Tuesday, May 01, 2012

Today's Headlines

Posted by Gary .....at 2:53 PM

Bloomberg:
  • Merkel Rejects Stimulus Package for Growth, Abendblatt Reports. German Chancellor Angela Merkel rejected the introduction of stimulus packages to create economic growth in Europe, Hamburger Abendblatt reported in a preview of an article that will run tomorrow, citing Merkel. It is “important that we break with the idea that growth always costs a lot of money and must be the result of expensive stimulus programs,” Merkel said in answer to questions posed by Abendblatt. She instead proposed programs that need “political courage and creativity rather than billions of euros,” the newspaper reported. Europe must implement structural reforms that eliminate growth obstacles and improve competition and should focus on education, research, a sensible salary development and the opening up of job markets to achieve sustainable growth, Abendblatt cited Merkel as saying. The way out of Europe’s crisis rests on two pillars -- solid finances and measures for growth and employment, the German chancellor said. Germany is willing to strengthen the European Investment Bank to help it provide more support, Merkel told Abendblatt.
  • ECB Loans Plant Sees of European Disintegration. European Central Bank measures to stem the region’s debt crisis threaten instead to undermine the euro. ECB loans worth more than $1.3 trillion have been recycled into government bonds, capping borrowing costs. As Italy’s reliance on its local institutions increases and Spanish banks accelerate purchases of domestic government securities, however, the economic ties that bind the fate of euro members to each other loosen, weakening the incentives for cross-border support to defend the currency union. “As the local bond markets have become owned only by domestic institutions, there is less and less incentive for the other countries to support and bail out one of those,” said Stephane Monier, who helps manage more than $150 billion as head of fixed income and currencies at Lombard Odier Investment Managers. “Basically you’re planting the seeds for the disintegration of the euro zone.”
  • Manufacturing in U.S. Grows at Fastest Pace in a Year: Economy. Manufacturing grew in April at the fastest pace in almost a year, propelled by a pickup in orders that signaled factories will remain a source of strength for the U.S. expansion. The Institute for Supply Management’s factory index climbed to 54.8 last month, exceeding the most optimistic forecast in a Bloomberg News survey and the best reading since June, the Tempe, Arizona-based group’s report showed today.
  • Fed Said to Criticize Banks on Risk Models in Stress Test. The Federal Reserve criticized how some of the 19 largest U.S. banks calculated potential losses and planned dividends in this year’s stress tests, people with knowledge of the process said. The critiques will be part of feedback letters sent to the lenders this week that cover everything from data collection to risk measurement, said three of the people, who declined to be identified because communications with the Fed are private. Flaws included marking down all housing prices at the same rate, rather than matching them to specific regions, and planning dividends that could drain needed capital.
  • Iraq's credit risk surged to the highest in almost two years as a dispute between the central government and authorities in the Northern Kurdish region threatens to undermine the Arab nation's oil exports. 5-year credit default swaps for the country sitting on the world's fifth-largest crude deposits reached 467 on April 23, the highest since August 2010, according to CMA. The contracts jumped 108 basis points from the lowest level in more than four months on March 19, surpassing a 17 basis-point gain in average Middle East credit risk, excluding Iraq, and a 41 basis point advance for nations in central and eastern Europe in that period.
  • Oil Rises to One-Month High. Crude oil for June delivery gained $1.16, or 1.1 percent, to $106.03 a barrel at 11:29 a.m. on the New York Mercantile Exchange. It touched $106.32, the highest intraday level since March 28. Prices climbed 1.8 percent in April and are up 7.3 percent this year. Brent oil for June settlement gained 29 cents, or 0.2 percent, to $119.76 a barrel on the London-based ICE Futures Europe exchange.
  • Indian Exports Shrank in March for First Time Since 2009. Indian exports fell in March for the first time in two and a half years as Europe’s debt crisis and slower Chinese growth hurt demand. Merchandise shipments dropped 5.7 percent from a year earlier to $28.7 billion, the government said in a statement in New Delhi today. Imports rose 24.3 percent to $42.6 billion, leaving a trade deficit of $13.9 billion. Exports last shrank year-on-year in September 2009. India’s trade deficit surged to a record $184.9 billion in the fiscal year ended March 31 as elevated crude oil prices stoked import bills and a struggling global recovery hurt exports. “The fragile global economy doesn’t augur well for Indian exports,” Rupa Rege Nitsure, an economist at state-owned Bank of Baroda (BOB) in Mumbai, said before the report. “The widening trade deficit and slowing economic growth pose significant risks to India’s macroeconomic stability.”
  • Man Group Has $1 Billion Outflow; Shares Fall on Lower Cash. Man Group Plc (EMG), the world’s biggest publicly traded hedge fund manager, reported that clients withdrew a net $1 billion in the first quarter, while costs such as employee bonuses ate up more cash than analysts expected. The shares slid as much as 8 percent as analysts cut their earnings forecasts for the company. Clients redeemed $4.1 billion from Man’s investment funds, which was partly offset by $3.1 billion of sales, the London-based company said today.
  • Gross Says Credit Expansion to Create Inflation, Slow Growth. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said structural distortions brought by central bank credit expansion will limit growth and accelerate the risk of inflation. Pimco favors bonds in the five-year maturity range, as well as dividend-paying stocks that yield 3 to 4 percent and recommended that real assets and commodities be part of an investor portfolio, Gross said in his monthly investment outlook posted on the Newport Beach, California-based company’s website today. “Not suddenly, but over time, gradually higher rates of inflation should be the result of QE policies and zero-bound yields that will likely continue for years to come,” Gross said, referring to the Federal Reserve’s balance sheet through debt purchases, or quantitative easing, known as QE.
  • Electronic-Records Goals Aren't Met by 80% of U.S. Hospitals. More than 80 percent of hospitals have yet to achieve the requirements for the first stage of a $14.6 billion U.S. program to encourage doctors to adopt electronic medical records, the industry’s largest trade group said. The program is too ambitious and goals may not be met, Rick Pollack, executive vice president of the American Hospital Association, said yesterday in a 68-page letter to the Health and Human Services Department. He cited “the high bar set and market factors, such as accelerating costs and limited vendor capacity.”
  • Dallas Fed Urges Removal of CEOs of Bailed-Out Banks. The Federal Reserve Bank of Dallas said taxpayer aid to failing banks should come only after the voiding of all employment and bonus contracts and the removal of chief executive officers and boards of directors. “A set of harsh, non-negotiable consequences” for requesting U.S. Treasury assistance might also include “clawbacks” to gain cash and stock bonuses paid the top management team during the prior two years, the Dallas Fed said today in a slide presentation on its website. The proposal reflects Dallas Fed President Richard Fisher’s view that large U.S. banks need to be split apart because they operate with an implied government safety net that puts their risks of failure on taxpayers. The “institutions that amplified and prolonged the recent financial crisis remain a hindrance to full economic recovery and to the very ideal of American capitalism,” Fisher said in an essay in the Dallas Fed’s 2011 annual report posted online.
  • Bolivia Seizing Unit of Spanish Power Company Red Electrica. Bolivia is seizing the local assets of Spain’s Red Electrica Corp. to give the government control of the Andean nation’s electricity grid. President Evo Morales signed the nationalization decree today, Communications Minister Amanda Davila said in a telephone interview from La Paz. The Alcobendas, Spain-based company’s investment in its Bolivian unit was inadequate and the energy industry should be controlled by the government, Davila said.
  • Lacker Says Fed May Have to Tighten Even With Unemployment at 7%. Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said the central bank may have to raise interest rates when the unemployment rate is at 7 percent or higher. Speaking in an interview today at the Bloomberg Washington Summit hosted by Bloomberg Link, he said the Fed will probably have to raise rates in mid-2013. Adding more monetary stimulus now would raise inflation risks without doing much to boost growth, he said. “It could well be above 7 percent, and I think we have to prepare for that,” Lacker said. “I think it’s a misconception to think we have to get unemployment all the way down to 5 or some number like that before we raise rates.” Lacker has cast the only dissenting vote at each of the FOMC’s policy meetings this year. He has opposed the Fed’s statement that economic conditions will probably warrant “exceptionally low” levels of the federal funds rate at least through late-2014. Lacker said it is “really tricky” for the Fed to find “that time when interest rates need to rise to prevent inflation pressures from emerging, before you see them emerge, before you see inflation move up steadily.”
  • Einhorn Says Fed Rate Stance 'No Longer Useful,' Risks Inflation. Hedge-fund manager David Einhorn said Federal Reserve policy intended to stimulate the economy and create jobs is “no longer useful” because it risks inflation. Investors including Pacific Investment Management Co.’s Bill Gross have said Fed policy makers may be adding the risk of future economic disruption. The central bank has kept interest rates near zero since late 2008.
Wall Street Journal:
  • There's Plenty of Money for Junk. Banks and investors are showering junk-rated companies with easy money, the latest sign that risk-taking is spreading through parts of the financial markets. Lenders are making more loans with few restrictions on borrowers—known as covenant-lite loans—to riskier companies than they did just a few months ago. Some $11.5 billion of these loans were issued in April, up from $3.6 billion in all of the first quarter, according to Thomson Reuters, making April the busiest for covenant-lite deals since last May.
  • PF Chang's(PFCB) Reaches Deal to Be Taken Private. P.F. Chang's China Bistro Inc. has reached a deal with private-equity firm Centerbridge Partners LP to be taken private for about $1.1 billion. The company's shares jumped 30% to $51.44 Tuesday morning on the news. Through Monday's close, shares were up 28% this year.
  • GE(GE) Says China Is 'Hard,' Aims at Resource Hubs. For General Electric Co., Australia is the new China. The continent of 22 million people is set to generate more revenue for the industrial conglomerate this year than will the Middle Kingdom, with 1.3 billion. The shift stems in part from Chief Executive Jeff Immelt's shuffling of the company's business lines to emphasize energy. But it also reflects a significant rethinking of China's value for GE, which, after years of missed targets and slow growth in the country, has turned its attention to resource-rich locations that have friendlier rules for investing and fewer national champions as rivals.
MarketWatch:
CNBC.com:
Business Insider:
 Zero Hedge:
 New York Times:
paidContent:
Absolute Return + Alpha:
Advanced Trading:

cnet:

CharlotteObserver:
  • Charlotte to Curb Protests at Duke Energy(DUK), Bank of America(BAC) Meetings. The city of Charlotte said Monday that upcoming Duke Energy and Bank of America shareholders meetings will represent the first test of expanded police powers that grant officers more leeway to stop and search people in or near protests. The meetings have been designated “extraordinary events,” which were approved by the Charlotte City Council in January in preparation for September’s Democratic National Convention. The city also said police will have extra power during the Speed Street festival in May and the 4th of July celebration uptown.

Reuters:

Financial Times:

  • Those Increasing iTraxx Tranches, Behind the Scenes. It also prompted us to take a closer look at the recent, and rather remarkable, growth in trading in standardised credit tranches since the beginning of 2012. Such trades are effectively highly leveraged bets/hedges on the creditworthiness of corporations. So what’s behind this particular resurgence, whereby the net notional volumes outstanding have doubled?

Telegraph:

  • Debt Crisis: Live. US protestors from the Occupy movement took to the streets on May Day, as thousands of workers across Europe protested against spending cuts in a wave of rallies.

MailOnline:

  • SEALs Slam Obama for Using Them as 'Ammunition' in Bid to Take Credit for Bin Laden Killing During Election Campaign. Serving and former US Navy SEALs have slammed President Barack Obama for taking the credit for killing Osama bin Laden and accused him of using Special Forces operators as ‘ammunition’ for his re-election campaign. The SEALs spoke out to MailOnline after the Obama campaign released an ad entitled ‘One Chance’. Besides the ad, the White House is marking the first anniversary of the SEAL Team Six raid that killed bin Laden inside his compound in Abbottabad, Pakistan with a series of briefings and an NBC interview in the Situation Room designed to highlight the ‘gutsy call’ made by the President.

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