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Pre-Market Primer: European Leaders Mull Eurobonds While Specter of 'Grexit' Looms


EU leaders are in Brussels to discuss sharing fiscal burdens and Germany borrows money practically for free.

MINYANVILLE ORIGINAL Yesterday's optimism is gone as European leaders mull collective borrowing and the possibility of a Greek exit from the eurozone.

European leaders are in Brussels today for an informal summit to discuss, yet again, the region's ongoing financial crisis. Francois Hollande, the new French president, is likely to butt heads with Angela Merkel, his German counterpart, over eurobonds and collective borrowing for the eurozone. Yesterday, the IMF and OECD joined the chorus supporting shared fiscal liability that could take the pressure off of Spain, whose borrowing costs are hardly sustainable.

Yesterday, Lucas Papademos, the former Greek prime minister, gave markets a scare when he warned that the possibility of a Greek exit from the eurozone is actually possible.

"Although such a scenario is unlikely to materialize and it is not desirable either for Greece or for other countries, it cannot be excluded that preparations are being made to contain the potential consequences of a Greek euro exit," he told Dow Jones.

Not long after, Papademos denied that there are plans underway for the dreaded (or painfully necessary) "Grexit" from the euro. Still, markets are spooked. Asian and European trading was down as well as US futures. Dow (^DJI) ticked down 0.01% to 12,502.81 and Nasdaq (^IXIC) futures dropped 0.29% to 2,839.08. Futures on the S&P 500 (SPY) are up 0.05% at 1,316.63.

Meanwhile, German bonds are rallying. Germany sold 4.555 billion euros of two-year bonds for a record-low yield of 0.07%. This is also the first time that German bonds came with a coupon of 0.0%. The Germans slashed the coupon when they saw that demand for their debt was so strong, as investors crave safety over profits.

At 10:00 a.m., April new home sales in the US will be reported. Economists are expecting sales to pick up over March. A 0.3% monthly increase in the FHFA House Price Index is also expected. At 10:30 a.m., the EIA will tally US petroleum inventories. Crude oil prices are still down with WTI trading at $91.01/barrel, down 0.91%.

Dell (DELL) shares fell 13.13% since yesterday's close after the company reported disappointing revenue and earnings for the last quarter. In the BRIC countries, Dell saw a 4% increase in revenue, which only slightly offset the loss of revenue. The consumer segment of Dell's business suffered the most, declining by 12% on a yearly basis.

Massachusetts has subpoenaed Morgan Stanley (MS) to investigate analyst discussions with certain investors before the Facebook (FB) IPO. A Morgan Stanley analyst lowered his revenue forecast for the company not long before the offering, and this might have been privy only to select clients.

Hewlett-Packard (HPQ) and Pandora (P) will report earnings after the bell today. HP has recently considered laying off 10% of its workforce. In the conference call following the earnings release, executives will probably confirm the extent of the layoffs.

Twitter: @vincent_trivett
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