RBC Capital Markets

February marks the first three-months of consecutive declines in restaurant sales in almost three years as Bloomberg reports consumers caught in "an emotional moment" spooked by higher payroll taxes, surging healthcare premia, and spiking energy costs. "February was pretty ugly" for many chains after January delivered an initial blow." Malcolm Knapp notes that "it's important to keep in mind that companies also are facing unusually tough comparable sales because of favorable weather in 2012," so the result is an industry that’s been "a lot softer so far this year." "People are acting fearfully, or you could almost say rationally in a way,” because it’s not surprising they change their dining habits when they feel less confident; as once again it's the middle class that appears under pressure. Casual dining is "definitely being squeezed" because "it's not food on-the-go and it's not high-end food for people trying to treat themselves."

With a modest premium over yesterday's closing price (and 25% premium to Jan 11th price), and thanks to a big hand from Microsoft (with a bridge not an equity participation), Michael Dell (and Silver Lake) are taking Dell private.

• *DELL TO BE ACQUIRED BY MICHAEL DELL-SILVER LAKE FOR $13.65-SHR
• *DELL TO BE BOUGHT IN DEAL VALUED AT $24.4 BILLION :DELL US
• *DELL DEAL TO BE FINANCED BY FUNDS INCLUDING $2B MICROSOFT LOAN
• *DELL SAYS THERE IS NO FINANCING CONDITION :DELL US
• *DELL PACT PROVIDES GO SHOP PERIOD FOR 45 DAYS         :DELL US

Funding by BofAML, Barclays, CS, and RBC - better hope the CLO demand keeps up. Full PR below:

• Obama Picking Lew for Treasury Fuels Fight on Budget (BBG)
• Deutsche Bank Bank Made Huge Bet, and Profit, on Libor (WSJ)
• Spain Beats Maximum Target in First 2013 Debt Sale (BBG) - In other news, the social security fund is now running on negative?
• "Icahn is also believed to have taken a long position in Herbalife" (NYPost) - HLF +5% premarket
• Lew-for-Geithner Switch Closes Era of Tight Fed-Treasury Ties (BBG)
• Turkey Beating Norway as Biggest Regional Oil Driller (BBG)
• Greek State Firms are Facing Closure (WSJ)
• Draghi Spared as Confidence Swing Quells Rate-Cut Talk (BBG)
• China’s Yuan Loans Trail Estimates (BBG)
• SEC enforcement chief steps down (WSJ)
• CFPB releases new mortgage rules in bid to reduce risky lending (WaPo)
• Japan Bond Investors Expect Extra Sales From February (BBG)

• Turns out no free lunch after all: Greeks rage against pension calamity (Reuters)
• Athens banks told of debt buyback ‘duty’ (FT)
• U.N. Gives Palestinians 'State' Status (WSJ)
• Obama's Cliff Offer Spurned (WSJ)
• Republicans Reject Obama Budget as He Sells It to Public (Bloomberg)
• Macau Gangster Who Missed Boom to Be Freed After 14 Years (Bloomberg)
• China Economic Optimism Returns in Poll as Xi Beats Hu (Bloomberg)
• Spain May Escape European Bailout, Former ECB Board Member Says (Bloomberg)... but they won't
• After a bashing, BOJ weighs "big bang" war on deflation (Reuters)
• Recession Left Baby Bust as U.S. Births Lowest Since 1920 (Bloomberg)
• Japan unveils second Y880bn stimulus package (FT)

• Greek Aid Payment Call Won’t Be Made Next Week, EU Official (Bloomberg)
• Eurozone faces brinkmanship on Greece (FT)
• Pressure Rises on Fiscal Crisis (WSJ)
• The JC Penney massacre continues (BBG) - In other news, any minute now Bill Ackman will get that 15x return...
• SEC left computers vulnerable to cyber attacks (Reuters) cue "back door Trojan" jokes
• Former Goldman trader accused of fraud (FT)
• Elizabeth Warren's Inadvertent Best Friends: Wall Street and Republicans (BusinessWeek)
• Zurbruegg Says Managing SNB Currency Reserves Is Major Challenge (BBG)
• Obama ally leads push on fiscal cliff (FT)
• Britain threatens to block banking union (FT)
• PBOC’s Zhou Says China’s Economy Improving as Data Due (Bloomberg)
• China slaps duties on steel tube imports (FT)
• Obama to Make Statement on Economic Growth, Cutting Deficit (Bloomberg)

Market indexes and recessions are two very different data series...

~ Doug Short

As if depressing PMI data out of China overnight was not enough (it was certainly enough to send the Shanghai Composite tumbling 2.08% to 2024.8 and just off fresh 4 year lows), we then got Europe to join in the fray with a composite PMI print of 45.9, down from 46.3, and a miss to expectations of a modest rise to 46.6 (driven by a manufacturing PMI of 46.0 up from 45.1, and a Services PMI down from 47.2 to 46.0). The biggest surprise was the sheer collapse in French manufacturing data which tumbled from 46.0 to a 4 year low of 42.6 on expectations of a rise to 46.4, which sent the EURUSD firmly into sub 1.30 territory and not even several good paradoxical bond auctions from Spain (because a good auction here means no bailout, means those who bought the bonds will soon suffer big losses) have managed to dent the very poor overnight sentiment which now implies a European GDP contraction of -1% of more. Reality has also halted the global easing euphoria (the USDJPY is now 40 bps below where the BOJ announced the injection of another Y10 Trillion), and has everyone wondering, now that QEternity is priced in, what next?

Fed Chairman Bernanke should be impeached if he does not restore Fed surveillance over primary dealers immediately.

Less than an hour ago Zero Hedge was happy to point out the glaringly obvious.

Bernanke speech will have nothing in it

— zerohedge (@zerohedge) June 7, 2012

Shortly thereafter, Bernanke confirmed it. Now it is Wall Street's turn to join in.

All you need to read

Update: It appears that when a company calls the market's bluff with a forced strategic alternatives announcement coupled with the phrase "challenging financial performance", the market does not like it very much. Stock now down 13% and sliding.

RIMM stock was just halted, preceding an announcement that JPM and RBC have been retained for "strategic purposes", as well as an operating loss warning for Q1 and notification of major headcuts. In other words, the endgame for RIMM is here: either the company finds a suitor or it may well be game over. For the benefit of RIMM longs we sure hope FB is eager to spend some of its cash soon if not quite soon.

January's hopium catchphrase of the month was that Europe's recession would be "technical" which is simply a euphemism for our Fed's beloved word - "transitory." Based on the just released Euroarea PMI, we can scratch this Euro-accented "transitory" addition to the lexicon, because contrary to expectations that the Euroarea composite PMI would show expansion at 50.5, instead it came out at 49.7 - the manufacturing PMI was 49.0 on Exp of 49.4, while the Services PMI was 49.4, on hopes of expansion at 50.6, which as Reuters notes suggests that firms are still cutting prices to drum up business and reducing workforces to cut costs. This was accompanied by a overnight contraction in China, where the flash manufacturing PMI rose modestly from 48.8, but was again in contraction at 49.7. We would not be surprised if this is merely the sacrifice the weakest lamb in the pack in an attempt to get crude prices lower. So far this has failed to dent WTI much if at all following rapidly escalating Iran tensions. What is curious is that Germany and France continue to do far better than the rest of the Eurozone - just as America has decoupled from Europe, so apparently have Germany and France. This too is surely "sustainable."

All you need to read.

It took Europe two days to go from fixed to fully broken all over again. Those curious why they are waking up to a see of red, Italian 10 Year yields back over 7%, stock futures tumbling, the EUR/$ sliding, Italian, French and Belgian CDS at fresh records, and a record scramble for Bund short-dated bonds (2 Year under 0.030%) is due to two main things: a failed Spanish auction now that contagion is back to sleepy Iberia, which sold €3.2 billion of bills, below the €3.5 billion target, with the yield soaring to 5.02% from 3.61% at Oct. auction leading to Spanish 2-, 10-yr yield spreads to Germany both significantly wider to records.  The second main factor is the realization that Mario Monti is not the second coming and will in fact face major resistance to form a government. Bloomberg reports: "Monti, a former European Union competition commissioner, struggled to get political parties to agree to participate in his so-called technical Cabinet during talks in Rome yesterday. A government lacking political representation will find it harder to muster support from the parties in parliament to pass unpopular laws. Monti said he’ll conclude his talks today." And if Monti can't do it, nobody can. Which explains why the fulcrum European security, the Italian 10 year BTPs, just fell off a cliff, and is now yielding back over 7% at a euro price of under 85 cents. This could well be crunch time: there are no more magic rabbits in the hat, or deus ex prime minister resignations in the hat for Italy.

Italian borrowing costs reached breaking point on Wednesday after Prime Minister Silvio Berlusconi's promise to resign failed to raise optimism about the country's ability to deliver on long-promised economic reforms.

Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting investors' concerns that they may not get their money back, a fear that also showed up in a jump in the cost of insuring against Italian debt default.