- Spain's Guindos: Future of Euro at Stake. Spanish Economy Minister Luis de Guindos said the future of the euro is at stake in Italy and Spain, as data showed a net 66 billion euros ($82 billion) of capital left the country in March. “The future of the euro is going to be at play in the next weeks in Spain and Italy,” he told a conference in Sitges, Spain yesterday. “I don’t know if we’re on the edge of the precipice, but we’re in a very, very, very difficult situation.” The euro region needs to integrate further in order to overcome the crisis and de Guindos said he expected “signals” in the coming days and weeks on integrating deposit-guarantee funds and banking supervision. “We all agree” on the need to move toward a “banking union,” he said. Spanish borrowing costs compared with Germany’s rose to the highest in the euro’s history this week and the nation’s 10-year bond yields approached the 7 percent level that pushed Greece, Ireland and Portugal into bailouts. As the International Monetary Fund denied it was preparing financial aid for Spain, data showed that a record 66.2 billion euros of net capital flows left the country in March.
- Merkel’s Isolation Deepens as Draghi Criticzes Strategy. German Chancellor Angela Merkel was besieged by critics for letting the euro crisis smolder, with the leaders of Italy and the European Central Bank demanding bolder steps to stabilize the 17-nation economy. Italian Prime Minister Mario Monti and ECB President Mario Draghi pushed Germany to give up its opposition to direct euro- area aid for struggling banks. Monti further antagonized Germany by urging a roadmap to common borrowing.
- U.K. Economy Will Barely Grow This Year on Euro Crisis, BCC Says. The U.K. economy will almost stagnate this year and the government needs to support the recovery with fiscal-stimulus measures, the British Chambers of Commerce said. Gross domestic product will probably rise 0.1 percent this year as the renewed turmoil from the euro-area debt crisis crimps demand, the London-based group said in an e-mailed statement today. It previously forecast growth of 0.6 percent.
- EU Questions French Plan for Municipal Lending Amid Dexia Probe. European Union regulators questioned French plans for a takeover of the Dexia SA (DEXB) unit that finances public-sector loans as last year’s collapse of the banking group threatens to affect municipal lending in the country. Dexia’s resolution plan, which requires regulatory approval under EU state-aid rules, includes a takeover of the French covered-bond unit Dexia Municipal Agency by a new lender that will be controlled by the French state, government-owned Caisse des Depots & Consignations and La Banque Postale SA. “The aid received should not be used to allow the perpetuation of the failed business model at the level of DMA,” the European Commission, the EU’s Brussels-based antitrust agency, said in a statement yesterday.
- Greek Exit Contagion Impossible to Predict, Zoellick Says in FT. A Greek exit from the euro region would hurt confidence in other sovereign euro assets, World Bank President Robert Zoellick wrote in the Financial Times. Different views among ECB board members “raise doubts about its ability to respond fast, fully and forcefully,” Zoellick said. Euro-area leaders must be prepared to recapitalize banks, he wrote. “Massive” ECB liquidity injections may not be enough, Zoellick wrote.
- Euro Swap Curve Flattest Since Lehman Collapse: Chart of the Day. The gap between short- and long-term euro-denominated interest-rate swaps is the narrowest since the months following the collapse of Lehman Brothers Holdings as Europe's debt and banking system crisis worsens. The difference between rates on two- and 10-year euro-denominated interest rate swaps fell last month to the least since December 2008. "The euro yield curve has found itself between a rock and a hard place," said Julien Turc, head of cross-asset quantitative strategy at SocGen in Paris. "Short-term rates have gone up because of funding concerns while long term rates are being driven down by the flight-to-quality of German bunds. There is risk of more sovereign and bank stress."
- Copper Bears Rise to Eight-Month High as Hedge Funds Bet on Drop. Copper traders are the most bearish since September and hedge funds are betting on price declines as concern that Europe’s debt crisis is deepening drove the metal to the lowest this year. Eighteen of 33 analysts surveyed by Bloomberg expect the metal to drop next week and six were neutral, the highest proportion since Sept. 23. Fund managers and other speculators held a net short position of 2,808 U.S. futures and options in the week ended May 22, from net-long holdings of 4,833 a week earlier, Commodity Futures Trading Commission data show. That’s the first bearish bet since January.
- Swaps Index Linked to JPMorgan Loss Surges Versus Current Gauge. The vintage credit-default swaps index said to have contributed to JPMorgan Chase & Co.’s $2 billion trading loss is surging relative to the current index. The 10-year Markit CDX North America Investment Grade Index Series 9, created in 2007, increased to 168.6 basis points at 4:30 p.m. in New York, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. The difference with the current version of the five-year index, the Series 18 expiring in June 2017, widened to 45.2 basis points, the biggest gap since August 23. Traders are pushing the older gauge wider as they wager it’s one of the bank’s positions contributing to the loss after its chief investment office took flawed positions in credit derivatives, wagers that were “poorly monitored,” according to JPMorgan Chief Executive Officer Jamie Dimon. The index expiring in December 2017 jumped 13 basis points to 139.75 on May 11, the day after Dimon disclosed a $2 billion trading loss in synthetic credit. It’s climbed from 111.7 on March 30.
- Facebook(FB) Fiasco Coupled With European Crunch Freezes IPO Plans. Facebook Inc. led U.S. initial public offerings to their worst monthly performance since Lehman Brothers Holdings Inc. collapsed, as Europe’s debt crisis scuttled IPO plans from New York to Hong Kong. The Bloomberg IPO Index (BIPO), which tracks U.S. equities in the first year after their IPOs, sank 15 percent last month, with Facebook posting the worst one-week performance among the 30 largest U.S. IPOs since 2011. The IPO index’s decline is in line with the drop in October 2008, the month after Lehman’s bankruptcy triggered the worst financial crisis since the Great Depression.
- Obama Tells Donors Health-Care Fight May Loom After Court Rules. President Barack Obama is confiding to Democratic donors that he may have to revisit the health-care issue in a second term, a position at odds with his publicly expressed confidence that the U.S. Supreme Court will uphold the Affordable Care Act, according to three Democratic activists. As he previewed his agenda for donors at a May 14 fundraiser, Obama said he may be forced to try to revise parts of his health-care plan, depending on how the court rules later this month, said one activist, who requested anonymity to discuss the president’s comments. Guests at the $35,800-a-plate dinner in the Manhattan apartment of Blackstone Group LP (BX) President Tony James were asked to check their smart phones and BlackBerries at the door.
- China's home prices fell to a 16-month low in May as officials pledged to keep property curbs that have sapped buyer demand, according to SouFun Holdings Ltd., the nation's biggest real estate website owner. Home prices declined .3% from April to $1,364 per square meter, SouFun said. That's the lowest since January 2011 and the ninth month-on-month drop, the longest stretch since it started compiling data in July 2010.
- China's Economic Slowdown Ripples Through Hong Kong Retail. China's economic slowdown is rippling through Hong Kong, with the city's retail sales rising at the slowest pace since 2009 as shoppers visiting from the mainland trim their spending.
- Facebook(FB) Buyers Expecting Surge Were Naive, Gorman Says. Investors who bought Facebook Inc. (FB) shares expecting a large short-term increase in the stock price were “naive,” Morgan Stanley (MS) Chief Executive Officer James Gorman said.
- U.S. Probe of JPMorgan(JPM) Widens. Federal regulators are using powers they gained in the Dodd-Frank financial overhaul law to ramp up an inquiry into the recent trading blunders at J.P. Morgan Chase & Co., people close to the investigation said. Investigators in the enforcement division of the Commodity Futures Trading Commission are issuing subpoenas requesting emails and other internal J.P. Morgan documents, the people said. The probe focuses on what J.P. Morgan traders told their supervisors and internal risk-management staff as their wrong-way bets started to sour, the people said.
- Subprime Auto Debt Revs Up The Asset-Backed Securities Market. The subprime corner of the auto asset-backed securities market is showing signs of its boom-time self. This year's subprime auto-ABS issuance of more than $7 billion is on pace to exceed last year's issuance by about 25%, according to Standard & Poor's. Subprime now accounts for one-quarter of all volume in the expanding auto-ABS market, marking a rapid recovery from its single-digit share in 2008.
- Mutual Funds Push To Restrict Hedge Funds Ads. The mutual fund industry wants the Securities and Exchange Commission to impose restrictions on advertising by hedge funds and private equity funds now that such private funds will be allowed to engage in mass marketing. Hedge funds will soon be able to advertise broadly to the public thanks to a measure in the recently-passed JOBS Act that directed the SEC to repeal a longstanding ban on publicizing private securities offerings.
- U.S. Argues to Preserve GPS Tracking. The U.S. government told a federal appeals court Thursday that it still has the right to place Global Positioning System tracking devices on cars without obtaining a search warrant—despite a January Supreme Court ruling that the warrantless installation of such a device violated the Constitution.
- Google(GOOG) to Require Retailers to Pay. Google Inc., in a move to squeeze more cash out of its lucrative Web-search engine, is converting its free product-search service into a paid one. Online retailers will now have to bid to display their products on Google's Shopping site. Currently, retailers include their products for free by providing Google with certain data about the products. Google then ranks those products, such as cameras, by popularity and price.
- Property Taxes And State Aid Drop, Pinching Local Governments -Pew. While states are beginning to slowly recover from the recession, a nonpartisan policy group said Thursday that local governments are getting "hit with a one-two punch," with two major revenue sources--property taxes and state aid--declining together for the first time since 1980.
- Acquittal, Mistrial in Edwards Case. The campaign-finance trial of former presidential candidate John Edwards ended in a mistrial Thursday, disintegrating under the weight of sometimes contradictory evidence as the jury failed to reach a verdict on almost all of the charges.
- Business Braces for Europe's Worst. As European officials race to quell fears that Greece may exit the euro, many companies doing business in the troubled country are preparing for the worst.
- Debt Strains Hit Big Greek Lenders. Greece's deepening crisis has dealt a further blow to the country's four largest lenders, as bad debts ballooned and they struggled to hold onto nervous savers worried over the country's future inside the euro zone.
- Asia Strains Under Euro Crisis. The economies of Asia, both the emerging markets and the more developed countries, are being hit by a double whammy of slowing domestic growth and the impact of the European debt crisis on Asian exports and finance. Signs of distress are proliferating.
- John Taylor: Rules for America's Road to Recovery. As Hayek taught us, predictable policies will help restore economic prosperity and preserve freedom.
- LIVE: THOUSANDS OF COMPANIES AROUND THE WORLD REVEAL THE TRUTH ABOUT THE GLOBAL ECONOMY.
- The Other Slowdown Is Here. CHINESE STATE NEWSPAPER: Corruption Is Here To Stay And The Public Should Get Used To It.
- WEAK AGAIN: China's HSBC PMI Falls To 48.4, 'Employment Down At Fastest Rate In 38 Months'. (graph)
- Busting The "Core" European Myth.
- Be Afraid Europe, Be Very Afraid - Tim Geithner Is Now "Helping" You.
- Optimism Among Wealthy Americans Is Down, Economy Worries Are Up. (graph) After two consecutive months of positive improvement, optimism of America’s wealthiest has dipped due to continued concerns about the economy and the job market.
- ECB, EU Officials Warn Euro's Survival at Risk. The European Central Bank stepped up pressure on Thursday for a joint guarantee on bank deposits across the euro zone, saying Europe needed new tools to fight bank runs as the bloc's debt crisis drives investors to flee risk.
- Wal-Mart(WMT) Launching "Goodies" Food Service. Wal-Mart Stores Inc will soon launch a paid monthly mail subscription called "Goodies" that will allow customers to test new food and other products, Global eCommerce Chief Executive Neil Ashe said on Thursday.
- China has not decided to quicken lending: report. China has not told banks to speed up lending and will set credit policy in line with economic conditions, a vice chairman of the country's banking regulator said in remarks published on Friday, as fresh data raised fears that business activity may be cooling faster than expected.
- Nikkei heads for worst weekly losing run in 20 years.
- Hedge Funds Cut Back On Equity Research. Hedge funds are sharply reducing spending on equity research from brokerage firms, in a sign that volatile markets are hurting demand for brokers’ lucrative client services. Institutional investors cut spending on research services, such as analyst notes and trading ideas, to $6.2bn in the twelve months to March 31, down 9 per cent from the prior year, according to a survey by Greenwich Associates.
- Only ECB Can Save The Euro Now.
- Eurozone is 'unsustainable' warns Mario Draghi. The head of the European Central Bank hit out at the political paralysis gripping the region as he warned the eurozone's set-up was "unsustainable".
- Rated (MFRM) Overweight, target $45.
- Asian equity indices are -1.25% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 200.0 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 162.50 +2.0 basis points.
- FTSE-100 futures +.31%.
- S&P 500 futures -.52%.
- NASDAQ 100 futures -.42%.
Earnings of Note
8:30 am EST
- The Change in Non-farm Payrolls for May is estimated at 150K versus 115K in April.
- The Unemployment Rate for May is estimated at 8.1% versus 8.1% in April.
- Average Hourly Earnings for May is estimated +.2% versus unch. in April.
- Personal Income for April is estimated to rise +.3% versus a +.4% gain in March.
- Personal Spending for April is estimated to rise +.3% versus a +.3% gain in March.
- The PCE Core for April is estimated to rise +.2% versus a +.2% gain in March.
10:00 am EST
- ISM Manufacturing for May is estimated to fall to 53.8 versus 54.8 in April.
- ISM Prices Paid for May is estimated to fall to 57.0 versus 61.0 in April.
- Construction Spending for April is estimated to rise +.4% versus a +.1% gain in March.
- Total Vehicle Sales for May are estimated to rise to 14.5M versus 14.38M in April.
- (OKE) 2-for-1
Other Potential Market Movers
- The Supreme Court's decision on Obamacare, (MDT) analyst meeting, (WMT) shareholder meeting, (GRPN) lock-up expiration, public comments on the Volcker rule and the ASCO meeting could also impact trading today.