Evening Headlines
Bloomberg:
- Merkel Faces Hollande Pleas to Shed 'Taboos'. A plea to shed “taboos” may put German Chancellor Angela Merkel in a corner today as she digs in against joint debt sales to counter Europe’s financial crisis. Merkel, the dominant figure in more than two years of crisis-fighting, heads to a Brussels summit unable to stifle calls for measures she opposes, including euro bonds, the use of European money to recapitalize banks, a bigger rescue fund and extra time for debt-swamped countries to cut spending. “Policy makers across the euro area continue to act in their own interest,” said David Song, a currency analyst in New York at DailyFX.com, the research unit of FXCM Inc. “We may see a growing rift between France and Germany as the anti-austerity movement gathers pace.” The summit, the 18th since Greece was convulsed by debt and the first since an anti-austerity campaign carried Francois Hollande to France’s presidency, takes place with market indicators showing mounting stress on banks. European Union officials damped expectations for the 27- nation summit starting at 7 p.m., eying the next meeting on June 28-29 as the time to take pro-growth steps. The crisis in the 17 euro countries will come up tonight only “at the very end,” EU President Herman Van Rompuy said in a pre-summit letter. Merkel is on the defensive at home after her party was routed in elections in Germany’s largest state and internationally after her hard line on budgets was drowned out by pro-growth appeals at last week’s Group of Eight meeting.
- War-Gaming Greek Euro Exit Highlights Hazards in 46-Hour Weekend. Greece may have only a 46-hour window of opportunity should it need to plot a route out of the euro. That's how much time the country's leaders would probably have to enact any departure from the single currency while global markets are largely closed, from the end of trading in New York on a Friday to Monday's market opening in Wellington, New Zealand, based on a synthesis of euro-exit scenarios from 21 economists, analysts and academics.
- CIC’s Jin Says Other Countries May Follow If Greece Exits Euro. Jin Liqun, chairman of China Investment Corp.’s supervisory board, said European authorities have shown a “lack of leadership” on the euro area’s debt crisis and other countries may leave if Greece exits the single currency bloc. “Ever since the debt crisis broke out, there has never been a master plan for a resolution,” Jin said at an event hosted by the Centre for Policy Studies in London late yesterday. “The core members of the monetary union certainly have to keep an eye out for possible copycats should the Greeks be allowed to escape from the crisis unscathed.”
- Germans Afraid of Greek Anger Avoid Vacations in Blow to Economy. German taxi driver Rudolf Kugel, who says he’s visited Greece more times than he can count, won’t be going again anytime soon to the Mediterranean sunspot because he’s concerned about the reaction of local people. “They hold Germans responsible for all their misery,” said the 62-year-old from near Stuttgart. “You want to go on holiday to have a comfortable break, not to be lynched.” It’s thinking like Kugel’s which has contributed to declines of as much as a third in bookings from Germans planning their summer break in Greece, according to Air Berlin Plc (AB1) and TUI AG (TUI1), which owns Europe’s biggest travel company. Their avoidance is further hampering Greece’s economic woes. Tourism is Greece’s biggest industry, accounting for almost 16 percent of the country’s gross domestic product in 2011, and almost one in five jobs, according to the London-based World Travel and Tourism Council. The 2.2 million Germans who visited Greece last year represented the biggest national group at 13.6 percent of the total, according to the Hellenic Statistical Authority, ahead of the British at 10.7 percent.
- Japan Boosts FDI in Asean to Reduce China Risk: Chart of the Day. Japan's foreign direct investment to Southeast Asia has surpassed that to China as Japanese companies alter plans because of rising Chinese labor costs. Japan's investment to the Association of Southeast Asian Nations more than doubled to $19.6 billion in 2011 from the previous year, according to the Japan External Trade Organization's figures using finance ministry data. In the same period, FDI to China and Hong Kong rose 52% to $14.2 billion. Rising wages and an aging population in China have prompted some Japanese businesses to diversify production away from Japan's largest trading-partner nation even as overseas investment has been steeped up because the yen has strengthened to a near-record versus the dollar. China's Ministry of Industry and Information Technology said last month average wages may increase about 20% nationwide this year. About 17.5% of Chinese are under the age of 15, compared with 28.5% in 1990, according to the U.S. Census Bureau.
- Rubber Seen Poised For Glut On Weaker Chinese Growth. Supplies of rubber, used in tires and gloves, are set to exceed demand in the second half, reversing a shortage and pressuring global prices, as growth slows in Europe and China, the biggest consumer. Output may top consumption by 400,000 metric tons in the six months to December after a seasonal deficit of 150,000 tons in the first half, said Chris Pardey, chief executive officer of RCMA Commodities Asia, a Singapore-based trading company. A surplus will persist through 2014, said Prachaya Jumpasut, managing director of industry adviser The Rubber Economist.
- Japan Rating Cut Rings Alarm for Diet Gridlocked on Taxes. Japan's sovereign-rating cut by Fitch Ratings escalated pressure on lawmakers to double the sales tax, with the Organization for Economic Cooperation and Development warning the nation's debt is heading into "uncharted territory." The local-currency rating was reduced one step, and foreign-currency grade two levels, to A+, the fifth-highest ranking, Fitch said in a statement yesterday. The Paris-based OECD said separately that boosting the 5 percent consumption levy is a "top priority."
- World Bank Says Asia Must Watch Inflation As Expansion Slows. The World Bank said policy makers in Asia’s emerging economies must guard against inflation risks and be prepared to reverse policy easing, even as slowing growth in China and Europe’s sovereign-debt turmoil hurt exports.
- Going Over U.S. 'Fiscal Cliff' May Mean Recession, CBO Says. The U.S. economy will probably tip back into recession next year if Congress doesn't address an impending "fiscal cliff," the Congressional Budget Office said. The nonpartisan agency said in a report today that the economy would contract at an annual rate of 1.3 percent in the first half of 2013 if lawmakers allow the George W. Bush-era tax cuts to expire as scheduled and don't head off $1.2 trillion in government spending cuts set to begin taking effect in January.
- BofA(BAC) Will Buy Back $330 Million Of Mortgages From Freddie. Bank of America Corp., the second- biggest U.S. lender, will repurchase $330 million of home loans from Freddie Mac, the mortgage company supported by taxpayers, after flaws were found in how they were created.
- Nasdaq(NDAQ) Official Concedes Facebook(FB) Missteps. A Nasdaq OMX Group Inc. official acknowledged that the exchange operator was unaware of all the problems affecting Facebook Inc.’s initial public offering as it worked to start trading on the morning of May 18, according to two people with direct knowledge of the discussions. Had the scope of the issues with the IPO auction been known before it began, Nasdaq wouldn’t have moved forward, Eric Noll, the executive vice president for transaction services, said in a call with brokers today, according to the people, who asked not to be identified because the talks were private.
- JPMorgan(JPM) Exposed on Right Flank. J.P. Morgan Chase & Co. is finding few friends on Capitol Hill. Already under attack from Democrats, the bank is now discovering its giant trading loss has stoked frustration among Republicans as its $2 billion-plus stumble undercuts arguments that GOP lawmakers have been making against Wall Street regulation. Compounding matters, Republicans haven't forgotten that J.P. Morgan gave a majority of its campaign donations to President Barack Obama and Democrats in the 2008 campaign.
- Finra: It's Nasdaq's(NDAQ) Call on Covering Facebook(FB) Losses. Nasdaq OMX Group Inc. will make the final decisions on making up losses sustained by brokers and traders after glitches struck the initial public offering of Facebook Inc., according to a senior official with the agency tasked to review the matter. The Financial Industry Regulatory Authority, or Finra, may need to seek further information from firms affected by the problems with Nasdaq's systems, which led to some orders going unfilled.
- Vornado(VNO), Looking to Exit Malls, Lists Three Properties for Sale. Vornado Realty Trust is following through on its pledge last month to sell many or all of its shopping malls, having hired brokerage Eastdil Secured to market for sale its stakes in three malls in and around New York City.
- Large Investors Choose to Swim on Their Own. Some of the world's biggest investors are betting they can beat real-estate fund managers at their own game. Put off by high fees and disappointing performance of so-called pooled funds, major institutions such as Harvard University's endowment, Canada Pension Plan and Abu Dhabi Investment Authority are building in-house real-estate investment divisions to acquire property directly. They are making fewer real-estate investments through outside fund managers who pool contributions from dozens of investors.
- China 2012 Growth May Be Under 7%, NDRC Researcher Says. China's full-year economic growth may be below 7% unless the government introduces more stimulus measures, citing Chen Dongqi, deputy head of the National Development and Reform Commission's macroeconomic research institute.
- Former Greek PM Papademos: Risk of Greece Leaving Euro is Real. Greece's former prime minister Lucas Papademos Tuesday warned that Greeks have no choice but to stick with a painful austerity program dictated by its lenders or face an exit from the euro zone that would destitute the economy, send inflation soaring and generate new social strains. In his first interview since leaving office last week, Papademos told Dow Jones Newswires that dropping the single currency would have "catastrophic" economic consequences for Greece and profound and far-reaching implications for the rest of the euro zone. This is why some European states and institutions are considering contingency plans for any eventuality, he said, declining to provide details.
- REPORT: Key Witnesses In Trayvon Martin Slaying Changed Their Stories.
- EXCLUSIVE: Here's The Inside Story Of What Happened On The Facebook IPO.
- In The Kentucky Primary, 40 Percent Of Democrats Voted For 'Uncommitted'.
- Michelle Meyer: This One Key Thing Is Holding Back The Housing Market.
CNBC:
- Dell(DELL) Shares Skid as Earnings, Outlook Disappoint. Dell's quarterly earnings and outlook missed Wall Street's expectations on Tuesday as consumer sales fell sharply.
- Sold-off Commodities Seen Set for Further 20% Decline.
- World Bank Cuts China Forecast, Urges Measured Policy. The World Bank cut its economic growth forecast for China this year to 8.2 percent on Wednesday and urged the country to rely on easier fiscal policy that boosts consumption rather than state investment to lift activity.
- JPMorgan(JPM) exec seen in field as US money-laundering cop. A JPMorgan executive and former Treasury Department official is considered by industry sources to be a top candidate to replace the dismissed head of the department's anti-money laundering unit, at a time financial institutions face more demands from the fight against terrorism financing and drugs trafficking.
- Germany Rules Out Common Euro Bonds. Germany refused to share the debt burden of stressed eurozone peers on Tuesday, ignoring two of the most influential international economic bodies which offered support for proposals championed by Paris, Rome and Brussels ahead of a summit.
- Angela Merkel 'astonished' by austerity debate as Germany left increasingly isolated on eurobonds. The German Chancellor Angela Merkel said she finds it “astonishing” that her pro-austerity stance is the cause of controversy, as Germany found itself increasingly isolated on the issue of eurobonds ahead of Wednesday’s European Union leaders summit.
- Christine Lagarde tells Britain to step up recovery plan. The Bank of England should cut interest rates, print more money and ease the regulatory pressure on banks as part of a radical set of measures to return Britain to recovery, the International Monetary Fund has urged.
- Japan's fiscal death is a warning to the West. Fitch Ratings has downgraded Japan two notches to A+, citing a surge in public debt since the Lehman crisis and the lack of any plan to restore fiscal probity.
- China State Council Set to Approve Move to Narrow Gap Between Rich and Poor. A new income distribution framework is set for approval to redress the growing gap between rich and poor, government officials said.The framework comes at a time when the most affluent 10 percent of the population make 23times more than the poorest 10 percent.In 1988 it was seven times.The framework, eight years in the making, has been tabled for approval by the State Council and is likely to be introduced in the second half of this year.
- Industrial and Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd. lent a combined 34b yuan in the first 20 days of May. Deposits at the four banks fell by 270b yuan during the period.
Oppenheimer:
- Rated (JAZZ) Outperform, target $66.
- Rated (DNDN) Underperform, target $5.
- Asian equity indices are -1.50% to -.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 198.0 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 154.5 -6.0 basis points.
- FTSE-100 futures -1.25%.
- S&P 500 futures -.53%.
- NASDAQ 100 futures -.39%.
Earnings of Note
Company/Estimate
- (ZLC)/-.20
- (TOL)/.03
- (HRL)/.41
- (EV)/.48
- (SNPS)/.55
- (P)/-.18
- (PVH)/1.26
- (NTAP)/.63
- (HPQ)/.91
- (SMTC)/.31
- (GCO)/.74
- (AEO)/.20
- (BIG)/.69
10:00 am EST
- The House Price Index for March is estimated to rise +.3% versus a +.3% gain in February.
- The House Price Purchase Index QoQ for 1Q is estimated to rise +.1% versus a -.1% decline in February.
- New Home Sales for April are estimated to rise to 335K versus 328K in March.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,650,000 barrels versus a +2,128,000 barrel gain the prior week. Distillate supplies are estimated to fall by -500,000 barrels versus a -969,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -650,000 barrels versus a -2,797,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.3% versus a +1.9% gain the prior week.
Upcoming Splits
- (FMC) 2-for-1
Other Potential Market Movers
- The Fed's Kocherlakota speaking, EU summit, Germany bond auction, China HSBC PMI, BoJ rate decision, 5-Yr T-Note auction, weekly MBA mortgage applications report, Citi Consumer Conference, Goldman Basic Materials Conference, Raymond James Construction Conference, Morgan Stanley Retail/Restaurant Conference, Wells Fargo Specialty Finance Symposium, Sterne Agee Tech Conference, Barclays TMT Conference, (TMO) analyst meeting, (STM) analyst day, (MET) investor day and the (NEM) investor day could also impact trading today.