Monday, April 15, 2013

Today's Headlines

  • Slovenia Asset-Sale Plan Fails to Ease Debt Squeeze Concern. Slovenia’s plan to sell shares in state-owned companies failed to ease investor concern that the country will become the next euro-area nation to need a bailout. Slovenia’s default risk rose to a six-month high and bond yields hovered near records as the country prepares to tap markets this week. Prime Minister Alenka Bratusek’s April 12 announcement of plans to sell stakes in companies, including a bank, looks like an effort to stall rather than to obtain financing, according to Milan Smiljanic, head of trading at Perspektiva d.d. “There is skepticism that they are only buying time and will try to fix debt problems, avoiding privatization,” Smiljanic said by e-mail from Ljubljana. “There are no bank bidders at the moment.” The government will sell 500 million euros ($654 million) in 18- month Treasury bills at an auction in two days as it tries to shore up confidence that it can recapitalize its ailing banks without seeking outside assistance. The cost of protecting Slovenian debt against non-payment using credit-default swaps rose to a six-month high today, advancing six basis points to 375, according to data compiled by Bloomberg.
  • German Curve Reveals Woes Masked by Spanish Rally: Euro Credit. The widening yield gap between 10- and 30-year German government securities suggests recent gains in Spanish and Italian bonds may prove unsustainable. The spread, a measure of risk perceptions among bondholders, rose to 97.5 basis points on April 4, the most since September 2011, as 10-year yields plunged. The steepening yield curve suggests investors are favoring Europe’s safest fixed-income assets as Italy awaits a government seven weeks after elections and the bank crisis in Cyprus stokes concern the region’s debt crisis may worsen.
  • China Growth Loses Momentum in Blow to Global Expansion. China’s economic growth unexpectedly lost momentum in the first quarter as gains in factory output and consumption weakened, driving stocks and commodities lower on concern global expansion will slow. Today’s data add to concerns the global recovery is struggling, with the International Monetary Fund set to lower its forecast for U.S. growth and investor George Soros warning that Germany will probably be in recession by the end of September. “The disappointing data show the recovery is much weaker and bumpier than expected, dragged down by soft domestic demand,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong. The expansion in credit so far this year may help growth pick up in the second quarter, and authorities may ease efforts to rein in so-called shadow banking while boosting spending in areas including health care and environmental protection, Zhu said. JPMorgan today cut its 2013 growth forecast to 7.8 percent from 8.2 percent, while Royal Bank of Scotland Group Plc lowered its estimate to 7.8 percent from 8.4 percent
  • China Stocks Drop 10% From February High as Data Miss Estimates.
  • Emerging-Market Losses Break From Global Stock Gains. For only the third time since 2001, emerging-market currencies are weakening as global stocks rise, revealing doubts about the ability of economies from South Africa to South Korea to reverse a slowdown. A group of 20 developing-nation currencies lost an average of 0.3 percent this year, including losses of more than 5 percent for the rand and won, while the MSCI World Index of equities advanced 8.3 percent. The 60-day correlation between the group and the stock index fell this month to the lowest since October 2008, data compiled by Bloomberg show. Currencies that typically benefit most from an increase in investors’ appetite for risk are falling out of favor as emerging-market nations struggle to boost growth. “The model of global growth has been broken,” Stephen Jen, the managing partner at SLJ Macro Partners LLP in London and the former head of currency strategy at Morgan Stanley, said in a phone interview. “Those countries with questionable fundamentals in emerging markets are exposed, one by one, by the deceleration. They are starting to feel the pain.”
  • Commodities Tumble to Lowest Level Since July on China. Commodities tumbled to the lowest level since July, led by precious metals, crude oil and wheat, after economic growth in China, the world’s biggest consumer of metals and energy, missed analysts’ estimates. The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped as much as 2.6 percent to 606.70, the least since July 12, and traded at 610.19 at 11:37 a.m. in New York. West Texas Intermediate oil fell below $88 a barrel for the first time this year and gold fell the most since 1980. Silver reached a two- year low and copper a 17-month low. Wheat dropped as much as 3.5 percent.
  • Iron-Ore Swaps Fall as China Economic Growth Loses Momentum. Iron-ore swaps fell the most in two weeks after China’s economy expanded more slowly than anticipated, prompting speculation demand will be curbed from the world’s largest importer of the steelmaking commodity. The contracts for May slid 3.6 percent to $135 a dry metric ton as of 11:12 a.m. in London, according to broker SSY Futures Ltd. That’s the biggest one-day slump since April 1, based on data from SGX AsiaClear, the largest clearer of the derivatives. The swaps traded as low as $134.
  • AQR's Cliff Asness Says Hedge Funds Increasingly Hedging Less. Clifford Asness, co-founder of AQR Capital Management LLC, said hedge funds have been hedging less in the past decade than they did in previous years. The funds are more "net long" than they used to be, he said in an interview.
  • Foreign Demand for U.S. Financial Assets Plunged in February. International demand for U.S. stocks, bonds and other financial assets plunged in February as investors in Japan, the U.K. and Switzerland reduced their holdings of Treasuries. Net selling of long-term equities, notes and bonds totaled $17.8 billion during the month, down from net purchases of $25.7 billion in January, the Treasury Department said today in Washington. Economists surveyed by Bloomberg projected net buying of $40 billion of long-term assets, according to the median estimate.
Wall Street Journal: 
  • Boston Marathon Explosions: Live Coverage.
  • Explosions Reported at Boston Marathon Finish. Two explosions at the finish line of the Boston Marathon have resulted in injuries. Bloody spectators were being carried Monday to the medical tent that had been set up to care for fatigued runners. Police wove through competitors as they ran back toward the course. "There are a lot of people down," said one man, whose bib No. 17528 identified him as Frank Deruyter of North Carolina. He was not injured, but marathon workers were carrying one woman, who did not appear to be a runner, to the medical area as blood gushed from her leg. A Boston police officer was wheeled from the course with a leg injury that was bleeding. About three hours after the winners crossed the line, there was a loud explosion on the north side of Boylston Street, just before the photo bridge that marks the finish line. Another explosion could be heard a few seconds later.
  • Commodity Super Cycle Is Dead: Citi. The super cycle in commodities has come to an end, according to researchers at Citi, who downgraded several mining stocks on Monday as metals prices have continued to decline since the start of the year.
  • For Small Business, Learning Obamacare Math. Even as you finish with this year's taxes, if you're a small-business owner experts say it's time to look ahead to 2014, when the tax implications of the Affordable Care Act (ACA) begin to kick in. "Just now, things are really sinking in that there is this employer responsibility," said Amanda Austin, of the National Federation of Independent Business.
Zero Hedge: 
Business Insider: 

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