Bloomberg:
- Merkel Says Greece Accord Possible Only If Tsipras Moves. (video) Chancellor Angela Merkel said a deal with Greece is still possible provided the Greek government follows through on the economic-reform pledges made to creditors. Merkel, while shying away from the posturing and rhetoric of others that has characterized the standoff over the past week, offered no concessions in her speech to lower-house lawmakers in Berlin on Thursday. Instead, she contrasted the experience in Greece with fellow euro-area bailout countries that “took their chance” to overhaul their economies. Reading from the agreement signed by Prime Minister Alexis Tsipras’s government and euro-area creditors on Feb. 20, she said that Greece had committed to “comprehensive structural reform,” much of which remained to be carried out.
- IMF Warns No Leeway on Payment. International Monetary Fund chief Christine Lagarde said Greece won’t be given a grace period if it fails to make a payment at the end of the month as Chancellor Angela Merkel said there’s still time to reach a deal on aid. Lagarde, whose policies were labeled “criminal” last week by Prime Minister Alexis Tsipras, said that Greece will immediately be considered in default unless it pays about 1.5 billion euros ($1.7 billion) due to the fund on June 30.
- Greek Deal Won't Save the Country's Banks. (video) Greek banks, which received two capital infusions in the past two years, may need a third one as a recession drives up losses from bad loans. The four biggest lenders, accounting for 91 percent of the country’s banking assets, could see their 12 billion euros ($14 billion) of tangible core capital wiped out by mounting provisions as overdue and restructured loans default. Even if Greece reaches an agreement with European creditors to free up additional money, its next bailout will need to include a new round of funding for the ailing banks.
- LNG Capital Shorts Junk Bonds as Selloff Spreads to Europe Haven. LNG Capital, a London-based hedge fund that focuses on credit markets in western Europe, is shorting some of the region’s safest junk bonds as the global selloff spreads. LNG last week sold holdings of top-rated junk bonds maturing in 2025, including those of German bearings maker Schaeffler AG, with the intention of buying them back at a lower price, according to Chief Investment Officer Louis Gargour. It also bought a derivatives index insuring against losses on high-yield bonds. Investors are starting to sell speculative-grade debt, which was seen as a haven during the rout led by government bonds, as concerns about Greece’s sovereign debt crisis and rising U.S. interest rates deepen. High-rated, long-dated, euro-denominated junk bonds are especially vulnerable, said Gargour, who oversees more than $200 million of assets.
- Why BofA’s Global Bond Guru Is Fixated on Chinese Equities. Forget U.S. Treasuries and the euro. If Bank of America Corp. is right, the new must-watch indicator for global bond and currency markets comes from somewhere few traders in New York and London would think to check: the Shanghai Composite Index of Chinese share prices. “Normally, when I come into the office, the first thing I look at is where 10-year Treasury yields are trading, where euro-dollar is trading,” David Woo, the head of global rates and currencies research at Bank of America, said in an interview on Bloomberg Radio in New York. “These days, the first thing I look at on the Bloomberg terminal is where the Shanghai Composite is trading.” Woo said China’s rally has become so big -- he called it the world’s largest bubble since dot-com boom of the late 1990s -- that the eventual collapse will have consequences for markets around the world. Chinese shares may drop as much as 30 percent when the mania ends, weighing on consumers who have been an important driver of growth in Asia’s largest economy, Woo said. He expects the selloff will be bullish for the dollar and U.S. Treasuries. It will have a “knock on effect on the whole world economy,” Woo said. “The only thing that’s holding up the Chinese economy are the Chinese consumers right now. The Chinese consumers are all involved in the Chinese stock market.”
- Europe Stocks Little Changed Amid Fed Optimism, Greek Debt Talks. European stocks were little changed amid optimism the Federal Reserve will raise rates gradually, while investors weighed Greek debt talks. The Stoxx Europe 600 Index added 0.1 percent to 384.22 at the close of trading. The benchmark gauge trimmed a decline of as much as 1.5 percent after U.S. jobless claims and leading economic indicators beat estimates, while consumer prices rose at a slower pace than forecast.
- China’s Churning Out Steel And the World Isn’t Happy. From Brazil to Canada and Mexico to Turkey, steelmakers are unhappy with China. The producer of half the world’s steel is destabilizing the market with “massive and increasing overcapacity in an era of slowing growth,” according to a joint statement by industry associations from around the world this week. All regions are suffering from a “dramatic increase in unfair imports,” it said. China exported more of the alloy in April than any other country produced, according to the World Steel Association.
ZeroHedge:
- Eurogroup Meeting Ends Without A Deal, Greek Belligerence Grows.
- Moscow Furious After Both Belgium And France Freeze Russian State Assets.
- Fear Trumps Greed As Chinese Stock Bubble Canary In The Coalmine Croaks. (graph)
- Is Greece Hurting The Euro Or The Euro Hurting Greece? (graph)
- Biotech Stocks Up 75% Since Fed "Stretched Valuations" Warning. (graph)
- Nasdaq Takes Out Dot Com Bubble Record Highs. (graph)
- Philly Fed Bounces But Employment Plunges & Costs Soar By Most In 42 Years! (graph)
- Initial Jobless Claims Drop, Remains Near 42 Year Low. (graph)
- CPI Misses Despite Surge In Gasoline Prices, Core Inflation Rise Is Smallest In 2015. (graph)
- About Those Rising Wages: Real Hourly Earnings Drop To Lowest In 2015. (graph)