Thursday, May 10, 2012

Today's Headlines

Posted by Gary .....at 3:03 PM

Bloomberg:
  • Greeks May Hold $510 Billion Trump Card in Renegotiation. Greece’s next government may hold a trump card worth more than $510 billion if it heeds voters’ demands to renegotiate its bailout with the European Union. The nation owes about 400 billion euros ($517 billion) to private bondholders, public bodies such as the International Monetary Fund and European Central Bank, and other creditors, according to data compiled by Bloomberg. About 252 billion euros of that’s due to official organizations that used their status to avoid the losses suffered by ordinary bondholders when Greece restructured its debt two months ago. “Greece has got some strong cards to persuade them to go easy on austerity,” said John Whittaker, an economist at Lancaster University Management School in England. “Everyone fears a Greek departure from the euro because they’ll lose money and lose political capital.”
  • Italy Can't Recover, Euro Exit Isn't 'Taboo,' Grillo Says. Italians should consider exiting the euro amid rising public debt and no signs of economic recovery, said Beppe Grillo, a comedian-turned-politician opposed to Prime Minister Mario Monti's austerity measures. "Let's face the issue, it can't be a taboo," Grillo, 63, said in an interview yesterday after his Internet-based political movement emerged as the third-biggest party in local elections this week. "As debt rises, spending isn't under control, businesses close down, labor cost is up, salaries are down and we don't even have the power of bargaining our debt." His 5 Star Movement, founded in October 2009, is the latest grouping to profit from rising anger in Europe over tax increases, budget cuts and joblessness amid the sovereign debt crisis. The National Front, which seeks a euro exit, won record support in the first-round of French voting last month, while the second-place party in Greek polls this week wants to tear up the nation's European Union-led bailout agreement.
  • Merkel’s Euro Policies Have No Alternative, Kohl Tells Bild. Europe is “a matter of war and peace” and Germany must work for its integration, former German Chancellor Helmut Kohl told Bild-Zeitung. “I’m looking with great sympathy at the course Angela Merkel is plotting for Europe and her commitment to necessary structural changes -- including necessary savings measures,” the German newspaper quoted Kohl as saying. “There isn’t any real alternative to that.”
  • Rio Tinto Group(RIO), the third-biggest mining company, said any exit by Greece from the European Union currency bloc would significantly destabilize the region's economy and negatively affect global confidence. "Looking at Greece, it is not looking good at all and clearly if Greece would leave the euro it would destabilize the European economy to a significant extent," Jan du Plessis, chairman of London-based Rio Tinto, told reporters. "So it will have an impact on our business, and it's one of the things we keep an eye out on all the time."
  • Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, reversing an earlier decline, according to BNP Paribas SA. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed 1.5 basis points to 285.5 at 11:40 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rose 4.5 basis points to 696.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased two basis points to 158 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers was three basis points higher at 268 and the subordinated index was up five at 433.
  • Trade Gap in U.S. Widens More Than Forecast as Imports Jump. The trade deficit widened more than forecast in March as American demand for crude oil, computers, automobiles and televisions propelled imports to a record. The gap grew 14 percent to $51.8 billion, the Commerce Department reported in Washington today. The median estimate of economists surveyed by Bloomberg News called for an increase to $50 billion. A 5.2 percent jump in imports, the biggest in more than a year, swamped the 2.9 percent gain in exports, which also reached a record.
  • Jobless Claims Fall Slightly: Economy. First-time claims dropped by 1,000 to 367,000 in the period ended May 5, the Labor Department said today in Washington. Other reports showed that a gauge of consumer confidence declined to a three-month low, and the trade deficit widened on rising demand for imports from oil to autos.
  • Goldman(GS) Lifts 'Reasonably Possible' Legal-Loss Estimate. Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, raised estimates of potential losses from legal claims by 13 percent and said a probe into its handling of Greek finances includes trading and research. The forecast of “reasonably possible” legal costs rose to $2.7 billion as of March 31 from $2.4 billion three months earlier, according to a regulatory filing today. The New York- based firm didn’t give specific reasons for the increase. An investigation of the firm’s financing and swap transactions with the Greek government, which started about two years ago, also includes “trading and research activities with respect to Greek sovereign debt,” according to today’s filing. “Goldman Sachs has cooperated with the investigations and reviews,” the company said.
  • Goldman Sachs(GS) May Owe $2.21 Billion If Rating Falls Two Levels. Goldman Sachs Group Inc. (GS), one of the five U.S. banks with the biggest positions in over-the-counter derivatives, may owe counterparties $2.21 billion if its credit rating falls two levels. Counterparties could demand the money in collateral and termination payments, the New York-based bank said in a quarterly filing today. A one-level reduction would require $1.33 billion in payments, according to the filing.
  • Salesforce(CRM) Falls on Corporate IT Spending Cuts. Salesforce.com Inc. (CRM), the biggest provider of online customer-management software, fell the most in five months after computer-networking leader Cisco Systems Inc. (CSCO) said some corporate customers are reluctant to spend. Salesforce declined 8.7 percent to $136 at 12:52 p.m. in New York, and earlier touched $134.88 for the biggest decline since Dec. 21.
Wall Street Journal:
  • Cautious Cisco(CSCO) Rattles Corporate IT Market. Analyst: ‘Canary in coal mine again?’ Other corp. IT stocks also fall. Cisco Systems Inc.’s warning of “cautious” spending in information technology sent its shares falling on Thursday, weighing down the stocks of other firms that sell IT products and services to businesses. Cisco shares retreated by more than 8% to $17.17, a day after the company reported in-line results, but issued an outlook that was below expectations.
  • Google(GOOG) Joins Gripes About Microsoft(MSFT) Shutting Out Rival Web Browsers. Google Inc. is echoing concerns that Microsoft Corp. is hindering rival Web browsers on some computing devices being designed for the next version of the Windows operating system.
  • Blasts Rock Damascus. Twin car bombs that exploded near a state intelligence compound in the Syrian capital on Thursday killed 55 people and injured nearly 400 more, offering a gruesome new setback to a United Nations-brokered plan meant to temper the violence in Syria.
MarketWatch:
CNBC.com:
  • European Central Bank Leveraged Like Lehman: Author. The European Central Bank is indebted to the hilt and is beginning to look like one of the banks it has done so much to save, according to author Satyajit Das. Having subsidized the European banking industry with its 1 trillion euro ($1.29 trillion) long-term refinancing operation (LTRO), funds that were distributed at well below market prices, the central bank is leveraged to levels Bear Stearns and Lehman Brothers might have felt comfortable with in early 2007. “If the European Financial Stability Fund was a collateralized debt obligation, the ECB increasingly resembles a highly leveraged bank. The ECB balance sheet is now around euro 3 trillion, an increase of about 30 percent just since Mario Draghi took office in November 2012,” said Das in notes sent to CNBC before an interview on “Squawk Box Europe” on Thursday. “It is supported by it own capital (scheduled to increase to 10 billion euros) and the capital of euro zone central banks (80 billion euros). This equates to a leverage of around 38 times,” he said.
  • Fed Worries US 'Fiscal Cliff' Is as Big a Threat as Europe. Federal Reserve officials are increasingly concerned about the coming “fiscal cliff,” putting it on par with the European financial crisis and the housing market as among the biggest potential threats for the U.S. economy.
  • UK Bookie Suspends Bets on Greek Euro Exit.
  • Slump Worsens in Ailing Greek Property Market.
Business Insider:
Zero Hedge:
New York Times:
Washington Post:
  • Greek Left Party Head Tells EU Leaders Austerity Lacks Legitimacy, Must Be Re-Examined. The head of Greece’s second-placed Radical Left Coalition has written to top European officials urging them to re-examine the country’s strict austerity program. In a letter Thursday, Alexis Tsipras said the strong anti-austerity vote in Sunday’s election, which produced a hung parliament, stripped Greece’s bailout commitments of “political legitimacy.”

ForexLive:

  • Spanish CDS Point to a Growing Crisis. (graph) The bond market may be understating the risk of a Spanish restructuring/bailout. Yields have been trending higher since March but remain well-below the November highs. Meanwhile, credit-default swaps are trading at record highs. 5-year CDS vs 5-year yields:

Reuters:

  • Merkel Resists Calls to Put Growth Before Reforms. Chancellor Angela Merkel rejected calls from her centre-left opponents in Germany and Europe for economic stimulus policies that rely on new debt, warning parliament on Thursday that "growth on credit" would just tip Europe deeper into crisis. Since the election of Socialist Francois Hollande as French president on Sunday, Merkel has come under pressure to relax the austerity measures that, as leader of Europe's biggest economy, she has prescribed as the remedy for the euro zone debt crisis. But Germany's centre-right leader, standing her ground, told the Bundestag (lower house of parliament) that reducing debt and encouraging growth were "twin pillars" of European policy, rather than alternative paths. "Growth through structural reforms is sensible, important and necessary. Growth on credit would just push us right back to the beginning of the crisis, and that is why we should not and will not do it," said Merkel, who is expected to get a visit from Hollande next week on his first foreign trip as president.
  • Fortress Commodities Fund to Close After Losses. The Fortress Commodities Fund will close later this month and distribute funds to investors after poor performance and heavy withdrawals. U.S.-based Fortress Investment Group LLC said the hedge fund will cease operations around May 23 and "will commence procedures to distribute capital to its investors," according to a regulatory filing. The fund, run in London by William Callanan, fell 12.6 percent during the first four months of the year and 4.23 percent in April alone, the filing said.
  • Apple(AAPL), Supplier Foxconn to Share Costs on Improving Factories. Apple Inc and its key supplier Foxconn Technology Group will share the initial costs of improving labour conditions at the Chinese factories that assemble iPhones and iPads, Foxconn's top executive said on Thursday. Foxconn chief Terry Gou did not give a figure for the costs, but the group has been spending heavily to fight a perception its vast plants in China are sweatshops with poor conditions for its million-strong labor force.
  • NY Fed Sells Assets From AIG(AIG) Bailout to Merrill Lynch. The New York Federal Reserve said on Thursday it sold all its TRIAXX collateralized debt obligations from a portfolio of assets that was used in the government bailout of insurer AIG to Merrill Lynch, following a competitive bid process with eight other Wall Street firms.

Financial Times:

  • US Bank Bears Await Summer of Downgrades. Shares in large US banks have fallen sharply since the sector peaked in late March, with the likes of Morgan Stanley, Bank of America and Citigroup entering “bear market” territory after their stock prices have dropped some 20 per cent.
  • S&P Warns of $46 Trillion Refinancing Challenge. European companies could face serious challenges refinancing a wall of maturing debt over the next few years as the region’s banks deal with the impact of regulation and fallout from the eurozone debt crisis, according to a new report from Standard & Poor’s. The rating agency predicted that companies round the world would need new funding or to refinance existing debt totalling as much as $46tn over the next five years. And while global banks and debt capital markets should largely be able to provide the majority of funding for companies, S&P raised concerns about the ability of European lenders in particular to meet all corporate funding needs as they deal with the impact of sluggish economic growth and tough regulatory requirements.

Telegraph:

  • Europe's Nuclear Brinksmanship With Greece Is A Lethal Game. Fresh from the Hellenic Statistical Authority: Youth unemployment up to the age of 24 reached a fresh record of 53.8pc in February. The rate for those aged 25-34 rose to 29.1pc. The total rate hit 21.7pc but will soon be much higher as 150,000 public sector workers are chopped – with pro-cyclical effects, in the middle of a depression – to comply with the EU-IMF Memorandum. Polls show that 70pc or even 80pc of Greeks still wish to stay in the euro, while at the same voting in large numbers for hard-Left and hard-Right parties committed to tearing up the Memorandum – a course of action that will take them straight out of the euro.
  • The Chinese Save While Their Government Spends. The Chinese have always been a nation of savers, and now they have more reason than ever to hoard their hard-earned pay.

La Presse:

  • Former Federal Reserve Chairman Alan Greenspan said his biggest concern is a possible breakup of the euro, according to an interview.

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