Bill Gross: Reduce Risk as Fed Fails to Boost Growth

“Pacific Investment Management Co.’s Bill Gross, manager of the world’s biggest bond fund, said the Federal Reserve’s zero-bound interest rate policy and quantitative easing programs are becoming more of a problem for an economy that needs structural reforms.

The Fed’s polices are “desperately attempting to cure an economy that requires structural as opposed to monetary solutions,” Gross wrote in his monthly investment outlook posted on Newport Beach, California-based Pimco’s website. “Central banks, including today’s superquant Kuroda, leading the Bank of Japan, seem to believe that higher and higher asset prices produced necessarily by more and more QE check writing will inevitably stimulate real economic growth via the spillover wealth effect.”

The Fed is purchasing $85 billion a month in Treasurys and mortgage debt as part of its third round of quantitative easing, which began after it dropped its benchmark rate to almost zero to lift the economy out of recession. The central bank cut its target rate for overnight loans to a range of zero to 0.25 percent in December of 2008.

Global Stimulus….”

Full article

CP, EQIX, FDZ, GE, MPWR, PVH, RIGL, SEAS, ULTA, WMT,

Full report

SOURCE
NYSE

NASDAQ

AMEX

In Play ,

On the Wires 

“A six year old virus that drains bank accounts is thriving on Facebook, reports Nicole Perlroth of the New York Times.

Facebook has been alerted to the problem but it isn’t taking the matter nearly as seriously as it should be, says Eric Feinberg, founder of the advocacy group Fans Against Kounterfeit Enterprise (FAKE).

Feinberg told the NYTimes, “[Facebook isn’t] listening…we need oversight on this.”

The virus is called Zeus…..”

Full article

“If earnings guidance is any guide, the S&P could be in trouble. The second quarter earnings picture that we can piece together from S&P 500 guidance is a negative one indeed.

Over the past five years, an average of 62 percent of S&P companies that have issued earnings-per-share guidance have given projections below the mean EPS estimate. But research company FactSet reports that for the second quarter, 86 of the 106 S&P companies have projected below the mean, meaning that 81 percent of the guidance has been negative. In the materials sector, a whopping 88 percent of guiding companies have issued negative guidance.

“There’s certainly a trend where companies tend to be more conservative when giving guidance, so that can turn around and beat that number,” said John Butters, senior earnings analyst at FactSet. But on the other hand, “if we finished here, it would be the quarter with the highest percentage of negative pre-announcements since we began tracking the data in 2006.” Butters adding that the percentage of negative guidance is likely to change somewhat in the coming days.

Analysts, for their part, have slashed their earnings growth expectations over the course of the second quarter. Whereas they have previously expected earnings growth of 4.4 percent for the S&P 500, analysts now expect growth of just 1.3 percent, FactSet reports.

In the battered materials sector, analysts used to expect earnings growth of 9.4 percent. But since the second quarter began, analysts have cut earnings growth expectations so that they now anticipate materials companies to report a 3 percentdecline in earnings.

That said, it’s not all bad news…”

Full article

“U.S. regulators have proposed designatingAmerican International Group,Prudential Financial and GE Capital for heightened regulatory oversight, in a long-anticipated move aimed at cracking down on risks to markets.

A group of regulators known as the Financial Stability Oversight Council said Monday it had voted to propose dubbing certain nonbank financial companies “systemically important,” or so big their failure could destabilize financial markets.

Regulators did not name the companies involved. AIG, Prudential and GE Capital, the financial services arm of General Electric, all said Monday that they had been notified that the risk council had proposed designating them.

A final determination by the council that a firm is systemically important would trigger extra regulatory scrutiny by the Federal Reserve….”

Full article

“(Reuters) – Web-based software maker Salesforce.com Inc said it would buy marketing software provider ExactTarget for $2.5 billion as it looks to build a marketing platform that will tap increasing use of mobile devices and social networks.

The offer price of $33.75 for each ExactTarget share represents a 53 percent premium to the stock’s closing on Monday on the New York Stock Exchange.

ExactTarget shares rose 53 percent in premarket trading on Tuesday, while Salesforce.com’s shares fell 3 percent to $39.85.

ExactTarget, Salesforce.com’s eighth acquisition in the past year, has 6,000 customers including Coca-Cola Co, Gap Inc and Nike Inc….”

Full article

“WASHINGTON (AP) — U.S. home prices soared 12.1 percent in April from a year earlier, the biggest gain since February 2006, as more buyers competed for fewer homes.

Real estate data provider CoreLogic says prices rose in April from the previous April in 48 states. Price also rose 3.2 percent in April from March, much better than the previous month-to-month gain of 1.9 percent.

Prices in Nevada jumped 24.6 percent from a year earlier….”

Full article

“(Reuters) – Discount chain Dollar General Corp cut the top end of its full-year profit forecast, citing moderating sales growth and a lower gross profit rate, sending its shares down 5 percent in premarket trading.

The company, which prices most of its merchandise below $10, cut the high end of its earnings forecast range to $3.22 per share from $3.30. The low end is unchanged at $3.15.

Analysts on average were expecting a profit of $3.28 per share, according to Thomson ReutersI/B/E/S.

The company said it expected sales of non-consumable items – higher-margin goods such as home products and apparel – to remain under pressure as frugal customers opt for lower-margin products.

However, Dollar General said it expected same-store sales to increase by 4-5 percent through the year as key initiatives, including the rollout of tobacco products, gain traction….”

Full report

Last month was revised to – $37.1b…..

Full report

“West Texas Intermediate crude fell after the biggest gain in a month, amid forecasts that inventories of gasoline expanded last week in the U.S., the world’s largest oil consumer.

Futures retreated as much as 0.8 percent in New York. Gasoline stockpiles probably climbed by1.2 million barrels last week, while distillate supplies, including heating oil and diesel, may have gained 1.5 million barrels, according to a Bloomberg News survey before an Energy Information Administration report tomorrow. Crude inventories declined by an estimated 650,000 barrels last week, sliding from an 82-year high, the survey showed.

“The market is in bad shape,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Demand is sluggish, and supplies are ample.”

WTI for July delivery slid as much as 72 cents to $92.73 a barrel in electronic trading on theNew York Mercantile Exchange and was at $92.83 as of 12:21 p.m. London time. The volume of all futures traded was 8 percent below the 100-day average. The contract rose $1.48 to $93.45 yesterday, the biggest gain since May 3.

Brent for July settlement dropped as much as 46 cents, or 0.5 percent, to $101.60 a barrel on the ICE Futures Europe exchange. The European benchmark grade was at a premium of $8.89 to WTI, up from $8.61 yesterday.

Chart Resistance…”

Full article

“BASF SE (BAS) plans to invest 10 billion euros ($13 billion) in the Asia-Pacific region as it shifts research and procurement to the world’s fastest growing chemical market to help double profitability there.

The Asia-Pacific division, which saw margins deteriorate to 10 percent last year, has a “good chance” to reach the average profitability of the group, Martin Brudermueller, deputy chief executive officer and head of the region, said today at a press conference in Hong Kong. On a group level, BASF aims to lift margins to 20 percent by the end of the decade from a current 14 percent.

The world’s largest chemical company will hire 9,000 people and double sales to 25 billion euros in Asia-Pacific by 2020. Competition in the region is intensifying and BASF is looking to avoid developments in the agrochemical market, where it fell behind peers expanding in Asia.

“The competitive environment has become sharper and more challenging than we had thought,” Brudermueller said today. “We have to change and accelerate the change. We have to be creative and take out costs.”

One-quarter of research and development will take place in the region in an effort to shift the Ludwigshafen, Germany-based company’s focus to a service provider from a chemical producer and differentiate it more from local competitors, Brudermueller said.

Chinese Pressure…”

Full article

“The European Commission is seeking to give itself the power to shut down failing euro-area banks as part of a draft crisis blueprint that defies German calls for a more decentralized approach.

The Brussels-based authority is set to propose that decisions to force losses on crisis-hit lenders’ creditors, as well as other steps to prevent a disorderly collapse, should be taken largely out of national hands, according to a document obtained by Bloomberg News. While the system would include a “newly-created central resolution body,” final decisions would be taken by the commission itself.

“Among EU institutions, the commission is best placed to play this role, bolstered by its experience of bank restructuring during the crisis under state-aid control, and given the need to ensure expeditious and effective decision-making,” according to the document.

The move puts the commission at odds with Germany (GDBR10), which has said that a centralized approach to bank resolution in the euro area should only come once the bloc has taken further steps toward common fiscal and economic policies. German Finance MinisterWolfgang Schaeuble has warned that a strong single authority couldn’t be set up under the EU’s current treaties, and that the euro area should opt in the first instance for a networked approach that is reliant on national regulators.

Both the European Central Bank and the commission have, instead, urged rapid progress toward a centralized system in a bid to bolster confidence in the bloc’s banks, and break the financial link between lenders and sovereigns.

Resolution Agency…”

Full article

“Foreigners’ holdings of Australian government securities fell to the lowest proportion of the total in 2 1/2 years, as an improving global outlook damped demand for the safety of the top-rated debt.

Offshore holdings declined to 68.9 percent of total outstanding debt as of March 31, down from 70 percent three months earlier and the least since the third quarter of 2010, according to government data compiled by Bloomberg. Non-residents owned A$206.4 billion ($200.8 billion) worth of government bonds and bills, down from A$207 billion at the end of the prior quarter.

Australian government bonds fell for a second quarter in the three months ended March 31, the first back-to-back declines since the first half of 2009. Foreign holdings of the nation’s debt peaked at a record 77 percent in June 2012, up from 59 five years earlier, boosted by purchases from foreign central banks.

“The magnitude of those flows are a lot less than they perhaps were a couple of years ago,” said Sally Auld, a Sydney-based interest-rate strategist at JPMorgan Chase & Co. “That’s consistent with this idea that central banks have moved from the build-up phase of their portfolio in Aussie bonds to a maintenance phase.”

Offshore demand for Australian government securities remains strong, with foreign central banks holding notes across the yield curve, Rob Nicholl, head of the Australian Office of Financial Management, said today in Sydney.

Price Declines…”

Full article

“Australia’s central bank said it still has room to cut the benchmark interest rate from its record-low level and judged that the nation’s exchange rate remains high even after the biggest monthly drop since 2011.

Governor Glenn Stevens and his board kept the overnight cash-rate target at 2.75 percent, theReserve Bank of Australia said in a statement today in Sydney. “The inflation outlook, as currently assessed, may provide some scope for further easing, should that be required,” Stevens said. The pause was predicted by 24 of 26 economists surveyed by Bloomberg News….”

Full article

“Japan’s wages rose by the most in a year in April, a gain that supports Prime Minister Shinzo Abe’s campaign to reflate the world’s third-biggest economy after 15 years of falling prices.

Monthly wages including overtime and bonuses rose 0.3 percent from a year earlier to 273,427 yen ($2,746), the Labor Ministry said today in Tokyo. Abe aims to sustain investor and public confidence amid market volatility, with the Topix index of stocks swinging betweens gains and losses today….”

Full article

“The yen weakened as Asian and European stocks gained amid waning speculation that theFederal Reserve will reduce monetary stimulus.

Japan’s currency depreciated beyond 100 per dollar after climbing to the strongest in three weeks yesterday. Australia’s dollar declined versus all of its 16 major counterparts after theReserve Bank said the inflation outlook provided some scope for further monetary easing. South Africa’s rand strengthened for a second day against the U.S. currency amid demand for higher-yielding assets.

“The market is giving back some of its recent moves, with the yen weakening,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The performance of the U.S. economy and Fed policy direction will be important for the yen.”

The yen fell 0.4 percent to 99.90 per dollar at 7:09 a.m. New York time after depreciating to 100.42. It appreciated to 98.87 yesterday, the strongest since May 9. Japan’s currency declined 0.5 percent to 130.85 per euro after gaining 1 percent during the previous two days. The euro was little changed at $1.3091.

Japan’s currency will weaken toward 110 per dollar over the next 12 months, Bank of Tokyo-Mitsubishi’s Hardman said.

The MSCI Asia Pacific Index of shares gained 1.1 percent and the Stoxx Europe 600 Index advanced 0.3 percent.

Fed Stimulus…”

Full article

“Elan Corp. (ELN) won an order from a U.S. judge temporarily blocking Royalty Pharma AG from attempting a $6.4 billion hostile takeover of the Irish drugmaker after Elan sued to halt what it called a “coercive” tender offer.

U.S. District Judge William Pauley in Manhattan yesterday issued a temporary restraining order blocking Royalty and related parties from “consummating or closing defendants’ tender offer” for the outstanding shares of Elan. Pauly scheduled a June 11 hearing to consider whether to issue a preliminary injunction.

Pauly’s order came after Elan filed a complaint claiming that Royalty Pharma made “material misrepresentations” in its revised tender offer. Elan said “shareholders who do not tender their shares may find themselves trapped in a company under Royalty Pharma’s control.” The offer gives stockholders until June 6 to determine whether to waive their shares, Elan said.

Elan, which receives royalties on Biogen Idec Inc. (BIIB)’s multiple sclerosis treatment Tysabri, said yesterday in a yesterday won a ruling from an Irish court restraining Royalty Pharma from distributing a proxy to shareholders. Judge Gerard Hogan left the injunction in place at a hearing today in Dublin pending further hearings this afternoon.

Royalty Pharma on May 20 issued a revised proposal to buy the stock of the company at $12.50 per American depositary receipt, raising its bid from $5.7 billion to $6.4 billion.

Pharmaceutical Royalties…”

Full article

World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …