Monday Watch

Weekend Headlines 
Bloomberg: 

• Bank of Cyprus’s Customers May Lose as Much as 60% on Deposits. Cyprus may imposes losses of as much as 60 percent on Bank of Cyprus Plc accounts exceeding 100,000 euros ($128,000) as part of an aid deal to stop the country from going bankrupt. Customers will have 37.5 percent of their deposits above this amount converted into shares with full voting rights and access to any future Bank of Cyprus dividend, the Nicosia-based central bank said in an e-mailed statement. A further 22.5 percent will be temporarily withheld to ensure the lender meets the terms of its recapitalization, as agreed under Cyprus’s loan agreement with international creditors, the central bank said.

• Euro Drops After Monthly Drop on Weak Economic Recovery. The euro weakened following a decline last month as economic data signal the 17-nation region is struggling to recover, damping demand for the currency. The euro fell versus most of its 16 major counterparts ahead of a report tomorrow that may show unemployment in the bloc climbed to a record in February, two days before European Central Bank officials meet to set interest rates. The yen strengthened, after last month capping its longest string of losses in 12 years, as a drop in Asian stocks spurred demand for safer assets. The Australian dollar slid after gains in Chinese manufacturing missed estimates.

• China’s Home Prices Increase Most in 26 Months, SouFun Says. China’s March new home prices posted the biggest gain in more than two years as buyers rushed into the market ahead of property curbs by local governments, driving real estate stocks higher. Prices climbed for the 10th month, rising 1.1 percent to 9,998 yuan ($1,610) per square meter (10.76 square feet) from February, SouFun Holdings Ltd. (SFUN), the country’s biggest real estate website owner, said in a statement today after a survey of 100 cities. That’s the biggest increase since January 2011.

• Beijing, Shanghai Add to Home Curbs as China Acts to Cool Market. China’s largest cities, including Beijing and Shanghai, tightened rules on home purchases after the nation asked local governments to step up efforts to cool the property market. Beijing, the capital, banned single-person households from buying more than one residence while Shanghai prohibited banks from giving credit to third-home buyers, according to the local administration websites. The two cities will also enforce a 20 percent tax on capital gains from property sales. “This will help calm people’s panic about home prices,” said Yi Xianrong, a Beijing-based researcher at the Chinese Academy of Social Sciences, which advises the Cabinet.

• Kim Calls Nuclear Weapons Top Priority as Korea Tensions Climb. Kim Jong Un called nuclear weapons development one of North Korea’s top priorities as his country ratcheted up tensions by declaring a state of war with South Korea and reiterating threats to attack the U.S. Nuclear arms can “never be abandoned” nor “traded with billions of dollars,” Kim said yesterday at meeting of the ruling Workers’ Party Central Committee, the state-run Korean Central News Agency reported. North Korea’s rubber stamp parliament meets today to ratify his remarks. 

• Japan March Business Confidence Improves Less Than Estimated. Confidence among big Japanese manufacturers improved by less than economists estimated, in a sign that the weaker yen is yet to boost conditions for the nation’s exporters. The quarterly Tankan (JNTSMFG) for large manufacturers rose to minus 8 in March from minus 12 in December, the Bank of Japan said in Tokyo today. The median estimate of 24 economists surveyed by Bloomberg News was for minus 7. A negative figure means pessimists outnumber optimists.

• Rebar Slumps to Lowest Since December on China PMI, Inventories. Steel reinforcement-bar futures in Shanghai declined to the lowest level in more than three months after a Chinese manufacturing indicator missed analysts’ estimates and inventories of the building material swelled. The contract for delivery in October dropped as much as 2 percent to 3,733 yuan ($601) a metric ton on the Shanghai Futures Exchange, the lowest level since Dec. 14, and traded at 3,736 yuan at 10:36 a.m. local time. Futures lost 4.5 percent in the first quarter. 

• Copper Drops to 8-Month Low in Shanghai on China Manufacturing. Copper slumped for a fifth day in Shanghai to the lowest level since August as a key gauge of Chinese manufacturing missed estimates, stoking concern demand in the biggest consuming nation is slowing. Copper for delivery in July on the Shanghai Futures Exchange fell as much as 1.9 percent to 53,800 yuan ($8,666) a metric ton, the lowest level since Aug. 3, before trading at 54,080 yuan by 10:14 a.m. local time. Futures for May delivery lost 1.3 percent to $3.3590 a pound on the Comex. The London Metal Exchange is closed today for a public holiday.

• Bullish Bets Rebound at Fastest Pace in Four Years: Commodities. Investors are boosting wagers on higher commodity prices at the fastest pace in almost four years, rebounding from the least bullish position since 2009, on signs that the U.S. is accelerating and Europe’s debt crisis is easing. Hedge funds and other large speculators increased net-long positions across 18 U.S. futures and options by 10 percent to 679,191 contracts in the week ended March 26, data from the Commodity Futures Trading Commission show. The bets surged 67 percent in three weeks, the biggest advance since May 2009. Wagers on higher oil prices climbed the most this year, while those for cattle are at a six-week high.

• SAC Siege by U.S. Seen Slowing in Steinberg’s Indictment. SAC Capital Advisors LP may seem under siege by federal prosecutors, with the steady drumbeat of indictments over the past few years and the invariable 6 a.m. knock at the door as one employee after another meets agents of the Federal Bureau of Investigation’s New York office.

Wall Street Journal: 

• Era of Fed Stimulus Wanes. Between U.S. stocks reaching highs and Treasury yields holding near all-time lows, one of these two contrary markets will eventually have to give. "We are getting closer to the end," John Brynjolfsson, managing director of global macro hedge fund Armored Wolf LLC, said of the Fed's stimulus efforts. "Discussion of tapering helps to make the exit less of a digital on-off decision, and should allow the Fed to more gradually wean the markets off its support."

Marketwatch.com:

• Why China wants to eat Apple(AAPL). Commentary: Handset standoff with China Mobile spurs spat.

• U.S. probing Panasonic over suspected bribery: WSJ.

Fox News:

• US sends F-22 jets to join South Korea drills. The United States has sent F-22 stealth fighter jets to South Korea to join Seoul forces in military drills as North Korea warns the Korean Peninsula has entered "a state of war." A senior U.S. official confirms to Fox News that the F-22 Raptors were deployed to Osan Air Base in South Korea from Japan on Sunday to support ongoing U.S.-South Korean military drills. 

• Survey: New York, California last in personal freedoms.

CNBC: 

• Italian President at Center of Storm as Deadlock Continues. Italy's 87-year-old President Giorgio Napolitano will face the greatest test of his career during his final weeks in office as he tries to end the standoff preventing a new government being formed more than a month after elections.

• Emerging Markets Dump Euro Reserves. The euro's challenge to the international status of the U.S. dollar has been set back a generation as new data shows developing countries dumping the European currency from their official reserves.

Zero Hedge: 

• "I Went To Sleep Friday A Rich Man, I Woke Up Poor".

• ECB Backs Dijsselbloem's Liquidation Policy "Template".

• The Chess Game Of Capital Controls.

• 25 Lessons From The Cyprus 'Deal'.

• Who's Next? Italy's Monte Paschi Admits To Billions In Deposit Outflows.

• Europe's Last Green Shoot Is Wilting.

• Cyprus Parliament President Says "No Future" Under Troika, Calls For "Iceland" Solution.

• Tom Hoenig: "This System Distorts The Market And Turns Appropriate Risk-Taking Into Recklessness".

• The Seven Broken Taboos Of The Cyprus Deal.

Business Insider: 

• Scary Derivatives Are Back In A Big Way On Wall Street.

• LIVE FROM CAIRO: Things Are Much Worse Than We Realized.

• The Euro Is Destroying Europe By Ripping It In Half.

• Why The Euro Is Doomed In 4 Steps.

• Meet The Influential German Professor Who Wants To Get Rid Of The Euro In Order To Save Europe.

• David Stockman Is Outraged — And A Lot Of Powerful People Won't Like What's In His New Book.

• LIVE: Thousands Of Companies Around The World Are Revealing The Truth About The Economy.

• We're In The Midst Of A 'Cash Is Trash' Bubble.

Wall Street All-Stars:

• Indicator Update: Economic Soft Patch Coming?

Reuters:

• Exxon(XOM) cleans up Arkansas oil spill; Keystone plan assailed. Exxon Mobil on Sunday continued cleanup of a pipeline spill that spewed thousands of barrels of heavy Canadian crude in Arkansas as opponents of oil sands development latched on to the incident to attack plans to build the Keystone XL line. 

• U.S. fracking helped kill off German solar firms -Bosch. Bosch, one of the world's largest auto parts suppliers, blames the U.S. fracking boom in shale gas for hurting demand for energy-efficient green technologies, its chairman told a German newspaper.

El Pais:

• Spanish Prime Minister Mariano Rajoy is preparing a new financing model for autonomous region of Catalonia to stem wave of separatism. New offer for Catalonia would alert leaders of other autonomous communities who would require same treatment.

Le Journal du Dimanche:

• 70% of French people remain unconvinced that President Francois Hollande has a clear strategy to fight rising unemployment, according to an Ifop poll.

Yonhap News:

• South Korea to Strongly Respond to Any North Korea Provocation, South Korean President Park Geun Hye Says.

Sankei:

• Japan, U.S. to Hold Island-Recapturing Drill in June. Japan's Ground, Maritime and Air Self-Defense Force to join drills in California. First time for Maritime and Air SDFs to join similar exercise. Japan, U.S. to draft plan to defend disputed islands, VOA said

China Securities Journal:

• China Financial System Faces 'Large' Risks. Problems including high levels of corporate debt, shadow banking and property bubbles are worth concern, citing former People's Bank of China adviser Yu Yongding. Yu said local government financing vehicles may "deteriorate" again. China economic growth may be weaker than expected as a result of tightening monetary policy and M2 growth target of 13%, Yu said.

• China will manage property demand and supply and continue curbs on speculation, citing Qin Hong, director of policy research at the Ministry of Housing and Urban-Rural Development.

Weekend Recommendations

Barron's:

• Bullish commentary on (STM), (RT), (T), (WLP), (STX), (WU) and (ETN).

Night Trading

• Asian indices are -.75% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 122.50 +1.0 basis point.

• Asia Pacific Sovereign CDS Index 97.5 +2.25 basis points.

• FTSE-100 futures n/a.

• S&P 500 futures -.09%.

• NASDAQ 100 futures unch.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CALM)/1.40 

Economic Releases
10:00 am EST

• Construction Spending for March is estimated to rise +1.0% versus a -2.1% decline in February.

• ISM Manufacturing for March is estimated to fall to 54.0 versus 54.2 in February.

• ISM Prices Paid for March is estimated to fall to 60.0 versus 61.5 in February. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The RBA rate decision and Final Markit US PMI for March could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.