“When I have to depend upon HOPE in a trade, I get out of it” — Jessie Livermore

1. S&P lowers Italy’s credit-rating outlook — Standard & Poor’s Ratings Services late last week lowered its outlook on Italy’s A-plus sovereign credit rating from stable to negative, citing potential political gridlock that could derail the government’s plan to balance its budget by 2014.
2. Greek PM rules out restructuring — Greek Prime Minister George Papandreou was due to hold a cabinet meeting today about a new four-year fiscal plan to reduce the country’s €340B ($484B) of sovereign debt after yesterday ruling out a restructuring of that debt.
3. Moody’s considering downgrades for U.K. banks — Moody’s is placing 14 U.K. banks on review for downgrades, including Lloyds (LYG) and Royal Bank of Scotland (RBS), due to the authorities indicating that they will be less likely to bail out the banks in the future. The rating agency also changed Barclays’ (BCS) outlook to negative and maintained the same prognosis for HSBC (HBC).
4. Pressure on banks from probes intensifies — despite their protestations of innocence, the scrutiny on banks by the authorities continues to increase. The SEC is examining whether Bank of New York Mellon (BK) and State Street (STT) fairly charged pension-fund clients for currency trading, a source said. The probe follows investigations by the Justice Department and three state attorney generals. Meanwhile, other sources said New York AG Eric Schneiderman has extended his probe into mortgage practices at leading banks to include Royal Bank of Scotland (RBS), UBS (UBS), JPMorgan Chase (JPM) and Deutsche Bank (DB), bringing to seven the number of firms under scrutiny.
5. First-quarter GDP growth remains at 1.8% — In the first quarter, the U.S. economy expanded at the same 1.8% clip that was initially forecast, the Commerce Department said in its second estimate of quarterly gross domestic product released Thursday. The second estimate comes in well below expectations of 2.2%.
6. Foreclosure sales tick higher — sales of homes in foreclosure rose to 28% of all home sales in Q1, nearly six-times as much as in a typical healthy housing market. “It’s an astronomically high number,” RealtyTrac’s Rick Sharga said, though it is down from a peak of 37.4% in 2009.
7. Latest sentiment figures from the American Association of Individual Investors (AAII), bullish sentiment declined from 26.7% to 25.6% — chart courtesy from the Bespoke Investment Group.

The week ahead — Economic data from Econoday.com:

“New Indicator:CFO Magazine gave Excellence awards to Worldcom’s Scott Sullivan (1998), Enron’s Andrew Fastow (1999), and to Tyco’s Mark Swartz (2000). All were subsequently indicted” — R. Lowenstein

1. Strauss-Kahn arrest clouds Greek bailout talks — Dominique Strauss-Kahn, head of the IMF, was arraigned in Manhattan attempted rape charges.
2. U.S. hits $14.3 trillion debt limit — the government maxed out its borrowing ability, raising fears of a US default. To stave off a cash shortage, Treasury Sec’y Timothy Geithner diverted money to be invested in two big gov’t pensions for use elsewhere. He warned the US faces default by Aug 2 2011 if the debt ceiling isn’t raised.
3. Strauss-Kahn steps down as head of IMF — Dominique Strauss-Kahn has resigned as managing director of the IMF following his arrest on sex-assault charges in the U.S. John Lipsky, the organization’s first deputy managing director, remains as the acting head.
4. Japan slides back into recession — Japan’s GDP fell 0.9% in Q1 2011 from the previous quarter as the earthquake, tsunami and nuclear crisis in March hurt business and consumer spending as well as supply chains. The fall was greater than a forecast drop of 0.5% and represented a 3.7% annualized decline. With GDP contracting 0.8% in Q4 2010 from the previous period, Japan officially entered recession in Q1.
5. European Central Bank threatens to pull the plug on Greek lending — The European Central Bank has threatened to stop lending to banks using Greek government bonds as collateral if Athens changes the terms of the debt, a move which could bring down the country’s banking system.

The week ahead — Economic data from Econoday.com:

“With enough inside information and a million dollars, you can go broke in a year.” – Warren Buffet

1. Standard & Poor’s downgrades Greece’s rating — Standard & Poor’s Ratings Services downgraded Greece’s credit rating, dealing another blow to the debt-laden European nation. S&P lowered its long- and short-term ratings on Greece to B and C, respectively, from BB- and B previously. The ratings remain on credit watch with negative implications.
2. China hikes reserve requirement ratio for banks — The People’s Bank of China lifted the ratio of funds domestic banks must set aside as reserves on May 12, the fifth such hike this year amid persistent inflation concerns.
3. Finland approves Portugal aid plan — Finland’s caretaker government has won support from the opposition Social Democratic Party that enables it to approve the €78B ($112.4B) EU-IMF bailout for Portugal.
4. Deficit on course to exceed $1T again — a 45% year-on-year increase in tax revenues in April couldn’t prevent a deficit of $40.5B for the month, putting annual net spending on track to pass $1T for the third year in a row. The deficit is set to reach $1.4T this year, up from $1.29T in 2010.
5. House to propose bill to replace Fannie and Freddie — a bipartisan-sponsored bill set to debut in the House today would replace Fannie Mae and Freddie Mac with at least five private companies that would issue mortgage-backed securities with explicit federal guarantees.

The week ahead — Economic data from Econoday.com:

“Commodity takes the stairs up and the elevator down” — anonymous

1. President Obama announced that the United States has killed Osama bin Laden, the leader of al Qaeda.
2. India steps up rate-hike pace to curb inflation — The Reserve Bank of India on Tuesday hiked interest rates by a larger-than-expected 50 basis points, saying that containing inflation has become more important than short-term growth.
3. Australia keeps interest rates on hold — The Reserve Bank of Australia Tuesday kept its key cash rate on hold 4.75%, a level it has been at since November.
4. U.S. gets three more weeks to avoid default — the Treasury will begin to take ‘extraordinary measures’ on Friday that, along with better-than-expected tax revenues, will extend by three weeks the date at which the U.S. will hit its $14.29T debt ceiling.
5. Portugal secures €78B bailout — Portugal has reached a deal with the EU and IMF for a €78B ($116B) three-year bailout that sets a target of reducing the budget deficit to 3% of GDP by 2013 from 9.1% last year.

The week ahead — Economic data from Econoday.com:

“It wasn’t raining when Noah built the ark” — Warren Buffett

1. S&P cuts Japanese auto outlook to negative — Standard & Poor’s Ratings Services cut its outlooks on six Japanese auto companies, including Toyota Motor Corp. (7203.TO, TM) and Honda Motor Co. (HMC, 7267.TO), to negative due to production cuts following the March earthquake and tsunami.
The move indicates the increased likelihood of a downgrade for the automakers and suppliers, who have struggled with parts shortages since last month’s disaster. A host of companies in the electronics, industrial and other sectors have face supply-chain problems in the wake of the catastrophe.
2. Misrata, Libya under rebel control — the battle for Libya continues to shake the Middle East as Gaddafi forces bombarded rebel troops along a ferociously contested strip of Misrata Sunday.
3. Greek deficit exceeds forecasts — Greece’s budget deficit in 2010 was 10.5% of GDP, significantly higher than estimated by either the Greek government or the EU. The latter had calculated a figure of 9.6% for 2010 and forecast the deficit would be 7.6% at the end of this year.
4. S&P slashes Japan outlook — S&P cut its outlook on Japan to Negative from Stable, and affirmed the country’s AA- rating, warning that the cost of last month’s earthquake will further hurt weak public finances unless divided politicians agree to raise taxes. Japan’s public debt, already double the size of its $5T economy, could increase even more to pay for reconstruction costs – estimated by S&P at ¥20-50T ($245B-$613B) vs. the government’s ¥16-25T estimate.
5. Bernanke navigates first ever conference — Ben Bernanke avoided any serious gaffes at the first ever post-FOMC press conference by a Fed Chairman. Bernanke said rates would stay at 0-0.25% for another “couple of meetings” at least. He also expects the end of QE2 in June to have little impact on markets.
6. EU opens CDS probe into 16 banks — the European Commission has opened two antitrust investigations into the market for credit default swaps. The probe includes 16 major U.S. and European banks, including JPMorgan (JPM), Barclays (BCS), HSBC (HBC) Citigroup (C) and Goldman Sachs (GS).

The week ahead — Economic data from Econoday.com: