Evening Headlines
Bloomberg:
- Oil Trades Near Two-Month Low, Heads for Biggest Weekly Decline in a Year. Oil traded near the lowest in almost two months in New York and headed for the biggest weekly drop in a year as a surprise increase in U.S. jobless claims added to signs of slower growth in the world’s largest crude consumer. Futures were 0.2 percent lower after declining 8.6 percent yesterday, the biggest fall in more than two years. U.S unemployment claims rose the most since August and German factory orders slipped. “The spike in weekly jobless claims and the drop in German factory orders follow a series of weak economic data,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The ECB is stepping back from tightening, which is ending the commodity inflation trade. This is a significant recasting of the environment.” Prices are down 12.6 percent this week, the most since the week ended May 7, 2010, and are 29 percent higher the past year. Brent crude oil for June settlement plunged $10.39, or 8.6 percent, to $110.80 a barrel, the lowest since March 16, on the London-based ICE Futures Europe exchange yesterday.
- Trichet's ECB Rate Signal Just a Respite for Indebted Nations: Euro Credit. Jean-Claude Trichet’s signal that the European Central Bank will hold off raising interest rates next month may provide only a respite for distressed euro nations grappling with anemic growth and demands to cut their debt. The ECB president indicated that the bank will wait until after June to raise rates for a second time this year after the ECB left its benchmark rate at 1.25 percent yesterday. The prospect of rising borrowing costs underscored Europe’s economic divide and political tensions over bailouts. While the ECB’s decision wrong-footed some investors who had expected a quicker move to fight accelerating inflation, the euro region’s most indebted countries are being squeezed by rate increases and a strengthening euro. “The periphery’s weak cyclical outlook, poor earnings prospects for workers -- especially in real terms -- and tighter credit conditions will jointly amplify the restrictive impact of rising interest rates,” said Vladimir Pillonca, an economist at Societe Generale SA in London. “Greece, Portugal, Ireland and structurally weak economies such as Italy are likely to suffer disproportionately.” Greece is in its third year of recession and its two-year notes yield more than 25 percent. Portugal yesterday cut its 2011 forecast, saying the economy will shrink 2 percent. Ireland and Italy last month both scaled back their forecasts for this year, respectively to 0.75 percent and 1.1 percent, while Spain expects 1.3 percent growth. A year of crisis management hasn’t worked and “it’s a question of time before a default will happen” in Greece, Timo Soini, head of Finland’s euro-skeptic True Finns party, told Bloomberg Television. He indicated the party, which rocketed to third place in elections last month, will use its status in the future government to oppose strengthening Europe’s rescue fund. European voters are now saying “we have had enough of the transfer of risk and debt from the private sector to the public sector,” said Irwin Stelzer, an economist at the Washington- based Hudson Institute, a research center. “The whole theory of the euro zone is a kind relief of democratic pressures; you do things in committees and the electorate isn’t really involved. That game is over.” Variable-rate mortgages account for almost 100 percent of new lending in Portugal and about 85 percent in Spain, compared with 15 percent in Germany, according to the Brussels-based European Mortgage Federation. In Ireland, 85 percent of outstanding loans track market rates. “Consumers in the periphery, already under pressure from consolidation efforts, will increasingly feel the impact of rate hikes, especially since Portugal, Ireland and Spain are among the euro-area countries with the highest share of variable-rate mortgages,” said Nick Matthews, a senior European economist at Royal Bank of Scotland Plc in London.
- Asia Inflation Fight Spreads on Philippines, Malaysia Rate Moves. The Philippines and Malaysia joined India and Vietnam in raising interest rates this week as nations in a region that led the global economic recovery intensified their fight against inflation. Bangko Sentral ng Pilipinas yesterday increased the rate it pays lenders for overnight deposits to 4.5 percent from 4.25 percent in its second move this year, while Bank Negara Malaysia lifted the benchmark overnight policy rate for the first time in 2011, boosting it by a quarter point to 3 percent. Surging food and oil costs are escalating the danger of inflation in Asia, prompting policy makers to accelerate monetary tightening even at the risk of slowing growth. India on May 3 doubled the magnitude of rate increases and the State Bank of Vietnam raised borrowing costs the following day for the fifth time in 2011. “The bigger picture is that inflation still remains quite an issue around the region,” said Wellian Wiranto, an economist at HSBC Holdings Plc in Singapore. “Inflation risk still trumps growth risk as you can see from the central bank thinking.” Asia faces a “serious setback” from surging inflation that threatens to push millions into extreme poverty, the Asian Development Bank said last week.
- Kraft(KFT) Foods Lowers Full-Year Profit Forecast, Citing Commodity Costs. Kraft Foods Inc. (KFT), the world’s second- largest food company, lowered its full-year earnings forecast because of the loss of the Starbucks Corp. (SBUX) distribution business and surging commodity costs. Profit, excluding items such as integration costs, will be at least $2.20 a share, Northfield, Illinois-based Kraft said today in a statement. That compares with a prediction of at least $2.24 in February. Analysts on average project $2.23, according to a Bloomberg survey.
- JPMorgan Chase(JPM) Said to Be Subpoenaed by SEC Over Mortgage Debt Documents. JPMorgan Chase & Co. (JPM) was subpoenaed by the U.S. Securities and Exchange Commission over failed mortgages, a person familiar with the investigation said, as the agency probes banks sued for allegedly boosting their profits by failing to share refunds from sellers of faulty debt.
- SEC Subpoena Credit Suisse Over Mortgages: MBIA. The U.S. Securities and Exchange Commission subpoenaed Credit Suisse Group AG (CSGN) seeking documents related to mortgage debt, bond insurer MBIA Insurance Corp. said in a court filing as it seeks information as part of a lawsuit against three of the bank’s units. “Credit Suisse is now the subject of an investigation by the Securities and Exchange Commission, which issued a subpoena this week seeking the same types of documents as MBIA seeks with this motion,” the bond insurance unit of Armonk, New York-based MBIA Inc. (MBI), said in the filing in New York State Supreme Court.
- Republican Senators to Block Consumer Nominee Absent Changes. U.S. Republican senators told President Barack Obama they have enough votes to block any nominee for the Consumer Financial Protection Bureau unless Democrats agree to change the agency’s structure and funding. The warning, delivered in a letter to the White House, adds to the uncertainty surrounding the agency, which was included in the Dodd-Frank financial-regulation overhaul last year over the objections of Republican lawmakers and financial industry lobbyists. Forty-four Republican senators, led by Richard Shelby, the ranking Republican on the Banking Committee, signed the May 2 letter made public today. They wrote that they want the agency’s director to be replaced by a board of directors, its funding brought under congressional control and its operations subject to increased oversight from other banking regulators. “No person should have the unfettered authority presently granted to the director of the Consumer Financial Protection Bureau,” the signees, which include Minority Leader Mitch McConnell, wrote. “Therefore, we believe that the Senate should not consider any nominee to be CFPB director until the CFPB is properly reformed.”
- Bank of America(BAC) Raises Range of Possible Legal, Regulatory Costs. Bank of America Corp. (BAC), the lender facing lawsuits and probes by state attorneys general tied to its mortgage business, increased its estimate for costs that may result from legal complaints and regulatory matters. Losses may range from $150 million to $1.6 billion in excess of accrued liability, the Charlotte, North Carolina-based company said today in a regulatory filing that covered the first quarter of this year. The range cited after the fourth quarter of 2010 was $145 million to $1.5 billion.
- U.S. Will Push China to Let Yuan Strengthen at Faster Pace. U.S. officials will press their Chinese counterparts at a meeting next week to let the yuan strengthen more rapidly, a Treasury Department official said. “We are going to press China to let its exchange rate adjust at a faster pace to correct its still-substantial undervaluation,” David Loevinger, the Treasury’s senior coordinator for China, told reporters in Washington today. “China continues to intervene massively in foreign-exchange markets to constrain the appreciation of its currency.”
- Copper may fall on concern demand will weaken as stockpiles increase and China, the world's biggest consumer of the metal, moves to curb inflation, a survey showed. Seven of 14 analysts, investors and traders surveyed by Bloomberg, or 50%, said prices will drop next week. Five predicted a gain and two forecast little change.
- Rubber Plunges on Concern Global Economic Slowdown May Cut Demand. Rubber declined to its lowest level in seven weeks, in line with losses across commodities markets, amid concerns that slowing economic growth in the U.S. and high prices may reduce demand for the commodity used in tires. The October-delivery contract lost as much as 8.7% to 353.2 yen a kilogram on the Tokyo Commodity Exchange, the lowest since March 16th.
- Hong Kong Stocks Drop in Longest Streak Since SARS, Iraq War. Hong Kong stocks fell for an eighth day, the longest stretch of losses since the 2003 spread of severe acute respiratory syndrome and the U.S. invasion of Iraq, as economic reports in America and falling commodity prices damped investor confidence in the global recovery. “There’s been a decline in sentiment,” said Peter Elston, a strategist at Aberdeen Asset Management Plc, which oversees about $282 billion. “Fears of the U.S. economy grew yesterday. I haven’t been convinced by these recoveries in the developed world as I just see them being driven by stimulus and the major structural trend is one of deleveraging.”
- Goldman Sachs(GS) Chief Blankfein Faces Shareholders Amid 'Lingering Problems'. Lloyd C. Blankfein, chief executive officer of Goldman Sachs Group Inc. (GS), has sought to quell shareholder concerns about its bonuses and business practices at the past two annual meetings. Today, he will try again. As the fifth-biggest U.S. bank by assets hosts investors for the first time at its building in Jersey City, New Jersey, shareholders are still questioning Goldman Sachs’s actions during the financial crisis, executive pay and business model.
- Egypt Front-Runner Seeks Reset With Israel. The leading candidate in Egypt's presidential race said that if he was elected he would break with former President Hosni Mubarak's reliably amenable policies toward Israel. Amr Moussa, the 74-year-old outgoing head of the Arab League, said the former regime's attempts to resolve the Palestinian-Israeli conflict had "led nowhere" and that Egypt now needs policies that "reflect the consensus of the people." Mr. Moussa, in an interview with The Wall Street Journal, also described a political landscape in which the Muslim Brotherhood, outlawed under Mr. Mubarak, is dominant. It is inevitable, he said, that parliamentary elections in September will usher in a legislature led by a bloc of Islamists, with the Brotherhood at the forefront. If Mr. Moussa, who was Mr. Mubarak's foreign minister from 1991 to 2001, is elected, he is likely to accelerate shifts in Egypt's foreign policy that have already vexed the U.S. and Israel. Since massive demonstrations overthrew Mr. Mubarak's regime in February, the new military-led government has negotiated a power-sharing deal between the Palestinian Authority and the militant Islamist party Hamas, pledged to work toward normalizing estranged relations with Iran, and announced plans to permanently open Egypt's border with the blockaded Gaza Strip, against protests from neighboring Israel. Under Mr. Mubarak, Egypt was arguably Washington's closest political partner in the Arab world. While following the American line in its policies toward Israel, the Palestinians and Iran brought benefits, it also cost Egypt its once muscular diplomatic influence in a region that is now witnessing its most profound political change in more than a generation. In a recent poll by the Pew Research Center, 89% of Egyptians said they had a positive impression of Mr. Moussa—far ahead of competitors such as Ayman Nour, of whom 70% approved. Mohammed ElBaradei, the Nobel Peace laureate, rated 57% approval.
- Al-Qaeda Sought to Target U.S. Train Network. A set of handwritten notes picked up by the Navy SEALs who killed Osama bin Laden prompted the government to warn of potential al Qaeda threats to the U.S. train network, the first known use of intelligence gleaned from the raid. In an "intelligence message," the Department of Homeland Security alerted law-enforcement officials that initial analysis of evidence seized from bin Laden's compound shows al Qaeda hoped to attack trains in the U.S., possibly on the anniversary of the Sept. 11 attacks. According to the DHS bulletin, the terror group in early 2010 envisioned sabotaging a railway to cause a wreck. DHS said it isn't clear if there has been any further planning since February 2010.
- Bin Laden's Widow Says Pakistan Home Was Base for 5 Years. Osama bin Laden's youngest widow has told Pakistani investigators the al Qaeda leader and his family had been living in the compound where he was killed for the past five years, said a senior Pakistani intelligence official. His account of her testimony offers some of the strongest evidence so far of how long the world's most-wanted man had been living in Abbottabad, and in what circumstances, as well as some fresh insight into what happened during and immediately after the raid.
- CVS Caremark(CVS) Got SEC Subpoena In February Over 2009 Disclosures. CVS Caremark Corp. disclosed that it received a Securities and Exchange Commission subpoena at the end of February seeking information about public disclosures it made in 2009 in relation to its struggling Caremark pharmacy-benefits-management division and its Medicare Part D business, as well as information about ownership and transactions in CVS securities by certain company officers.
- Probe Eyes Trades by Fund Titan. Prosecutors are examining trades made in an account overseen by hedge-fund titan Steven Cohen that were suggested by two of his former fund managers who have pleaded guilty to insider trading. The development surfaced in court filings submitted in connection with a sweeping insider-trading investigation, which focuses on ways traders can receive nonpublic information from experts connected to industries or firms.
- Schumer Tilts Toward Offer by Germans for Big Board. Sen. Charles Schumer (D-NY) — Wall Street's strongest Washington ally and a target of arm-twisting in the battle for the New York Stock Exchange—hasn't taken a public position on the competing bids for its parent company. But behind the scenes, according to people who have spoken to him, he is leaning toward a surprising choice as a merger partner: the Germans.
- Is the Chinese Listing Bubble Going Bust? Suddenly the boom in Chinese listings on U.S. exchanges is looking shaky, and two primary reasons were reinforced in separate developments today. On Wall Street, Renren, dubbed the Chinese Facebook, tanked after its shares debuted at a stratospheric multiple on Wednesday, calling into question the appetite for future Chinese IPOs. Meanwhile, at a New York City financial conference, SEC officials were nearly elbowing each other out of the way to express their concerns about reverse mergers that are allowing Chinese firms to back door their way into U.S. markets.
- The Waterboarding Trail to Bin Laden. Former CIA Director Michael Hayden said that as late as 2006 fully half of the government's knowledge about the structure and activities of al Qaeda came from harsh interrogations.
- Australia's RBA Flags More Rate Hikes. The Reserve Bank of Australia said Friday that it expects further monetary-policy tightening will be required in the future in order to keep inflation within target.
- Carlyle Faces Questions Over China Investments. Carlyle, the US private equity group, is facing questions over its investments in two Chinese companies that have been accused of fraud and suspended from trading on stock exchanges in Hong Kong and New York. China Forestry, a Hong Kong-listed plantation operator in which Carlyle has an 11 percent stake, and China Agritech(CAGC), a Nasdaq-listed fertiliser maker in which Carlyle has a 22 percent stake, have both had their shares suspended from trading in recent months. “To paraphrase Oscar Wilde, to make one duff investment might be regarded as misfortune, but to make two smacks of carelessness,” said David Webb, a Hong Kong-based corporate governance activist.
Zero Hedge:
NY Times:
Forbes:
- As Predicted in December, Commodity Bubble is Popping. After keeping interest rates near 0% for years, the amount of free debt flying around is exceptionally high. And rather than funelling the cash into job-creating businesses, traders have been using the money to buy commodities futures contracts while selling short the dollar. This trade has done a marvelous job of driving up those prices well beyond what would make sense if prices were set solely on the basis of supply and demand for the commodity. As with previous bubbles over the last three decades, the commodities bubble has been financed by excessive borrowing. For example, to control a $100 commodities contract, a trader is required to put down $6 of his own capital to $94 worth of debt. In March, I suggested that the quickest way to accelerate the popping of the commodities bubble would be for regulators to raise the so-called margin requirements for traders from $6,000 per contract to perhaps $12,000.
- Your Monthly Gasoline Bill: $368. Round-trip airfare from New York to Los Angeles. More than a dozen dinners for two at Applebee's. Two 16 GB iPod nanos. These are just a few of the things you could have bought if you weren't spending $368.09 a month on gasoline. That's the average amount American households spent on gas in April, according to an exclusive analysis of data by the Oil Price Information Service for CNNMoney. The study, which compared average gas prices with median incomes nationwide, also showed that U.S. households spent nearly 9% of their total income on gas last month. That's more than double what the average American family spent just two years ago, when gas prices were hovering around $2.05 a gallon. After surging nearly 30% this year, the national average price for regular gasoline is less than 2 cents away from $4 a gallon. That's still below the all-time high of $4.114, but prices in many parts of the country have already risen to new records well above that level.
Politico:
- House Votes to Expedite Offshore Oil and Gas Drilling Leases. The House on Thursday fired the latest shot in the Washington war over gasoline prices, easily passing a GOP plan to expedite offshore oil and gas drilling leases. Nearly three dozen Democrats signed on to a bill from House Natural Resources Committee Chairman Doc Hastings (R-Wash.) that would expedite lease sales in the Gulf of Mexico and off the Virginia coast that have been delayed or canceled since last year’s BP oil spill disaster. Still, that probably won’t spur any action in the Senate or break the overall partisan gridlock on soaring gas prices.
- Silver Slides Into a Bear Market. The price of silver collapsed for the fourth-consecutive day, falling a brutal 8% Thursday to $36.23 an ounce. Silver lost 25% of its value in just four days after hitting a peak of $48.58 last week. That's the metal's biggest four-day decline since 1983, Bloomberg News says. Silver now finds itself in a crushing bear market that's not showing any signs of relenting. A 20% decline from a market high is the unofficial definition of a bear market. Silver's crash "is relentless," says Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital, who called for a correction months ago. "To see (the size of) this correction … it's unreal," he says.
- Retailers Say Gas Prices Are Starting to Take a Bite Out of Sales. Some stores that cater to low-income shoppers are starting to warn that their customers are facing pressure from high gas prices.
- At Least 25 Hacked to Death in Guinea Ethnic Clashes - Sources. At least 25 people were killed in ethnic clashes in south eastern Guinea, many hacked to death with machetes, sources said on Thursday. "We have sent reinforcements and a government official native to the area is on his way to help calm the situation," a police official told Reuters on condition of anonymity. He said at least 25 people were killed. The clashes in the village of Galapaye, about 100 km (60 miles) south of N'Zerekore and 1,000 km from the capital Conakry, began on Monday between members of the largely Christian Guerze group and the mostly Muslim Malinke tribe.
- US Targets Bankers in HSBC Laundering Probe - Source. The Justice Department's money-laundering probe against banking giant HSBC Holdings Plc is looking at possible prosecution of individual bankers, a source close to the investigation said on Thursday.
- Sony(SNE) Shares Fall More Than 4% after 2nd Data Security Breach. Shares of Sony Corp fell more than 4 percent after the company revealed hackers had stolen data on another 25 million users of its PC games system in a second massive security breach for the consumer electronics giant.
- Visa(V) Profit Rises, But Regulations Weigh. Visa Inc's quarterly profit rose more than expected as increasingly confident consumers spent more, but doubts remain about the payments network's ability to grow under looming regulation. Shares fell in after-hours trading, as Visa failed to beat expectations by the wide margins investors were once used to.
- Priceline(PCLN) Profit Rises on Bookings Growth. Online travel agency Priceline.com posted a quarterly profit on Thursday that topped expectations on surging travel bookings.
- AIG(AIG) Posts Ongoing Loss On Debt, Quake Charges. Bailed-out insurer American International Group lost more than $1 billion from its ongoing operations in the first quarter, as the company took a huge charge for the termination of its credit facility with the Federal Reserve.
- Equity ETFs Dominate Inflows, Munis Lose - Lipper.
ABS CBNnews.com:
- Putin Accuses Oil Firms of Gasoline Price Fixing. Russian Prime Minister Vladimir Putin accused oil companies on Thursday of a "conspiracy" to force up gasoline prices, as the world's largest oil producer struggles to combat fuel shortages. Putin rebuked Deputy Prime Minister Igor Sechin, his point man for energy, for suggesting at a government meeting that price rises had resulted from a lack of oil products offered for sale on commodities exchanges. "It's not a shortage. This is not about a shortage. This is a conspiracy. They are colluding," Putin told Sechin, who serves on the board of state-controlled oil major Rosneft and is widely seen as the chief spokesman for the industry. The government last week raised gasoline export duties by 44 percent to keep fuel in the domestic market after pumps ran dry in some regions and shortages spread to Moscow and St Petersburg. Sechin has chaired talks to discuss proposed amendments to oil tax reforms that would ramp up export duties on refined products to punitive levels if crude oil prices are high. Analysts blame the shortages on price curbs demanded by Putin from industry bosses in February, and a lack of investment in the refinery capacity needed to produce the premium fuel used by Russia's growing fleet of modern cars. Fuel prices are the latest driver of inflation that is close to double digits. Gasoline prices rose by 2.8 percent last week, their biggest jump in 14 weeks, data showed on Thursday.
Kyodo News:
- Toyota Motor Corp.(TM) sold 48,700 new vehicles in China last month, down 23.5% from a year earlier, citing the company.
- The Chinese Academy of Social Sciences called for the real estate tax introduced in Chongqing and Shanghai to be extended nationwide over five years, citing a report from the research group. The tax will create a sustainable source of local-government revenue, curb increases in real-estate prices and help narrow the income gap between rich and poor, according to the report.
- The director of China's electricity regulator said the nation is able to make short term increases in on-grid power prices as part of efforts to reduce supply shortages, citing Tan Rongyao, director of the States Electricity Regulatory Commission.
China Securities Journal:
- The growth of China's textile and clothing exports may slow this year to about 15% from 24% in 2010 because of rising costs, the appreciation of the yuan and tight monetary policy, citing webtextiles.com analyst Wang Qianjin.
- China Banking Regulatory Commission warns rural cooperatives of risks from dairy companies' lending, citing people from various rural cooperatives.
- China's April vehicle sales may have dropped about 5% from March's 1.83 million units sold, citing China Automobile Dealers Association deputy director Su Hui.
- China lacks a long-term housing development plan, citing Li Jing, a researcher at the Chinese Academy of Social Sciences.
Citigroup:
- Reiterated Buy on (PCLN), boosted target to $650.
- Rated (GOOG) Buy, target $626.
- Asian equity indices are -1.50% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.50 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 115.0 +1.0 basis point.
- S&P 500 futures -.06%.
- NASDAQ 100 futures -.16%.
Earnings of Note
Company/Estimate
- (CHD)/1.14
- (CEG)/.96
- (ZEUS)/.38
- (SUP)/.47
- (WCRX)/.82
- (WCG)/.16
8:30 am EST
- The Change in Non-Farm Payrolls for April is estimated at 185K versus 216K in March.
- The Change in Private Payrolls for April is estimated at 200K versus 230K in March.
- The Unemployment Rate for April is estimated at 8.8% versus 8.8% in March.
- Average Hourly Earnings for April are estimated to rise +.2% versus unch. in March.
- None of note
- The (AGL) analyst day and the (AER) investor meeting could also impact trading today.