- U.S. Sees No Sign of Russian Troop Pullback From Border. The U.S. said there was as yet no evidence that Russian forces in regions bordering Ukraine have started a withdrawal announced by President Vladimir Putin two days ago. “We have not seen any withdrawal activity as of 2:45 this afternoon, and we’re watching as best we can constantly,” Pentagon spokesman Rear Admiral John Kirby told reporters at a briefing yesterday. “We’ve seen them say this before, we’re going to withdraw, we’re going to move.” Kirby’s comments echo assessments by the Ukrainian government and NATO. Russian state television said yesterday soldiers in three regions had started to return to their bases following Putin’s order.
- Moody’s Turns Negative on China Property Developers’ Outlook. Moody’s Investors Service revised its credit outlook for Chinese developers to negative from stable, citing a slowdown in home sales growth as liquidity weakens and inventories rise in the coming 12 months. The outlook change is the first by the credit rating provider on China’s property market since November 2012, it said in a statement today. Home sales growth will decelerate to 5 percent at most on a year-on-year basis over the next year, “materially lower” than 27 percent growth last year, it said. “The liquidity of developers with relatively weak credit quality will be more vulnerable in 2014, and their refinancing risk will increase as banks became more selective in credit extension following recent defaults in China,” Franco Leung, a Hong Kong-based analyst at Moody’s, said in the statement.
- Spying Fuels U.S.-Sino Friction Year After Obama-Xi Talks. A year ago, President Barack Obama and Chinese President Xi Jinping took a friendly stroll at a California estate to repair the fraying bonds between their two nations. It didn’t work.
- German Unease With ECB Simmers as Anti-Euro Party Gains. Lawmakers from Chancellor Angela Merkel’s party are criticizing European Central Bank policies as a German anti-euro party gains support before elections across Europe this week. Misgivings by Finance Minister Wolfgang Schaeuble about the ECB’s threat of unlimited bond-buying and Merkel’s warning of “deceptive calm” in financial markets are the latest signs that German policy makers and economists don’t want to discount the lingering risk to taxpayers from the debt crisis.
- Trader Spends $13 Million to Bet VIX Will Jump 56% by September. A trader paid almost $13 million to buy call options that pay off if the Chicago Board Options Exchange Volatility Index rises at least 56 percent in the next four months. The person used a strategy known as a call spread, designed for bets that a security will trade within a certain range. About 150,000 bullish contracts on the VIX expiring in September with a strike price of 19 were bought, according to an e-mailed note from Lake Hill Capital Management LLC, a hedge fund that provides analysis on equity derivatives. The cost was offset by selling the same amount of Sept. 28 calls.
- Junk-Rated? Horribly Illiquid? Perfect, I’ll Buy Them All. It’s getting harder to trade bonds. Hours, sometimes days can go by before investors can complete a transaction. That’s not dissuading them from piling into the most-illiquid debt out there. Junk-bond investors are earning practically nothing extra to own older, smaller bond issues that don’t typically trade as often as bigger, newer debt offerings, according to Barclays Plc (BARC) data. The gap has collapsed to almost zero from a 1.05 percentage point premium for the less-liquid notes in the fourth quarter of 2011. That means bondholders aren’t really being compensated for the risk that there might be no one who wants to buy their obscure securities if demand dries up and they’re forced to sell. They’re not worrying about that now, though, with volatility at historic lows and cash flowing into credit markets amid a sixth year of unprecedented Federal Reserve stimulus. “The ‘roach motel’ dynamic is as pernicious as ever,” Pacific Investment Management Co.’s Christian Stracke wrote in a May note posted on the Newport Beach, California-based firm’s website. “Investors should beware of credit funds that offer daily liquidity where managers are reaching for yield and are not paying close attention to the prospective liquidity profile of what they buy.”
- What Lurks Beneath? Market Calm Unnerves Central Bankers. Global central bankers sounded the alert about the calmness in financial markets, saying it risked creating future instability and complicating monetary policy. Twenty-four hours of warnings were led by Federal Reserve Bank of New York President William Dudley’s acknowledgment that the slide in market volatility “makes me a little nervous.” Bank of England Deputy Governor Charlie Bean said conditions were “eerily reminiscent” of the pre-crisis era, while Bundesbank board member Andreas Dombret said “we do see risks despite the fact that the markets are calm.” The concern of policy makers is that their easy money is making investors complacent, pushing them to search for risk and leaving markets prone to a swift reversal similar to that which began in 2007. Reflecting the lull, Bank of America Corp.’s Market Risk Index last week reached its lowest in seven years.
- American Eagle(AEO), PetSmart(PETM) See Slump in Glum Day for Retailers. Retailers including PetSmart Inc. (PETM:US), Target Corp. (TGT:US) and Sears Canada Inc. (SCC) also reported same-store sales declines today, underscoring the impact of a particularly cold winter and still-shaky consumer confidence.
- Target(TGT) Misses Estimates as It Works to Recover From Data Breach. Target Corp. (TGT:US), struggling to rebound from last year’s hacker attack and a botched Canadian expansion, posted first-quarter profit that missed analysts’ estimates and cut its annual forecast.
- Russia And China Finally Sign Historic $400 Billion "Holy Grail" Gas Deal.
- FOMC Minutes Show Fed Fears No Inflation Risk; Worries About Complacency.
Helsingin Sanomat:
- Russia Testing Finnish Military Response. Two violations of Finland's airspace by state aircraft yesterday show Russia is testing Finnish military responses, citing researcher Charly Salonius-Pasternak. Russia probing when Finns detect aircraft, how long it takes air force to launch fighter jets.
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