Wednesday, June 05, 2013

Today's Headlines

  • Anti-EU Sentiment Increases as Britons Demand Exit, Poll Shows. Rising anti-European Union sentiment and the threat that Britain will quit the bloc may boost nationalist candidates in next year’s European Parliament elections, a poll showed. Pluralities in six countries said things are going in the “wrong direction” in the EU, with a majority in the U.K. favoring a pullout from the bloc if a referendum were held now, Gallup Europe said. EU Parliament balloting in May 2014 risks “the strong mobilization of voters in favor of radical nationalist and anti-EU parties, which could result in a drastic change in the landscape of European democracy,” Gallup Europe said in a statement in Brussels today. Economic ills and a sense of “disconnect” between the people and EU politicians are likely to depress turnout, making it easier for well-organized anti-EU forces to make inroads in the election, the pollsters said.
  • Finnish Economy Enters Recession as Euro Slump Saps Output. Finland’s economy shrank in the first quarter, entering a recession as its fellow euro-area countries struggle with austerity and surging unemployment. Gross domestic product, adjusted for seasonal swings, contracted 0.1 percent from the prior three months, when it shrank a revised 0.7 percent, Statistics Finland in Helsinki said today on its website. The slump matched the median estimate of three economists in a Bloomberg survey. The economy also stalled in the third quarter, after being revised from 0.1 percent growth, data showed. 
  • Lira Weakens as Turkish Yields Climb on Sixth Day of Protests. The lira weakened and bond yields rose as anti-government demonstrations in Turkey continued for a sixthday. Shares slid, with Akbank TAS among the decliners as Bank of America Merrill Lynch cut the lender to underperform. Markets swung to negative after a record rally in two-year bonds yesterday followed the biggest plunge a day earlier. Protesters accusing Prime Minister Recep Tayyip Erdogan of autocratic governance and citing grievances, including alleged police brutality and curbs on alcohol sales, clashed overnight with police, who responded with tear gas and water cannons in about 10 cities.
  • European Stocks Drop to Their Lowest Level in Six Weeks. European stocks retreated to their lowest level in six weeks as investors weighed comments by Federal Reserve policy makers on when to scale back the central bank’s bond-buying program. Tesco Plc slid the most in 16 months after the U.K.’s largest retailer reported same-store sales that fell short of analysts’ estimates. Carrefour SA lost 4.1 percent after HSBC Holdings Plc recommended that investors sell the French retailer’s shares. Man Group Plc plunged 17 percent after reporting a decline in the net assets of its flagship fund. The Stoxx Europe 600 Index dropped 1.5 percent to 295.12 at the close of trading, its lowest level since April 24.
  • Obama Team Bullying Cited by Critics in Drive for Uninsured. Anne Filipic, who helped Barack Obama secure a turning-point victory in the 2008 Iowa caucuses, plans to send thousands of volunteers door-to-door this year on a new campaign: to help the president sell his health-care law to the nation’s 50 million uninsured. First, though, her organization, Enroll America, must deal with the fallout from congressional Republicans who say the Obama administration is pressuring companies such as drugmaker Johnson & Johnson to support an outreach effort that could cost as much as $100 million.
Wall Street Journal:
Dow Jones:
  • IMF to Publish Paper Admitting Lapses in Greece Bailout. IMF says own projections on Greece too optimistic. Says EU commission weak in crisis management.
Fox News:
  • China's Strength Could Become Its Weakness. Who's afraid of China? Everyone apparently. As China's economic might grows, trading partners from Europe to Asia to the U.S. are crying foul, some louder than others. But growing domestic tensions and internal economic imbalances are forcing Chinese leaders to overhaul the very economic model that has served them so well for the past decade.
Zero Hedge:  
Business Insider:  
  • Credit Default Swap ETFs Coming To Market. Unlike other products now on the U.S. market, a new family of proposed ETFs from ProShares that is focused on credit default swaps (CDSs) will allow U.S. investors a "pure play" to weigh in on credit quality for the first time. Bond issuers, especially low-credit issuers, have benefited immensely from the Federal Reserve’s low-rate policy as yield-starved investors have crept down the credit spectrum in search of real return. It’s not just U.S. companies that have loaded up on debt either, “global bond issuance is up a stunning 53 percent from the same period in 2012,” according to CNBC. But after a long sustained upward move in bond prices, some are nervous this beast might turn around to bite them. ProShares’ filing seems to capitalize on investor anxiety and be an attempt to placate it.
  • Mortgage applications drop as rates surge: MBA. Interest rates on U.S. mortgages continued to surge last week, rising above 4 percent for the first time in a year and driving down demand from homeowners to refinance, data from an industry group showed on Wednesday.Fixed 30-year mortgage rates climbed 17 basis points to average 4.07 percent in the week ended May 31, the Mortgage Bankers Association said. Rates have risen by 48 basis points in the last four weeks, with the most recent upswing driven by nervousness that the Federal Reserve could slow its economic stimulus efforts sooner than had been anticipated. Last week's interest rate was the highest since April 2012 and the first time rates have been above 4 percent since early May of last year. MBA's seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, tumbled 11.5 percent last week. Demand for refinancing was hit hardest by the acceleration in rates, with applications slumping 15.0 percent. The refinance share of total mortgage activity fell to its lowest level since July 2011 at 68 percent of applications from 71 percent the week before. The gauge of loan requests for home purchases - a leading indicator of home sales - held up relatively better, falling just 1.6 percent.
  • Senator says Smithfield(SFD) deal has food safety implications. The head of the Senate Agriculture Committee on Wednesday said she was concerned about the food safety implications posed by the proposed purchase of pork producer Smithfield Foods by Shuanghui International, a Chinese meat products company. The federal agencies considering the merger "must take China's and Shuanghui's troubling track record on food safety into account, and do everything in their power to ensure our national security and the health of our families is not jeopardized," Senator Debbie Stabenow, a Michigan Democrat, said in a statement.
Financial Times: 
  • Quant hedge funds hit by US bonds sell-off. Some of the world’s biggest quant hedge funds have suffered steep losses in the past two weeks following the sell-off in global bond markets. So-called “CTAs”, which use computer models to automatically spot and ride market trends, were caught out as investors anticipated an end to the Federal Reserve’s measures to stimulate the US economy, triggering a global rout in fixed income investments.

  • ECB Acting Outside Mandate, ZEW's Fuest Says. ECB has signaled to financial markets that it will guarantee govt debt without limits, and that's not within the bank's mandate, Clemens Fuest, head of Germany's ZEW Center for European Economic Research, says in an interview. ECB is operating in "grey zone", he said. Reasoning of ECB is faulted, while bank hasn't proven wrong the assertion that all it does is ensure cheap credit for countries in crisis. The ECB should step aside and let governments prevent a potential collapse of the euro zone, he said.

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