Oil Gains a Third Day After Reports Saudi Arabia Cut Production This Month. Oil gained for a third day in New York after a Saudi Arabia-based economist said the holder of the world’s biggest crude reserves cut production this month. Futures gained as much as 0.6 percent today after John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi, said the desert kingdom reduced output by 300,000 barrels a day. Barclays Plc said Saudi Arabia may be reducing production of its lighter oil blends introduced in response to the slump from Libya. “The news that the Saudis are cutting output should be scaring the daylights out of people,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “It looks like they couldn’t find buyers for their light blends,” he said. Crude for May delivery gained as much as 60 cents to $108.71 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $108.56 at 9:21 a.m. Sydney time. Yesterday, the contract increased $1, or 0.9 percent, to settle at $108.11. Prices are up 27 percent from a year ago. Brent oil for May settlement slipped 52 cents, or 0.4 percent, to end the session at $122.36 a barrel on the London- based ICE Futures Europe exchange yesterday.
NATO Chief Seeks More Attack Jets for Libya, Raising Pressure on Pentagon. NATO’s chief said the alliance needs more attack jets to target Libyan ground forces, putting pressure on the U.S. military to step back into the air campaign against Muammar Qaddafi’s troops as they continue to attack the besieged coastal city of Misrata. “We need a few more precision-fighter ground-attack aircraft for air-to-ground missions,” NATO Secretary General Anders Fogh Rasmussen said today at a meeting of the North Atlantic Treaty Organization’s 28 foreign ministers and leaders from other allied nations in Berlin. NATO ministers met as a seven-week rebel drive to push Qaddafi from power has ground to a standstill and the Libyan leader’s forces pound Misrata, Libya’s third-largest city. Allies are struggling to overcome divisions on how to force Qaddafi’s exit amid complaints by Britain, France and rebel commanders that NATO isn’t doing enough. “Qaddafi is testing our determination,” U.S. Secretary of State Hillary Clinton said at the meeting. “As our mission continues, maintaining our resolve and unity only grows more important.” French Foreign Minister Alain Juppe told reporters that within NATO “there are differences over the means to achieve a united goal” in Libya. France currently is “the biggest air force contributor, so we don’t have room for an increase,” Juppe said. “Other countries are in a position to do that, so I hope they will.” Italian Foreign Minister Franco Frattini said troops loyal to Qaddafi are planting land mines around Misrata, a city 210 kilometers (130 miles) east of the capital, Tripoli, where he said 250 civilians have been killed in the last two weeks. Rebels say that NATO’s air strikes have been insufficient in aiding their drive to topple Qaddafi’s 42-year regime, while French and British officials this week said alliance members need to offer more combat jets. Additional U.S. warplanes are on standby for deployment in NATO missions, though alliance commanders have yet to request any, two U.S. officials said earlier today on condition of anonymity. Libyan rebels want to borrow at least $2 billion to buy food, medicine, fuel and perhaps weapons as their foreign allies agreed to do more to help them prevail over Qaddafi’s forces.
CICC Says Global Banks Too Bullish on China's Stock Market as Pimco Buys. China’s biggest investment bank is turning “cautious” on the country’s stocks, just as six of its overseas rivals and the manager of the largest mutual fund say it’s time to buy. China International Capital Corp. predicts slowing economic and earnings growth will limit equity gains. The top-ranked provider of China research in Asiamoney’s survey recommends “defensive” companies including drugmakers and consumer staples producers. “We’re turning cautious,” Hao Hong, the global equity strategist at CICC, said in an April 13 interview in Shanghai. “Economic growth is going to slow down in the coming months.” “Consensus sees the beginning of the end of the interest- rate hike cycle and thus is getting bullish,” Hong said in a report sent to clients April 10. “The end of the cycle is not necessarily bullish judging from the experiences of 2004 and 2007.”
Shocks Slow Global Expansion Sustained by Labor Gains, Profits. The global economy is cooling, in a shift that will slow, not stop, the worldwide expansion. Growth is decelerating in the two largest economies as finance ministers and central bankers gather in Washington for the semi-annual meeting of the International Monetary Fund and World Bank starting today. Higher gasoline prices have sapped consumer spending in the U.S., while tighter monetary policy has curbed demand in China. Japan, the world’s third largest economy, is struggling to right itself in the wake of a record earthquake, while Europe is battling a debt crisis that claimed its third victim -- Portugal -- last week. “The headwinds we’ve run into are pretty strong,” said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York. “The fundamental forces driving the recovery have not been stopped. We’re bending but not breaking.”
Gold Leaps to Record on Inflation, Dollar; Silver Tops $42 at 31-Year Peak. Gold climbed to a record as concern about rising inflation and an extended decline in the dollar bolstered the allure of precious metals as a store of value. Silver reached a 31-year peak. Immediate-delivery bullion advanced as much as 0.3 percent to a record $1,478.32 an ounce before trading at $1,477.40 an ounce at 7:30 a.m. in Singapore. Bullion for June delivery in New York also leapt to an all-time high of $1,479.90 an ounce, gaining as much as 0.5 percent. “Commodities, including gold, will continue to be the focus of investors,” said Gavin Wendt, an analyst with MineLife Pty. “There’s no compelling reason to own the U.S. dollar and I see little significant recovery ahead for the currency.” The dollar touched a 16-month low against six major currencies on speculation the Federal Reserve will lag behind the European Central Bank in raising interest rates. Gold is headed for its second weekly advance, taking gains in the past year to 27 percent. Fourteen of 18 traders, investors and analysts surveyed by Bloomberg, or 78 percent, said bullion will rise next week. Three predicted lower prices and one was neutral.
FHA's Ryan Says Mortgage Down Payment Rule Could Restrict Credit. U.S. regulators “must be mindful of the trade-off” between borrower equity and access to credit as they consider new rules for mortgage risk-retention, Acting Federal Housing Administration Commissioner Bob Ryan said. Higher down payments won’t necessarily reduce default risk and could keep creditworthy consumers from buying homes, Ryan said at a House Financial Services subcommittee hearing on mortgage risk retention. “This definition has the potential to create false- positive situations,” Ryan told lawmakers. The Financial Services capital markets panel is reviewing a proposal calling on homebuyers to have a 20 percent down payment and unblemished credit to qualify for so-called qualified residential mortgages that would be exempt from regulations requiring lenders and securitizers to retain a stake.
Brazil Lula Field May Hold 6.7 Billion Barrels. The Lula oil field offshore Brazil may hold 6.7 billion barrels of oil, with 200 million barrels of reserves outside an exploration block, O Estado de S. Paulo reported, without saying where it got the information. Brazil’s oil regulator has asked state-controlled Petroleo Brasileiro SA (PETR4) to start a so-called unitization process to determine how far the Lula field extends beyond the contract of the block, BM-S-11, Sao-Paulo-based Estado said today. Petrobras, as the Rio de Janeiro-based producer is known, estimates Lula’s oil reserves at 6.5 billion barrels.
Goldman Sachs(GS) Credit-Default Swaps Jump as Levin Claims Bank Duped Clients. The cost to protect debt issued by Goldman Sachs Group Inc. (GS) jumped to the highest level in almost a month after the chairman of the Senate panel that investigated the financial crisis said the bank misled clients and Congress about investments in securities tied to mortgages. Credit-default swaps on the U.S. bank that makes the most revenue from trading climbed 4.2 basis points to 115.5 basis points, according to data provider CMA. That’s the highest level since 118.1 basis points on March 17. Senator Carl Levin said he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought collateralized debt obligations without knowing the firm was betting they would fall in value. “In my judgment, Goldman clearly misled their clients and they misled the Congress,” Levin said at a media briefing yesterday where he and Senator Tom Coburn, an Oklahoma Republican, discussed a 640-page report from the Permanent Subcommittee on Investigations. Credit-default swaps on other major U.S. banks also rose, with contracts on Morgan Stanley adding 3.6 basis points to 140.6 and those on JPMorgan Chase & Co. climbing 2.8 basis points to 74.5, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Contracts on Citigroup Inc. increased 1.5 basis points to 120.9, and those on Wells Fargo & Co. added 1.2 basis points to 79.4. Default swaps on Bank of America Corp. climbed 2.7 basis points to 132.5, the data show.
Morgan Stanley's(MS) Gorman Gets $14 Million Pay Packages for 2010. Morgan Stanley’s James Gorman received a $14 million compensation package for his first year as chief executive officer, less than the $15 million he was awarded for 2009. Gorman, 52, received a $1.55 million cash bonus and a deferred cash bonus of $2.33 million that can be clawed back, in addition to his salary, stock, option awards and other compensation, the company said today in a regulatory filing. About $1.94 million of Gorman’s $5.82 million in stock compensation depends on the New York-based firm meeting performance measures. The package trailed the $23.6 million that JPMorgan Chase & Co. (JPM) awarded CEO Jamie Dimon, 55, and the $19.1 million that Goldman Sachs Group Inc. granted CEO Lloyd Blankfein, 56. Morgan Stanley (MS), owner of the world’s largest brokerage, fell 8.1 percent last year, lagging the share performance of those two rivals.
Lacker Says Fed Must Remove Stimulus Before Inflation Picks Up. Federal Reserve Bank of Richmond President Jeffrey Lacker said policy makers were too slow to withdraw monetary stimulus last decade and should tighten credit this time before inflation picks up too much. “Four years of 3 percent inflation may not have been the worst of all possible outcomes, but I do not consider it a success,” Lacker said today in a speech in Baltimore, referring to the period from 2004 to 2007. “I hope we do better this time.” Lacker is among a minority of Fed policy makers who have indicated they may favor a move this year to start reversing record monetary stimulus. Fed officials must validate expectations of businesses that inflation will remain low “by conducting monetary policy in such a way that inflation does not accelerate,” Lacker said in remarks at the University of Baltimore. “I believe we need to heed the lesson of the last recovery that inflation is capable of rising even if the level of economic activity has not returned to its pre-recession trend.”
Goldman Sachs(GS) recommended an "underweight" allocation to commodities for the next three to six months in a report e-mailed today.
Infosys(INFY) Profit, Sales Miss Estimates on Shorter Contracts. Infosys Technologies Ltd. (INFO), India’s No. 2 software exporter, plunged the most in almost two years in Mumbai after forecasting sales that lagged behind analysts’ estimates and fourth-quarter profit that missed expectations. The shares had their biggest intraday drop since May 19, 2009, after the Bangalore, India-based company said sales in the year that began this month would be in the range of $7.13 billion to $7.25 billion. The average of 43 analysts’ estimates was for 341.4 billion rupees ($7.7 billion). Infosys declined 7.5 percent to 3,060 rupees at 10:18 a.m. in Mumbai. The benchmark Sensex Index fell 0.6 percent.
Wall Street Journal:
Portugal Bailout Could Be "Bottomless Pit", Risks Spreading To Spain - Ifo Head. The bailout of Portugal could become a "bottomless pit" for euro-zone states, and the crisis risks spreading to Spain because of local banks' involvement in Portugal, the head of Germany's Ifo research institute said in an interview this week. Germany's government is likely to lose much of the "several hundreds of billions of euros" it has provided to struggling peripheral euro-zone states through European Union and International Monetary Fund rescue packages, as well as European Central Bank policies, Hans-Werner Sinn, President of Ifo, said. "I'm afraid Germany will not get much of that money back, and will in the end be forced to add it to its national debt," he said. Asked about the risks of a bailout for Portugal, Sinn warned that the situation there "is very similar to that in Greece" because of the country's wide current account deficit and negative savings rate. "It could be a bottomless pit," he said. "Markets believe a Portuguese default is becoming more probable." Portugal began talks Tuesday with delegations from the International Monetary Fund and the European Union to lay the groundwork for talks on an estimated three-year, EUR80 billion bailout package. Sinn said he expects a "formal default" in Greece, which last year received a EUR110 billion loan from the European Union and International Monetary Fund, "in the near future."Portugal "is facing the same risk if the austerity measures are postponed", he said. "The longer foreign credit flows to Portugal, the more foreign debt the country will accumulate and the further Europe moves away from a solution to its problems." Despite cutting its deficit by about a third, many analysts say Greece's fiscal reforms are not enough to tackle a public debt burden that is expected to peak around 160% of gross domestic product, and there has been increasing speculation that the country will need to proceed with some sort of debt restructuring. Sinn said he supports temporary help for Portugal but warned it must be "disciplined" with "generous help for two years and piecemeal haircuts for the maturing debt, coupled with more limited help from the third year onward." "It is time for Portugal to stop living beyond its means," he said. The debt crisis could yet spread to Spain because "Spanish banks seem to be heavily involved in Portugal," Sinn said. "There is a risk of contagion," he said. "The Spanish current account deficit is much too big to be sustainable. Spain, too, has to undergo an austerity period." Besides the rescue packages, Germany is exposed to large liabilities that have built up between the Bundesbank and central banks in peripheral euro-zone states, according to Sinn. A spokeswoman for the Bundesbank said its increasing liabilities within the Target2 system did not constitute higher risk, because all central banks would be liable if one defaulted. But she conceded that risks to the Eurosystem as a whole have increased during the crisis due to decisions to extend its refinancing operations.
China's Inflation Accelerates, Adding Pressure. China's economic growth slowed slightly in the first quarter, but inflation accelerated to a nearly three-year high in March, raising the likelihood that Beijing will have to take further measures to tighten policy. The consumer-price index, meanwhile, rose by 5.4% from a year earlier in March, up from 4.9% in February and the fastest pace since July 2008. Economists had expected a 5.3% rise. China's leaders have said repeatedly that taming consumer prices is their top economic priority this year. China's State Council, or Cabinet, said Wednesday it will take all means necessary to maintain price stability. The government aims to keep this year's overall CPI increase under 4%. China's producer-price index, a measure of wholesale factory prices that can be a leading indicator of inflation pressures, rose 7.3% from a year earlier in March, the data showed, higher than February's 7.2% rise but below economists' median forecast of a 7.4% increase. The Chinese economy expanded at a seasonally adjusted rate of 2.1% from the previous quarter, the statistics bureau said. This is the first time that China has released an official estimate of its quarter-on-quarter growth, which is the preferred measure of growth in most major economies.
Political Overlords Shackle China's Monetary Mandarins. China's premier, Wen Jiabao, warned last month that inflation is like a tiger—once unleashed, it is "very hard to cage again." Yet Beijing has been slow to pounce, even though food prices are rising at a nearly 12% annual clip and overall inflation hit 5.4% in March, according to numbers released Friday, more than twice the pace of a year ago. The steps it has taken thus far, including last week's 0.25% interest-rate increase, have been modest.
Groupon to Pick Goldman(GS), Morgan Stanley(MS) to Lead IPO. Groupon Inc. is expected to pick Goldman Sachs Group Inc. and Morgan Stanley as its two lead underwriters for a planned public offering later this year, people familiar with the matter said. The IPO is expected to value the Chicago company at between $15 billion and $20 billion, these people said. The valuation could change depending on market conditions at the time of the IPO. J.P. Morgan Chase & Co. is one of the banks that is expected to have a co-manager role for the Groupon IPO, the people said, adding that at least two other banks are vying to be part of the syndicate.
RIP: Joseph Battipaglia, Popular Wall Street Strategist. Wall Street veteran Joseph Battipaglia, chief market strategist at Stifel Nicolaus, died at 55 from an apparent heart attack on Thursday according to Fox Business News. Battipaglia, well known in the finance industry for his opinionated views, was the former chairman of investment policy at brokerage Ryan Beck & Co, before it was acquired by Stifel in 2007. He also worked in executive positions at Gruntal & Co. and as an analyst at Exxon Corporation and Elkins & Co.
Parties Trade Jabs Ahead of Talks on Deficit. Hardening positions and harsh political rhetoric are complicating moves by the White House and Republicans to start cutting the deficit, but the tensions didn't entirely derail the efforts Thursday.
Banks Near Deal With SEC. U.S. securities regulators are in talks with several major Wall Street banks to settle fraud allegations related to mortgage-bond deals that helped unleash the financial crisis, according to people familiar with the matter. The expected settlements, some of which could be reached as soon as next week, collectively mark the biggest attempt by enforcement agencies to hold Wall Street accountable for its role in the subprime mortgage bust.
U.S., Allies Raise Ante on Ouster of Gadhafi. The leaders of the U.S., France and the U.K. said the North Atlantic Treaty Organization must continue operations in Libya until Col. Moammar Gadhafi leaves power, raising the stakes in the showdown with the Libyan ruler.
The Obama Growth Discount. Had the U.S. economy recovered from the current recession the way it bounced back from the other 10 recessions since World War II, our per-capita gross domestic product (GDP) would be $3,553 higher than it is today, and 11.9 million more Americans would be employed. Those startling figures are based on the average recovery rate of real GDP and jobs three years after the beginning of each postwar recession. Some apologists suggest that the current recovery is so weak because the recession was so deep. But the totality of our experience in the postwar period is exactly the opposite—the bigger the bust, the bigger the boom that follows.
MarketWatch:
China's Angang Steel Expects Prices to Hit Profit. Chinese steel maker Angang Steel Co. (0347.HK) said Thursday it expects its first-quarter net profit to fall by 94% from a year earlier due to a significant increase in raw material and fuel prices.
Oil-Price Shock Is Hitting American Consumers. US crude is now up $20 in two months. The extra wealth oil producers are now draining from America is greater than the annual cost of most US government agencies. The falling dollar is ensuring that consumers in the US are hardest hit.
Google(GOOG) Shares Tumble After Earnings Miss Estimates. Googleshares slid in extended trading Thursday after the firm posted a profit that missed Wall Street expectations for the quarter, the first reporting period for the company since it named a new CEO. The Internet advertising giant reported first-quarter earnings of $8.08 a share. Google earned $6.76 a share during the same period a year earlier. Sales for the most recent quarter rose to $6.5 billion, up from $5.07 billion last year, excluding traffic-acquisition costs. The company was seen earning $8.10 a share on revenue of $6.32 billion, according to a consensus estimate from Thomson Reuters. Shares of Google tumbled more than 4 percent in extended trading Thursday.
Barry Bonds Faces Jail Time While Wall Street Execs Sit Pretty. What’s the difference between Barry Bonds and Goldman Sachs(GS) executives? The later was fortunate enough to be questioned by incompetent lawmakers while Bonds ended up in a courthouse with an actual jury and prosecutors.
Draconian Energy Regulation Will Never Die. Sure, global warming policy seems off of the political radar, but it is still in the air, homing fast and true on your pocketbook via the stealth technology of the courts and the EPA. It will never be shot down. Many would like to believe that cap-and-trade, carbon dioxide taxes, or simple command-and-control regulation went into a coma when the Senate failed to pass any companion legislation to the House’s American Clean Energy and Security (ACES) Act, which squeaked through 219-215 on June 26, 2009. And then, the myth goes, it died in the House blowout last November.
Intrepid Potash's(IPI) Estimated Q1 Sales Fall. Fertilizer maker Intrepid Potash Inc said its estimated first-quarter sales were down 18-22 percent, but average realized price for potash rose during the quarter.
Agco(AGCO) Could Top First-Quarter Earnings Forecast - CEO. Farm equipment maker Agco Corp may top its own first-quarter earnings outlook when it reports the results later this month, the company's chief executive said on Thursday. "I think everything is pretty much in line," Agco Chief Executive Martin Richenhagen told reporters in Chicago. "I would be astonished if we only made the guidance," he said.
Telegraph:
Fears Grow Over Greek Debt Default Despite Bail-Out. Fears that Greece will default on its debts soared on Thursday as the German finance minister admitted that a restructuring may be needed, despite last year's €110bn (£97bn) bail-out. Investors' flight from Greek government debt left 10-year bond yields at a new euro lifetime high of over 13pc and yields on two-year bonds at over 18pc, after Wolfgang Schaeuble said "additional steps" could be necessary if the European Central Bank concludes that the country's burden is unsustainable. Greece is implementing spending cuts but concerns have mounted in recent days because tax revenues have disappointed as the austerity programme squeezes the economy.
World Bank: Food Prices Have Entered The 'Danger Zone'. Food prices have entered the “danger zone”, threatening to condemn a generation to extreme poverty and malnutrition, the World Bank has warned. Robert Zoellick, World Bank president, said food prices are at “a tipping point”, having risen 36pc in the last year to levels close to their 2008 peak. The rising cost of food has been much more dramatic in low-income countries, pushing 44m people into poverty since June last year. Another 10pc rise in food prices would push 10m into extreme poverty, defined as an effective income of less than $1.25 a day. Already, the world’s poor number 1.2bn. Mr Zoellick said he saw no short term reversal in the damaging effect of food inflation, which is felt much more in the developing world as packaging and distribution accounts for a far larger proportion of the cost in the advanced economies.
Asahi:
Groundwater near the No.2 reactor of the Fukushima Dai-Ichi nuclear plant had 610 becquerels of radioactive iodine-131 per cubic centimeter, according to a sample taken on April 13, 17 times a week earlier, citing the company. Contaminated water in the reactor may have seeped into the soil, the report said.
China Daily:
Establishing a multi-currency international monetary system is needed to prevent another global financial crisis as seen in 2008, Zheng Xinli, an executive vice president of the China Center for International Economic Exchanges, wrote in a commentary. The "root cause" of the financial crisis was U.S. "long-term abuse" of sovereign credit, the misuse of its status as a major reserve currency issuing country and U.S. "promotion" of twin deficits, Zheng wrote.
China's price control measures are taking "initial" effect, citing the National Development and Reform Commission's Vice Chairman Peng Sen.
ShanghaiDaily.com:
Bank Gets Tough. CHINA Minsheng Banking Corp has halted mortgage services to second-home buyers while the procedure to approve loan applications on first homes can take a longer time, sources said yesterday. The bank is following the central government's call to tighten credit to drive out speculative home buyers. Analysts said the move also came after conditions for tighter supply of liquidity were imposed on small and medium banks.
ChannelNewsAsia.com:
CIA Will Not Halt Pakistan Operations. The Central Intelligence Agency (CIA) has no plans to suspend "operations" in Pakistan against terror suspects despite objections from leaders in Islamabad, a US official said Thursday. Pakistan has criticised missile strikes by US drone aircraft against Islamist militants in the country but CIA Director Leon Panetta has told intelligence officials that he has a duty to prevent attacks on the United States, the senior official, who spoke on condition of anonymity, told AFP. "Panetta has been clear with his Pakistani counterparts that his fundamental responsibility is to protect the American people, and he will not halt operations that support that objective," the official said.
China Business News:
China Mengniu Dairy Co. and Inner Mongolia Yili Industrial Group Co. raised ice cream prices by as much as 50% because of higher milk and sugar input costs.
Evening Recommendations Citigroup:
Reiterated Buy on (DE), target $109.
Night Trading
Asian equity indices are -.75% to unch. on average.
Asia Ex-Japan Investment Grade CDS Index 107.0 unch.
Asia Pacific Sovereign CDS Index 115.25 +1.25 basis points.
The Consumer Price Index for March is estimated to rise +.5% versus a +.5% gain in February.
The CPI Ex Food & Energy for March is estimated to rise +.2% versus a +.2% gain in February.
Empire Manufacturing for April is estimated to fall to 17.0 versus a reading of 17.50 in March.
9:00 am EST
Net Long-Term TIC Flows for February is estimated to fall to $40.0 Billion versus $51.5 Billion in January.
9:15 am EST
Industrial Production for March is estimated to rise +.6% versus a -.1% decline in February.
Capacity Utilization for March is estimated to rise to 77.4% versus 76.3% in February.
9:55 am EST
Preliminary Univ. of Mich. Consumer Confidence for April is estimated to rise to 69.0 versus a reading of 67.5 in March.
Upcoming Splits
None of note
Other Potential Market Movers
The could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 95.54 +.84%
European Financial Sector CDS Index 83.08 -.78%
Western Europe Sovereign Debt CDS Index 170.08 bps +2.61%
Emerging Market CDS Index 201.86 +2.03%
2-Year Swap Spread 17.0 +1 bp
TED Spread 21.0 -2 bps
Economic Gauges:
3-Month T-Bill Yield .07% +2 bps
Yield Curve 273.0 unch.
China Import Iron Ore Spot $183.30/Metric Tonne +.77%
Citi US Economic Surprise Index +25.80 -3.8 points
10-Year TIPS Spread 2.63% +1 bp
Overseas Futures:
Nikkei Futures: Indicating -13 open in Japan
DAX Futures: Indicating +43 open in Germany
Portfolio:
Higher: On gains in my Medical, Retail, Tech and Biotech sector longs
Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and then added them back
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades at session highs despite rising energy prices, emerging market inflation fears, financial sector weakness, disappointing economic data and rising eurozone debt angst. On the positive side, Tobacco, Food, Restaurant, REIT, Drug, Biotech, Medical, Disk Drive, Paper, Energy and Utility shares are especially strong, rising more than .75%. (IYR) has traded well throughout the day. The Transports are trading better today. Small-caps are also outperforming. The Spain sovereign cds is falling -1.0% to 219.82 bps. On the negative side, Airline, Homebuilding, Hospital, I-Banking, Bank, Ag and Defense shares are under pressure, falling more than .5%. (XLF) has been heavy throughout the day again. Cyclicals are also underperforming. Oil is rising +1.3%, gold is jumping +1.22% and lumber is falling -2.97%. The US price for a gallon of gas is unch. today at $3.81/gallon. It is up .69/gallon in 58 days. The 10-year TIPS spread is building slightly on recent gains. The US dollar continues to trade very poorly, given the situation in Europe and recent equity weakness, which is helping to boost oil/gold again. The Portugal sovereign cds is rising +3.68% to 592.66 bps, the Belgium sovereign cds is rising +3.57% to 131.17 bps and the Greece sovereign cds is surging +4.79% to 1,139.05 bps. The Greece sovereign cds is making another new record high. As well, the California Municipal cds is rising +3.2% to 235.35 bps. Oil is not trading like a major top is in place as of yet, which is a large broad equity market negative. For the third consecutive day, the major averages are once again displaying exceptional resilience in the face of a number of potential downside catalysts as the S&P 500 trades back to its 50-day moving average. If the bears are unable to break us convincingly lower on tomorrow morning's likely disappointing economic data, I suspect we could see another more meaningful late afternoon surge in equities. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting and technical buying.
Greek, Portuguese Yields Surge to Record as Schaeuble Raises Restructuring. Greek and Portuguese bonds led a slump in the securities of Europe’s most indebted nations amid mounting investor concern that some may be forced to restructure their debts. The declines pushed the yields on Greek and Portuguese 10- year bonds to euro-era records after German Finance Minister Wolfgang Schaeuble said that Greece may need to renegotiate its debt burden if an audit in June questions its ability to pay creditors. Standard & Poor’s head of European sovereign ratings, Moritz Kraemer, said the risk of such an event has risen. Greek two-year yields climbed the most since January 27. “Schaeuble’s comments bring the prospect of restructuring back onto the table,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “It gives the market plenty of time to fret. If we have to wait until June, there’s the prospect of event risk in the future, which leaves the market open to speculation and spread- widening.” The yield on 10-year Greek debt jumped 36 basis points to 13.27 percent as of 4:38 p.m. in London, the highest since at least 1998 when Bloomberg began collecting the data. The two- year note yield surged as much as 103 basis points to 17.96 percent. Portuguese 10-year yields added 14 basis points to 8.88 percent, after reaching 8.89 percent, the most since at least 1997. Two-year note yields were 26 basis points higher at 9.31 percent. Yields on 10-year Spanish debt rose nine basis points to 5.32 percent, while the yield on Irish securities of a similar maturity jumped 25 basis points to 9.34 percent.
Geithner Says U.S. Has More Room to Increase Taxes Without Harming Economy. “We have the capacity, with very modest changes in tax reform” to improve the country’s fiscal position without hurting future growth, Geithner said. The changes the Obama administration is seeking pose “no plausible risk” to how the economy grows, he said at an event in Washington.
U.S. Jobless Claims Unexpectedly Jump. More Americans unexpectedly filed first-time claims for unemployment insurance last week, reflecting greater-than-normal volatility at the end of the quarter. Applications for jobless benefits rose 27,000 in the week ended April 9 to 412,000, the most in two months, Labor Department figures showed today in Washington. Economists projected claims would be little changed at 380,000, according to the median estimate in a Bloomberg News survey. The four-week moving average, a less volatile measure, rose to 395,750 from 390,250. The unemployment rate among people eligible for benefits, which tends to track the national jobless rate, fell to 2.9 percent in the week ended April 2 from 3 percent the prior week.
Ackermann Is 'Dangerous,' Ex-IMF Economist Johnson Tells TAZ. Deutsche Bank AG (DBK) Chief Executive Officer Josef Ackermann is “one of the most dangerous bank managers in the world” because he’s sticking to the company’s high profitability target, Simon Johnson, a former chief economist at the International Monetary Fund, was cited as saying by German newspaper Die Tageszeitung. The target of pretax return on equity of 25 percent is only possible because Ackermann knows Deutsche Bank poses systemic risk and would be rescued by taxpayers, Johnson said in the interview, according to an article on the newspaper’s website dated April 13.
Obama's Money Pump for 2012 Re-Election Campaign Primed by Chicago Friends. Les Coney, an executive vice president at Chicago-based Mesirow Financial, will take a seat at two of three hometown events Barack Obama is scheduled to headline today as the president kicks off fundraising for a re- election bid that might cost as much as $1 billion.
CFTC's Proposal to Change Futures Margin System May 'Kill' Brokerage Model. The Commodity Futures Trading Commission may require margin changes in futures markets that could wipe out billions of dollars of interest income at brokers. The CFTC has proposed divvying up margin payments of individual swaps users at clearinghouses rather than allowing accounts to be treated as one pool by banks representing multiple customers. Futures markets now allow banks to pool all their customer accounts together when settling a day’s margins. The swaps plan may be used for futures margin, too, said CFTC Commissioner Scott O’Malia. “It’s being considered,” he said in an interview yesterday.
California Begs Texas for Job-Creating Recipe With Growth Trading Places. When California Lieutenant Governor Gavin Newsom begins meetings in Austin with Hardee’s hamburgers chief Andrew Puzder, local Chamber of Commerce Chairman Bobby Jenkins and Texas Governor Rick Perry, it’s because the most- populous state lingers in a funk, even as the U.S. pulls out of the deepest recession in half a century. The world’s eighth-largest economy has lagged in job growth since California-based lenders such as Countrywide Financial Corp. led America into the housing bust. Unemployment in the state is 12.2 percent, more than a third higher than the national average. While signature industries such as technology, trade and tourism have rebounded, construction and government employment are weak or falling. Newsom is one of two California Democrats in the talks starting today on how the Lone Star State created 165,000 jobs over the past three years, while California, with the country’s largest workforce, lost 1.15 million, according to the trip’s organizer, Assemblyman Dan Logue, a Republican from Linda.
Plosser Says Fed Should Adopt Inflation Target as Stimulus Exit Approaches. Federal Reserve Bank of Philadelphia President Charles Plosser said the U.S. central bank should set a numerical inflation target to promote price stability as it prepares to withdraw record monetary stimulus. “The apparent strengthening of the U.S. economy suggests that, in the not-too-distant future, monetary policy will have to begin reversing course from a very accommodative policy stance,” Plosser, 62, said today in the text of remarks at the annual Hyman P. Minsky conference in New York, organized by the Levy Economics Institute of Bard College. “As we choreograph that exit, I believe that the Fed should do all it can to underscore its commitment to maintaining price stability,” said Plosser, who votes this year on the policy-setting Federal Open Market Committee. Plosser has said the central bank should consider removing record monetary stimulus in 2011 before inflation flares.
China Changes How It Reports GDP. The National Bureau of Statistics is bringing China’s gross domestic product data closer to international standards, but will likely ignite some controversy along the way. On Friday, the bureau is scheduled to issue economic data for the first quarter, and for the first time it will include a measure known as the quarter-on-quarter seasonally adjusted annualized rate of growth of gross domestic product.
CFOs: Revenue Surge Needed to Boost Hiring. Despite double-digit gains in corporate earnings over the past six quarters, it would take much stronger-than-expected revenue growth for businesses to be comfortable adding employees, according to a new survey.
Interesting News From The LA Ports. (graph) In March, outbound traffic at the LA ports spiked 11%. This comes two days after that disappointing February trade balance data.
TVA Settlement Resolves N.C. Bad-Air Claims. The Tennessee Valley Authority today agreed to a $3 billion to $5 billion cleanup of its coal-fired power plants in three states, resolving claims North Carolina made in a 2006 lawsuit. The Environmental Protection Agency announced the settlement of Clean Air Act violations at 11 power plants in Alabama, Kentucky and Tennessee. It requires TVA to install new or upgraded pollution controls that will reduce smog and acid rain-forming emissions by more than two-thirds. The independent federal utility will also spend $350 million on clean energy projects, including $11.2 million for N.C. energy-efficiency and electricity demand-reducing programs. TVA will also pay a $10 million fine. The settlement goes beyond the terms of a federal judge's 2009 order that settled North Carolina's lawsuit against TVA.
Reuters:
China Wealth Fund Denies Reports of Spanish Bank Investment. China Investment Corp, the country's sovereign wealth fund, on Thursday denied reports that it was studying a $9 billion investment in Spanish banks. "The reports are groundless and are not in line with the truth," a CIC official, speaking on the condition of anonymity, told Reuters.
Dollar Slides Across the Board as Rate View Weighs. The dollar fell on Thursday in choppy trading and further losses were seen as likely, hurt by reported central bank selling amid a backdrop of low U.S. interest rates that were not expected to rise any time soon.Recent U.S. economic numbers, including jobless claims and retail sales, have come in on the soft side, which kept intact expectations the Federal Reserve's $600 billion asset-buying program would stay in place until June. The ICE Futures' dollar index dropped to a fresh 16-month low at 74.617 .DXY. At midday, it was down 0.2 percent at 74.827. The euro, in contrast, remained supported by the prospect of higher interest rates in the euro zone despite the re-emergence of peripheral debt issues.
US, Allies See Libyan Rebels in Hopeless Disarray. Too little is known about Libya's rebels and they remain too fragmented for the United States to get seriously involved in organizing or training them, let alone arming them, U.S. and European officials say. U.S. and allied intelligence agencies believe NATO's no-fly zone and air strikes will be effective in stopping Muammar Gaddafi's forces from killing civilians and dislodging rebels from strongholds like Benghazi, the officials say. But the more the intelligence agencies learn about rebel forces, the more they appear to be hopelessly disorganized and incapable of coalescing in the foreseeable future. U.S. government experts believe the state of the opposition is so grave that it could take years to organize, arm and train them into a fighting force strong enough to drive Gaddafi from power and set up a working government.The realistic outlook, U.S. and European officials said, is for an indefinite stalemate between the rebels -- supported by NATO air power -- and Gaddafi's forces.
USA Today:
US Internet Ad Revenue Hit Record in 2010. U.S. Internet advertising revenue hit a record $26 billion in 2010, boosted by the popularity of online videos and social media. A PricewaterhouseCoopers report commissioned by the Interactive Advertising Bureau found that last year's ad revenue grew 15% from 2009. The previous record was in 2008, when full-year revenue hit $23.4 billion. The report, released Wednesday, said fourth-quarter advertising revenue also hit a record, at $7.4 billion. That's up 19% from the fourth quarter of 2009. The previous record was in the third quarter of 2010, at $6.5 billion. The most popular ad format was search, which represented 46%, or $12 billion, of the year's total revenue. Display-related ads accounted for 38%, or $9.9 billion, of 2010 ad revenue. That category includes banner ads, digital video ads and sponsorships. The third-largest Internet ad category is classifieds, which accounted for $2.6 billion, or 10% of 2010 revenue. PricewaterhouseCoopers partner David Silverman said more time spent online, fueled by the popularity of digital videos and social media, has helped fuel the ongoing advertising growth. The report estimated 2010 mobile advertising revenue to be between $550 million and $650 million in the U.S. This is the first time it estimated mobile ad revenue.
Handelsblatt:
Germany's Federal Network Agency said the government's decision to idle the country's seven oldest nuclear reactors for a three-month safety review could cause power supply bottlenecks in the fall and winter.
Valor Economico:
Brazil's central bank is creating a group to monitor food prices because there's demand-driven pressure on inflation.
Folha de S.Paulo:
The Brazilian government sees a possibility of the benchmark inflation exceeding the country's target as early as May. Brazil consumer prices may exceed the 6.5% upper-limit of the government's target next month, ahead of a previous estimate that the breach would occur between July and August.
Xinhua:
China supports "reasonable" changes to the UN Security Council to make it more "representative" of developing countries, especially in Africa, citing a statement from Hong Lei, a foreign ministry spokesman.
