- Schaeuble Dares Greece Exit as Contingency Plans Start. As German Finance Minister Wolfgang Schaeuble dares Greece to quit the euro, investors and economists are mapping out what he and fellow policy makers need to do to save the single currency if his bluff is called. Emergency lending and bond buying from the European Central Bank coupled with recapitalizations and deposit insurance for lenders and broader powers for the region’s rescue fund are among the prescriptions for insulating Spain and other cash- strained nations from what Citigroup Inc. calls a “Grexit.” Pressure for contingency plans are mounting as Greece’s electoral quagmire forces euro-area officials to publicly revive the once forbidden topic of whether a nation can leave the single currency.
- Schaeuble Says Greek Exit Wouldn't Bring Down Europe. German Finance Minister Wolfgang Schaeuble suggested the euro area could handle Greece dropping out, raising pressure on Greek political leaders struggling to form a government amid a rise in anti-bailout sentiment. "We have learned a lot in the last two years and built in protective mechanisms," Schaeuble told the Rheinische Post newspaper in an interview published today, when asked whether the euro area is girded for a Greek exit. His comments were confirmed by the Finance Ministry in Berlin. "The risks of contagion for other countries of the euro zone have been reduced and the euro zone as a whole has become more resistant," Schaeuble said. "The notion that we wouldn't be able to react in a short time to something unforeseen is wrong."
- Schaeuble Plans Tighter Control Over State Deficits, FAZ Says. German Finance Minister Wolfgang Schaeuble plans to force the country’s states to define binding spending limits starting in 2014 to ensure adherence to a constitutional balanced-budget rule for the regions from 2020, Frankfurter Allgemeine Zeitung reported. The plan is part of the implementation in Germany of the so-called fiscal pact among 25 European Union governments that aims to ensure budget discipline, the German newspaper said. Tighter budget controls would thwart plans by the government of North Rhine-Westphalia, a coalition of the Social Democrats and Greens that are in opposition at national level, to raise the budget deficit to boost economic growth, the newspaper said. The state votes on May 13.
- Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, heading for the biggest weekly increase in about two months. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose 1.5 basis points to 285 at 8:35 a.m. in London, and is up 9 basis points this week, the most since March 23. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 12.5 basis points to 700. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 4.5 basis points to 161, and is up from 145 last week, heading for the biggest increase since November 25. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose five basis points to 270 and the subordinated index jumped 10 to 440.
- Newedge's Blain on Outlook for JPMorgan(JPM). (video) Bill Blain, co-head of the Special Situations Group at Newedge Group Ltd., talks about JPMorgan Chase & Co.'s $2 billion trading loss and the outlook for the banking industry.
- Fisher Says Excessively Big Banks Can Lose Risk Focus. Federal Reserve Bank of Dallas President Richard Fisher, when asked about a $2 billion trading loss by JPMorgan Chase & Co. (JPM), said U.S. banks can become so big they lose their focus on risk management. “You can reach a size where risk management becomes an exercise,” Fisher said today in response to audience questions following a speech to the Texas Bankers Association meeting in Fort Worth. “At what point do you reach a size you don’t know what is going on beneath you?”
- Facebook(FB) Co-Founder Saverin Gives Up U.S. Citizenship Before IPO. Eduardo Saverin, the billionaire co- founder of Facebook Inc. (FB), renounced his U.S. citizenship before an initial public offering that values the social network at as much as $96 billion, a move that may reduce his tax bill. Facebook plans to raise as much as $11.8 billion through the IPO, the biggest in history for an Internet company. Saverin’s stake is about 4 percent, according to the website Who Owns Facebook. At the high end of the IPO valuation, that would be worth about $3.84 billion.
- Drew Built 30-Year JPMorgan(JPM) Career Embracing Risk. JPMorgan Chase & Co. (JPM) Chief Investment Officer Ina R. Drew, head of the unit responsible for a $2 billion trading loss, built a 30-year career at the largest U.S. bank by embracing risk and avoiding the spotlight. “With everything she does, she thinks in terms of trading,” said Stephen Murray, head of CCMP Capital Advisors LLC, created from a JPMorgan private-equity unit in 2006. “There are risk-lovers, there are risk-haters, and the best traders will take the risk as long as they get paid for it.”
- Producer Prices in U.S. Decrease for First Time in Fourth Months. Wholesale prices in the U.S. fell in April for the first time in four months, led by a decline in fuel costs that signals inflation may cool. The producer price index dropped 0.2 percent after no change in March, Labor Department figures showed today in Washington. Economists projected the gauge would be unchanged in April, according to the median estimate in a Bloomberg News survey. The 1.9 percent increase over the past 12 months was the smallest since October 2009.
- Consumer Sentiment in U.S. Rises: Economy. The Thomson Reuters/University of Michigan preliminary sentiment index for May climbed to 77.8, the highest since January 2008, from 76.4 the prior month. The gauge was projected to drop to 76, according to the median forecast of 68 economists surveyed by Bloomberg News.
- Dismal China, India Data Signal Slowing Growth. Dismal data from China and India on Friday may signal a further weakening of the global recovery, undermining hopes the dynamic emerging economies of Asia can help prop up growth. China reported its industrial production rose 9.3 percent from a year earlier in April, below expectations and down from nearly 12 percent in March. Investment and retail sales also slowed, though easing inflation offers leeway for fresh moves to boost growth. India's industrial output fell 3.5 percent in March from a year earlier on weak manufacturing and investment. Output for the fiscal year ending in March rose 2.8 percent, down from 8.2 percent the year before. The anemic indicators suggest Asia's ability to counter slowing growth in Europe may be limited. It also shows that the brief burst of vitality partly fueled by European stimulus late last year is likely wearing off.
- Europe's Luxury Rally Founders as China, Greece Hurt LVMH. The biggest rally in three years for luxury-goods makers in Europe is fizzling on concern slower economic growth in China and renewed euro-area political turmoil after Greece’s inconclusive election will choke off demand. The nine-company Bloomberg European Luxury Goods Index (BNLXGDEU), whose clothiers and watchmakers get 34 percent of sales from Asia, tumbled 5.5 percent over the past five days, the largest decline since Nov. 24, data compiled by Bloomberg show.
- China April Home Sales Fall 16% as Property Curbs Remain. China’s home sales transaction value fell 16 percent in April from the previous month as the government reiterated it will keep curbs on the property market. The value of homes sold declined to 315.4 billion yuan ($50 billion) from 373.3 billion yuan in March and 324.9 billion yuan a year earlier, based on the difference between the National Statistics Bureau’s data for the first four months of the year and the first quarter. Housing sales value from January to April fell 13.5 percent to 1.02 trillion yuan from a year earlier, according to the data. “It’s very hard to forecast when sales will fall to the bottom,” said Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG.
- U.S. Senator Questions Fed on Chinese Bank Decision. A Federal Reserve decision to let Chinese banks acquire U.S. lenders was challenged by Senator Bob Casey, who said it could open the way for Chinese government-run institutions to undercut U.S. banks. “I worry that these banks and their U.S. subsidiaries will use their state support as a way to underprice U.S. banks,” Casey, a Pennsylvania Democrat and chairman of the Joint Economic Committee, said in a letter yesterday to Fed Chairman Ben S. Bernanke.
- France Entrepreneurs Flee From Hollande Wealth Rejection. “What’s really driving my departure is the fact that I don’t share the values that emerged during the election, the rejection of ambition and success,” he said in an interview. “It’s part of France’s difficult relationship with money, but it has reached a new level. Even if it’s utopian, I need to believe for me and my descendants that the sky is the limit.”
- Hedge Funds Profit as JPMorgan(JPM) Sees Losses. For a group of hedge funds and other traders, J.P. Morgan Chase & Co.’s sudden $2.3 billion trading loss means big profits, according to people familiar with the matter. Firms such as BlueMountain Capital Management LLC and BlueCrest Capital Management LP each scored gains of about $30 million, according to people familiar with the matter. Representatives for the firms declined to comment. One trader elsewhere estimated that well more than a dozen firms, including his, as well as traders at banks also profited by taking the other side of J.P. Morgan’s trades.
- Spanish Default Protection Costs Hit Fresh Record High. The cost of protecting Spanish government debt against default rose to a fresh record high Friday. Spain's five-year CDS spread--insurance-like financial tools that protect debt holders in the event of a default--widened to 521 basis points, above the intra-day record of 520 basis points hit in April, according to data-provider Markit. The move came amid increased worries about Spain, which has joined Greece at the center of the euro-zone debt crisis. Spain's CDS were 11 basis points wider on the day. This now means it costs an average of $521,000 a year to insure $10 million of debt issued by the country. Italy's five-year CDS was 12 basis points wider at 452 basis points.
- Copper Prices Fall on Chinese Data, EU Worries. Copper prices retreated Friday on weaker Chinese industrial production data and simmering concerns about Europe's debt problems. The most actively traded contract, for July delivery, was recently down 4.50 cents, or 1.2%, at $3.6455 a pound on the Comex division of the New York Mercantile Exchange. China's industrial output growth slowed in April to the lowest level since May 2009, stoking worries over slowing growth in the world's second-largest economy. Chinese value-added industrial output rose 9.3% in April from a year earlier, slowing sharply from a 11.9% on-year increase in March. The data fell short of market expectations of a 12.2% gain. "Markets were left unimpressed by the macro reports coming out of China," said Edward Meir, senior commodity analyst with INTL FCStone.
- What Beached the London Whale? Credit Indices.
- Nvidia(NVDA) Revenue, Outlook Beat Street; Shares Jump. Nvidia's quarterly revenue and outlook topped Wall Street estimates on better-than-expected sales of its latest graphics chips, sending its shares up sharply in premarket trade.
- Fitch Warns Euro Zone of Downgrades If Greeks Exit. Credit rating agency Fitch put the whole of the euro zone on notice on Friday that were Greece to leave the currency bloc as a result of its current crisis, the remaining countries could find their sovereign ratings at risk. It said it was likely to put all euro area ratings on negative watch if Greece were to leave and that those countries which currently have a negative outlook on their ratings would be at most immediate risk of a downgrade. It said those countries were France, Italy, Spain, Cyprus Ireland, Portugal, Slovenia and Belgium.
- This is Why JPMorgan(JPM) Isn't Giving You Any Details About The Trade That Caused Its $2 Billion Loss.
- Nomura: 6 Crucial Things To Watch During Europe's 'Summer of Discontent'.
- As A China Bear, I Was Wrong... I Wasn't Bearish Enough. (graphs)
- The US is Now Worried That Israel Could Attack Iran At Any Moment.
- These Are The Stocks That Hedge Funds Are Buying Up Right Now.
- Why You Can't Ignore The Fiscal Cliff.
- Santelli on CDS Regulation and Why Bank Analysts Fail.
- Why What Jamie Dimon Doesn't Know Is Plain Scary.
- Greece Next Steps.
- Visualizing Europe's "Ponzi Patriotism".
- YouTube Considering Introducing Subscription-Based Streaming Service. Insiders familiar with YouTube’s plans stress the move doesn’t mean the Google(GOOG) unit is suddenly going to start charging for what is already available for free — but rather would add some premium offerings not on the site.
- SEC Opens Investigation Into JPMorgan's(JPM) $2 Billion Loss.
- European Warning Over Spanish Debt. As the Spanish government Friday took further measures to shore up the country’s banking sector, the European Commission injected a new dose of gloom by warning that Madrid was likely to miss its deficit-reduction targets for this year and next by wide margins. Spain was headed for a budget deficit of 6.4 percent of gross domestic product this year and 6.3 percent next year — far beyond the 3 percent maximum allowed under European Union rules and exceeding its own target of 5.3 percent for 2012, according to the commission’s spring economic forecasts. “For Spain, the key to restoring confidence and growth is to tackle the immediate fiscal and financial challenges with full determination,” Olli Rehn, the E.U. economic and monetary affairs commissioner, told reporters. “This calls for a very firm grip to curb the excessive spending of regional governments.”
- China's Growth Slows, and Its Political Model Shows Limits.
- Why It's Time For Higher Interest Rates by Shelia Bair. Progressives, led by Paul Krugman, believe that we can fix our economic woes with more consumer debt and higher inflation. The reality is that near zero interest rates encourage speculation, discourage savings, weaken pension funds, and put millions of baby boomers at risk.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows Mitt Romney earning 50% of the vote and President Obama attracting 43% support. Four percent (4%) would vote for a third party candidate, while another three percent (3%) are undecided.
- Sound Spanish banks to keep toxic assets on books-source. Spanish banks able to cover by themselves losses on their toxic property assets won't be forced to remove them from their books while it will be compulsory for those receiving public help, a Spanish government source said on Friday. All Spanish lenders will have to create holding companies where problematic real estate assets will be parked to be later sold off. "The removal (of toxic assets from books) won't be compulsory for entities which does not require public backing," the source said.
- Greek Finmin Asks PM to Decide on Paying May 15 Bond. Greece's finance minister said on Friday he had asked the prime minister to decide whether the country will pay a remaining amount of 430 million euros ($557 million) of a bond maturing on May 15, which was not part of a major bond swap.
- Triple Whammy Leaves Pain For Spain. Denial is not just a river in Egypt. There have been many times over the past few years when Spain has declared the problems at its banks officially solved. A bank rescue fund was set up in 2009; the government then forced mergers between its 45 weak savings institutions; and as recently as February it demanded that banks set aside an extra €36bn against property loans gone bad. Both in public and behind the scenes, Spain’s government and its regulatory authorities argued that its property market had stabilised, and its banks were coming out of the woods. Neither was true.
- US Banking Strength Worries Investors. After leading the S&P 500 in gains so far this year, financial shares fell sharply after JPMorgan Chase rattled markets on Thursday, and raised doubts about the strength of banks’ balance sheets. JPMorgan fell more than 8 per cent to trade at $37.48. Friday’s slump followed heavy losses in extended trading on Thursday in response to its admission that the bank had made “egregious mistakes”.
- JPM Whale-Watching Tour. Too Big To Hedge. Throughout FT Alphaville’s coverage of the credit trades of JP Morgan’s Chief Investment Office, there were two thoughts that kept nagging us. We’d think about them whenever we wrote about the technicals the trades might be creating. One was: could this really happen under CEO Jamie Dimon’s watch? The other was: where the hell are the regulators in all of this?
- Debt Crisis: Live. The Spanish government has told banks they must increase their provisions against property loans from 7pc to 30pc, meaning they must raise another €30bn.
- French president-elect Francois Hollande plans to partly reverse Nicolas Sarkozy's reduction in the French wealth tax effective this year.
- Spain may put public money into more struggling banks, make lenders provision up to 47% for current loans to real estate developers and force banks to sell 5% of their real estate holdings each year. The newspaper cited a draft bank reform law that was presented to the cabinet today.