JPM May Face $4.2Bn 2Q Loss, Time To Buy FB, Bad News From Germany, Spain & Portugal: Wall Street News Digest 6/5/12

by Beth Connolly on June 5, 2012

Police clashed with protesters as Spanish workers staged a 24-hour general strike on March 29 against the government's new labor reforms, austerity cuts, and soaring unemploymentWall Street doesn’t ‘like’ Facebook [Biz Smart] Facebook has lost nearly a third of its value since its heavily hyped IPO, but experts think the stock is close to bottoming out and you might want to “friend” it soon. “I think Facebook will still go down a ways before it finds a stable level, but then investors will start to bid it back up,” analyst Roger Kay of Wayland-based Endpoint Technologies said yesterday after the stock fell 3 percent to close at $26.90 a share. That’s the lowest finish yet for Facebook, which went public less than three weeks ago at $38.

Global downturn puts investors, companies in retreat [Reuters] Gripped by fears that Europe’s debt crisis is driving the world economy into a ditch, companies are delaying plans to raise capital and canceling deals, while investors are taking refuge in cash or any other place they think their money will be safe. The retreat has been so acute that yields on German two-year bonds have gone negative, meaning investors have become so wary of losses elsewhere that they are willing to pay for the privilege of lending money to the German government. Stocks and commodities have been hammered. And with the economic picture dimming in the United States and major developing economies, including Brazil, India and China, brave is the major corporation willing to take on new workers. The pace of hiring in the United States in May was the slowest in a year.

German industry orders slump as foreign demand falters [Reuters] German industrial orders fell at their fastest rate since November 2011 in April as orders from abroad dried up, adding to signs that Europe’s largest economy is heading for a slowdown. Seasonally and price-adjusted order intake sank 1.9 percent on the month, Economy Ministry data showed on Tuesday, well below the consensus expectation for a decline of 1.0 percent in a Reuters poll of 34 economists. The fall was driven by a 3.6 percent drop in orders from abroad. Orders for consumer and capital goods were the hardest hit, falling 5 percent and 3.3 percent respectively.

World markets hesitant ahead of G7 finance meeting [SFGate] World stock markets faltered Tuesday ahead of an emergency conference call of finance ministers and central bank presidents from the world’s seven industrialized powers to discuss Europe’s worsening debt crisis. The private discussion involves officials from the United States, Japan, Germany, France, Britain, Italy and Canada. U.S. officials have said Washington expects more action to strengthen the European banking system in the next two weeks before a meeting of the Group of 20 major economies in Los Cabos, Mexico, later this month.

Unemployment spike sets Portugal up for second bailout [Reuters] Surging unemployment is stretching Portugal’s austerity program to breaking point, and its international lenders are likely to respond by giving the country more time to hit its budget targets, likely paving the way for a second bailout. Portugal passed the latest of several performance reviews under its 78-billion-euro rescue package on Monday. But inspectors from the European Union and International Monetary Fund said the soaring jobless rate required “decisive policy action”, adding fuel to a region-wide debate on whether to extend or row back on the austerity programs that have put a brake on growth in Europe’s most vulnerable economies, including Portugal.

Spain Warns Market Access Being Shut [WSJ] Spain’s Budget Minister Cristobal Montoro on Tuesday urged euro-zone partners to act faster to help support its enfeebled banks, saying that the government has effectively lost access to capital markets because of steep risk premiums demanded by sovereign bond investors. In making this dramatic admission, Mr. Montoro joined recent calls by the Spanish government for direct aid from European Union institutions for Spanish banks as the government hopes to avoid a full-blown bailout package. The matter has gained urgency after Madrid was forced into a €19 billion ($23.75 billion) rescue of lender Bankia SA, BKIA.MC +1.67% while the government’s borrowing costs have surged to record highs with yields on Spanish 10-year bonds staying above the 6% mark for the third straight week. Midday in Europe, the yield was at 6.37%. By comparison, the yield on the German 10-year bond, considered a haven for investors, was at 1.20%.

U.S. economic outlook worsens after jobs report [CBS] The faltering U.S. job market has prompted economists to take a much dimmer view of the country’s growth prospects. That’s a shift from just a few weeks ago, when many were upgrading their forecasts. Friday’s surprisingly bleak jobs report for May followed a spate of disappointing data. Manufacturing activity slowed, an index of home sales fell and consumer confidence tumbled. Mounting troubles in Europe and elsewhere have heightened economists’ concerns. “The latest economic data have been decisively disappointing,” Michael Feroli, an economist at JPMorgan Chase, wrote in a client note.

Singapore Family Sedan Matches Cost of a U.S. Home [Bloomberg] Vinay Mathur gave up on buying a new car in Singapore as the cost of a permit rose to the highest in 17 years. He settled for a two-year-old BMW 3-series. By the time we began seriously to think of buying a car, license prices had shot up,” said Mathur, 42, referring to the so-called certificates of entitlement, which are auctioned by the city-state and used to control congestion. At S$86,889 ($67,000) just for a permit, the total price of a Volkswagen Passat in Singapore is about the same as the median U.S. metropolitan home. A 25 percent jump in residents in seven years, coupled with the world’s highest proportion of millionaire households, has fueled a 10-fold surge in license prices over three years. The government said last week it will postpone plans to cut the number of permits available and slow traffic growth, responding to the outcry over soaring prices.

JPMorgan Faces $4.2 Billion Trading Loss, ISI Forecasts [Bloomberg] JPMorgan Chase & Co. (JPM), the largest U.S. bank, may report a $4.2 billion second-quarter trading loss in its chief investment office, according to an estimate by International Strategy & Investment Group Inc. The pretax loss would help cut second-quarter earnings to 65 cents a share, a 30 percent decline from an earlier estimate of 93 cents, Ed Najarian, an ISI analyst, said in a note yesterday. Weaker-than-expected trading and investment banking revenue coupled with mark-to-market private-equity losses will also weigh on results, Najarian said. JPMorgan Chief Executive Officer Jamie Dimon, 56, said last month the firm lost about $2 billion on trades conducted at its CIO unit, which is charged with managing the bank’s idle cash to earn a profit while minimizing risk. Dimon has said losses could grow and it might take the rest of the year to liquidate the New York-based lender’s trades.

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