Bloomberg:
- Derivatives Bludgeoned by Debt Crisis Making Return: Euro Credit. Investors are reviving credit derivatives trades they used to boost returns before the financial crisis as unprecedented central bank liquidity drives down yields and default rates. Investors accumulated 47 contracts insuring a net $461.6 million of debt on so-called tranches of the current series of the Markit iTraxx Europe Index of credit-default swaps since trading started April 3, according to the Depository Trust & Clearing Corp. Tranche trading allows investors to make concentrated bets on a pool of companies with varying risks and returns. The strategy was widely used by investors before the U.S. housing crash and contributed to a $6.2 billion loss at JPMorgan Chase & Co. after wrong-way wagers by dealers including Bruno Iksil, nicknamed the London Whale. Trades are now being buoyed by the European Central Bank’s pledge last year to protect debt markets. “The ECB backstop along with high liquidity provided by central banks globally should promote risk taking and entice market participants to search for yield through standardized tranche products,”said Ioannis Angelakis, a credit derivatives strategist at Bank of America Merrill Lynch in London. “It’s encouraging seeing traction from the very first couple of weeks.”
- Napolitano Opens New Round of Italian Government Formation Talks. Italian President Giorgio Napolitano, strengthened by his re-appointment yesterday, is starting a new round of consultations aimed at forging consensus for a new government. “We can no longer, in any way, shirk the responsibility of proposing practical solutions and timely decisions for reforms that are immediately needed for the survival and progress of Italian democracy and society,” Napolitano, 87, said in a speech to Parliament in Rome after his swearing in.
- Michelin Quarterly Sales Drop as Europe Recession Widens. Michelin & Cie. (ML), Europe’s largest tiremaker, said first-quarter revenue fell 8.1 percent as a recession reducing car sales in its home region widened to hurt demand at bulldozer and military-plane manufacturers. Sales dropped to 4.88 billion euros ($6.36 billion) from 5.3 billion euros a year earlier, Clermont-Ferrand, France-based Michelin said yesterday in a statement. Revenue missed the 4.97 billion-euro average of four analyst estimates compiled by Bloomberg. The tiremaker, reiterating forecasts of “steady” volume and “stable” earnings for 2013, said it may look at reorganizing in the absence of a market recovery. Demand for earthmovers is “falling sharply” in Europe and North America, and sales of farm tractors and defense aircraft are also declining, Michelin said. “If volumes stay at the levels at which they are today, that would imply some European restructuring,” Chief Financial Officer Marc Henry said on a conference call with analysts. “This is under scrutiny of course, but nothing is said yet.”
- Chinese Stocks Slump Most in Three Weeks as Manufacturing Slows. China’s stocks fell, dragging the benchmark index down the most in three weeks, as a gauge of manufacturing in the nation this month trailed estimates. Anhui Conch Cement Co. slid 6.5 percent and Sany Heavy Industry Co. lost 3.2 percent, pacing declines by construction- related companies. China Minsheng Banking Corp. slumped 3.9 percent as financial companies retreated. The preliminary reading of a Purchasing Managers’ Index fell to 50.5 from 51.6 in March, according to HSBC Holdings Plc and Markit Economics. That compared with the 51.5 median forecast of economists. The Shanghai Composite Index (SHCOMP) declined 2.1 percent to 2,194.12 at the 11:30 a.m. local-time break, heading for its biggest loss since March 28. The CSI 300 Index (SHSZ300) fell 2.8 percent to 2,459.33. The Hang Seng China Enterprises Index (HSCEI) retreated 1.8 percent in Hong Kong, taking this year’s drop to 9.1 percent.
- Japan Lawmakers Visit War Shrine After China, S. Korea Protest. A group of 168 Japanese lawmakers visited a shrine seen in Asia as a symbol of the country’s wartime aggression, a day after a similar visit by Finance Minister Taro Aso drew complaints from South Korea and China. The cross-party group made the visit today to coincide with the spring festival at Yasukuni Shrine, Kyodo news agency said, citing an announcement by the lawmakers. The shrine commemorates Japan’s war dead, including World War II leaders convicted by an international tribunal of war crimes.
- Yen Gains as China Manufacturing Growth Slows; Aussie, Kiwi Drop. The yen rose versus all 16 major peers after a private report signaled a slowdown in Chinese manufacturing, underscoring concern the largest Asian economy is faltering and boosting demand for the safest assets.
- Fraga Says He’s Disturbed by Brazil’s Focus on Consumption. Arminio Fraga, Brazil’s former central bank president, is concerned by the government’s push to foster growth by encouraging consumers to spend more on credit. The speed of loan growth in Brazil merits “some monitoring,” Fraga, founder of Gavea Investimentos Ltda., said in remarks at an event organized by the Brazilian-American Chamber of Commerce in New York. Brazil is using state-owned banks aggressively to promote its goals, said Fraga, who was president of Brazil’s central bank from 1999 to 2002. “The excessive emphasis on consumption disturbs me,” Fraga, 55, said. “You’re borrowing a lot now, but time will come that people will have to pay. You need to do some things on the fiscal and monetary front and also pay attention, with a prudential mindset, keeping an eye on what these loan portfolios look like.”
- Rebar Falls for Second Day on Supply Concern, China Flash PMI. Steel reinforcement-bar futures fell for a second day amid concerns that production is too high at local mills and after a preliminary reading of China’s manufacturing in April trailed estimates. The contract for October delivery on the Shanghai Futures Exchange declined by as much as 1.2 percent to 3,605 yuan ($584), before trading at 3,625 at 10:42 a.m. local time. Futures lost 4 percent last week, the biggest weekly decline since Feb. 22.
- Copper, Oil Lead Commodity Decline as China Manufacturing Slows. Copper extended a third day of losses and crude oil dropped, leading declines in commodities, after data showed manufacturing growth was slowing in China, the world’s biggest user of metals and energy.
- STMicro(STM) Sales Forecast Trails Estimates as Wireless Losses Mount. STMicroelectronics NV (STM), Intel Corp. (INTC)’s biggest competitor in Europe, forecast revenue that fell short of analysts’ estimates after demand in the wireless business failed to improve in the first quarter. Second-quarter sales will grow by 3 percent from the previous period, plus or minus 3.5 percentage points, Europe’s biggest chipmaker said yesterday.
- Fresh Bomb Details Revealed. Prosecutors Describe Suspect's 'Calm' Behavior; Charges Could Carry Death Penalty. Dzhokhar Tsarnaev coolly dropped off a homemade bomb in the crowd at the Boston Marathon and then walked away amid the confusion as another explosive set by his brother detonated nearby, federal authorities alleged Monday in charging the teen with a terrorist act that could carry the death penalty.
- Flight Delays as Political Strategy. The FAA furloughs traffic controllers rather than cut other spending. President Obama's sequester scare strategy has been a political flop, but his government keeps trying. The latest gambit is to force airline flight delays until enough travellers stuck on tarmacs browbeat enough Republicans to raise taxes again. This week the Federal Aviation Administration (FAA) began furloughing each of its air-traffic controllers for one day out of every 10 to achieve roughly $600 million in savings this fiscal year. The White House dubiously claims that the furloughs are required by the sequester spending cuts enacted in 2011. Capitol Hill Republicans say the White House is free to make other cuts instead. House Transportation and Infrastructure Chairman Bill Shuster suggests the FAA first take a whack at the $500 million it's spending on consultants, or perhaps the $325 million it blows on supplies and travel.
- China April HSBC Flash PMI Eases, Points to Tepid Recovery. Growth in China's vast factory sector dipped in April as new export orders shrank, a preliminary survey of factory managers showed on Tuesday, suggesting the world's second-largest still faces formidable global headwinds into the second quarter. The flash HSBC Purchasing Managers' Index for April fell to 50.5 from 51.6 in March but was still stronger than February's reading of 50.4. A sub-index measuring new export orders fell to 48.6 in April from 50.5 in March, reflecting weaker global demand as the U.S. economic recovery remains fragile and the euro zone is mired in recession.
- Texas Instruments(TXN) Earnings, Revenue Top Forecasts. Texas Instruments reported first-quarter earnings and revenue on Monday that slightly exceeded analyst expectations as demand for its chips improved following concerns about a troubled global economy.
- A New Tax Could Send Shoppers Back to the Mall. Your Internet shopping addiction could soon face a new tax. The Senate appears ready to ease the restrictions on how states can charge sales tax. Under current federal law, online retailers only collect the tax when they have a physical presence—a store, warehouse or office—inside your state. In a new bill expected on Monday to clear a procedural Senate vote, all online sales would be subject to state sales taxes.
- Netflix(NFLX) Shares Soar After Earnings Beat. Netflix delivered earnings that topped expectations, added more online subscribers and introduced a service that will allow users to stream four movies at the same time. Netflix shares shot up more than 25 percent after the report.
- China PMI Miss Slams JPY-Carry Trades. (graphs)
- Canada Foils "Terror Plot" Involving Attack On New York To Toronto Railroad; Al-Qaeda Linked. (video)
AFP:
- 8 Chinese ships in Japan waters near disputed isles. Eight Chinese government ships entered Japanese territorial waters near disputed islands on Tuesday, the most in a single day since Tokyo nationalised part of the archipelago, the Japanese government said. Japan's coastguard confirmed the vessels had entered waters near the East China Sea island chain, while the government's top spokesman said the flotilla was a one-day record since Tokyo's nationalisation in September.
- U.S. takes $21 mln from Fisker as automaker misses payment. The U.S. Department of Energy took $21 million from cash-strapped Fisker Automotive on April 11 that will go toward repaying nearly $200 million in loans extended to the automaker under a U.S. program to spur advanced vehicle development. "The department recouped the company's approximately $21 million reserve account -- funds that came from the company's sales and investors, not our loan- and will apply those funds to the loan," DOE spokeswoman Aoife McCarthy said on Monday.
- McDonald's(MCD) fined in Brazil for pushing Happy Meals to children. A consumer protection agency in Brazil has taken aim at the Happy Meal, fining McDonald's Corp on Monday for targeting children with its advertising and toys. The Procon agency in the state of Sao Paulo fined the fast-food company 3.2 million reais ($1.6 million), adding fuel to a global debate about fast food and public health.
- Brazil's sluggish economy starts to weigh on ecommerce. Brazilian ecommerce executives used to laugh when asked about the stagnation of Latin America's biggest economy. Not anymore. With inflation eroding consumption in this nation of 194 million people, the economy is casting a shadow over a once-hyped market that recently attracted Amazon, Facebook, Twitter and Netflix.
- EU warns US on bank ‘protectionism’. US plans to force foreign banks to hold more capital are a threat to harmonious global regulation and risk “a protectionist reaction”, the EU commissioner in charge of financial services has warned. Michel Barnier told Ben Bernanke, Federal Reserve chairman, that plans to force higher capital requirements on the US subsidiaries of European banks could lead to retaliation against US banks.
- CFTC’s Gensler says Libor ‘unsustainable’. Libor borrowing rates must be replaced soon as possible as it was “unsustainable” to continue to use them, the top US regulator overseeing a global effort to reform the benchmarks for global financial markets has urged.
- This economic funk won’t go away until the eurozone crisis is fixed. Please make me chaste, but not yet. This famous prayer by St Augustine has been the defining characteristic of the policy response in advanced countries to the economic crisis ever since it began nearly six years ago.
- EU near austerity limit, says Barroso. EC president José Manuel Barroso warns public spending cuts alone will not solve European financial crisis.
- Parcel with powder sent to S. Korean defense minister. A parcel containing a threatening letter and suspicious powder was delivered to South Korean Defense Minister Kim Kwan-jin on Tuesday, ministry officials said, days after hundreds of leaflets threatening him were found amid high tensions with North Korea. "In the parcel addressed to defense minister with no sender name, the ministry found a threatening letter and unidentified powder," the ministry said in a release. The ministry identified the parcel delivery as "an attempted terror" against the minister and formed an emergency team to analyze components of the white powder and trace the sender. The letter was the same leaflet, which were distributed near the ministry in early Friday morning, officials said. It denounced Kim's hard-line stance on North Korea and threatened to "punish" him.
- China's local government financing vehicles will have to repay 3.49t yuan of loans over the next 3 years, citing Shang Fulin, Chairman of the China Banking Regulatory Commission.
- None of note
- Asian equity indices are . to +% on average.
- Asia Ex-Japan Investment Grade CDS Index 112.50 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 90.0 -.25 basis point.
- FTSE-100 futures +.06%.
- S&P 500 futures -.27%.
- NASDAQ 100 futures -.16%.
Earnings of Note
Company/Estimate
- (DFS)/1.12
- (FRX)/.15
- (TRV)/2.02
- (DAL)/.06
- (APD)/1.36
- (UTX)/1.29
- (LCC)/.27
- (LMT)/2.04
- (LXK)/.87
- (WDR)/.61
- (CIT)/.88
- (AKS)/-.12
- (R)/.77
- (GCI)/.35
- (DD)/1.53
- (COH)/.80
- (JCI)/.42
- (RF)/.20
- (WAT)/1.09
- (IDXX)/.82
- (ITW)/.96
- (PCAR)/.68
- (RHI)/.41
- (EW)/.76
- (OII)/.59
- (AAPL)/9.97
- (JNPR)/.22
- (CREE)/.34
- (NSC)/1.17
- (AMGN)/1.84
- (T)/.64
- (VMW)/.69
- (BRCM)/.56
- (OI)/.57
- (SLG)/1.21
- (YUM)/.60
- (PNRA)/1.65
- (EAT)/.69
- (DV)/.82
- (PII)/1.00
8:58 am EST
- The Preliminary Markit US PMI for April is estimated at 53.9.
- The House Price Index for February is estimated to rise +.7% versus a +.65 gain in January.
- The Richmond Fed Manufacturing Index for April is estimated to fall to 2.0 versus 3.0 in March.
- New Home Sales for March are estimated to rise to 416K versus 411K in February.
- None of note
- The Eurozone PMI data, 2Y T-Note auction and the weekly retail sales reports could also impact trading today.
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