Economic Calendar

Wednesday, May 9, 2012

Greek Leaders Given Bailout Ultimatum

By Maria Petrakis and Natalie Weeks - May 9, 2012 4:00 AM GMT+0700

Alexis Tsipras of Greece’s Syriza party squared off with political leaders before talks on forming a coalition, handing them an ultimatum to renounce support for the European Union-led rescue if they want to enter government.

Tsipras said he expected Antonis Samaras of New Democracy and Evangelos Venizelos, the former finance minister who leads the Pasok party, to send a letter to the EU revoking their written pledges to implement austerity measures by the time he meets them today to discuss a government alliance. Samaras and Venizelos rejected the request. Samaras said he was being asked “to put my signature to the destruction of Greece.”

Leader of the Greek conservative party New Democracy Antonis Samaras in Athens. Photographer: Aris Messinis/AFP/Getty Images

May 8 (Bloomberg) -- German Chancellor Angela Merkel, Barton Biggs, managing partner and co-founder of Traxis Partners LP, and Carl Weinberg, founder and chief economist at High Frequency Economics, offer their views on European elections, Greece's debt crisis and the outlook for the euro zone. John Taylor, founder and chief executive officer of FX Concepts LLC; Charles Dallara, head of the Institute of International Finance; Andrew Bosomworth, a managing director at Pacific Investment Management Co., and David Blanchflower, a professor at Dartmouth College and a Bloomberg Television contributing editor, also speak. (Source: Bloomberg)

“He interprets, with unbelievable arrogance, the election result as a mandate to drag the country into chaos,” Samaras said late yesterday in televised remarks. “I hope Mr Tsipras will have come to his senses by the time we meet.” Tsipras is due to meet with political leaders from about 5 p.m. in Athens.

The stand-off since the inconclusive May 6 election has reignited European concerns over Greece’s ability to hold to the terms of its two bailouts negotiated since May 2010. With Parliament split and policy makers in Berlin and Brussels urging Greece to stay the course, the country at the epicenter of the debt crisis is again facing the risk of an exit from the euro.

‘Huge’ Repercussions

The repercussions are “potentially huge,” said Gillian Edgeworth, a London-based economist at UniCredit. “The chances of Spain needing official aid would increase, with implications for spillover to others.”

The risk of Greece leaving the euro by the end of 2013 has risen to as high as 75 percent, Citigroup Inc. said May 7.

Greek stocks sank to their lowest level in about two decades yesterday amid the political instability. The benchmark ASE Stock index fell 3.6 percent to 620.54 at the close in Athens, its lowest since November 1992. The Stoxx Europe 600 Index slid 1.7 percent. The euro fell 0.3 percent to $1.3007.

New Democracy and Pasok, rivals until the country’s crisis made them pro-bailout partners in a national government last year, are two deputies short of the 151 seats needed for a majority in the 300-seat chamber. President Karolos Papoulias handed the mandate to build a coalition to Tsipras yesterday, one day after Samaras, who won the election, abandoned his bid to forge a government.

Tsipras said he aimed to link up with parties in a government that would nationalize banks, place a moratorium on debt payments and cancel the bailout and measures such as labor reforms and pension cuts.

‘Plunder’ Greece

“The bailout parties no longer have a majority in parliament to vote for measures that plunder the country,” Tsipras told reporters. “There will be no 11 billion euros ($14 billion) of additional austerity measures; 150,000 jobs will not be cut.”

Samaras said yesterday that his party is prepared to support a minority government as long as it ensured Greece’s membership in the euro and its national interests.

Venizelos said Pasok’s proposal for a national unity government with the participation of all parties with a pro- European orientation was the only solution. Greece must remain “safely” within the euro while pursuing changes to the bailout accord to boost growth, he said.

International creditors urged Greek leaders to hold to the agreed terms of their EU-International Monetary Fund bailouts.

‘No Alternative’

“Greece has to be aware that there is no alternative to the agreed consolidation program if it wants to remain a member of the euro zone,” European Central Bank Executive Board member Joerg Asmussen was quoted as saying in an interview with Germany’s Handelsblatt newspaper to be published today.

German Foreign Minister Guido Westerwelle called on “the authorities in Greece to quickly move toward stability so that a government of reason can be formed,” telling reporters in Berlin that the steps to be taken in return for aid “are not up for negotiation.”

New Democracy won the election with 19 percent of the vote, gaining 108 seats; Syriza came second with 17 percent, winning 52 seats; and Pasok placed third with 13 percent, or 41 seats.

Tsipras met yesterday with the leader of Democratic Left, which won 19 seats in Parliament and rejects austerity measures. As well as talks with Samaras and Venizelos, he’s due to see the head of Independent Greeks, Panos Kammenos, who has 33 seats.

If Tsipras fails to build a working majority, the onus on forming a government will pass to Pasok. Each mandate can last for three days. If the process still fails to yield a coalition, the president must try to broker a government of national unity, the constitution says. If that fails, new elections are held.

New Elections

“A Greek return to the polls in mid-June looks increasingly likely,” Malcolm Barr, an economist at JPMorgan Chase & Co in London, said in a note. “There is little doubt that the drop in support for New Democracy, Pasok has raised the probability of an eventual euro exit.”

Either New Democracy and Pasok will form a government with the Democratic Left or Greece will hold new elections within weeks, said Thanos Veremis, the vice president of the Hellenic Foundation for European and Foreign Policy. New elections are the more likely scenario, in which case New Democracy and Pasok would see a return of voter support, he said. Veremis was an unsuccessful candidate on May 6 for Drasi, a pro-bailout party that failed to reach the threshold for entering the parliament.

“The Greeks have to blow their top to let the world know they are unhappy,” Veremis said by phone on May 7. “Once they do that, they tend to go back to the real world.”

To contact the reporters on this story: Maria Petrakis in Athens at; Natalie Weeks in Athens at

To contact the editor responsible for this story: Tim Quinson at; Jerrold Colten at


Ross Says Looming ‘Freak Show’ May Threaten U.S. Economy

By Jason Kelly - May 9, 2012 2:29 AM GMT+0700

The U.S. economy is at risk of slipping back into recession in 2013 because of likely impasses in Washington over taxes and mandatory spending cuts, said Wilbur Ross, the billionaire investor.

“That’s too big a hit for the economy to take,” Ross said today during a discussion at Bloomberg Markets’ Global Financial Elite lunch in New York. “We’re going to have another freak show at the end of the year.”

Wilbur Ross, chairman and chief executive officer of WL Ross & Co. LLC. Photographer: Scott Eells/Bloomberg

Ross said he’s worried that President Barack Obama and Congress won’t be able to agree on extending tax cuts passed under former President George W. Bush that expire at the end of 2012, or on mandatory spending cuts tied to the extension of the country’s debt-ceiling agreement. He said he’s optimistic about the U.S. economy between now and then, and found a new way to describe the shape of the recovery beyond a “W.”

“It’s more like punctuation,” he said. “Dots, dashes, question marks and an occasional exclamation point.”

W.L. Ross & Co., his namesake firm known for buying distressed assets in industries from steel to financial services, is largely avoiding investments in what he called “the Club Med countries” of Europe, according to Ross.

“It’s way too unsettled, even for our tastes, to be in Spain or countries like that just yet,” he said, adding that he has made deals in countries including Ireland. “You have to be very selective within Europe.”

To contact the reporter on this story: Jason Kelly in New York at

To contact the editor responsible for this story: Christian Baumgaertel at


Panasonic Rises After Report It May Swing to Profit

By Mariko Yasu and Shunichi Ozasa - May 9, 2012 8:15 AM GMT+0700

Panasonic Corp. (6752), Japan’s largest appliance maker, rose the most in two months in Tokyo trading after the Nikkei newspaper said it may post a 50 billion yen ($626 million) profit this fiscal year.

Panasonic advanced as much as 4.9 percent, the biggest intraday gain since March 9, to 605 yen and traded at 601 yen as of 9:58 a.m. Japan’s benchmark Nikkei 225 Stock Average lost 1.3 percent.

Attendees watch a presentation wearing Panasonic 3D glasses. Photographer: David Paul Morris/Bloomberg

The Osaka-based manufacturer, which has said it may post a record 780 billion-yen loss for the year ended March 31, may return to profit this year because of restructuring, the Nikkei reported, without saying where it got the information. The 50 billion-yen projection compares with the 106 billion-yen average of 18 analyst estimates compiled by Bloomberg.

Operating profit may rise to about 250 billion yen this year from 30 billion yen in the previous 12 months, the Nikkei reported. The projection compares with the 241 billion-yen average of 19 estimates compiled by Bloomberg.

Yuko Hosaka, a spokeswoman for Panasonic, said the company wasn’t the source of the report and that it will disclose its earnings May 11.

Panasonic’s revenue may be unchanged this year at about 8 trillion yen while television sales will probably fall below last year’s approximately 18 million units, the Nikkei said. Solar-cell sales will be buoyed by a government subsidy program, the report said.

Panasonic said in February it may post a 780 billion-yen loss for the year ended March 31, the most since the company was founded in 1918, after natural disasters disrupted production while the surging yen eroded overseas earnings and the global economy slowed.

President Fumio Ohtsubo, set to step down as president next month, has said he’s eliminating jobs, shifting output overseas and closing display factories in an attempt to transform Panasonic into a leader in solar panels and rechargeable batteries.

To contact the reporters on this story: Mariko Yasu in Tokyo at; Shunichi Ozasa in Tokyo at

To contact the editor responsible for this story: Michael Tighe at


S&P 500 Declines to Lowest Level in One Month on Greece

By Rita Nazareth - May 9, 2012 3:40 AM GMT+0700

U.S. stocks retreated, sending the Standard & Poor’s 500 Index to the lowest level in almost a month, as political tension in Greece intensified concern about a euro exit and a deepening of the region’s debt crisis.

Equities trimmed earlier losses after the S&P 500 dropped below 1,350, a so-called support level being watched by traders. Hewlett-Packard (HPQ) Co. and Bank of America Corp. fell at least 2.1 percent to pace declines among the biggest companies. McDonald’s Corp., the world’s largest restaurant chain, slumped 2.1 percent as April sales trailed projections. Fossil Inc. (FOSL) plunged 38 percent, the most since 1995, after the owner of the namesake watch brand reduced its full-year earnings forecast.

May 8 (Bloomberg) -- Bloomberg’s Trish Regan, Adam Johnson and Alix Steel report on today’s ten most important stocks including Fluor, LinkedIn and Berkshire Hathaway. (Source: Bloomberg)

May 8 (Bloomberg) -- Michael Darda, chief economist and chief market strategist at MKM Partners LP, talks about the outlook for equity markets, investor sentiment and the prospects for a fiscal crisis. Darda speaks with Betty Liu, Joshua Lipton and Dominic Chu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

May 8 (Bloomberg) -- U.S. stock-index futures declined as Greek political leaders struggled to form a government, raising concern the Mediterranean nation may default on its debt as early as next month. (Source: Bloomberg)

The S&P 500 slid 0.4 percent to 1,363.72 at 4 p.m. New York time, trimming a loss of as much as 1.6 percent. The Dow Jones Industrial Average fell 76.44 points, or 0.6 percent, to 12,932.09 for a fifth day of losses. Greek stocks sank to a two- decade low. About 7.8 billion shares changed hands on U.S. exchanges, or 17 percent above the three-month average.

“It’s the unknown in Europe affecting the market,” said Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania. His firm manages about $6.5 billion. “If Greece does exit the euro, will there be contagion? It could have a negative reverberation throughout the globe.”

Equities fell as Greece’s leaders met for a second day to try to form a government after an election that raised questions about the nation’s membership of the euro. Alexis Tsipras, leader of the Syriza party who has vowed to rip up the terms of Greece’s bailout, was handed the mandate to form a government after Antonis Samaras of New Democracy failed to reach a deal.

Euro Exit

Concern about the European debt crisis helped drive the S&P 500 down 2.5 percent in May. The situation in Europe could get “worse” before it gets better, according to James McDonald, chief investment strategist at Northern Trust Corp., whose firm manages $715 billion. John Taylor of hedge fund FX Concepts LLC said Greece will probably leave the euro as soon as next month as the government runs out of cash and European institutions fail to lend more to the nation.

“This summer I think is very likely,” Taylor, founder and chief executive officer of FX Concepts in New York, said today in an interview on Bloomberg Television’s “Inside Track” with Erik Schatzker. “The Europeans aren’t going to give them the money, the International Monetary Fund’s not going to give them an OK. They will be out of money in June.”

Stocks pared losses after the S&P 500 dipped below 1,350 for only about 15 minutes this morning. The market found support at that level, according to Michael Shaoul, chairman of Marketfield Asset Management in New York.

‘Buy the Dip’

“Once that held, you’ve seen a willingness to buy the dip in the U.S. market in names that people have become comfortable with,” said Shaoul. His firm oversees more than $1.6 billion.

Eight out of 10 groups in the S&P 500 retreated today as consumer discretionary, financial and commodity companies had the biggest declines. Utilities and health-care shares, which are less-tied to economic growth, rose. Hewlett-Packard dropped 2.3 percent, the most in the Dow, to $23.32. Bank of America sank 2.1 percent to $7.79.

McDonald’s (MCD) lost 2.1 percent to $93.55. Sales at stores open at least 13 months rose 3.3 percent worldwide last month, trailing estimates, as sales growth slowed in the U.S. Analysts projected a gain of 4.3 percent, the average of 13 estimates compiled by Consensus Metrix. Sales in the U.S. advanced 3.3 percent. Analysts estimated an increase of 5.2 percent.

Electronic Arts (EA) dropped 4.3 percent to $14.48. The second- largest U.S. video-game publisher tumbled after its forecasts for the current quarter and fiscal year fell short of analysts’ estimates. The company plans to cut jobs.

Most in S&P 500

Fossil plunged 38 percent, the most in the S&P 500, to $78.52. Wholesale revenue in Europe in the first quarter rose 4.7 percent from a year earlier, the Richardson, Texas-based company said today in a statement. Chief Financial Officer Mike Kovar said in a February conference call that wholesale and retail activity in the U.S. and Europe would increase in a “low double-digit area” in the first quarter and for the year.

Discovery Communications Inc. (DISCA) retreated 6.1 percent to $50.80. The owner of cable networks such as Animal Planet and TLC reported a 28 percent decline in first-quarter profit after a one-time gain last year on Oprah Winfrey’s network, OWN.

Wynn Resorts Ltd. (WYNN) slid 4.8 percent to $119.23. The casino company founded by billionaire Steve Wynn reported first-quarter earnings fell 19 percent, missing analysts’ projections on lower winnings in Las Vegas.


Dendreon Corp. (DNDN) tumbled 25 percent to $8.75. The maker of the prostate cancer drug Provenge said growth this year will be “modest” and its first-quarter loss fell short of estimates.

Investors should buy utilities because the group tends to do better from May through October, when the S&P 500 averages its worst six-month return of the year, according to Sanford C. Bernstein & Co.

A gauge of utilities has risen at an average annualized pace of 12 percent from May through October since 1970 (S5UTIL), compared with a gain of 4.5 percent for the S&P 500, according to data compiled by Bernstein. The group was the second-worst performing among 10 S&P 500 industries, falling 1.7 percent this year through yesterday, as investors snapped up financial and technology shares in anticipation of an economic rebound.

“With political risk rising in Europe and U.S. economic indicators showing tepid growth, we believe investors should consider holding high yielding, low beta regulated utilities during the traditionally low return, high volatility months of May through October,” Hugh Wynne, a New York-based analyst with Bernstein, wrote in a note yesterday.

Facebook IPO

Facebook Inc. (FB) officials are touting growth prospects for the largest social network in meetings this week in New York and Boston with hundreds of would-be investors before its record initial public offering. Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman led a presentation in Boston today. They were joined yesterday in New York by Chief Executive Officer Mark Zuckerberg.

Facebook plans to raise as much as $11.8 billion in its IPO, the biggest ever for an Internet company. Zuckerberg, 27, has had to pitch his business model during Facebook’s years as a private company and probably won’t have trouble communicating the mission to prospective public investors, said Herman Leung, an analyst at Susquehanna International Group.

“It’s important to hear directly from him for investors who are about to put millions and millions of dollars into a company,” said Leung, who is based in San Francisco. “Convincing others now they should buy shouldn’t be that hard for a company that has amassed a user base of over 900 million.”

To contact the reporter on this story: Rita Nazareth in New York at

To contact the editor responsible for this story: Nick Baker at