“HONG KONG (MarketWatch) — A hedge fund run by billionaire investor George Soros was back placing bets in Japan, shorting the yen and snapping up local stocks, according to a Dow Jones Newswires report Friday, citing a source close to the matter. Soros returned to the market following some signs of stability in the Japanese bond market, the source was cited as saying in the report. The person said that while the sharp recent fall in Japanese equities was a “surprise,” the current level of stocks was “very attractive”….”

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“Several U.S. cities, such as Detroit and Stockton, Calif., have suffered severe financial crises, and more municipal troubles are likely on the way, says financial analyst and author Meredith Whitney, CEO of Meredith Whitney Advisory Group.

They could even hit Los Angeles, she tells Newsmax TV in an exclusive interview. “You know no one mentions L.A.,” she tells Newsmax TV in an exclusive interview.

“L.A. is one of the municipalities that’s not at risk of default, but at risk of real loggerheads in terms of how deeply do you cut into social services, and how much are you going to push down to localities.”

Watch our exclusive video….”

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“There are two market warning signs which have just recently been triggered and which have gotten a lot of press attention due to their catchy names.  The Titanic Syndrome was created in 1965 by the late Bill Ohama. It gives a “preliminary sell signal” anytime that the number of 52-week New Lows (NL) exceeds New Highs (NH) on the NYSE within 7 trading days before or after a major market high.

The top chart shows all of the instances since 1984 of these preliminary sell signals firing off.  You can see that they do tend to cluster around major tops, but they also seem to cry “wolf” a lot at other times when an uptrend continues.  Ohama noticed that too, and so he added further criteria to constitute what he called “additional evidence”.  He wanted to see NL exceed NH for 4 out of 5 days, plus NH declining to less than 1.5% of total issues, and finally to have the DJIA (or SP500) decline for 4 out of 5 days.  We now have 2 out of those 3 criteria met, but have not seen the DJIA or SP500 drop for 4 of 5 days.

In 1995, mathematician and market analyst Jim Miekka created a similarly ominous signal that came to be known as the Hindenburg Omen.  It too looks at NH and NL, and was an adaptation of Gerald Appel’s “Split Market Sell Signal”.  Appels signal was simply a case of seeing both NH and NL exceed 45, with no adjustment for changes in the number of issues traded.  Miekka refined it by adding a few additional rules to get a more quantified signal.

Initially, Miekka set a threshold that both NH and NL had to exceed 2.2% of total NYSE issues on the same day.  He later adjusted that up to 2.8% of Advances plus Declines after decimalization changed the way that issues traded, and reduced the number of unchanged issues each day.  In addition, the NYSE Comp has to be above its value of 50 trading days ago, and the McClellan Oscillator has to be negative.

You may see web sites that list different criteria, based on Miekka’s earlier writings.  The criteria I use are as Miekka himself reported to Greg Morris for Morris’ 2006 book, The Complete Guide to Market Breadth Indicators.  Using the original 2.2% threshold, there have been 4 Hindenburg Omen signals between May 29 and June 4, 2013.  Using the more up to date 2.8% threshold, there have been only 2, but that is still a significant alert to get our attention.  For more on the calculations and the differences in criteria, see this 2010 article….”

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Unemployment rate stands at: 7.6%

April was revised 149k

Government and manufacturing lose steam

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“Former Federal Reserve Chairman Alan Greenspan told CNBC on Friday that the central bank should taper its $85 billion a month bond-buying even if the U.S. economy is not ready for it.

He said in a “Squawk Box” interview that near-zero interest rate policy at the Fed has helped stock prices, but the markets need to be prepared for faster-than-expected rise in rates.

If the Fed moves too quickly in reining in its accommodative policies, it could shock the market, which is already dealing with a very large element of uncertainty.

Greenspan said that he’s not sure the markets will allow an easy exit and they may not give policymakers the leeway might like….”

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“There’s a bombshell report tonight that nine leading tech companies are knowingly giving information on users to the U.S. Government

The program is called PRISM and it reportedly involved Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube, Apple.

Apple, Google, Microsoft, and Facebook have all come out to deny participation in the program.

We have each of their statements here.

A spokesperson for Apple emphatically denied that it is handing over user information telling us: “We have never heard of PRISM. We do not provide any government agency with direct access to our servers, and any government agency requesting customer data must get a court order.”

Here’s the statement from Facebook: “We do not provide any government organization with direct access to Facebook servers. When Facebook is asked for data or information about specific individuals, we carefully scrutinize any such request for compliance with all applicable laws, and provide information only to the extent required by law,.”

And here’s Google’s statement, given to AllThingsD: “Google cares deeply about the security of our users’ data. We disclose user data to government in accordance with the law, and we review all such requests carefully. From time to time, people allege that we have created a government ‘back door’ into our systems, but Google does not have a ‘back door’ for the government to access private user data.”

Microsoft spokesperson: “We provide customer data only when we receive a legally binding order or subpoena to do so, and never on a voluntary basis. In addition we only ever comply with orders for requests about specific accounts or identifiers. If the government has a broader voluntary national security program to gather customer data we don’t participate in it.”

The PRISM program allegedly allowed the NSA and FBI to tap directly into the central servers of the companies. From there, they could get user photos, emails, documents and more. This was all done in cooperation with big tech companies, according to the report…..”

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WMT, GPS, COO, ZQK, INTC, YUM, MON, T, TIVO, GM, AAPL, S,

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“LONDON—U.S. and British authorities are preparing to bring criminal charges against former employees of Barclays BARC.LN +0.15% PLC for their alleged roles trying to manipulate benchmark interest rates, according to people familiar with the plans, marking an escalation of a global investigation now entering its sixth year.

The charges are likely to be filed this summer, these people said, roughly a year after the big British bank became the first institution to settle over allegations that it attempted to rig the London interbank offered rate, or Libor, and other widely used financial benchmarks. The people cautioned that the plans aren’t finalized and could be delayed or modified.

The planned criminal cases indicate that government investigations into Libor manipulation, which have been under way since 2008 and until now have targeted mostly institutions rather than individuals, are moving into a new phase. So far, U.S. authorities have filed charges against two individuals. British prosecutors haven’t charged anyone. Units of two banks—UBS AG UBSN.VX +0.12% and Royal Bank of Scotland Group RBS.LN +1.29% PLC—pleaded guilty to U.S. criminal charges as part of rate-manipulation settlements….”

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FAYETTEVILLE, Ark. (AP) — Wal-Mart executives are expected to make the case it is improving the way it does business overseas and outline new growth opportunities at the world’s largest retailer’s annual shareholder meeting Friday.

“Wal-Mart faces increasing scrutiny from investors over how it has handled allegations of bribery in its Mexican operations that surfaced a year ago. It also faces pressure to increase its oversight of factory conditions abroad following a building collapse in April in Bangladesh that killed more than 1,100 garment workers. The discounter, based in Bentonville, Ark., is also under scrutiny for how it treats its workers.

Those problems are happening as Wal-Mart Stores Inc. is wrestling with slower sales growth.

Wal-Mart’s annual meeting, at the University of Arkansas at Fayetteville’s Bud Walton Arena, attracts thousands of investors and has historically had the air of a giant pep rally. The company brings in A-list speakers and performers like basketball legend Michael Jordan and pop singer Justin Timberlake.

Wal-Mart is considered an economic bellwether because it accounts for nearly 10 percent of nonautomotive retail spending in the U.S. The company’s first-quarter results, reported last month, showed that its low-income shoppers remain under stress. While the housing market is recovering and the stock market has rallied, low-income people haven’t benefited much. They’re also facing new pressures like higher payroll taxes that have affected spending.

During the first quarter, Wal-Mart said its profit edged up just slightly, but the company reported its first decline in a key revenue measure in its U.S. namesake business in seven quarters.

U.S. Wal-Mart stores account for 59 percent of the company’s total sales, which reached $466.1 billion for the year ended Jan. 31, excluding revenue from membership fees from its Sam’s Club division….”

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“NEW YORK, June 7, 2013 /PRNewswire/ — Royalty Pharma today announced, pursuant to Rule 2.5 of the Irish Takeover Rules (the “Announcement”), a firm intention to further increase its offer for Elan Corporation, plc (ELN) to $13.00 per share in cash plus a contingent value right (“CVR”) worth up to $2.50 per share.  The CVR, based on feedback from Elan Shareholders, enables participation in the future upside of Tysabri including approval in secondary progressive multiple sclerosis and the achievement of certain sales milestones that are detailed further in section five of the Announcement which is available atwww.royaltypharma.com.

“While Elan’s Board and Management team appear to be solely focused on what we perceive to be increasingly desperate attempts to fend off Royalty Pharma’s highly compelling offer, we have been carefully listening to shareholders and are pleased to revise our offer today based on their feedback,” said Pablo Legorreta, Chief Executive Officer of Royalty Pharma. “Our increased offer gives shareholders certainty and immediate, full value for their shares. It also now allows them to realize continued upside from the Tysabri Royalty through the CVR structure. Approving Elan’s purely defensive transactions at the upcoming EGM will force Royalty Pharma to withdraw its offer and leave shareholders invested in a company with an uncertain future overseen by a Board with no track record of creating shareholder value, so we urge shareholders to oppose those proposals and tender in favor of our offer.”

With the revised offer, Royalty Pharma is now offering a compelling upfront cash value of $4.9 billion for Elan’s Tysabri Royalty (or $6.2 billion including the maximum aggregate amount payable under the CVRs), a 52% to 92% premium to the $3.25 billion at which Royalty Pharma believes Elan sold approximately half of its interest in Tysabri to Biogen.  The aggregate amount payable under the Further Increased Offer of $13.00 up to $15.50 (including the maximum aggregate amount payable under the CVRs) represents a premium of 56% to 97% to the Undisturbed Elan Enterprise Value….”

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“The emerging market selloff sparked by speculation the Federal Reserve will reduce stimulus may cut revenue for investment banks including Standard Chartered Plc and HSBC (HSBA)Holdings Plc, JPMorgan Chase & Co. (JPM)’s Cazenove said.

Emerging markets are going through the most disruptive period since the collapse of Lehman Brothers Holdings Inc. in 2008 based on the rise in equity, currency and rates volatility, according to the JPMorgan unit’s report titled “Fed Tapering: Who is Afraid of EM Selloff? We Are!”

The swings may cause a “material slowdown” in emerging market fixed-income revenues with volumes “drying up,” Cazenove analysts includingKian Abouhosseinin London wrote.

Cazenove said it’s more concerned about fixed-income revenue for Standard Chartered and HSBC than previously because of higher revenues related to emerging markets. It’s in “wait-and-see” mode for European banks with lending or earnings in Brazil, South Africa and Mexico, including Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), according to the report.

Standard Chartered spokesman Jon Tracey declined to comment as did Paul Tobin, a Madrid-based spokesman for BBVA, and HSBC spokeswoman Archana Achuthan. A spokesman for Santander wasn’t immediately available to comment.

Emerging market government bonds in dollars slumped 3.5 percent in May, the most in at least three years, according to the Bloomberg USD Emerging Market Sovereign Bond Index. (BEMS) Brazilian government local-currency bonds lost the most since October 2008 last month, according to JPMorgan’s GBI-EM Broad Brazil LOC Unhedged Index. South Africa’s rand has plunged 15 percent against the dollar this year.

BlackRock Trims…”

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“Economists cut their estimates for how much the Federal Reserve will reduce the amount of its monthly asset purchases, a Bloomberg survey shows.

Policy makers led by Chairman Ben S. Bernanke will trim their so-called quantitative easing program to $65 billion a month at the Oct. 29-30 meeting of the Federal Open Market Committee, from the current level of $85 billion, according to the median estimate in the survey of 59 economists this week. In a similar survey before the Fed’s April 30-May 1 meeting, economists expected the Fed to cut purchases to $50 billion in the fourth quarter.

Debate among central bank policy makers over when and how to dial back their unprecedented easing campaign has shaken financial markets. The Standard & Poor’s 500 Index has dropped 2.8 percent since reaching a record closing high on May 21, and the yield on 10-year Treasuries has risen to 2.08 percent from as low as 1.63 percent last month as investors weighed the timing of a reduction in the central bank’s stimulus.

“Even those who are advocating for tapering are thinking that it could be a pretty small first step to see how it goes,” said Julia Coronado, chief economist for North America at BNP Paribas in New York and a former Fed economist. “That’s one of the few things we’ve learned” from the debate among policy makers.

When the first move comes, officials will split their $65 billion in purchases between $30 billion a month of mortgage bonds and $35 billion a month of Treasuries, a $10 billion reduction in each category, according to the survey, conducted June 4-5.

June Tapering?

Two of the 59 economists surveyed this week expect the pace of purchases to be reduced at the FOMC meetings on June 18-19 or July 30-31. Sixteen say tapering will begin at the Sept. 17-18 meeting, 14 see it happening Oct. 29-30 and 15 forecast the first tapering Dec. 17-18. Twelve see tapering next year or later.

“If jobs growth continues in the 150,000-to-200,000 per month range, that’s probably sufficient to lower the unemployment rateslightly,” said Tom Lam, chief economist at DMG & Partners Securities in Singapore. “Coupled with real GDP growth recovering to 2.5 percent, that would be sufficient for them to consider tapering modestly at the December meeting.”

Stocks, Bonds…”

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“West Texas Intermediate headed for its first weekly gain in a month before data forecast to show more jobs were added in the U.S., the biggest crude consumer.

Futures rose as much as 0.4 percent, and have advanced 3.4 percent this week. Employers in the U.S. probably created as many jobs in May as in the month before, a Bloomberg survey showed before the Labor Department’s report today. WTI’s discount to the European benchmark, Brent, widened for the first time in three days. WTI may slide next week, according to a separate Bloomberg survey.

“We are expecting a seasonal pick-up in demand in the coming months,” said Amrita Sen, chief oil-market analyst at Energy Aspects Ltd., a consulting company in London. “The U.S. recovery has been broadly on track so far. The labor market is healing and the economy is slowly getting better.”

WTI for July delivery was at $95.06 a barrel, up 30 cents, in electronic trading on the New York Mercantile Exchange as of 10:36 a.m. London time. The volume of all futures traded was 15 percent below the 100-day average. The contract rose $1.02 to $94.76 yesterday, the highest close since May 28.

Brent for July settlement was up 39 cents at $104 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade was at a premium of $8.97 to WTI, compared with $8.85 yesterday.

Economic Recovery…”

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“Brazil’s credit rating outlook was cut to negative by Standard & Poor’s, which said sluggish economic growth and an expansionary fiscal policy could lead to an increase in the government’s debt levels.

S&P said in a statement yesterday that it lowered the outlook on Brazil’s BBB rating, which is two levels above junk and in line with Mexico and Russia, from stable. The rating company also cut the outlooks for state-controlled oil company Petroleo Brasileiro SA and government-run utility Centrais Eletricas Brasileiras SA.

The move, which threatens to end a decade-long stretch of rating upgrades for Latin America’s biggest country, was triggered by forecasts for a third year of “modest” economic growth, “weaker” fiscal policy and a deterioration in the government’s credibility, S&P said. Yields onBrazil’s dollar bonds have surged an average 0.81 percentage point in the past month to 4.49 percent. The outlook revision may prompt Brazilian debt to underperform, according to Siobhan Morden, a fixed-income strategist at Jefferies Group LLC.

“It has to do with policy inconsistency, the low-growth high-inflation trade off, and the loss of credibility of the central bank,” Morden said in a phone interview from New York.

Brazil’s economy expanded 0.9 percent last year and is forecast to grow just 2.77 percent in 2013, according to a central bank survey published June 3. Quickening inflation has prompted policy makers to boost interest rates by 0.75 percentage point this year after they lowered borrowing costs by 5.25 percentage points in cuts that began in August 2011.

‘Not Expansionary’…”

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“European Central Bank President Mario Draghi isn’t racing to the rescue of Europe’s banks or economy this time.

Almost a year since his promise to do “whatever it takes” to protect the euro soothed investors, and a month since cutting interest rates, Draghi signalled yesterday that governments, not the ECB, should do more to fight recession and boost credit to businesses in cash-strapped countries such as Spain.

As he predicted a resumption of growth by the end of the year, Draghi’s maintenance of the status quo sent bonds falling and the euro rising as investors questioned the ECB’s crisis-fighting resolve, which previously reinforced its president’s “Super Mario” nickname. Yields on Spanish and Italian 10-year bonds jumped yesterday to the most in six weeks, while German two-year borrowing costs climbed to the highest since February. Markets rebounded today with rates falling across the region.

“Investors see ECB talk for what it is, a fig leaf,” said Ciaran O’Hagan, head of European rates strategy at Societe Generale SA in Paris. “Draghi mentioned many possible measures, only to conclude that they are too hard to introduce.”

If the economy improves in the second half of the year, the ECB may refrain from further action as “the easy instruments have all been used,” Austrian central bank governor Ewald Nowotny said today.

Recession Risks…”

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“German industrial production (GRIPIMOM) surged the most in more than a year in April as construction activity surged after an unusually long winter damped output.

Production jumped 1.8 percent percent from March, when it gained 1.2 percent, the Economy Ministry in Berlin said today. That’s the third consecutive increase and the strongest gain since March last year. Economists forecast no change, according to the median of 38 estimates in aBloomberg News survey. From a year earlier, production rose 1 percent when adjusted for working days.

The Bundesbank downgraded its outlook for the German economy today, while pointing to a gradual recovery in the course of the year. Exports in April rose more than forecast, supporting the central bank’s view that trade with faster-growing markets in Asia and the U.S. will help offset the effects of six quarters of recession in the 17-nation euro area.

“The German economy is gradually exiting the weak phase that it had around the turn of the year,” Mario Gruppe, an economist at NordLB in Hanover, said before the release. “It is however a growth path that has a few potholes in it. It will be a recovery that now and again has setbacks.”

After the European Central Bank left interest rates at a record low of 0.5 percent yesterday, President Mario Draghi reiterated his view that the region’s economy will still return to growth this year.

Stocks Fall…”

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“Germany’s Bundesbank cut its forecasts for growth in Europe’s largest economy for this year and next, while signaling confidence that the worst of the recession in the euro area is over.

The Frankfurt-based central bank cut its 2013 growth projection to 0.3 from the 0.4 percent predicted in December, and said the economy would grow by 1.5 percent in 2014, down from the previously-estimated 1.9 percent.

“Much will depend on whether the economic situation stabilizes in the euro-area crisis countries and whether expansionary forces will gradually gain the upper hand there,” Bundesbank President Jens Weidmann said in a statement. “A sustained upturn in the world economy is just as important as a precondition for the growth path we have assumed.”

While the German economy grew just 0.1 percent in the first three months of this year, business confidence rose in May…”

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“Britain’s trade deficit narrowed more than economists forecast in April as imports declined faster than exports.

The goods trade gap was at 8.2 billion pounds ($12.8 billion) compared with 9.2 billion pounds in March, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 19 economists was for 8.8 billion pounds. Exports fell 1.4 percent and imports declined 3.8 percent.

While data this week show the economy is gaining momentum, today’s figures underline the risks to the recovery from a recession-stricken euro zone, Britain’s biggest trading partner. Exports to the bloc fell 2.3 percent to their lowest level since February 2011. Net trade acted as a drag on economic growth in the first quarter.

“It seems unlikely that net trade can significantly help the U.K. economy in the near term given current ongoing weak domestic demand in the euro zone and moderate and stuttering global growth,” said Howard Archer, an economist at IHS Global Insight in London. “The hope is that the overall marked weakening of the pound earlier in 2013 will increasingly feed through to boost exports and the beneficial impact of this is reinforced by global growth gradually improving.”

Exports to the European Union as a whole fell 3 percent. The decline was partially offset by a 0.2 percent rise in shipments to countries outside the bloc.

The surplus on trade in services narrowed to 5.6 billion pounds in April, leaving the overall trade deficit at 2.6 billion pounds compared with a gap of 3.2 billion pounds a month earlier, the ONS said….”

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“Australia’s dollar dropped versus the yen, set for its worst weekly rout since 2011, before Chinese data tomorrow forecast to show growth in imports slowed, dimming the demand outlook for commodities.

Implied volatility of the Aussie against the U.S. currency was set for a sixth weekly advance, the longest in two years, before a U.S. jobs report today that may help investors estimate when the Federal Reserve will start reducing monetary stimulus. Australia’s government bonds extended their gains to a third day amid increasing bets the Reserve Bank will cut borrowing costs to shore up economic growth.

“We’re bearish on the currency,” said Andrew Salter, a currency strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney, referring to the Aussie. It’s a little bit of a surprise that “Chinese growth is so sluggish,” he said.

The Australian currency dropped 1 percent to 92.13 yen as of 5:10 p.m. in Sydney after touching 90.84, the least since Jan. 2. It’s slumped 4.2 percent in the five days through today, poised for the biggest plunge since September 2011. New Zealand’s kiwi dollar declined 0.6 percent to 77.31 yen, having fallen 3.2 percent this week.

Australia’s dollar slid 0.8 percent to 95.17 U.S. cents, extending its fifth weekly drop to 0.6 percent. New Zealand’s dollar lost 0.5 percent to 79.86 U.S. cents, trimming its weekly advance to 0.5 percent.

Australian Yields

The yield on Australia’s benchmark 10-year government note dropped 9 basis points to 3.26 percent, extending its weekly decline to 10 basis points. Similar-maturity note yields in New Zealand fell 5 basis points to 3.55 percent…”

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“China’s record funding expansion this year may be overstated in part because of double-counting, say Credit Suisse Group AG and Bank of America Corp. analysts trying to reconcile the data with weaker economic growth.

Some Chinese companies may use loans to buy wealth management products that are recorded a second time in another category, Vincent Chan, a Credit Suisse analyst in Hong Kong, wrote in a June 5 report, citing people he didn’t identify at the central bank and banking regulator. Bank of America estimates that double-counting explains 2.7 percentage points of a 12-point gap between first-quarter growth in outstanding credit and nominal gross domestic product.

The concerns echo doubts about Chinese trade figures that helped trigger an official crackdown on false reporting, resulting in May export growth forecast to be about half of April’s gains in data due tomorrow. While the estimated distortions in the credit numbers are smaller, they may provide one part of the explanation for the inconsistency between growth in financing and an economic slowdown.

“The statistics errors in total social financing this year are larger than normal, and it’s mainly caused by double counting,” Zhu Haibin, chief China economist at JPMorgan Chase & Co., said at a briefing yesterday in Beijing.

The first quarter’s $1 trillion increase in economy-wide financing contrasted with an unexpected growth slowdown, suggesting China was becoming less responsive to credit.

More Noticeable

The gap between lending and growth “has become more noticeable in recent months,” Zhu said. Another issue is that some Chinese companies have to borrow to cover working capital as accounts receivable rise, adding to the gap between credit and economic growth, Zhu said….”

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