Bloomberg:
- Monti Rushes to the Exit as Bersani Seeks ‘Insane’ Person’s Job. Italian Prime Minister Mario Monti can’t wait to quit his job. Pier Luigi Bersani, who has first shot at replacing Monti, said only a lunatic would want to. “Believe me, only an insane person would want to govern at this moment,” Bersani said yesterday in a meeting with rival lawmakers as he sought to persuade them to support his bid to form a government. The contradiction is characteristic of Italian politics at a time when the economy is stuck in recession. Parliament was deadlocked by inconclusive elections last month, and Bersani, after nearly a week of talks, has given no signal that he can break the impasse. He will report to President Giorgio Napolitano today with the results of his negotiations. The incumbent has indicated his desire for a breakthrough. “This government, and I’ll say it in the most respectful way possible, can’t wait to have its mandate rescinded,” Monti said yesterday in a speech to parliament. Italian 10-year bond yields jumped 21 basis points to 4.78 percent yesterday, widening the difference in yield with similar-maturity German bunds 28 basis points to 3.5 percentage points, the biggest gap since Dec. 10.
- Slovenian Austerity After Cyprus Fails to Stem Yield Gain. Slovenia’s pledge to continue austerity measures failed to stem a rise in bond yields to record highs as investors worry the Alpine nation will follow Cyprus as the next euro-region member requiring a bailout. Prime Minister Alenka Bratusek, in her first major policy speech since taking office, told Parliament yesterday that her week-old government would rebuild ailing banks and improve state finances that are in “bad shape” so the country won’t become the sixth euro member to need aid.
- Cyprus Fig Leaf Masks Hollande Economic Growth Woes: Euro Credit. French President Francois Hollande is basking in borrowing costs are near record lows, helped most recently by investors seeking shelter from problems in Cyprus. The yield on France's benchmark 10-year bond fell 6 basis points to 2.0% during the 10 days as European authorities roiled markets by imposing a tax on depositors in Cypriot banks. The French rate is just short of the all-time low of 1.92% reached in December. "I don't see any value in French bonds" at current levels, said Robin Marshall, director of fixed-income at Smith & Williamson Investment Management in London. "The reforms in France have stalled and the economy is contracting. The problem is the peripheral space helped to divert attention of the market from these problems.
- EU to Start Debate on Energy, Climate Rules Amid Crisis. The European Union’s executive started a debate today on EU climate and energy rules as the crisis-ridden bloc seeks a long-term plan to cut greenhouse gases and promote clean power technologies. While the 27-nation bloc is making “good progress” toward its 2020 goals to boost the share of renewable energy and cut greenhouse gases, a framework for the subsequent decade is needed to give investors legal certainty, spur innovation and prepare for a global climate deal, the European Commission said in a consultation paper published in Brussels. The commission invited member states, the European Parliament, industry groups and non-governmental organizations to submit until July 2 their views on EU objectives for 2030.
- China Stocks Fall Most in Three Weeks as Financial Shares Slump. China stocks fell, dragging the CSI 300 Index (SHSZ300) down the most in three weeks, as banks tumbled on concern new wealth-management product rules will hurt earnings and as the government signaled more flexible interest rates. Industrial Bank Co. lost 9.2 percent, while China Minsheng Banking Corp. declined 7.6 percent, leading a gauge of financial companies to an 11-week low. A directive from the banking regulator for lenders to limit the investment of client funds in debt that isn’t publicly traded will hurt revenue for some banks by 2 percent, according to a Citic Securities Co. report today. “The regulation will hurt banks’ profits,” Zhou Lin, an analyst at Huatai Securities Co., said by phone from Nanjing. That will drag on stocks because “banks have a big weighting” on benchmark indexes, he said. The Shanghai Composite Index (SHCOMP) sank 2.4 percent to 2,245.57 at 10:27 a.m. local time. The CSI 300 Index, which tracks stocks in Shanghai and Shenzhen, tumbled 2.9 percent, the most since March 4, to 2,508.96. Hong Kong’s Hang Seng China Enterprises Index dropped 1.7 percent. The CSI 300 Financials Index slumped 4.7 percent, the most since March 4 and the biggest drop among the CSI 300’s 10 industry groups. The rule to cap investment by Chinese banks’ wealth management products in non-exchange traded products will reduce growth of total social financing, leading to pessimistic expectations about economic recovery, analysts led by Mao Changqing at Citic Securities wrote in a report today.
- Rebar Falls in Shanghai on Concerns Over China’s Property Market. Steel reinforcement-bar futures declined with China’s stocks on concerns that further tightening measures in the property sector may damp demand. Futures for delivery in October dropped as much as 1.2 percent to 3,841 yuan ($618) a metric ton on the Shanghai Futures Exchange, before trading at 3,847 yuan at 11:08 a.m. Shanghai time. The most-active contract has lost 11 percent after climbing to a 10-month high of 4,297 yuan on Feb. 8.
- China Says Elected Hong Kong Leader Cannot Oppose Beijing Rule. China won’t allow Hong Kong to choose a chief executive who opposes Chinese government rule, as some lawmakers in the former British colony demand universal suffrage earlier than planned in 2017.
- Kia Says Weakening Yen Becoming ‘Weapon’ for Japanese Carmakers. The weakening yen is becoming a “weapon” for Japanese automakers by making them more competitive, said a senior executive at South Korea’s second- largest carmaker. “The weakening yen reinforces the Japanese competitors,” Kia Motors Corp. (000270) Vice President Lee Soon Nam told reporters today at the Seoul Motor Show. “The weakening yen will become the Japanese automaker’s weapon, they now have reinforcements.” The Japanese currency has weakened 17 percent against the South Korean won in the past six months, making the country’s exports cheaper versus its Asian neighbor.
- S. Koreans in Farm U-Turn as Chaebol Era’s Rapid Growth Ends. The number of people leaving cities for rural areas is at a record high in South Korea, as government subsidies to boost agricultural production coincide with slowing economic growth.
- Japan Sees Population Shrinking 16% by 2040, More Elderly. Japanese population may drop 16% from 2010 level to 107.3m in 2040, according to estimates released by National Institute of Population and Social Security Research yesterday. People who are 65 years old and above will likely account for 36% of total population in 2040, compared with 23% in 2010 and 30% in 2025.
- Rubber Drops as Debt Crisis, Weak U.S. Data Raise Demand Concern. Rubber declined the most in a week on concern that demand for the commodity will weaken as Europe’s debt crisis is deepening and pending U.S. home sales fell. The contract for delivery in September fell as much as 2.2 percent, the most since March 22, to 276.4 yen a kilogram ($2,936 a metric ton) on the Tokyo Commodity Exchange and was at 276.7 yen at 10:49 a.m. Futures have lost 8.5 percent this year.
- Lead Prices Drop to Four-Month Low on European Debt Concerns. Lead prices fell to a four-month low in London as a bailout for Cyprus and political deadlock in Italy stoked concern that the euro-area debt crisis will curb metal demand. Tin and copper also dropped. The Cyprus rescue "tarnished" the region's appeal, Swiss bank Pictet & Cie. said, while the euro fell to a four-month low against the dollar. An index of six industrial metals headed for the first two-month slide in more than a year. "The Cyprus situation is dragging everything lower, and the markets look pretty bleak," Grant Barratt, a trader at Jefferies Bache LLc in New York, said in an interview. "The euro isn't helping things."
- Red Hat(RHT) Falls as Fourth-Quarter Sales Miss Estimates. Red Hat Inc. (RHT), the largest seller of Linux operating-system software, reported fiscal fourth-quarter sales that missed estimates as some customers -- concerned about sluggish economic growth -- put off purchases. Profit excluding some items was 36 cents a share on sales of $347.9 million, the Raleigh, North Carolina-based company said today in a statement. That compares with analysts’ average prediction of earnings of 30 cents on revenue of $349.3 million, according to data compiled by Bloomberg. Sales and profit forecasts for the current period also missed projections. Tax increases in the U.S. and a worsening recession in Europe are causing businesses to delay upgrading to Red Hat’s Linux software from older Unix systems, according to Richard Williams, an analyst at Cross Research. “The channel checks showed that activity just stopped after the first week of December,” said Williams, who has a hold rating on the stock, with $51 price target. The shares decreased as much as 14 percent in extended trading.
- PVH(PVH) says Warnaco deal will cut profit in 2013. PVH Corp. says its Warnaco acquisition will require more investments than it initially anticipated and weigh on its earnings for the year. The clothing company also declared that 2013 will be a transitional year as it invests in its brands, and its shares sank in after-hours trading Wednesday.
- Use of Food Stamps Swells Even as Economy Improves. The financial crisis is over and the recession ended in 2009. But one of the federal government's biggest social welfare programs, which expanded when the economy convulsed, isn't shrinking back alongside the recovery. Enrollment in the Supplemental Nutrition Assistance Program, as the modern-day food-stamp benefit is known, has soared 70% since 2008 to a record 47.8 million as of December 2012. The biggest factor behind the upward march of food stamps is a sluggish job market and a rising poverty rate. At the same time, many states have pushed to get more people to apply for SNAP, a program where the federal government picks up the tab. But there is another driver, which has its origins in President Bill Clinton's 1996 welfare overhaul. In recent years, the law has enabled states to ease asset and income tests for would-be participants, with the encouragement of the Obama administration, allowing into the program people with relatively higher incomes as well as savings. By expanding the pool of potential applicants, they are redrawing the landscape of government assistance. It is one reason why SNAP appears to have evolved from a program that rose and fell with the unemployment rate to a more permanent feature of the landscape.
- China Tightens Regulations on Wealth Management. China moved to rein in wildly popular but opaque investment products that form a key plank of the nation's shadow-banking system, after the high-profile failure of one product offered a glimpse of the risk they pose to the financial system. The rules issued Wednesday by China's banking regulator came as China's four biggest state-run banks said they had more than 3 trillion yuan ($467 billion) worth of such products outstanding at the end of last year, their fullest disclosure yet of their exposure to the products and a move signaling their own caution toward their proliferation.
- Bank Havens Seek Distance From Crisis. The risks posed by hosting a large financial industry became a flash point on Wednesday as the Cyprus bailout trained the spotlight on other small euro nations that depend on the sector for jobs and economic growth. The issue has become a sore spot mainly for Luxembourg and Malta after the debate over Cyprus prompted European ministers and politicians to question the viability of housing a large financial center in a small country. Cyprus's bailout requires the country to shrink its large financial-services industry to the euro-zone average, setting an unwelcome precedent for nations whose economic models are based on financial services.
- Justices Show Reluctance for Broad Marriage Ruling. Two days of arguments on same-sex marriage revealed a Supreme Court uneasy about making sweeping moves on gay rights and holding doubts about whether the cases belonged before the justices at all.
- Funds Reshape Investment Mold. Hedge funds that specialize in bonds are bulking up on stocks, in the latest sign of investor concern over the health of the long bull market in debt prices. Fund managers that have made winning bets in corporate loans, mortgage bonds and distressed debt are altering course after a flood of cash has pushed up the prices of all sorts of debt investments, raising risks and depressing expected returns.
- Facebook's(FB) Mark Zuckerberg Starting Political Group. The 28-year-old Facebook Inc. chief executive is in the process of co-organizing a political advocacy group made up of top technology leaders that would push federal legislative reform on issues ranging from immigration to education, said people familiar with the development.
- Laffer and Moore: The Red-State Path to Prosperity. Blue states with high taxes are struggling to compete for businesses and workers. You can tell a lot about prosperity in America by observing the places people are moving to and where they are packing up and moving from. New Census Bureau data on metropolitan areas indicate that the South and the Sunbelt regions continue to grow, while the Northeast and Midwest continue to shrink. Among the 10 fastest-growing metro areas last year were Raleigh, Austin, Las Vegas, Orlando, Charlotte, Phoenix, Houston, San Antonio and Dallas. All of these are in low-tax, business-friendly red states. Blue-state areas such as Cleveland, Detroit, Buffalo, Providence and Rochester were among the biggest population losers.
- What to Cut: Red tape stalls firing of ineffective federal workers. Working for the federal government used to mean a trade-off -- lower salaries, in exchange for higher job security. Today, that trade-off is gone as federal workers often make good money with little risk of being fired. Though numbers are hard to come by in the mammoth 2.4 million-employee federal workforce, an analysis by USA Today found the federal government fired only one half of one percent of its workers in fiscal year 2011. That's about five times smaller than in the private sector.
- Five Below(FIVE) fourth-quarter profit rises 55%. Five Below Inc.'s fiscal fourth-quarter profit rose 55% as the discount retailer's same-store sales improved, though margins edged down. Shares sank 6.4% after hours to $36.65 after the company forecast weak full-year results.
- Surging Student-Loan Debt Is Crushing the System. Student-loan defaults surged in the first three months of 2013, while efforts to collect bad loans are faltering, according to credit analysts and government audits. It is the latest twist in a college debt crisis that is hanging over recent graduates and dragging on the broader economy.
- G4S Readies Guards as Cypriot Banks Prepare to Open. Cyprus reopens its banks on Thursday while limiting withdrawals, banning cheques and curbing the use of Cypriot credit cards abroad, among measures imposed to avert a bank run after it agreed a tough rescue deal with international lenders.
Business Insider:
Reuters:
- Fisker puts U.S. workforce on furlough this week. Fisker Automotive, which has not made a vehicle since July, placed its U.S. workforce on furlough this week as part of its effort to keep costs low while it continues to search for a strategic partner, the U.S. automaker said on Wednesday.
- Oil industry to sidestep brunt of new U.S. swaps rules. Oil companies are largely escaping the close scrutiny of derivatives trading they once warned would harm their business and are seeking further delays from U.S. regulators. Beginning in January this year, the top U.S. derivatives regulator has required that companies register as dealers if they trade more than $8 billion in swaps a year, unless they do so to hedge price swings in their day-to-day business. But no large energy companies have yet joined the ranks of the 70 or so investment banks that have registered as swap dealers and are subject to the toughest level of oversight, two people briefed on the matter said.
- JPMorgan(JPM) risk disclosures fell short for regulators -documents. For months after JPMorgan Chase & Co executives first admitted that they had wrongly brushed off questions about the "London Whale" derivatives losses, officials at the U.S. Securities and Exchange Commission pressed the company to disclose more to investors about risks it was taking.
- Cyprus has finally killed myth that EMU is benign. The punishment regime imposed on Cyprus is a trick against everybody involved in this squalid saga, against the Cypriot people and the German people, against savers and creditors. All are being deceived. The Cyprus debacle has taught us yet again that EMU has gone off the rails, is a danger to stability, and should be dismantled before it destroys Europe’s post-War order. Whether it marks a watershed moment in the crisis is another matter. Italy, Spain, France and Portugal have their own crises, moving to their own rhythm. The denouement will arrive when the democracies of southern Europe conclude that recovery is a false promise and that the only way to end mass unemployment is to break free of EMU’s contractionary regime. It will be decided by Italy, not Cyprus.
- Fasten your seat belts – a balance of payments crisis looms. Whatever happened to the holy grail of a more balanced UK economy? Britain has been living substantially beyond its means for more than thirty years now. Spending more than we earn long pre-dated the Labour years. And it's getting worse, not better.
- The South Korean government will cut its 2013 GDP forecast to mid-2% from 3% today, citing unnamed government officials.
- Apple's(AAPL) after-sale service policy may violate Chinese law, citing the General Administration of Quality Supervision, Inspection and Quarantine. The report cites customer complaints about being charged for keypad repairs. Apple must provide free maintenance service within certain period, AQSIQ is cited as saying. Apple should provide free spare phones to customers if products can't be repaired in 7 days, citing AQSIQ. The government will "seriously deal with" Apple if it doesn't rectify problems "if proven true," the report says.
- Yao Jingyuan, researcher at the Counselors' Office of the State Council, said China faces relatively large downward economic pressure in the middle of this year. Yao is also former chief economist at the National Bureau of Statistics. Yao cites growth rate for newly started projects in first two months being nearly 20 percentage points slower than a year earlier.
- Cities in the central and western Chinese provinces may issue detailed property curb policies in early- or mid-April, citing people familiar with the situation. Tier-2 and tier-3 Chinese cities may impose different property market controls than the nation's major cities, the report said.
- China's southern city of Shenzhen will likely raise in April the down payment for second home purchases to 70%, from 60% currently, citing people familiar with the situation.
- None of note
- Asian equity indices are -1.50% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 121.50 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 95.25 +1.0 basis point.
- FTSE-100 futures -.24%.
- S&P 500 futures -.39%.
- NASDAQ 100 futures -.29%.
Earnings of Note
Company/Estimate
- (GME)/2.09
- (FINL)/.74
- (CMC)/.18
- (ACN)/.97
- (BBRY)/-.32
- (FRED)/.19
- (MOS)/.89
- (SIG)/2.09
- (UTIW)/.14
8:30 am EST
- Final 4Q GDP is estimated to rise +.5% versus a prior estimate of a +.1% gain.
- Final 4Q Personal Consumption is estimated to rise +2.1% versus a prior estimate of a +2.1% increase.
- Final 4Q GDP Price Index is estimated to rise +.9% versus a prior estimate of a +.9% gain.
- Final 4Q Core PCE is estimated to rise +.9% versus a prior estimate of a +.9% gain.
- Initial Jobless Claims are estimated to rise to 340K versus 336K the prior week.
- Continuing Claims are estimated to fall to 3041K versus 3053K prior.
- The Chicago Purchasing Manager report for March is estimated to fall to 56.5 from 56.8 in February.
- None of note
- The German jobs report, Japan Manufacturing PMI, Canada GDP report, Japan unemployment rate, 7Y T-Note auction, Kansas City Fed Manufacturing Activity for March, NAPM-Milwaukee for March, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, CIBC Retail/Consumer Conference and the (EBAY) analyst day could also impact trading today.
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