Today's Headlines

Bloomberg: 

• Russia Threatens to Counter NATO Buildup as Ties Fray. Russia will take measures against a buildup of NATO forces on its borders as regional and global security weakens with the rupture of ties between the former Cold War enemies, the country’s top military commander said. The Ukrainian conflict is “practically a civil war” as the authorities in Kiev are using the army against “unarmed civilians,” Valery Gerasimov, the head of the Russian military’s General Staff, told a security conference in Moscow today. Internal conflicts “are no longer purely domestic and take on an increasingly international character.” 
• Russia Sanction Naysayers Collect $90 Billion: Chart of the Day. Investors who have ignored international sanctions against Russia are being rewarded. The CHART OF THE DAY shows the MSCI Russia Index of stocks has gained 22 percent, adding about $90 billion in market value since March 17, when the U.S. banned President Vladimir Putin’s business allies in response to his annexation of Crimea.
• Ukraine’s Chocolate Tycoon Set for Victory as Unity Frays. A billionaire chocolate magnate is sure he’s the man to hold Ukraine together as gun-toting separatists threaten to rip it apart. Petro Poroshenko, the front-runner in the May 25 presidential election, says he’ll unite the nation by bolstering democracy and sealing deeper European ties. A regular presence at the Kiev protests that toppled President Viktor Yanukovych and a minister in the last two governments, the tycoon is a pragmatist who can strike deals to ease tensions, according to Iryna Bekeshkina, head of the Democratic Initiatives Foundation.
• Australia’s Pollution U-Turn Threatening UN Climate Talks. Australia’s program to rein in pollution is losing momentum, the latest in a series of setbacks for the international effort to tackle global warming. With the highest per-capita fossil fuel emissions among industrial countries, Australia’s participation in United Nations-led climate talks is seen as crucial to sway China and India to step up pollution controls even as developed nations backslide. Now, Australia’s environmental stance is undergoing an about-face as the country’s new government and its political opponents haggle over the best way to dismantle earlier regulations. The shift in Australia comes just ahead of a series of global climate talks set for later this year. The UN is aiming to craft an agreement in 2015 that would include 190 nations. That pact would limit emissions in both industrialized and developing nations for the first time. Yet China and India have signaled their reluctance to join without broad participation from richer industrial nations, including Australia.
• European Stocks Advance on U.S. Data as Randstad Gains. European stocks rose, with the region’s benchmark index capping its longest streak of weekly gains since November, as data showed a drop in German business confidence and a rebound in U.S. housing activity. Randstad Holding NV (RAND) advanced 3.1 percent as UBS AG advised investors to buy shares in the biggest Dutch staffing company. Pandora (PNDORA) A/S fell 4.2 percent as some shareholders sold a stake of about 10 percent in the Danish jewelry maker. Orange SA dropped 1.6 percent after Societe Generale SA lowered its recommendation on France’s largest phone company. The Stoxx Europe 600 Index added 0.2 percent to 341.76 at the close of trading as investors also weighed the Ukraine situation before the May 25 presidential election.
• Bond Buyers Skip Fine Print as Low Rates Sow Complacency. To understand the rising concern about complacency in the corporate-debt market, look no further than the Clear Channel Communications Inc. bonds that investors showed up in droves to buy last month. While the radio broadcaster has debt that’s 12 times its earnings and a credit rating that implies a default is a virtual certainty, it was still able to more than double the offering to $850 million. Not only that, the indentures governing the notes designed to protect bondholders lacked restrictions typically found in such risky offerings, such as limits on the company’s ability to issue more debt or shift cash to shareholders. A sixth year of financial repression brought on by the Federal Reserve’s near-zero interest-rate policy are intensifying the risks in the $2 trillion global market for speculative-grade corporate bonds. Lenders are more willing to forgo standard protections to capture increasingly paltry returns. A measure of the strength of junk-bond covenants is about the weakest since Moody’s Investors Service started tracking the data in 2011.
• The Bearish Signs Junk Buyers Reject in Stoking ’14 Rally. This year’s unexpected bond boom may look like a rally, but it doesn’t smell like one. At least not to Morgan Stanley strategists, who detect something amiss in the way different securities are performing relative to one another. Here’s an example: Stocks of the smallest companies usually move in tandem with high-yield bonds. Small caps are slumping this year, with the Russell 2000 (RTY) Index down 3.8 percent, while junk-rated securities have gained 4.4 percent. The extra yield investors demand to hold the notes instead of government debt has shrunk by 0.22 percentage point this year. Then there’s this: The top-tier of speculative-grade bonds is beating the bottom level. That doesn’t make sense if investors are buying risky assets because they feel good about the economy. The lowest-ranked assets usually outperform when there’s an optimistic outlook, yet bonds rated BB have returned 4.8 percent in 2014, compared with a 4.4 percent return for securities rated CCC and lower, Bank of America (BAC:US) Merrill Lynch index data show. “Given these factors, as well as low volatility, we think hedging credit risk is both cheap and a sensible strategy in this environment.” 
• Retailers Miss Quarterly Estimates by Most in 13 Years. U.S. retailers’ first-quarter earnings are trailing analysts’ estimates by the widest margin in 13 years after bad weather and weak spending by lower-income consumers intensified competition. Chains are missing projections by an average of 3.1 percent, with 87 retailers, or 70 percent of those tracked, having reported, researcher Retail Metrics Inc. said in a statement today. That’s the worst performance relative to estimates since the fourth quarter of 2000, when they missed by 3.3 percent. Over the long term, chains typically beat by 3 percent, the firm said.

Wall Street Journal:

• Kuroda Signals Concern Over Yen's Strength. BOJ Governor Said He Sees Little Reason for Currency to Strengthen More. Bank of Japan Gov. Haruhiko Kuroda said he saw little reason for the yen to strengthen against key currencies, signaling concern that a further rebound could cast a shadow over the Japanese economy and the central bank's fight against deflation. While previous BOJ governors have traditionally avoided openly discussing exchange rates, in an exclusive interview with The Wall Street Journal this week, Mr. Kuroda described at... 
• Treat Veterans With Respect, Not Pity. Too many Americans assume that troops who served in Iraq and Afghanistan must be traumatized. 
• Mexico Cuts Economic Growth Forecast. Economy Is Now Seen Expanding 2.7% in 2014 After A Weaker-Than-Expected First Quarter.

ZeroHedge:

• Watch The Russian Helicopter Drill In Action, Just In Time For The Ukraine Elections. (video)
• "The Poster Child Of Too Much Money Chasing Deals".
• Tick, Tick, Tick. (graph)
• Russia Has Prepared A Confidential Retaliation Document As Ukraine Set To Hold NATO Accession Referendum.
• New Home Sales Post Tepid April Bounce As Average, Median Home Price Drops From Year Ago. (graph)

Business Insider: 

• Miss Teen USA Was 'In Tears And Shock' After A Hacker Took Nude Photos Through Her Bedroom Webcam.
• Report: Donald Sterling Caves, Agrees To Let His Estranged Wife Sell The Clippers.
  

Reuters:

• Visa(V), Mastercard(MA) vow to stay as Russia softens tone on rules. The world's two largest credit and debit card companies Visa Inc (V.N) and Mastercard Inc (MA.N) pledged on Friday to stay in Russia after officials showed a willingness to relax laws that hinder their operations in the country.

Telegraph:

• Russia's gas king taunts crumbling Europe over China pipeline coup. Gazprom's chairman has describing Europe's energy shortage as "scary" and ridiculed the EU's push for wind and solar power as a shambles.