Today's Headlines
Bloomberg:
- China Property Boost to GDP Risks Fading After Debt-Fueled Rise. China’s expansion may face stronger headwinds this year should the debt-fueled boost from real estate, a key driver of recent economic growth, prove unsustainable. The economy grew 1.1 percent in the first quarter from the prior quarter, the slowest quarter-to-quarter expansion in data since 2011, the National Bureau of Statistics said Saturday. Housing demand helped boost growth, with output of real-estate services adding 9.1 percent from a year earlier while construction activities rose 7.8 percent, NBS said. Saturday’s reports take some of the shine off of Friday’s data showing 6.7 percent growth from a year earlier and better-than-forecast strength in March across a range of indicators. While surging home sales and property investment have supported expansion, economists say it remains to be seen whether debt-aided growth can hold up, and more stimulus maybe needed to sustain the 6.5 percent to 7 percent government growth target. "Growth is still under pressure and the economy remains fundamentally weak," said Zhou Hao, an economist at Commerzbank AG in Singapore.
- Rousseff Ally Concedes Defeat in Congress Impeachment Vote. President Dilma Rousseff has lost a key impeachment vote in the lower house but will fight back in court and in the Senate, a government leader in Congress said. "We can turn the game around in Brazil’s Senate," Jose Guimaraes, Rousseff’s leader in the lower house, told reporters as the vote was wrapping up. The "coup mongers" were stronger, he said. With 83 legislators left to vote, the opposition had garnered 316 votes in favor of impeachment. It needs at least 342 votes, or a two-thirds majority among 513 deputies, to send the motion to the Senate. Most analysts agree that if Rousseff were to lose Sunday, it would be very difficult for her to avoid being ousted in the Senate.
- Oil Plunges After Output Talks Fail Amid Saudi Demands Over Iran. Oil tumbled by the most in two months after output talks Sunday between the world’s biggest producers ended without any agreement on limiting supplies, a diplomatic failure that threatens to renew the rout in prices. Futures fell as much as 6.8 percent in New York, the biggest intraday drop since Feb. 1. The summit in the Qatari capital, which dragged on for more than ten hours beyond its initially scheduled conclusion, finished with no final accord. Discussions stumbled after Saudi Arabia and other Gulf nations wouldn’t agree to any deal unless all OPEC members joined including Iran, which wasn’t present at the meeting, Russian Energy Minister Alexander Novak told reporters. “The weekend talks are demonstration that the Saudi government, as the deputy crown prince has clearly stated, doesn’t want to cede market share,” said Ed Morse, head of global commodity research at Citigroup Inc. by phone. “They are fearful that the world may be in a weak or bearish market for a long period of time. In a bear market, as they learned from the 1980s, if they cede market share it is very difficult to get it back.”
- Saudis Won't Shed Any Tears Over Doha. Saudi Arabia's policy-makers will no doubt be relieved as the much-hyped OPEC/non-OPEC output freeze unravels. The last thing the kingdom wanted was the oil price rising to a level that allows high-cost projects to move forward. The meeting in Doha to formalize the freeze ended in failure with Saudi Arabia refusing to agree unless other nations, particularly Iran, joined from the beginning. Iran, the one country with the determination and ability to boost output this year, wasn't even at the gathering.
- Singapore's Non-Oil Exports Plunge Most in Three Years in March. Singapore’s exports plunged the most in more than three years in March, providing more evidence of a weakening economy. Non-oil domestic exports dropped 15.6 percent in March from a year earlier, worse than the median estimate of a 12.3 percent decline in a Bloomberg survey of 15 economists, and compared with a revised 2 percent expansion in February, a government report showed on Monday. Electronics shipments contracted 9.1 percent in March.
- Won Declines With Korean Stocks as Oil Plunge Curbs Risk Taking. South Korea’s won weakened after the failure of talks to limit oil output spurred a plunge in crude, curbing demand for emerging-market assets. The Kospi index of local shares fell the most in almost two weeks as a meeting between the world’s biggest producers ended in Doha on Sunday without any agreement. The Bank of Korea will refrain from following India and Indonesia in easing monetary policy further on Tuesday, and keep its benchmark interest rate at a record-low 1.5 percent for the 10th straight month, according to 16 of 20 economists surveyed by Bloomberg. The rest see a 25 basis point cut. The won slipped 0.5 percent to 1,151.90 a dollar as of 10:56 a.m. in Seoul, taking its monthly loss to 0.7 percent, according to data compiled by Bloomberg.
- Asian Stocks Drop as Japan's Topix Tumbles With Commodity Shares. Asian stocks fell, with the regional benchmark index retreating from a four-month high, as crude plunged and Japanese shares tumbled on a stronger yen after oil talks ended without an agreement on limiting supplies. The MSCI Asia Pacific Index fell 1.1 percent to 130.75 as of 9:07 a.m. in Tokyo.
- Citigroup Says Iron Ore Rally Will Fade as Oversupply Kicks In. The global iron ore market faces increasingly severe oversupply, according to Citigroup Inc., which said the commodity’s gains will probably be reversed in the second half. Increases in production, including from miners that restarted output after this year’s rally, coupled with likely declines in steel prices, will combine to hurt iron ore, the bank said in a quarterly commodities report received Monday. While iron ore’s price declines may have been delayed, they’re still coming, analysts led by Ed Morse wrote. Iron ore surged 23 percent in the first quarter as Chinese mills ramped up output to take advantage of a rally in steel prices, and some supply was disrupted in Australia. Citigroup said that both of those supportive factors were likely to reverse, hurting the outlook for iron ore. Last week, Rio Tinto Group Chief Executive Officer Sam Walsh said that iron ore prices may fall in the second half as new production offsets improving demand in China.
- Trump Is Running 'Banana Republic' Campaign, Cruz Loyalist Says. (video) Donald Trump’s presidential campaign has adopted “banana republic” tactics because it’s getting “stomped” in the Republican ground game in states like Wyoming and Colorado, said the head of Ted Cruz’s delegate-hunting team. “When we win, Trump whines,” Ken Cuccinelli, the former Virginia attorney general, said on ABC’s “This Week” on Sunday. “We’re playing within the rules established years ago.” The war of words continues between the Trump and Cruz campaigns as each prepares his strategy for a contested Republican convention if neither candidate assembles the 1,237 delegates needed to automatically clinch the party’s nomination to compete in the November general election. “How about calling for riots in the street? How about threats: We’re going to go to the hotel rooms of delegates; death threats to the Colorado Republican chairman?” Cuccinelli said. “This is a banana republic approach by the Trump team because they’re getting beaten on the ground.”
Wall Street Journal:
- Moody’s Another Thorn in Oil Patch. The bond rater has deprived 19 energy companies of their investment grades this year. Moody’s Investors Service is emerging as a new scourge for energy firms. The bond rater has deprived 19 energy companies of their investment-grade ratings this year, dropping many several notches into the deeper reaches of high-yield, or junk, territory.
CNBC:
- China economy: Are traders overestimating its health? Strategists say it will only take another disappointing economic report from China for global investors to once again put the country at the top of their worry list. "With every statistic we see out of Asia, ex-China, whether it's Taiwan, whether it's Hong Kong and other Asian countries, they're suffering slowdowns from their sensitivity and exposure to China."
- Iran's central banker dismisses idea of output cut. Iran's top central banker is adding to growing doubts about an agreement to freeze output at a meeting of oil producers in Doha, Qatar on Sunday. Ahead of a pivotal meeting that may determine the near-term outlook for crude prices, Iran on Saturday announced that it would not participate in the conference. The country, still trying to recover from Western sanctions, is seen trying to preserve market share, and has steadfastly resisted any suggestions that Iran should freeze or curb output in order to prop up prices.
MarketWatch:
Zero Hedge:
- Oil Futures Crash Most In 7 Months, Stocks Tumble. (graph)
- Goldman(GS) On Doha: "Bearish For Prices ", Expect "High Price Volatility"; Saudi Oil Production May Jump.
- Europe: Suicide by Jihad.
- Bundesbank Defies Elites: Warns That "Plans To Abolish, Criminalize Cash Out Of Line With Freedom".
- What Is The Worst-Case Outcome Of Helicopter Money: Deutsche Bank Explains.
- No Deal: Doha Talks End Without Agreement.
- The Real Reason Hillary Clinton Refuses To Release Her Wall Street Transcripts.
- A Nationwide Minimum Wage Is Even Worse Than State-Imposed Wages.
- Loonie Plunges Most In A Month Ahead Of Crude Open.
- Russian Fighter Jet Flies Within 50 Feet Of US Recon Plane Over Baltic Sea.
- Saudi Stocks Slide Most In 3 Weeks As Post-Doha Hangover Begins. (graph)
- Japan's Economy Grinds To A Halt After Earthquake Paralyzes Critical Supply Chains.
- Kyle Bass On The Resurgence Of Gold And The Looming "Run On Cash".
Business Insider:
- Debate turns vitriolic in Brazil as impeachment vote nears.
- Here's how the oil crash will affect Canada in the long-term.
- Drug cartels have turned social-media sites like Facebook into one of their most potent weapons.
- The world's largest investor says negative rates are breeding a disaster for the economy.
- SAM ZELL: We're in the 9th inning of this cycle.
Reuters:
- New Doha oil deal draft says all OPEC members must join - sources. A new draft of a deal to freeze oil output that is to be agreed later on Sunday in Doha has a line saying all OPEC members should be part of the agreement, industry sources said. The change appears to be a major obstacle for clinching a binding deal, given that OPEC member Iran had decided not to send representatives to the meeting.
Financial Times:
- US Air Force commander warns on space launch ‘bubble’. The US Air Force’s most senior space commander, General John Hyten, has voiced concerns about the rush of new operators in commercial space launches, warning there could be a “bubble” in the sector.
- Global corporate defaults reach $65b. Corporate borrowers across the world have defaulted on $US50 billion ($65 billion) of debt so far this year as the number of delinquent companies rises at its fastest pace since the US emerged from the crisis in 2009. The number of defaults rose by five in the past week, including the first European company of the year, according to Standard & Poor's. Forty-six companies have defaulted since the year began.
Night Trading
- Asian indices are -1.50% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 140.25 +1.75 basis points.
- Asia Pacific Sovereign CDS Index 56.575 +1.0 basis point.
- Bloomberg Emerging Markets Currency Index 72.42 -.18%.
- S&P 500 futures -.59%.
- NASDAQ 100 futures -.64%.
Earnings of Note
Company/Estimate
- (HAS)/.24
- (JBHT)/.85
- (MTB)/1.88
- (MS)/.47
- (PEP)/.81
- (BMI)/.41
- (BRO)/.42
- (IBM)/2.09
- (NFLX)/.03
- (RMBS)/.12
- (SANM)/.56
Economic Releases
10:00 am EST
- The NAHB Housing Market Index for April is estimated to rise to 59.0 versus 58.0 in March.
Upcoming Splits
- None of note
- The Fed's Kashkari speaking, Fed's Rosengren speaking and the RBA meeting could also impact trading today.
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