Today's Headlines

Bloomberg:

• Italian Bonds Slide on Bersani Comments, Lower Demand at Auction. Italian bonds slumped, with five- year yields rising the most in a month, as Democratic Party leader Pier Luigi Bersani said there was no chance of a broad coalition to end the deadlock caused by elections last month. Italy’s 10-year yields extended their first quarterly increase since June as demand fell when the Treasury sold 6.91 billion euros ($8.84 billion) of debt at an auction today. Spanish and Greek bonds also slid as investors shunned the securities of so-called peripheral nations. German bunds gained, with 10-year yields falling to a three-month low, even as European governments vowed the tax on bank accounts to finance Cyprus’s aid package won’t be a precedent for future rescues. Italy’s five-year yield jumped 18 basis points, or 0.18 percentage point, to 3.52 percent at 3:26 p.m. London time after rising as much as 22 basis points, the biggest increase since Feb. 26.
• Spain Says 2012 Deficit Is Bigger Than First Estimated: Economy. The Spanish government said its 2012 budget deficit will be bigger than first estimated after the European Union requested changes in how tax claims are computed. The budget shortfall excluding aid to the banking sector was 6.98 percent of gross domestic product last year, more than the 6.74 percent predicted on Feb. 28, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid today. That compares with 8.96 percent in 2011.
• France’s Towns Demand Rescue From ‘Time Bomb’ of Dexia Loans. French towns from Asnieres to Sainte-Etienne are calling on President Francois Hollande’s government to save them from about 10 billion euros ($13 billion) in Dexia loans whose risks they say weren’t made clear. Sitting on debt pegged to foreign interest rates or currencies, many troubled municipalities are struggling to service their loans and clamoring for help from the state. “This is a time bomb for a certain number of local governments,” Sebastien Pietrasanta, the mayor of Asnieres, a Paris suburb, told reporters yesterday.
• European Stocks Drop as Italian Yilds Surge; TDC Retreats. European stocks fell to a three- week low, led by a selloff in banks, as the leader of Italy’s Democratic Party ruled out the possibility that rival politicians will agree on a broad coalition government. Banca Monte dei Paschi di Siena SpA and Banco Popolare SC slid more than 1 percent as Italian bond yields surged. TDC (TDC) A/S dropped 1.6 percent as its private-equity owner sold another 6.8 percent stake in the Danish phone company. Safran (SAF) SA slipped 1.5 percent as the French government sold 13 million shares in the maker of aircraft engines.
• Euro Weakens Below $1.28 on Deadlocked Italy, Cyprus Concern. The euro fell to less than $1.28 for the first time in more than four months as a bailout for Cyprus and a political deadlock in Italy undermined demand for the region’s assets. Europe’s shared currency weakened against all 16 of its major peers as demand fell at a sale of Italy’s bonds and the nation’s political parties remained at an impasse after last month’s elections.
• VIX Contracts Reach Six-Year High Versus S&P 500 Bets: Options. While U.S. stock volatility is stuck close to a six-year low, options used to wager on its resurgence are jumping. The VVIX Index, tracking contracts whose value is tied to swings in the CBOE Volatility Index, has gained 21% since reaching the lowest level of the year on Feb. 19. Over that period, the VIX climbed 3.7%, pushing the ratio between them to the widest in six years on March 15, according to Bloomberg. Divergence between the gauges shows increasing speculation that the VIX is poised for a rebound after losing 45% since the end of 2011. Traders that are buying options on volatility rather than stocks are betting that when losses hit the S&P's 500 Index, they will be rapid, according to Philippe Trouve, a director for equity derivatives at Bank of America in NY.
• Cliffs(CLF) Declines After Morgan Stanley Downgrade. Cliffs Natural Resources Inc. (CLF), the largest U.S. iron-ore miner, tumbled the most in six weeks after analysts at Morgan Stanley said new supply in North America may reduce the commodity’s price. Cliffs fell 12 percent to $18.94 at 9:41 a.m. in New York, after earlier dropping 15 percent, the most intraday since Feb. 13. The shares (CLF) have declined 51 percent this year, making it the year’s worst performer on the Standard & Poor’s 500 Index.
• N. Korea Cuts Hotline to South After Attack Threats. North Korea cut off a military hotline with South Korea a day after putting its artillery forces on high alert and threatening to attack the U.S., in the latest escalation of tensions on the peninsula. “Under the situation where a war may break out any moment, there is no need to keep north-south military communications,” the official Korean Central News Agency said, adding that South Korea was informed at 11:20 a.m. today. The regime cut off a separate Red Cross hotline on March 8.
• Oil-Demand Plateau Seen as Natural Gas Favored: Chart of the Day.

Wall Street Journal:

• Apple(AAPL) Ire Spreads to China’s SOEs. Want to know who are China’s most hated companies? All you have to do is hit out at one of its most beloved. For the third consecutive day, the Chinese Communist Party’s official mouthpiece, the People’s Daily, has run articles criticizing Apple for its warranty policy in China and calling Apple’s defense of its customer-service practices arrogant. Apple has declined to comment on the coverage. It’s still difficult to know whether the unkind official media attention will dull or polish Apple’s shine if it has an effect at all.

CNBC:

• JPMorgan(JPM) Faces Full-Court Press of Federal Investigations. As the nation's strongest bank, JPMorgan Chase used to be known for carrying special sway with regulators. Now it increasingly finds itself in the cross hairs of federal authorities. At least two board members are worried about the mounting problems, and some top executives fear that the bank's relationships in Washington have frayed as JPMorgan becomes a focus of federal investigations. 
• Only an 'Insane Person' Would Want to Run Italy: Bersani.
• Deep Freeze: Home Sales to Barely Budge in Spring. The U.S. housing market will see no surge at the start of spring, as fewer buyers signed contracts to purchase existing homes in February. An industry index of so-called pending home sales fell 0.4 percent from January.

Zero Hedge: 

• Market Update - The Damage So Far.
• The Next Cyprus? (graph)
• Cypriot Foreign Minister Blasts Germany's "Ruthless Decision To Wreck The Country's Economic System".
• When Is A Euro Not A Euro.

Business Insider: 

• After One Of The Greatest Stock Market Crashes Ever, Cyprus Is About To Crash All Over Again.
• The Biggest Cyber Attack In History Is Taking Place Right Now.
• Peak Oil Is Dead.
• JUSTICE KENNEDY: Obama's Actions On DOMA Have Been 'Very Troubling'.
• Obama's Health Care Reform Is Coming — With $1 Trillion In New Taxes.
• BofA(BAC): 'Banks Will Never Look The Same Post-Cyprus'.
• GUNDLACH: The Southern California Housing Market Hasn't Been This Crazy Since The '80s.
• At A Conference In Dubai, David Kotok Gave This Presentation On The Precarious State Of Global Monetary Policy.

Time:

• Why Derivatives May Be the Biggest Risk for the Global Economy. The very fact that reliable figures are hard to come by is itself part of the problem. The $638 trillion currently reported by the BIS is only a floor. Estimates for the total capital employed in derivatives trading is somewhere between $10 and $20 trillion, roughly comparable to the capitalization of the NYSE. That means that each actual dollar in the derivatives market is supporting between $35 and $70 of nominal value. Losses of only a few percent of face value therefore would be enough to wipe out even the best-capitalized derivatives traders.

Reuters: 

• Cyprus bailout not expected to be euro zone's last -Reuters poll. Cyprus probably won't be the last euro zone country to ask for an international bailout, according to a Reuters poll of economists, who cited Spain and Slovenia as the likeliest candidates. The survey also showed no agreement over whether the latest bailout, which hinges on shutting one of Cyprus's biggest banks at a cost to richer depositors, would be better or worse for the financial stability of the euro zone. There were 16 responses naming Spain, and 16 for Slovenia, whose outsized banking industry has drawn comparisons with Cyprus, making it the latest country to fall under the spotlight of the euro zone's debt crisis. "The Cyprus deal has brought the European banking crisis to a new level," said Lena Komileva, director of G+ Economics, a research consultancy in London.
• METALS-Copper falls on strong dollar, euro zone worries.

 AP:

• China Holds Landing Exercises in Disputed Seas. China's increasingly powerful navy paid a symbolic visit to the country's southernmost territorial claim deep in the South China Sea this week as part of military drills in the disputed Spratly Islands involving amphibious landings and aircraft. The visit to James Shoal, reported by state media, followed several days of drills starting Saturday and marked a high-profile show of China's determination to stake its claim to territory disputed by Vietnam, the Philippines, Taiwan, Malaysia and Brunei amid rising tensions in the region.

Telegraph:

• Cypriot 'solution' threatens further economic carnage among the other PIGS. There is no mess quite so bad that eurocrat intervention won't make even worse. Ever since the Dutch finance minister Jeroen Dijsselbloem declared that Cyprus would act as a template for other struggling eurozone lenders, the sound of screeching brakes and gear sticks being wrenched rapidly into reverse has been deafening. This is what he told Reuters:
• Cyprus bail-out: live. Cypriots face a suspension of credit card payments for overseas goods and a ban on cashing cheques under draft capital controls designed to avert a run on the banks.  
• UK economy contracts by 0.3pc - reaction. Britain's economy contracted by 0.3pc in the fourth quarter of 2012, official data confirmed on Wednesday, as industrial production posted its biggest quarterly fall in almost four years. Here experts give their view. 

Die Welt:

• One Third of Germans Want Deutsche Mark Back. One in three Germans has lost faith in the euro, citing a Forsa poll commissioned by Royal Bank of Scotland's German unit. Only the strongest countries in the euro area should keep the common currency, 43% of respondents said. 50% of those asked said they're concerned they may lose money in a banking crisis.

Ruhr Nachrichten:

• German Chamber of Commerce Warns of High Labor Costs. A further increase in labor costs in Germany would be hardly bearable, citing Martin Wansleben head of the German Chamber of Commerce. Says more than every third company sees a business risk for the coming months.

Europa:

• March 2013: Economic sentiment weakens in both the euro area and the EU. (graphs)