Japan Lifts Atomic Alert to Highest Level, Matching Chernobyl. Japan raised the severity rating of its nuclear crisis to the highest, matching the 1986 Chernobyl disaster, after increasing radiation prompted the government to widen the evacuation zone and aftershocks rocked the country. Japan’s Nuclear and Industrial Safety Agency today raised the rating to 7. The accident at the Fukushima Dai-Ichi station was previously rated 5 on the global scale, the same as the 1979 partial reactor meltdown at Three Mile Island in Pennsylvania. The stricken nuclear plant, located about 220 kilometers (135 miles) north of Tokyo, is leaking radiation in Japan’s worst civilian nuclear disaster after a magnitude-9 quake and tsunami on March 11. Tokyo Electric Power Co. said its plant, which has withstood hundreds of aftershocks, may spew more radiation than Chernobyl before the crisis is contained. “The radiation leaks haven’t stopped,” Junichi Matsumoto, general manager of the utility’s nuclear power and plant fitting division, said in Tokyo today. “If the leaks continue, the total radiation from the reactors may exceed” that from Chernobyl.
Libya Rebels Spurn African Union Cease-Fire Unless Qaddafi Gives Up Power. Libya’s rebels turned down an African Union cease-fire proposal that would leave Muammar Qaddafi in power, as the regime’s continued shelling and sniper fire in Misrata claimed civilian lives, including a three-year- old girl. “Qaddafi must leave immediately if he wants to survive,” the head of Libya’s rebel council, Mustafa Abdel Jalil, said at a televised news conference yesterday in Benghazi. In Misrata, Libya’s third largest city, the situation was “very bad” with shelling coming within a few hundred yards of a hospital, according to James Elder, a UNICEF spokesman in Cairo. “All day, casualties have poured in, including families killed,” he said in an e-mail yesterday after talking by Skype with a doctor at the hospital. He said the doctor described a three-year-old girl killed by a sniper’s bullet in the head.
Junk Spreads Diverging Fastest in Year on Oil: Credit Markets. The difference in relative yields between the highest-rated junk bonds is expanding at the fastest pace in a year, signaling growing concern that rising oil prices will slow the global economy. U.S. notes ranked B yield 458 basis points more than government debt on average, according to Bank of America Merrill Lynch data. That compares with a spread of 331 for bonds rated a tier higher at BB. The difference, which stands at 127 basis points, grew 20 basis points in March, the most since Greece became the first euro member to take a bailout in May.
Moussa Koussa Tells BBC Libya Must Avoid Falling Into Civil War. Libya’s former Foreign Minister Moussa Koussa, who defected to the U.K. last month, called tonight for all parties involved in the conflict in Libya to “work to avoid taking Libya into a civil war.” Libyans themselves must find a solution for Libya, Koussa said to the BBC. “We refuse dividing Libya. The unity of Libya is essential to any solution, any settlement in Libya,” Koussa said to the broadcaster.
Oil Falls for a Second Day After IMF Cuts Growth Forecasts for U.S., Japan. Oil declined for a second day after the International Monetary Fund cut its growth forecasts for the U.S. and Japan, saying high crude prices pose a risk to global economic expansion. Futures tumbled from a 30-month high yesterday as the IMF said in its World Economic Outlook that the U.S. economy will expand at a slower pace than in 2010 amid an unemployment rate above 8 percent and a drop in consumer confidence. Oil for May delivery slid as much as $1.21, or 1.1 percent, to $108.71, in electronic trading on the New York Mercantile Exchange, and was at $109.06 at 9:27 a.m. Sydney time. The threat of further oil-price increases has become a “key downside risk” for global growth, according to the IMF report. Oil will rise 36 percent in 2011 to $107.16 a barrel, based on the average prices of U.K. Brent, Dubai and West Texas Intermediate crudes, the IMF said. The January forecast was for oil at $89.50 a barrel this year.
Alcoa(AA) Shares Drop After Aluminum Producer's Quarterly Sales Miss Estimates. Alcoa Inc. (AA), the largest U.S. aluminum producer, fell in New York trading after reporting first-quarter sales that missed analysts’ estimates as the dollar weakened. Alcoa declined 62 cents, or 3.5 percent, to $17.15 at 7:19 p.m. after the close of regular New York Stock Exchange trading. The company’s sales increased 22 percent to $5.96 billion from $4.89 billion a year earlier, Alcoa said today in a statement. That trailed the $6.06 billion average estimate of eight analysts in a Bloomberg survey. Alcoa, traditionally the first company in the Dow Jones Industrial Average to report quarterly results, said its earnings were curbed by a weaker U.S. dollar, and higher energy and raw-material costs. Some costs for materials, such as caustic soda used in the processing of bauxite, are increasing following the earthquake and tsunami in Japan, Chief Financial Officer Chuck McLane said on a conference call to discuss the earnings. “We are seeing increasing tightness in the Asian caustic market,” McLane said. “Due to this disruption as well as the continuing unrest in the Middle East, we expect to see higher input costs for fuel oil.” Crude-oil prices on the New York Mercantile Exchange averaged 20 percent more in the first quarter than a year earlier.
Toyota(TM) Tells U.S. Dealers to Brace for Reduced Car Supplies. Toyota Motor Corp. (7203) told U.S. dealers that assembly disruptions triggered by last month’s record earthquake and tsunami in Japan may thin supplies of vehicles into the third quarter. The world’s largest automaker will build vehicles at “significantly reduced levels,” Bob Carter, group vice president of U.S. sales, said in a memorandum to dealers.
Silver Options Trader Bets $1 Million on Price Drop by July. A trader’s almost $1 million bet that an exchange-traded fund tracking silver will decline by July was today’s biggest single options trade on U.S. exchanges as futures on the metal reached a 31-year high. The 100,000 puts, or options to sell 100 shares each of the iShares Silver Trust (SLV) at $25 by July, changed hands at the ask price of about 10 cents and exceeded the open interest of 6,054 outstanding contracts before today, indicating that a buyer of a new bearish position initiated the transaction. The ETF rose to $40.33, the highest intraday level since trading began five years ago, before falling 1.6 percent to $39.21 at 4 p.m. New York time. It hasn’t closed below $25 since November. “It’s definitely a massive downside bet on silver,” said Henry Schwartz, president of Trade Alert LLC, a New York-based provider of options-market data and analytics.
Marvell(MRVL) Founders Accuse Goldman Sachs(GS) of Fraud in Suit Over Margin Calls. Two co-founders of Marvell Technology Group Ltd. (MRVL) sued Goldman Sachs Group Inc. (GS) alleging the investment bank tricked them into selling company shares by claiming the sale was needed to cover a margin loan, according to a complaint filed today in state court in San Francisco. Sehat Sutardja, Marvell’s chief executive officer, and Weili Dai, the company’s former chief operating officer, said they were duped into selling shares in 2008 that are now worth $141.5 million. Goldman Sachs pressured them by claiming a regulatory rule, which didn’t exist, required them to sell their stock, according to the complaint. Goldman Sachs held millions of shares of Marvell stock in 2008, they said.
Taylor Rule Gives 'Early Warning' at the Fed: Chart of the Day. The Federal Reserve should increase borrowing costs for the first time in two years, according to the Taylor Rule, a measure of where interest rates should be set given inflation and growth projections. The Taylor Rule, based on the consumer price index and the jobless rate, indicates the Fed's target for overnight loans between banks should be .35%. "Inflation expectations have shot up in the past three to four months," said Andy Cossor, Hong Kong-based chief Asia market strategist at DZ Bank AG, Germany's fifth-largest lender. "Some early warning lights may be starting to flash at the Fed. It has had its foot hard on the accelerator. The Taylor Rule and other yardsticks are sending a signal that it's time to start reconsidering that." The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, widened to 2.67 percentage points yesterday, the most in three years.
JPMorgan(JPM), Bank of America(BAC) Earnings May Show Weaker Revenue as Loans Stall. U.S. banks such as JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) may report weak revenue for the first quarter after lending by the industry dropped in almost every category. Bank loans and leases fell $87.4 billion to $6.97 trillion from the end of 2010 through March 30, or 1.3 percent, according to Federal Reserve data. Deposits at U.S. banks rose the same percentage to $7.97 trillion, showing households and businesses are still hoarding cash instead of borrowing, analysts said. “While loan growth tends to be seasonally weak in the first quarter, this quarter is tracking worse than seasonality would suggest,” Barclays Capital Inc. analysts led by Jason Goldberg wrote in an April 8 report. “We fear companies have been disappointed.”
Wall Street Journal:
Pakistan Tells U.S. to Halt Drones. Pakistan has privately demanded the Central Intelligence Agency suspend drone strikes against militants on its territory, one of the U.S.'s most effective weapons against al Qaeda and Taliban leaders, officials said.
President Open to Deal on Debt Cap. White House officials have opened the door to a deal with Republicans that would allow the U.S. to increase its ability to borrow, potentially easing worries in financial markets that the country might default on its debt.
This Takeover Pits Bureaucrat vs. Bureaucrat. Just when deal-making has snapped back to life, the nation's two main antitrust cops are locked in a series of increasingly tense feuds over which agency should take the lead in big cases. The latest standoff between the Justice Department and Federal Trade Commission centers on a key piece of the Obama administration's health-care overhaul. That battle has worsened already poor relations between the two agencies, sparking concern that billions in freshly minted business deals could be delayed as they squabble for control. At times, officials have resorted to coin flips and turn-taking games to settle which agency will get jurisdiction.
Germany Rebuffs U.S. Calls to Shut Iran Bank. Germany is resisting international pressure to freeze the activities of an Iranian-owned bank based in Hamburg that U.S. officials say provides the financial lifeblood for some of Iran's blacklisted companies. U.S. and European Union officials in recent months have stepped up pressure on Germany to close down the European-Iranian Trade Bank AG—including a Feb. 2 letter from 11 U.S. senators to German Foreign Minister Guido Westerwelle that urged immediate action. The U.S. says the German-licensed bank, known as EIH Bank for its German initials, has become a major financial conduit for Iranian companies involved in weapons proliferation. Last September, it added EIH to its own blacklist of entities banned from the U.S. financial system. Germany has rebuffed such appeals, arguing that it has no proof of illegal activity.
Details Emerge in Berkshire(BRK/A) Deal That Led to Resignation. David Sokol, the Berkshire Hathaway Inc. executive who resigned last month, had more conversations with bankers for Lubrizol Corp. than previously disclosed, according to a regulatory filing that adds more detail about the chemical maker's interest in a potential deal.
MarketWatch:
Obama Regrets 2006 Debt-Ceiling Vote. Five years ago, a new U.S. senator from Illinois voted against raising the limit on how much debt the federal government could issue. He said it would be a big mistake.“Increasing America’s debt weakens us domestically and internationally,” the senator said at the time. “Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
Trump: The Next Ross Perot? (video) Donald Trump says he will 'probably' run as an independent candidate for U.S. president if he does not receive the Republican nomination.
Einhorn's Shorts Dragged Down Fund's Returns. In the first quarter, Einhorn's Greenlight Capital Qualified LP dipped 2.9 percent, compared to an average 2 percent gain for the hedge fund industry.
U.S.-Pakistan Relations Near Collapse. The relationship between The United States and Pakistan has always been fraught with "issues," but it is hard to remember a time when things were this bad. And The New York Times is now reporting that things are getting worse:
Gas Prices Rise, and Economists Seek Tipping Point. The question, economists agreed, is what happens if prices continue to go up and remain high. Prices for a gallon of regular unleaded gas are topping $4 at more service stations nationwide, revisiting the bleak territory of three years ago, when the average price for a gallon of regular gas reached a peak of $4.11 on July 17, 2008, according to the Oil Price Information Service.
Confidence That U.S. is Winning War on Terror Down to Lowest Level Since 2006. A new Rasmussen Reports national telephone survey finds that just 32% of Likely U.S. Voters now believe the United States and its allies are winning the war on terror. That's down eight points from a month ago and the most pessimistic assessment since October 2006.
AP:
Ford(F) Says Asian Operations May Face Parts Shortages Later This Month Due to Japan Quake. Ford Motor Co. says that its Asia-Pacific operations may have to slow or stop production later this month because of parts shortages from Japan. Ford has had to temporarily halt operations in the U.S. and Europe because of shortages, but this was the first word of possible production cuts in Asia. Ford has 13 plants in its Asia-Pacific region, including eight assembly plants in Australia, Thailand, Taiwan, Vietnam, India, the Philippines and China. Ford doesn't have any production facilities in Japan but, like other automakers, does source parts from suppliers that were hurt by the March 11 earthquake and tsunami. Ford said in a regulatory filing Monday that it expects its operations will be affected beginning the last week of April and into May. It didn't say which factories or for how long, but said it doesn't expect any production disruption to have a big impact on the company's overall financial results. It is pursuing other sources for some of its supply. However, if the supply of a key material or part from Japan is disrupted and it can't find an alternate, Ford said it may have to reduce or temporarily halt vehicle production. That could hurt both the company's results and Ford Motor Credit Co.'s financial condition, it added.
Reuters:
Falcone-Backed Telecom Tests IPO Water. Billionaire hedge fund investor Philip Falcone may have found a way out of his risky wireless telecom bet through a possible initial public offering, three sources said.
Short Bets in US Stocks Rise in Late March. Short interest on both the New York Stock Exchange and Nasdaq rose through the second half of March, the exchanges said on Monday, suggesting investors added to their short positions on expectations of further losses as the market slid. The Standard & Poor's 500 index .SPX hit its 2011 low on March 16 as Japan's natural and nuclear crisis, as well as unrest in Libya and the Middle East, hurt investor sentiment. Short interest on the NYSE rose 0.85 percent to 12.64 billion shares through March 31, from 12.54 billion shares as of March 15. Short interest on the Nasdaq rose 1.6 percent in the second half of March to 6.67 billion shares, from 6.56 billion shares as of March 15.
Transocean(RIG) Drills in Record Water Depth Off India. A rig owned by Transocean Ltd (RIGN.VX)(RIG.N) has drilled in the deepest-ever water depth off India, eclipsing a record set eight years before in the Gulf of Mexico, the company said on Monday.
Financial Times:
Arab Spring Sends Chill Through Israelis. Israelis may talk of the Arab spring, yet most have come to regard the eruption of popular protests across the Middle East with a distinct sense of wintry gloom. According to one opinion poll, 56 per cent of Israelis believe current events in the Arab world will be “bad for Israel” – almost double the proportion who say the country will benefit.
This Housing Bubble Will Break Our Banks. In last week's post I showed that there is a debt-financed, government-sponsored bubble in Australian house prices. Now let’s look at what this might mean for the Australian banks who have sated on this housing hot air if, or rather when, the bubble is pricked.
Economic Times:
India's environment ministry may soon give its final forest clearance to 50 coal blocks to be developed by companies including Reliance Power Ltd., Jindal Steel & Power Ltd., Steel Authority of India Ltd. and Hindalco Industries Ltd.
Korea Economic Daily:
Apple Inc.(AAPL) and Google Inc.(GOOG) may face complaints from South Korean Internet portal site operators for unfair trade practices, citing industry officials.
Economic Observer:
China's land ministry may raise the minimum price it will sell land for some industrial projects to help curb investment growth.
Beijing News:
Beijing's average new home prices fell 10.9% in March from a year ago to 19,679 yuan per square meter, the first year-on-year decline since September 2009, citing the city's housing and urban-rural development commission.
China Securities Journal:
China's Ministry of Finance is considering a reduction of export rebates for some aluminum and stainless steel products. Export rebates for some aluminum products may be reduced to 9% from 13%. The entire 5% export rebate for stainless steel products may be removed.
China National Cotton Reserves Corp.:
China's imports of cotton for March dropped 15% on a year earlier to 276,400 tons.
Evening Recommendations Barclays Capital:
Rated (PLCE) Overweight, target $63.
Rated (ANF) Overweight, target $81.
Rated (BEBE) Overweight, target $8.
Rated (ARO) Overweight, target $31.
Rated (ANN) Overweight, target $36.
Rated (URBN) Overweight, target $37.
Rated (GPS) Overweight, target $28.
Rated (EXPR) Overweight, target $25.
Rated (LULU) Underweight, target $90.
Rated (TLB) Underweight, target $6.
Rated (ZUMZ) Underweight, target $26.
Rated (LTD) Underweight, target $34.
Night Trading
Asian equity indices are -1.75% to -.75% on average.
Asia Ex-Japan Investment Grade CDS Index 105.0 +1.0 basis point.
Asia Pacific Sovereign CDS Index 112.0 +3.0 basis points.
The NFIB Small Business Optimism Index for March is estimated to rise to 95.0 versus a reading of 94.5 in February.
8:30 am EST
The Import Price Index for March is estimated to rise +2.1% versus a +1.4% gain in February.
The Trade Deficit for February is estimated at -$44.0 Billion versus -$46.3 Billion in January.
2:00 am EST
The Monthly Budget Deficit for March is estimated at -$189.0 Billion versus -$222.5 Billion in February.
Upcoming Splits
(NDSN) 2-for-1
Other Potential Market Movers
The Fed's Dudley speaking, Fed's Hoenig speaking, Fed's Tarullo speaking, Fed's Fisher speaking, $32 Billion 3-Year Treasury Notes Auction, weekly retail sales reports, IBD/TIPP Economic Optimism Index for April, (SUPG) analyst day and the (QDEL) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity 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.
North American Investment Grade CDS Index 93.51 +.73%
European Financial Sector CDS Index 76.58 -3.62%
Western Europe Sovereign Debt CDS Index 160.83 bps -.10%
Emerging Market CDS Index 194.18 +.71%
2-Year Swap Spread 18.0 unch.
TED Spread 25.0 unch.
Economic Gauges:
3-Month T-Bill Yield .04% unch.
Yield Curve 275.0 -1 bps
China Import Iron Ore Spot $183.0/Metric Tonne +1.22%
Citi US Economic Surprise Index +32.80 -1.3 points
10-Year TIPS Spread 2.64% -1 bp
Overseas Futures:
Nikkei Futures: Indicating -90 open in Japan
DAX Futures: Indicating -1 open in Germany
Portfolio:
Slightly Higher: On gains in my Medical, Biotech and Retail sector longs and ETF hedges
Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows despite falling eurozone debt angst, earnings optimism, diminishing govt shutdown fears, buyout speculation and falling energy prices. On the positive side, Medical Equipment, Drug, Airline, Food, Retail and Tobacco shares are slightly higher on the day. The Transports are just -.2% lower on the day. Oil is falling -3.2% and gold is declining -.74%. On the negative side, Coal, Hospital, Education, Gaming, Construction, Networking, Disk Drive, Paper, Steel, Oil Service, Energy, Oil Tanker, Alt Energy and Utility shares are under meaningful pressure, falling more than -1.50%. Cyclicals and small-caps are underperforming again. Commodity-related stocks have been heavy throughout the day. The UBS-Bloomberg Ag Spot Index is down just -.29%, copper is falling -1.1% and Lumber is falling another -3.47%. Lumber is down about -20.6% in about 2 weeks. The Ag Spot Index is still near levels that sparked the Tunisian riots. The US price for a gallon of gas is up +.03 today to $3.77/gallon. It is up .65/gallon in 55 days. The 10-year TIPS spread is maintaining recent gains despite today's energy price pullback, which is also a large negative. Stocks in China and India reversed opening gains and closed at session lows overnight. I still think investors are underestimating the extent of the inflation problems in many key emerging markets. As well, the Japan nuclear situation remains more tenuous than perceived, in my opinion. The broad US market feels a bit tired and a number of market leaders continue to trade poorly. Trading is sloppy and somewhat random. Given the numerous headwinds, the market still remains extraordinarily resilient, notwithstanding today's losses. I expect US stocks to trade mixed-to-lower into the close from current levels on more shorting, technical selling, rising Mideast unrest, emerging markets inflation fears, more hawkish fed commentary, profit-taking and Japan concerns.
Oil-Price Risk Threatens Stronger Global Recovery, IMF Says. The threat of further oil-price increases has become a “key downside risk” for global growth, compounding the difficulties posed by overheating in emerging economies and persistent unemployment in developed nations, the International Monetary Fund said. The IMF stressed an “urgent” need for deficit reduction in the U.S., while recommending that emerging counterparts raise interest rates and let their currencies appreciate amid inflation pressures. In advanced economies, where unemployment remains high and bank credit “is still very sluggish,” monetary policy can remain accommodative, the IMF said. In the U.S. and the U.K. new programs to purchase government bonds “appear unnecessary, given current prospects for activity and developments in inflation expectations,” it said.
Oil Drops From 30-Month High as IMF Cuts Growth Forecasts. Oil fell from a 30-month high after the International Monetary Fund cut its growth forecasts for the U.S. and Japan, indicating high oil prices pose a risk to global economic expansion. Crude tumbled as much as 2.9 percent as the IMF predicted in its World Economic Outlook that the U.S. economy will expand at a slower pace than in 2010 amid an unemployment rate above 8 percent and a drop in consumer confidence. Oil for May delivery fell $2.59, or 2.3 percent, to $110.20 a barrel at 1:31 p.m. on the New York Mercantile Exchange. Futures settled at $112.79 a barrel on April 8, the highest closing price since Sept. 22, 2008. Prices have risen 30 percent in the past year.
Soros Warns Moral Hazard 'Looms Larger' as Volcker Says Big Banks Can Fail. Moral hazard in the financial system “looms larger than ever before,” even after the Dodd- Frank law gave U.S. federal agencies tools to regulate institutions that may be deemed too big to fail, said billionaire investor George Soros. “The evidence is overwhelming that the first priority of the authorities is to prevent a market collapse, and everything else has to take second place,” Soros, chairman of Soros Fund Management LLC, said yesterday at a conference in Bretton Woods, New Hampshire. Europe’s refusal to allow members of the monetary union to restructure their debt has added to moral hazard in the financial system, Soros said. “Look at the situation in Europe, for instance, where authorities are insisting on no renegotiation or restructuring on outstanding debt because that could possibly provide a financial banking crisis,” Soros said. “At the present we bail out, but in the future we will bail in. It has absolutely no credibility.”
Hedge Funds Boost Bullish Bets on Grain, Soy as Demand Rises. Hedge funds boosted their bullish bets on corn and soybeans to the highest in four weeks as demand surged for food, livestock feed and fuel. Bullish bets on wheat jumped the most since early December. The funds and other large speculators increased net-long positions, or wagers on rising prices in corn by 14 percent to 322,069 futures and options contracts as of April 5, according to data from the Commodity Futures Trading Commission. Bullish soybean bets gained 2.9 percent to 118,280 contracts. Holdings for both commodities were the highest since March 8.
Endo(ENDP) to Buy American Medical(AMMD) for $2.9 Billion to Trim Pain-Drug Dependence. Endo Pharmaceuticals Holdings Inc. (ENDP) agreed to buy American Medical Systems Holdings Inc. (AMMD), the maker of incontinence treatments, for $2.9 billion to help reduce its dependence on its top-selling painkiller Lidoderm. American Medical shareholders will get $30 a share, Chadds Ford, Pennsylvania-based Endo said today in a statement. That’s 34 percent above the April 8 closing price for Minnetonka, Minnesota-based American Medical. Endo, whose shares jumped 5.8 percent in Nasdaq Stock Market trading, will also assume $312 million of American Medicine Systems debt.
Level 3(LVLT) Surges on Deal to Buy Global Crossing(GLBC) for $1.9 Billion. Level 3 Communications Inc. (LVLT), the unprofitable provider of broadband services, jumped the most in almost two years after agreeing to buy Global Crossing Ltd. (GLBC) for about $1.9 billion. Level 3, based in Broomfield, Colorado, will acquire Global Crossing in an all-stock transaction to expand its network over three continents and reduce expenses, the companies said in a statement today. The deal is worth $23.04 a share based on Level 3’s closing stock price on April 8, 56 percent more than Global Crossing’s share price that day.
Dollar May Rise Against Euro on Interest-Rate Outlook, UBS Says: Tom Keene. The dollar may gain this year as faster-than-expected growth and inflation in the U.S. force the Federal Reserve to tighten monetary policy, according to UBS AG. Sentiment towards the dollar, especially among Asian investors, will improve once the Fed ends its $600 billion asset-purchase program in June, said Mansoor Mohi-Uddin, Singapore-based chief currency strategist at UBS AG. He declined to say when he expects the Fed to start raising interest rates. The dollar has fallen 7.3 percent against the euro this year. “U.S. inflation numbers keep on printing higher,” Mohi- Uddin said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “The way the dollar is now against the euro, against the Australian dollar, has not priced in the risk that the Fed can end quantitative easing. It has not priced in the risk that U.S. policy will lead to stronger growth in America.” The euro may decline because the market is expecting more interest-rate increases by the European Central Bank than policy makers are likely to deliver, Mohi-Uddin said. “The European Central Bank may go for a couple more rate hikes this year, but the market is pricing in five rate hikes in the next 12 months,” said Mohi-Uddin. “We think that’s too high and that’s why we are cautious about the euro at this level against the dollar.”
Discouraged Workers Complicate Fed's Response to Jobless Fall. The jobs market still isn’t working for many Americans. Some 6.3 million people have been out of work and looking for a job for more than six months. The employment-to-population ratio is lower than it was when the recession ended as companies have been slow to add to payrolls. And big sources of hiring in the past -- government, health care and retailing -- may not be able to reprise that role in the future as lawmakers limit outlays and consumers curb spending. “The trends are a little bit scary,” said Nobel laureate Michael Spence, a professor at New York University. “There’s been a break in an important part of the social contract” for many Americans who are finding they can’t get ahead.
Tenet(THC) Sues Community Health(CYH) Over Medicare Billing After Spurning Takeover. Tenet Healthcare Corp. (THC), after rejecting Community Health Systems Inc. (CYH)’s unsolicited buyout offer, said it sued that company for allegedly overbilling Medicare in admitting patients to its hospitals. Community Health Systems shares plunged. Tenet, based in Dallas, fell $1.35 cents, or 18 percent, to $6.20 in New York Stock Exchange composite trading at 10:35 a.m. Community Health fell $14.79, or 37 percent, to $25.51., before trading curves were implemented.
Missouri Attorney General Opposes U.S. Health Law in Break With Democrats. Missouri Attorney General Chris Koster said Congress exceeded its authority when it passed a law requiring citizens to obtain health insurance, according to a filing with a federal appeals court. The Obama administration asked the U.S. Court of Appeals in Atlanta to overturn a Jan. 31 ruling by U.S. District Judge C. Roger Vinson in Pensacola, Florida, that the Patient Protection and Affordable Care Act is unconstitutional. The U.S. argued the mandate portion of the law was “a valid exercise of Congress’s commerce power.” Missouri legislators passed measures calling on Koster to oppose the 2010 statute. “The federal courts, in reviewing this aspect of the law, must either expand Congress’ Commerce Clause authority, justify the provision on alternate constitutional grounds, or strike down the individual mandate,” Koster, a Democrat, said in a letter accompanying his so-called amicus, or friend-of-the- court, brief.
Wall Street Journal:
Japan Broadens Nuclear Evacuation Zone. An aftershock that shook Japan's northeast region temporarily shut down power supply and makeshift cooling systems at the Fukushima Daiichi plant Monday, highlighting the vulnerability of the crippled facility a month after a massive earthquake triggered the nation's worst nuclear-power crisis. Cooling functions at three of the plant's six reactors were restored 50 minutes after the temblor that rattled Fukushima and surrounding areas. Regulators said the suspension didn't appear to have caused any significant safety issues. Still, the latest quake served as a reminder of how lingering aftershocks and the risk of tsunami could easily upset the delicate efforts to stabilize the problems at the stricken plant.
Yellen Says Fed Won't Repeat Mistakes of '70s. The Federal Reserve is unlikely to have to raise interest rates soon because the surge in global commodity prices should have a temporary impact on U.S. inflation, a key Fed official said Monday. However, Fed Vice Chairman Janet Yellen said in prepared remarks that the U.S. central bank will keep a close eye on inflation developments to avoid the mistakes of the 1970s, when high oil prices led to sharp increases in consumer prices.
Economists See Growth Accelerating Later in Year. The U.S. economic recovery is expected to gain momentum over the rest of the year, despite a sharp pullback in growth during the just-finished first quarter, according to economists surveyed by The Wall Street Journal. On average, the 56 economists polled downgraded their estimate of first-quarter growth in gross domestic product to 2.7% at a seasonally adjusted annual rate. That is down from an average first-quarter forecast of 3.6% just two months ago. The economy grew at a 3.1% rate in the fourth quarter. The respondents, not all of whom answer every question, cited the still-weak housing market, severe weather, declining confidence and the earthquake in Japan as factors contributing to the pullback. The single biggest factor named by 35 economists was the rising price of oil sparked by Mideast unrest. "High oil prices usurp confidence and erode spending by consumers still struggling with lost wealth," said Sean M. Snaith of University of Central Florida.
US Home-Loan Brokers Face New Limits On Pay. New rules governing how mortgage-loan officers get paid are meant to protect consumers and make it clearer how the mortgage professional is making money off the loan--but some in the industry say the rules are creating new problems.
Toyota(TM) Says Vehicle Shortage Could Linger. Toyota Motor Corp. has warned its U.S. dealers that the company's supply of new vehicles could become "significantly impacted" by the summer, according to a memo distributed on Sunday. The memo is the clearest statement by Toyota that the shortage caused by the March 11 earthquake and tsunami in Japan will last into the third quarter.
Trump: Obama Is To Blame For High Oil Prices. Real estate developer Donald Trump blames President Obama for the rising price of oil, warning, "this country can never, ever recover" if oil prices continue to go up. "That's really the life's blood of the country," Trump told CNBC in a phone interview on Monday. The Trump Organization chairman, who says he's considering running for president, plans to decide "before June" on the matter. He contended that Obama is not a leader and is "in bed with these (OPEC) people. He doesn't speak the way you have to speak to them."
Drivers Starting to Cut Back as Gasoline Prices Keep Rising. With the price of gas above $3.50 a gallon in all but one state, there are signs that Americans are cutting back on driving, reversing a steady increase in demand for fuel as the economy improves. Gas sales have fallen for five straight weeks, the first time that has happened since November, according to MasterCard SpendingPulse, which tracks spending at 140,000 service stations nationwide.
CHBT: Chinese Fraud Du Jour? Not even a full hour of trading can pass anymore without a fresh Chinese fraud getting exposed. Today's plunge target: China Biotics. From BDOWatch:
New York Times:
Bailout for Portugal Will Put Politicians in a Vise. To secure a bailout worth about €80 billion, Portugal may have to agree to international creditors’ demands that it impose tougher austerity measures than those its own lawmakers rejected less than a month ago. This paradoxical situation is fueling divisions in Lisbon before a June 5 general election that was itself called because of a parliamentary standoff over how to clean up the public finances. In fact, Portuguese politicians may be more concerned about not getting blamed by voters for seeking outside help than about negotiating favorable terms for that rescue, valued at $116 billion.
U.S. Venture Funds Raised $7.7 Billion In First Quarter. U.S. venture capital firms raised more money last quarter than in any period since 2001. The total raised for new funds was $7.7 billion, according to Dow Jones LP Source. The capital going into VC funds was up 97 percent from a year ago, when they raised $3.9 billion.
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 19% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Thirty-nine percent (39%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20 (see trends).
Reuters:
NATO to Continue Airstrikes to Aid Libya Civilians. NATO will continue to target Libyan leader Muammar Gaddafi's forces as long as they continue to threaten civilians, a NATO official said on Monday. South African President Jacob Zuma has urged NATO to stop air strikes on government targets to give a ceasefire "a chance", after Gaddafi accepted an African Union roadmap for ending the conflict in Libya including an immediate ceasefire. "We will continue to put pressure on forces threatening civilians and our operations will continue," a NATO official told Reuters, speaking on condition of anonymity. "Our aircraft are still flying and when we see a threat to civilians, we will engage," the official said. The official said Libyan government forces shelled the Libyan city of Misrata on Monday morning. "It does not appear that this indication of a peace deal has any substance at this point," the official said.
Nasdaq(NDAQ), ICE(ICE) Not Walking Away from NYSE(NYX) Bid - Sources. Nasdaq OMX Group (NDAQ.O) and IntercontinentalExchange Inc (ICE.N) are not going to walk away from their bid for NYSE Euronext (NYX.N), despite the NYSE board's rejection of the unsolicited offer, according to people familiar with the matter. The two exchanges have been working behind the scenes to rally support from NYSE shareholders for their bid, asking them to press the NYSE board to talk to Nasdaq and ICE about the offer, one of the sources said.
Karzai Says West Had Role in Bank Crisis. Afghan President Hamid Karzai accused foreigners on Monday of contributing to a corruption scandal at the country's biggest lender, and vowed to impose Afghan terms on the country's "strategic partnership" with the United States. Politically well-connected Kabulbank lost hundreds of millions of dollars through fraud, bad loans and mismanagement, and the scandal has jeopardised the country's flow of aid, because of disputes with the International Monetary Fund about how to handle it. Karzai warned that those responsible for bad loans would have to repay within a month or face trial, and promised tighter regulations of the sector in future. But he also said foreigners helped plunge the private bank into crisis.
USA Today:
Boehner: GOP Not Going to 'Roll Over' on Debt. House Speaker John Boehner today defended the budget deal that kept the government running and expressed low expectations for President Obama's upcoming speech on the deficit. Boeher, speaking this morning on Fox News, warned the Obama administration that the Republican majority in the U.S. House will not automatically vote for an increase to the nation's debt limit. "We are not going to do the typical Washington thing and roll over and increase the debt limit without addressing the underlying problem," Boehner said in his first TV interview since reaching a budget agreement for the rest of fiscal 2011. The United States has about $14.3 trillion in debt. The nation will reach its debt limit -- the amount of money it can legally borrow -- sometime in mid-May.
Financial Times:
Junk-bond funds had record inflows last week as retail investors' appetite for high-yield corporate debt reasserted itself after a lull in March, citing EPFR, which tracks fund flows. Globally, $1.47 billion was invested in high-yield funds last week, the highest weekly figure ever; in the U.S., inflows amounted to $933 million.
Telegraph:
ICB Tells UK Banks Capital Reserves Must Be Higher. Britain's banks will today be told they must massively increase their capital reserves to protect savers and taxpayers from another financial crisis.
Kyodo News:
Japan may raise its estimate of the severity of the Fukushima Dai-Ichi nuclear plant accident to level 7, the highest on the International Nuclear and Radiological Event Scale. That would put the accident's severity at the same level of the 1986 Chernobyl accident. Japan's current assessment is 5, the same as the 1979 partial meltdown at Three Mile Island in the U.S.
Xinhua:
China 'Very Concerned' About Unrest, Citing Xi. China is "very concerned" about unrest in West Asia and North Africa, and wants an "early" return to stability, citing remarks by Vice President Xi Jinping to visiting Moroccan Foreign Minister Taieb Fassi Fihri.
China Business Indepth:
China's March consumer price index likely rose 5%, citing an official of the National Bureau of Statistics.
Ma'an:
The Palestinian Authority plans to publish a report this week saying it will be ready to establish an independent state during September, citing Planning Minister Ali Al-Jerbawi. The report is being prepared for presentation to a conference of international donors this week in Brussels.
