Bloomberg:
- China Walks $264 Billion Tightrope as Margin Debt Powers Stocks. Confident that China’s stock market rally still has legs, Jiang Lin recently began borrowing money from her brokerage to buy more shares. Her newly-opened margin finance account with state-owned China Investment Securities Co. has allowed Jiang, a 29-year-old marketing executive in Beijing, to double up her bets on the vertigo-inducing rally in Chinese share prices. “It’s worth the risk,” said Jiang, while admitting she doesn’t fully understand how margin finance works because she hasn’t had her broker explain it to her. Investors such as Jiang are part of a $264 billion dilemma facing the country’s securities regulator, the China Securities Regulatory Commission, after the Shanghai Composite Index climbed on Monday to a seven-year high. Should it tighten its rules governing margin finance and risk triggering a crash, or continue tinkering with regulations and see stock purchases on credit rise to potentially perilous levels?
- China Junk Bonds Pose Most Risk Since ’04 on Credit-Quality Dips. Investors in Chinese junk bonds are taking the biggest gamble in at least a decade. Leverage for speculative-grade Chinese companies is at its highest since at least 2004, whether measured by earnings relative to interest expense or total debt to a measure of cash-flow, according to data compiled by Bloomberg using a Bank of America Merrill Lynch index. Borrowers have also piled on the most debt relative to their assets since 2007. The deterioration in credit quality coincides with the slowest annual growth since 1990 for Asia’s biggest economy, and helps explain why Fitch Ratings Ltd. predicts defaults will climb. That’s bad timing for bond investors who swallowed a record $209.2 billion of Chinese-company notes denominated in either dollars, euros or yen last year, Bloomberg data show. “The credit cycle in China has peaked,” said Hong Kong-based Arthur Lau, the head of fixed income for Asia ex-Japan at PineBridge Investments Asia Ltd., which manages $35.3 billion of debt globally. “Corporate earnings are negative in general and investors are bracing for a deterioration in metrics.”
- Abe Economic Adviser Hamada Sees Yen Weak at 120 Per Dollar. An economic adviser to Prime Minister Shinzo Abe indicated the yen has weakened enough and that the Bank of Japan needn’t force inflation to its 2 percent target. The yen at 120 against the dollar is “considerably weak” and a level around 105 would be appropriate based on purchasing power parity, Koichi Hamada said on BS Fuji television Monday evening in Tokyo.
- Tencent Slumps Most in a Year After Billionaire Ma Cuts Stake. Tencent Holdings Ltd. slumped for the first time in 10 days after billionaire Chairman Ma Huateng cut his stake in the operator of Asia’s most-popular message services. The stock fell 4.9 percent to HK$162.10 as of 10:26 a.m. in Hong Kong trading, the most in almost a year. The benchmark Hang Seng index declined 0.9 percent.
- China’s H-Share Index Declines After Prices Reach 2008 High. Chinese stocks trading in Hong Kong retreated for the first in nine days after the Hang Seng China Enterprises Index climbed to the highest level since May 2008. China Merchants Bank Co. and New China Life Insurance Co. slid at least 3 percent. Hainan Airlines Co. jumped by the 10 percent daily limit in Shanghai on a plan to sell new shares in a private placement. Hong Kong’s Hang Seng China Enterprises Index dropped 1.47 percent to 14,393.84 at 10:10 a.m. local time, poised to end a 23 percent rally over the past eight days. The measure’s 14-day relative strength index rose to 88.2 Monday. Levels above 70 signal to some traders that gains have gone too far, too fast. The Hang Seng Index lost 0.7 percent after an eight-day surge.
- Asian Stocks Rise as Industrial, Healthcare Stocks Lead Advance. Asia’s benchmark stock gauge climbed, trading at an almost seven-year high, as industrial and healthcare shares led the advance. Central Japan Railway Co. gained 1.2 percent in Tokyo, boosting the industrial industry group. Celltrion Inc. jumped 8.6 percent in Seoul, extending yesterday’s gains after EBEST Investment & Securities Co. initiated coverage on the biopharma company with a buy rating. Orix Corp. slid 0.9 percent in Tokyo after its Chief Executive Officer said the financial services firm is in early talks to purchase a U.S. fund manager. The MSCI Asia Pacific Index added 0.3 percent to 153.08 as of 9:30 a.m. in Tokyo, after closing Monday at its highest since May 2008.
- Oil-Rich Nations Burn Through Petrodollar Assets at Record Pace. In the heady days of the
commodity boom, oil-rich nations accumulated billions of dollars in
reserves they invested in U.S. debt and other securities. They also
occasionally bought trophy assets, such as Manhattan skyscrapers, luxury
homes in London or Paris Saint-Germain Football Club.
Now that oil prices have dropped by half to $50 a barrel, Saudi Arabia and other commodity-rich nations are fast drawing down those “petrodollar” reserves. Some nations, such as Angola, are burning through their savings at a record pace, removing a source of liquidity from global markets. If oil and other commodity prices remain depressed, the trend will cut demand for everything from European government debt to U.S. real estate as producing nations seek to fill holes in their domestic budgets. - Oil ETF Holders Cash Out for First Time in 7 Months on Rebound. Oil investors are cashing out of funds that track prices for the first time in seven months after crude rebounded. Holders of the three biggest U.S. exchange-traded products that follow oil have withdrawn almost $300 million so far in April, leaving the funds poised for their first monthly outflow since September. West Texas Intermediate climbed to near $54 this month after reaching a six-year low of $43.46 in March.
- Prudential Chief Says Biggest Worry Is Liquidity, Echoing Dimon. Prudential Investment Management Chief Executive Officer David Hunt says the No. 1 concern among bond buyers globally is liquidity and its rapid disappearance. “The biggest worry of the buy side around the world is that there has been a dramatic decline in liquidity from the sell side for many fixed income products,” said Hunt, who heads Prudential Financial Inc.’s investment management unit, which had $934 billion in assets at the end of 2014. “I think it’s a big risk and is one of the unintended consequences” of regulators trying to prevent another financial crisis, he said.
- Ackman Says Student Loans Are the Biggest Risk in the Credit Market. Bill Ackman says the biggest risk in the credit market is student loans. “If you think about the trillion dollars of student loans we have outstanding, there’s no way students are going to pay it back,” Ackman, who runs $20 billion Pershing Square Capital Management, said today at 13D Monitor’s Active-Passive Investor Summit in New York.
- Qualcomm’s(QCOM) Main Profit Driver Is Under Pressure. Decision sets precedent for chip maker that charges a royalty on nearly every smartphone made.
- 5 Things to Watch in Bank Earnings.
- Corporate Pension Funds Pile Into Bonds. Increased appetite fuels demand for highly rated debt issues.
- Hillary and the Liberal Way of Lying. How the Clintons pioneered the methods by which Obama sold his Iran deal. Sometime in the 1990s I began to understand the Clinton way of lying, and why it was so successful. To you and me, the Clinton lies were statements demonstrably at variance with the truth, and therefore wrong and shameful. But to the initiated they were an invitation to an intoxicating secret knowledge. What was this knowledge? That the lying was for the greater good, usually to fend off some form of Republican malevolence. What was...
- Jordan's King Abdullah II says airstrikes increasing inside Syria and Iraq. (video) Jordan’s King Abdullah II said Monday that airstrikes have increased inside Syria and Iraq following the murder of a Jordanian pilot burned to death earlier this year by Islamic State terrorists.
- Are These The "Everyday Americans" Hillary Clinton Is Running For? (video)
- "There Are Big, Big Problems" - The Shocker Crushing The Economy Revealed. (graph)
- Market Melts Down After Opening Buying-Panic. (graph)
- Human Bond Traders Barely Show Up To Work As Machines Take Control.
- Blinder Leading The Blind.
- Einhorn Slams Bernanke's Blog, Says Fed Policy Is A "Destructive Force That Shouldn't Exist Outside Of Fiction".
- GE(GE) Shakes Up Corporate Credit Market.
- Greeks Are The Poorest Since 1980... Could It Happen In America?
- The global financial markets appear to have gone nuts.
- The fatal flaw in Canada's economy is its dependence on resources.
- Railroad giant Norfolk Southern warns that earnings will be hurt by 'increased hiring and training costs'.
- Brazil's economy faces a perfect storm of problems.
- Marco Rubio just launched his campaign by taking not-so-subtle shots at his older rivals.
- Russia's transfer of S-300 missiles to Iran reverses one of Obama's big foreign policy achievements.
- Russia and Iran just showed how 'they can do whatever they like' right now.
- The next recession could lead to a vicious spiral of debt-deflation.
- BlackRock’s(BLK) Chief, Laurence Fink, Urges Other C.E.O.s to Stop Being So Nice to Investors. On Tuesday morning, the chief executives of 500 of the nation’s largest companies will receive a letter in the mail that will most likely surprise them. The sender of the letter is Laurence D. Fink, chief executive of BlackRock, the largest asset manager in the world. Mr. Fink oversees more than $4 trillion — that’s trillion with a “t” — of investments, making him perhaps the world’s most important shareholder. He is planning to tell the leaders that too many of them have been trying to return money to investors through so-called shareholder-friendly steps like paying dividends and buying back stock. To Mr. Fink, these maneuvers, often done under pressure from activist investors, are harming the long-term creation of value and may be doing companies and their investors a disservice, despite the increases in stock prices that have often been the result.
- S&P warns of imminent downgrade for several miners. Standard & Poor's warned on Monday it may soon downgrade several miners as it lowered its iron ore price estimates for the next couple of years.
Susquehanna:
- Rated (SODA) Positive, target $24.
- Rated (PEP) Positive, target $123.
- Rated (CCE) Negative, target $33.
- Rated (KO) Negative, target $33.
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 +.75 basis point.
- Asia Pacific Sovereign CDS Index 58.75 +.25 basis point.
- S&P 500 futures +.14%.
- NASDAQ 100 futures +.12%.
Earnings of Note
Company/Estimate
- (FAST)/.42
- (JBHT)/.72
- (JNJ)/1.54
- (JPM)/1.41
- (WFC)/.98
- (CSX)/.45
- (INTC)/.41
- (LLTC)/.53
8:30 am EST
- Retail Sales Advance for March are estimated to rise +1.1% versus a -.6% decline in February.
- Retail Sales Ex Autos for March are estimated to rise +.7% versus a -.1% decline in February.
- Retail Sales Ex Autos and Gas for March are estimated to rise +.6% versus a -.2% decline in February.
- PPI Final Demand for March is estimated to rise +.2% versus a -.5% decline in February.
- PPI Ex Food and Energy for March is estimated to rise +.1% versus a -.5% decline in February.
- NFIB Small Business Optimism Index for March is estimated at 98.0 versus 98.0 in February.
- Business Inventories for February are estimated to rise +.2% versus unch. in January.
- None of note
- The Fed's Kocherlakota speaking, China Industrial Production/GDP data, UK CPI/Retail Sales data, weekly US retail sales reports, Needham Healthcare Conference, (DKS) analyst meeting and the (FLO) investor briefing could also impact trading today.
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