Evening Headlines
Bloomberg:
- Greece Creditors Say No Deal Near as Frustration Vented at G-7. Greece’s creditors said a deal to unlock rescue aid isn’t imminent
as they demanded the debt-ravaged nation make stronger commitments to
overhaul its economy and strengthen public finances. The Greek government saw its optimism over an agreement scoffed at as
European officials gathered in Germany for a Group of Seven meeting and
said much more effort is needed. Greece had claimed a solution could be
reached by Sunday. The two sides are “certainly not the three quarters of the way”
there, European Economic Commissioner Pierre Moscovici told reporters in
Dresden on Thursday where finance ministers and central bankers from
the world’s largest economies discussed the global economy. “We need to
work day and night.”
- The U.S. Suddenly Sounds an Alarm on Greece. In the world’s most pressing financial crisis, Greece’s potential
default on its debt, the U.S. has adopted a quiet, behind-the-scenes
role. That’s changing. Until recently, President Barack Obama and his top financial advisers
have made few public statements on Greece’s debt crisis, which
threatens to drive the country out of the euro zone. Yet this week U.S.
Treasury Secretary Jacob J. Lew voiced frustration over a stalemate in
the talks between Greece and its European creditors.
- China Reforms Head Down Path Littered With Crisis Casualties. “History shows that if China prematurely opens the capital account
before properly sequencing in other reforms the results could be
disastrous for financial stability and longer-run growth prospects,”
said Kevin Gallagher, an associate professor of international relations
at Boston University who co-wrote a paper on China’s cross-border
capital deregulation. “I worry that they are forgetting the past.”
- Evergrande Stock Sinks After Developer Sells Shares Below Range. Evergrande Real Estate Group Ltd., among China’s most indebted
developers, plunged the most in five-and-a-half years after it was
forced to cut the price of a share offering in order to successfully
raise capital. The company raised HK$4.6 billion ($593 million) net proceeds from a
sale of 820 million shares at HK$5.67 each, according to a statement to
the Hong Kong stock exchange Friday. The price represents an 18 percent
discount to Evergrande’s last close.
- Abenomics Heads Toward Debt Meltdown, Reflation Enemies Warn. Two years after unleashing record monetary stimulus, Bank of Japan
Governor Haruhiko Kuroda and his allies are confronting increasingly
vocal opposition from the opponents of reflation who once dominated the
policy debate. Hundreds of economists filed in to a Saturday symposium on BOJ policy
at a Japan Society of Monetary Economics semiannual gathering in Tokyo
May 16. Backers of Kuroda’s 2 percent inflation target squared off
against advocates of monetary restraint, who say the BOJ’s bond
purchases are delaying a crucial overhaul of public finances to deal
with record debt.
- Macquarie Sees Ticking Bomb for India as Restructured Loans Fail. India’s state-run banks’ restructured loans are souring at a record
pace, threatening their appetite for new lending with profitability
already at a seven-year low. Reworked assets that turned bad almost doubled to 570 billion rupees
($8.9 billion) in the year ended March 31, industry data show. There’s
another 2.9 trillion rupees in the category, which must be reclassified
as delinquent or healthy within two years. Macquarie Group Ltd. has
called this debt a ticking time bomb. Standard & Poor’s predicts a
record portion will fail in the year ending March 2016 as Fitch Ratings
Ltd. sees lenders’ return on equity falling to the least since 2006.
- Asian Stocks Pare Monthly Loss as Yen Rises; China Extends Drop. Asian stocks rallied, trimming their first monthly drop this year,
as the yen rebounded from a 12-year low and oil gained. Chinese shares
declined after plunging on record turnover on Thursday.
The MSCI Asia Pacific Index climbed for the first time in four days,
adding 0.2 percent by 9:49 a.m. in Hong Kong. The Shanghai Composite
index dropped 2.4 percent, after a 6.5 percent slump the previous day.
- Wall Street’s Young Guns Brace for First Big Test. Magdy
El Mihdawy remembers exactly where he was when the stock market tanked
in 2009. He was on Spring Break in Florida -- as a 22-year-old
undergrad. Today, El Mihdawy is part of a Wall Street demographic whose own
trial by fire awaits: traders who’ve never known anything but a
post-crisis world of rock-bottom interest rates and ever-rising markets.
- Bullard Warns Delaying Fed Rate Rise Boosts Asset-Bubble Threats. Federal Reserve Bank of St. Louis President James Bullard warned
that keeping interest rates near zero risks inflating asset-price
bubbles, saying officials should raise borrowing costs this year as the
economy improves. A prolonged accommodative stance is a “recipe for asset-price bubbles
and a lot of mischief to happen,” Bullard said Thursday in a Bloomberg
Radio interview from St. Louis. “Asset price bubbles have been a
devastating feature for the U.S. economy in the last 15 years.”
Wall Street Journal:
- NYSE Looks to Ease Late-Day Pileup. Exchange plans midday auction for thinly traded shares. The New York Stock Exchange is preparing a new plan to make it
easier to buy or sell the shares of thousands of listed companies, an
effort to counter the slow midday trading and uneven liquidity plaguing
U.S. stock markets. Officials at the NYSE, a unit of
Intercontinental Exchange Inc., plan to launch a midday auction for
thinly traded shares after winning the blessing of the Securities and
Exchange Commission last week. Already, the NYSE and its chief rival,
the Nasdaq Stock Market, operated by Nasdaq OMX Group Inc.,...
- Wipeout in Europe Bond Funds Tests Investors’ Resolve. Recent rout in government debt pummels funds’ strong start to the year. A strong start to the year for many of Europe’s biggest bond funds
was all but wiped out by an abrupt selloff in the region’s credit
market, testing the mettle of investors who rely on the asset class for
its steady returns. Europe has been at the center of the global
bond-market turmoil that began in mid-April. About €344 billion ($375
billion) was wiped off the value of eurozone-government bonds when
prices fell abruptly after rising for several months to record levels,
according to...
Fox News:
Zero Hedge:
Business Insider:
NY Post:
Reuters:
- Unexpectedly weak household spending casts doubt on BOJ's optimism. Japan's household spending
unexpectedly slumped in April and consumer inflation was roughly
flat, casting doubt on the central bank's view that a steady
economic recovery will help accelerate inflation toward its 2
percent target. Households spent less
on leisure, travel and dining out even
as real income rose for the first time in 19 months and the
jobless rate fell to a 18-year low, underscoring the challenges of
eradicating the sticky "deflationary mindset" that has beset Japan for
nearly two decades.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 58.25 -.25 basis point.
- NASDAQ 100 futures -.01%.
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- 1Q GDP is estimated to fall -.9% versus a prior estimate of a +.2% gain.
- 1Q Personal Consumption is estimated to rise +2.0% versus a prior estimate of a +1.9% gain.
- 1Q GDP Price Index is estimated to fall -.1% versus a prior estimate of a -.1% decline.
- 1Q Core PCE is estimated to rise +.9% versus a prior estimate of a +.9% gain.
9:00 am EST
- ISM Milwaukee for May is estimated to rise to 50.0 versus a reading of 48.08 in April.
9:45 am EST
- Chicago Purchasing Manager for May is estimated to rise to 53.0 versus a reading of 52.3 in April.
10:00 am EST
- Final Univ. of Mich. Consumer Sentiment for May is estimated to rise to 89.5 versus 88.6 in April.
Upcoming Splits
Other Potential Market Movers
- The UK GDP report, ASCO annual meeting and the (TOT) annual meeting could also impact trading today.
BOTTOM LINE: Asian
indices are mostly higher, boosted by commodity and technology
shares in the region. I expect US stocks to open modestly higher and to
weaken into the afternoon, finishing mixed. The Portfolio is
50% net long heading into the day.