$AXP Beats Street Estimates

“American Express Co. (AXP), the biggest U.S. credit-card issuer by customer spending, reported a first- quarter profit that exceeded analysts’ estimates as consumers boosted purchases.

Net income rose 1.9 percent to $1.28 billion, or $1.15 a share, from $1.26 billion, or $1.07, a year earlier, the New York-based lender said yesterday in a statement. The average estimate of 25 analysts surveyed by Bloomberg was $1.12.

Chairman and Chief Executive Officer Kenneth I. Chenault, 61, is cutting about 5,400 jobs this year to contain expenses as AmEx rolls out products such as a prepaid card sold by Wal-Mart Stores Inc. to broaden the lender’s client base beyond more affluent credit and charge-card customers….”

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“Gold gained for a third day in London as prices near the lowest in more than two years attracted jewelry buyers and global economic data disappointed.

Jewelry demand in India and China surged as consumers rushed to take advantage of the price drop. Retail sales tripled across China April 15-16, the China Gold Association reported. The U.S. Federal Reserve, which buys $85 billion of securities a month to support economic recovery, said in its Beige Book business survey that the U.S. expansion remained moderate. Data this week showed slower-than-expected Chinese economic growth and European car sales slid to a 20-year low.

“Due to the latest turn to bearish macro sentiment, a further fall in gold has been prevented for now,” Bjarne Schieldrop, the Oslo-based head of commodity research at SEB AB, said today by e-mail. A surge in physical demand is “positive for gold and supportive,” he said.

Immediate-delivery gold climbed 0.8 percent to $1,387.23 an ounce by 9:50 a.m. in London trading. Prices fell to $1,321.95 on April 16, the lowest since January 2011. Gold for June delivery added 0.4 percent to $1,387.90. Futures trading volume was more than double the average for the past 100 days for this time of day, according to data compiled by Bloomberg….”

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“Brazil’s central bank raised its benchmark rate for the first time since July 2011, as policy makers seek to slow inflation levels jeopardizing an economic recovery.

The bank’s board, led by President Alexandre Tombini, voted 6-to-2 to increase the Selic rate 25 basis points to 7.50 percent from a record low, matching the median forecast from 58 economists surveyed by Bloomberg.

Policy makers said that “the high level of inflation” and “resilience of inflation” required a response, which was tempered by the central bank’s recognition that “external uncertainties” also required “that monetary policy be managed with caution,” according to the board’s statement posted on Banco Central do Brasil’s website.

President Dilma Rousseff’s government is facing renewed pressure to contain consumer prices after annual inflation in March breached the central bank’s target range for the first time since November 2011. Rising prices are sapping purchasing power and eroding demand even after officials cut taxes on consumer goods and lowered the Selic to 7.25 percent in October. Retail sales in February fell for the second time in three months.

“Inflation has clearly become detrimental to growth,” Gustavo Rangel, chief Latin America economist at ING Bank NV in London, said in a telephone interview before today’s decision. “Both the retail figures and investors’ confidence levels are signaling that inflation is a big concern.”…”

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“European stocks rose after the biggest four-day selloff since July as Italian and Spanish bonds gained. Copper fell for a second day, poised to enter a bear market.

The Stoxx Europe 600 Index advanced 0.6 percent at 10:40 a.m. in London, while Standard & Poor’s 500 Index futures added 0.4 percent. Italy’s 10-year bond yield fell four basis points to 4.21 percent and Spain’s dropped six basis points to 4.62 percent. The euro strengthened 0.2 percent to $1.3055. Copper slumped 1.4 percent.

More than $1 trillion has been erased from the value of equities worldwide this week as concern deepened the global recovery was weakening and companies from Bank of America Corp. to Textron Inc. reported disappointing results. Finance ministers from around the world prepared to gather in Washington to discuss policies to support the economy and strengthen financial systems. Spain sold 4.71 billion euros ($6.14 billion) of bonds, more than its maximum target of 4.5 billion euros.

“It’s an important earnings season, with market participants trying to see if corporate earnings and forecasts are going to be in line with the weakening global macro data,” Serge Berger, a Zurich-based trader at Blue Oak Advisors LLC, said in a phone interview.

Three shares gained for each one that fell in the Stoxx 600 (SXXP), as the gauge rebounded from the lowest close this year. The index tumbled 3.8 percent in the previous four days, the most since a 4.4 percent slump ended July 25….”

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“Japan’s swap market is already starting to anticipate central bank Governor Haruhiko Kuroda’s endgame even as he makes his first monetary easing moves.

Two-year overnight-index swap rates that reflect investor expectations for the Bank of Japan’s benchmark rate are set for the biggest monthly jump since November 2010 and reached 0.095 percent this week, according to data compiled by Bloomberg. The contract has climbed from a low of 0.039 percent in January to the highest since July 2011, approaching the 0.1 percent upper range of the Bank of Japan’s benchmark rate target. The comparative swap rate in the U.S. was at 0.163 percent…”

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“China’s property rebound gathered pace in March as new home prices in the southern city of Guangzhou jumped the most in more than two years, underscoring concerns that a bubble may be building.

Guangzhou prices rose 11.1 percent from a year earlier while those in Beijing climbed 8.6 percent and Shanghai posted a 6.4 percent increase, the National Bureau of Statistics said in a statement today, all showing the biggest gains since January 2011 when the government changed its methodology for the data. Prices rose in 68 of 70 cities tracked by the government, the most since September 2011….”

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“Asian stocks fell, with the regional benchmark index set for its biggest drop in a month, led by mining companies as commodities slumped on concern weaker global economic growth will crimp demand for raw materials.

BHP Billiton Ltd. (BHP), the world’s biggest miner, sank 4.3 percent in Sydney. LG Display Co., which supplies touch screens for Apple Inc., dropped 4.8 percent in Seoul after audio-chip maker Cirrus Logic Inc. reported an inventory glut that suggests iPhone sales may fall short of expectations. Softbank Corp., Japan’s third-largest wireless carrier, lost 1.6 percent as a rival’s bid for Sprint Nextel Corp. gained shareholder support.

The MSCI Asia Pacific Index slipped 1.1 percent to 135.89 as of 5:08 p.m. in Tokyo, heading for its biggest drop since March 18. All 10 industry groups fell on the gauge, which is set for its third decline in four days after China’s economy expanded less than economists estimated. The International Monetary Fund this week cut its global growth forecast as Europe sinks deeper into recession.

“Weak corporate earnings results and renewed concerns about the global economy saw traders switch to a risk-off mode,” said Matthew Sherwood, Sydney-based head of markets research at Perpetual Investments, which manages about $25 billion.

The MSCI Asia Pacific Index (MXAP) advanced 6.2 percent this year through yesterday amid signs the U.S. economy is recovering and as Japanese shares rallied on optimism theBank of Japan will step up efforts to stimulate the economy. Shares on the gauge traded at 13.8 times average estimated earnings compared with 14 for the Standard & Poor’s 500 Index and 12.3 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg…..”

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“Japan’s exports exceeded estimates in March and the trade deficit narrowed from the previous month after declines in the yen made the nation’s products more competitive in overseas markets.

Overseas shipments rose 1.1 percent from a year earlier, the Finance Ministry said in Tokyotoday. The median estimate of 22 economists surveyed by Bloomberg News was for a 0.2 percent increase. The trade shortfall was 362.4 billion yen ($3.7 billion) from 777.5 billion yen in February….”

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“Morgan Stanley, previously the most bullish brokerage on Japanese stocks, says the Topix Index (TPX) will fall about 10 percent as investors await corporate earnings and progress on promised economic reforms.

Japan’s broadest equity measure may fall to 1,020 “in the near term,” according to Morgan Stanley which in March had a year-end estimate for the Topix of 1,270, the highest among brokerages and asset managers surveyed by Bloomberg News. The company isn’t changing its outlook even as others including Nomura Holdings Inc. (8604) and Goldman Sachs Group Inc. (GS) raise their forecasts, Jonathan Garner, Hong Kong-based chief strategist for Asia andemerging markets, said by phone….”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

 

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“Volatility’s prolonged absence from the stock market appears to be coming to an abrupt end.

After being largely invisible for the past nine months – coinciding with a sharp equity rally – several signs indicate that instability is coming back.

Call options buying recently hit a three-year high for the CBOE’s Volatility Index, a popular measure of market fear that usually moves in the opposite direction of the Standard & Poor’s 500 stock index.

(Read More: Scary Pattern Could Be Forming on S&P 500 Chart)

A call buy, which gives the owner the option to purchase the security at a certain price, implies a belief that the VIX is likely to go higher, which usually is an ominous sign for stocks.

“We saw a huge spike in call buying on the VIX, the most in a while,” said Ryan Detrick, senior analyst at Schaeffer’s Investment Research. “That’s not what you want to hear (because it usually happens) right before a big pullback.”

The last time call options activity hit this level, on Jan. 13, 2010, it preceded a 9 percent stock market drop that happened over just four weeks, triggered in large part by worries over the ongoing European debt crisis.

“That obviously has been the smart money in the past,” Detrick said. “We’re not ignorant to the fact that this could be the same thing. The fears out of Europe for whatever reason spring up in the springtime.”…”

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“The Federal Reserve said the U.S. economic expansion remained “moderate” amid gains in manufacturing, housing and autos that offset weakness in defense-related industries in some regions.

“Most districts noted increases in manufacturing activity since the previous report,” the central bank said today in its Beige Book business survey, which is based on reports from the Fed’s 12 regional banks from late February to early April. “Particular strength was seen in industries tied to residential construction and automobiles.”

Most regions said “residential and commercial real estate improved markedly” as housing prices rose in many areas and demand for home loans was “steady to slightly up,” the Fed said. Consumer spending “grew modestly” even as some regions said sales were curbed by rising gasoline prices, higher payroll taxes and winter weather. “Employment conditions remained unchanged or improved somewhat,” the report said.

Several policy makers, including Federal Reserve Bank of New York President William C. Dudley, have said the Fed should maintain record monetary stimulus after an April 5 report showed employers added 88,000 workers in March, the smallest gain in nine months. The Federal Open Market Committee said in March that it will continue buying $85 billion in bonds each month until the labor market “improves substantially.”

Renewed Pledge…”

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BREAKING: Law enforcement official: Arrest imminent in marathon bombing, suspect to be brought to court.

-CNBC

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Carney, W.H. speaker, in a current news flash has informed the public that the president was sent a letter with a “suspicious substance.”

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In other news a second letter was reported to have been sent to Senator Reid.

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Commodities began a sell off in Asia last night paring most of the gains had in early trade. That sell off along with worries of a downgrade for France and Germany spooked investors in Europe. All of which spilled into U.S. futures. Then we had some not so good earnings out of $BAC and $LLTC which helped to take U.S. equities down hard thus far.

Miners across the board are hitting fresh 52 week lows and the S&P has broken crucial support between 1550 -1557. Currently we have popped back above 1550. Closing prices will spell the extent of the damage….or not. We shall see.

Market update

[youtube://http://www.youtube.com/watch?v=mzJj5-lubeM 450 300]

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$LLTC put in good earnings, but gave horrible guidance and has helped the chip sector to sell off hard this morning….

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“Back in 2010, Goldman’s Jan Hatzius, fresh on the heels of QE2, committed rookie Economist mistake 101, and mistook a centrally-planned market response to what then was a record liquidity infusion, for an improvement in the economy (a move we appropriately mocked at the time, as it was quite clear that the Fed’s intervention meant the economy was getting worse not better). It took him about 4 months to realize the folly of his ways and realize no recovery for the US or anyone else was on the horizon. He then wised up for a couple of years until some time in December he did the very same mistake again, and once again jumped the shark, forecasting an improvement to the US economy in 2013, albeit in the second half (after all nobody want to predict an improvement in the immediate future: they will be proven wrong very soon) based on consumer strength when in reality the only “reaction function” was that of the market to the Fed’s QE4 (or is it 5, and does it even matter any more?). Four months later we get this…

A Consumption Setback

 

Coming into this year, we expected a notable slowdown in real personal consumption expenditures (PCE) from around 2% in 2012 to a 1% (annualized) pace in the first quarter of 2013. The main reason was the hit to disposable income resulting from the 2-point increase in payroll taxes that took effect in January. Based on our statistical analysis of the effects of past shocks to disposable income, we thought that the tax increase would deliver a sizable, front-loaded hit to spending. Such a front-loaded hit also seemed plausible intuitively. After all, lower- and middle-income consumers–many of whom seem to spend their income on a pay-as-you-go basis and should therefore respond quickly to a shock–saw a reduction in their disposable income of up to 2%.

 

This forecast was too pessimistic. Our current estimate is that real PCE grew 2-1/2% (annualized) in the first quarter, which would be the strongest quarter in two years. While this estimate is based on incomplete data for March and the January/February data are subject to revision, the basic thrust is unlikely to change at this point in the quarter. We have therefore been wondering whether we have already moved “over the hump” of fiscal contraction, at least as far as the consumer is concerned.

 

But the recent data suggest that the answer is no:

 

1. Weaker tracking. The March retail sales report showed a drop in “core” sales (excluding autos, building materials, and gasoline) to a level below the first-quarter average. If core retail spending through the quarter (that is, June vs. March) grows at the 2% pace seen over the prior year, quarterly average growth in core spending as well as real PCE (that is, the Q2 average vs. the Q1 average) could be as low as 1%. Admittedly, the retail sales data can be noisy and the weak March reading might have been influenced by seasonal adjustment distortions related to the timing of Easter and/or the relatively poor weather. But we do need a significant rebound in the pace of growth over the next few months to avoid a meaningful deceleration in Q2.

 

2. Weaker confidence. The weaker data are not confined to the retail sales release. Consumer sentiment according to the University of Michigan also took a dive in early April. To be sure, the preliminary Michigan reading is based on a small sample of households and other surveys such as the daily Rasmussen Reports series do not show a meaningful decline. But we would put a bit of weight on the Michigan reading given its relatively good historical performance as a coincident indicator of spending.

 

3. Lower saving rate. According to the February personal income and spending release, the personal saving rate currently stands at 2.6%. Except for the January 2013 reading, which was artificially depressed by tax-related income shifting between 2012 and 2013, this is the lowest number since late 2007. As shown in Exhibit 1, it is nearly 1 percentage point below our estimated equilibrium, which is based on a model using household wealth, bank lending standards, and labor market conditions. If this model is correct, we might see upward pressure on saving and correspondingly weaker growth in spending over the next couple of quarters.

 

Exhibit 1: Savings Rate Below Equilibrium

In our view, the most plausible interpretation of the weaker data is a delayed negative impact from the tax hike. Although we find a front-loaded impact more intuitive given the concentration of the hit among pay-as-you-go consumers, some of the models we estimated–specifically those using the Romer-Romer measure of tax shocks–do show a significant amount of back-loading. The low saving rate also points in that direction…..”

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“Outside the rarefied world of art dealers and collectors, where discretion is often prized nearly as much as the art itself, the Nahmad family does not attract the same recognition as some of their fellow billionaires.

But for those who trade in multimillion-dollar paintings, they have long been a major presence at the premier auctions held every spring and fall at Sotheby’s and Christie’s, where they often descend, wives and children included, and have been known to argue loudly with one another, even while others around them engaged in more genteel bidding.

Despite sneers from some of their more staid peers who have accused them of unfairly negotiating special terms with auction houses, they are among the most powerful, wealthy and colorful members of the elite global club of fine art dealers.

“They have sold more works of art than anybody alive,” Christopher Burge, the former chairman of Christie’s New York, once said.

But on Tuesday, the family’s New York flagship gallery, the Helly Nahmad Gallery, at the opulent Carlyle Hotel in Manhattan, was filled with agents from the Federal Bureau of Investigation conducting a raid. An indictment unsealed on Tuesday charged its owner, Hillel Nahmad, 34, with playing a leading role in a far-flung gambling and money-laundering operation that stretched from Kiev and Moscow to Los Angeles and New York.

The case features a wide cast of characters, including a man described as a Russian gangster accused of trying to rig Winter Olympic skating competitions in Salt Lake City and a woman who once organized high-stakes poker games for some of Hollywood’s most famous faces.

In all, 34 people were charged on Tuesday with playing a part in what federal prosecutors described as two separate but interconnected criminal groups — one operating overseas and the other in the United States. Together, they are accused of laundering more than $100 million in gambling money….”

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