Evening Headlines
Bloomberg:
- Merkel’s G-7 Faces Confluence of Deadlines on Greece to Russia. In June 2007, the last time Chancellor Angela Merkel hosted a Group of Eight summit, she was unaware that the world’s leaders stood on the edge of a global financial precipice. Now down one member after Russia’s exclusion last year after it annexed Ukraine’s Crimea peninsula, Merkel’s G-7 faces a series of existential crises that are in large part hers to solve. Greece’s five-year battle to stay solvent runs the almost daily risk of failure, the European Union is struggling to maintain unanimity on sanctions against Russia, and nuclear talks with Iran are touch-and-go. Those are challenges that President Barack Obama will press European leaders to heed to ensure unity among the world’s leading advanced economies.
- China’s Online Lending Boom Spurs Startups, Investment and Risk. Though peer-to-peer lending was pioneered in the U.S. by companies such as LendingClub Corp., China is where it’s really taking off. Internet-based peer lenders there gave out at least $32.5 billion in loans last year, almost quadruple the rest of the world combined, according to U.K. investment bank Liberum Capital Ltd. It predicts lending in China will almost double this year to $60 billion versus $11.7 billion in the U.S., the second-largest market. In peer-to-peer lending, companies use the Internet to quickly match borrowers and lenders at better rates than banks.
- Asian Stocks Retreat for Fifth Day as Greece Delays Debt Payment. Asian stocks fell for a fifth day, with the regional benchmark index heading for its second week of losses, following a decline in U.S. equities as Greece asked for a deferral on its debt payments. The MSCI Asia Pacific Index dropped 0.3 percent to 148.85 as of 9:01 a.m. in Tokyo, heading for a 1.7 percent decline this week amid a selloff in bonds and commodities.
- Oil Set for Weekly Drop as Glut Seen Persisting After OPEC Meet. Oil headed for the biggest weekly drop since March amid speculation OPEC will maintain its output target at a meeting on Friday, leaving the market oversupplied. Futures were little changed in London, poised for a 5.3 percent decline through June 5. The Organization of Petroleum Exporting Countries will continue its battle to retain market share, according to Maria van der Hoeven, the executive director of the International Energy Agency. The 12-member group is forecast to keep its daily production target of 30 million barrels unchanged at the meeting in Vienna.
- Whatever OPEC Decides, Oil Supplies Are Rising From All Sides. No matter what OPEC says Friday about its production target, the outcome is sure to be more oil. Iran, Iraq and Libya said this week they plan to add millions of barrels to the market this year. Saudi Arabia, the biggest member in the group, is already pumping the most in three decades. And executives from the world’s biggest oil companies pledged to keep expanding by cutting costs and focusing on the most promising drilling sites. The contest for market share is proving more important than price as the Saudis seek to undercut higher-cost producers while costs keep dropping. The competition is intensifying because producers are eager to sell ever more oil even as world demand slows.
- Goldman(GS) Said to Near U.S. Settlement Exceeding $2 Billion. Goldman Sachs Group Inc. is in talks to pay $2 billion to $3 billion to settle a probe into its sales of mortgage bonds leading up to the financial crisis, according to a person with direct knowledge of the situation. The investment bank could reach a deal with the U.S. Justice Department within weeks, the person said, asking not to be identified because the negotiations aren’t public.
Wall Street Journal:
- China’s IPO Market Leaves U.S. in the Dust. Mainland and Hong Kong exchanges together far surpass U.S. in initial offerings this year.
- The Clinton ‘Charity’ Begins at Home. Employment rolls for the Clinton Foundation show scads of political operatives—but this doesn’t seem to bother the IRS. The scandal of the century at the IRS was that agency’s secret targeting of conservative nonprofits. Perhaps a close second is the scandal of what the IRS hasn’t been investigating: the Clinton Foundation.
- Islamic State’s Global Expansion. After years of denial, the U.S. response must now go beyond countering ISIS in Iraq and Syria. As Islamic State advances in the northern Syrian province of Aleppo, there is a deadly twist in the war. The radical Islamist group, also known as ISIS or ISIL, is now expanding in roughly a dozen countries across Africa, the Middle East and Asia by exploiting local grievances, doling out money and leveraging its battlefield successes.
Fox News:
- ISIS shows off US gear seized from Iraqis in fighting near Fallujah. A new video from ISIS reportedly depicts the terrorist army showing off U.S. military equipment seized from Iraq troops in fierce fighting near Fallujah. The 10-minute video shows live action from skirmishes in the town of Karmah, just east of Fallujah. The black-clad jihadists are shown using small arms and several rocket-propelled grenades. One scene features an ISIS sniper shooting at Iraqi military positions near the town, and another shows a suicide bomber identified as “Turkistani” being deployed.
MarketWatch.com:
CNBC:
- SEC investigating whether activist funds colluded: Report. (video) The U.S. Securities and Exchange Commission is reportedly probing whether funds run by some activist investors worked together without disclosing their partnerships.
Zero Hedge:
- Volatility Explodes: China, Bunds Crash Then Smash; Dow, S&P500 Tumble Below Key Support Levels. (graph)
Business Insider:
Reuters:
Telegraph:
- Greece misses IMF payment in warning shot as showdown with Europe escalates. No developed country has ever skipped a payment to the IMF - but Greek sources say they were provoked.
Evening Recommendations
- None of note
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 108.5 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 61.75 +2.0 basis points.
- S&P 500 futures -.06%.
- NASDAQ 100 futures -.12%.
Earnings of Note
Company/Estimate
- None of note
Economic Releases
8:30 am EST
- The Change in Non-Farm Payrolls for May is estimated at 225K versus 223K in April.
- The Unemployment Rate is estimated at 5.4% versus 5.4% in April.
- Average Hourly Earnings for May is estimated to rise +.2% versus a +.1% gain in April.
3:00 pm EST
- Consumer Credit for April is estimated at $16.0B versus $20.523B in March.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Dudley speaking, Eurozone GDP report and the OPEC meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
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