Overnight Markets- Leading News

 

China Latest Reforms Not a Sign of Economic Strength

http://www.bloomberg.com/news/2012-05-09/china-s-latest-reforms-not-a-sign-of-economic-strength.html

China’s Big Banks Look More Like Paper Tigers 

http://www.bloomberg.com/news/2012-05-10/china-s-big-banks-look-more-like-paper-tigers.html

France Entrepreneurs Flee From Hollande Wealth Rejection

Jeremie Le Febvre, the 30-year-old founder of private equity marketing-services firm TBG Capital Advisors, plans to move to Singapore from Paris this year.

Not because of President-elect Francois Hollande’s pledge to boost taxes; rather for what Hollande’s victory says about how wealth is viewed in France, the entrepreneur said.

What’s really driving my departure is the fact that I don’t share the values that emerged during the election, the rejection of ambition and success,” he said in an interview. “It’s part of France’s difficult relationship with money, but it has reached a new level. Even if it’s utopian, I need to believe for me and my descendants that the sky is the limit.”

France, the fifth-richest country and home to some of the world’s wealthiest people, including LVMH Moet Hennessy Louis Vuitton SA Chief Executive Officer Bernard Arnault, doesn’t celebrate its affluent. Hollande, a Socialist who once said “I don’t like the rich,” and who plans to slap a 75 percent tax on income of more than 1 million euros ($1.29 million), reinforces the sentiment that in France to be rich is not glorious.

“Hollande is using the 75 percent tax as a symbol to convey certain values through stigmatization,” Le Febvre said.

Hollande’s rhetoric against wealth and finance is prompting some in France to consider leaving, and European rivals are welcoming them. “Bienvenue a Londres,” or welcome to London, Mayor Boris Johnson quipped in January. Switzerland and Belgium have been just as warm…

http://www.bloomberg.com/news/2012-05-10/entrepreneurs-in-france-flee-from-hollande-s-rejection-of-wealth.html

 

China April Home Sales Fall 16 Pc 

http://www.bloomberg.com/news/2012-05-11/china-april-home-sales-fall-16-as-government-maintains-curbs.html

Euro Economy to Shrink as Spain, Italy Re-Enter Recession

The euro-region economy will return to growth in 2013, with only Spain among its 17 members remaining in recession, according to the European Commission.

Gross domestic product will rise 1 percent in 2013 after declining 0.3 percent in 2012, the Brussels-based commission said today. While Greece will have the deepest slump, with GDP declining 4.7 percent, its economy may stay unchanged in 2013. Italy and Portugal will return to growth next year, while Spain’s economy may shrink 1.8 percent this year and 0.3 percent in 2013.

The report comes against a backdrop of renewed market turbulence after an anti-austerity revolt saw voters punish administrations at the ballot box in Greece and France while Spain on May 9 took control of the nation’s fourth-largest lender to assuage concerns. With the area’s economic slump deepening and unemployment at the highest in 15 years, governments may struggle to restore investor confidence. Fifty- seven percent of respondents in a Bloomberg Global Poll said at least one country would abandon the euro this year.

“We see slight euro-region growth in the second half of 2012 followed by a weak expansion in the following year,” saidChristoph Weil, a senior economist at Commerzbank AG inFrankfurt. “We can’t really call it an upswing, more of a stabilization. Spain remains the problem child; they’re facing the biggest issues apart from Greece.”

The euro was little changed after the report, trading at $1.2944 at 12:43 p.m. in Brussels, up less than 0.1 percent….

http://www.bloomberg.com/news/2012-05-11/euro-economy-to-shrink-as-spain-italy-re-enter-recession.html

Data Shows Economic Trouble In China 

http://www.nytimes.com/2012/05/11/business/global/china-trade-growth-slumps-in-april.html?_r=2&ref=business

Sony Falls to 31 Year Low 

The Japanese companies need to develop unique and No. 1 products to propel growth in the future,” said Yuuki Sakurai, chief executive officer at Tokyo-based Fukoku Capital Management Inc., which manages $7.3 billion of assets. “At this point, I don’t see any company in Japan that can do that.”…

http://www.bloomberg.com/news/2012-05-11/sony-falls-to-31-year-low-as-forecast-misses-estimates.html

Schaeuble Dares Greece Exit as Contingency Plans Start

As German Finance Minister Wolfgang Schaeuble dares Greece to quit the euro, investors and economists are mapping out what he and fellow policy makers need to do to save the single currency if his bluff is called.

Emergency lending and bond buying from the European Central Bank coupled with recapitalizations and deposit insurance for lenders and broader powers for the region’s rescue fund are among the prescriptions for insulating Spain and other cash- strained nations from what Citigroup Inc. calls a “Grexit.”

Pressure for contingency plans are mounting as Greece’s electoral quagmire forces euro-area officials to publicly revive the once forbidden topic of whether a nation can leave the single currency. Schaeuble told today’s Rheinische Postnewspaper that the euro area could handle a Greek departure as “the risks of contagion for other countries of the euro zonehave been reduced.”

“Any exit would need to be done as part of a package to reduce disruptions,” said Mohamed El-Erian, chief executive officer atNewport Beach, California-based Pacific Investment Management Co., which manages the world’s largest bond fund. “At this stage, it’s very easy to find things wrong with any approach that is proposed.”

Lehman Moment

The risk is if Greece leaves and the save-the-euro response flops the world economy could face a sovereign-version of Lehman Brothers Holdings Inc.’s collapse. That makes Schaeuble’s confidence sound all too similar to former U.S. Treasury Secretary Henry M. Paulson’s optimism that the U.S. financial system could withstand the 2008 loss of Lehman Brothers, only to witness the deepest global recession since World War II and a 40 percent slide in the Standard & Poor’s 500 Index in six months.

“If there’s no contagion who cares about Greece, but I wouldn’t be so sure and if I were Germany I’d not be willing to risk it either,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in a May 9 interview. “If a Greek exit had unforeseen consequences for contagion across countries it would have been a huge mistake.”

Decades in the making and 13 years in existence, the euro- area in its present 17-nation form is in jeopardy after Greece’s voters backed parties allergic to the terms of its bailouts, depriving it of a working government and risking access to the aid it needs to pay its bills and meet debt maturities…

http://www.bloomberg.com/news/2012-05-11/schaeuble-dares-greece-exit-as-contingency-plans-begin.

European Stocks Drop on Earnings, Greece; Banks Decline

European (SXXP) stocks declined as company earnings missed estimates, talks on forming a Greek government entered a fifth day and JPMorgan Chase & Co. posted a $2 billion trading loss. Asian shares and U.S. futures fell.

Credit Agricole SA (ACA), France’s third-largest bank by market value, retreated after first-quarter profit fell 75 percent, missing analysts’ estimates. Telefonica SA (TEF)Spain’s biggest telecommunications company, lost 2 percent as first-quarter operating income fell short of analyst projections. Vallourec SA (VK), the French producer of steel pipes, plunged the most since at least 1989 after profit in the first quarter tumbled.

The Stoxx Europe 600 Index fell 0.4 percent to 250.13 at 12:44 p.m. in London. The gauge is heading toward a 1.1 percent weekly drop, its second week of losses. The benchmark measure has still increased 2.3 percent so far this year. The MSCI Asia Pacific Index (MXAP) lost 1 percent while Standard & Poor’s 500 Index futures expiring in June slid 0.5 percent.

“Equity markets are driven by two things: fundamentals and sentiment,” said Lorne Baring, managing director at B Capital SA in Geneva, which oversees almost $500 million. “Sentiment is being eroded by headline risk as it looks like the euro zone nations are at odds over what to do next.”

The Stoxx 600 climbed 0.6 percent yesterday, as companies from Deutsche Telekom AG to Repsol YPF SA posted better-than- estimated quarterly profit. The volume of shares changing hands today was 1.3 percent greater than the 30-day average.

Greek Talks

In GreeceEvangelos Venizelos, the socialist Pasok leader, will press counterparts on a proposal for a unity government that would avert a new election.

Greece’s political impasse has raised the possibility another election will have to be held as early as next month, threatening the implementation of austerity pledges. The standoff has reignited European concern over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010 and sparked concerns about the country leaving the euro.

Spain will make a fourth attempt to convince investors its banking system is solid after failing to do so with three prior tries in as many years.

The country took control of the nation’s third-biggest lender on May 9 and Prime Minister Mariano Rajoy, who said for the first time he may use public money to save banks, will announce further measures today to help cleanse lenders of real estate assets. A failure to shore up the system and assuage investors’ concerns threatens to escalate Europe’s sovereign- debt crisis.

European Commission Forecasts

Europe’s economy will fail to grow this year with risks to the outlook “tilted to the downside” after nations from Spain to Italy slipped into recession, the European Commission said.

Gross domestic product in the 17-nation euro area will drop 0.3 percent, the European Commission said today, reiterating a February forecast. Greece will have the deepest contraction, with GDP declining 4.7 percent this year, while the economies of Spain and Italy are seen shrinking 1.8 percent and 1.4 percent. Portugal’s GDP will drop 3.3 percent, it said.

“These are very sensitive numbers because of the fierceness of the debate between austerity and growth,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, wrote in an e-mail. “The overriding message from these grim forecasts is that the credibility of fiscal policy in the euro zone is in tatters and needs to be better calibrated to economic realities.”

In China, a report showed that the country’s industrial output rose 9.3 percent in April from a year earlier. That compared with the 12.2 percent median estimate in a Bloomberg News survey of 32 economists and 11.9 percent in March.

Credit Agricole lost 0.5 percent to 3.48 euros after it said first-quarter profit fell to 252 million euros from 1 billion euros a year earlier, hurt by Greek losses. That trailed the 482 million-euro average estimate of five analysts surveyed by Bloomberg.

JPMorgan Loss

JPMorgan Chase late yesterday reported a $2 billion surprise loss on synthetic credit securities. Chief Executive Officer Jamie Dimon said the loss occurred after an “egregious” failure in a unit managing risks.

“The JPMorgan loss couldn’t have come at a worse time because the market was already showing fragile sentiment,” Baring said. “When we get into this kind of headline driven market, it’s an insult at the end of an injurious week. The market really didn’t need more bad news.”

A gauge of European banks was among the worst performers of the 19 industry groups in the Stoxx 600, with Barclays Plc (BARC) dropping 3.4 percent to 201.8 pence and Deutsche Bank AG slipping 2.1 percent to 30.59 euros.

Telefonica declined 2 percent to 11.09 euros. First-quarter operating income before depreciation and amortization was 5.08 billion euros, falling short of the 5.23 billion-euro analyst estimate. Revenue in the first quarter was 15.51 billion euros, more than the average analyst estimate of 15.43 billion euros. The company reiterated its full-year targets.

Vallourec Slides

Vallourec plummeted 20 percent to 34.38 euros, the most since at least October 1989, after first-quarter profit tumbled 65 percent to 29 million euros as demand from power generation, industrial and automotive customers proved weaker than forecast. Analysts had projected profit of 50.2 million euros.

Eutelsat Communications SA (ETL), the satellite provider that broadcasts about 4,000 channels, plunged 13 percent to 23.07 euros, the biggest drop since at least December 2005. The company cut its forecast for revenue in the fiscal year through June to about 1.22 billion euros after previously projecting sales of more than 1.24 billion euros.

Schibsted ASA (SCH)Norway’s largest media group, declined 5.5 percent to 189.50 kroner after it reported earnings before interest, taxes, depreciation and amortization of 421 million kroner in the first quarter. That missed the average analyst estimate of 452 million kroner.

EDP-Energias de Portugal SA, the nation’s biggest utility, retreated 3.1 percent to 2.07 euros. The company said first- quarter net income declined to 337 million euros from 342 million euros a year earlier.

Fresenius, Michelin

Fresenius SE slid 2.7 percent to 75.59 euros. The German health-care company said it will issue 13.8 million new ordinary shares with a combined value of around 1 billion euros to finance the planned acquisition of Rhoen-Klinikum AG.

Michelin & Cie., the world’s second-largest tiremaker, added 2.6 percent to 54.15 euros after the company forecast a “high increase” in 2012 operating profit.

A gauge of European carmakers was the best performing group in the Stoxx 600. Renault SA (RNO) and Pirelli & C SpA (PC) jumped 4.1 percent to 32.90 euros, and 4.2 percent to 8.89 euros, respectively. Nissan Motor Co., Japan’s second-biggest automaker, forecast profit will rise to the highest in five years, helped by rising demand for its vehicles in the U.S. and China.

Distribuidora Internacional de Alimentacion SA, the world’s third-largest discount retailer, gained 4 percent to 3.73 euros after first-quarter gross sales were 2.8 billion euros, topping the average 2.43 billion-euro analyst estimate.

http://www.bloomberg.com/news/2012-05-11/european-stock-index-futures-drop-telefonica-may-move.html

Bunds Hit New Record on EU Turmoil 

http://www.bloomberg.com/news/2012-05-11/german-30-year-bund-yield-declines-to-record-amid-greek-turmoil.html

Credit Agricole First-Quarter Net Drops 75% on Greek Losses

http://www.bloomberg.com/news/2012-05-11/credit-agricole-first-quarter-profit-drops-75-on-greek-losses.html

Spain Stakes Credibility on Fourth Bank Cleanup Attempt

Spain will force the country’s banks to increase provisions against losses on real estate loans by 30 billion euros ($38 billion) and will hire two auditors to gauge all the assets of lenders in the government’s fourth attempt to clean up the financial system.

Banks will have to raise their provisions on real estate loans that are still performing to 30 percent from 7 percent on average, Economy Minister Luis de Guindos said today in Madrid. The government will also force all banks to move real estate assets off their balance sheets so they can be sold, he said….

http://www.bloomberg.com/news/2012-05-10/spain-stakes-credibility-on-fourth-bank-cleanup-in-three-years.html

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