- China Default Chain Reaction Threatens Products Worth 35% of GDP. The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China. WMPs, which traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives, are now increasingly investing in each other. Such holdings may have swelled to as much as 2.6 trillion yuan ($396 billion) last year, based on estimates from Autonomous Research this month. The trend has China watchers worried. For starters, it means that bad investments by one WMP could infect others, causing a loss of confidence in products that play an important role in bank funding. It also suggests WMPs are struggling to find enough good assets to meet their return targets. In the event of widespread losses, cross-ownership will create more uncertainty over who’s vulnerable -- a key source of panic in 2008 when soured U.S. mortgage securities triggered a global financial crisis.
- Goldman Sees End of Yuan ‘Sweet Spot’ Spurring Capital Outflows. The end of a temporary sweet spot that China enjoyed with its exchange rate -- strength versus the dollar and weakness against trading partners -- will spur renewed capital outflows, Goldman Sachs/Gao Hua Securities Co. said. With the U.S. poised to raise interest rates and pressure building on China to ease monetary policy, cash outflows will accelerate, said Song Yu, China economist for Goldman Sachs/Gao Hua. The yuan is down 1.3 percent this month against the greenback, with policy makers last week setting the currency’s daily fixing at the weakest level in five years, and is little changed against a basket of peers.
- Yen’s Yellen Slump Fuels Japan Stock Gains as Gold Extends Slide. Japanese shares drove gains in Asia as the yen extended its slump against the dollar, amid confidence the global economy can withstand an interest-rate hike that the Federal Reserve chief said could be warranted in the next few months. Gold and bonds retreated. The dollar climbed to a one-month high against the yen and rallied versus emerging-market currencies in Asia after Fed Chair Janet Yellen said late Friday that the improving economy meant another rate hike would probably be in order “in the coming months.” Australian government debt paced last session’s decline in Treasuries, with American and U.K. markets closed for a holiday. Gold fell a ninth day, set for its longest slump in more than a year as the U.S. rate outlook damped its appeal versus interest-bearing assets. While the dollar-denominated MSCI Asia Pacific Index lost 0.4 percent as of 9:35 a.m. Tokyo time, about 300 stocks climbed as around 180 declined.
Wall Street Journal:
- Suncor Starts to Bring Canadian Oil Sands Back Online. The oil producer expects initial output by the end of the week.
- Robots for Trump (and Clinton). The robotic revolution will upend society even more than the information revolution. No matter what happens in November, one big winner has already emerged from the ruins of America’s 2016 election: the robot. Both major candidates have embraced policies that will ensure the accelerating replacement of low-wage workers with no-wage workers.
- Senators Slam Loretta Lynch: End The Climate Change Witch Hunt.
- Over 40 Shot As Violence Erupts In Chicago During Memorial Day Weekend.
- "Here We Go Again" - A List Of Monthly Highs Above 2,100 In The S&P500. (graph)
- Unintended Consequences: Easy Money = Overcapacity = Trade Wars.
- Losing Ground In Flyover America, Part 3. (graph)
- Donald Trump keeps giving Republicans major cause for alarm — because he's still attacking them. He said he wouldn't say it. But Donald Trump seemingly couldn't resist. "I wonder if I could say — you know, remember lyin'. Lyin'. I won’t say ‘Lyin' Ted' — I refuse to say it," he told a crowd during a Friday rally in Fresno, California. “Lyin’ Ted!" Trump then exclaimed. "Holds that Bible high, puts it down, and then he lies.
- This one sentence sums up why Britain's housing market is going to crash.
- SAM ZELL: It's really hard not to be a seller in real estate right now.
- Big oil groups raise net debt by a third to cope with low prices. The net debts of the largest Western oil companies have surged by a third over the past year, increasing their vulnerability to another fall in oil prices. The aggregate net debt of the 15 largest North American and European oil groups rose to $383bn at the end of March, up $97bn from 12 months ago, according to company reports compiled by Bloomberg.