North American Investment Grade CDS Index 103.88 bps +1.40%
European Financial Sector CDS Index 116.50 bps -1.78%
Western Europe Sovereign Debt CDS Index 120.33 bps +1.12%
Emerging Market CDS Index 240.50 bps +.34%
2-Year Swap Spread 31.0 +3 bps
TED Spread 28.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 269.0 +1 bp
China Import Iron Ore Spot $175.30/Metric Tonne -.11%
Citi US Economic Surprise Index +14.40 -.3 point
10-Year TIPS Spread 2.26% +2 bps
Overseas Futures:
Nikkei Futures: Indicating +49 open in Japan
DAX Futures: Indicating +10 open in Germany
Portfolio:
Slightly Higher: On gains in my Biotech, Retail and Medical long positions
Disclosed Trades: Covered all of my (IWM), (QQQQ) hedges and then added them back
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as equities trade slightly high despite more euro weakness and China bubble fears. On the positive side, HMO, Road/Rail, Gaming, Hospital, Biotech, Bank, Networking, Gold and Oil Serivce stocks are especially strong, rising .75%+. Small-caps are strongly outperforming, with the Russell 2000 rising +1.1%. The Greece sovereign cds is falling -8.08% to 542.42 bps and the Portugal sovereign cds is dropping -12.5% to 229.70 bps. Oil is falling -1.24% on euro weakness and worries over China demand. Weekly retail sales rose +3.3% this week, up from a +2.4% gain the prior week. On the negative side, I-Banking, Education, Internet, Paper, Steel, Ag, Energy and Coal shares are underperforming today, falling .75%+. The Shanghai Composite continues to trade poorly and is now in a technical bear market. The Latin America Economic Surprise Index is falling to -15.50 today, which is the lowest since Dec . 23, 2009. Most gauges of credit angst are moving higher today. The S&P 500 came close to its 50-day moving average during today's rally. However, I suspect the euro and Chinese stocks will need to stabilize before a clear break above this level is in the offing. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear and bargain-hunting.
North American Investment Grade CDS Index 98.98 bps +1.84%
European Financial Sector CDS Index 118.15 bps +7.86%
Western Europe Sovereign Debt CDS Index 106.66 bps -2.88%
Emerging Market CDS Index 233.83 bps +1.18%
2-Year Swap Spread 30.0 +3 bps
TED Spread 28.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 271.0 +1 bp
China Import Iron Ore Spot $169.50/Metric Tonne -1.22%
Citi US Economic Surprise Index +13.90 -.5 point
10-Year TIPS Spread 2.30% -2 bps
Overseas Futures:
Nikkei Futures: Indicating -135 open in Japan
DAX Futures: Indicating -15 open in Germany
Portfolio:
Slightly Lower: On losses in my Biotech, Retail and Technology long positions
Disclosed Trades: Added to my (IWM), (QQQQ) hedges and added to my (EEM) short
Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is bearish as equities trade near session lows this afternoon despite gains in most overseas markets. On the positive side, Oil Tanker and Food stocks are slightly higher. Sovereign debt angst is lower today with the Spain sovereign cds falling -2.46%, which is a positive. Oil is lower again on more euro weakness, rising supply and worries over China demand. Despite a calming of eurozone debt fears, the euro still trades very poorly and likely has further meaningful downside. On the negative side, Homebuilding, Semi, Disk Drive and Networking shares are under meaningful pressure, falling 2.0%+. Lumber prices have fallen -7.0% over the last five days. Some broad gauges of credit angst are moving higher again today. The eurozone investment grade cds index is jumping +6.5% today to 89.66 bps. As well, the California municipal cds is rising another +4.3% to 265 bps. The AAII % Bulls fell to 36.6 this week, while the % Bears rose to 36.6. Some gauges of investor angst are once again registering a bit too much complacency. The decline in the euro today is starting to take on a disorderly feel again and the S&P 500 failed again to break above its 50-day moving average. I will closely monitor Asia's reaction to our afternoon weakness tonight before further shifting market exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, more shorting, rising financial sector pessimism and technical selling.
ECB 'Shock Troops' Go It Alone as Investors Question EU Plan. European Central Bank President Jean- Claude Trichet is buying time for the euro region as investors speculate on whether the $1 trillion bailout plan is enough to stop the sovereign debt crisis. Spanish and Portuguese bonds have rebounded as the ECB snapped up government debt, reversing a rout that threatened the nations’ ability to borrow. At the same time, the euro fell and stock indexes pared yesterday’s gains on concern about how indebted countries will cut deficits and access aid if needed.
AIG(AIG) Approves $380 Million of Awards for Managers in 2010 Plan. American International Group Inc. approved a plan to award executives $380 million, based on their performance, as part of an overhaul of pay practices following the insurer’s taxpayer-funded bailout. The payouts are earmarked for as many as 3,000 managers in a long-term incentive plan, for an average of more than $125,000 per recipient, said two people with knowledge of the program. Board members approved the 2010 program in March, New York-based AIG said in a filing last week. That is the same month employees got the final payments from a previous retention bonus program. The new plan covers managers who fall below AIG’s top 100 earners, said the people, who declined to be identified because some details of the program haven’t been disclosed.
EU's Barnier Says Hedge-Fund Compromise Is Possible. Michel Barnier, the European Union’s financial services commissioner, said that a final agreement between the U.S. and EU on rules to regulate hedge funds is “possible soon.” “The debate on hedge funds and private equity is in the last stretch” Barnier said following a speech in Washington. He is on a trip to the U.S. to reach a consensus on issues including regulation of banks and their capital requirements.
China Stocks Enter Bear Market on Inflation, Property Concerns. dropped, sending the benchmark index into a bear market, on concern the government will raise borrowing costs to combat inflation and unveil more measures to curb soaring housing prices.China’s stocks The Shanghai Composite Index fell 1.9 percent, led by financial companies and commodity producers, after reports showed consumer prices rose the most in 18 months and property values in 70 cities jumped a record 12.8 percent in April. “If inflation isn’t contained, the central bank will have to raise interest rates,” said Zhao Zifeng, who helps oversee about $10.2 billion at China International Fund Management Co. in Shanghai. “We’ll still need to gauge housing prices in the coming months as the previous crackdown measures were put in place not long ago. More tightening policies could follow.” The Shanghai index has dropped more than 20 percent from a November peak, the definition of a so-called bear market, on speculation efforts to rein in the housing market will hurt earnings.
Copper Falls in Asia on Dollar, Slowing China Industrial Production. Copper declined in Asia as a stronger dollar reduced the investment appeal of commodities priced in the currency and industrial production growth in China slowed. Aluminum, lead and zinc also dropped. Three-month delivery copper on the London Metal Exchange fell as much as 1.9 percent to $6,986 a ton before trading at $6,995 a ton at 3:05 p.m. in Shanghai as the dollar rose for the first time in three days. “China’s credit tightening and investors’ risk aversion will together strangle any rebound in copper,” Liu Zhuang, an analyst at Haitong Futures Co., said from Shanghai.
New Obama Strategy Treats 'War' on Drugs as Public Health Issue. President Barack Obama’s plan to fight drug abuse and trafficking proposes spending $15.5 billion next year and shifting the emphasis from fighting a war on drugs to treating the problem as a national health issue, the administration’s top drug-policy adviser said in an interview. “It’s a disease, it’s diagnosable and it’s certainly something that can be treated -- but it’s not a war,” said Gil Kerlikowske, director of the White House Office of National Drug Control Policy. The president’s plan calls for increasing drug-control spending by 3.5 percent in the fiscal year that begins Oct. 1.
Germany, France May Hurt AAA Ratings in 'Ponzi Game'. Germany and France are among top- rated euro-area states that may compromise their AAA grades by standing behind the debts of weaker members with their 750 billion-euro ($955 billion) stabilization fund. The package is “making debt profiles deteriorate, potentially damaging the ratings of core sovereigns,” said Stefan Kolek, a strategist at UniCredit SpA in Munich. “It’s a kind of Ponzi game at the highest level.”
Taliban Ties to NY Bomb May Spark Wider Pakistan War. The Pakistan Taliban’s ties to the failed car bomb in New York’s Times Square may ignite an escalating conflict in the South Asian nation as the U.S. pressures its ally to foil future attacks. Secretary of State Hillary Clinton said in a CBS television interview May 9 the U.S. has told Pakistan it would face severe consequences if militants in that country attacked the U.S.
Obama Administration Plans Oil Drilling Agency Split. President Barack Obama will propose splitting the government agency that administers offshore oil drilling into two sections as part of the response to the spill in the Gulf of Mexico, White House spokesman Robert Gibbs said.
EU Governments' Deficit Cuts May Hamper Recovery, IMF Warns. Europe still needs economic-support measures as their early withdrawal may jeopardize the recovery, the International Monetary Fund said, a day after the region’s finance ministers agreed on a rescue package that includes stepped-up budget-deficit cuts. “Aiming to stabilize public debt in the short run is neither feasible nor desirable, given the risk of a relapse into recession and the magnitude of the required fiscal retrenchment,” the IMF said in a report released today. “However, sustainability indicators are flashing warning signs about the public debt in most countries, and sizable consolidation efforts are needed in the medium term.” “It’s not just about giving money or lending money,” European Commission President Jose Barroso said today in Brussels. “It’s about asking the member states of the euro area to make additional efforts” to narrow their deficits. European Central Bank Governing Council member Nout Wellink stressed that the emergency aid facility has a limited lifetime of three years. “If the countries don’t shore up their budgets fast, this will be insufficient,” Wellink said in an interview with Dutch newspaper NRC Handelsblad.
Bank of New York Mellon's Ivy Sued by Cuomo on Madoff. Ivy Asset Management LLC, its former Chief Executive Officer Lawrence Simon and ex-Chief Investment Officer Howard Wohl were sued by New York Attorney General Andrew Cuomo and accused of misleading clients about investments tied to Bernard Madoff. Ivy, a New York-based investment adviser owned by Bank of New York Mellon, withheld damaging information about Madoff so the firm could make millions of dollars in fees, Cuomo said today in a statement. From 1998 to 2008, Ivy was paid more than $40 million to give advice and conduct due diligence for clients with large Madoff investments, Cuomo said. Even after the company learned Madoff was not investing client funds as promised, Ivy kept silent so as to not lose the fees, e-mails revealed, according to Cuomo.
Home Prices Gain in 91 Cities in First Quarter. Home prices rose in 91 U.S. cities in the first quarter as states hard hit by foreclosures began to recover and a tax credit cut the number of properties for sale. The median price of a single-family home sold in Saginaw, Michigan, doubled to $60,800, the Chicago-based National Association of Realtors said in a report today. Prices in Akron, Ohio, climbed 90 percent to $95,300 and Grand Rapids, Michigan, recorded a 26 percent increase to $90,700. Nationally, the median declined 0.7 percent.
CNBC:
US Exposure to EU Bailout: $50 Billion and Counting. US taxpayers could be on the hook for $50 billion or more as part of the European debt bailout, which is likely to be a close cousin to the strategy used to rescue the American financial system.
NY Times:
Florida Suit Poses a Challenge to Health Care Law. As they constructed the requirement that Americans have health insurance, Democrats in Congress took pains to make their bill as constitutionally impregnable as possible. But despite the health care law’s elaborate scaffolding, attorneys general and governors from 20 states, all but one of them Republicans, have now joined as confident litigants in a bid to topple its central pillar. In the process, they hope to present the Supreme Court with a landmark opportunity to define the limits of federal authority, perhaps for generations. In the seven weeks since the legislation passed, at least a dozen lawsuits have been filed in federal courts to challenge it, according to the Justice Department. But the case that could carry the most weight, and may be on the fastest track in the most advantageous venue, is the one filed in Pensacola, Fla., by state officials, just minutes after President Obama signed the bill.
A Mighty Trading Quarter for Goldman(GS) and JPMorgan(JPM). Goldman Sachs isn’t the only firm that made a trading gain every day last quarter. JPMorgan Chase reported positive trading revenue every day in its first quarter, according to a regulatory filing posted Monday. The firm said that its average daily revenue was $118 million. The achievement is remarkable for both Goldman and JPMorgan — and yet may serve as another target for legislators eager to restrain the trading activities of banks.
Business Insider:
The Amazing Management Principles of Bridgewater's Ray Dalio. Dealbreaker has an amazing story on the inside of hedge fund Bridgewater complete with an internal handbook of "management principles" compiled by top manager Ray Dalio. Dalio's dogma is displayed in full, as the core principals of Bridgewater are there front and center for everyone to see.
Country Default Risk Plummets. The European aid package announced over the weekend has helped boost global equity markets across the board, and it has also caused sovereign debt default risk to decline significantly over the past two days. Below we highlight 5-year credit default swap prices ($, bps) for a number of countries around the world. For each country, we highlight where default risk stands now, where it was last Friday before the bailout, and where it was at the start of 2010 and the start of 2008.
Washington Times:
Lawsuit Wants SEC to ID Porn Snoopers. The Securities and Exchange Commission is facing a federal lawsuit for keeping secret the names of dozens of its supervisors, employees and contractors who spent their workdays looking at pornography on their government computers. The lawsuit, filed Friday by a Denver- and Washington-based law firm, accuses the SEC of violating federal open-records law by shielding the identities of more than two dozen current and past porn-snooping workers. "There simply is no privacy right or interest to search pornography on SEC computers, particularly during work hours," says the 17-page complaint, filed in federal court in Denver.
Risk.com:
China Readies for Launch of Onshore CDS. China is gearing up efforts to launch an onshore credit default swap (CDS) market as the country seeks to gradually build out its financial derivatives markets. The creation of a credit derivatives market in the country is seen as an important step to enable Chinese banks to lay off risks that ultimately might reduce their need to tap capital markets to meet strict capital ratios as they expand their lending operations.
Rasmussen Reports:
63% Expect Health Care Law to Increase Deficit, 56% Favor Repeal. The number of U.S. voters who expect the recently passed health care bill to increase the federal deficit is at its highest level yet, and most voters continue to favor its repeal. The latest Rasmussen Reports national telephone survey of Likely Voters shows 63% now believe the health care reform legislation signed into law is likely to increase the federal deficit. That’s up four points from last week and up three points from when the law was passed in March. Only 12% expect the law to reduce the deficit, down four points over the past week and the lowest level measured to date. Support for repeal is proving to be just as consistent as opposition to the plan before it was passed into law. Fifty-six percent (56%) now favor repeal, including 46% who Strongly Favor it. Thirty-seven percent (37%) are opposed to repeal, with 28% Strongly Opposed.
Financial Times:
Eurozone Banks Sip at ECB's Dollar Swap Facility. Rumors of an interbank funding squeeze swirled through the market last week. Barclays Capital analysts for example noted that demand for USD funding in Europe had spiked in recent days. The activation of fresh ECB, BoE, Fed and Bank of Japan dollar swap lines over the weekend seemed to confirm as much. But it wasn’t until Tuesday that we really got a good idea of how much of a funding squeeze there had actually been. In short, $9bn-worth is not a huge number in the context of about $500bn average use of the Fed’s swap facility at the peak of the crisis, but it does show some demand. Reuters, meanwhile, reported that the Bank of England had received no bids at its first dollar repo operation since restarting the facility. In other words, this may firmly be just a eurozone problem — for now.
London Evening Standard:
Gordon Brown Quits as PM as Lib-Dem Deal Falls Apart. Gordon Brown is set to resign and allow David Cameron to be Britain's new Prime Minister, Evening Standard learns. The Labour leader's final desperate attempt to cling on to power with a Lib-Lab deal crumbled amid a rebellion on his own side and policy disagreements with Liberal Democrat leader Nick Clegg. This afternoon he retreated to No 10 to discuss his situation with senior ministers, friends and wife Sarah. Mr Brown had planned to stay in power until the summer if the deal had worked, earning himself a place in history as the man who won a historic fourth term for Labour. However, Labour MPs and ministers reacted with anger to the attempted deal, saying they would prefer to be in opposition than in government with the Lib-Dems.
Finanz und Wirtschaft:
Citigroup Inc. Chief Economist Willem Buiter said European governments may have to expand their stabilization package for indebted nations to about 2 trillion euros of capital and guarantees "in the medium term," citing an interview. The rescue plan probably will not be limited to three years as foreseen now and may be turned into a permanent feature.
Sina.com:
China's consumer price index will continue to trend higher over the next three months compared with last year, citing Yao Jingyuan, chief economist at the National Statistics Bureau.
Bank Swaps, Libor Show Doubts on Europe Bailout: Credit Markets. The cost to protect bank bonds from losses and money markets show investors are concerned that the almost $1 trillion rescue package announced by European leaders may not be enough to contain the region’s sovereign debt crisis. A credit-default swaps index linked to European banks is trading 30 basis points higher than an investment-grade benchmark, according to CMA DataVision. While the gap narrowed from 58 basis points before European leaders agreed to the rescue plan, the bank index on average traded 10 basis points tighter than the benchmark for three years. A measure of banks’ reluctance to lend stayed at three times the level from March. “Sovereign risk hasn’t gone away in the slightest,” said Jim Reid, head of fundamental strategy in London for Deutsche Bank AG, Germany’s biggest bank. “What this package has done is massively reduced the tail risk in European markets without necessarily changing the medium- to long-term dynamics of financial markets.”
IMF's Lipsky Signals Spain, Portugal Must Step Up Deficit Cuts. European countries saddled with debt should focus on cutting deficits in the wake of policy makers’ unprecedented efforts to contain the region’s sovereign-debt crisis, the International Monetary Fund’s No. 2 official indicated. The rescue package “is an important step,” John Lipsky, the first deputy director at the fund, said in an interview with Bloomberg Television. “Now let’s see what happens in other countries that need to undertake adjustment programs.”
Largest Banks Would Face Stricter Capital Rules in Senate Plan. Bank of America Corp.(BAC), Citigroup Inc.(C) and other large banks would face higher capital standards under a proposed change to the financial-overhaul bill aimed at containing risk-taking at big institutions. Lenders with more than $250 billion in assets would have to meet capital standards that are at least as strict as those that apply to smaller banks, under an amendment offered by Senator Susan Collins, a Maine Republican. “It makes no sense that capital and risk standards for our nation’s largest financial institutions are more lenient than those that apply to small depository banks when the failure of larger institutions is much more likely to have a broad economic impact,” Collins said today on the Senate floor. The Collins amendment is the latest in a series of changes offered to the financial-overhaul bill proposed by Senate Banking Committee Chairman Christopher Dodd to prevent large institutions from taking on so much risk they could threaten U.S. financial stability. The Collins amendment directs federal regulators to impose minimum leverage and risk-based capital requirements on financial firms that the proposed systemic-risk council identifies for Federal Reserve oversight.Banking groups criticized the amendment, saying Congress shouldn’t set capital standards.
Euro Package Leaves Governments Out of Ammunition: Matthew Lynn. Big problem, big number. The leaders of the euro-area countries have thrown 750 billion euros ($963 billion) at shoring up confidence in the single currency. But it doesn’t matter how many zeros you put on the end of a bad idea. It’s still a bad idea. In reality, you can’t stabilize a sinking ship. The new stability package suffers from the same problem as all the other ones the European Union has come up with in the months since the Greek crisis started rattling the markets last year: It tries to fix the symptoms, not the causes. Greece has exposed deep structural problems within the euro. There is no mechanism to stop governments breaking the rules. There is no popular support for massive fiscal transfers between countries. The rules for the euro area have turned out to be unreliable. And there is no way to start stimulating economic growth again in the heavily indebted nations.
Dollar May Extend Rally After Greece Rescue, Deutsche Bank Says. The dollar may extend this year’s 12 percent climb against the euro even after Europe crafted a $1 trillion plan to rescue Greece and other debt-laden governments, said Deutsche Bank AG, the world’s biggest currency trader. “The risk of default has receded for the time being, but emergency measures alone will not be enough to lift the euro,” said Koji Fukaya, a senior currency strategist in Tokyo at Deutsche Bank. Europe needs sustained efforts to rebuild the finances of indebted nations, not just emergency loans, he said. “The euro is still overvalued” based on the gap in bond yields and in the differing degrees of economic recovery between the U.S. and Europe, he said. “It wouldn’t be surprising if the currency fell below $1.25 by the middle of the year.” Purchasing power parity, a measure of the relative cost of goods, shows the euro’s long-term neutral level at $1.15 to $1.20, he said.
Biggs Says U.S. Stocks May Surge 20%, Led by Technology Shares. U.S. stocks could jump as much as 20 percent, led by technology companies, as the global economy rebounds from Europe’s debt crisis, said Barton Biggs. “I’m betting the next move in the U.S. market is going to be up 15 to 20 percent,” Biggs, who runs New York-based hedge fund Traxis Partners LP and whose flagship fund returned three times the industry average last year, said in a Bloomberg Television interview today.
China's April Inflation Accelerates, Lending Surges. China’s inflation accelerated, new lending topped economists’ estimates and property prices rose by a record, highlighting the threat of overheating in the fastest- growing major economy. Consumer prices rose 2.8 percent in April from a year earlier, the fastest pace in 18 months, and property prices jumped 12.8 percent, the statistics bureau said in statements today. New lending of 774 billion yuan ($113 billion), announced by the central bank, was more than any of 24 economists forecast.
Wall Street Journal:
Some Think One Big Bet Helped Spur Giant Selloff. Shortly after 2:15 p.m. Eastern time last Thursday, hedge fund Universa Investments LP placed a big bet in the Chicago options trading pits that stocks would continue their sharp declines. On any other day, this $7.5 million trade for 50,000 options contracts might have briefly hurt stock prices, though not caused much of a ripple. But coming on a day when all varieties of financial markets were deeply unsettled, the trade may have played a key role in the stock-market collapse just 20 minutes later.The trade by Universa, a hedge fund advised by Nassim Taleb, author of "Black Swan: The Impact of the Highly Improbable," led traders on the other side of the transaction—including Barclays Capital, the brokerage arm of British bank BarclaysNYSE Euronext's electronic ARCA exchange started to appear questionable, say traders. In the disarray, some huge superfast-trading hedge funds that now provide much of the liquidity for the stock market pulled to the sidelines. The working theory among traders and others involved in the exchange meltdown is that the "Black Swan"-linked fund may have contributed to a "Black Swan" moment, a rare, unforeseen event that can have devastating consequences. "Universa alone couldn't have caused the meltdown," said Mark Spitznagel, Universa's founder. "We had reached a critical point in the market and it was poised to collapse." Barclays Capital declined to comment. As more details of last Thursday's dizzying collapse become clear, there is less evidence to suggest a "fat-finger" data-entry error caused the collapse. Instead, the picture is one of a highly rare confluence PLC—to do their own selling to offset some of the risk. Then, as the market fell, those declines would have forced even more "hedging" sales, creating a tsunami of pressure that spread to nearly all parts of the market. The tidal wave appears to have jarred the flow of data going into brokerage firms, such as Barclays Capital, according to people familiar with the matter. Exchanges, in turn, were clogged by huge volumes of offers to buy and sell stocks, say traders and exchange executives. Even before some individual stocks collapsed to just a penny a share, data from the of events, some linked, some unrelated, that exposed structural flaws in the stock market large and small.
Two Oil Firms Tie Rig Blast to 'Plug'. Executives from BP PLC(BP), Transocean Ltd.(RIG) and Halliburton Co.(HAL) began pointing fingers on Monday over who bears ultimate responsibility for the April 20 oil-rig explosion that took 11 lives and is spilling oil into the Gulf of Mexico. The question will loom large at a Senate hearing Tuesday that will hear from executives of the three companies.
Fannie Mae Needs $8.4 Billion More. Fannie Mae asked the U.S. government for an additional $8.4 billion in aid after posting an $11.5 billion net loss for the first quarter, the latest sign that the bailout of the mortgage investor and its main rival, Freddie Mac, is likely to be the most expensive legacy of the U.S. housing-market bust. Fannie's losses reflected continuing weakness in the housing market and would have been worse without accounting changes that reduced its deficit.
Bloomberg Businessweek:
Former PBOC Adivsor Says Too Early for Stable EU, Daily Reports. It’s still too early to suggest that Europe has stabilized after the European Union approved a bailout for Greece, China Daily reported today, citing former Chinese central bank advisor Yu Yongding. The Greek crisis “fully exposed” the weakness of the global economic recovery, the Beijing-based newspaper cited Yu as saying. The euro will likely remain weak as the dollar strengthens, Yu was cited as saying. The Greek crisis also challenges Chinese policymakers who have wanted to diversify the nation’s overseas holdings away from the dollar, the newspaper cited Yu as saying. China’s exports are also set to suffer, China Daily cited Yu as saying. That shouldn’t stop policymakers from tightening policy, Yu was cited as saying. Tightening will likely result in slower Chinese economic growth this year, the newspaper cited Yu as saying.
Confirmed: Apple(AAPL) and AT&T(T) Signed Five-Year iPhone Exclusivity Deal - But Is It Still Valid?The term of Apple and AT&T's iPhone exclusivity deal has long been a mystery -- although USA Today reported a five-year arrangement when the original iPhone came out in 2007, that number has never been independently confirmed, and it's been looking suspect in recent weeks as Verizon iPhone chatter has gotten louder. But we've been doing some digging and we can now confirm that Apple and AT&T entered into a five-year iPhone exclusive in 2007, based on court documents filed by Apple in California.
The Hill:
Reform Fallout Vexes Small Hedge Funds. There are thousands of small funds that worry they’ll suffer from Washington’s effort to rein in the big players.
Politico:
Kagan's Scant Writings Spark Concern. The Senate is about to embark on something it hasn’t done in nearly four decades: vet a candidate for the Supreme Court — Solicitor General Elena Kagan — who has no paper trail as a judge. A thin paper trail can be a good thing for a nominee, meaning few past legal writings to untangle at a confirmation hearing. But so far it hasn't shielded Kagan from attack. President Barack Obama’s supporters on the left are questioning whether Kagan is liberal enough — and the shortage of past writings has given conservatives ammunition to attack Kagan’s qualifications for the high court. “She basically has such a scanty academic record, and she hasn’t written anything at all outside the strictly academic context. And she hasn’t been a judge. There’s no public record at all to speak of to evaluate her on, which is really a very strange situation,” said Paul Campos, a liberal law professor at the University of Colorado. Or as liberal blogger Jane Hamsher of Firedoglake put it: “Accepting Kagan just because people like Obama is wrong. That’s appropriate for ‘American Idol,’ not the Supreme Court. Nobody knows what she stands for but him.”
Wellpoint(WLP) to Obama: Stop 'False' Info. WellPoint CEO Angela F. Braly has fired the latest shot in an escalating battle between the Obama administration and one of America’s largest health insurers. In a letter to President Barack Obama, Braly accused Obama of repeating “false information” about the company cutting off insurance for breast cancer patients and “grossly misrepresent[ing]” the company’s work to treat breast cancer patients. Braly’s letter was prompted by President Barack Obama’s address on Saturday.
Reuters:
US Audit Urges Controls on Treasury Warrant Deals. The U.S. Treasury has managed to negotiate prices for warrants from bailed out banks at prices largely at or above estimated values, but it needs better controls over its bargaining process, a government watchdog said on Tuesday. The Special Inspector General for the Troubled Asset Relief Program said in a new audit report that Treasury has failed to document decisions of the internal panel that makes decisions on banks' offers to repurchase warrants from Treasury. It also said Treasury does not document the substance of its conversations and negotiations with banks, potentially jeopardizing the return realized by taxpayers.
Beijing property prices fell 31.4% for the week ending May 9 from the week ending April 11, to a average price of 16,898 yuan per square meter, citing statistics from consulting firm Comprehensive Real Estate Services Corp.
21st Century Business Herald:
Chinese banks can withstand a 30%-50% decline in home prices, citing bank officials. The nation's banks have completed stress test on their exposure to mortgages. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. can withstand about a 35% decline in home prices. Bank of Communications Co. can withstand a 30% decline in prices and Agricultural Bank of China can take a 20% drop. China Minsheng Banking Corp. can withstand a decline of 40%. China Merchants Bank Co. can withstand a drop of 37%.
The Chosun Ilbo:
Clinton Mulls Seoul Visit Over Cheonan Findings. South Korea and the U.S. are discussing a visit by Secretary of State Hillary Clinton to Seoul once the findings of an investigation into the sinking of the Navy corvette Cheonan are announced late this month. A diplomatic source in Washington on Monday said Clinton is to reaffirm the strong alliance "and send a solemn warning message to the North if findings of the Cheonan's sinking point clearly to North Korea's involvement."
Evening Recommendations Citigroup:
Reiterated Buy on (AGU), target $76.
Night Trading
Asian indices are -.75% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 108.0 -7.0 basis points.
Wholesale Inventories for March are estimated to rise +.5% versus a +.6% gain in February.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Lacker speaking, Fed's Lockhart speaking, Fed's Plosser speaking, $38B 3-year Treasury Note Auction, weekly retail sales reports, ABC consumer confidence reading, IDB/TIPP Economic Optimism Index, NFIB Small Business Optimism Index, (PBI) investor meeting, UBS Global Financial Services Conference, Deutsche Bank Alt Energy/Utilities/Power Conference, BofA Merrill Lynch Healthcare Conference, Jeffries Internet/Media/Telecom Conference, BofA Merrill Metals/Mining Conference, (CE) analyst meeting, (FAF) analyst meeting, (WMB) analyst meeting, (WPZ) analyst meeting, (RADS) investor day, (INTC) analyst meeting, (BMR) analyst meeting and the (TDSC) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.
