Bloomberg:
- ECB Targeted as Blockupy Protesters Descend on Frankfurt. Frankfurt, Germany’s financial capital and the seat of the European Central Bank, is bracing for as many as 30,000 demonstrators to descend on the city for four days of protests against European leaders’ handling of the sovereign-debt crisis. Activists have set up camp on the outskirts of the trade fair grounds to the west of the city, awaiting the arrival of busloads of people from all over the country as well as from abroad, according to Blockupy, an international group that is organizing the blockades. The biggest action is planned for May 31, when the demonstrators plan to “visibly disturb the usual business of the ECB as well as other actors of the crisis regime,” Blockupy said in a statement on its website.
- EU Warns of Uncertainty If CFTC Won’t Delay Swaps Rule. The European Union is urging the U.S. to allow time for international talks before it imposes swaps rules on EU lenders, saying that the current timetable would lead to “huge legal and operational uncertainty.” The European Commission wrote to Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, urging him to extend a temporary exemption for overseas banks, which is due to expire on July 12, according to a copy of the letter obtained by Bloomberg News.
- China Failure to Grow With $1 Trillion Credit Seen as Li Warning. China’s economy is proving less responsive to credit, escalating pressure on Premier Li Keqiang to strengthen the role of private enterprise. The government’s broadest measure of credit rose 58 percent to a record 6.16 trillion yuan ($1 trillion) in January-to-March, when gross domestic product gained 7.7 percent, compared with 8.1 percent a year earlier. Each $1 in credit firepower added the equivalent of 17 cents in GDP, down from 29 cents last year and 83 cents in 2007, when global money markets began to freeze, according to data compiled by Bloomberg. The diminishing returns to lending heighten focus on the need for what the International Monetary Fund said yesterday are “decisive” policy changes in the world’s second-largest economy. Without a refocus away from state-approved projects, Li and President Xi Jinping risk overseeing both a further slowdown in growth and an increase in non-performing loans. “Less efficient and more highly leveraged borrowers have been kept afloat, tying up credit that could be used to generate more growth,” said David Loevinger, former senior coordinator for China affairs at the U.S. Treasury Department. “To boost growth, China needs to channel more financing to its private enterprises, which are both more profitable and less leveraged than their state-owned counterparts.” State enterprises have seen their return on equity fall by half in six years, according to CLSA Asia-Pacific Markets in Hong Kong. The biggest concern from China’s credit surge is the money going to companies and state-run enterprises whose performance is deteriorating, Francis Cheung, head of China-Hong Kong strategy, wrote in a May 9 report.
- China Optimism Declines Among European Companies, Survey Shows. European companies’ optimism for business prospects in China is declining amid slowing growth, rising labor costs, regulatory obstacles and intensified competition, a survey showed. Optimism for future revenue growth among 526 respondents dropped to a four-year low of 71 percent, while 62 percent lack confidence or aren’t sure the government has the resolve to introduce market-driven change, according to a business confidence survey released today in Beijing. It was conducted in March by the European Union Chamber of Commerce in China and Roland Berger Strategy Consultants.
- Asian Stocks Decline as Japanese Exporters Drop on Yen. Asian stocks retreated, with the regional benchmark index heading for its first monthly decline in seven months, as commodities fell and the yen traded near a three-week high. Honda Motor Co. (7267), which gets 46 percent of sales from North America, slid 2.2 percent, on concern a stronger yen will damp the earnings outlook among Japanese exporters. BHP Billiton Ltd. (BHP), the world’s biggest mining company and Australia’s top oil producer, lost 1.3 percent after crude oil and copper futures dropped. National Australia Bank Ltd., the nation’s fourth-biggest lender, fell 0.3 percent, heading for an eighth day of decline, its longest losing streak since November 2010. The MSCI Asia Pacific Index decreased 0.9 percent to 136.77 as of 10:19 a.m. in Tokyo, with all 10 industry groups falling on the gauge, which is poised to close at the lowest level since April 19.
- Brazil Raises Rate to 8% as Inflation Threatens Recovery. Brazil’s central bank accelerated the pace of interest rate increases, as policy makers step up efforts to slow inflation that forestalled the economy’s rebound in the first quarter. The bank’s board, led by President Alexandre Tombini, voted unanimously to raise the benchmark Selic rate 50 basis points to 8.00 percent, matching the forecast of 19 of 57 economists surveyed by Bloomberg. Thirty-eight analysts expected a second straight 25 basis-point increase.
- Rubber Slumps to Three-Week Low as Yen’s Rebound Reduces Appeal. Rubber slumped to the lowest level in more than three weeks, heading for the fourth monthly decline, as a rebound in Japan’s currency against the dollar reduced the appeal of the yen-based futures. The contract for delivery in November fell as much as 3.7 percent to 257.6 yen a kilogram ($2,540 a metric ton) on the Tokyo Commodity Exchange, the lowest level since May 7. The most-active contract traded at 260.7 yen at 10:14 a.m. and lost 0.8 percent this month.
- Rebar Trades Near Lowest in Eight Months on Overcapacity Concern. Steel reinforcement-bar futures traded near the lowest level in more than eight months on concern that overcapacity at Chinese mills means supply will exceed demand. Rebar for October delivery on the Shanghai Futures Exchange fell to as low as 3,422 yuan a ($558) a metric ton, the lowest for a most-active contract since Sept. 10. It traded at 3,436 at 9:58 a.m. local time. Futures have lost 4.6 percent in May and are set for a fourth monthly decline.
- Copper Users Squeezed as Glut Clogs Warehouse Lines: Commodities. At a time when copper stockpiles are rising to the highest in a decade, manufacturers are paying the biggest premiums for the metal in as much as seven years as financing deals lock up supply and extend lines at warehouses.
- Blankfein Leads Bank CEO Pay With $26 Million Deemed as Overpaid. Bankers at Goldman Sachs Group Inc. had a tumultuous 2012. The firm cut 900 jobs, promoted the fewest executives to the exalted post of partner in more than a decade and slashed the portion of revenue set aside for compensation to 38 percent from 42 percent a year earlier. For the man at the very top of Goldman Sachs’s pay pyramid, Chief Executive Officer Lloyd Blankfein, 2012 was his finest year since the boom times of 2007. Blankfein, 58, was awarded $26 million for his work last year, lifting him to No. 1 in the Bloomberg Markets ranking of the best-paid CEOs at North America’s 20 largest financial companies by customer deposits. John Stumpf, who led Wells Fargo & Co. to a record profit of $18.9 billion, ran a distant second, at $19.3 million, Bloomberg Markets magazine will report in its July issue. The pay of the 20 chiefs increased an average of 7.7 percent for 2012 compared with a year earlier, according to data compiled by Bloomberg. The tally is based on salaries, stock, bonuses and long-term incentive pay awarded to the CEOs for 2012. “All of them are being overpaid,” says Eleanor Bloxham, CEO of Value Alliance Co., a board advisory firm in Westerville, Ohio. “The bank boards still don’t have a good handle on how they should be compensating their executives.” Bloxham says directors lean too much on share performance and instead should look at how CEOs manage risk, including capital ratios that measure financial strength.
- Volcker Cautions Federal Reserve May ‘Fall Short’. Former Federal Reserve Chairman Paul Volcker said today the central bank will probably “fall short” by being asked to do too much. “It’s fashionable to talk about a dual mandate, that policy should somehow be directed toward two objectives, of price stability and full employment,” Volcker told the Economic Club of New York. “Fashionable or not, I find that mandate both operationally confusing and ultimately illusory.” “Asked to do too much, for instance to accommodate misguided fiscal policies, to deal with structural imbalances, to square continuously the hypothetical circles of stability, growth and full employment, then it will inevitably fall short,” Volcker said. Those efforts cause it to lose “sight of its basic responsibility for price stability, a matter that is within the range of its influence.” “The Federal Reserve, any central bank, should not be asked to do too much to undertake responsibilities that it cannot responsibly meet with its appropriately limited powers,” Volcker said. He said a central bank’s basic responsibility is for a “stable currency.” “Credibility is an enormous asset,” Volcker said. “Once earned, it must not be frittered away by yielding to the notion that a little inflation right now is a good a thing, a good thing to release animal spirits and to pep up investment.” “The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives,” according to Volcker. “Up today, maybe a little more tomorrow and then pulled back on command. Good luck in that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse.”
- Google’s(GOOG) Motorola to Sell Made-in-Texas Moto X by October. Google Inc. (GOOG)’s Motorola Mobility handset unit plans to unveil a new smartphone called Moto X by October, stepping up efforts to gain share from Apple Inc. (AAPL) in the market for handheld hardware.
- Mexico Housing Bust Bruises Investors, Buyers. Hardly anyone turns up nowadays at a Homex sales center for low-income homes in this dusty town north of Mexico City. On a recent Saturday, a banner promising "well-being" flapped in the wind near a sign that read "a new life awaits you." Even the lone saleswoman on duty, Carolayn León, says she no longer believes in her employer after several missed paychecks. She isn't the only one who has lost faith. Home buyers and investors are turning their backs on Mexico's low-income housing darlings, bringing a government-fueled boom that lasted more than a decade to a screeching halt. Scores of new homes in far-flung communities sit empty, while banks have canceled credit lines to some of the country's biggest housing companies.
- Latin America Boom Starts to Fade. Slowdown in China, a Major Commodities Importer From the Region, Drags on Growth; Xi to Visit.
- Blackstone(BX) Weighs Bigger SAC Withdrawal. SAC Capital's largest outside investor, Blackstone Group, is planning to withdraw close to $400 million from the embattled hedge-fund firm, or potentially twice as much as was expected earlier this month.
- Currencies Cave to Commodity Dive. Aussie Dollar, Others Start to Tumble as Investors Bet on Sustained Price Declines for Raw Materials. Currencies of the world's biggest commodity exporters are plumbing fresh lows, the latest sign that investors are betting on a sustained decline in prices of oil, iron ore, copper and other raw materials.
- Henninger: Obama's Dangerous Confusions. When the President speaks on national security, it is hard to distinguish between personal belief and political calculation.
- Tea Party groups file lawsuit over IRS targeting. A Washington advocacy group filed a lawsuit on Wednesday against the IRS and top Obama administration officials on behalf of 25 Tea Party-related groups, marking the biggest lawsuit to date over the tax agency's practice of targeting conservatives for additional scrutiny.
CNBC:
- China's Grab of US Hogs Stokes Interest on Hill. China's largest acquisition to date of a U.S. company, Smithfield Foods, raised eyebrows on Wednesday among market watchers who question China's interest in taking possession of one of America's largest food producers.
- Flipping Homes Back To 2005 Levels. (graph)
New York Times:
- China’s Food Play Extends Its Reach, Already Mighty. If you dined on tilapia recently, chances are it came from China. And that artificial vanilla you just used to make cookies? It, too, may have made the same long journey to your kitchen in the United States. A growing amount of food commonly consumed by Americans — ranging from canned tuna and mandarin oranges to fresh mushrooms and apple juice — is now being imported from China. By the end of last year, the United States imported 4.1 billion pounds of food products from China, according to the Agriculture Department.
Reuters:
- Moody's downgrades Alcoa(AA), sees headwinds for primary metals. Moody's Investors Service downgraded aluminum producer Alcoa Inc. on Wednesday, citing weak aluminum prices and a tough market for the company's primary metals business. Moody's cut Alcoa's senior unsecured debt ratings to Ba1 from Baa3, and assigned a corporate family rating of Ba1. It said the firm's rating outlook is stable.
- BOJ's Kuroda: will reduce JGB volatility to lower L/T yields. Bank of Japan Governor Haruhiko Kuroda said on Thursday the central bank will try to reduce bond market volatility as much as possible to apply strong downward pressure on long-term yields.
- REFILE-Lawmaker asks US Justice Dept to investigate JPMorgan(JPM) power trading. A U.S. Congressman on Wednesday called on the Department of Justice to investigate JPMorgan Chase & Co's power trading in Michigan, as the Federal Energy Regulatory Commission (FERC) considers whether to sanction the firm.
- Buffett pays $5.6 bln for Vegas utility, bulks up in West. Berkshire's MidAmerican Energy Holdings Co said on Wednesday it will buy NV Energy for $23.75 per share, a 23 percent premium to NV's Wednesday closing price. NV Energy shares rose to $23.90 in after-hours trading on Wednesday.
- No saviour in sight as world credit cycle rolls over. This may be as good as it gets for the world economy. The HSBC index for the global business cycle hit a three-year high around Easter, and has since rolled over.
- Francois Hollande tells European Commission it can't 'dictate' to France. Francois Hollande has warned the European Commission not to “dictate” orders on how France should run its economy after the Brussels executive called for urgent eurozone reforms to avert a “social emergency”.
- France must reform or the euro will die. Yes, there were sighs of relief on Wednesday as the European Commission stepped back from hitting eurozone countries with fines for their failure to meet targets to cut public spending. Behind the cover of easing up on austerity, the commission flexed new European Union powers to enforce economic reform and France is in its sights.
- South Korea's Hyun Says Japan's Economic Policies Fragile. South Korean Finance Minister Hyun Oh Seok described policies being promoted by Japanese Prime Minister Shinzo Abe as "a fragile sand castle," citing Hyun in a Q&A session at an OECD meeting in Paris. Hyun says quantitative easing without improvement in economic fundamentals doesn't support sustainable growth. Says Japan's easing brings adverse effects to region, including more exchange rate volatility.
- U.S. to Collect Anti-Subsidy Duty on China Shrimp. The U.S. will collect anti-subsidy duty of 5.76% on imports of frozen shrimp from China, citing a preliminary decision announced by the U.S. Dept. of Commerce.
- Beijing to Take Measures to Limit Home Prices. China's Beijing will likely cap home prices on a "larger scale" in 2H.
- China Railway Corp. Wants Debts Waived. China Railway Corp. officials have been reaching out to the State Council and asking to have its liabilities waived, citing a person close to the company. The company has total liabilities of 2.84t yuan by the end of March, according to its bond prospectus.
SunTrust Robinson:
- Rated (BMY) Buy, target $55.
- Rated (LLY) Buy, target $63.
- Rated (PFE) Reduce, target $27.
- Asian equity indices are -2.0% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 112.50 +5.5 basis points.
- Asia Pacific Sovereign CDS Index 94.50 +3.75 basis points.
- FTSE-100 futures +.06%.
- S&P 500 futures +.10%.
- NASDAQ 100 futures +.01%.
Earnings of Note
Company/Estimate
- (JOY)/1.56
- (BIG)/.61
- (COST)/1.03
- (SAFM)/.71
- (PLL)/.73
- (CPRT)/.49
- (PANW)/.05
- (SPLK)/-.06
- (OVTI)/.21
- (ESL)/1.25
- (GES)/.08
- (JOSB)/.34
8:30 am EST
- 1Q GDP is estimated to rise +2.5% versus a prior estimate of a +2.5% gain.
- 1Q Personal Consumption is estimated to rise +3.3% versus a prior estimate of a +3.2% gain.
- 1Q GDP Price Index is estimated to rise +1.2% versus a prior estimate of a +1.2% gain.
- 1Q Core PCE is estimated to rise +1.2% versus a prior estimate of a +1.2% gain.
- Initial Jobless Claims are estimated at 340K versus 340K the prior week.
- Pending Home Sales for April are estimated to rise +1.5% versus a +1.5% gain in March.
- Continuing Claims are estimated to rise to 2955K versus 2912K prior.
- Pending Home Sales for April are estimated to rise +1.5% versus a +1.5% gain in March.
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -500,000 barrels versus a -338,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -500,000 barrels versus a +3,015,000 barrel gain the prior week. Distillate inventories are estimated to fall by -450,000 barrels versus a -1,052,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by +.3% versus a -.7% decline prior.
- None of note
- The 7Y T-Note auction, Japan CPI report, China Manufacturing PMI report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (FLEX) analyst day could also impact trading today.
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