Monday, May 14, 2012

Today's Headlines

  • Greece Euro-Exit Debate Goes Public. European finance ministers grappled with the costs of keeping Greece in the euro area or letting it go, as Greece’s post-election political feud dragged on with little progress toward forming a government. German Finance Minister Wolfgang Schaeuble said Europe has done the “utmost” to prop up the financially stricken country, limiting any further room for leniency after about 240 billion euros ($308 billion) of aid pledges. “There’s no easy way for Greece, whatever the outcome will be,” Schaeuble told reporters before a meeting of euro-area finance ministers in Brussels today. “It’s not about the question of being more or less generous toward Greece. It’s simply about what is still economically justifiable, what can be done that’s still convincing in economic terms, that still has credibility.” Signs of stress abounded in European markets today. The euro fell for the 10th time in 11 days and bond yields in recession-wracked Spain, the next potential candidate for financial aid, touched a five-month high. On the eighth day of Greece’s post-election maneuvering, the head of the biggest anti-bailout party, Alexis Tsipras, said he would boycott an evening meeting in Athens, the latest attempt to form a unity government, and pushed for a new election.
  • Hollande Jobs Pledge Faces Test as Corporate France Readies Job Cuts. France Inc. risks losing more than 15,000 jobs in the months ahead, testing Socialist President- elect Francois Hollande’s resolve to block firings. Companies from Carrefour SA (CA) and Peugeot SA to Air France- KLM and Vivendi SA (VIV) are reorganizing operations to counter shrinking growth as the economy at home and across Europe slows. The presidential race prompted many companies to put job-cutting plans on hold to avoid becoming a campaign subject. With the May 6 vote behind them, the wave of firings may start, unions say.
  • Ifo’s Sinn Says S. Europe Faces ‘Infirmity,’ Handelsblatt Says. Hans-Werner Sinn, president of the Munich-based Ifo economic institute, said supplying southern European countries with continued, cheap, public credit will lead to a infirmity if not to a complete economic collapse in Europe, Handelsblatt said. When the euro region becomes the central administrator with investment management carried out by the state, the system can’t work because it prevents the capital market from being the important economic driver, Sinn wrote in a guest commentary in the German newspaper. The European Central Bank is causing private capital to flee countries such as Italy and Spain because it offers cheap credit, Sinn wrote in Handelsblatt.
  • Papademos Says Hard for Greece to Make June Payments, Ta Nea Says. The Greek state will find it difficult to cover its payment needs in June, Ta Nea said citing Prime Minister Lucas Papademos in a letter given to Greek President Karolos Papoulias. The withholding of 1 billion euros ($1.3 billion) from the May loan tranche from the European Union, the European Central Bank and the International Monetary Fund and May 6 elections stalling the tax collection process are putting pressure on the state’s coffers the Athens-based newspaper reported, without saying how it obtained the letter.
  • European Stocks Drop on Greek Deadlock, Merkel's Setback. European stocks retreated, snapping two days of gains, as Greece moved closer to a possible exit from the euro currency union and German Chancellor Angela Merkel’s party lost a state election. Banks paced losses, with HSBC Holdings Plc (HSBA) dropping 1.5 percent. Infineon Technologies AG (IFX), Europe’s second-largest semiconductor maker, retreated after Chief Executive Officer Peter Bauer decided to step down. ING Groep NV (INGA) tumbled 6 percent as European Union regulators will reexamine its rescue by the Dutch government. The Stoxx Europe 600 Index lost 1.8 percent to 247.43 at the close of trading. All 19 industry groups on the gauge fell. The Stoxx 600 has pared this year’s gains to 1.2 percent as an inconclusive election in Greece left political parties struggling to form a government, risking the collapse of proposed austerity measures.
  • Europe's Cross-Border Bank Model at Risk, Development Bank Says. Euro-area governments are encouraging local lenders to trim their foreign exposure, threatening the continent's cross-border banking model, European Bank for Reconstruction and Development economists wrote in the Times. The governments want banks to lend more at home at the expense of subsidiaries elsewhere in Europe, causing capital and liquidity to be hoarded, the economists wrote. That's leading to a shortage of credit in some countries, with emerging Europe and the U.K. at risk, they added. "We are witnessing an astonishing process of financial fragmentation," Erik Berglof, chief economist at the London-based EBRD, and Jeromin Zettelmeyer, his deputy, wrote today in the newspaper. "Sovereign and bank risk are impairing the ability of banks in the periphery countries to lend."
  • Sovereign Debt Risk Rises as Spain Bank Woes Heighten Euro Alarm. The cost of insuring against a sovereign default in Europe surged as Greece’s political deadlock and Spain’s bank capital crisis heightened speculation the euro region may start to crumble. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments jumped 7.5 basis points to 293.5 at 3:15 p.m. in London, signaling deterioration in perceptions of credit quality. Contracts on Spain soared as much as 26 basis points to a record 543, according to Bloomberg data. European officials are starting to consider a Greek abandonment of the euro as authorities in Athens struggle to form a government that agrees to the austerity terms of the nation’s bailout. Spain’s plan to force banks to increase provisions by 30 billion euros ($39 billion) and inject less than 15 billion euros of cash will worsen its debt burden and may not be enough, Moody’s Investors Service said. “The risk eventually is some kind of euro exit,” said Harpreet Parhar, a strategist at Credit Agricole SA (ACA) in London. “There’s the rise of austerity rebels in other countries as well, and Spain’s bank recapitalization plan isn’t going to be sufficient to convince people.” Swaps on Spain were trading at 539, while Italian debt jumped 29 basis points to a four-month high of 487 and Ireland climbed 28 to 621, Bloomberg data show. The cost of insuring against default on European corporate and financial debt rose to the highest levels since January, according to BNP Paribas SA. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings soared 43 basis points to 728. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 13 to 171. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers jumped 21 basis points to 286.5 and the subordinated index was up 32 at 467.
  • India Inflation Quickens, Curbing Room for Cutting Rates. Indian inflation unexpectedly accelerated in April, crimping the central bank’s scope to bolster economic growth by extending interest-rate cuts. Stocks fell, reversing earlier gains. The benchmark wholesale-price index rose 7.23 percent from a year earlier, after climbing 6.89 percent in March, the Ministry of Commerce and Industry said in a statement in New Delhi today. The median of 32 estimates in a Bloomberg News survey was for a 6.67 percent gain.
  • China Growth Seen at 13-Year Low by PIMCO. China’s slowdown may deepen as policy makers unwind the excesses of a record credit boom while only gradually increasing stimulus, leaving 2012 growth at the weakest in 13 years, Pacific Investment Management Co. says.
  • Dimon Fortress Breached as Push From Hedges to Bets Blows Up.
  • Brown Calls for $8.3 Billion Cuts to Close Wider Deficit. California Governor Jerry Brown proposed $8.3 billion of cuts from welfare and medical care for the poor to help close a $15.7 billion state deficit for the year starting July 1. The revised deficit is about 70 percent more than Brown projected in January after tax revenue fell short, spending exceeded projections and some savings were blocked by the federal government, courts and Democrats in the Legislature.
  • Facebook(FB) Said Set to Finish Taking IPO Orders Tomorrow. Facebook Inc. plans to stop taking orders for its initial public offering tomorrow, two days ahead of schedule, according to a person with knowledge of the transaction. Facebook will likely finish taking orders for the IPO after U.S. markets close May 15, said the person, who declined to be identified as the plans are private. The offer of 337.4 million shares at $28 to $35 each has been oversubscribed, people with knowledge of the matter said. Jonathan Thaw, a spokesman for Facebook, declined to comment.
Wall Street Journal:
  • Iran Talks' Moment of Truth Has Arrived. In the long and winding American quest to curb Iran's nuclear program, the next month is the most critical period yet. And there are three men to keep an eye on as it unfolds: President Barack Obama, Iranian Supreme Leader Ali Khamenei and Israeli Defense Minister Ehud Barak.
  • John Snow: 'Taxmaggedon' Is a Real Threat. Next year's scheduled increases on dividends and capital gains will retard investment and derail the recovery.
Business Insider:
Zero Hedge:
NY Post:
  • Political Hedge. Blackstone Group(BX) President Tony James is holding a $35,800-per-plate fund-raiser tonight at his Park Avenue co-op that has hauled in around $1.5 million for President Obama’s re-election campaign. “He’s pushing hard, and I think he’s struggling a bit,” said a Democratic source close to the event.
  • Break Up The Big Banks Before Its Too Late by Charles Gasparino.

US News:



  • Debt Crisis: Live. Markets have fallen heavily and debt yields have risen, as EU finance ministers meet this afternoon for 'political' talks that are expected to focus on the ongoing crises in Greece and Spain.


  • Li & Fung Says Europe Uncertainties May Affect Exports. Exports to Europe seen to be impacted by the debt crisis in the region, citing Chairman William Fung. Fung said market growth in China may be slower than that of last year. The Co. says price increases of export orders to China can offset volume decline.

No comments: