- China Has Its Worst-Ever Start to a Year For Defaults. China’s deleveraging push has racked up the most defaults on corporate bonds ever for a first quarter, and the identity of the debtors is pretty revealing. Seven companies have defaulted on a total of nine bonds onshore so far in 2017, versus 29 for all of last year, according to data compiled by Bloomberg. In a sign of the struggles facing China’s old economic model, most of them depend on heavy industry and construction. While it’s still far from a crisis point, the defaults shows how policy makers’ efforts to reduce the liquidity that had propelled the bond market until late last year is exacting casualties. “Weak companies can’t sell bonds, which adds to the pressure on their cash flow,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. “The pace of defaults will continue. It will be even more difficult for weak companies to sell bonds because corporate bond yields may rise further -- the current yield premium doesn’t provide enough protection against credit risks.”
- Trump Says U.S. Would Act Alone on North Korean Nuclear Threat. President Donald Trump said the U.S. can “totally” address North Korea’s nuclear threat unilaterally if China doesn’t cooperate to put pressure on that nation, according to the Financial Times. “If China is not going to solve North Korea, we will. That is all I am telling you,” Trump said in an interview published on Sunday. When pressed about whether he could do it one-on-one without China’s help, the president said, “I don’t have to say any more. Totally.” The comments come ahead of Trump’s planned summit with Chinese President Xi Jinping at the president’s Mar-a-Lago resort in Palm Beach, Florida. The North Korean threat is expected to take center stage at the April 6-7 talks. Trump said he’ll discuss North Korea and the scope for cooperation when he hosts the Chinese leader.
- Asian Stocks Poised to Nudge Higher; Euro Rises.
Stocks looked set to climb as trading begins on Monday in Asia ahead of
a busy week of macro-economic events that culminates in the monthly
U.S. jobs report. Equity futures in Japan, Australia and Hong Kong were
up slightly in their most recent trading. The euro climbed early Monday,
after posting its first weekly decline since February, while the yen
and the Aussie both traded flat against the dollar. Markets in China and
Taiwan are closed for holidays. As the second quarter gets going,
political developments threaten to cloud the improving global economic
outlook. Even last month’s Federal Reserve interest-rate increase and
the prospect of tighter monetary policy later this year has failed to
spur the greenback, which fell to a four-month low last mont
h on concern President Donald Trump may struggle to steer his promised tax cuts through Congress. The yen traded at 111.45 per dollar as of 7:06 a.m. in Tokyo. The euro rose 0.1 percent to $1.0665. Futures on the Nikkei 225 climbed 0.3 percent in Singapore and contracts on Australia’s S&P/ASX 200 Index added 0.1 percent. Hang Seng futures advanced 0.2 percent, while contracts on South Korea’s Kospi index were flat.
- OPEC's Barkindo Sees Progress in Oil Cuts as Stockpiles Fall. Crude stockpiles are starting to decline in a sign that the production cuts implemented this year are bringing the market to balance, according to OPEC’s Secretary-General Mohammad Barkindo. An overhang of an estimated 285 million barrels of oil in storage has been a drag on crude prices even as OPEC and some non-members producers curbed output. Six members of the Organization of Petroleum Exporting Countries and Oman back extending production cuts beyond June, with Saudi Arabia and Kuwait saying oil stockpiles need to fall to the five-year average. Oil had its biggest weekly increase this year last week amid speculation OPEC will extend its deal to curb output, and after a U.S. government report showed the nation’s refineries boosted crude use by the most in almost three years while fuel supplies fell. Morgan Stanley said in a report that “less visible” crude stockpiles, including in China, Japan and floating storage around the world, have declined 72 million barrels this year.
- OPEC Deal Pushes Russian Oil Output Down 1.6 Percent From Peak. Russia cut its crude production in March, moving closer to fulfilling its agreement with OPEC as the deadline approaches. Production of crude and condensate fell to 11.05 million barrels a day, down 1.6 percent from Russia’s post-Soviet high of 11.23 million barrels in October, according to data from the Energy Ministry’s CDU-TEK statistics unit. Russia has committed to reducing supply by as much as 300,000 barrels a day by the end of this month.
- A Squabble at Iraq's Oldest Oil Field Could Rock Global Supplies. A territorial dispute in northern Iraq threatens to disrupt oil output at a field containing as much crude as Norway, even as U.S.-backed forces prepare what could be a decisive blow against Islamic State militants in the nearby city of Mosul. Kirkuk, where Iraq first discovered oil in 1927, can produce more than 1 million barrels a day but is pumping at less than half its capacity while competing ethnic and political groups scramble to control its 9 billion barrels of reserves.
- McConnell Says He's `Very Confident' Congress Can Avoid Shutdown. Senate Majority Leader Mitch McConnell said he’s “very confident” Congress can pass a funding bill that would avoid a government shutdown at the end of April. McConnell weighed in on the first discussions about government-wide spending in President Donald Trump’s administration on “Fox News Sunday,” saying the appropriations committees of the House and Senate were “working on the bills on a bipartisan basis” to fund the government after April 28.
Wall Street Journal:
- Trump Touts Party Unity Days After Threatening Dissident Lawmakers. On Twitter, president says he isn’t giving up on health-care overhaul; golf with a critic.
- Fading Trade-Crackdown Fears Power Overseas Rebound. Mexican peso strengthened more than any other major currency this year and emerging-market stocks have fared better than those in the U.S.
- Vote on Trump’s Supreme Court Nominee to Test Red State Democratic Senators. Dueling dynamics ensure vote for or against Neil Gorsuch will anger one faction of senators’ constituencies.
- Hundreds Dead, Missing in Colombian Landslide. Colombian President Juan Manuel Santos declares state of emergency in Mocoa.
- Oil Companies’ Modest Prize: Breaking Even. Exxon, Shell, Chevron and BP barely cover spending, dividends with cash.
- Why The Market's "One-Sided Stability" Is Becoming Increasingly Dangerous: Deutsche Explains. (graph)
- Asian indices are unch. to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 94.5 +.75 basis point.
- Asia Pacific Sovereign CDS Index 21.25 +.25 basis point.
- Bloomberg Emerging Markets Currency Index 72.14 unch.
- S&P 500 futures +.06%.
- NASDAQ 100 futures +.09%.
Earnings of Note
- None of note
10:00 am EST
10:00 am EST
- ISM Manufacturing for March is estimated to fall to 57.1 versus 57.7 in February.
- ISM Prices Paid for March is estimated to fall to 66.0 versus 68.0 in February.
- Construction Spending MoM for February is estimated to rise +1.0% versus a -1.0% decline in January.
- Total Vehicle Sales for March are estimated to fall to 17.3M versus 17.47M in February.
- None of note
- The Fed's Dudley speaking, Fed's Lacker speaking, Eurozone PPI report and the Japan Manufacturing PPI report could also impact trading today.