- UniCredit, Intesa Among 26 Italian Banks Cut by Moody’s. UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) were among 26 Italian banks that had their credit ratings cut one to four levels by Moody’s Investors Service, which cited weakened earnings and the country’s economic outlook. UniCredit, Italy’s biggest bank, had its long-term debt rating lowered one step to A3, Moody’s said in a spreadsheet on its website yesterday. Milan-based Intesa, the nation’s second- largest lender, also was downgraded to A3 from A2. “Italian banks are particularly vulnerable to adverse operating conditions, which are likely to cause further asset quality deterioration, earnings pressure, and restricted market funding access,” Moody’s said in a statement. “These risks are exacerbated by investor concerns over the sustainability of the Italian government’s debt burden, which has contributed to the difficult wholesale funding conditions faced by Italian banks.”
- Greek President Pitches New Government Plan to Break Stalemate. Greek President Karolos Papoulias will attempt to persuade divided party leaders today to accept his proposal for a government of prominent non-politicians to steer the country and avert new elections as doubts mount that Greece can avoid an exit from the euro area. Papoulias will meet with all leaders of parties represented in parliament except for an ultra-nationalist party today at 2 p.m. in Athens, said Evangelos Venizelos, the leader of Pasok, the third-biggest party. Venizelos, who did not provide further details of the president's plan, spoke after meeting with Papoulias and the leaders of two other parties yesterday. "Pasok is taking a responsible stance," Venizelos said in comments televised live on state-run NET TV. "We support a government of prominent figures as a necessary solution." The new plan threatens to extend the political gridlock that has left the country without a government for more than a week since the inconclusive May 6 elections. Democratic Left leader Fotis Kouvelis, who attended yesterday's meeting, said he was opposed to the new plan and will attend today to press for his unity-government proposal, which has already been rejected by the second-biggest party, Syriza.
- Money Market Stresses Rise Fastest in Six Months: Credit Markets. Stress in global credit markets is climbing at the fastest pace in six months as speculation Greece may exit Europe's common currency sparks anxiety that the region's leaders can't stem their sovereign-debt crisis. Interest-rate swap spreads, which gauge fear in debt markets, and a measure of corporate credit risk in the U.S. climbed to four-month highs yesterday. A gauge of banks' reluctance to lend to each other reached the most since February.
- Euro Chiefs May Offer Leniency to Greece. European governments hinted at giving Greece extra time to meet budget-cut targets, as long as the financially stricken country’s feuding politicians put together a ruling coalition committed to austerity. Calling talk of a Greek pullout from the euro “nonsense” and “propaganda,” Luxembourg Prime Minister Jean-Claude Juncker said only a “fully functioning” Greek government would be entitled to tinker with the conditions attached to 240 billion euros ($308 billion) of rescue aid. “The government would have to stand by the program,” Juncker told reporters after chairing a meeting of euro-area finance ministers in Brussels late yesterday. “If there are dramatic changes in circumstances, we wouldn’t close ourselves off to a debate over extending the deadlines.”
- Huether Says Greece May Be Forced to Exit Euro, Bild Reports. Michael Huether, the German economist and head of the IW economic institute, said eurozone governments may have to force Greece to exit the common currency unless the country adheres to its austerity promises, Bild-Zeitung reported. Greece may shun such a step because of the “dramatic consequences” for the country, the newspaper cited Huether as saying in a preview of an interview in tomorrow’s edition.
- Appaloosa’s Tepper Bets on Technology With Apple(AAPL), Google(GOOG) Buys. Appaloosa Management LP, the hedge fund run by David Allan Tepper, bet on technology in the first quarter with purchases of Apple (AAPL) Inc., Google Inc. (GOOG) and an exchange-traded fund that mimics the Nasdaq 100 Index. The hedge fund, based in Chatham, New Jersey, bought 503,000 shares of Apple valued at $337 million, 162,000 shares of Google valued at $104 million and 18.9 million shares of the PowerShares QQQ Trust, valued at $1.27 billion, according to a filing today with the Securities and Exchange Commission.
- Dimon on New York Fed Board Renews Concern About Conflict. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon’s position as a director on the Federal Reserve Bank of New York’s board renewed concern that the central bank is too close to the institutions it oversees.
- JPMorgan(JPM) Said to Weigh Bonus Clawbacks After Loss. JPMorgan Chase & Co. (JPM), the biggest U.S. bank, will consider reclaiming incentive pay from employees including former Chief Investment Officer Ina Drew after her unit had a $2 billion trading loss, said two senior executives. The lender can cancel stock awards or demand they be repaid if an employee “engages in conduct that causes material financial or reputational harm,” JPMorgan said in its annual proxy statement. The company will claw back pay if it’s appropriate, said one of the executives, who asked not to be identified because no decisions have been made.
- China Foreign Investment Falls 0.7% in Sixth Monthly Drop. Foreign direct investment in China fell for a sixth month in April, as faltering global growth and renewed turmoil in financial markets dented company spending in Asia’s biggest economy. Inbound investment dropped 0.7 percent from a year earlier to $8.4 billion, the Ministry of Commerce said today in Beijing. That compares with a 6.1 percent drop in March and extends the longest stretch of declines since the global financial crisis.
- Amylin(AMLN) Said to Attract Interest From Pfizer, AstraZeneca. Amylin Pharmaceuticals Inc. (AMLN) has lured suitors such as Pfizer Inc. (PFE), AstraZeneca Plc and Sanofi, which signed confidentiality agreements on the drugmaker’s sale process, said people familiar with the matter.
- Rubber Plunges to a Four-Month Low on Greek Impasse. Rubber plunged to a four-month low as the political impasse in Greece raised speculation the nation may leave the euro, deepening an economic slump in the region and weakening demand for the commodity used in tires. October-delivery rubber slumped as much as 5.1 percent to 265 yen a kilogram ($3,317 a metric ton), the lowest level for a most-active contract since Jan. 6, before trading at 268 yen on the Tokyo Commodity Exchange at 10:15 a.m. local time. Prices have trimmed this year’s advance to 1.7 percent.
- Spain's Bank Crisis Hits Aerospace. A Spanish manufacturer of critical components for major aircraft makers including Airbus, Boeing Co. and Embraer is slowing production and struggling to pay its bills. Alestis Aerospace SL is facing a cash crunch because of Spain's banking crisis, a powerful illustration of how Europe's financial upheaval is hurting its industrial economy and risks disrupting some of the world's most successful jetliner programs. Seville-based Alestis earlier this month was placed under court administration, the Spanish equivalent of U.S. bankruptcy protection.
- Iran Exile Group Nears U.S. Rebirth. The Obama administration is moving to remove an Iranian opposition group from the State Department's terrorism list, say officials briefed on the talks, in an action that could further poison Washington's relations with Tehran at a time of renewed diplomatic efforts to curtail Iran's nuclear program. The exile organization, the Mujahedin-e Khalq, or MeK, was originally named as a terrorist entity 15 years ago for its alleged role in assassinating U.S. citizens in the years before the 1979 Islamic revolution in Iran and for allying with Iraqi strongman Saddam Hussein against Tehran.
- Brown Warns Californians: Taxes or Cuts. California Gov. Jerry Brown laid out a revised budget plan that relies on deeper spending cuts and higher taxes to bridge a projected state deficit that has widened to $15.7 billion from $9.2 billion since January. The Democratic governor said Monday he had no choice but to cut even deeper into social services to help close a budget gap that has shot up due to lower-than-expected tax revenue and delays and court-ordered impediments to spending cuts.
- JPMorgan(JPM) Moves to Protect Dimon. J.P. Morgan Chase & Co. closed ranks around Chief Executive James Dimon ahead of a shareholder meeting and announced the departure of a senior executive at the center of a trading blunder that has cost the bank more than $2 billion in losses.
- The Union Pension Bomb. Imagine the panic if investors discovered that many of the nation's biggest public companies had hidden liabilities so large as to make them worth a fraction of their value. That's something akin to the shock created by the recent Credit Suisse report on multi-employer pension plans.
- This Former CIA Officer Reveals Everything You Want To Know About Being An American Spy. "I would hazard to guess there are more foreign intelligence officers inside the U.S. working against U.S. interests now than even at the height of the Cold War,"said Crumpton.
- GREEK MINISTER: An Exit From The Eurozone Could Trigger Civil War.
- JPM Chase(JPM) Chairman, Jamie Dimon, The Whale Man, And Glass-Steagall.
- It's An Interconnected World After All.
- Deja Deja Deja Etc. As S&P 500 Closes Below 50DMA First Time Since November.
- Groupon(GRPN) Beats Expectations on Domestic Growth, Lower Costs. Investors who snapped up Groupon shares on Friday certainly snagged a deal. After reporting earnings after the bell Monday, the online deals service's shares climbed, gaining some 33 percent since Friday’s close. The after-hours action extended today’s rally—Groupon's stock soared 18 percent as 14.7 million shares traded hands—the heaviest trading of the stock since its IPO on November 4.
- Facebook(FB) Raises IPO Price Range to $34-38 per Share.
- Where Are the Investors? Turnover in Major Asian Markets Plunges. Trading, measured by the turnover in Hong Kong and Singapore equities, fell in the first four months of the year on concerns over Europe’s debt crisis and as investors seek alternative investments to stocks after recent corporate scandals and the 2008 global financial crisis.
- Coty Withdraws Takeover Bid for Avon(AVP). Coty said on Monday it is withdrawing its $10.7 billion takeover bid for Avon Products, saying the world's largest cosmetics direct seller had missed its deadline to start talks.
- Red Flags Said to Go Unheeded by Chase Bosses. In the years leading up to JPMorgan Chase’s $2 billion trading loss, risk managers and some senior investment bankers raised concerns that the bank was making increasingly large investments involving complex trades that were hard to understand. But even as the size of the bets climbed steadily, these former employees say, their concerns about the dangers were ignored or dismissed.
- Disk Network(DISH) Ad-Skipping Feature Auto Hop Irks Network TV Execs. An NBC executive called the satellite broadcaster's new offering enabling customers to block commercials from certain recorded shows 'an attack on our ecosystem' while a Fox executive described Dish's decision to offer the feature 'a strange thing to do.'
- Poll: Romney 46%, Obama 43%. Last month, a CBS News/New York Times poll showed Mr. Obama and Romney locked in a dead heat, with both earning 46 percent support among registered voters.
- Fed Examining Other Risks Being Taken by JPMorgan.(JPM). The Federal Reserve is examining whether JPMorgan Chase & Co is taking risks elsewhere in the bank similar to the botched trading strategy that could cost the bank more than $2 billion, a Fed spokeswoman said on Monday. The central bank is also reviewing whether the trading losses have any broader implications for how JPMorgan manages its risk, the spokeswoman said.
- Maybe Europe Should Abandon Euro - Canada's Flaherty. If European countries are not prepared to bail out fellow euro zone members, maybe they should just abandon the whole concept of a common currency, Canadian Finance Minister Jim Flaherty said on Monday in some of his most direct remarks on the issue. "This is a time of crisis in the euro zone. The whole future of the euro zone is up for grabs, and this is very important for many of the euro zone member countries, given the history of Europe in the last 100 years or so," Flaherty told CTV television. "So they have to show courage. They have to do the right thing, use some of their taxpayers' money to bail out some of the weaker members of the euro zone - or start moving away from the euro zone and just say this was an experiment that has not worked."
- Agilent(A) profit beats; forecasts strong revenue. Electronics testing equipment maker Agilent Technologies Inc posted a better-than-expected profit as orders rose in its core business, and forecast third-quarter revenue above estimates.
- Faith Fades in Eurozone Firewall. Fears that the eurozone’s firewall will prove insufficient to shield Spain and other embattled countries against the effects of a possible disorderly Greek exit from the currency union hit European financial markets on Monday.
- Brace, Brace. Dark Times Ahead as Greece Heads for the Exit. European policymakers are about to commit another major blunder in their handling of the eurozone debt crisis, and this time it could well be fatal. Mistakenly, they have convinced themselves that it won't much matter if Greece leaves, and indeed that it might even help resolve the wider crisis to get rid of this persistent thorn in the flesh. Bring it on, they mutter callously; it will be a lot worse for them than for us. On one level, this is just bravado. It's an attempt to put as nonchalant a face as possible on the now apparently inevitable. But they also seem to believe in their validity of their own analysis – that they have indeed used the past two years well, and are now fully prepared for a Greek exit. Believe it if you will. The ineptitude to date of the eurozone's crisis response strongly suggests a different conclusion – both that the likely contagion from an exit has been hugely underestimated, and that by prompting a wider breakup, thereby tipping Europe into depression, it may end up as bad for everyone else as it is for Greece.
- IG Metall, Germany's main labor union for manufacturing workers, plans to ask its members in the state of Baden-Wuerttemberg to vote on unlimited strikes unless there is progress in wages talks. The union, which is demanding a 6.5% pay raise, will start the voting process on May 16 unless talks scheduled for tomorrow reach a breakthrough, citing an interview with union leader Joerg Hofmann.
- Germany's financial regulator Bafin wants to boost the number of Germans serving at European regulatory agencies, citing an interview with Bafin chief Elke Koenig.
- Chinese Railway Ministry's Massive Debt Tipped To Get A Lot Worse, Dagong Says. Rising costs to hurt profitability, credit rating agency says, citing a report on the ministry's first issue of short-term bonds in 2012. The Ministry will issue 20b yuan of 1-yr bonds to fund construction, buy rolling stock, citing the prospectus. Ministry total debt was 2.4t yuan on March 31 vs. 1.3t at the end of 2009.
- Problems associated with "unbalanced", "uncoordinated" and "unsustainable" development in China remain "apparent," Zhou Yongkang, a member of the nation's Politburo Standing Committee, said in a speech from May 9th published today. China will be at the "beginning stages" of socialism for a long period of time, Zhou said. Many factors currently exist that affect social stability, he said.
- China Investment Corp. has asked the U.S. Federal Reserve to give it status as a sovereign wealth fund and not a bank holding company to be exempted from the Volcker rule, citing people familiar with the matter. The exemption would allow the fund to avoid the compulsory sale of some of its U.S. assets, particularly private equity investments and hedge fund investments, the report says.
- Shanghai Tightens Home Purchase Restrictions. Single residents with Shanghai registration, so-called hukou, are no longer allowed to buy a second home, citing the city's real estate trading centers. Shanghai previously said local families with hukou, including single persons, could buy a second home.
- None of note
- Asian equity indices are -1.25% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 190.0 +7.0 basis points.
- Asia Pacific Sovereign CDS Index 150.50 +5.0 basis points.
- FTSE-100 futures -.40%.
- S&P 500 futures +.25%.
- NASDAQ 100 futures +.20%.
Earnings of Note
8:30 am EST
- The Consumer Price Index for April is estimated unch. versus a +.3% gain in March.
- The CPI Ex Food & Energy for April is estimated to rise +.2% versus a +.2% gain in March.
- Empire Manufacturing for May is estimated to rise to 9.0 versus a reading of 6.56 in April.
- Advance Retail Sales for April are estimated to rise +.1% versus a +.8% gain in March.
- Retail Sales Less Autos for April are estimated to rise +.2% versus a +.8% gain in March.
- Retail Sales Ex Autos & Gas for April are estimated to rise +.3% versus a +.7% gain in March.
9:00 am EST
- Net Long-Term TIC Flows for March are estimated to rise to $32.5B versus $10.1B in February.
10:00 am EST
- Business Inventories for March are estimated to rise +.4% versus a +6% gain in February.
- The NAHB Housing Market Index for May is estimated to rise to 26.0 versus 25.0 in April.
- None of note
Other Potential Market Movers
- The Hollande/Merkel meeting in Berlin, Greek bond redemption, Italian GDP, weekly retail sales reports, (BA) investor conference, JPMorgan Tech/Media/Telecom Conference, BofA Merrill Metals/Mining/Steel Conference, Oppenheimer Industrials Conference and the JPMorgan Homebuilding Conference could also impact trading today.