•Equities stage broad-based pullback overnight driven by a mix of 1) catch-up to the USsell-off on Friday, 2) concerns over GS allegations, 3) Increased property tightening in China,4) UK elections polls getting closer (increasing risk of a hung parliament), and 5) continuedspread of the Icelandic ash plume.
•China underperformed on further real estate tightening from China's cabinet which onSaturday laid out further detailed measures for keeping the property sector in check (i.e.banks can stop lending to buyers of 3rd homes, banks were instructed not to lend to thosewho could not produce local tax/social security payment proof, etc. and follows lastThursday's announcement of the increase in down payments for 2nd home buyers)
•Also in Asia, India's central bank may raise interest rates for the second time in a month perBloomberg and Japan's household sentiment index rose to the highest level in more than twoyears in March.
•On the Greek front, Greek Yield Premium to German Bunds rose to fresh wides (out 21bpstoday to 452bps) following reports that the EU/IMF mission will be delayed until Wed due tothe Icelandic volcano eruption. Greece's finance minister dismissed speculation that hisgovernment would be forced to introduce tougher austerity measures in return for securing a45 billion euro loan package.
•In the UK, Liberal Dems and their leader Nick Clegg continue to gain in the British pollsahead of that country's election; at the current pace, Bloomberg says the Labor Party wouldwin the most seats in a new parliament.
•Bank failures - there were 8 bank failures this weekend, brining the YTD total to 50. TDBank bought 3 failed banks in FL and said it could make more purchases in the state.Mitsubishi's Union Bank in California also bought a failed bank from the FDIC thisweekend.
•Goldman - slew of articles out this weekend relating to the SEC news from Fri. Goldmanreleased a statement after the close on Fri providing some details on the Abacus deal inquestion (inc. that Goldman lost $90MM as a long investor in the deal and that ACA selectedthe portfolio). Goldman said it knew the SEC was investigating but was stunned by Fri'saction – Goldman was never given a chance to settle the case according to the Journal. Whilethe SEC complaint only named a single Goldman employee, the NYT says that seniorcompany officials oversaw the mortgage unit in question. Germany's gov't is consideringwhether to pursue legal action while Britain's G Brown called the firm "morally bankrupt".In the US, Representatives Elijah E. Cummings, Democrat of Maryland, and Peter DeFazio,Democrat of Oregon, are asking the S.E.C. to investigate all the Abacus deals issued byGoldman, and especially those insured by A.I.G. Public criticism of the company could riseas it is expected to post strong earnings on Tues and set aside ~$5.5B for employee bonuses.WSJ/NYT
•Goldman to face "profound" investigation relating to its role in helping Greek skirtbudget rules - The European Union investigation into Goldman Sachs Group Inc.'s role inproviding swaps to the Greek government to help reduce its budget deficit will be "profoundand thorough," EU Monetary Affairs Commissioner Olli Rehn said
•SEC is said to be looking into whether other soured mortgage deals on Wall St may havemisled investors – the WSJ says that "among the firms that created mortgage deals that soonwent sour were Deutsche, UBS, and Merrill".
•Bill Clinton says Goldman case helps regulatory passage - Bill Clinton, the former USpresident, said: "At 10 o'clock on Friday morning, I thought the odds were about 60 per centor 70 per cent this bill would pass." But then "the odds went up to about 90 per cent, becausewhen the SEC brought that fraud suit against Goldman, I think that was the clincher". FT
•Mortgage delinquencies drop in Mar for second consecutive month; some see turningpoint in housing (WSJ)
V-Shaped recovery possible amid surging corporate profits - Surging profits areprompting economists to revise their estimates for growth, tilting the recovery more in thedirection of a V-shape – Bloomberg
•Airlines – the IATA estimates that the economic impact of the Icelandic volcano and therelated travel bans was greater than the 9/11 attacks. Reuters
•Corp Credit from JPMorgan's E Beinstein - We expect High Grade bond spreads to widenin the short term and move to a TACTICAL UNDERWEIGHT recommendation, whilemaintaining out YE target of 125bp. HG bonds closed at 130bp on Friday, up from 127bp onThursday (in our index brokers were 19bp wider, banks were 6bp wider on the day). Reasonsfor short-term downgrade: 1) Goldman SEC inquiry; 2) financial reform bill; 3) HG credit acrowded trade; 4) investors likely to take profits after strong rally.
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