Today's Headlines

Bloomberg:

• Greeks May Hold $510 Billion Trump Card in Renegotiation. Greece’s next government may hold a trump card worth more than $510 billion if it heeds voters’ demands to renegotiate its bailout with the European Union. The nation owes about 400 billion euros ($517 billion) to private bondholders, public bodies such as the International Monetary Fund and European Central Bank, and other creditors, according to data compiled by Bloomberg. About 252 billion euros of that’s due to official organizations that used their status to avoid the losses suffered by ordinary bondholders when Greece restructured its debt two months ago. “Greece has got some strong cards to persuade them to go easy on austerity,” said John Whittaker, an economist at Lancaster University Management School in England. “Everyone fears a Greek departure from the euro because they’ll lose money and lose political capital.”
• Italy Can't Recover, Euro Exit Isn't 'Taboo,' Grillo Says. Italians should consider exiting the euro amid rising public debt and no signs of economic recovery, said Beppe Grillo, a comedian-turned-politician opposed to Prime Minister Mario Monti's austerity measures. "Let's face the issue, it can't be a taboo," Grillo, 63, said in an interview yesterday after his Internet-based political movement emerged as the third-biggest party in local elections this week. "As debt rises, spending isn't under control, businesses close down, labor cost is up, salaries are down and we don't even have the power of bargaining our debt." His 5 Star Movement, founded in October 2009, is the latest grouping to profit from rising anger in Europe over tax increases, budget cuts and joblessness amid the sovereign debt crisis. The National Front, which seeks a euro exit, won record support in the first-round of French voting last month, while the second-place party in Greek polls this week wants to tear up the nation's European Union-led bailout agreement.
• Merkel’s Euro Policies Have No Alternative, Kohl Tells Bild. Europe is “a matter of war and peace” and Germany must work for its integration, former German Chancellor Helmut Kohl told Bild-Zeitung. “I’m looking with great sympathy at the course Angela Merkel is plotting for Europe and her commitment to necessary structural changes -- including necessary savings measures,” the German newspaper quoted Kohl as saying. “There isn’t any real alternative to that.”
• Rio Tinto Group(RIO), the third-biggest mining company, said any exit by Greece from the European Union currency bloc would significantly destabilize the region's economy and negatively affect global confidence. "Looking at Greece, it is not looking good at all and clearly if Greece would leave the euro it would destabilize the European economy to a significant extent," Jan du Plessis, chairman of London-based Rio Tinto, told reporters. "So it will have an impact on our business, and it's one of the things we keep an eye out on all the time."
  
• Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, reversing an earlier decline, according to BNP Paribas SA. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed 1.5 basis points to 285.5 at 11:40 a.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rose 4.5 basis points to 696.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased two basis points to 158 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers was three basis points higher at 268 and the subordinated index was up five at 433.
• Trade Gap in U.S. Widens More Than Forecast as Imports Jump. The trade deficit widened more than forecast in March as American demand for crude oil, computers, automobiles and televisions propelled imports to a record. The gap grew 14 percent to $51.8 billion, the Commerce Department reported in Washington today. The median estimate of economists surveyed by Bloomberg News called for an increase to $50 billion. A 5.2 percent jump in imports, the biggest in more than a year, swamped the 2.9 percent gain in exports, which also reached a record.
• Jobless Claims Fall Slightly: Economy. First-time claims dropped by 1,000 to 367,000 in the period ended May 5, the Labor Department said today in Washington. Other reports showed that a gauge of consumer confidence declined to a three-month low, and the trade deficit widened on rising demand for imports from oil to autos.
• Goldman(GS) Lifts 'Reasonably Possible' Legal-Loss Estimate. Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, raised estimates of potential losses from legal claims by 13 percent and said a probe into its handling of Greek finances includes trading and research. The forecast of “reasonably possible” legal costs rose to $2.7 billion as of March 31 from $2.4 billion three months earlier, according to a regulatory filing today. The New York- based firm didn’t give specific reasons for the increase. An investigation of the firm’s financing and swap transactions with the Greek government, which started about two years ago, also includes “trading and research activities with respect to Greek sovereign debt,” according to today’s filing. “Goldman Sachs has cooperated with the investigations and reviews,” the company said.
• Goldman Sachs(GS) May Owe $2.21 Billion If Rating Falls Two Levels. Goldman Sachs Group Inc. (GS), one of the five U.S. banks with the biggest positions in over-the-counter derivatives, may owe counterparties $2.21 billion if its credit rating falls two levels. Counterparties could demand the money in collateral and termination payments, the New York-based bank said in a quarterly filing today. A one-level reduction would require $1.33 billion in payments, according to the filing.
• Salesforce(CRM) Falls on Corporate IT Spending Cuts. Salesforce.com Inc. (CRM), the biggest provider of online customer-management software, fell the most in five months after computer-networking leader Cisco Systems Inc. (CSCO) said some corporate customers are reluctant to spend. Salesforce declined 8.7 percent to $136 at 12:52 p.m. in New York, and earlier touched $134.88 for the biggest decline since Dec. 21.

Wall Street Journal:

• Cautious Cisco(CSCO) Rattles Corporate IT Market. Analyst: ‘Canary in coal mine again?’ Other corp. IT stocks also fall. Cisco Systems Inc.’s warning of “cautious” spending in information technology sent its shares falling on Thursday, weighing down the stocks of other firms that sell IT products and services to businesses. Cisco shares retreated by more than 8% to $17.17, a day after the company reported in-line results, but issued an outlook that was below expectations.
• Google(GOOG) Joins Gripes About Microsoft(MSFT) Shutting Out Rival Web Browsers. Google Inc. is echoing concerns that Microsoft Corp. is hindering rival Web browsers on some computing devices being designed for the next version of the Windows operating system.
• Blasts Rock Damascus. Twin car bombs that exploded near a state intelligence compound in the Syrian capital on Thursday killed 55 people and injured nearly 400 more, offering a gruesome new setback to a United Nations-brokered plan meant to temper the violence in Syria.

MarketWatch:

• Fiscal Cliff Poses a Greek Moment for the US. The U.S. is not like Greece in most respects but we may be facing a Greek moment with the “fiscal cliff” looming at the end of the year.

CNBC.com:

• European Central Bank Leveraged Like Lehman: Author. The European Central Bank is indebted to the hilt and is beginning to look like one of the banks it has done so much to save, according to author Satyajit Das. Having subsidized the European banking industry with its 1 trillion euro ($1.29 trillion) long-term refinancing operation (LTRO), funds that were distributed at well below market prices, the central bank is leveraged to levels Bear Stearns and Lehman Brothers might have felt comfortable with in early 2007. “If the European Financial Stability Fund was a collateralized debt obligation, the ECB increasingly resembles a highly leveraged bank. The ECB balance sheet is now around euro 3 trillion, an increase of about 30 percent just since Mario Draghi took office in November 2012,” said Das in notes sent to CNBC before an interview on “Squawk Box Europe” on Thursday. “It is supported by it own capital (scheduled to increase to 10 billion euros) and the capital of euro zone central banks (80 billion euros). This equates to a leverage of around 38 times,” he said.
• Fed Worries US 'Fiscal Cliff' Is as Big a Threat as Europe. Federal Reserve officials are increasingly concerned about the coming “fiscal cliff,” putting it on par with the European financial crisis and the housing market as among the biggest potential threats for the U.S. economy.
• UK Bookie Suspends Bets on Greek Euro Exit.
• Slump Worsens in Ailing Greek Property Market.
  

Business Insider:

• Chart of the Day: How Stocks Have Tumbled Around the World.
• These Two Pictures Show Just How Political Obama's Endorsement of Gay Marriage Was.
• These Two Paragraphs Explain Why You Should Be Watching This China-Philippines Territorial Dispute.
  

Zero Hedge:

• As New Greek Bonds Tumble To All Time Lows, Is Greece About To Re-Default In 5 Days?
• On Greece's Systemic Risk Impact.
• Italian Economic Deterioration Accelerates: Q2 GDP Forecast To Drop More Than 1%. (graph)
• Consumer Comfort Index Plummets Most Since Feb 2008 As Personal Finance Component Crashes. (graph)
• Anti-Bailout Coalition Soars in Popularity Ahead of Second Greek Election.
  

New York Times:

• Data Indicate Economic Trouble in China.

Washington Post:

• Greek Left Party Head Tells EU Leaders Austerity Lacks Legitimacy, Must Be Re-Examined. The head of Greece’s second-placed Radical Left Coalition has written to top European officials urging them to re-examine the country’s strict austerity program. In a letter Thursday, Alexis Tsipras said the strong anti-austerity vote in Sunday’s election, which produced a hung parliament, stripped Greece’s bailout commitments of “political legitimacy.”

ForexLive:

• Spanish CDS Point to a Growing Crisis. (graph) The bond market may be understating the risk of a Spanish restructuring/bailout. Yields have been trending higher since March but remain well-below the November highs. Meanwhile, credit-default swaps are trading at record highs. 5-year CDS vs 5-year yields:

Reuters:

• Merkel Resists Calls to Put Growth Before Reforms. Chancellor Angela Merkel rejected calls from her centre-left opponents in Germany and Europe for economic stimulus policies that rely on new debt, warning parliament on Thursday that "growth on credit" would just tip Europe deeper into crisis. Since the election of Socialist Francois Hollande as French president on Sunday, Merkel has come under pressure to relax the austerity measures that, as leader of Europe's biggest economy, she has prescribed as the remedy for the euro zone debt crisis. But Germany's centre-right leader, standing her ground, told the Bundestag (lower house of parliament) that reducing debt and encouraging growth were "twin pillars" of European policy, rather than alternative paths. "Growth through structural reforms is sensible, important and necessary. Growth on credit would just push us right back to the beginning of the crisis, and that is why we should not and will not do it," said Merkel, who is expected to get a visit from Hollande next week on his first foreign trip as president.
• Fortress Commodities Fund to Close After Losses. The Fortress Commodities Fund will close later this month and distribute funds to investors after poor performance and heavy withdrawals. U.S.-based Fortress Investment Group LLC said the hedge fund will cease operations around May 23 and "will commence procedures to distribute capital to its investors," according to a regulatory filing. The fund, run in London by William Callanan, fell 12.6 percent during the first four months of the year and 4.23 percent in April alone, the filing said.
• Apple(AAPL), Supplier Foxconn to Share Costs on Improving Factories. Apple Inc and its key supplier Foxconn Technology Group will share the initial costs of improving labour conditions at the Chinese factories that assemble iPhones and iPads, Foxconn's top executive said on Thursday. Foxconn chief Terry Gou did not give a figure for the costs, but the group has been spending heavily to fight a perception its vast plants in China are sweatshops with poor conditions for its million-strong labor force.
• NY Fed Sells Assets From AIG(AIG) Bailout to Merrill Lynch. The New York Federal Reserve said on Thursday it sold all its TRIAXX collateralized debt obligations from a portfolio of assets that was used in the government bailout of insurer AIG to Merrill Lynch, following a competitive bid process with eight other Wall Street firms.

Financial Times:

• US Bank Bears Await Summer of Downgrades. Shares in large US banks have fallen sharply since the sector peaked in late March, with the likes of Morgan Stanley, Bank of America and Citigroup entering “bear market” territory after their stock prices have dropped some 20 per cent.
• S&P Warns of $46 Trillion Refinancing Challenge. European companies could face serious challenges refinancing a wall of maturing debt over the next few years as the region’s banks deal with the impact of regulation and fallout from the eurozone debt crisis, according to a new report from Standard & Poor’s. The rating agency predicted that companies round the world would need new funding or to refinance existing debt totalling as much as $46tn over the next five years. And while global banks and debt capital markets should largely be able to provide the majority of funding for companies, S&P raised concerns about the ability of European lenders in particular to meet all corporate funding needs as they deal with the impact of sluggish economic growth and tough regulatory requirements.

Telegraph:

• Europe's Nuclear Brinksmanship With Greece Is A Lethal Game. Fresh from the Hellenic Statistical Authority: Youth unemployment up to the age of 24 reached a fresh record of 53.8pc in February. The rate for those aged 25-34 rose to 29.1pc. The total rate hit 21.7pc but will soon be much higher as 150,000 public sector workers are chopped – with pro-cyclical effects, in the middle of a depression – to comply with the EU-IMF Memorandum. Polls show that 70pc or even 80pc of Greeks still wish to stay in the euro, while at the same voting in large numbers for hard-Left and hard-Right parties committed to tearing up the Memorandum – a course of action that will take them straight out of the euro.
• The Chinese Save While Their Government Spends. The Chinese have always been a nation of savers, and now they have more reason than ever to hoard their hard-earned pay.

La Presse:

• Former Federal Reserve Chairman Alan Greenspan said his biggest concern is a possible breakup of the euro, according to an interview.
  

Bear Radar

Style Underperformer:

• Small-Cap Growth +.25%

Sector Underperformers:

• 1) Networking -2.50% 2) Software -1.42% 3) Homebuilding -1.21%

Stocks Falling on Unusual Volume:

• CSCO, CRM, UBNT, QLIK, NTAP, EMC, FFIV, BTE, ECA, AMAG, CPNO, WIN, PSSI, MYRG, QSII, BECN, PANL, CAVM, JOBS, ALTE, INTL, PCLN, MAKO, EZCH, ARUN, Z, KSS, AMED, RYL, RNF, MD, CTXS, FLT, FTK and SF
  

Stocks With Unusual Put Option Activity:

• 1) CSCO 2) XLU 3) CTL 4) STLD 5) PANL
  

Stocks With Most Negative News Mentions:

• 1) WYNN 2) SGI 3) QSII 4) BRK/A 5) JCP
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Large-Cap Value +.64%

Sector Outperformers:

• 1) Banks +1.21% 2) Utilities +.81% 3) Airlines +.75%

Stocks Rising on Unusual Volume:

• NRG, EWBC, CPA, TSLA, INSP, MNST, AMCX, ARMH, NWSA, SYNC, EWBC, QUAD, BWC, TPX and TSO
  

Stocks With Unusual Call Option Activity:

• 1) PCS 2) PANL 3) LIZ 4) CSCO 5) AVP
  

Stocks With Most Positive News Mentions:

• 1) SGMS 2) SAPE 3) PRU 4) ABC 5) NWL
  

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Thursday Watch

Evening Headlines
Bloomberg:

• Spain Underplaying Bank Losses Faces Fate Ireland Couldn’t Avoid. Spain is underestimating potential losses by its banks, ignoring the cost of souring residential mortgages, as it seeks to avoid an international rescue like the one Ireland needed to shore up its financial system. The government has asked lenders to increase provisions for bad debt by 54 billion euros ($70 billion) to 166 billion euros. That’s enough to cover losses of about 50 percent on loans to property developers and construction firms, according to the Bank of Spain. There wouldn’t be anything left for defaults on more than 1.4 trillion euros of home loans and corporate debt. Taking those into account, banks would need to increase provisions by as much as five times what the government says, or 270 billion euros, according to estimates by the Centre for European Policy Studies, a Brussels-based research group. Plugging that hole would increase Spain’s public debt by almost 50 percent or force it to seek a bailout, following in the footsteps of Ireland, Greece and Portugal. “How can you only talk about one type of real estate lending when more and more loans are going bad everywhere in the economy?” said Patrick Lee, a London-based analyst covering Spanish banks for Royal Bank of Canada. “Ireland managed to turn its situation around after recognizing losses much more aggressively and thus needed a bailout. I don’t see how Spain can do it without outside support.”
• Spanish Banks Erode Creditors With ECB Loans: Mortgages. Spain’s lenders are pledging some of their best assets to raise record levels of secured funding, including from the European Central Bank, eroding creditor safeguards at the same time the government is planning the country’s largest bank bailout. Borrowing from the ECB rose 50 percent in March from the prior month to 227.6 billion euros ($294.3 billion). Bankia Group is among lenders that increased mortgage-backed debt issuance by 35 percent since December 2007 to 535.1 billion euros, or 53 percent of their real-estate loans, according to Spanish Mortgage Association data at the end of 2011. Rodrigo Rato, its chairman, stepped down this week as part of a plan in which the government is willing to inject public funds. Spanish Lenders are increasingly depending on the central bank and secured debt sales to lower funding costs after their return on equity in 2011 was the lowest in more than four decades following the country’s real-estate crash. The ECB provides loans at rates of 1 percent against collateral such as covered bonds and mortgage-backed securities, which would be used to repay the debt in an event of a default, leaving fewer assets available to unsecured creditors, including depositors. “Banks strongly relying on ECB funding and secured bonds are actually subordinating other creditors in the event of a bank insolvency, so recovery levels would be lower” said Helene Heberlein, managing director for covered bonds at Fitch Ratings. “The asset encumbrance is especially worrying from the point of view of banking authorities,” when the “issuers are also deposit-taking institutions.”
• Spain Takes Over Bankia, Readies Second Bailout. Spain said it would take over Bankia (BKIA) SA and prepared to inject public funds into the banking group with the most Spanish real estate as part of government efforts to bolster confidence in the country’s lenders. Spain’s bank bailout fund will convert its 4.5 billion euros ($5.8 billion) of preferred shares in Bankia’s parent company Banco Financiero y de Ahorros, or BFA, into voting shares, the Economy Ministry said in a statement yesterday. The action will give it a controlling stake of 45 percent in Bankia, the ministry said, adding the government will provide the capital that’s “strictly necessary” to clean up the lender.
• China's Latest Reforms Not a Sign of Economic Strength. This year, China has announced a flurry of financial liberalization measures that were perceived by many in the U.S. and Europe as a sign of confidence among Chinese leaders about their economy’s growth prospects. They are defensive steps intended to protect the economy from a coming slowdown and possibly to boost domestic asset prices.
• Iran May Be Erasing Nuclear Work Evidence, Analysts Say. Iran may be erasing evidence of nuclear weapons work at its Parchin military complex southeast of Tehran, according to an analysis of satellite imagery by a Washington-based research institute. Commercial satellite imagery of the Parchin site taken on April 9, compared with a previous image obtained on March 4, shows unidentified items lined up outside a rectangular building and what appears to be water flowing out of the same structure, Paul Brannan, an analyst at the Institute for Science and International Security, said today in a phone interview.
• ICBC Gets Fed Nod as Chinese Banks Seek U.S. Growth. Industrial & Commercial Bank of China (601398) Ltd., the world’s most profitable lender, was approved to operate as a U.S. bank holding company with the purchase of a controlling stake in Bank of East Asia Ltd. (23)’s U.S. unit. The Federal Reserve also granted bank holding company status for ICBC’s government shareholder Central Huijin Investment Ltd. and that company’s parent, sovereign fund China Investment Corp., and applications by Bank of China Ltd. and Agricultural Bank of China Ltd. to open U.S. branches, according to statements posted yesterday on the regulator’s website.
• Euro Diminished in Poll Showing More Than 50% Predicting an Exit. The 17-nation euro area is on the verge of losing one of its members, with more than 50 percent of investors predicting an exit this year as Greece’s election impasse threatens to push the debt crisis to new depths, according to the Bloomberg Global Poll. As Greece faces political paralysis and voters balk at austerity, 57 percent of the 1,253 investors, analysts and traders who are Bloomberg subscribers said at least one country will abandon the euro by year-end and 80 percent expected more pain for Europe’s bond markets. With a majority identifying a deterioration in Europe as a large threat to the world economy, respondents to the May 8 survey were increasingly worried Spain will default and less willing to buy French debt as Francois Hollande takes power.
• Pimco's Gross Cuts Emerging Debt as IMF Sees Slowdown. Bill Gross, who runs the world’s biggest bond fund, cut his holdings of emerging-market debt to a two-year low, selling assets from an area where the International Monetary Fund says growth will slow. Gross reduced the securities to 7 percent of assets in Pacific Investment Management Co.’s Total Return Fund (PTTRX) in April from 10 percent in March, according to Newport Beach, California-based Pimco’s website.
  

Wall Street Journal:

• IMF Drafting New Safeguards For Its Cash, May Limit Euro Lending - Sources. The International Monetary Fund is drafting plans to protect it from potential lending losses, including proposals that could limit the size of loans to euro-zone countries, according to people familiar with the situation. The proposals are being developed as political turnover in troubled countries has renewed concern about a fresh flare-up in Europe's debt crisis. More than a dozen of the world's largest economies joined Europe last month in pledging to boost the IMF's resource base by around $430 billion.
• Spain to Get Room on Deficit Rules. Euro-zone governments are expected to give Spain more leeway to meet its budget-deficit target next year, according to officials involved in the discussions, in a sign they intend to shift away from rigid enforcement of the currency bloc's budget rules. Austerity will still be the guiding principle of European fiscal policies. But the likely Spanish move suggests the rules will be adjusted in some cases to account for the fact that when economies go into recession, their budget deficits usually grow. Officials said the flexibility is unlikely to stop with Spain's politically sensitive deficit target.
• FDIC to Lay Out New Plan for Big Bank Failures. When the next crisis brings a major financial firm to its knees, U.S. regulators will seize the parent company but allow its units around the globe to keep operating while the mess is cleaned up, according to a planned announcement Thursday from the Federal Deposit Insurance Corp. The equity stakeholders of the large bank or other financial firm will be wiped out, and bondholders will face losses as their holdings are swapped for equity in a new entity, as a part of the FDIC's plan. Nearly four years after the massive government bailouts of the financial crisis, regulators are looking to chip away at the tacit understanding that the government will step in to save top financial institutions seen as vital to the economy or banking system.
• How a Radical Greek Rescue Plan Fell Short. Two years after Europe bailed Greece out to protect the euro, the rescue has become a debacle that threatens to unravel the common currency. After Greece's May 6 elections left pro-bailout parties too weakened to govern the country, more elections are likely in June, with no guarantee a stable government will emerge. By next month, Athens must identify €11.5 billion, or $15 billion, in fresh spending cuts or face suspension of the international loans it needs to pay pensions and run schools. If it doesn't get the money, it would eventually have to print its own.
• NYSE Euronext(NYX) Scrutinizing Portfolio In Bid To Cut Costs - COO. NYSE Euronext (NYX) is reviewing a list of about 25 investments and ventures, weighing the sale or closure of several efforts as the transatlantic exchange operator works to cut $250 million in annual costs by 2014.
• MasterCard(MA) Exec: High-End Spending Slowdown A Concern. Growth of consumer spending on luxury items dipped in March and April, a potential "cause for concern" about future economic growth, a MasterCard Inc. (MA) executive said Wednesday. The dip is likely due to rising gasoline prices in the first quarter, a slowdown in travel to the U.S. by European consumers and other factors, Tim Murphy, chief product officer for MasterCard, said during a presentation. "The luxury sector in the last two months has really experienced some down-drafts relative to the overall economy," Murphy said. The luxury category includes things like high-end apparel and travel, though it excludes jewelry. Specifically, spending in the category increased 1.8% and 5.5% year-over-year in April and March, respectively, down from 11.7% in February.
• French Start-Ups Worry About Hollande's. New administrations are times of both optimism and uncertainty, and France's new breed of digital entrepreneurs are watching closely how President-elect François Hollande is going to help them; many are skeptical.
• Clooney Event Taps Big, Small Donors. A dinner at the home of actor George Clooney on Thursday night is expected to raise as much as $15 million for President Barack Obama's re-election, surpassing anything he has raised in a single campaign event since he became a candidate for the office in 2007, according to people familiar with the event. The Obama campaign heavily promoted the Clooney dinner, with Hollywood executive Jeffrey Katzenberg soliciting contributions at $40,000 a head.
• Robert Barro: Stimulus Spending Keeps Failing. The weak economic recovery in the U.S. and the even weaker performance in much of Europe have renewed calls for ending budget austerity and returning to larger fiscal deficits.

Barron's:

• (PANL) Drops 18%: Q1 Misses, Samsung Rev Deferred.

MarketWatch:

• China Trade Data Show Surprising Weakness. Chinese trade data showed a sharp drop in activity in April, with both export and import growth falling well short of expectations, raising fresh concerns about the resilience of the Chinese economy amid softening global demand. Exports rose 4.9% in April from a year earlier, while imports rose just 0.3%, official data showed. The results were far below economists’ expectations. A Reuters survey had tipped 11% growth for imports, while a Dow Jones Newswires survey had predicted a 10% rise. For exports, both news services’ surveys had projected an 8.5% gain. China’s trade surplus for April widened to $18.4 billion, up from $5.4 billion in March, but well short of expectations of $10.4 billion in the two surveys.

Business Insider:

• A Wave Of Star Traders Are Dumping Banks For Hedge Funds Over New Cash Bonus Rules.
• The Economic Surprise Index Continues to Fall. (graph)

Zero Hedge:

• 11th Consecutive Outflow From US Equity Mutual Funds Pulls Cash Levels To Record Lows. (graph)
• Europe's Most Parabolic Chart Goes Parabolic-er. (graph)
• "Europe Has Started The Endgame" And Biderman Says "The US Is Next".

CNBC:

• Philip Falcone Voices Concern Over China. Harbinger Capital hedge fund manager Phil Falcone says his view of Europe isn’t entirely dire. “They’re going to have problems,” Falcone said Wednesday at a SALT panel, “but I’m more concerned about how that ripple ... effects, especially China.” China’s recent political dislocations — the most severe since the Tiananmen Square uprising in 1989 — and the fact that the country is dealing with slowing growth and inflation might prove fair bigger issues, he said. You can’t “put Europe in a box,” Falcone said, adding that it’s not a binary scenario in which the continent’s economy either works or it doesn’t.
• Euro Will Have to Be Devalued to Save EU: Siegel. Faced with a stubborn sovereign debt crisis that just won't go away, the European Central Bank will be forced into currency devaluation, Wharton finance professor Jeremy Siegel said.
• Priceline(PCLN) Beats on Earnings; Outlook Falls Short. Online travel agency Priceline reported a big jump in earnings on an increase in travel bookings, but the company predicted a slower pace of bookings growth in the second quarter.
• Cisco(CSCO) Shares Skid as Outlook Disappoints. Cisco Systems shares skidded after the company's outlook fell short of expectations. The networking-gear maker said it expects fiscal fourth-quarter earnings of between 44 and 46 cents a share and revenue growth of 2.5 percent; analysts currently expect earnings of 49 cents a share on revenue growth of 7 percent, according to Thomson Reuters.
• Mobile Growth May Negatively Affect Facebook(FB) Revenue.
• Beyond Greece: EU Banks May Be Next Focus of Markets. So far, Europe’s latest sovereign ills have not spread, but traders are watching the euro zone banks since they would be the first to carry the germs of financial contagion. Following several days of rumors, Spain late Wednesday moved to take state control of its fourth-largest bank, Bankia. The Bank of Spain would hold a 45 percent stake in BFA, the parent of Bankia, which it says is still solvent. The move requires clearance from the EU. This comes as efforts to form a government in Greece among fractured political groups continue to flounder. The developments in Greece, since Sunday’s election, have set global markets on edge and amplified concerns that Greece could leave the euro zone. Greece, it is feared, would be a catalyst for other weak sovereigns to follow.

IBD:

• Dollar General(DG) Woos New Customers With Bargains.

Absolute Return:

• Eton Park Increases Liquidity, Pulls Back on Emerging Markets.

Futures Magazine:

• ISDA to Begin Biggest Revisions to Credit Swaps Since 2009. Credit-default swaps market leaders will meet this week in New York and London to discuss changes to the contracts in what may be the biggest revisions since 2009. The International Swaps and Derivatives Association’s credit steering committee will meet May 11 to discuss changes, said Steven Kennedy, an ISDA spokesman. Possible amendments to standard contracts, which are governed by ISDA, include how debt-for-equity exchanges would be treated after a bankruptcy, specifying that credit swaps only cover losses from defaults that occur after their purchase, and clarifying how the date of a so-called credit event is determined, according to people familiar with the situation.

Dealbreaker:

• Greek CDS Will Be Fixed Soon, In Case You Were Waiting On That. As Greece prepares to default on its new bonds, now seems as good a time as ever to fix the problems that occurred when it defaulted on its old bonds. Remember that?

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows Mitt Romney earning 49% of the vote and President Obama attracting 44% support. Four percent (4%) would vote for a third party candidate, while another three percent (3%) are undecided.

Reuters:

• Zoe Cruz's Voras Capital Hedge Fund Shutting Down - Source. Zoe Cruz, the former Morgan Stanley co-president, is closing her Voras Capital Management hedge fund and returning investor money, a source familiar with the fund said. Cruz is said to have been struggling to raise anything beyond the initial $200 million she obtained from investors, the source said.
• Special Report - Chesapeake's(CHK) Deepest Well: Wall Street.
• China restructures local operations of "Big Four" auditors. China released new rules for the world's top four auditing firms on Thursday that include a requirement for their local operations to be led by Chinese citizens within three years. The rules released by the Finance Ministry said that Chinese operations of the Big Four global audit firms must be "localised" to comply with laws that will set requirements on the ages, experience and training of executives. China said the four auditors - Deloitte Touche Tohmatsu, Pricewaterhousecoopers, Ernst & Young and KPMG - must comply with the new rules by the end of 2017.
• Florida Foreclosure Case Could Slam Banks. The Florida Supreme Court is set to hear oral arguments Thursday in a lawsuit that could undo hundreds of thousands of foreclosures and open up U.S. banks to severe financial liabilities in the state where they face the bulk of their foreclosure-fraud litigation. The court is deciding whether banks who used fraudulent documents to file foreclosure lawsuits can dismiss the cases and refile them later with different paperwork. The decision, which may take up to eight months to render, could affect hundreds of thousands of homeowners in Florida, and could also influence judges in the other 26 states that require lawsuits in foreclosures.
• News Corp(NWSA) profit beats forecasts on cable, movies. Rupert Murdoch's News Corp on Wednesday posted a stronger-than-expected quarterly profit, aided by its cable networks and movie studio business, and its shares rose 2.7 percent in post-market trade.

Telegraph:

• Europe's Delusional Search for Growth.
• Germany warns Greece it will halt aid unless it commits to bailout agreements. Germany has threatened to halt vital financial aid to Greece unless a new government commits to the terms of the country’s bail-out agreements.

Sueddeutsche Zeitung:

• A European financial transaction tax wouldn't harm growth and may even strengthen growth, citing a European Commission study.

The Standard:

• China Warships Steam to Stormy Seas. China has sent five warships to the disputed Scarborough Shoal off the west coast of the Philippines with the warning that Beijing is ready for "any escalation" of the conflict. That comes as the outgunned Philippines looks to the United States for naval support in South China Sea territory that may be rich in energy sources. The five warships are said to be among the most advanced vessels in the Chinese fleet. They include ships with state-of-the- art systems against attack from the sky, while one is an assault ship that carries 20 amphibious tanks and specialized fighting teams among 800 personnel. Japanese surveillance aircraft saw the flotilla west of Okinawa and sailing south on Sunday.

Shanghai Securities News:

• China's State Council plans to expand a property tax trial to other cities this year, citing Qin Hong, head of policy research at the country's Ministry of Housing and Urban-Rural Development. The government is determined to curb speculative housing demand, citing Qin. Home purchase restrictions will continue, citing Qin.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.0% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 179.50 +6.5 basis points.
  
• Asia Pacific Sovereign CDS Index 143.75 +4.75 basis points.
  
• FTSE-100 futures -.17%.
  
• S&P 500 futures +.13%.
  
• NASDAQ 100 futures -.21%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (KSS)/.60
• (CA)/.52
• (MCP)/.14
• (CECO)/.25
• (MDR)/.15
• (ESRX)/.77
• (NUAN)/.40
• (JWN)/.75
• (BID)/-.15
• (MHS)/.99
• (DYN)/-.62

Economic Releases
8:30 am EST

• The Import Price Index for April is estimated to fall -.2% versus a +1.3% gain in March.
• The Trade Deficit for March is estimated to widen to -$50.0B versus -$46.0B in February.
• Initial Jobless Claims are estimated to rise to 368K versus 365K the prior week.
• Continuing Claims are estimated to fall to 3275K versus 3276K prior.
  

2:00 pm EST

• The Monthly Budget Statement for April is estimated at $30.5B versus -$40.4B in March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Bernanke speaking, Fed's Kocherlakota speaking, weekly EIA natural gas inventory report, 30Y T-Bond auction, USDA crop report, weekly Bloomberg Consumer Comfort Index, BoE rate decision, China trade balance, China inflation data, France govt budget, Goldman Sachs Consumer Products Symposium, (NDAQ) investor day, (WY) analyst meeting, (TLM) investor day and the (HAE) analyst day 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Less Financial Sector Optimism, Rising Global Growth Fears, Technical Selling

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Almost Every Sector Declining
  
• Volume: Around Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 20.11 +5.88%
  
• ISE Sentiment Index 106.0 +89.29%
  
• Total Put/Call 1.0 -11.50%
  
• NYSE Arms .98 -44.22%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 103.22 +2.27%
  
• European Financial Sector CDS Index 258.72 +1.01%
  
• Western Europe Sovereign Debt CDS Index 287.24 +4.47%
  
• Emerging Market CDS Index 261.39 +3.22%
  
• 2-Year Swap Spread 33.0 +2.0 basis points
  
• TED Spread 38.0 unch.
  
• 3-Month EUR/USD Cross-Currency Basis Swap -48.25 -3.0 basis points
  

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
  
• Yield Curve 157.0 -1 basis point
  
• China Import Iron Ore Spot $141.30/Metric Tonne -.98%
  
• Citi US Economic Surprise Index -21.60 +.4 point
  
• 10-Year TIPS Spread 2.16 -2 basis points
  

Overseas Futures:

• Nikkei Futures: Indicating a -60 open in Japan
• DAX Futures: Indicating +1 open in Germany
  

Portfolio:

• Slightly Higher: On gains in my Tech sector longs and index hedges
  
• Disclosed Trades: Covered some of my IWM/QQQ hedges, then added them back
  
• Market Exposure: 50% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades well off session lows, but still lower for the day, despite rising Eurozone debt angst, less financial sector optimism, high energy prices, rising global growth fears, technical selling, more shorting and less US economic optimism. On the positive side, Coal, Computer and Homebuilding shares are especially strong, rising more than +.75%. Tech/Homebuilding shares have held up well throughout the day. Oil is falling -1.0%, the UBS-Bloomberg Ag Spot Index is down -1.0% and Gold is down -1.0%. On the negative side, Energy, Oil Service, Ag, Paper, Bank, Biotech, Drug, Hospital, HMO, Road & Rail and Airline shares are under pressure, falling more than -1.50%. Transportation and Financial shares have lagged throughout the day. Lumber is down -.54% and Copper is down -.4%. Major Asian indices fell around -1.25% overnight, led lower by a -1.7% decline in China. The Nikkei fell another -1.5% and is down -11.0% in about 6 weeks, closing slightly below its 200-day ma. Major European indices are falling around -.75%, led lower by a -2.8% decline in Spain. Spain is now just 109 points away from its March 9th, 2009 low and down -20.5% ytd. The Bloomberg European Bank/Financial Services Index is down -2.0% today and down -19.0% since March 19th. The Germany sovereign cds is gaining +4.3% to 89.17 bps, the France sovereign cds is jumping +3.5% to 209.50 bps, the Spain sovereign cds is rising +3.6% to 516.17 bps(testing all-time high), the Italy sovereign cds is rising +3.8% to 462.0 bps, the Portugal sovereign cds is jumping +4.6% to 1,106.29 bps, the China sovereign cds is gaining +3.0% to 118.64 bps, the Russia sovereign cds is rising +4.3% to 206.33 bps and the Brazil sovereign cds is gaining +3.7% to 131.79 bps. Moreover, the European Investment Grade CDS Index is jumping +3.9% to 156.41 bps and the Italian/German 10Y Yld Spread is gaining +4.3% to 407.91 bps. US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to early-Oct. levels. Lumber is -5.5% since its Dec. 29th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -22.0% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +556.0% ytd. The recent intensification of the downturn in Eurozone economies raises the odds of further sovereign/bank downgrades. Overall, recent credit gauge deterioration is a big worry with a number of key sovereign cds breaking out technically. The 10Y T-Note continues to trade too well, copper trades poorly and the euro currency is breaking down technically. Oil is testing its 200-day ma again. While crude will likely bounce off this level short-term, I expect it to move still lower over the coming months. In general, US stocks remain extraordinarily resilient as aggressive dip-buyers once again materialized into an opening swoon. I continue to believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, less US economic optimism, rising global growth fears, more shorting, technical selling and less financial sector optimism.

Today's Headlines

Bloomberg:

• Greek Euro-Exit Talk Goes Public as Officials Air Doubts. From the monetary fortress of the European Central Bank to the pro-European duchy of Luxembourg, policy makers are beginning to air their doubts that Greece can stay in the euro. Post-election tumult in Athens has put the once-taboo subject of an exit from the 17-country currency union on the agenda, lifting the veil on possible scenario planning afoot behind the scenes. “If Greece decides not to stay in the euro zone, we cannot force Greece,” German Finance Minister Wolfgang Schaeuble said at a conference sponsored by German broadcaster WDR in Brussels today. “They will decide whether to stay in the euro zone or not.” After 386 billion euros ($499 billion) in aid pledges for Greece, Ireland and Portugal, 214 billion euros in ECB bond purchases and another trillion euros in low-interest loans for banks, plus 17 high-level crisis summits, Greece’s political chaos thrust Europe into a perilous new phase. The world is witnessing an “important moment in European Union history, a moment of crisis,” EU President Herman Van Rompuy said in Brussels on the 62nd anniversary of the declaration by Robert Schuman, then France’s foreign minister, that launched postwar European integration.
• Spain's Top Seven Banks Need $88 Billion as Buffer, RBS Says. Spain’s biggest seven banks need 68 billion euros ($88 billion) of additional capital as a buffer against bad loans and to meet regulatory requirements, according to Royal Bank of Scotland Group Plc. (RBS) “Not only only do banks need to raise more provisions against 323 billion euros of real estate exposure, but insolvencies are rising steadily on other loans too,” Alberto Gallo, the bank’s head of European credit strategy, wrote in a note. Using public money to fund the lenders may “result in a vicious circle of austerity,” Gallo said, which could create higher unemployment and increase insolvency rates.
• China Stops Buying Europe Government Debt on Crisis Concern. China Investment Corp. has stopped buying European government debt because of an economic crisis on the continent, though it continues to look for new investments there, said CIC President Gao Xiqing. “What is happening in Europe right now is of course of concern,” Gao said today in an interview in Addis Ababa, Ethiopia, during the World Economic Forum on Africa. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.”
• Spanish Stocks Plunge to Eight-Year Low on Europe Crisis. Spanish stocks declined to the lowest level in more than eight years amid concern the Mediterranean nation may have to seek a financial rescue and Greece may leave the euro currency union. Bankia (BKIA) SA led a selloff in banking shares as the country’s 10-year bond yield climbed above 6 percent. Mapfre SA (MAP) retreated 6.3 percent after reporting a 13 percent drop in first-quarter net income. Sacyr Vallehermoso SA (SYV), a property developer, slumped to the lowest price since at least October 1989. The IBEX 35 Index (IBEX) dropped 2.8 percent to 6,812.7 in Madrid, its lowest since Oct. 2, 2003. The benchmark gauge has plunged 20 percent this year, the worst performance of 18 western European markets. The volume of shares changing hands on IBEX 35 companies was 44 percent higher than the average in the past 30 days, data compiled by Bloomberg showed. “Investors worry about what will happen next, to the euro and to Spain,” said John Plassard, director at Louis Capital Markets SA in Geneva. “This should lead to increased market volatility over the coming weeks. Spain, as the icing on the cake, adds to concern with some voices fearing another revision of its deficit targets this year.”
• Spanish Credit Risk Surges to Record on Bankia 'Zombie' Peril. The cost of insuring against a Spanish default surged to a record on concern a bailout of Bankia SA (BKIA), the nation’s third-biggest lender, won’t fend off a banking crisis triggered by bad real estate loans. “While there is no danger of an imminent collapse at Bankia, there is a risk that it becomes a zombie bank, which has to rely on the European Central Bank to fund it over the long term,” said Roger Francis, an analyst at Mizuho International Plc in London. There is growing speculation Spain may become the fourth European nation to seek a rescue as its lenders become overwhelmed by 184 billion euros ($239 billion) of what the nation’s central bank terms “problematic” assets linked to property. Of the 38 billion euros of real estate the Bankia group held at the end of 2011, about half was classed as either “doubtful” or at risk of becoming so, according to the lender’s annual report. Credit-default swaps insuring Spanish government debt rose 18.5 basis points to 517.25 basis points a 12:55 p.m. in London, according to data compiled by Bloomberg. Spanish 10-year government bonds extended a decline, pushing the yield on the securities above 6 percent for the first time since April 27. The yield climbed 17 basis points, or 0.17 percentage points, to 6.02 percent. Swaps on Valencia-based Bankia climbed nine basis points to 721 while contracts on Banco Santander SA (SAN), the largest Spanish lender, increased 15.5 basis points to 411 and Banco Bilbao Vizcaya Argentaria SA (BBVA), the second biggest, was up 19 basis points to 446.
• Money-Market Stress Indicators Increase on Greece. Money-market indicators signaled increased stress in the market for borrow and lend short-term funds as Greek politicians struggled to form a government, fueling concern the nation may leave Europe’s currency union. The Libor-OIS spread, a gauge of banks reluctance to lend, traded in the forward market widened to 35.4 basis points, the June so-called FRA/OIS spread shows, from 33.4 basis points yesterday. The difference between the two-year swap rate and the comparable-maturity Treasury note yield, known as the swap spread, widened to 33.44 basis points, the most since January.
  
• Brazil Bulls Capitulate as State Intervention Spurs Outflows. Brazil’s efforts to boost economic growth with the most aggressive interest rate cuts are driving away investors, reducing equity valuations to five-year lows and fueling the world’s biggest currency tumble. MSCI Inc.’s Brazil Index has dropped to the cheapest level since 2006 versus global shares as investors pulled $869 million from the nation’s mutual funds this year, the only country among the four largest emerging markets to post outflows, according to data compiled by Bloomberg and EPFR Global. Brazil’s debt handed foreign investors the worst losses since September last month. Three months after saying Brazil was in a “sweet spot,” JPMorgan Chase & Co. is advising clients to reduce stock holdings as President Dilma Rousseff, 64, orders state banks to slash lending rates, threatening profits. The real is the world’s most overvalued major currency even after posting the worst slump in the past month, Morgan Stanley says.
• Chilean Drops Most in Two Months as Trading Range Broken. Chile’s peso fell the most in two months as concern political turmoil in Greece may harm global growth prospects damped demand for commodities including copper, the South American country’s top export. The peso depreciated 1 percent to 490.55 per U.S. dollar at 11:02 a.m. in Santiago. The currency earlier plunged as much as 1.4 percent to 491.85, breaking through the 491 level for the first time since March 7. “It’s intraday still, but we’re breaking through and if we close above 491, the next is 495 or 500 pesos per dollar,” said Cristian Donoso, a trader at Banchile Inversiones in Santiago. “The trigger is the elections in Greece, and Spanish and Italian bonds are getting badly beaten up. That’s pushing down commodities, and emerging-market currencies are depreciating.” Copper for July delivery fell as much as 1.8 percent to a three-week low of $3.61 a pound on the Comex in New York. The metal accounts for more than half of Chile’s exports. BNP Paribas SA today recommended investors sell the Chilean peso versus the U.S. dollar, setting a target of 510 per dollar for the currency.
• Commodities Drop a 6th Day as Greek Crisis Fuels Concerns. Commodities fell, heading for the longest slump since August, as a global equity rout and an unraveling bailout of Greece increased the risk that a slowdown in the global economy will curb demand for raw materials. The Standard & Poor’s GSCI Spot Index (MXWD), which tracks 24 commodities, lost 0.4 percent to 646.23 at 1:07 p.m. in New York, leaving the gauge little changed this year. The index fell as low as 641.8 yesterday, the lowest since Dec. 29, as the euro extended a drop. Silver and gold plunged to four-month lows. The MSCI All-Country World Index of equities dropped to the lowest since January.
• Romney Says Obama Taking Unfair Credit for Oil-Production Gains. Mitt Romney, campaigning amid oil rigs dotting the landscape in Colorado, said President Barack Obama’s policies have hurt U.S. energy output and that regulation of hydraulic fracturing for natural gas should be left to states. “The president tries to take credit for the fact that oil production is up,” the former Massachusetts governor and presumptive Republican presidential nominee told supporters against the backdrop of an oil rig outside Fort Lupton. “I’d like to take credit for the fact that when I was governor, the Red Sox won the World Series,” he said, referring to the team’s 2004 title. “But neither one of those would be the case. It was not the president’s policies that led to oil production being up.”
• U.K. Retail Sales Drop Most in More Than a Year, BRC Says. U.K. retail sales fell the most in more than a year last month as poor weather and consumer caution on spending curbed demand at stores. Sales at stores open at least 12 months, measured by value, declined 3.3 percent from a year earlier, the London-based British Retail Consortium said today. That’s the biggest monthly drop since March 2011. Including stores open less than 12 months, sales decreased 1 percent.

Wall Street Journal:

• Hollande Meets Chief of European Council. French President-elect François Hollande on Wednesday discussed some of the most burning issues in the European Union with European Council President Herman Van Rompuy, including how to revive growth on the Continent and the crisis in Greece. At the Socialist's campaign headquarters in Paris, in his first meeting with a foreign official since his election on Sunday, Mr. Hollande discussed with Mr. Van Rompuy how to boost growth.
• Rehn: EU Has No Plans To Ease Budget Rules For The Netherlands. European Economic and Monetary Affairs Commissioner Olli Rehn Wednesday moved to quash speculation that the European Commission is considering relaxing its budget rules for the Netherlands.
• No French Minister at Ecofin, Eurogroup Meetings - Source.
• Banks Back Obama's Fed Nominees. President Barack Obama's two nominees to the Federal Reserve Board have received support from the financial-services industry, including Goldman Sachs Group Inc.(GS) and J.P. Morgan Chase & Co.(JPM)( Sen. David Vitter (R., La.) has effectively blocked Senate confirmation of the nominees, Harvard University economics professor Jeremy Stein and former private-equity executive Jerome Powell. Wall Street firms have been quietly pressing Mr. Vitter to drop his objections, an aide to the senator said.
• Intimidation by Proxy. The campaign to intimidate companies from exercising their free-speech rights is in high gear as shareholder proxy season arrives, and the most prominent early target is health-insurer WellPoint. The arc of this attack will be one of the election year's political leitmotifs, and it should be on the radar of every corporate boardroom. In the favored new tactic of the left, unions and activists are using politicized shareholder resolutions to send a message to corporations: Drop support for free-market and conservative causes, or you'll take a political beating.
  

CNBC.com:

• Dohmen: 'Soft Landing' in China? No Way!
• Fed Exit Should Start in 6 to 9 Months: Kocherlakota. Recent improvements in the U.S. economy should mean the Federal Reserve's next policy move will be to raise interest rates, possibly by the end of the year, Narayana Kocherlakota, president of the Minneapolis Fed, said on Wednesday. "I don't see a need for additional accommodation," Kocherlakota told a group of lawyers in Minneapolis. The increase in inflation and decline in unemployment over the past year point to the need for tightening, he said. "I would say in six to nine months we should begin to be thinking about initiating our exit strategy," he said.
• New Greek Poll Looms as Government Efforts Founder. Greece moved closer to a second snap election on Wednesday when the head of the biggest party launched a new attack on radical leftist Alexis Tsipras, saying his plans for a new government would push the country out of the euro zone.
• Health-Care Costs in Retirement Rise to $240,000. Americans are making a dangerous assumption: that their current retirement savings will be enough to cover health-care costs. Two new reports, released this week from Fidelity Investments and Nationwide Financial show Americans drastically underestimate how much they will spend out-of-pocket on health-care costs during retirement. According to Fidelity, couples retiring this year will need, on average, $240,000 to cover medical expenses throughout retirement, or an out-of-pocket cost of up to $10,750 per year. This is 4 percent more than those who retired a year ago.

Business Insider:

• Here's What You'll Find In The SALT Hedge Fund Conference Goodie Bag.
• Now We Know How Banks Plan To Make Up For All That Lost Overdraft Fee Revenue.
• Hugh Hendry: This Is The Biggest Psychological Problem Plaguing Hedge Funds Right Now.
• Chinese Architect Comments On 'Dark Apartments,' Vacancies and Malinvestment.
• The Disaster You Forgot: Portugal. (graph)
  

Zero Hedge:

• Europe's Stigmatized Banks On The Verge Of Crucifixion.
• Nigel Farage: "The EU Titanic Has Now Hit The Iceberg".
• Germany's Roadmap For A Greek Return To The Drachma.
• Spain's Bank "Bailout" A Complete Dud: Allows Banks To Opt-Out.
  

New York Times:

• In Spain, a Debt Crisis Rooted in Corporate Borrowing. In a country with one of the highest levels of company debt in the world, few businesses in Spain shoulder as big a burden as Grupo A.C.S., the global construction giant whose debt woes have become a mirror image of Spain’s own increasingly fraught financial struggle.

Seeking Alpha:

• The Fed and Credit Bubbles.

Reuters:

• Germany's Steinbrueck: Plan B Needed for Smaller Euro Zone. Europe should prepare a 'plan B' to cope with any possible departure of a country from the euro zone, Germany's former finance minister Peer Steinbrueck said on Wednesday. "If I had political responsibility, I would want to prepare for a plan B that would foresee that the European currency union, that the euro zone, no longer necessarily consists of 17 member states," Steinbrueck said in an interview on German television, when asked about Greece's future. "And that means to make provisions so that other countries are not pulled into the maelstrom through contagion." Steinbrueck's comments, coming at a time of growing uncertainty over Greece, carry weight. He is a leading member of Germany's centre-left Social Democrats (SPD) and is considered one of the leading candidates in the party to challenge Chancellor Angela Merkel in next year's federal election.
• US Money Funds Add Euro Zone Bank Debt in April - JPMorgan. U.S. prime money market funds raised their holdings of euro zone bank debt in April, resuming their return to this sector this year after scaling back their exposure in March, a report from J.P Morgan Securities released on Wednesday showed. Prime money market funds increased their euro zone debt holdings by $14 billion in April. This raised their total exposure to euro zone banks to $205 billion, up $52 billion since the beginning of the year, according to J.P. Morgan's latest monthly analysis of prime money funds' holdings.
• Spain, Portugal Committed to Budget Consolidation. Spain and Portugal urged Greece on Wednesday to stick to its bailout programme and stay in the euro and promised to spare no effort in reducing their own budget deficits to ward off the growing euro zone debt crisis. "I hope that Greece stays in the European Union and remains part of the euro project," Spanish Prime Minister Mariano Rajoy told journalists after a summit with his Portuguese counterpart, Pedro Passos Coelho. Passos Coelho said the Greek election result was "worrying" and urged the country's politicians to establish a government in order to follow the terms of Athens' second bailout.

Financial Times:

• Merkel's Austerity Put to Test in Poll. The austerity message of Angela Merkel, the German chancellor, and her insistence on balancing the budget and cutting government debt across the eurozone, is about to face its sternest test in a vital state election in Germany itself. On Sunday, a week after the French and the Greeks went to the polls, the 13m voters of North Rhine-Westphalia, Germany’s most populous state, will be called on to choose a new government. Ms Merkel’s Christian Democratic Union is fighting to win back power in the state by arguing for tougher budget discipline.

Telegraph:

• Debt Crisis: Live. Greece's future in the eurozone is in jeopardy, warns Germany's foreign minister Guido Westerwelle, as the EU and IMF will cut off future bailout payments if it refuses to continue implementing austerity measures.
• 'The Eurozone bail-out had three aims. It has failed on all of them' Two years after the eurozone bail-out was launched, experts give their verdict on its achievements.

Die Zeit:

• German Chancellor Angel Merkel's coalition may delay a parliamentary vote on the fiscal pact that had been planned for May 25, citing Rainer Bruederle, parliamentary head of Merkel's Free Democratic Party coalition partner. The coalition may decide to await the outcome of a May 23 special meeting of European Union leaders at which the pact will be discussed.
  

Handelsblatt:

• German economists including Kai Carstensen of the Ifo Institute and Michael Huether, who heads the IW economic institute, said Europe must prepare for a potential euro-exit by Greece. It is "absolutely appropriate" to develop a "plan B" that allows Greece to leave the common currency in as orderly a manner as possible, citing Carstensen. Huether said a country that no longer fulfills its obligations in the euro area cannot count on the solidarity of other members and may have to leave.
• ECB Executive Board member Joerg Asmussen said the bank can't keep coming to the rescue during the sovereign debt crisis, citing an interview. "We did what we could and had to do, but we can't keep conducting operations that actually overburden monetary policy," Asmussen said.
• Germany's Free Democratic Party, the junior coalition partner to Angela Merkel's Christian Democratic Union, says support payments to Greece should be stopped immediately, citing an interview with the party's parliamentary finance spokesman, Frank Schaeffler. A planned 5.2 billion-euro payment to Greece is "irresponsible", Schaeffler said.
  

La Vanguardia:

• Spain plans to demand banks make a further EU32b in real estate provisions. The Spanish government, Bank of Spain are working on a proposal to increase to 30% from 7% the provisioning rate on loans to developers that are still performing.
  

Shanghai Daily:

• Sales of Used Homes Decline. SHANGHAI'S existing property market failed to sustain March's strong sales last month amid a drop in supply and a continued caution among buyers, according to the latest market data. The market posted a 13.3 percent monthly drop in purchases of these properties, most of which were residential developments, to 14,300 units last month, Century 21 China Real Estate said in a report yesterday.
  

CRI English:

• Sina(SINA) Looks to Guide Microblog User Behavior. China's leading microblog site, sina.com, issued the country's first "community convention" Tuesday which clarified users' behavior norms and a mechanism of net management. The convention stressed that users should respect others' rights of not being disturbed and should not defame and insult others. Microblog users should cite the original sources of their reposts and should not release false information, the convention said. On the same day, the site also issued another regulation and a community committee system on the management of microblogs with all the three papers to be put into use on May 28. The regulation made a clear range over irregularities, including releasing harmful and false information and comments that will arouse disputes among the users. The site will welcome reports on illegal users from the netizens who have verified their identities as well as inspection of illegal information, the regulation said.