offered 2.6 billion euros ($3.4 billion) for a larger stake in the business. The Stoxx Europe 600 Index (SXXP) slid 1.7 percent to 250.58 at the close in London as the cost of insuring against default on European sovereign and corporate debt advanced. The Stoxx 600 has fallen 8 percent from this year’s high on March 16, paring the gauge’s advance in 2012 to 2.5 percent. The U.K. and Irish markets were closed for a holiday yesterday. “European political risk remains center stage for financial markets,” wrote Adrian Cattley, a strategist at Citigroup Inc. in a report to clients dated yesterday. Greece’s election result “suggests no quick path to a new stable government and could raise probability of contagion risks.”
  • Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose 1.5 basis points to 277 at 8:30 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 17 basis points to 672. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 4.5 basis points to 149 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 6 basis points to 250 and the subordinated index was up 7.5 at 405.
  • Euro Near Three-Month Low on Greek Leadership Concern.
  • Commodities Erase 2012 Gains as Economic Outlook May Dim Demand. Commodities fell, erasing this year’s gains, as the struggle by Greek political leaders to form a coalition underscored growing concern that the region’s debt crisis will worsen, dimming prospects for raw-material demand. The Standard & Poor’s GSCI Spot Index dropped for a fifth straight session, heading for its worst run since August. The measure lost as much as 1.6 percent to 641.8, the lowest since Dec. 29. The gauge, which tracks 24 raw materials, was at 642.8 as of 11:22 a.m. in New York, down 0.3 percent for the year. Silver, gold, cocoa and crude oil led the declines. The last annual slump was in 2008. “We’re in a deflationary credit contraction situation globally,” said James Dailey, who manages $215 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. “The banking systems in China, Australia, and obviously much of Europe are under severe stress, and that’s creating this kind of deflationary contraction that’s starting to unfold. You’re starting to get a smell of panic in the air and shift towards bearishness in commodities broadly.”
  • Canada Housing Bubble Concern Shown in Insurer Query: Mortgages. Anyone trying to understand the concern over a potential housing bubble in Canada need look no further than the debate among government officials over whether to exit the mortgage insurance business. The board of Canada Mortgage & Housing Corp. considered selling the home loan insurer last year, according to former Chairman Dino Chiesa, whose term ended in March. CMHC, set up in 1946 to promote home ownership, also studied the sale of Australia’s government-owned insurer and presented the findings to the Bank of Canada, according to documents released to Bloomberg News under Canada’s Access to Information Act.
  • Al Jazeera English Exits Beijing After Secret-Jail Reports. Al Jazeera English said it was closing its Beijing bureau after China refused to renew the visa of a correspondent whose stories included reports on secret jails and forced abortions in the country. The government also declined to grant approval to replace the correspondent, Melissa Chan, 31, who had reported from China since 2007, Al Jazeera said today. The Foreign Correspondents Club of China said it was "appalled" by the move, which it called an expulsion.
  • UK RICS House-Price Gauge Declines to Six-Month Low: Economy.
Wall Street Journal:
  • Redbook: US Retail Sales Down 1.3% In First Week Of May Vs April. National chain store sales fell 1.3% in the first week of May from April, according to Redbook Research's latest indicator, released Tuesday. The index's fall compared with a targeted 1.1% decline. The Johnson Redbook Index also showed seasonally adjusted sales for the period were up 2.6% from last year, compared with a 2.8% targeted gain.
  • French Debt Insurance Costs Rise As Investors Mull Hollande Win. The cost of buying default protection against France climbed in early trading Tuesday as investors continue to weigh the results of the weekend's presidential election. Around 0750 GMT, five-year credit default swaps on France had widened seven basis points to 196 basis points.
  • Foiled Plot Highlights U.S. Concern on Yemeni Group. A recently thwarted airline bomb plot shows that al Qaeda's offshoot in Yemen is "the most operationally active" branch of the worldwide terrorist organization, the White House said Tuesday, calling the group a "cancer" that has to be excised from the Arabian Peninsula. Investigators were closely scrutinizing the construction of a garment bomb seized in the plot discovered last month by U.S. officials and their foreign allies. They are looking for clues that would lead to its makers, as well as help aviation security experts improve and adjust airport detection systems.
  • Four Things to Watch in Tuesday's Votes.
MarketWatch:
CNBC.com:
  • Bank of America(BAC) Offers Principal Reductions to 200,000 Homeowners. A select group of struggling mortgage borrowers are about to get an offer that sounds too good to be true. Executives at Bank of America say they will begin mailing 200,000 letters offering certain customers mortgage principal reduction. The offer is real, and eligible borrowers could get as much as $150,000 knocked off the balance of their mortgages. It is all part of the $25 billion settlement reached this year between federal and state agencies and the nation’s five largest mortgage servicers over fraudulent foreclosure document processing.
  • Market Ignores 'Taxmageddon' to Its Peril: Manager. Noronha, who is flat this year following gains on his shorts but just 1 percent on his long positions, believes 2012 will become more challenging over the coming months as the U.S. election comes to the forefront of investor’s minds. “The U.S. will have to start dealing with issues that some market participants refer to as Taxmageddon," said Noronha The term, favored by Washington pundits, refers to a slew of fiscal decisions on topics including tax breaks that are on hold until after the November 6 elections. “The Taxmageddon effect has been estimated at roughly $500 billion in 2013 alone. It includes the [expiration of the] Bush tax cuts, the general payroll tax rate hike, the regular extenders, the death tax (estate tax) and some of the tax hikes from Obama care,” he said. With a new bill needing to be signed by the beginning of next year to avoid so-called Taxmageddon, Noronha believes it is time to be defensive.
  • McDonald's(MCD) April US Same-Store Sales Miss Estimates. Same-restaurant sales in the U.S. rose 3.3 percent, while analysts expected a gain of roughly 5 percent.
  • Small Business Optimism on Roller Coaster Ride: Survey. Small business owners were more optimistic in April, but compared to a year ago they haven’t really moved the needle forward on feeling more confident about the economy. While the National Federation of Independent Business’ Small Business Optimism Index rose two points in April to 94.5, the index is back to the same level it had been in February 2011. “It’s positive from last month,” said NFIB chief economist William Dunkelberg. “But we’re in the same place as a year ago, so a whole year has gone by and we don’t go anywhere.”
Business Insider:
Zero Hedge:
New York Times:
  • Leftist Leader in Greece Rules Out Coalition With Incumbents. Greece’s post-election political and economic chaos deepened on Tuesday, when the leader of a leftist anti-austerity party that gained in the balloting ruled out a coalition with the two formerly dominant parties that had backed hugely unpopular budget cuts. The announcement raised further doubts about the country’s future in the euro zone, as well as fears about the stability of the common currency itself.
  • AMC Said to Be Talking to Chinese Buyer. AMC Entertainment, which owns the second-largest movie theater chain in North America, is in talks to sell the company or a significant stake in it to the Wanda Group, one of China’s largest theater owners, according to people briefed on the discussions.

CNN:

  • Greek Leftist Leader Lays Out Radical Agenda. Greek leftist leader Alexis Tsipras on Tuesday laid out the radical agenda he hopes to pursue if he becomes prime minister, including the cancellation of severe budget-cutting measures forced on the country by international lenders. Laws which cut pensions and salaries and those which "cancel basic workers' rights" must be annulled, Tsipras said as he started efforts to form a governing coalition in the wake of parliamentary elections on Sunday. He also called for state control of the banks, which "remain in the hands of the managers who bankrupted the system," he said. The Greek people voted clearly to reject the austerity demanded by international lenders, Syriza Party leader Tsipras said. The two parties that made the agreement with international lenders "don't have a majority any more to vote for the plundering of the Greek people," Tsipras told lawmakers.

CBS News:

  • China to Re-Investigate Human Flesh Capsule Claims. Chinese state media say health officials will launch a new probe into allegations that China manufactures drug capsules filled with powdered flesh from dead babies. The official Xinhua News Agency quoted a Ministry of Health spokesman as saying an investigation launched in August found no such capsules in China. Spokesman Deng Haihua was quoted as saying Tuesday that China would investigate again following new reports of pills being smuggled into South Korea. The Korea Customs Service said Monday it had seized capsules made in northeastern China from babies whose bodies were chopped into small pieces and dried on stoves before being turned into powder.

Gallup:

Reuters:

  • India's Sensex Falls 367 Points, Nifty Below 5,000 as Tax Worries Weigh. The BSE Sensex posted its biggest fall since February 27 on Tuesday after analysts warned about the continued lack of clarity regarding taxation for foreign investors, while the fall in the rupee also weighed. Stock accelerated their falls late in the session, especially in the Nifty index after stop losses were triggered in futures and options markets. Despite the government's changes to the General Anti-Avoidance Rule (GAAR), foreign investors have sold a net of 10.3 billion rupees in Indian stocks on Monday and Tuesday, according to provisional data from the National Stock Exchange. Analysts said the changes were still vague, and added the uncertainty would continue at least until May 31, when a government committee is expected to provide guidelines. "Not all potential concerns in regard to GAAR are completely addressed. We still have to be clear how exactly it is going to be implemented," said Pranav Sayta, a tax partner at Ernst & Young. The 30-share BSE index fell 2.17 percent to 16,546.18 points, while the 50-share NSE index lost 2.23 percent to 4.999.95 points.
  • Copper Falls on Dollar Strength, Europe Uncertainty.
  • Brazil Car Inventory Highest Since 2008 Crisis. Automobile production and sales in Brazil fell in April from March, as inventories climbed to their highest level since the global financial crisis of 2008, raising the specter of idling production lines and continued weak industrial output. Inventories in Brazil's auto sector amounted to 43 days' worth of sales last month, according to the national automakers' association, Anfavea. That was the highest level since November 2008, when stocks reached 56 days of sales. Last year, carmakers idled lines and furloughed workers as inventories rose to 40 days of sales in October, triggering government stimulus and industry protections that upset regional partners such as Mexico. A slumping car industry also aggravated a sharp slowdown in Brazil's industrial output late last year. Banco Votorantim analysts warned in a Monday note that automakers' weak April signaled a moderate recovery at best for industrial production, which contracted unexpectedly in March. Vehicle output fell 15.5 percent to about 260,800 cars and light trucks in April, and sales dropped 14.2 percent to around 257,900 autos, Anfavea said on Monday.
  • Exclusive: China Considers Delay of Key Party Congress: Sources. China's ruling Communist Party is seriously considering a delay in its upcoming five-yearly congress by a few months amid internal debate over the size and makeup of its top decision-making body, sources said, as the party struggles to finalize a once-in-a-decade leadership change. The two most senior posts, of president and premier, are not considered in much doubt. But any delay in the congress, no matter the official reason, would likely fuel speculation of infighting over the remaining seats in the nine-member politburo standing committee which calls the shots in China.
  • Fed's Fisher Not Yet Ready to Push For Policy Exit. The U.S. Federal Reserve should not start raising interest rates yet, a top Fed official known for his hawkish views on inflation said on Tuesday. "I'm not yet ready to advocate an exit strategy," Dallas Federal Reserve Bank President Richard Fisher told reporters after a speech on the Texas economy in Dallas. "We have to stop accommodating first."
  • Wells Fargo(WFC) May Face Fair Lending Claims. Wells Fargo & Co could face civil charges from the U.S. Department of Justice under laws that prohibit discrimination against minority homebuyers, the bank disclosed on Tuesday. The fourth-largest U.S. bank said in a securities filing it believes the charges should not be brought and said it is seeking to show the department that it is in compliance with fair lending laws.

Telegraph:

  • Europe Runs Out of Other People's Money. Francois Hollande’s election victory is a symbol of the EU’s decline.
  • Debt Crisis: Live. Leader of left-wing Syriza party says Greeks voted against the "barbaric bailout" and austerity pledges are "null and void", while British 10-year borrowing costs drop to historic lows.

Guardian:

  • Anti-austerity parties ride protest vote in Italian local elections. The Italian comedian Beppe Grillo has promised that his fledgling party is heading for parliament after his candidates rode a wave of protest against austerity politics and Italy's traditional parties in local elections. "We will see you in parliament," he tweeted, suggesting his Five Star Movement party will field candidates in national elections in 2013. The comic campaigns on green issues, fights corruption and has recently criticised Mario Monti's unpopular tax hikes, as well as claiming Italy should ditch the euro. His party took 14% of the vote in Genoa, 9% in Verona and 19% in Parma, where it forced the mainstream Democratic party into a runoff.

Der Spiegel:

  • Fitch Ratings head Paul Taylor says Greece's exit from the euro-zone wouldn't necessarily mean the end of the euro, citing an interview. Germany has a fundamental interest in keeping the common currency as the D-Market would appreciate strongly, Taylor said.

ARD Television:

  • Germany's Finance Minister Wolfgang Schaeuble "has no doubt" that France will stick to the agreements reached among all European countries to cut deficits. European countries should not reopen negotiations on agreements that have already been made after each new election.

Imerisia:

  • Greece's net budget revenue fell 10.2% in April compared with the same month a year earlier as sales tax revenue declined 13.5%.
Sydney Morning Herald:
  • Eurozone Faces the Domino Principle. It happens like this: the election result in Greece means pro-austerity parties lack the parliamentary support and the moral authority to govern. Demands from Athens for tough bailout conditions to be softened are turned down by the International Monetary Fund, the European Central Bank and the European Commission. Political impasse in Greece leads to a second general election being called for next month. The German chancellor, Angela Merkel, makes it clear the next tranche of cash to keep Greek banks and the state solvent will not be given unless the plan is adhered to in full. The strains on the single currency become intolerable; Greece leaves the euro and defaults, starting the process by which monetary union unravels.

Xinhua:

  • China 'Not Optimistic' on Huangyan Island Situation. China is "not optimistic" on the situation of the disputed islands with Philippines, citing Vice Foreign Minister Fu Ying. China is fully prepared to respond to any action taken by the Philippines to escalate the situation, Fu said.
  • China will ban executives at state-owned companies from spending corporate budgets on excessive purchases of assets like cars. Executives at unprofitable state-owned companies may not buy cars or high-end office supplies, or redecorate offices, citing a joint statement from three government departments including the Ministry of Finance. Executives are also banned from covering their family expenses out of company funds, it said.

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