Today's Headlines

Bloomberg:

• Spanish Banks Bad Loans Worsen as Recession Bites: Economy. More Spanish loans soured in March, fueling concern that the government's focus on making banks clean up real estate was too narrow as the country's economy entered a recession. Bad loans as a proportion of total lending jumped to 8.37 percent in March, the highest since August 1994, from a restated 8.30 percent in February, according to data published today by the Bank of Spain. As much as 8.21 billion euros of loans soured in the first quarter, 90 percent more than in the same period of last year. The regulator said a further 4.15 billion euros ($5.3 billion) of loans went bad, in addition to its original 143.82 billion-euro total for February before the number was restated. Spain's government said on May 11 it would make banks take charges of about 30 billion euros to cover potential losses on real-estate loans that are still performing, adding to about 54 billion euros of provisions and capital ordered in February. With unemployment topping 24 percent and the economy set to shrink 1.8 percent this year, according to International Monetary Fund estimates, analysts say the state will need to impose more charges on banks as the slump damages assets beyond real estate. "As the economy keeps getting worse, the banks will keep on having to make provisions to account for the negative impact of the lower activity and the higher unemployment," Steen Jakobsen, chief economist at Saxo Bank A/S, said by telephone. "The first step in reaching a solution is recognizing the scale of the problem, and we're not there yet."
• Spanish Banks’ Bonds Slide After Moody’s Downgrades Ratings. Bonds of Spanish banks fell after Moody’s Investors Service downgraded 16 of the nation’s lenders and said it may cut seven of them again because of the state of the economy and the government’s deteriorating credit. The yield premium investors demand to hold the 1 billion euros ($1.23 billion) of senior unsecured 4 percent bonds due 2017 of Banco Santander SA (SAN), whose rating was cut three levels to A3 to match the sovereign, rose to 503 basis points more than similar-maturity German debt, according to Bloomberg Bond Trader. The spread demanded over the benchmark swap rate, 250 basis points when the notes were issued in March, rose to 392 basis points, the prices show.
• Schaeuble Sees Two Years of Turmoil as G-8 Leaders Meet. German Finance Minister Wolfgang Schaeuble said turmoil in the financial markets caused by Europe’s debt crisis may last another two years, as Group of Eight leaders prepared to discuss Greece and its impact on the global economy. More than 2 1/2 years after Greece revealed its bloated budget deficit, Europe has “known a lot of crisis,” Schaeuble said in a recorded interview broadcast today on France’s Europe 1 radio. “It’s practically normal.” Even so, “in 12 to 24 months we’ll see a calming of financial markets,” he said. At the same time, German Chancellor Angela Merkel’s government has a duty to voters to prepare for a potential Greek exit, Finance Ministry spokeswoman Silke Bruns said. “People have the right to expect the government to make preparations for all eventualities,” Bruns said at a regular government press briefing in Berlin today.
• European Stocks Drop On Signs of Slowing Chinese Economy. European stocks fell for a fifth day, posting their biggest weekly selloff since September, amid signs of slowing growth in China and continued concern that Greece will have to leave the euro area. Rio Tinto Group and Volkswagen AG (VOW) led mining companies and carmakers lower. Industrial goods companies retreated after Caterpillar Inc. reported slowing sales. London Stock Exchange Group Plc paced rising shares after reporting that second-half profit quadrupled. The Stoxx Europe 600 Index (SXXP) slid 1.1 percent to 238.88 at the close in London. The equity benchmark slumped 5.2 percent this week and 7.2 percent so far this month. That would be the largest monthly drop since last August. “On a medium-term view, there is certainly valuation support for equities, particularly relative to government bonds which have now hit quite remarkable levels,” said Bill Dinning, an investment strategist at Kames Capital in Edinburgh which oversees about $79 billion. “However, that doesn’t help much in terms of timing. Obviously, we are back in a situation where the euro area is having an existential crisis.”
• Emerging Market Stocks Head For Longest Streak Of Weekly Losses Since 1994. Emerging-market stocks fell, heading for the longest string of weekly losses since 1994, as Citigroup Inc. cut its estimate for the gauge and a drop in Chinese property prices dimmed the global growth outlook. The MSCI Emerging Markets Index (MXEF) sank 1.6 percent to 906.42 by 12:13 p.m. in New York, increasing its weekly loss to 6.7 percent, the most in eight months. The gauge erased its annual gain as Europe’s debt crisis worsened. The MSCI Bric Index fell for a ninth week as the ruble weakened 0.5 percent versus the dollar, dropping 11 days in the longest run of losses since January 2009. Russia’s Micex retreated to a seven-month low while Brazil’s Bovespa snapped an eight-day decline. Citigroup reduced its year-end estimate for the MSCI gauge of 21 developing nations to 1,100 from 1,225, citing concern Greece will exit the euro and China’s economy will slow further, Geoffrey Dennis, the brokerage’s global emerging-market strategist in New York, wrote in a report yesterday. China’s home prices fell in 46 of 70 cities in April, the National Bureau of Statistics reported today. “We’re seeing a huge dislocation globally with concerns about the euro zone, China slowdown and U.S. slowdown bubbling in the background,” Win Thin, global head of emerging market strategy at Brown Brothers Harriman & Co., said by phone today from New York. “The combination makes it hard to get positive on the risk assets in emerging markets. They’re getting pummeled along with everything else.”
• Facebook(FB) Advances In Public Debut After $16 Billion IPO. Facebook Inc. (FB) rose in its trading debut following a record initial public offering that made the social network more costly than almost every company in the Standard & Poor’s 500 Index. (SPX) The shares advanced 8 percent to $41.05 at 1:33 p.m. in New York after earlier trading at the IPO price of $38, which valued the company at $104.2 billion. Facebook sold 421.2 million shares to raise $16 billion yesterday. “They squeezed the lemon dry here,” said Dan Veru, chief investment officer at Palisade Capital Management, who didn’t participate in the IPO. “They didn’t leave enough on the table. You want to price these things a little lower, so that the shares have better support in the aftermarket.”
• Copper Open Interest Falls to Two-Year Low On Greece Worries. Copper open interest declined to the lowest level in almost two years on the London Metal Exchange, suggesting traders are closing out bets. Investors probably closed out bets on higher prices as market open interest in LME futures declined by 11,531 contracts to 414,375 lots in the week ended May 15, according to bourse figures. That’s the lowest level since June 23, 2010. The exchange’s benchmark contract for three-month delivery dropped 4.1 percent in the period.
• Oil Falls Again On Europe. Futures fell as much as 1.3 percent after German Finance Minister Wolfgang Schaeuble said that financial market turmoil caused by the euro-zone crisis may last two more years. Prices are heading for the third straight weekly decline as U.S. consumer confidence dipped and American crude supplies climbed to the highest level since 1990. “All of the macroeconomic news has been negative,” said Stephen Schork, president of the Schork Group in Villanova, Pennsylvania. “Oil is moving on what’s happening in Europe and what it will mean here. In February, people were afraid to sell oil and now they’re afraid to buy it.” Crude oil for June delivery fell $1.03, or 1.1 percent, to $91.53 a barrel at 2:11 p.m. on the New York Mercantile Exchange. The contract touched $91.40, the lowest level since Nov. 3. Prices have retreated 4.8 percent so far this week. Brent oil for July settlement slipped 19 cents to $107.30 a barrel on the London-based ICE Futures Europe exchange. The European benchmark dropped to $106.40, the lowest level since Dec. 21.
• Yahoo(YHOO) Said In Talks to Sell 20% of Alibaba for $7 Billion. Yahoo! Inc. (YHOO) is in talks to sell about 20 percent of Alibaba Group Holding Ltd. for about $7 billion, a deal that would cut by half its stake in China’s largest e- commerce provider, a person with knowledge of the matter said.

Wall Street Journal:

• Glitches Mar Facebook's(FB) First Day of Trading.
• GM(GM) Bows Out of Super Bowl Advertising.
  

CNBC.com:

• Forget Greece, China Biggest Risk to Global Economy: Faber.
• Euro Zone Crisis to Hit Eastern Europe: Region's Banks. The European Bank for Reconstruction and Development (EBRD) expects the economies of Eastern Europe and the former Soviet Union, as well as four countries in the Middle East and North Africa, to experience a "substantial" slowdown this year because of fallout from the euro zone crisis.

Business Insider:

• This Is Why Facebook(FB) Isn't Falling Below $38/Share.
• U2's Bono Will Make More On The Facebook(FB) IPO Than Throughout His 30-Year Music Career.
• The NDAA Amendment To Stop Indefinite Detention Of Americans Goes Down In Flames.

Zero Hedge:

• 3+3=2 As Big US Banks Amass Trillions of Dollars Of Risk With Only $50 Of Exposure?
• Will The European Union Destroy Itself Just To Save The Euro?
• Ireland and Portugal Resume Their Places Among Europe's Teetering Dominos.
• And Now Back to Europe, Which is More Unfixed Than Ever.
  

Reuters:

• Steel output in China reached a daily record of 2.045 million metric tons in the first 10 days of May, citing data from the China Iron & Steel Association.
• EU, ECB Working on Greece Exit Contingency: Trade Commissioner. The European Commission and the European Central Bank are working on scenarios in case Greece has to leave the euro zone, EU trade commissioner Karel De Gucht has said. Speculation about such planning has been rife, but the comments in a newspaper interview, confirmed by a person close to De Gucht, appear to be the first time an EU official has acknowledged the existence of contingency plans being drawn up in case Greece has to drop out of the currency bloc."A year and a half ago there maybe was a risk of a domino effect," De Gucht told Belgium's Dutch-language newspaper De Standaard, referring to the threat of Greece leaving the euro. "But today there are in the European Central Bank, as well as in the Commission, services working on emergency scenarios if Greece shouldn't make it." He added: "A Greek exit does not mean the end of the euro, as some claim."
• Troubled Brazil Economy Shrinks Again in March. Brazil's economic activity fell for the third straight month in March, a surprisingly weak performance that may lead the central bank to slash its benchmark interest rate to all-time lows and prompt further stimulus measures from President Dilma Rousseff. The central bank's IBC-Br economic activity index , a closely watched proxy for gross domestic product, fell 0.35 percent in March from February, the bank said on Friday. Most analysts expected activity to rise 0.5 percent. The weak reading means that the Brazil economy has remained stagnant since almost falling into recession in the second half of 2011. In the fourth quarter, the Brazil's gross domestic product expanded only 0.30 percent, a figure that could be easily revised down once fresh growth data is released on June 1.
• Weak Coal Shipments Weigh on U.S. Railroads. More cars, less coal. That sums up the shipping trends at the biggest U.S. railroads so far in the second quarter. Three of the biggest freight railroads -- Kansas City Southern, Norfolk Southern Corp and CSX Corp. -- reported strong growth in auto shipments but weakness in their key coal-hauling businesses, as they gave mid-quarter updates to a transportation conference on Friday.
• Wall Street Banks Facing 2nd-Qtr Slowdown: Analyst. Wall Street banks will report sharp declines in trading and investment banking revenues in the second quarter because of weaker client activity, JPMorgan analyst Kian Abouhossein said in a report on Friday.
• RMBS Market Frets at JPM(JPM) Losses. While many in the market were revelling in the discomfort caused to JP Morgan by the losses in its chief investment office last week, those working in European structured finance found it difficult to enjoy what has become known as "Dimonfreude". Rather, they were fretting whether the losses might alter the unit's buying strategy when it comes to European structured paper.

Telegraph:

• Euro Austerity Example Ireland 'may need second bailout'.
• Debt Crisis: Live. European Commissioner for Trade admits to emergency plan for Greek euro exit for first time, while David Cameron says the euro crisis could get 'a lot worse' as he travels to G8 summit.

Kathimerini:

• Greece's public revenue dropped 15% in the first 10 days of May compared with the same period of 2011. The finance ministry forecasts that with no improvement in collection revenue for the month will be down 50% compared with May 2011.