Evening Headlines
Bloomberg:
- China Trade Surplus Seen by BofA at One-Tenth Customs Figure.
China’s trade surplus is one-tenth the official $61 billion reported so
far this year after accounting for fake transactions used to disguise
hot-money inflows, Bank of America Corp. says. The true surplus is about
$6 billion, according to Lu Ting, Bank of America’s head of Greater
China economics in Hong Kong. That would be the smallest for
January-April since the nation posted a $10.8 billion deficit in 2004. Lu’s
calculations suggest the surplus shrank instead of tripling from a year
earlier, a sign that global demand is restraining rather than boosting
the world’s second-largest economy. Bank of America’s estimate
underscores the size of possible discrepancies in the trade data, which
has been disputed by analysts for four months, and broader skepticism
about Chinese statistics from gross domestic product to jobs. “Growth
is weak in China now -- the overstated export growth means the real
growth is slightly weaker,” said Shen Jianguang, chief Asia economist at
Mizuho Securities Asia Ltd. in Hong Kong. “We are expecting to see a
fairly big drop in export growth in the coming months” as regulators
crack down on so-called hot-money inflows, he said.
- Block Says China Banks’ Bad Loans Spread Beyond Government Debt.
Carson Block, the short seller who runs Muddy Waters LLC, said China’s
bad-loan problem is more widespread than just local government debt and
includes public and private sector borrowing. Non-performing loan “figures greatly understate the
potential scope of the problem of poor-quality loans,” Block
said in an e-mail. “We believe that the PRC banking system will
be hit hard by the unwind, and that the government will be
forced to recapitalize a number of the banks.”
Wall Street Journal:
- China Is Seeking U.S. Assets.
Agency Sets Up New York Office to Make Real-Estate, Private-Equity
Purchases. China's currency-reserves manager has set up a New York
operation to
invest in private equity, real estate and other U.S. assets, according
to people with knowledge of the move. The move by the State Administration of
Foreign Exchange, or SAFE, which oversees the world's largest stockpile
of foreign-exchange holdings, comes as it steps up diversification away
from U.S. government debt, the people said.
- Fed Paper Urges Trading Revamp. A Federal Reserve official has called for fundamental changes in
financial markets to slow trading and allow investors to better compete
with the ultrafast computer programs used by some participants. A paper due to be presented Tuesday by the Federal Reserve Bank of
Chicago proposes altering the structure that allows a nonstop stream of
trades and instead execute orders every half-second. The proposal is expected to ignite controversy among some traders and
exchanges, which have invested heavily in the technology to profit from
ultrafast trading. The paper said high-frequency trading has inflated
transaction costs, with limited benefits for liquidity and pricing.
- How to Cut a Job in Italy? Wait, and Wait Some More.
It took Whirlpool Corp. WHR -0.90% eight months to close its
1,000-person factory in Fort Smith, Arkansas, last year amid falling
sales. In Italy, the world's biggest appliance maker has been trying for
three years to cut 500 jobs—with only partial
success.
- Role of Health-Law 'Navigators' Under Fire. Lawmakers across the country are tussling over the Obama
administration's plans to create a small army of assistants to guide
millions of Americans as they sign up for new health-insurance options
available this fall.
Backers of the health-care overhaul
face an uphill battle to spread the word about the law, in the face of
consumer research that suggests most uninsured people know little about
it and are skeptical about the value of health insurance generally. Some
Democrats have openly worried that the administration is doing too
little to make sure the enrollment process goes smoothly.
Fox News:
- Search for survivors after massive tornado strikes areas near Oklahoma City, killing at least 51. A tornado at least a half mile-wide with 200mph winds churned through
Oklahoma City's suburbs Monday afternoon, killing at least 51 and
causing significant property damage for the second day in a row, forcing
rescue crews to search for survivors in the debris of flattened homes,
businesses and two schools. Amy Elliott, a spokeswoman for the Oklahoma Medical Examiner's
Office, said the death toll is expected to rise. Oklahoma City Police
say seven of those deaths were children at Plaza Towers Elementary
School, which was hit by the tornado, Fox 25 reports. Oklahoma police
also told Fox News' Casey Stegall, on the ground in Moore, Okla., that
at least four people were killed at a 7-11 convenience store.
- Watchdog report says DOJ official retaliated against ‘Furious’ whistle-blower, lied about it. The former U.S. Attorney for Arizona could be disbarred, after an
investigation found he lied to the Justice Department about his role in
trying to discredit the federal whistle-blower who exposed the botched
gun-running scheme known as Fast and Furious. An Office of Inspector
General report showed that Dennis Burke -- the
former chief of staff for Homeland Security Secretary Janet Napolitano
appointed as U.S. Attorney for Arizona by President Obama in September
2009 -- lied when asked if he leaked sensitive documents to the press
meant to undermine the credibility of ATF whistle-blower John Dodson.
The IG report also said Burke likely leaked the memo in retaliation
for Dodson's whistle-blowing, and challenged the credibility of
statements he made to congressional investigators.
Breaking News:
CNBC:
Zero Hedge:
Business Insider:
Real Clear Politics:
Reuters:
- EU draft bank rescue law would not shield big deposits. A draft law that a group of European Union
lawmakers voted for on Monday would shield small depositors from losing
their savings in future bank rescues, but customers with more than
100,000 euros in savings when a bank failed could suffer losses.
Financial Times:
- Sluggish Thai growth deepens fears of wider Asian slowdown. Thailand’s
economy grew more slowly than expected in the first three months of
this year, adding to a slew of recent disappointing data from other
Asian economies that have cast a shadow over one of the world’s
fastest-growing regions. The Thai economy contracted by 2.2 per cent
seasonally adjusted from the previous quarter.
Evening Recommendations
Piper Jaffray:
- Rated (HAS) Overweight, target $55.
- Rated (MAT) Overweight, target $53.
- Rated (LF) Overweight, target $11.
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 101.0 unch.
- Asia Pacific Sovereign CDS Index 84.75 unch.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The Fed's
Dudley speaking, Fed's Bullard speaking, Germany/UK inflation data,
weekly retail sales reports, JPMorgan Homebuilding Conference, Goldman
Basic Materials Conference, (JPM) shareholder meeting, (MET) investor
conference and the (ARMH) 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 rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 99.0 +10.0%
- Total Put/Call .78 -2.50%
Credit Investor Angst:
- North American Investment Grade CDS Index 70.88 +.80%
- European Financial Sector CDS Index 127.84 -2.29%
- Western Europe Sovereign Debt CDS Index 86.35 -.95%
- Emerging Market CDS Index 247.65 +.46%
- 2-Year Swap Spread 14.5 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -15.5 +1.75 bps
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- China Import Iron Ore Spot $123.0/Metric Tonne -.08%
- Citi US Economic Surprise Index -18.2 -.7 point
- 10-Year TIPS Spread 2.27 +1 bp
Overseas Futures:
- Nikkei Futures: Indicating +9 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/tech/medical sector longs
- Market Exposure: 75% Net Long
Bloomberg:
- German Notes Fall on Economy Optimism as Italian Spread Narrows. Germany’s two-year notes declined for
the first time in four days amid signs the global economic
recovery is gathering pace, damping investor demand for the
safest government assets. The extra yield that investors get for
holding Italian 10-year securities instead of German bunds narrowed to
the least since January as a report showed Italy’s industrial orders
increased in March more than economists predicted. German 10-year yields
approached the highest in seven weeks and Dutch
bonds snapped a two-day gain.
- Europe’s debt frenzy undeterred by record recession. Investors are snapping up long-dated bonds from Europe’s high debt and
deficit nations even as prices reach the most expensive levels since
2010 and the region’s deepening recession threatens to hamper
deficit-reduction plans.
- European Stocks Advance as Carmakers Climb; Ryanair Rises.
European stocks advanced, extending
the Stoxx Europe 600 Index’s highest level since June 2008, as the
region’s carmakers rallied. Peugeot SA and Volkswagen AG both gained
more than 3
percent as Morgan Stanley raised its recommendation on European
automobile companies. Ryanair Holdings Plc jumped the most in
more than 1 1/2 years as Europe’s largest low-cost carrier said
full-year profit rose 13 percent. Fresnillo Plc slid 3.3 percent
as silver slumped to its lowest price since October 2010. The Stoxx 600 rose 0.3 percent to 309.77 at the close of
trading.
- Luxury Car Prices Fall in China Amid Government Frugality Push. Prices
of imported cars in China fell the most in five months, adding to signs
that demand for luxury products is slowing because of a government
campaign to rein in lavish spending by public servants. Average prices
of imported cars in
April fell 3.4 percent from a year earlier, according to Cheng Xiaodong,
head of auto-price monitoring at the National Development and Reform
Commission, China’s top economic planner. That compares with the 0.2
percent increase for locally made passenger vehicles.
- U.S. Faces Downgrade in 2013 Without Budget Deal, Moody’s Warns. U.S. policy makers must address debt
loads projected to rise later this decade to avoid a 2013
downgrade, even as the latest budget projections are “credit
positive,” according to Moody’s Investors Service. The U.S. budget deficit will drop to $378 billion in 2015
from a record $1.4 trillion in 2009, according Congressional
Budget Office data. The federal government will post an $642
billion deficit this year, the first time in five years that the
shortfall has been less than $1 trillion. Moody’s said Sept. 11
that the U.S.’s top Aaa rating would likely be cut to Aa1 if an
agreement on the debt ratio isn’t reached.
- Gold Reboundd After Moody’s Says U.S. May Face Downgrade. Gold and silver futures rebounded
after Moody’s Investors Service said U.S. policy makers must
address debt woes to avoid a credit-rating downgrade this year,
boosting the appeal of the metals as a haven.
“More needs to be done on the policy front to address this
rising debt ratio,” said Steven Hess, a senior vice president at New York-based Moody’s. The
ratio of debt to gross domestic product will increase in the long term,
according to the Congressional Budget Office. Gold futures for June
delivery gained 1.4 percent to settle at $1,384.10 an ounce at 1:43 p.m. on the Comex in New York. Earlier, the price touched $1,336.30, the lowest for a most-active contract since April 18.
- Fed’s Evans Says Economy Has Been ‘Improving Quite a Lot’. Federal Reserve Bank of Chicago President Charles Evans said the U.S. economy has improved
“quite a lot” as the central bank maintains record stimulus. “I’m optimistic that the labor market has been doing much,
much better and that unemployment is going to continue to go
down,” Evans said in a speech in Chicago today. “Currently we
have the appropriate monetary policy in place.”
- Arctic Refuge Oil Targeted by Alaksa Amid U.S. Reluctance. Alaska’s government proposed investing its own cash in an assessment of oil reserves in the U.S. Arctic National Wildlife Refuge, seeking to prod the
federal government to consider drilling in the protected area.
Wall Street Journal:
- Vista Equity Partners to Buy Websense(WBSN).
Buyout firm Vista Equity Partners agreed to pay about $1 billion to
acquire Websense Inc., WBSN +28.64% a maker of software and services
designed to help protect companies against cyber attacks and data theft.
- Why the IRS Flap Matters Most for Obama. People in general, and journalists in particular, tend to like things
that come in groups of three, because a collection of three is small
enough to comprehend but big enough to suggest a trend. That's why it's so damaging that the Obama White House came
face-to-face in recent days with three controversies bubbling up at
once—the revival of questions about the attacks on U.S. outposts in
Benghazi, Libya; the disclosure that the Justice Department secretly
subpoenaed a raft of phone records from the Associated Press in search
of a leaker; and the news that the Internal Revenue Service targeted for
special scrutiny conservative groups seeking tax-exempt status.
Fox News:
CNBC:
- Rumors Spark Bank Run, Break-Ins in Brazil. Rumors that Brazil's social security fund called Bolsa Familia was
to be cancelled led thousands of people to rush to withdraw money from a
Brazilian bank over the weekend. Customers lined up at ATMs at
dozens of bank branches of Caixa Economica Federal, a government-owned
bank, which pays the social security subsidy on Saturday and Sunday.
- QE Halt Would Be 'Too Violent' for Market: Fed's Fisher. (video) The
Federal Reserve should not go from "wild turkey" monetary policy to
"cold turkey" overnight, Dallas Fed President Richard Fisher told CNBC
on Monday,
saying that when to dial back is the key because stopping would be "too
violent for the marketplace."
Zero Hedge:
Business Insider:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Biotech -.95% 2) HMOs -.93% 3) Homebuilders -.91%
Stocks Falling on Unusual Volume:
- XNPT, GTN, LMOS, LEAP, YPF, TISI, OSIS, PTY, ALK, SPRD, ICA, DF, WWAV, THOR, CPB, RHT and APO
Stocks With Unusual Put Option Activity:
- 1) MNKD 2) RAD 3) DXJ 4) SCTY 5) XLF
Stocks With Most Negative News Mentions:
- 1) KSU 2) SNDK 3) BBBY 4) NTAP 5) AMGN
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Alt Energy +4.44% 2) Gold & Silver +3.50% 3) Coal +3.14%
Stocks Rising on Unusual Volume:
- PXP, WPX, RBS, IBKC, WBSN, WCRX, NOAH, SCTY, ACT, GIVN, AMBA, QIHU, FWLT, INSM, YELP, BYI, UNXL, YRCW, YY, TSO, WWWW, CBI, ACAD, FSLR, SPWR, BKS, INFI, VOYA, KBR, SZYM, CVI, XONE, TSO, RH and SN
Stocks With Unusual Call Option Activity:
- 1) FLR 2) HCA 3) PPHM 4) FXY 5) KSS
Stocks With Most Positive News Mentions:
- 1) NOV 2) MMR 3) WBSN 4) C 5) CAT
Charts:
Weekend Headlines
Bloomberg:
- Europe's Debt Frenzy Undeterred by Record Recession: Euro Credit.
Investors are snapping up long-dated bonds from Europe's high debt and
deficit nations even as prices reach the most expensive levels since
2010 and the region's deepening recession threatens to hamper
deficit-reduction plans. Bonds maturing in more than 10 years from Greece, Spain, Portugal,
Italy and Ireland are the best performers in the world this quarter.
"At the moment, the power of monetary policy and the hunt for yields are
outweighing the growth factors," said Joost van Leenders, who helps
oversee $657 billion as a strategist at BNP Paribas Investment Partners in Amsterdam. "We are not sure how much patience the markets have. Growth prospects in Europe are really a problem and a risk for government finances, so we don't see that as a positive for markets. The rally has gone a bit too far."
- Yen Climbs as Japan Signals Negative Impact From Further Losses. The
yen climbed versus all 16 major
peers after Japan’s Economy Minister Akira Amari said further losses in
the currency would threaten to negatively affect people and the
government’s job is to minimize that. The yen retreated from near its weakest in more than four
years versus the dollar after Amari said yesterday there’s
speculation the Japanese currency’s past strength has “been
corrected a lot.”
- China Small-Cap Bubble Seen Bursting by Chen. Chen Li,
the UBS AG strategist who predicted the tumble in China’s smallest
shares two years ago, says the companies are poised to retreat again
after valuations rose to the biggest premium over larger stocks since
2010. The smaller-company gauge trades for 4.6 times net assets versus 1.7 for the CSI index,
the widest gap since June 2010, data compiled by Bloomberg show.
- China’s Aluminum Producers Seen Having to Make Cuts Amid Surplus. China, the world’s largest producer of aluminum, will have a “manageable” surplus of the metal for
the next five years if companies cut back 4 million to 5 million
metric tons of production, according to researcher CRU. China has cut output 1 million metric tons this year and
will probably reduce it 2 million tons by 2015, with about 24
million tons produced this year, according to Marco Georgiou, an
analyst at CRU in London. Aluminum fell 3.8 percent this year in
China and 10 percent in London.
- Asia Stocks Head For Highest Close in Nearly Five Years. Asian
stocks rose the first time in three days, with the regional gauge
heading for the highest close since June 2008, after U.S. consumer
sentiment topped
estimates and Tokyo Electric Power Co. led Japanese utilities
higher. Li & Fung Ltd., a supplier of toys and clothing that
gets
63 percent of its sales in the U.S., gained 2.2 percent in Hong
Kong. Osaka Gas Co. advanced to the highest in more than five years
after the U.S. conditionally approved a Texas liquefied natural gas
project partially owned by the energy supplier. Tokyo Electric Power
soared 14 percent after the Yomiuri newspaper said it will apply to
restart reactors. The MSCI Asia Pacific Index gained 1.3 percent to 144.28 as
of 10:13 a.m. in Hong Kong.
- Silver Plunges to Lowest Since 2010 as Gold Drops for Eighth Day. Silver
plunged to the lowest level
since September 2010, sending its ratio to gold to the highest
in 33 months, while bullion extended the longest slump in four
years as investment holdings contracted and stocks rallied. Silver for
immediate delivery tumbled as much as 7 percent to $20.6985 an ounce,
and was at $21.345 at 11:32 a.m. in Singapore. The ratio surged to 64.89, the highest since August 2010. Gold lost as much as 1.5 percent to $1,338.85 an ounce,
the lowest price since April 18, and was at $1,347.23.
- Copper Declines for First Day in Three on China Demand Concerns. Copper dropped for the first time in
three days on speculation that China will continue to curb its
property market, reducing demand from the world’s biggest
consumer. Tin, lead and zinc also fell. Copper for delivery in three months on the London Metal
Exchange fell as much as 0.6 percent to $7,260 a metric ton and
was at $7,265 at 10:45 a.m. in Tokyo. The metal retreated 1
percent last week. Futures for delivery in July on the Comex
were down 0.8 percent at $3.2970 per pound. China’s new-home prices rose last month in 68 of 70 cities
tracked by the government, indicating Premier Li Keqiang will
need to maintain efforts to cool the property market even as
economic growth slows. The nation’s policy makers are trying to
avoid property bubbles and make homes more affordable while bolstering an economy that lost steam in the first quarter. “Any measures to cool down China’s property market would
be negative for metals,” Hwang Il Doo, a senior trader at Korea
Exchange Bank Futures Co. in Seoul. An increase in LME
stockpiles and an outflow of funds to stock markets also weighed
on copper, he said. Copper stockpiles monitored by the LME rose 0.9 percent to
629,950 tons, the highest since Aug. 20, 2003, data from the
bourse showed on May 17.
- Intelligence Panel Head Says Justice’s AP Probe ’Large Dragnet’. The Justice Department’s subpoena of
Associated Press phone records appears to be “a large dragnet”
that lacked a clear focus, Michigan Republican Representative
Mike Rogers said. “It doesn’t appear to me to be appropriate,” Rogers said
in an interview on Bloomberg Television’s “Political Capital
with Al Hunt,” airing this weekend. Rogers’ criticism of the Justice Department is significant
because the lawmaker is chairman of the House Intelligence
committee and a former FBI agent who had asked for an
investigation into leaks of national security information.
Wall Street Journal:
- Obama's Counsel Told of IRS Audit Findings Weeks Ago. The White House's chief lawyer learned weeks ago that an audit of the
Internal Revenue Service likely would show that agency employees
inappropriately targeted conservative groups, a senior White House
official said Sunday.
That disclosure has prompted a debate over whether the president should have been notified at that time.
- Embassy Threats Grow in Mideast. The U.S. is seeing a spike in al Qaeda-related terror plots and
threats against its embassies in Libya, Yemen and Egypt, say current and
former U.S. officials citing domestic and foreign intelligence reports.
The threats against U.S. missions in
Tripoli and Yemen's capital, Sana'a, are believed to involve bomb plots
by Sunni extremists and perhaps al Qaeda-linked individuals, and have
set off alarms among U.S. officials still shaken by last September's
attack on a diplomatic outpost in Benghazi, Libya.
- Senate Launches Pension-Sale Probe. A Senate committee launched an investigation of a controversial business
in which retirees sell pieces of their future pension income to
investors for a lump-sum cash payment.
- Criminal Charges Weighed Against SAC. Hedge-Fund Company Has Discussed Alternatives Such as Deferred-Prosecution Agreement. U.S. prosecutors are considering possible criminal charges against
SAC Capital Advisors LP as a result of the government's insider-trading
investigation of the hedge-fund firm, according to people familiar with
the matter. The move came before the company told clients Friday that it will no
longer provide "unconditional" cooperation with the multiyear probe of
SAC and billionaire founder Steven A. Cohen. The firm didn't tell
clients the reason for the reversal.
- China Property Gains Defy Government Plans. Rapid Rise in Prices Comes Despite Beijing's Efforts to Keep Homes Affordable for First-Time Buyers. Surging credit has kept China's real estate-sector humming despite a
renewed attempt by the government to bring prices under control,
supporting short-term economic growth but risking a destabilizing
decline in prices down the line.
- Syria Sweeps Into Rebel Stronghold.
Syrian government forces, backed by members of Lebanese militant
group Hezbollah, launched a sweeping operation Sunday to capture a rebel
stronghold near the Lebanese border, according to Syrian state media
and activists opposed to the regime.
Taking the town of Qusayr, southwest
of the city of Homs, would bolster recent gains by regime forces in
central Syria and around the capital, Damascus. It also could further
embolden Syrian President Bashar al-Assad, who told an Argentine
newspaper over the weekend that his fate would be decided in elections
scheduled for next year.
- Big Government Loses Control. Tea party and other groups use social media to spread the news about IRS abuse world-wide. What to make of the political scandals that are dominating the headlines
and forcing the Obama administration into Nixonian damage control?
Technology is finally doing to big government what it has done to big
business, big media and other institutions that once could operate with
nearly full control over information. The government is losing the
ability to manipulate information to avoid accountability.
Marketwatch.com:
- Too big to fail is now bigger than ever: Andy Xie. The flawed global financial system essentially holds all major
governments hostage. Whenever a crisis happens, the policy priority is
to stabilize the financial system for short-term economic stability.
This tends to favor TBTF financial institutions. Every crisis makes the
problem bigger.
- Republicans link IRS scandal, health reform. “Just think about the fact that it’s the IRS that will be responsible
for enforcing many of these regulations. If we’ve learned anything this
week, it’s that the IRS needs less power, not more,” said Rep. Andy
Harris of Maryland, who delivered the Republican response.
Fox News:
- Top Obama adviser stakes out defiant defense on IRS, Benghazi, AP scandals. A top White House adviser staked out a defiant defense Sunday on a
series of scandals that have hit the Obama administration, going so far
as to say it was an “irrelevant fact” where the president was the night
of the Benghazi terror attacks and saying the Obama administration
wouldn’t cooperate in “partisan fishing expeditions” over IRS officials
targeting Tea Party groups. Dan Pfeiffer went on five Sunday talk shows where he tried to reverse
the damage done to the Obama administration this week by a series of
scandals. On “Fox News Sunday” he tried to hammer home that the
president only heard that the IRS unfairly targeted Tea Party groups
“when it came out in the news.”
CNBC:
- China April Housing Inflation Quickens.
China's housing inflation quickened in April, marking the fourth
consecutive year-on-year rise and challenging policymakers who are
trying to cool record home prices while supporting economic expansion.
Average new home prices rose 4.9 percent last month from a year ago,
after a year-on-year increase of 3.6 percent in March, according to
Reuters calculations from data released by the National Bureau of
Statistics (NBS) on Saturday. Rising
home prices have reignited concerns about property inflation, adding to
pressure on policymakers who are struggling to curb house prices and
still spur a strong economic recovery. "The market expectations
on rising home prices have not changed thoroughly and the property
tightening campaign is still at a critical stage to strictly enforce
(curbing measures)," Liu Jianwei, a senior statistician at the NBS, said
in a statement.
- Bernanke’s Testimony Critical to Oil Prices. The U.S. dollar and its reaction to the Federal Reserve Chairman Ben
Bernanke's Congress testimony on Wednesday will prove central for crude
oil price direction this week, according to CNBC's weekly survey of
market sentiment.
Business Insider:
IBD:
San Francisco Chronicle:
- Gun control: Cartridge ID law to take effect. A
hotly contested gun-control law that was passed in 2007 is finally
ready to be implemented, Attorney General Kamala Harris said Friday: a
requirement that every new semiautomatic handgun contain
"micro-stamping" technology that would allow police to trace a weapon
from cartridges found at a crime scene. The law, signed by then-Gov.
Arnold Schwarzenegger, made California the first state to require
micro-stamping, which engraves the gun's serial number on each
cartridge. But the legislation specified that it would take effect only
when the technology was available and all private patents had expired.
The gun owners' group Calguns Foundation tried to forestall the law at
one point by paying a $555 fee in an attempt to extend a patent held by
the inventor, who wanted it to lapse. Gun manufacturers said the
technology was expensive and ineffective, and a National Rifle
Association lawyer has threatened a lawsuit. But at a Los Angeles news
conference Friday, Harris announced that micro-stamping had cleared all
technological and patenting hurdles and
would be required on newly sold semiautomatics, effective immediately.
Washington Post:
- A rare peek into a Justice Department leak probe. When the Justice Department began investigating possible leaks of
classified information about North Korea in 2009, investigators did more
than obtain telephone records of a working journalist suspected of
receiving the secret material. They used security badge access records to track the reporter’s
comings and goings from the State Department, according to a newly
obtained court affidavit. They traced the timing of his calls with a
State Department security adviser suspected of sharing the classified
report. They obtained a search warrant for the reporter’s personal
e-mails.
ValueWalk:
Reuters:
- Bundesbank
President Jens Weidmann says France must take deficit cut rules
seriously to reduce budget deficits. Weidmann points out that Germany
and France have special responsibilities in the eurozone.
France
has a special responsibility as a euro zone heavyweight to take deficit
reduction rules seriously, even though its budget deficit is above
target, Bundesbank President Jens Weidmann said in an interview
published yesterday. Weidmann told the Bild am Sonntag newspaper that
the credibility of the new euro zone rules would be hurt if their
flexibility were pushed to the limit right at the start. “The
economic developments in some countries have indeed been weaker than
expected and the European rules offer in such cases a certain amount of
flexibility,” Weidmann said when asked about Italy, France and Slovenia
getting more time to fulfill the stability criteria. “France, but also
Germany, has a special responsibility, as heavyweights in the euro zone,
to take seriously the new deficit reduction rules created last year to
reduce budget deficits.” Weidmann noted that France’s budget deficit was still “far above 3 percent.”
- Analysis: High speed trading a stiff challenge for U.S. regulators. Financial trading in world markets has grown so lightning-fast that
effective regulation is growing tougher by the second, increasing the
threat of crashes sparked by hoaxes, electronic glitches or yet-unknown
causes. The latest alarm was
triggered by a fake tweet saying that the White House was bombed,
prompting a U.S. market nosedive that ended minutes later when the
Associated Press said its Twitter account had been hacked. In 2010 U.S.
stocks plunged in a "flash crash" following aggressive sales of
stock-index futures by a mutual fund.
Financial Times:
- Portugal’s banks fear ‘Cyprus virus’.
Portugal’s top bankers have called on Europe’s leaders to stop “playing
with fire” and moderate their stance towards the eurozone periphery, or
risk instilling alarm among bank depositors in future. In separate
interviews, the heads of the country’s two biggest banks – Millennium
BCP and Banco EspÃrito Santo – said they were concerned that the
precedent set by Europe’s treatment of Cyprus’s recent troubles had
increased nervousness across the eurozone to dangerous levels.
Telegraph:
- Meet the man who is betting against China. Carson Block, the founder of Muddy Waters Research, believes that China’s
banks hold more toxic assets than Western peers did ahead of the 2008
financial crash. He is listened to by institutional investors, regulators and politicians but
he rarely speaks publicly. Last week, his analysis of Standard Chartered’s
exposure to China caused a tremble in its share price and its backers to
leap to the bank’s defence. Carson Block has broken his silence this weekend to reveal his fears for the
global economy. The secretive fund manager said the risks within China’s
banking system are more severe than those in Western financial institutions
before the crisis.
Frankfurt Allgemeine Sonntagszeitung:
- German SPD to Introduce Referendum Law Next Month. Germany's Social Democratic Party may push for a new law on country-wide referendums. Draft law due to be debated in mid-June allows for referendum to repeal legislation already passed in parliament. Chancellor Angela Merkel's CDU/CSU opposed the introduction of country-wide referendums.
Kathimerini:
- EU's Barnier Says ESM Is Last Resort. The ESM will intervene to directly recapitalize euro-area banks only after lenders have exhausted all alternatives, citing an interview with European Commissioner Michel Barnier. Barnier says alternatives include imposing losses on uninsured deposits as in Cyprus.
Apple Daily:
- Hong Kong Competitiveness Waning on Possible Bubble. Hong Kong economy shows
signs of a possible bubble because of its high dependency on financials
and real estate industries, citing the latest Chinese cities
competitiveness report from the Chinese Academy of Social Sciences.
Shanghai Securities News:
- BOC
President Wants Lending-Rate Floor Canceled. Bank of China Ltd.
President Li Lihui suggested that China cancel the floor on lending
rates and let banks price credit risk, citing Li's speech at a forum yesterday.
People's Daily:
- China faces "relatively large pressures" from capital inflows and
yuan appreciation, citing Ji Zhihong, an official at the research
bureau of the People's Bank of China.
China Securities Journal:
- China May Expand Property Tax Trial This Year. China may expand
property tax trail to several new cities this year, citing people
familiar with the matter.
- China Needs Restructuring for
Outstanding Debt. China should proactively push forward restructuring of
banks' outstanding debt to eliminate possible "external risks," Liu
Yuhui, a researcher at the Chinese Academy of Social Sciences, writes in
a commentary. China's total debt-to-GDP ratio rose by nearly 60
percentage points between 2009 and 2012, according to the commentary.
Debt ratio is still rising as the social financing growth in 1Q was 12
percentage points faster than nominal GDP, Liu wrote. U.S. monetary
policy may normalized, putting pressure on capital markets in the
Asia-Pacific, he said.
Weekend Recommendations
Barron's:
- Bullish commentary on (C), (S), (R) and (RIG).
Night Trading
- Asian indices are unch. to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 101.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 84.75 unch.
- NASDAQ 100 futures -.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The Fed's Evans speaking, Fed's Williams speaking, Chicago Fed Nat Activity Index for April, RBA minutes, Stifel Nicolaus Internet/Media/Communications Conference, UBS Healthcare Conference and the UBS Oil & Gas Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.
