Today's Headlines

Bloomberg:    

• It's All Suddenly Going Wrong in China's $3 Trillion Bond Market. The unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel. Spooked by a fresh wave of defaults at state-owned enterprises, investors in China’s yuan-denominated company notes have driven up yields for nine of the past 10 days and triggered the biggest selloff in onshore junk debt since 2014. Local issuers have canceled 60.6 billion yuan ($9.4 billion) of bond sales in April alone, while Standard & Poor’s is cutting its assessment of Chinese firms at a pace unseen since 2003. While bond yields in China are still well below historical averages, a sustained increase in borrowing costs could threaten an economy that’s more reliant on cheap credit than ever before. The numbers suggest more pain ahead: Listed firms’ ability to service their debt has dropped to the lowest since at least 1992, while analysts are cutting profit forecasts for Shanghai Composite Index companies by the most since the global financial crisis.
• China State Enterprises Likely to Suffer More Defaults, S&P Says. China’s state-owned enterprises are likely to suffer more defaults over the next year as the government shows its readiness to shut companies in industries struggling with overcapacity, according to Standard & Poor’s. “In a major policy shift, the central government appears willing to close and liquidate struggling enterprises in the steel, mining, building materials, and shipbuilding industries,” S&P analyst Christopher Lee wrote in a report Monday. “We believe this stance will exacerbate the problems of companies in these cyclical and capital-intensive sectors, which are facing sluggish demand amid slowing investment growth.”
• Brazil Investor Impeachment Euphoria May Fade Quickly as It Came. Investors in Brazil may find that getting what they wished for isn’t all it was cracked up to be. The real slumped and the Ibovespa edged higher after the lower house of Congress voted to proceed with President Dilma Rousseff’s ouster. The scope of gains going forward is seen as limited given the difficulty in tackling the country’s economic and fiscal crises no matter who is in power, according to long-time watchers. Investors have piled into Brazilian assets this year on speculation Rousseff’s ouster will allow a new government to push through measures aimed at pulling Latin America’s biggest economy out of its worst recession in a century and tackling an exploding budget deficit. But the severity of the problems means her likely successor -- Vice President Michel Temer -- will have little margin for error.
• Europe's Biggest Chipmaker Says Semiconductor Goldrush Over. The semiconductor acquisitions bonanza, which soared to about $110 billion of deals last year, is over, according to Infineon AG Chief Executive Officer Reinhard Ploss. Industry consolidation “has decelerated,” said the head of Europe’s largest chipmaker by revenue, which kicked off the spate of deals with its announcement in 2014 that it would pay $2.3 billion for International Rectifier Corp. “It’s not the same goldrush.” The wave of takeovers was prompted by the rising costs of production and a shrinking customer list, and included Intel Corp.’s $14 billion acquisition of Altera Corp., NXP Semiconductors NV’s $16 billion purchase of Freescale Semiconductor Ltd. and Avago Technologies Ltd.’s $30 billion deal for Broadcom Corp. Chipmakers are now digesting their purchases and focusing on product development to target new growth areas such as the Internet of things and self-driving vehicles.
• Italian Bonds at Risk From Efforts to Break Bank-Sovereign Nexus. Bonds from peripheral countries may be the most vulnerable to Europe’s effort to limit banks’ sovereign-debt holdings. As European Union nations wrangle over ways to integrate and safeguard the region’s banking system years after the euro debt crisis, a major point of contention is how to deal with the government bonds banks have on their balance sheets.
• Strategists Turn Bearish on One of Europe's Most-Loved Markets. As recently as last year, German stocks were among investors’ favorite in Europe. Now, even strategists, who started the year with bullish calls, have turned bearish. The benchmark DAX Index will fall 1.6 percent this year, according to the average of 13 projections compiled by Bloomberg. That would mark the first annual decline since 2011 for the gauge, which rallied almost twice as much as its regional peers since a low that year.Strategists have slashed their year-end forecasts across the region amid rising pessimism about earnings.
• China's Stocks Slump Most in Three Weeks as Oil Producers Slide. Chinese stocks fell by the most in three weeks, led by energy producers and property developers, as oil tumbled and accelerating home prices sparked concern the government will act to cool the property market. The Shanghai Composite Index fell 1.4 percent at the close. China Petroleum & Chemical Corp. lost 3 percent while Yanzhou Coal Mining Co. slid 2 percent. Crude slumped the most in two months in New York after talks between major oil producers ended in Doha without any agreement on limiting output. Average new-home prices rose 1.9 percent from February, when they advanced 0.6 percent, according to SouFun Holdings Ltd., the owner of China’s biggest property website. Falling oil would undercut one of the biggest drivers in Chinese stocks this year. A gauge of energy shares jumped 11 percent in the three months through Friday, the most among industry groups, as crude rebounded. The Shanghai Composite closed at 3,033.66, the lowest since April 12. The Hang Seng China Enterprises Index retreated 1.4 percent at the close in Hong Kong, with Huaneng Power International Inc. leading declines. The Hang Seng Index fell 0.7 percent.A gauge of information-technology companies on the CSI 300 Index slumped 2.2 percent, the biggest loss among the 10 industries on the measure.
• European Stocks Rise as Carmakers, Miners Gain, Oil Pares Drop. (video) European stocks rebounded as carmakers and commodity producers surged, while energy companies pared declines with oil. Daimler AG and BMW AG led automakers to the biggest advance among industry groups on the Stoxx Europe 600 Index. Miners recovered, with Rio Tinto Group and BHP Billiton Ltd. pacing gains as base metals rose. While crude trimmed losses, it still pulled energy producers lower, with Total SA and Royal Dutch Shell Plc weighing heaviest. Apple Inc. suppliers ARM Holdings Plc and Dialog Semiconductor fell at least 3.3 percent on speculation the iPhone maker will cut production amid slower-than-expected sales of the 6S and 6S Plus models. The Stoxx 600 added 0.4 percent to 344.2 at the close of trading, after earlier sliding as much as 1.4 percent.  
• Aiming at Iran, Saudi Arabia Mixes Oil Policy With Politics. After taking over defense and economic planning, Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman has now stamped his authority over oil policy. In so doing, the 30-year-old son of King Salman upended the Saudis’ decades-long approach of separating commercial from political considerations. Over the weekend, Saudi officials quashed an agreement among major oil producers in Doha to freeze output due to Iran’s refusal to participate, a sign the regional rivalry is infecting the market. “Everything at Doha was about politics,” said Yasser Elguindi, an oil analyst at Medley Global Advisors, a consultant that advises large hedge funds.
• The Hole at the Center of the Rally: S&P Margins in Decline. (video) Stocks are rising, the worst start to a year is a memory, and short sellers are getting pummeled. And yet something is going on below the surface of earnings that should give bulls pause. It’s evident in quarterly forecasts for the Standard & Poor’s 500 Index, where profits are declining at the steepest rate since the financial crisis relative to revenue. The divergence reflects a worsening contraction in corporate profitability, with net income falling to 8 percent of sales from a record 9.7 percent in 2014. Bears have warned for years that such a deterioration would sound the death knell for a bull market that is about two weeks away from becoming the second-longest on record even as productivity sputters and industrial output weakens. While none of it has prevented stocks from advancing in seven of the last nine weeks, rallies have seldom weathered a decline in profitability as violent as this one -- and the squeeze is often a bad sign for the economy, too.

Wall Street Journal:

• U.S. Pledges More Troops for Iraq as Senior Isis Fighter Reported Dead. Defense Department promises 200 more troops while Kurdish state media reports Salman Abu Shabib al-Jebouri killed near Mosul.
• Supreme Court Justices Appear Split on Immigration Case. If court deadlocks, Obama’s policy to shield millions from deportation likely would be frozen.
• The Damage Bernie’s Hillary Bashing May Do. Damage from attacks is starting to matter, especially in Clinton’s standing with independent voters.
• Germany Can’t Save Europe. Berlin needs tax cuts for growth, not more Keynesian spending.

CNBC:

• By this measure, the S&P 500 is overvalued by 72%. (video)
• Low oil prices don't cut into US production by much. Overall output has fallen by about 6 percent since peaking a year ago, but many producers have opted to keep on pumping, even as prices remain stuck at around $40 a barrel — less than half the peak of mid-2014.
• Oil is headed to $30 after Doha. (video)

Zero Hedge:

• Greenspan Admits The Fed's Plan Was Always To Push Stocks Higher. (video)
• One Trader Finally Loses It.
• Dow Tops 18,000 - Highest In 9 Months (Earnings At 12-Month Lows). (graph)
• Multiple Clinton Connections Emerge As More "Panama Papers" Names Revealed.
• WTI Crude Soars 5% Off Post-Doha Lows. (graph)
• China's GDP Growth "Just Doesn't Add Up". (graph)
• Should Investors Be Bullish Or Bearish Right Now: BofA Explains.
• Brazil Buyers Bruised As "Sell The Impeachment News" Slams Stocks, Real. (graph)
• Morgan Stanley(MS) Profit Plunges By More Than 50% As Trading Revenue Tumbles 40%.

Business Insider:

• There's another sign the US could be headed for recession. (graph)
• It looks like 'helicopter money' isn't headed to Japan anytime soon.
• US Navy official: Russia's submarine activities are at their highest since the Cold War.
• A maker of jet fuel, paint and asphalt is getting smashed by more than 45%.
• Amazon(AMZN) is now selling Prime Video for $1 less a month than Netflix(NFLX).

Financial Times:

• Oil bulls will be the losers as technology upends demand. The crude oil market is likely to remain volatile for the foreseeable future, pushed and pulled by a myriad of large opposing forces. A highly uncertain outlook that has dramatically polarised market participants and price expectations for crude oil in 2020 — a key period for valuations and investment decisions — and will probably produce major winners and losers across energy and global markets.