Today's Headlines

Bloomberg:

- European Central Bank executive board member Lorenzo Bini Smaghi told Italian television today in Milan that the current record-low interest rate of 1% “is not necessarily the minimum.”

- An index of high-risk, high-yield company credit derivatives headed for its best week in more than a year after Federal Reserve Chairman Ben S. Bernanke said the results of a U.S. bank review should reassure investors.

- The cost of protecting US bank bonds from default fell, trading in credit default swaps shows. Contracts on Morgan Stanley(MS) dropped 55 basis points to 240, according to broker Phoenix Partners Group at 8:10 am in NY. Goldman Sachs Group decreased 35 to 165, Citigroup declined 30 to 360, Wells Fargo fell 15 to 145 and JPMogan Chase dropped 10 to 115.

- Ship owners are being forced to pay to carry oil from the Middle East to the U.S. for the first time in at least a decade after demand collapsed and the fleet expanded. Supertanker owners make no rental income from the voyages and are paying $3,445 a day toward fuel costs, data from the Baltic Exchange in London show. “It’s a sign there’s a lot of surplus” in the fleet, Martin Stopford, managing director of Clarkson Research Studies in London, said by phone today. Supertankers are moving at an average speed of 9.2 knots, from as fast as 10.6 knots in July, suggesting captains are slowing down to save on fuel, the data show. The supertanker fleet expanded by 21 to 520 vessels this year, according to Lloyd’s Register-Fairplay data on Bloomberg.

- Crude oil rose for a third day in New York, poised for the biggest weekly gain since March, on signs the global economy may be starting to recover. U.S. crude oil inventories rose 605,000 barrels to 375.3 million during the week ended May 1, the highest since 1990, according to a May 6 report from the Energy Department.

- Pakistan troops backed by fighter jets and military helicopters battled Taliban militants in the Swat Valley after Prime Minister Yousuf Raza Gilani ordered an “all- out assault” to retake control of the northwestern region. “Earlier, the military was only responding to the attacks by the militants, but after the prime minister’s orders, we are on the offensive in a fully fledged operation,” chief military spokesman Major General Athar Abbas said in Rawalpindi. “The operation will continue till all the militants are eliminated.”

- Chrysler LLC, as part of its planned alliance with Fiat SpA, plans to build new cars in the U.S. based on engineering of an Alfa Romeo model under development in Italy. Chrysler, seeking a sale of most of its assets through bankruptcy to a company controlled by Fiat, reached agreement with the Turin, Italy-based automaker to use the platform of the Alfa Romeo 149 in the U.S., according to a court filing.

- Fannie Mae, operating under a federal conservatorship, asked the U.S. Treasury for a $19 billion capital investment and raised the possibility that its long-term survival may be dependent on continued government funding. Fannie Mae, which took $15.2 billion in aid on March 31, cited the “unprecedented” housing market slump and government- mandated programs that are creating “conflicts in strategic and day-to-day decision making,” according to company filings today with the Securities and Exchange Commission.

- JPMorgan Chase & Co. and Goldman Sachs Group Inc., banks that passed government stress tests without needing fresh capital, may win more backing from customers and shareholders as competitors such as Bank of America Corp. and Citigroup Inc. raise funds by giving up assets or equity.

- Real estate investment trusts in the U.S. have raised $10.6 billion from share sales this year, almost matching the total for all of 2008, to reduce debt and acquire assets from competitors weakened by the recession. Property companies raised $6.51 billion in April alone as the Bloomberg REIT Index rallied 30 percent. Simon Property Group Inc., the biggest U.S. mall owner, sold shares for $1 billion this week and Vornado Realty Trust, the third-largest U.S. REIT by market value, raised more than $700 million.

- Asian stocks are set for a “correction” as a two-month rally drives valuations higher than justified by a recovery in company earnings, according to Citigroup Inc. The MSCI Asia Pacific Index has gained 37 percent from a five-year low on March 9. The rebound has lifted the average valuation for stocks on the Asian gauge to 23.6 times profit, the highest since March 2004 and 52 percent more than shares on the MSCI AC World Index, according to data compiled by Bloomberg. Markets are poised for a decline as valuations are higher than they should be at this point in the economic cycle, Citigroup’s Adrian Faure said.

- OppenheimerFunds Inc., the only mutual fund manager listed among opponents of the U.S. government’s restructuring plan for Chrysler LLC, dropped out of the effort, precipitating the collapse of the dissident lenders’ group. OppenheimerFunds “has determined that the senior creditors can no longer reasonably expect to increase the recovery rate on the debt they hold by opposing the Taskforce’s restructuring plan,” the New York-based company said in a statement today. Within an hour, the rest of the group, calling itself Chrysler’s Non-TARP lenders, withdrew objections to the sale to Fiat, said Tom Lauria, the White & Case attorney representing the group. “After a great deal of soul-searching and quite frankly agony, they concluded they just don’t have critical mass to withstand the enormous pressure and machinery of the U.S. government,” he said.

- Major U.S. banks are capable of supporting an economic recovery later this year, Federal Reserve Bank of Richmond President Jeffrey Lacker said, a day after the Fed indicated 10 lenders need to raise a total of $74.6 billion in capital. The U.S. banking system “is well positioned now to lend quite effectively,” Lacker said today in Washington in response to an audience question after a speech. “They are looking for all the creditworthy customers they can find.”

Wall Street Journal:

- Google(GOOG) plans to promote its Web browser through television ads that first appeared online.

CNBC:

- Bill Gross, co-chief investment officer of PIMCO, the operator of the world’s biggest bond fund, said Morgan Stanley’s(MS) debt and other senior bank debt is attractive now that the US government’s stress tests are complete. The banking “system’s on the mend,” Gross, co-founder of Newport Beach, California-based Pimco, said in a CNBC interview today. “These types of spreads on the senior debt level are historic and quite attractive.”

- From March 6th to today, REITs are up nearly 52 percent. Improvement in the credit markets and at least a falling rate of decline in the economy suggests we could be headed toward a bottom. And for commercial real estate, unlike residential, the trouble was never in the real estate itself, but in the economy and in the credit markets.

MarketWatch:
- The U.S. financial sector was higher Friday as the results of the government's stress tests on the nation's largest banks contained few nasty surprises for investors.

- With sales of pricy compact fluorescent bulbs slowed to a stop by the recession, the lighting industry is sharpening its focus on light emitting diodes in the hope this next-generation technology can rev up sales.

Washington Post:

- India has begun a tit-for-tat study on the barriers its exporters face in the United States, part of an effort to aggressively counter an American investigation into Indian trade hurdles. The Indian move came in response to the U.S. International Trade Commission's recent inquiries into the effects of Indian farm trade barriers on U.S. exports, initiated by the Senate Finance Committee in January. In February, India's Commerce Ministry asked exporters to begin reporting instances of hidden American barriers.

Detroit Free Press:

- General Motors Corp.'s(GM) dismal performance in the first three months of the year -- revenues fell by half and the automaker burned through $10.2 billion in operating cash -- shows why a bankruptcy, if one is necessary, must be swift, the company said. The automaker said Thursday the prospect of a bankruptcy filing, on top of the recession, is likely aggravating its worldwide drop-off in sales. "Our focus, clearly, is to stay out of bankruptcy," GM Chief Financial Officer Ray Young said. "But if we had to go in, we need to go in and out quickly." If GM is unable to restructure its debts by June 1, the company faces bankruptcy. Chrysler LLC already has filed for Chapter 11, but experts have doubted whether either automaker can restructure quickly in court.

USAToday:

- As unemployment soars, a combination of cash incentives and aggressive recruiting has left the Army National Guard with a surplus of soldiers, and now it plans to trim its force, according to government documents and interviews with Guard officials.

FINalternatives:

- The Securities and Exchange Commission announced today that Michael Lauer, the head of two Connecticut-based hedge funds, has been ordered to pay more than $62 million as a result of being found liable on SEC fraud charges last fall. U.S. District Judge Kenneth Marra for the Southern District of Florida found that Lauer, head of Lancer Management Group and Lancer Management Group II, must pay more than $43.6 million to deprive him of his ill-gotten gains, and more than $18.9 million in prejudgment interest.

Reuters:
- Shares of small and regional U.S. health insurers may rise in the coming months as they are increasingly viewed as takeout targets, even as the wild card of healthcare reform restrains any near-term consolidation.Three mid-sized health insurers that recently took steps to put troubles behind them are possible prey: Coventry Health Care Inc (CVH), Health Net Inc (HNT) and WellCare Health Plans Inc (WCG).

- Goldman Sachs Group Inc (GS) Chief Executive Lloyd Blankfein sounded a guardedly optimistic forecast for an economic recovery during the bank's annual meeting on Friday.

- A weekly measure of U.S. future economic growth rose along with its annualized growth rate, indicating that economic recovery is imminent, a research group

said Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index ticked up to a 17-week high of 109.3 for the week ending May 1 from 107.7 in the previous week. The index's annualized growth rate rose to a 30-week high of negative 16.1 percent from the prior week's rate of negative 17.5 percent. "The level of the WLI is fast approaching a six-month high, making it increasingly likely that the U.S. recession will end this summer," said Lakshman Achuthan, managing director at ECRI.

Financial Times:
- The Obama administration has renewed its sanctions against Syria for another year, citing a continuing “national emergency” facing the US from Syria’s support for terrorist organizations and weapons trade. The sanctions, which were introduced by the Bush administration in 2004, will remain in place for another year, a state department official told the Financial Times.