Today's Headlines

Bloomberg:

• Spain Banks Face Moody's Downgrades as Bankia Denies Deposit Run. Spanish banks face credit ratings downgrades by Moody’s Investors Service later today as the government denied there was a run on deposits at Bankia SA (BKIA), the ailing lender it’s taking over. Moody’s is expected to make a statement on downgrades for Spanish banks this evening after 9 p.m. in Madrid, said two people with knowledge of the situation, who asked not to be identified because the decision hasn’t been announced. A Moody’s spokeswoman in London declined to comment in a phone interview. A cut in credit ratings for Spanish lenders would cap a tense day for the industry after a report in El Mundo newspaper that about 1 billion euros ($1.3 billion) of deposits had been pulled from Bankia since the government announced plans to take it over on May 9. Bankia’s shares plunged as much as 29 percent. Deputy Economy Minister Fernando Jimenez Latorre used a Madrid news conference on the country’s gross domestic product data to deny Bankia was suffering a flight of deposits. Bankia, the lender with the biggest Spanish asset base, said in a filing to regulators today that changes in deposit level in the first half of May “have a substantially seasonal nature” and that it didn’t expect “substantial changes” in coming days. The main drivers for Moody’s expected action on Spanish banks today are rising loan defaults, a renewed recession, restricted funding access and the reduced ability of the government to support lenders, said one of the people familiar with the plans.
• The cost of insuring against a Spanish default rose to another record, with credit-default swaps on the nation's bonds jumping 13 basis points to a record 553, according to Bloomberg.
• Greek Asset Sales Program to Be Delayed Months, Chief Says. Greece’s 50 billion euro ($63.6 billion) state-asset sales program, a key plank in securing international funds from the European Union and International Monetary Fund, will be delayed by months as the country goes back to the polls to choose a new government. The Hellenic Republic Asset Development Fund said yesterday its board decided to freeze all projects and won’t make any binding decisions until the country holds elections on June 17. That will immediately affect the timetable for the sale of the nation’s gas company, a contract for a state lottery and the lease of the IBC conference center, said Costas Mitropoulos, chief executive officer of the fund.
• European Stocks Drop as ECB Pauses Greek Bank Lending. European stocks declined for a fourth day as the region’s central bank paused lending to some Greek banks and speculation mounted that Spanish banks may have their credit ratings cut at Moody’s Investors Service. Bankia SA (BKIA) sank 14 percent after a report that depositors withdrew 1 billion euros ($1.27 billion) in the past week. Cookson Group Plc (CKSN) rose the most in six weeks after saying it’s considering a separation of its main divisions. The Stoxx Europe 600 Index (SXXP) dropped 1.1 percent to 241.63 at the close of trading, for the longest losing streak since March 22, even as the Federal Reserve signaled further monetary easing remains an option if the U.S. economy worsens.
• Default Swap Bets Rise Most in BRICs Amid Slowdown: China Credit. Investors are increasing purchases of insurance against default on China's debt by the most among the BRIC nations as concern builds that a slowdown will deepen in the world's second-largest economy. The net amount of credit-default swaps on Chinese bonds rose by $189 million, or 2.1%, to $9 billion in the two weeks through May 11, according to data published by NY-based Depository Trust & Clearing Corp. The amount increased by $70 million for Russia contracts and $14.7 million on State Bank of India Ltd.'s debt. The annual cost of insuring China's debt for five years jumped 20 basis points this month to 133 basis points on May 16, the highest since January, according to CME Group Inc. prices.
  
• Chinese Company Debt Is at 'Alarming Levels,' Xinhua Says. Chinese companies have accumulated “alarming levels” of debt and will have difficulty with payments in an economic downturn, Xinhua News Agency said, citing Li Yang, vice president of the Chinese Academy of Social Sciences. The debt-to-asset ratio of Chinese companies is about 105.4 percent, the highest among 20 countries examined in yearlong study by Li’s team of borrowing by China’s government, corporations and individuals, Xinhua reported. Chinese companies tend to borrow from banks instead of raising funds in capital markets, Li said, as cited by Xinhua.
• China Car Dealerships Struggle as Stockpiles Increase. Chinese dealers are struggling with the rising number of unsold cars that’s threatening to deepen price cuts, according to the nation’s biggest automobile dealers’ association. Dealerships for Honda Motor Co. (7267), Chery Automobile Co., BYD Co. (002594) and Geely Automobile Holdings Ltd. (175) carried more than 45 days of inventory as of the end of April, exceeding the threshold that foreshadows debilitating price cuts, Su Hui, vice president of the auto market division at the state-backed China Automobile Dealers Association, said in an interview. The warning signals that vehicle deliveries reported by companies, which have risen more than analysts’ estimates for the past two months, aren’t fully translating to consumer sales and resulting in a pile up at showrooms.
• BRIC Stocks Head for Bear Market as Growth Woes Deepen. The MSCI BRIC Index (MXBRIC) fell, extending the gauge of the largest emerging markets’ drop from this year’s high to 20 percent, on mounting concern that Europe’s debt crisis and slower U.S. economic growth will curb exports. The benchmark index of shares in Brazil, Russia, China and India slipped 0.8 percent to 260.04 at 1 p.m. in New York, swelling its retreat to 20 percent from this year’s peak on March 2, a threshold analysts say marks a bear market. Klabin SA, Latin America’s biggest paper maker, led declines in Brazil’s Bovespa (IBOV) measure. Russia’s 30-stock Micex (INDEXCF) Index sank 4 percent, also entering a bear market. The 21-country MSCI Emerging Markets Index (MXEF) dropped to a four-month low. “Emerging markets had already been suffering their own headwinds and now they’re going to be buffeted by additional negative developments in the developed countries,” Komal Sri- Kumar, chief global strategist at TCW Group Inc., which oversees about $120 billion, said in a phone interview from Los Angeles. “China is facing a slowdown and inflation in India has shot up, making it hard for authorities there to cut rates. At the same time, Greece is on its way to a default. The immediate impact on emerging markets is negative.”
• Confidence Sinks as U.S. Job Market Falters. Consumer confidence fell last week to the lowest level in almost four months and more people than forecast filed claims for unemployment benefits, showing a lack of progress in the job market is rattling Americans. The Bloomberg Consumer Comfort Index dropped in the week ended May 13 to minus 43.6, a level associated with recessions or their aftermaths, from minus 40.4 in the previous period. Jobless applications were unchanged at 370,000 in the week ended May 12, Labor Department figures showed today in Washington. The Bloomberg U.S. consumer comfort index’s 12.2-point decline over the past four weeks has erased almost all of this year’s gains. Readings lower than minus 40 for the Bloomberg index are correlated with “severe economic discontent,” according to Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg. The gauge has averaged minus 15.3 since its inception in December 1985. All three of the Bloomberg Consumer Comfort Index’s components declined last week, today’s report showed. The gauge of personal finances fell to minus 12.9, the fourth straight drop and the weakest reading since November, from minus 11.2 in the prior week. A measure of whether consumers consider it a good or bad time to buy decreased to minus 48.2, a three-month low, from minus 45.8. Americans’ views on the state of the economy fell to a 10-week low of minus 69.6 from minus 64.2.
• Hewlett-Packard(HPQ) Said to Consider Cutting as Many as 25,000 Jobs. Hewlett-Packard Co. is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.
• Senate Confirms Power, Stein to Seats on Fed Board. The U.S. Senate today confirmed President Barack Obama’s two nominees to the Federal Reserve Board with both receiving the support of at least 70 senators. The Senate voted 70-24 to confirm the nomination of Jeremy Stein, a Harvard University professor and 74-21 to confirm Jerome Powell, an attorney and private equity investor who was a Treasury undersecretary for President George H.W. Bush.

Wall Street Journal:

• Philly Fed Undercuts the Growth Picture. Stocks are sliding again here late in the morning. The market got a rude shock this morning when the Philadelphia Fed’s monthly manufacturing survey went negative for the first time in eight months.
• Pinterest Raises $100 Million with $1.5 Billion Valuation. Pinterest, the online scrapbooking website that has become a Silicon Valley darling because of its rapid user growth, has raised $100 million in a financing round that values the start-up at $1.5 billion, said people familiar with the matter.
• Greek Leftist Leder Throws Down Gauntlet on Debt. The head of Greece's radical left party says there is little chance Europe will cut off funding to the country and if it does, Greece will repudiate its debts, throwing down a gauntlet that could increase tensions between Greece's recalcitrant politicians and frustrated European creditors.

MarketWatch:

• Wal-Mart(WMT) Rallies as U.S. Gains Traction. Wal-Mart Stores Inc. shares saw their biggest gain in more than three years Thursday after Walmart U.S., its biggest unit, reported the best same-store sales performance in three years while its Sam’s Club and overseas units also topped expectations.

CNBC.com:

• Euro Zone Fears, Starting to Hit Trade, Financing. The euro zone debt crisis is affecting trade as companies shy away from dealing with firms and banks in countries deemed at risk of contagion, a senior banker said on Thursday.
• Fitch Says Top 29 Banks May Need $556 Billion. The world's top 29 banks may need a total $556 billion to meet tougher new capital rules, cutting returns by a fifth and forcing them to curb investor payouts and raise customer charges, Fitch Ratings said on Thursday.

Business Insider:

• Get Ready: This is What Happens If Greece Exits the Euro.
• Israel's Chance to Attack Iran's Nuclear Facilities Is Running Out Fast.
• This Is The Most Likely Outcome To The Fiscal Cliff Crisis.
• Real Estate Crash in China: Foreign Funding Down 80%, Land Sales Down 57%, Starts Down 27%.
  

Zero Hedge:

• Philly Fed Plunges, First Contraction Since September 2011. (graph)
• European Financials Hit Six Month Lows; 12 Down Days In A Row. (graph)
• The American Foreclosure Process Has Ground To A Halt. (graph)
• Fitch Roundtrips On Greece, Re-Downgrades Country.
  

Reuters:

• BHP(BHP) May Delay at Least Two Mega Projects to Rein in Spending. BHP Billiton, the world's biggest miner, is likely to delay signing off on at least two mega projects after its chairman put the brakes on an $80 billion (50.4 billion pounds) plan to grow the company's iron ore, copper and energy operations, analysts say. Slumping commodity prices and escalating costs have squeezed cash flows, pushing BHP to join rival Rio Tinto (RIO) in reconsidering the pace of their long-term expansion in countries such as Australia and Canada.
• Spanish Regions, Central Govt Agree to Deep Spending Cuts. Spain's central government on Thursday approved plans to drastically cut the spending of its indebted regions this year and said it would introduce by July a new mechanism to back their financing needs. As the country races to control finances in its autonomous communities and reassure investors it can meet fiscal targets, the government said the regions had committed to slash spending by 13 billion euros ($16.52 billion) and increase revenues by 5 billion euros ($6.35 billion).
• Fed's Bullard - Long Easy-Money Period Has Risks. A top Federal Reserve policymaker said on Thursday he is worried that the Fed's extended period of ultra-loose monetary policy could be doing damage by discouraging thrift and encouraging undue risk-taking. "I'm worried about these low rates distorting other types of decision-making in the economy," St. Louis Fed President James Bullard told a Rotary Club lunch. "We're implicitly punishing savers ... we're encouraging people to go out and chase yield through other channels."
• US Postal Service to Close or Consolidate 140 Sites.

Telegraph:

• Fitch Warns of Mass Eurozone Downgrades. Ratings agency Fitch warns that all eurozone countries face a greater than 50pc chance of a downgrade if a stable, pro-bail-out government is not formed following Greece's second round of elections.

Valor Economico:

• The worsening of Europe's crisis and the slowdown in China may affect Brazil's economic expansion in the second half of this year and compromise 2013 growth, citing government officials. Brazil's economy is unlikely to grow much more than 2.7% this year, citing the officials.

Diario Economico:

• The so-called troika, which comprises officials from the European Commission, European Central Bank and International Monetary Fund, will study a contingency plan to protect Portugal if Greece exits the euro area. Troika officials will arrive in Lisbon next week for the fourth review of Portugal's aid program and will also look at the country's unemployment figures and the effects on the social security accounts.
  

Shanghai Securities News:

• China will steadfastly continue curbs on the housing market and won't flip-flop on its policies, citing Zhang Xiaohong, deputy director of markets of the Ministry of Housing and Urban-Rural Development.