Today's Headlines

Bloomberg:

• Greek Bonds Drop ;a 7th Day; Bund Spread Widens on Budget Woes. Greek two-year notes slid for a seventh day and the 10-year yield premium to German bunds jumped to the most since the euro’s debut after the nation’s finance minister failed to dispel concern that the government is doing enough to avoid a default. The decline drove the yield on the two-year note up as much as 130 basis points, bringing the increase since the streak began to 367 basis points. The 10-year yield climbed 41 basis points, or 442 basis points more than bunds, the benchmark for borrowing in Europe, based on Bloomberg generic prices. Greek stocks fell and credit-default swaps on the nation’s debt rose to a record. “Greece continues to look like a slow-motion train crash,” Steve Barrow, head of Group of 10 currency strategy at Standard Bank Plc in London, wrote in a report. “The crash has not occurred yet but it is coming. Efforts to avoid a crash seem doomed to failure, whether it’s emergency loans or some other initiative. Bond spreads are likely to widen much further.” Papaconstantinou said yesterday the nation’s 2009 deficit will be at least 12.9 percent of gross domestic product, up from the previous estimate of 12.7 percent. The EU’s limit is 3 percent. The cost of insuring against a default on Greek government bonds rose above that for Iceland for the first time. Credit- default swaps linked to Greek sovereign debt climbed 53 basis points to a record 468.5 today, according to CMA DataVision prices.
  
• Mortgage Rates on 30-Year U.S. Loans Jump to 5.21%. U.S. mortgage rates jumped to the highest level in almost eight months, increasing borrowing costs for buyers and signaling a threat to the housing market’s recovery as government efforts to spur demand end. Rates for 30-year fixed loans rose to 5.21 percent for the week ended today from 5.08 percent, mortgage finance company Freddie Mac said in a statement. That’s the highest rate since the week ended Aug. 13. The Mortgage Bankers Association’s index of mortgage applications fell 11 percent in the week ended April 2. The portion of refinancings dropped 17 percent. Applications to purchase a home increased 0.2 percent.
  
• Hedge Fund Rules Are Fair to U.S., EU's Barnier Tells Geithner. Hedge-fund rules proposed by the European Union aren’t protectionist, the bloc’s financial services chief told U.S. Treasury Secretary Timothy F. Geithner. Michel Barnier, the EU’s financial services commissioner, said the law wouldn’t shut out U.S. funds and managers from the 27-nation region, according to a copy of a letter to Geithner obtained by Bloomberg News.
• China on 'Treadmill to Hell' Amid Bubble, Chanos Says. China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos. The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV. China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.” Chinese state and local governments are among the most leveraged to property-related borrowings and the nation will “ultimately” have to nationalize a lot of the bad loans that will arise from the end of the bubble, Chanos said.
• Jobless Claims in U.S. Increased Heading Into Easter. More Americans unexpectedly filed claims for jobless benefits last week, a jump that may in part reflect difficulty in seasonally adjusting the data ahead of the Easter holiday. Initial jobless applications increased by 18,000 to 460,000 in the week ended April 3, Labor Department figures showed today in Washington. The week leading up to Easter and the two weeks that follow are traditionally a volatile time for claims, a Labor Department analyst said, making it difficult to discern the underlying trend in applications.
• ECB Keeps Rates at 1% on Greek Crisis 'Wait and See'. The European Central Bank left interest rates at a record low as the Greek fiscal crisis complicates its withdrawal of emergency stimulus measures. The Frankfurt-based ECB kept its benchmark interest rate at 1 percent, as predicted by all 62 economists in a Bloomberg News survey. A separate poll shows the rate may stay there until the first quarter of next year.
• Wall Street Bonuses Should Be Taxed More, NYC Comptroller Says. New York City and state officials should consider higher taxes on Wall Street bonuses in the face of deficits and shrinking revenue, Comptroller John Liu said. Governor David Paterson and Mayor Michael Bloomberg were wrong to rule out tax increases on bonuses to employees of banks and financial companies that received federal bailout funds, Liu said at a Manhattan breakfast sponsored by Crain’s New York Business. “We’re not at a point in time where it’s prudent to exclude any options,” Liu said, citing Paterson’s prediction of a $9 billion deficit for the state and Bloomberg’s $4 billion projected city budget gap.
• Gap(GPS), Saks(SKS) Lead Largest Monthly Sales Gain in a Decade. Gap Inc., Saks Inc. and TJX Cos. posted March sales gains that exceeded analysts’ estimates as retailers benefited from an early Easter and the economic recovery to report the biggest increase in a decade.Easter fell eight days earlier this year on April 4, which drew more purchases into the reporting period. That produced more favorable comparisons with last March, when the economy was in the depths of the recession and the Standard & Poor’s 500 Index fell to a 12-year low, said David Schick, a retail analyst for Stifel Nicolaus & Co. in Baltimore. “It certainly doesn’t finish making the case that we are in recovery, because of the easy comparison,” Schick said in a telephone interview. “What we need to see is healthy numbers against comparisons that aren’t as easy.” March sales at 31 chain stores rose 9 percent, the biggest one-month gain since March 1999, the New York-based International Council of Shopping Centers said today. The early Easter accounted for 4 to 5 percentage points of the gain, said the trade group. April sales may be unchanged or fall as much as 3 percent, the council said.

Wall Street Journal:

• Mutual Funds Often Unclear on Their Use of Derivatives. The use of derivatives by mutual funds has caught the eye of regulators, concerned that these complex instruments pose risks that aren't fully understood. It's safe to say that many investors, and even their advisers, can't easily determine the extent to which the funds they choose are using derivatives, including futures, options, swaps and other instruments. While more often associated with hedge funds and the more exotic types of exchange-traded funds, such as those that use leverage, derivatives are in fact employed to some extent by many different types of mutual funds.

Business Week:

• Chongqing Airport, Railways Mean Hard Landing for China's Wen. “Look at the scale of this,” said Li Chongyi, an engineer, as he watched a 4-kilometer line of trucks and earth movers busy quadrupling the size of Chongqing’s Jiangbei International Airport. “This will take years.” Jiangbei, which begins work on a third terminal when the second is done next year, is one of 15 trillion yuan ($2.2 trillion) in projects begun in 2009, almost twice the economy of India. The projects and their loans are stymieing efforts by Premier Wen Jiabao to curtail investment as inflation rose to 2.7 percent in February, a 16-month high. Failure to rein in local government spending could push inflation to 15 percent by 2012, said Victor Shih, a political economist at Northwestern University who spent months tallying government borrowing. “Increasingly the choice facing the government is between inflation or bad loans,” said Shih, author of the book “Finance and Factions in China,” who teaches political science at the university in Evanston, Illinois. “The only mechanism for controlling inflation in China is credit restriction, but if they use that, this show is over -- a gigantic wave of bad loans will appear on banks’ balance sheets.” Attempts to curb borrowing by raising interest rates would boost debt-servicing costs for local governments. At the same time, tightening credit may stall projects, triggering “a build-up of bad loans,” the Basel, Switzerland-based Bank for International Settlements said in a quarterly report in December. Nomura Holdings Inc., Japan’s biggest brokerage, estimates local government projects started last year totaled up to 10 trillion yuan -- 2.5 times the official 4 trillion yuan stimulus plan. Should the boom end in a property-market collapse, even those stocks tied to the local government projects will be affected along with most other industries, said Shanghai-based independent economist Andy Xie, formerly Morgan Stanley’s chief Asia economist. “Corporate profits are very much driven by the property sector,” said Xie. “The largest sectors will be hit hard, especially banks and insurance companies.” “Policy makers may need to start thinking about how to handle the aftermath of the bust,” said Nomura’s Sun.

CNBC:

• Tech Industry Recovery Under Way: Forrester.
• 'Distressed' Home Sales Levels Near 2009 Peak. Sales of foreclosed or other "distressed" homes are flirting with the peaks of the housing crisis in early 2009 when heavy inventory was pressuring home prices lower, according to First American CoreLogic. Distressed sales accounted for 29 percent of all sales in January, the highest since April 2009 and just shy of the 32 percent seen in January 2009, the mortgage data company said Thursday.

MarketWatch:

• After Shorting Subprime, Eisman Says Short AIG(AIG). Equity holders could lose $23 billion, FrontPoin's Eisman estimates.

NY Times:

• Apple(AAPL) Unveils Ad Platform and Phone Software.

Business Insider:

• Think This Market is Boring? Here Are 14 Crises That Could Blast The Complacency Out Of The Market.

zerohedge:

• S&P Threatens Greece With Downgrade If Bond Spreads Are Not Quickly Reduced.

Wisconsin Journal Sentinel:

• Tax Shock is Just Start for Obamacare.

Lloyd's List:

• Dry Bulk Newbuilding Deliveries Hit Record High. DELIVERIES of newbuilding dry bulk carriers hit a record high of 190 vessels in the first three months of the year, equivalent to two ships entering service every day.

CBS News:

• Qaeda Group Threatens to Attack World Cup. The North African terror group al Qaeda in the Islamic Maghreb has threatened to attack this summer's World Cup games in South Africa. "How amazing could the match United States vs. Britain be when broadcasted live on air at a stadium packed with spectators when the sound of an explosion rumbles through the stands, the whole stadium is turned upside down and the number of dead bodies are in their dozens and hundreds, Allah willing," reads a statement the group published in a recent issue of the Jihadi online magazine Mushtaqun Lel Jannah (Longing to Paradise)."Al Qaeda, who managed to deliver 50 grams of explosives to the Detroit plane, after infiltrating dozens of U.S. security barriers, al Qaeda, who enabled brother martyr Abul Kheir (Abdullah Asiri) to get into the palace of Mohammed bin Nayef, al Qaeda, who humiliated the world's greatest intelligence apparatus through the operation of Mujahid Abu Dujana al-Khorassani (Humam al-Balawi), who shattered the pride of the CIA and the Jordanian intelligence combined," the statement says. "Al Qaeda will have a presence in the games, Allah willing." In addition to the U.S. and U.K. teams, the teams representing France, Germany and Italy are also on the group's list of targets. "All those countries are part of the Zionist-Crusader campaign against Islam," the statement says. The group says they will use some undetectable explosive that will be able to circumvent security checkpoints at the games. The statement appears to directly challenge FIFA's president Joseph Blatter. "All the security checks and X-ray machines that America will be sending after reading this article would not be capable of detecting how those explosives made it into the stadium and that for a simple reason that we will be announcing in due course," the statement says. "So are your preparations for this event up to scratch, Mr. Platter? (sic)"

cnet:

• iPad Sold Out at Best Buy(BBY) Nationwide. Best Buy has sold out of the iPad at all 673 of its U.S. stores with Apple shops. In contrast, Apple stores are maintaining stock. "We expect to have iPad inventory replenished at these locations by Sunday," said company spokeswoman Paula Baldwin.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 28% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -14 (see trends).
• 55% Oppose Limits On U.S. Nuclear Response To Attacks. Fifty-five percent (55%) of U.S. voters oppose President Obama’s new policy prohibiting the use of nuclear weapons in response to chemical or biological attacks on the United States. A new Rasmussen Reports national telephone survey finds that just 25% of voters agree with the president’s decision to rule out a nuclear response if a non-nuclear country attacks America with chemical or biological weapons. Only 31% favor a reduction in the number of nuclear weapons in the U.S. arsenal. Fifty-three percent (53%) oppose any such reduction.

Politico:

• President Obama, Dmitry Medvedev Sign Strategic Arms Reduction Treaty. Making a down payment on his goal of a nuclear-arms-free world, President Barack Obama signed a new treaty with his Russian counterpart Thursday to reduce nuclear arsenals on both sides by about one-third. In a gilded hall here at a castle in Prague’s presidential complex, Obama and Russian President Dmitry Medvedev put their signatures on a new Strategic Arms Reduction Talks treaty that calls on each country to reduce its number of warheads and long-range missiles. Obama also predicted the U.S. Senate would ratify the treaty, despite some Republicans' objections that it goes too far in reducing American military might. China and Russia are the last nations at the negotiating table that have not agreed to move forward with tougher sanctions against Iran. Obama will meet one on one with the Chinese leader during the nuclear summit. He goes into that discussion with a stronger case if he can move the Russians closer to sanctions in his meeting Thursday with Medvedev. The White House downplayed the potential for a breakthrough with Russia in Prague. Briefing reporters on Air Force One, White House press secretary Robert Gibbs said not to expect any significant developments on Iran.
• Robert Rubin Returns. Former Treasury Secretary Robert Rubin — who watched his reputation as an economic titan shatter after he left the Clinton White House — is decidedly out of favor in the nation’s capital. Except for one place — the Obama administration. Behind the scenes, Rubin still wields enormous influence in Barack Obama’s Washington, chatting regularly with a legion of former employees who dominate the ranks of the young administration’s policy team. He speaks regularly to Treasury Secretary Timothy Geithner, who once worked for Rubin at Treasury. According to Geithner’s public calendar, the treasury secretary spoke or met with Rubin at least four times in the first six months of Geithner’s tenure. Three of those chats, including an hourlong session in Rubin’s New York office, came before President Obama released his Wall Street regulatory reform proposal in June 2009. Rubin’s is a discreet kind of influence, though, because the veteran Wall Street hand is still dealing with the fallout from his post-White House career. He took a job at Citigroup, where the bank’s collapse was averted only by the injection of $45 billion in taxpayer bailout cash.
• CBO Chief Says Debt 'Unsustainable'. The nation’s fiscal path is “unsustainable,” and the problem “cannot be solved through minor tinkering,” the head of the Congressional Budget Office said Thursday morning. Doug Elmendorf, best known for arbitrating the costs of various health care proposals, added his voice to a growing chorus of economic experts who predict dire consequences if political leaders don’t scale back spending, increase taxes or both — and soon. Elmendorf noted a recent CBO report that pegged an increase in the public debt from $7.5 trillion at the end of 2009 to $20.3 trillion at the end of 2020 if President Barack Obama’s fiscal 2011 budget were to be implemented as written. As a percentage of gross domestic product, the debt would rise from 53 percent to 90 percent, CBO forecasted.
  

Reuters:

• Exclusive: U.S. Group Targets Honeywell(HON) Over Iran. A pressure group, United Against Nuclear Iran (UANI), is urging industrial conglomerate Honeywell International Inc to stop selling security technology to Iran, the group said on Thursday. Honeywell security products can be used for surveillance of oil pipelines and nuclear reactors, UANI said in a letter faxed to Honeywell it provided exclusively to Reuters. The sale of security technology, via a British subsidiary, violates company guidelines for business conduct, UANI said, adding it may sue or pressure the New York Stock Exchange to delist Honeywell if the company continues operations in Iran.
• Tech Budgets To Rise in 2010-Morgan Stanley Survey. More companies are planning to increase their technology spending in 2010, especially in hardware, a Morgan Stanley survey showed on Thursday, suggesting stronger sales for companies such as Hewlett-Packard Co(HPQ) and International Business Machines Corp (IBM). The survey of 150 chief information officers (CIOs) showed tech budgets up 3.2 percent in 2010, after a 1.8 percent decline in 2009, signaling "increasing confidence in a return to IT spending growth this year across all the major tech segments." It was also a 1.5 point increase from the same survey in January, showing CIOs gaining confidence about business conditions in recent months. Hardware spending leads the improvement with a planned 4.1 percent increase, followed by a 3.7 percent increase in software spending, it showed.

Yonhap:

• North Korea said it will freeze a series of South Korea-owned facilities at its eastern mountain resort and expel South Korean personnel from them.

Bear Radar

Style Underperformer:

• Small-Cap Growth (-.36%)

Sector Underperformers:

• Coal (-1.73%), Education (-1.51%) and Semis (-1.44%)

Stocks Falling on Unusual Volume:

• AIG, FCS, OB, NOK, CTEL, UBS, SUSQ, PTNR, APOG, KMGB, FFCH, GYMB, RDWR, SCSC, ZUMZ, ZBRA, QLGC, FRX and BKE
  

Stocks With Unusual Put Option Activity:

• 1) BBBY 2) DHI 3) NAV 4) NOK 5) MGM
  

Bull Radar

Style Outperformer:

• Large-Cap Growth (-.09%)

Sector Outperformers:

• Airlines (+3.22%), Gaming (+1.81%) and Road & Rail (+1.28%)

Stocks Rising on Unusual Volume:

• GBX, SMSC, EOG, HUSA, UAUA, BBBY, WPRT, BMC, ROST, DJSP, WYNN, AMZN, TLCR, BYD, ARO and AGM
  

Stocks With Unusual Call Option Activity:

• 1) ONNN 2) TGT 3) LTD 4) LCC 5) BBBY
  

Thursday Watch

Evening Headlines
Bloomberg:

• Greece Default Swaps Trade Higher Than Iceland's for First Time. Credit-default swaps linked to Greece sovereign debt rose higher than those tied to Iceland for the first time, helping propel a benchmark indicator of U.S. corporate credit risk to its biggest jump in eight weeks. The Markit CDX North America Investment Grade Index Series 14 rose 3.4 basis points to a mid-price of 87.5 basis points, according to Markit Group Ltd. Swaps tied to Greece rose to 415 basis points today while those on Iceland traded at about 400 basis points, according to Markit data. The North American Markit index increased for a second day amid investor concern that contagion from a Greece default may spread to other assets, said Gavan Nolan, an analyst at Markit Group in London. “The whole EU response to Greece has been quite fragmented,” Nolan said in a telephone interview.
• Goldman Sachs(GS) Trader Hedayat Said to Leave Firm. Ali Hedayat, co-head in the Americas of Goldman Sachs Group Inc.’s largest internal hedge fund, has left the firm, the second senior departure from the unit in less than a month, said three people familiar with the matter. Hedayat’s departure follows last month’s exit by Pierre Henri Flamand, who ran the Goldman Sachs Principal Strategies division from London. Ed Canaday, a spokesman for Goldman Sachs in New York, declined to comment. Hedayat, 35, who was promoted to managing director in October 2006, also declined to comment. Goldman Sachs, the most profitable securities firm in Wall Street history, generates about 10 percent of its revenue from proprietary trading, or bets with the firm’s own money, Chief Financial Officer David Viniar has said.
• How $1 Trillion Time Bomb Posts a Phony Profit: Jonathan Weil. The Federal Home Loan Banks are a frequently overlooked band of government-chartered cooperatives whose name screams systemic risk with every word. Federal means Uncle Sam. Homes are a declining asset. A loan is money out the door. And banks are the things that get taxpayer bailouts when they’re too big to fail and enough of their loans go bad. So perhaps it shouldn’t come as a surprise that these 12 regional lenders collectively suffered massive losses last year. What’s astonishing is that you wouldn’t know it by looking at their bottom-line earnings or from the strange way their regulator measures their capital cushions. Last week, the FHLBs, which is pronounced “flubs,” published their combined audited financial statements for 2009. And at first glance, it might seem like they had a profitable year. Net income was about $1.9 billion, the banks said, up 54 percent from the year before. The most striking part about that dollar figure was what it didn’t include: About $8.8 billion of paper losses from their portfolios of mortgage-backed securities. By the banks’ own description, these losses were “other than temporary,” meaning the values of the investments aren’t expected to recover soon. The reason those losses weren’t included in earnings? The Financial Accounting Standards Board rewrote its rules a year ago so they wouldn’t have to count, following an intense campaign by the banking industry and its friends in Congress. One thing the rule change couldn’t do, though, was make those losses go away in real life.
• Japanese Machinery Orders Unexpectedly Fall 5.4%. Japanese machinery orders unexpectedly fell for a second month in February, a sign that the resurgence in overseas demand isn’t enough to compel companies to spend on plant and equipment. Orders, an indicator of business investment in three to six months, declined 5.4 percent from January, the Cabinet Office said today in Tokyo. The median estimate of 31 economists surveyed by Bloomberg was for a 3.7 percent gain.
• Revamped ECB Lending Rules May Give Greece More Pain Than Gain. The European Central Bank’s decision to change its lending rules may end up hurting debt-laden Greece more than helping it. While President Jean-Claude Trichet last month assisted Greece by extending the ECB’s emergency collateral rules into next year, the move may come at a cost. The new framework will make it more expensive for banks to exchange Greek bonds for central bank funds because of their lower credit rating.
• Indonesia Stocks in Bubble, Central Bank Study Shows. Indonesia’s stocks are in a bubble and officials are prepared to put controls on capital inflows if needed to maintain financial stability, the head of the central bank’s economic research and monetary policy division said. Indonesia’s experience is echoed across emerging markets that are benefiting from international capital flows shunning slow-growing advanced economies. Brazil imposed a tax on foreign funds last year, while central banks from China to India have ordered their banks to hold more of their assets in reserve, and India and Malaysia have raised interest rates. “There is a bubble going on,” Warjiyo said in the interview in his office yesterday. Bank Indonesia’s analysis shows the peak of the overvaluation was in July, with part of the deceleration owing to improved economic fundamentals, he said. The market has a “tendency of self-correction but we are” continuing to monitor it, he said.
• UAL's United(UAUA), US Airways(LCC) Said to Be in Merger Talks.
• Shanghai Plans Property Tax to Curb Gains, News Says. Shanghai, China’s wealthiest city, may impose a property tax to curb price gains, the Shanghai Securities News reported, citing unidentified people. The city government has already completed a basic plan for the tax, which would affect ownership of investment properties, the Shanghai-based newspaper reported. The tax is likely to be applied to existing homes as well as new properties, the report said, without saying when the charge may be levied. “The introduction of new taxation will curb speculative demand for properties and bring down prices,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai.
• Bernanke, Dudley Say Recovery Is Yet to Produce Major Job Gains. Federal Reserve Chairman Ben S. Bernanke and a top lieutenant said the U.S. economic rebound has yet to produce a significant recovery in jobs, signaling there’s no need yet to consider raising interest rates. Bernanke, speaking to businesspeople in Dallas yesterday, said the labor market contains “some of the toughest problems” for the economy and that he’s “particularly concerned” about the number of people out of work for at least six months. New York Fed President William Dudley said in a separate speech that “we are not getting the job gains we would like to get.”

Wall Street Journal:

• NAACP Will Drop Lawsuit Against Wells Fargo(WFC). The National Association for the Advancement of Colored People agreed to drop a predatory-lending lawsuit against Wells Fargo & Co. in exchange for access to loan data. The pact, set to be announced on Thursday, marks a more conciliatory approach from the fourth-largest U.S. bank in assets as it works to eliminate legal headaches resulting from the housing bust.
• Investors Playing Defense Heighten Greek Debt Woes. The market pummeling of Greece continued Wednesday, and many European politicians are quick to blame "traders and speculators," as Greek Prime Minister George Papandreou recently put it. They are missing a big part of the picture. Quick-trigger traders have certainly been active players, but the hammering of Greece and the euro reflects far more than a quest for fast profits, a Wall Street Journal review of trading records and securities filings, plus interviews with bankers, executives and traders, shows. Many of the bearish wagers have come not from hedge funds but from traditional asset managers, banks and corporate treasurers, seeking not to profit but to protect themselves. Coca-Cola Co. and Dole Food Co., for instance, bet on a weakening euro in recent months to shield the dollar value of euros they earn abroad. Asset managers sold Greek bonds, and banks bought default insurance on those they hold in their portfolios.
• Joblessness: The Kids Are Not Alright. Will the U.S. accept youth unemployment levels like Europe's? Unemployment today doesn't look like any unemployment in the recent American experience. We have the astonishing and dispiriting new reality that the "long-term jobless"—people out of work more than six months (27 weeks)—was about 44% of all people unemployed in February. A year ago that number was 24.6%. This is not normal joblessness. As The Wall Street Journal reported in January, even when the recovery comes, some jobs will never return. But the aspect of this mess I find more disturbing is the numbers around what economists call "youth unemployment." The U.S. unemployment rate for workers under 25 years old is about 20%.

BusinessWeek.com:

• Kyrgyz Opposition Claims Power as President Ousted. Kyrgyzstan’s opposition said it has taken power and the government has resigned after deadly protests in the capital, Bishkek, that forced President Kurmanbek Bakiyev to flee the city. Prime Minister Daniyar Usenov tendered his resignation to Roza Otunbayeva, appointed by opposition leaders as head of the new government, RIA Novosti reported, citing Otunbayeva. The opposition is “in full control,” the news agency said. Bakiyev left in his plane to an unknown destination, the Fergana.ru news service reported. The U.S. is “deeply concerned” about violence in the former Soviet republic, State Department official Philip J. Crowley said in Washington, noting that there is no sign the government has ceased to function. At least 65 people were killed in the protests, Agence France-Presse cited Kyrgyzstan’s Health Ministry as saying today.
• ISI's DeGraaf Sees Setback for U.S. Stocks: Technical Analysis. The Standard & Poor’s 500 Index may fall as low as 1,150 this quarter before resuming the advance that pushed it to an 18-month high on April 6, said Jeffrey deGraaf, a top-ranked technical analyst. Complacency in the options market and fewer stocks rising relative to those falling are signs a retreat is coming, he said in an interview. DeGraaf, a senior managing director at ISI Group Inc. in New York, was the No. 1 technical analyst in Institutional Investor’s annual survey for the past five years.

Marketwatch.com:

• Obama Official Opposes Exemption for Derivatives End Users. A key Obama administration official said Wednesday that he opposes efforts on Capitol Hill to automatically exempt end users, such as manufacturers or airlines, from new derivatives-trading transparency measures included in bank-reform legislation.

CNBC:

• Would a National Sales Tax Really Work in the US? Would a European-style "value-added tax" really work in the US? Paul Volcker, a White House advisor and former Federal Reseve chairman, is pushing the idea of a national sales tax to help cut the soaring US deficit. Though the proposal faces major obstacles, it is being seriously discussed in Congress.

IBD:

• Business Is Back For Houseware And Home Furnishings Chain. As consumers kept a tight lid on spending, Williams-Sonoma (WSM) felt the pressure. Profit and sales sank like a souffle gone bad.

NY Times:

• H.P.(HPQ) Sees a Revolution in Memory Chips.

CNNMoney:

• Diplomat Taken into Custody After Airliner Disturbance. A passenger with diplomatic credentials of Qatar was detained Wednesday night after a disturbance aboard a United Airlines flight en route to Denver, Colorado, federal authorities said. Initial reports were that the incident involved an attempt to set a shoe on fire, but there were later indications that the situation may have resulted from a misunderstanding involving smoking during the flight. The passenger was in a lavatory and may have been smoking, a U.S. official said. He also may have made an "unfortunate comment" referring to a shoe bomb when questioned on the plane, the official said.

Business Insider:

• Essential Reading: Fed's Hoenig Plays Cassandra And Blasts Our Persistent 0% Interest Rates.
• Remember That Huge Gift Obama Gave To The Auto Unions? Now We're About To Pay For It Dearly. The Government Accountability Office has a report out today on the unfunded liabilities of the GM and Chrysler pensions. The most controversial aspect of the bankruptcy reorganizations orchestrated by the Obama administration is that the companies reaffirmed their obligation to their retirement plans, which are often terminated when a company undergoes a bankruptcy.

zerohedge:

• The Annotated Opus Dei Goldman(GS) Squid.

Forbes:

• Who's Visiting The President? Among the most frequent nongovernmental guests at the White House: union chiefs, a banker and a Chicago billionaire. President Barack Obama has worked closely with House Speaker Nancy Pelosi to pass health care reform and other measures, but there are a number of private-sector figures whose names appear more frequently in White House visitor records. They include labor leaders, an executive for a Swiss bank and a Chicago billionaire.
• Where Oil and Gas Can be Recovered At Home. Barack Obama made a big fuss over his plan to open more U.S. acreage to exploratory oil and gas drilling. But wildcatters aren't overly excited about the prospects. Though the plan added acreage in Alaska for possible leasing, some choice sites there were yanked. Drillers still have to wait for environmental studies before a lease sale may be held. Even then, they'd need to do seismic surveys and get federal air permits before touching drill bit to earth. Expect environmentalists' lawsuits, too.

American Banker:

• Bank of America Corp.(BAC) plans to support the stricter consumer-protection provisions sought in the U.S. regulatory reform legislation. The company had previously stayed neutral on a consumer-protection agency.

Syracuse.com:

• Obama Administration Removing Terms Like 'Islamic Extremism' From National Security Document. The Obama administration is working on changing the language of the National Security Strategy to more politically-correct terminology. Counterterrorism officials say the goal of the new version is to emphasize that the United States does not view Muslim nations through the lens of terrorism. The National Security Strategy document, which outlined the Bush Doctrine of preventive war, currently states: "The struggle against militant Islamic radicalism is the great ideological conflict of the early years of the 21st century." The revisions to the document are part of a larger effort by the White House to change how the U.S. talks to Muslim nations. During a visit to Cairo last year, President Obama promised a ‘new beginning’ in the relationship between the United States and the Muslim world. Peter Feaver, a Duke University political scientist and former Bush adviser, said Obama, in his engagement efforts, runs the risk of seeming to adopt politically correct rhetoric abroad while appearing tone-deaf on national security issues at home.

appletell:

• Rumor: Apple(AAPL) to Enter the Mobile Advertising Market on Thursday? Can you remember back at the beginning of the year when we heard the news that Apple had acquired the mobile advertisement company, Quattro Wireless? Well, the rumor mill is heating up once again, as all signs lead to Apple unveiling a mobile advertising system for the iPhone OS during tomorrow’s media event.

USA Today:

• Nearly Half of U.S. Households Escape Federal Income Tax. Tax Day is a dreaded deadline for millions of Americans, but for nearly half of U.S. households, it's simply somebody else's problem. About 47% will pay no federal income taxes for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That's according to projections by the Tax Policy Center, a Washington research organization.

Reuters:

• US FDIC to Meet on Crisis-Era Guarantee, Bank Fees. U.S. bank regulators will meet next week on whether to extend a crisis-era guarantee designed to help small banks, and whether to change how it charges for deposit insurance, possibly making banks pay more if they have risky compensation schemes. The Federal Deposit Insurance Corp on Wednesday posted the agenda for the meeting next Tuesday, saying it will also discuss the "reporting and planning" of large banks.
• Thai PM Faces Hard Choice After Emergency Declared. Thai Prime Minister Abhisit Vejjajiva faces a difficult choice -- compromise and call an election he could easily lose or launch a crackdown on tens of thousands of protesters that could stir up even more trouble.
  
• Bed Bath & Beyond(BBBY) Beats Street, Shares Up 4%.
  

Financial Times:

• Eastern Europe Won't Pay What it Can't Pay. Greece is just the first in a series of European debt bombs about to go off. Mortgage debts in the post-communist economies and Iceland are more explosive. Although most of these countries are not in the eurozone, their debts are largely denominated in euros. Some 87 per cent of Latvia’s debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. These governments have been borrowing not to finance a budget deficit, as in Greece, but to support their exchange rates and thereby prevent a private-sector default to foreign banks. All these debts are unpayably high because most of these countries are running deepening trade deficits and are sinking into depression. Now that property prices are plunging, trade deficits are no longer financed by an inflow of foreign-currency mortgage lending. For the past year, these countries have supported their exchange rates by borrowing from the European Union and the International Monetary Fund. The terms of this borrowing are politically unsustainable: sharp public sector budget cuts, higher tax rates on already over-taxed labour, and austerity plans that shrink economies and drive more workers to emigrate. Bankers in Sweden and Austria, Germany and Britain are about to discover that extending credit to nations that cannot (or will not) pay may be their problem, not that of their debtors. No one wants to accept the fact that debts that cannot be paid, will not be. Someone must bear the cost as debts go into default or are written down, to be paid in sharply depreciated currencies, and many legal experts find debt agreements calling for repayment in euros unenforceable. Every sovereign nation has the right to legislate its own debt terms, and the coming currency re-alignments and debt write-downs will be much more than mere “haircuts”.
• Global Computer Server Sales See Rare Boom. The global computer-server industry is witnessing a once-in-decade sweet spot of sales growth, boosted by a rare alignment of economic recovery, big technological advances and soaring data-handling needs.

Telegraph:

• UK Needs 'Drastic Austerity Measures' to Prevent Debt Explosion. Bank for International Settlements issues stark warning on debt as OECD cuts growth forecast for British economy. Britain will need "drastic" austerity measures to prevent public debt exploding out of control, the Bank for International Settlements (BIS), has declared. Interest payments on the UK's public debt will double from 5pc of GDP to 10pc within a decade under the bank's "baseline scenario" before spiralling upwards to 27pc by 2040 – by far the highest among the OECD club of developed countries. Greece fares better, while Britain's interest burden is far worse than Italy's.

Guardian;

• Greece Pins Hopes on Luring Investors in US and Far East. As country slips further into debt crisis, ministers plan visits to the US and China to secure funds and calm markets.

Frankfurter Rundschau:

• The Bundesbank, Germany's central bank, has criticized the way European Union leaders agreed to help Greece in an emergency, including the envisaged role of the International Monetary Fund, citing an internal Bundesbank document. The IMF would require Greece to adopt less of a budgetary discipline than euro region governments would. Leaders have taken decisions, without consulting relevant central banks, that may threaten the stability of the region, Rundschau said. The involvement of the IMF would violate the Maastricht Treaty's no-bailout clause and force the Bundesbank to provide some of the funds the IMF needs to help Greece, citing the document.

Economy & Nation Weekly:

• Yao Jian, spokesman for the Chinese Ministry of Commerce, said the U.S. shouldn't politicize the yuan's exchange rate and shouldn't have "unrealistic" expectations. China's stance on its exchange rate policies is firm and the U.S. government should stop pressing China on the issue, Yao said.

RTHK:

• China Rights Lawyer Quits Activism. A crusading mainland China rights lawyer who disappeared more than a year ago says he is abandoning his once prominent role as a government critic in the hope of reuniting with his family. In his first meeting with the media since he resurfaced two weeks ago, Gao Zhisheng said he did not want to discuss his disappearance. He appeared thinner and more subdued than in the past. But he says the ordeal took a toll on him and his wife and two children, who secretly fled China early last year. Mr Gao was a dauntless campaigner for human rights.

EE Times:

• Next Fab Wave: LEDs. Needless to say, fewer semiconductor fabs are being built these days, and even the solar market has cooled a bit. So what's the next big thing for fabs? Try LEDs. Rising LED demand for lighting apps and TVs has semiconductor titans like Samsung and TSMC jumping into the market, and is fueling sales growth for equipment makers from Aixtron(AIXG) to Veeco(VECO). An investment banking firm has just upgraded its forecast for Veeco, and Applied Materials Inc. is looking to enter the LED tool market.

Evening Recommendations
Citigroup:

• Rated (MDAS) Buy, target $29.
• Rated (MDSO) Buy, target $21.
• Rated (MCK) Buy, target $79.
• Upgraded (ABC) to Buy, target $34.
• Reiterated Buy on (ESRX), raised target to $122.
• Reiterated Buy on (MHS), raised target to $82.
  

Soleil Securities:

• Rated (MSFT) Buy, target $34.
• Rated (NUAN) Buy, target $21.
• Rated (ORCL) Buy, target $30.
• Rated (SYMC) Buy, target $23.
  

Night Trading

• Asian indices are -1.25% to -.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 97.0 +4.5 basis points.
• S&P 500 futures -.25%
• NASDAQ 100 futures -.16%

Morning Preview Links

Earnings of Note
Company/Estimate

• (PIR)/.32
• (ISCA)/.53

Economic Releases
8:30 AM EST

• Initial Jobless Claims for last week are estimated to fall to 435K versus 439K the prior week.
• Continuing Claims are estimated to fall to 4630K versus 4662K prior.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Kohn speaking, Fed's Tarullo speaking, Fed's Duke speaking, Fed's Kocherlakota speaking, $13 Billion 30-year Treasury auction, monthly retail same-store-sales before the open, BOE rate decision, ECB rate decision, EIA weekly natural gas inventory report, (ACN) analyst conference, (SCG) analyst meeting and the (TLVT) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

Stocks Reversing Lower on Volume into Final Hour on Rising Sovereign Debt Fears, Profit-Taking, More Shorting

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 16.52 +1.79%
  
• ISE Sentiment Index 123.0 -10.87%
  
• Total Put/Call .92 +21.05%
  
• NYSE Arms .91 +19.24%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 86.38 bps +2.06%
  
• European Financial Sector CDS Index 76.84 bps +5.10%
  
• Western Europe Sovereign Debt CDS Index 85.17 bps +2.0%
  
• Emerging Market CDS Index 218.55 bps +2.74%
  
• 2-Year Swap Spread 14.0 bps -2 unch.
  
• TED Spread 13.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .16% unch.
  
• Yield Curve 280.0 bps -3 bps
  
• China Import Iron Ore Spot $161.20/Metric Tonne +.44%
  
• Citi US Economic Surprise Index +43.40 +1.6 points
  
• 10-Year TIPS Spread 2.33% unch.
  

Overseas Futures:

• Nikkei Futures: Indicating -47 open in Japan
• DAX Futures: Indicating -21 open in Germany

Portfolio:

• Slightly Lower: On losses in my Medical and Tech long positions
  
• Disclosed Trades: Added (IWM)/(QQQQ) hedges, added to my (EEM) short and took some profits in my (ISRG) long
  
• Market Exposure: Moved to 75% Net Long

BOTTOM LINE: Today's overall market action is bearish as stocks trade near session lows, despite lower long-term rates. On the positive side, Gold, Alt Energy, Computer, Semi, I-Bank and Restaurant stocks are higher on the day. The euro continues to trade poorly. On the negative side, Airline, REIT, Homebuilding, HMO, Telecom and Steel shares are under meaningful pressure, falling 2.0%+. (IYR) has been heavy throughout the day. Investor angst remains subdued, which is a big negative. The Greece sovereign cds is surging another 7.9% and the Portugal sovereign cds is jumping 6.8% today. The rise in the euro financial sector cds is also a large negative. The rise in gold, despite US dollar strength is also a broad market negative. I suspect investors are preparing for another spike in European sovereign debt angst. I expect US stocks to trade modestly lower into the close from current levels on profit-taking, technical selling, rising sovereign debt fears and more shorting.

Today's Headlines

Bloomberg:

• Trial Begins in First SEC Insider Default-Swap Case. A Deutsche Bank AG salesman’s trial began in U.S. regulators’ first case targeting insider trading in credit-default swaps.
• Greek Default Unavoidable Without More Aid, Jen Says. Greece may default on its debt as early as this year without “extraordinary” financial assistance from the European Union and International Monetary Fund, said Stephen Jen at BlueGold Capital Management LLP. The challenges facing Greece are similar to those that confronted Argentina, which defaulted on $95 billion of debt in 2001, as the government enacts austerity measures to narrow the European Union’s biggest budget deficit, Jen, managing director at the hedge fund, said today in an interview in London. That may drive the Mediterranean nation into a recession, he said. “A default may be ultimately unavoidable,” Jen said. “That eventuality may only be postponed by aid many times bigger than the 25 billion euros ($33 billion) people have in mind.” Any assistance needs to “impress the market,” he said.
• Gold Climbs to 12-Week High on Demand for Currency Alternative. Gold jumped to a 12-week high on demand for an alternative investment to currencies as the euro weakened against the dollar. Gold priced in euros reached a record today after a report showed Europe’s economic growth stalled in the fourth quarter. The euro fell against the dollar on mounting concerns that a financial-rescue plan for Greece may falter. The euro slid 1.4 percent against the dollar in the past three sessions.
• Buy McDonald's(MCD) Call Options Before Profit Report, Goldman Says. Investors should buy bullish McDonald’s Corp. options because they are at near record lows and the world’s largest restaurant company may rally on stronger-than-estimated earnings and a smoothie introduction, Goldman Sachs Group Inc. said.
• Apple(AAPL) iPad's Components May Cost $260, iSuppli Says.
• Los Angeles Rating Cut to Aa3 by Moody's on $3.2 Billion Bonds. Los Angeles had the credit rating on $3.2 billion of debt cut to Aa3 from Aa2 by Moody’s Investors Service a day after Mayor Antonio Villaraigosa called for a twice-a-week shutdown of “nonessential” services. The one-level downgrade for the nation’s second-largest city by population cited the difficulty of quickly rebalancing its budget. Moody’s maintains a negative outlook on the city’s debt, meaning the rating could be lowered further.
• Chief Executive Officers in U.S. Turn More Optimistic. Chief executive officers in the U.S. turned more optimistic in the first quarter as sales grew, boosting the prospect that employment and spending will climb, a survey showed. The Business Roundtable’s economic outlook index rose to 88.9 in the first three months of the year, the highest level since the second quarter of 2006, the Washington-based group said today. Readings higher than 50 are consistent with economic expansion.
• Bernanke Says Joblessness, Foreclosures Challenges to Recovery. “We are far from being out of the woods,” Bernanke said today in a speech in Dallas. While the financial crisis has abated and economic growth will probably reduce unemployment over the next year, the U.S. faces hurdles including the lack of a sustained rebound in housing, a “troubled” commercial real estate market and “very weak” hiring, he said.

Wall Street Journal:

• Wal-Mart(WMT) Ramps Up Online Efforts Globally. Wal-Mart Stores Inc. is stepping up its international e-commerce expansion, looking for staff, talking to vendors and mapping its approach to what could become one of the world's biggest Internet initiatives. Wal-Mart wants to mix the best of what is already offered with new elements that could allow the company to sell from the U.S. into overseas markets and use its presence in other countries as a springboard for online sales, said Steve Nave, general manager of Walmart.com.
• Answering the SEC's New Questionnaire. The SEC recently began sending a questinnaire to newly-registered hedge fund advisers. Guy Talarico, chief executive of Alaric Compliance, talks to columnist Suzanne Barlyn about what to expect and how advisers should respond. (video)
  

MarketWatch:

• OECD Sees Double-Dip Recession in Germany. The German economy was the only one out of the Group of Seven industrialized nations to have contracted during the first quarter, according to estimates released by the Organization for Economic Cooperation and Development on Wednesday. According to the OECD, Germany's economy shrank at a 0.4% quarter-on-quarter rate, after a stagnant fourth quarter. The VDO trade association said on Tuesday that German car sales plunged 27% in March. In the second quarter, the OECD expects the G7 to grow by 2.3% and for the U.S. to grow 2.3%.
• Fed's Hoenig Seeks Cautious Rate Hikes to 1% Soon.
  

CNBC:

• Fmr. Citi(C) Exec Warned Rubin About Mortgage Risk. A former executive of Citigroup Inc. is telling a panel investigating the roots of the financial crisis that he warned former chairman Robert Rubin and other bank leaders about the coming mortgage crisis back in 2006. Richard Bowen says other Citigroup executives were violating the bank's own risk management standards starting in 2006. He says he discovered in the middle of that year that over 60 percent of the mortgages bought and resold by subprime subsidiary Citifinancial Mortgage were defective. Bowen was chief underwriter for the division. Bowen says he issued many warnings to management about the mortgage risk starting in 2006, and e-mailed Rubin in November 2007.
• Subprime Delinquencies Fall for First Time in 4 Years. With serious delinquencies up for the 34th consecutive month, U.S. prime RMBS late-pays have now eclipsed 10 percent, according to Fitch Ratings in the latest edition of Performance Metrics. Conversely, subprime delinquencies fell for the first time in nearly four years.
• Treasury Auction Finds Strong Demand For 10-Year Notes.
• Five More States Join Suit Against Healthcare Law. Five more U.S. states are to join a Florida-led group of states in a collective lawsuit challenging President Barack Obama's overhaul of the U.S. healthcare system, Florida's attorney general said Wednesday. The joint lawsuit led by Florida and now grouping 18 states was filed on March 23. It claims the sweeping reform of the $2.5 trillion healthcare system violates state-government rights in the U.S. Constitution and will force massive new spending on hard-pressed state governments. South Carolina, Nebraska, Texas, Utah, Louisiana, Alabama, Colorado, Michigan, Pennsylvania, Washington, Idaho, and South Dakota had previously joined Florida's lawsuit.

NY Post:

• Bam Man Pitching National Sales Tax. Acknowledging it would be a highly unpopular move, White House economic adviser Paul Volcker said yesterday the United States should consider imposing a "value added tax" similar to those charged in Europe to help get the deficit under control. A VAT is a national sales tax that, like state and city sales taxes, would be collected by retailers. Volcker, at the New-York Historical Society, told a panel on the global financial crisis that Congress might also have to consider new taxes on carbon and energy. The VAT suggestion was immediately met with outrage by Republicans. "It shouldn't surprise anyone that the Obama White House would advocate a European-style tax to help finance their European-style government health-care plan," said Brian Walsh, a spokesman for the National Republican Senatorial Campaign Committee. "When you hear things like this, though, it's almost as if the Democrats think the American people will forget that we're in this situation because of their reckless spending agenda." Volcker, a former chairman of the Federal Reserve, told the global economic panel that a VAT is "not as toxic an idea as it has been in the past." He added, "If, at the end of the day, we need to raise taxes, we should raise taxes." The tax has long had backing from House Speaker Nancy Pelosi (D-Calif.), who last year said it is "on the table" for dealing with the country's fiscal woes. It's a quick way for governments to raise cash, but the tax could wind up being a burden on the poor, critics say.
• The Bad-Nukes Myth. Tossing away a vital deterrent.
  

NY Times:

• China Again Hopes to Drive U.S. Rail Construction. Nearly 150 years after American railroad companies imported thousands of Chinese laborers to build rail lines across the West, China is poised once again to play a role in American rail construction. But this time it would be an entirely different role: supplying the technology and engineers to build high-speed rail lines. The Chinese government has signed cooperation agreements with the state of California and General Electric to help build such lines.

Business Insider:

• CNBC Developing New Lunchtime Show Starring David Faber.

LA Times:

• Greenspan Defends Fed's Handling of Subprime Mortgage Market. Greenspan said the selling of the soaring number of subprime mortgages in securities to investors was the trigger for the financial crisis. He blamed affordable housing mandates set by federal officials on the government-sponsored housing enterprises Fannie Mae and Freddie Mac, and their subsequent large-scale purchase of securities backed by subprime mortgages, for the housing bubble that later burst, sending financial markets reeling.

market folly:

• Third Point Still Net Long Distressed Debt & MBS: Latest Exposure & Positions.

The Detroit News:

• UAW Suit Says GM Owes $450M. The United Auto Workers union sued General Motors Co. in federal court Tuesday, contending the Detroit automaker owes a union-run retiree health care fund $450 million. The suit, filed in U.S. District Court in Detroit, contends that General Motors Corp. agreed in June 2007 to pay $450 million to settle a UAW claim against Delphi Corp., GM's former parts unit, in the supplier's bankruptcy. GM filed for bankruptcy in June. The automaker's best assets were acquired by a government-sponsored entity known as General Motors Co. The UAW contends in its lawsuit that the "new" GM agreed to assume all of its labor contracts with the UAW -- including the 2007 deal among GM, Delphi and the UAW.

FINalternatives:

• CalSTRS Seeks Consultant For Global Macro Hedge Fund Program. The California State Teachers’ Retirement System is ready to take the plunge into global macro hedge funds, but the $132.5 billion pension fund needs some help. CalSTRS is looking for a hedge fund consultant to assist in setting up its global macro strategy, which will initially include between three and six managers and $200 million.

Chitika Labs:

• iPad Stats. Estimated number of iPads sold 516,222.

Politico:

• Rubio's Path. Marco Rubio's remarkable fundraising haul — $3.6 million this quarter, he just announced — is a reminder of the scale of his stardom inside the Republican Party, all of whose core constituencies seem to like the guy. He's already hearing every day (and brushing it off) that he should run for president in 2012, and at the inevitable moment in the cycle (as in every party, every cycle) when Republicans panic about their field of nominees, he's likely to be uniquely attractive: young, conservative, Hispanic and from a swing state besides.

Reuters:

• Ahmadinejad Attacks Obama on Nuclear "Threat". Iran's president made a scathing and personal attack on U.S. President Barack Obama on Wednesday as an "inexperienced amateur" who was too quick to threaten to use nuclear weapons against enemies of the United States. Iran, which says its nuclear programme is for entirely peaceful ends, also repeated warnings to Israel not to attack. "If they (Israel) attack Iran, possibly no trace will be left from the Zionist regime (Israel)," Defence Minister Ahmad Vahidi was quoted as saying by semi-official Mehr news agency. A deputy of Iran's Supreme Leader Ayatollah Ali Khamenei in the elite revolutionary Guards made similar threats on Tuesday. Russia, which, like China, is under intense Western pressure to support tougher U.N. sanctions has so far failed to deliver a S-300 anti-aircraft system Iran has ordered, a move which has irritated Iranian officials. But Defence Minister Vahidi said Russia had no intention of breaking the agreement to sell the missile system. "Russia is committed to our agreements over the S-300 system. They have told us that the system will be delivered to Iran on time." Analysts say the S-300 could help Iran to thwart any attempt by Israel or the United States -- which have refused to rule out military action if diplomacy fails to resolve the atomic row -- to bomb its nuclear facilities.
• Global PMI Jumps to Highest Since July 2007. The pace of global growth accelerated in March, expanding at its fastest pace since July 2007, with a slight gain in employment for the first time since April 2008, a survey showed on Wednesday.

Financial Times:

• Why The Greek Rescue Isn't Going to Plan by Mohamed El-Erian. It should be apparent to all by now: despite the rhetoric out of some European capitals, the Greek rescue package is not going according to plan. The triumphant Greece/European Union/International Monetary Fund announcement of a couple of weeks ago has not calmed markets, nor has it lowered Greek borrowing costs. In fact, market measures of risk signal more concern today than before the announcement. Meanwhile, worries are mounting about the health of the Greek banking system, raising the spectre of disorderly outflows of deposits. Society is not buying into the government’s adjustment plan. And the EU/IMF external financing package lacks the operational clarity that is required in these circumstances. Unfortunately, it is likely that things will get worse for Greece before they get better. In the short run, the persistence of alarming risk spreads will lead to even more cautious behaviour among depositors and investors. Late movers will sell Greek assets rather than buy, putting even greater pressure on the government’s ability to raise sustainable funding for its forthcoming debt maturities in May. Against this background, we should expect an intensification of the European blame game in the weeks ahead. The Greek government is having difficulty convincing its people of the magnitude of the country’s problems and the required internal adjustments. As a result, Greece is unable to provide sufficient assurances to its creditors, thereby further complicating an already tough situation. This accentuates the hesitancy of exceptional financiers, such as Germany, who resist having to again pay the bill after others have partied. And without exceptional financing, the Greek government finds it even more difficult to embark on an adjustment program that relies on only one instrument – that of fiscal austerity. It is a classic co-ordination failure in game theory. Any first mover will become worse off. Indeed, it is in the interest of any single party to wait for others to move first. As a result, no meaningful progress is made, the problems fester, and the risks of a disorderly outcome increase. Buoyed by a cyclical recovery, markets around the world have yet to recognise the complexity of this situation. When they do, it will also become apparent that Greece is part of a wider, and historically unfamiliar phenomenon – that of a simultaneous and large disruption to the balance sheet of many industrial countries. Tighten your seat belts.

Guardian:

• Goldman Sachs(GS) Denies 'Betting Against Clients'. Nine months after being labelled "a great vampire squid wrapped around the face of humanity", Goldman Sachs has issued a wide-ranging justification of its conduct before, during and after the financial crisis. The letter appears to be a detailed response to some of the allegations made nine months ago by Rolling Stone journalist Matt Taibbi. His article, which argued that Goldman had repeatedly profited by inflating unsustainable financial bubbles, received widespread coverage. It included the claim that the company was "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money". One of Taibbi's key charges was that Goldman had helped to fuel the housing boom during the last decade by packaging hundreds of millions of dollars worth of housing loans into complicated financial products such as collateralised debt obligations (CDOs). These CDOs were sold on to other banks and investors such as pension funds, who suffered big losses when the sub-prime housing bubble burst. Goldman, though, actually profited from the fiasco by short-selling the market before the credit crunch struck in summer 2007.