Bloomberg:
- Europe's Debt Frenzy Undeterred by Record Recession: Euro Credit. Investors are snapping up long-dated bonds from Europe's high debt and deficit nations even as prices reach the most expensive levels since 2010 and the region's deepening recession threatens to hamper deficit-reduction plans. Bonds maturing in more than 10 years from Greece, Spain, Portugal, Italy and Ireland are the best performers in the world this quarter. "At the moment, the power of monetary policy and the hunt for yields are outweighing the growth factors," said Joost van Leenders, who helps oversee $657 billion as a strategist at BNP Paribas Investment Partners in Amsterdam. "We are not sure how much patience the markets have. Growth prospects in Europe are really a problem and a risk for government finances, so we don't see that as a positive for markets. The rally has gone a bit too far."
- Yen Climbs as Japan Signals Negative Impact From Further Losses. The yen climbed versus all 16 major peers after Japan’s Economy Minister Akira Amari said further losses in the currency would threaten to negatively affect people and the government’s job is to minimize that. The yen retreated from near its weakest in more than four years versus the dollar after Amari said yesterday there’s speculation the Japanese currency’s past strength has “been corrected a lot.”
- China Small-Cap Bubble Seen Bursting by Chen. Chen Li, the UBS AG strategist who predicted the tumble in China’s smallest shares two years ago, says the companies are poised to retreat again after valuations rose to the biggest premium over larger stocks since 2010. The smaller-company gauge trades for 4.6 times net assets versus 1.7 for the CSI index, the widest gap since June 2010, data compiled by Bloomberg show.
- China’s Aluminum Producers Seen Having to Make Cuts Amid Surplus. China, the world’s largest producer of aluminum, will have a “manageable” surplus of the metal for the next five years if companies cut back 4 million to 5 million metric tons of production, according to researcher CRU. China has cut output 1 million metric tons this year and will probably reduce it 2 million tons by 2015, with about 24 million tons produced this year, according to Marco Georgiou, an analyst at CRU in London. Aluminum fell 3.8 percent this year in China and 10 percent in London.
- Asia Stocks Head For Highest Close in Nearly Five Years. Asian stocks rose the first time in three days, with the regional gauge heading for the highest close since June 2008, after U.S. consumer sentiment topped estimates and Tokyo Electric Power Co. led Japanese utilities higher. Li & Fung Ltd., a supplier of toys and clothing that gets 63 percent of its sales in the U.S., gained 2.2 percent in Hong Kong. Osaka Gas Co. advanced to the highest in more than five years after the U.S. conditionally approved a Texas liquefied natural gas project partially owned by the energy supplier. Tokyo Electric Power soared 14 percent after the Yomiuri newspaper said it will apply to restart reactors. The MSCI Asia Pacific Index gained 1.3 percent to 144.28 as of 10:13 a.m. in Hong Kong.
- Silver Plunges to Lowest Since 2010 as Gold Drops for Eighth Day. Silver plunged to the lowest level since September 2010, sending its ratio to gold to the highest in 33 months, while bullion extended the longest slump in four years as investment holdings contracted and stocks rallied. Silver for immediate delivery tumbled as much as 7 percent to $20.6985 an ounce, and was at $21.345 at 11:32 a.m. in Singapore. The ratio surged to 64.89, the highest since August 2010. Gold lost as much as 1.5 percent to $1,338.85 an ounce, the lowest price since April 18, and was at $1,347.23.
- Copper Declines for First Day in Three on China Demand Concerns. Copper dropped for the first time in three days on speculation that China will continue to curb its property market, reducing demand from the world’s biggest consumer. Tin, lead and zinc also fell. Copper for delivery in three months on the London Metal Exchange fell as much as 0.6 percent to $7,260 a metric ton and was at $7,265 at 10:45 a.m. in Tokyo. The metal retreated 1 percent last week. Futures for delivery in July on the Comex were down 0.8 percent at $3.2970 per pound. China’s new-home prices rose last month in 68 of 70 cities tracked by the government, indicating Premier Li Keqiang will need to maintain efforts to cool the property market even as economic growth slows. The nation’s policy makers are trying to avoid property bubbles and make homes more affordable while bolstering an economy that lost steam in the first quarter. “Any measures to cool down China’s property market would be negative for metals,” Hwang Il Doo, a senior trader at Korea Exchange Bank Futures Co. in Seoul. An increase in LME stockpiles and an outflow of funds to stock markets also weighed on copper, he said. Copper stockpiles monitored by the LME rose 0.9 percent to 629,950 tons, the highest since Aug. 20, 2003, data from the bourse showed on May 17.
- Intelligence Panel Head Says Justice’s AP Probe ’Large Dragnet’. The Justice Department’s subpoena of Associated Press phone records appears to be “a large dragnet” that lacked a clear focus, Michigan Republican Representative Mike Rogers said. “It doesn’t appear to me to be appropriate,” Rogers said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. Rogers’ criticism of the Justice Department is significant because the lawmaker is chairman of the House Intelligence committee and a former FBI agent who had asked for an investigation into leaks of national security information.
- Obama's Counsel Told of IRS Audit Findings Weeks Ago. The White House's chief lawyer learned weeks ago that an audit of the Internal Revenue Service likely would show that agency employees inappropriately targeted conservative groups, a senior White House official said Sunday. That disclosure has prompted a debate over whether the president should have been notified at that time.
- Embassy Threats Grow in Mideast. The U.S. is seeing a spike in al Qaeda-related terror plots and threats against its embassies in Libya, Yemen and Egypt, say current and former U.S. officials citing domestic and foreign intelligence reports. The threats against U.S. missions in Tripoli and Yemen's capital, Sana'a, are believed to involve bomb plots by Sunni extremists and perhaps al Qaeda-linked individuals, and have set off alarms among U.S. officials still shaken by last September's attack on a diplomatic outpost in Benghazi, Libya.
- Senate Launches Pension-Sale Probe. A Senate committee launched an investigation of a controversial business in which retirees sell pieces of their future pension income to investors for a lump-sum cash payment.
- Criminal Charges Weighed Against SAC. Hedge-Fund Company Has Discussed Alternatives Such as Deferred-Prosecution Agreement. U.S. prosecutors are considering possible criminal charges against SAC Capital Advisors LP as a result of the government's insider-trading investigation of the hedge-fund firm, according to people familiar with the matter. The move came before the company told clients Friday that it will no longer provide "unconditional" cooperation with the multiyear probe of SAC and billionaire founder Steven A. Cohen. The firm didn't tell clients the reason for the reversal.
- Employers Eye Bare-Bones Health Plans Under New Law. Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.
- Oil Out of Sync With Market Forces. Prices of many commodities are down this year, but U.S. oil futures have rallied. Skeptics say the mismatch is a sign of trouble.
- China Property Gains Defy Government Plans. Rapid Rise in Prices Comes Despite Beijing's Efforts to Keep Homes Affordable for First-Time Buyers. Surging credit has kept China's real estate-sector humming despite a renewed attempt by the government to bring prices under control, supporting short-term economic growth but risking a destabilizing decline in prices down the line.
- Syria Sweeps Into Rebel Stronghold. Syrian government forces, backed by members of Lebanese militant group Hezbollah, launched a sweeping operation Sunday to capture a rebel stronghold near the Lebanese border, according to Syrian state media and activists opposed to the regime. Taking the town of Qusayr, southwest of the city of Homs, would bolster recent gains by regime forces in central Syria and around the capital, Damascus. It also could further embolden Syrian President Bashar al-Assad, who told an Argentine newspaper over the weekend that his fate would be decided in elections scheduled for next year.
- Big Government Loses Control. Tea party and other groups use social media to spread the news about IRS abuse world-wide. What to make of the political scandals that are dominating the headlines and forcing the Obama administration into Nixonian damage control? Technology is finally doing to big government what it has done to big business, big media and other institutions that once could operate with nearly full control over information. The government is losing the ability to manipulate information to avoid accountability.
Marketwatch.com:
- Too big to fail is now bigger than ever: Andy Xie. The flawed global financial system essentially holds all major governments hostage. Whenever a crisis happens, the policy priority is to stabilize the financial system for short-term economic stability. This tends to favor TBTF financial institutions. Every crisis makes the problem bigger.
- Republicans link IRS scandal, health reform. “Just think about the fact that it’s the IRS that will be responsible for enforcing many of these regulations. If we’ve learned anything this week, it’s that the IRS needs less power, not more,” said Rep. Andy Harris of Maryland, who delivered the Republican response.
Fox News:
- Top Obama adviser stakes out defiant defense on IRS, Benghazi, AP scandals. A top White House adviser staked out a defiant defense Sunday on a series of scandals that have hit the Obama administration, going so far as to say it was an “irrelevant fact” where the president was the night of the Benghazi terror attacks and saying the Obama administration wouldn’t cooperate in “partisan fishing expeditions” over IRS officials targeting Tea Party groups. Dan Pfeiffer went on five Sunday talk shows where he tried to reverse the damage done to the Obama administration this week by a series of scandals. On “Fox News Sunday” he tried to hammer home that the president only heard that the IRS unfairly targeted Tea Party groups “when it came out in the news.”
- China April Housing Inflation Quickens. China's housing inflation quickened in April, marking the fourth consecutive year-on-year rise and challenging policymakers who are trying to cool record home prices while supporting economic expansion. Average new home prices rose 4.9 percent last month from a year ago, after a year-on-year increase of 3.6 percent in March, according to Reuters calculations from data released by the National Bureau of Statistics (NBS) on Saturday. Rising home prices have reignited concerns about property inflation, adding to pressure on policymakers who are struggling to curb house prices and still spur a strong economic recovery. "The market expectations on rising home prices have not changed thoroughly and the property tightening campaign is still at a critical stage to strictly enforce (curbing measures)," Liu Jianwei, a senior statistician at the NBS, said in a statement.
- Bernanke’s Testimony Critical to Oil Prices. The U.S. dollar and its reaction to the Federal Reserve Chairman Ben Bernanke's Congress testimony on Wednesday will prove central for crude oil price direction this week, according to CNBC's weekly survey of market sentiment.
Zero Hedge:
Business Insider: IBD:
San Francisco Chronicle:
- Gun control: Cartridge ID law to take effect. A hotly contested gun-control law that was passed in 2007 is finally ready to be implemented, Attorney General Kamala Harris said Friday: a requirement that every new semiautomatic handgun contain "micro-stamping" technology that would allow police to trace a weapon from cartridges found at a crime scene. The law, signed by then-Gov. Arnold Schwarzenegger, made California the first state to require micro-stamping, which engraves the gun's serial number on each cartridge. But the legislation specified that it would take effect only when the technology was available and all private patents had expired. The gun owners' group Calguns Foundation tried to forestall the law at one point by paying a $555 fee in an attempt to extend a patent held by the inventor, who wanted it to lapse. Gun manufacturers said the technology was expensive and ineffective, and a National Rifle Association lawyer has threatened a lawsuit. But at a Los Angeles news conference Friday, Harris announced that micro-stamping had cleared all technological and patenting hurdles and would be required on newly sold semiautomatics, effective immediately.
Washington Post:
- A rare peek into a Justice Department leak probe. When the Justice Department began investigating possible leaks of classified information about North Korea in 2009, investigators did more than obtain telephone records of a working journalist suspected of receiving the secret material. They used security badge access records to track the reporter’s comings and goings from the State Department, according to a newly obtained court affidavit. They traced the timing of his calls with a State Department security adviser suspected of sharing the classified report. They obtained a search warrant for the reporter’s personal e-mails.
- Market Neutral Hedge Fund Exposure Nears 2012 High: BAML. Market Neutral hedge funds increased market exposure to 16% net long, approaching the 2012 high.
Reuters:
Financial Times:- Bundesbank says France must take deficit cuts seriously. Bundesbank
President Jens Weidmann says France must take deficit cut rules
seriously to reduce budget deficits. Weidmann points out that Germany
and France have special responsibilities in the eurozone.
France has a special responsibility as a euro zone heavyweight to take deficit reduction rules seriously, even though its budget deficit is above target, Bundesbank President Jens Weidmann said in an interview published yesterday. Weidmann told the Bild am Sonntag newspaper that the credibility of the new euro zone rules would be hurt if their flexibility were pushed to the limit right at the start. “The economic developments in some countries have indeed been weaker than expected and the European rules offer in such cases a certain amount of flexibility,” Weidmann said when asked about Italy, France and Slovenia getting more time to fulfill the stability criteria. “France, but also Germany, has a special responsibility, as heavyweights in the euro zone, to take seriously the new deficit reduction rules created last year to reduce budget deficits.” Weidmann noted that France’s budget deficit was still “far above 3 percent.”
- Analysis: High speed trading a stiff challenge for U.S. regulators. Financial trading in world markets has grown so lightning-fast that effective regulation is growing tougher by the second, increasing the threat of crashes sparked by hoaxes, electronic glitches or yet-unknown causes. The latest alarm was triggered by a fake tweet saying that the White House was bombed, prompting a U.S. market nosedive that ended minutes later when the Associated Press said its Twitter account had been hacked. In 2010 U.S. stocks plunged in a "flash crash" following aggressive sales of stock-index futures by a mutual fund.
- Yahoo's(YHOO) board approves $1.1 billion Tumblr acquisition: WSJ. Yahoo Inc's board has approved a deal to buy blogging and social networking site Tumblr for $1.1 billion in cash, the Wall Street Journal cited people familiar with the matter as saying on Sunday.
- Portugal’s banks fear ‘Cyprus virus’. Portugal’s top bankers have called on Europe’s leaders to stop “playing with fire” and moderate their stance towards the eurozone periphery, or risk instilling alarm among bank depositors in future. In separate interviews, the heads of the country’s two biggest banks – Millennium BCP and Banco EspÃrito Santo – said they were concerned that the precedent set by Europe’s treatment of Cyprus’s recent troubles had increased nervousness across the eurozone to dangerous levels.
- Meet the man who is betting against China. Carson Block, the founder of Muddy Waters Research, believes that China’s banks hold more toxic assets than Western peers did ahead of the 2008 financial crash. He is listened to by institutional investors, regulators and politicians but he rarely speaks publicly. Last week, his analysis of Standard Chartered’s exposure to China caused a tremble in its share price and its backers to leap to the bank’s defence. Carson Block has broken his silence this weekend to reveal his fears for the global economy. The secretive fund manager said the risks within China’s banking system are more severe than those in Western financial institutions before the crisis.
- France has been ignoring its problems, now the chickens are coming home to roost. It is too early to be sure that the UK economy is finally emerging from the doldrums but the early signs look promising.
- German SPD to Introduce Referendum Law Next Month. Germany's Social Democratic Party may push for a new law on country-wide referendums. Draft law due to be debated in mid-June allows for referendum to repeal legislation already passed in parliament. Chancellor Angela Merkel's CDU/CSU opposed the introduction of country-wide referendums.
- EU's Barnier Says ESM Is Last Resort. The ESM will intervene to directly recapitalize euro-area banks only after lenders have exhausted all alternatives, citing an interview with European Commissioner Michel Barnier. Barnier says alternatives include imposing losses on uninsured deposits as in Cyprus.
Apple Daily:
- Hong Kong Competitiveness Waning on Possible Bubble. Hong Kong economy shows signs of a possible bubble because of its high dependency on financials and real estate industries, citing the latest Chinese cities competitiveness report from the Chinese Academy of Social Sciences.
- BOC President Wants Lending-Rate Floor Canceled. Bank of China Ltd. President Li Lihui suggested that China cancel the floor on lending rates and let banks price credit risk, citing Li's speech at a forum yesterday.
- China faces "relatively large pressures" from capital inflows and yuan appreciation, citing Ji Zhihong, an official at the research bureau of the People's Bank of China.
- China May Expand Property Tax Trial This Year. China may expand property tax trail to several new cities this year, citing people familiar with the matter.
- China Needs Restructuring for Outstanding Debt. China should proactively push forward restructuring of banks' outstanding debt to eliminate possible "external risks," Liu Yuhui, a researcher at the Chinese Academy of Social Sciences, writes in a commentary. China's total debt-to-GDP ratio rose by nearly 60 percentage points between 2009 and 2012, according to the commentary. Debt ratio is still rising as the social financing growth in 1Q was 12 percentage points faster than nominal GDP, Liu wrote. U.S. monetary policy may normalized, putting pressure on capital markets in the Asia-Pacific, he said.
Weekend Recommendations
Barron's:- Bullish commentary on (C), (S), (R) and (RIG).
- Asian indices are unch. to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 101.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 84.75 unch.
- FTSE-100 futures +.28%.
- S&P 500 futures +.05%.
- NASDAQ 100 futures -.01%.
Earnings of Note
Company/Estimate
- (CPB)/.56
- (URBN)/.29
- None of note
- None of note
- The Fed's Evans speaking, Fed's Williams speaking, Chicago Fed Nat Activity Index for April, RBA minutes, Stifel Nicolaus Internet/Media/Communications Conference, UBS Healthcare Conference and the UBS Oil & Gas Conference could also impact trading today.
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