Frontrunning: April 1

  • GM enters harsh spotlight as Congress hearings begin (Reuters)
  • Facebook’s Zuckerberg earns $3.3bn through share options (BBC)
  • Sheryl Sandberg has sold more than half her stake in FaceBook (FT)
  • Chinese Dragnet Entangles Family of Former Security Chief, Zhou Yongkang (WSJ)
  • NHTSA chief: GM did not share critical information with U.S. agency (Reuters)
  • Citigroup uncovered rogue trading in Mexico, fired two bond traders (Reuters)
  • Corporate America’s overseas cash pile rises to $947bn (FT)
  • Thai anti-government protester killed, rekindling political crisis (Reuters)
  • China Milk Thirst Hands U.S. Dairies Record 2014 Profits (BBG)
  • Caterpillar accused of ‘shifting’ profits (FT)
  • New iPhone 6 screens to enter production as early as May (Reuters)
  • Draghi Europe Scenario Points to Lowflation Still Painful (BBG)
  • NSA infiltrated RSA security more deeply than thought (Reuters)
  • Russia Signals It Will Withdraw Troops From Ukraine Border (WSJ)
  • Tesla’s Model S Lock Can Be Opened With a Basic Hack (Gizmodo)


Overnight Media Digest


* New problems in the federal health-insurance website stymied some of the hundreds of thousands of Americans trying to sign up at the last minute, prompting health plans and officials to brace for the complex task of enrolling people after Monday’s official deadline. (

* Yahoo Inc is in preliminary talks to acquire online-video service News Distribution Network Inc, a deal that would help Chief Executive Marissa Mayer compete with Google Inc’s YouTube for viewers and ad dollars. (

* The Federal Bureau of Investigation is probing whether high-speed trading firms are engaging in insider trading by taking advantage of fast-moving market information unavailable to other investors. Among the types of trading under scrutiny is the practice of placing a group of trades and then canceling them to create the false appearance of market activity. (

* Federal Reserve Chairwoman Janet Yellen offered new assurances that the Fed intends to keep interest rates low, describing in unusually personal terms why the economy needs these policies to support a weak job market. Yellen’s comments, coming less than two weeks after a Fed policy meeting where officials discussed the path to rate increases, were a notable affirmation of her commitment to low rates until the economy is much stronger. (

* General Motors Co’s chief and the top U.S. auto-safety regulator will face off on Capitol Hill on Tuesday over auto defects linked to 13 deaths. Separately, GM said it was recalling 1.5 million vehicles for a power-steering issue. (

* The U.S. Chamber of Commerce, among the most powerful business lobbying organizations in Washington, is planning a second outpost in Silicon Valley in an effort to broaden its membership and clout. The Chamber is expected to announce Tuesday that its second-in-command, David Chavern, will relinquish his role as chief operating officer to lead the initiative. (

* A hepatitis C pill from Gilead Sciences Inc that costs $1,000 a day is on track to notch among the biggest sales ever for the first year of a newly approved drug, showing how hard it is for insurers to curb usage. It could ring up $5 billion in U.S. sales this year if current prescription patterns hold. Some analysts say the figure might reach $9 billion. (

* Caterpillar Inc has deferred or avoided paying $2.4 billion of U.S. taxes under a corporate restructuring 15 years ago that shifted most of the profits from overseas replacement-part sales to a Swiss subsidiary, according to a Senate subcommittee report. (

* An investment venture set up by former Xstrata Chief Executive Mick Davis and three colleagues looks to finance a new midsize metals and mining group. (

* A federal judge upheld the validity of a key U.S. patent for Eli Lilly & Co’s blockbuster lung-cancer drug Alimta, a big legal victory that could relieve sales pressure for the drug maker later this decade. (

* MetLife Inc was hit with the largest New York state fine against an insurer – $50 million – to settle allegations that its international operations sold insurance in the state to multinational companies without proper licensing. (

* Arista Networks Inc disclosed plans to go public that come with an unusual twist: a dispute with one of its founders over software used in the startup’s networking hardware. The company said it received breach-of-contract allegations from a company called Optumsoft Inc that was founded by David Cheriton, a Stanford University computer science professor who stepped down from Arista’s board of directors on March 1. (

* U.S. safety regulators issued a new and long-awaited rule Monday to require auto makers to install rear-visibility technology in all new vehicles starting in May 2018, the latest in an effort to reduce injuries and deaths caused by backup accidents. (

* Chevron Corp will pursue claims against Washington, D.C., based law firm Patton Boggs Llp against a $9.5 billion environmental verdict in Ecuador saying the firm played “a pivotal role” in concealing misdeeds behind the verdict. (

* Exxon Mobil Corp says future regulations to protect the climate don’t threaten the value of its oil and gas reserves, arguing that economies will need the fuels too much to embrace drastic cuts in greenhouse-gas emissions. (

* Total compensation for Facebook Inc chief executive and founder Mark Zuckerberg tumbled 67 percent to $653,165 in 2013, as he declined to participate in the bonus plan for the year and took only a base salary of $1. (

* Macy’s Inc promoted Chief Merchandising Officer Jeffrey Gennette to president, giving the executive new responsibilities that could eventually pave the way for him to lead the company, people familiar with the situation said. (



Swiss and British regulators stepped up their scrutiny of alleged manipulation of foreign exchange markets as watchdogs take a closer look at whether banks have a tight enough grip on the behaviour of their traders.

Dutch bank ING said it would restart dividend payments from the next year once it finishes off the repayment of the government bailout sum of 1.23 billion pounds.

The chief executive of Italy’s biggest company Eni is sentenced to three years in prison over inadequate environmental standards at the Porto Tolle power plant at a time when Scaroni was CEO at Italian utility Enel.

Luxury sports car maker Aston Martin is in discussions with Mercedes-Benz over building its first SUV and hopes to have the SUV in showrooms within three to four year, sources said late Monday.

Lufthansa cancelled 3,800 flights for April 2-4, or virtually all of its operations, due to a planned walkout by pilots, in what would be one of the biggest strikes ever to hit the German airline.



* The nation’s top auto safety regulator will seek to cast blame on General Motors Co when he testifies on Tuesday before a House subcommittee looking into the ignition problem of Chevrolet Cobalts and other cars. In written testimony filed in advance, David Friedman, the acting administrator of the National Highway Traffic Safety Administration, argues that “G.M. had critical information that would have helped identify this defect.” (

* Caterpillar Inc, the big American maker of heavy construction and mining equipment, used a subsidiary in Switzerland to avoid paying $2.4 billion of income taxes over 13 years, according to a Senate investigative report released on Monday. (

* Author Michael Lewis in his new book “Flash Boys” talks about a perverse system on Wall Street that has allowed certain professional investors to pay hundreds of millions of dollars a year to locate their computer servers close to stock exchanges so they can make trades milliseconds ahead of everyone else. (

* Workers at three Toyota Motor Corp assembly plants in Ontario will vote next week on whether to join Canada’s largest union, an effort that could create the carmaker’s only unionized shop in the country and the United States. (

* Six years ago, Congress mandated auto safety regulators to pass a federal standard by 2011 that would help keep drivers from running over small children as they backed up their vehicles. On Monday, after three years of repeated delays and a lawsuit, the National Highway Traffic Safety Administration announced the new rule: By May 2018, all new cars and light trucks must be equipped with rearview cameras. (

* The Federal Communications Commission approved measures on Monday that will free up more airwaves for Wi-Fi and wireless broadband. The agency also moved to help curb increasing cable rates for consumers, but in doing so cracked down hard on the ability of broadcast stations to negotiate jointly in competition with cable systems. (


Hong Kong


— Pressure is growing on Hong Kong’s pan-democrat lawmakers to join a trip to Shanghai after pro-government figures said they would find a way for them to have an exclusive meeting with Beijing officials. (

— Qianhai is planning to auction up to 15 parcels of land this year totalling 2.6 million square metres, a third of which will be sold only to Hong Kong companies as a way of attracting more investment from the city. (

— The Securities and Futures Commission has obtained a Hong Kong court order to appoint interim receivers to take over the management of decorative paper maker Qunxing Paper after its major subsidiary secretly started a bankruptcy proceeding on the mainland. (


— Local yuan deposits rose 3 percent month-on-month to a record 920.35 billion yuan ($148.01 billion) as of February, but the trend may not be sustained amid the recent volatility in the currency. Yuan deposits account for 12.3 percent of the total deposits in Hong Kong. (

— China Construction Bank plans to sell subordinated debt notes worth 20 billion yuan ($3.22 billion) to replenish capital and may also issue preference shares. (

— The People’s Insurance Company of China will continue to increase its exposure to fixed-income investments in the coming year, according to Vice Chairman Li Liangwen. (


— Chinese gold producer Zijin Mining Group Co Ltd plans to produce 34 tonnes of gold this year, an increase of 7 percent from the previous year, according to Chairman Chen Jinghe, but slower than the 20 percent growth in 2013.


— Five major developers — Sun Hung Kai Properties , Henderson Land, New World Development , Cheung Kong and Sino Land — sold 2,700 flats for HK$21.1 billion ($2.72 billion) in the first quarter of 2014, a decrease of 19 percent in terms of the number of flats sold and 30 percent in terms of value when compared with the fourth quarter of 2013.



The Telegraph



Boris Johnson is seeking to strike a compromise with Heathrow in the aviation capacity debate by offering the airport’s owners a role in developing and operating a brand new hub in the Thames Estuary.



British banks deemed “too big to fail” are enjoying implicit government subsidies of up to $110 billion that could expose taxpayers to bail-outs costing hundreds of billions of pounds, the IMF has warned.

The Guardian



The public spending watchdog says the business secretary Vince Cable ploughed ahead with plans to float Royal Mail at a maximum price of 330 pence-a-share despite repeated warnings from City experts that the government had vastly undervalued the company.



Bonuses for Britain’s business leaders are falling for a third year as companies feel the need to be fair to their workforces, according to consulting group PriceWaterCoopers.

The Times

Weir Group opens talks with rival over 8.5 bln stg deal


It is understood that Weir Group is in talks with Metso Oyj, a Helsinki-listed company in much the same market of producing industrial pumps and valves for the global oil and gas and mining markets.

BT accused of abusing rural broadband monopoly


A report by Public Accounts Committee has accused BT of exploiting its monopoly position and criticised the Government for failing to deliver “meaningful competition”.

Sky News



The Chancellor defined his commitment as making the country the “best place in the world to create a job, to get a job” and the place with the “highest employment rate of the world’s largest economies”.



Homeowners in Britain are now able to sell their properties on average at more than 96 percent of the asking price, according to a new survey. Hometrack said the rate is even better in some areas, and has now reached a decade-long high in London.




Fly on The Wall 7:00 AM Market Snapshot


Domestic economic reports scheduled today include:
Markit manufacturing PMI for March at 9:45–consensus 56.0
ISM manufacturing index for March at 10:00–consensus 54.0
Construction spending for February at 10:00–consensus up 0.1%



Bridgepoint Education (BPI) upgraded to Outperform from Market Perform at BMO Capital
Cullen/Frost (CFR) upgraded to Neutral from Underperform at Sterne Agee
Gastar Exploration (GST) upgraded to Buy from Neutral at SunTrust
Informatica (INFA) upgraded to Overweight from Equalweight at Barclays
LabCorp (LH) upgraded to Buy from Neutral at UBS
MEDNAX (MD) upgraded to Buy from Hold at Deutsche Bank
NVIDIA (NVDA) upgraded to Outperform from Market Perform at JMP Securities
National CineMedia (NCMI) upgraded to Overweight from Neutral at JPMorgan
Overseas Shipholding (OSGIQ) upgraded to Outperform at Imperial Capital
PennyMac (PFSI) upgraded to Buy from Hold at Jefferies
Rubicon (RBCN) upgraded to Overweight from Neutral at JPMorgan
Rush Enterprises (RUSHA) upgraded to Outperform from Market Perform at BMO Capital
Tableau (DATA) upgraded to Outperform from Neutral at RW Baird
United Continental (UAL) upgraded to Buy from Neutral at UBS
Waddell & Reed (WDR) upgraded to Buy from Neutral at Goldman


Alaska Air (ALK) downgraded to Equal Weight from Overweight at Evercore
Beam (BEAM) downgraded to Hold from Buy at Stifel
Clean Harbors (CLH) downgraded to Hold from Buy at KeyBanc
Oasis Petroleum (OAS) downgraded to Hold from Buy at Deutsche Bank


3D Systems (DDD) initiated with a Neutral at UBS
American Eagle Energy (AMZG) initiated with a Buy at Wunderlich
Aquinox (AQXP) initiated with a Buy at Jefferies
Aquinox (AQXP) initiated with an Outperform at Cowen
Associated Banc-Corp (ASBC) initiated with a Neutral at SunTrust
Bright Horizons (BFAM) initiated with an Outperform at RBC Capital
Cancer Genetics (CGIX) initiated with a Buy at Cantor
Cinedigm (CIDM) initiated with an Overweight at Piper Jaffray (COUP) initiated with a Buy at BofA/Merrill (COUP) initiated with a Neutral at Goldman
Delta Apparel (DLA) initiated with a Buy at Ascendiant
Erickson Air-Crane (EAC) initiated with an In-Line at Imperial Capital
Extreme Networks (EXTR) initiated with a Buy at Wunderlich
HealthSouth (HLS) initiated with an Equalweight at Barclays
Independent Bank (INDB) initiated with a Neutral at SunTrust
JA Solar (JASO) initiated with an Outperform at Northland Securities
Key Energy (KEG) initiated with an Outperform at Imperial Capital
Landec (LNDC) initiated with an Outperform at Imperial Capital
MB Financial (MBFI) initiated with a Neutral at SunTrust
Old National Bancorp (ONB) initiated with a Neutral at SunTrust
Pinnacle Financial (PNFP) initiated with a Buy at SunTrust
Piper Jaffray (PJC) initiated with a Neutral at Susquehanna
PrivateBancorp (PVTB) initiated with a Neutral at SunTrust
Qlik Technologies (QLIK) initiated with an Outperform at Macquarie
Signature Bank (SBNY) initiated with a Buy at SunTrust
Splunk (SPLK) initiated with an Outperform at Macquarie
Stratasys (SSYS) initiated with a Buy at UBS
Tableau (DATA) initiated with a Neutral at Macquarie
Wintrust Financial (WTFC) initiated with a Neutral at SunTrust


General Motors (GM) said it will take Q1 charge up to $750M for recall-related repairs and recalled 1.3M older models to fix power steering
Macy’s (M) named Jeffrey Gennette as president, effective immediately
Amarin (AMRN) announced a co-promotion agreement with Kowa Pharmaceuticals America for its Vascepa capsules in the U.S.
McDermott (MDR) said Q1 results may differ “substantially” from the company’s current expectation
An FDA committee unanimously recommended Durata’s (DRTX) Dalvance
Eli Lilly (LLY) patent for Alimta held up by court through 2022


Companies that beat consensus earnings expectations last night and today include:
Gas Natural (EGAS), Intrexon (XON), Verint Systems (VRNT)

Companies that missed consensus earnings expectations include:
JGWPT Holdings (JGW), Checkpoint Systems (CKP), EveryWare Global (EVRY), Lifeway Foods (LWAY), CUI Global (CUI), WidePoint (WYY)


Hewlett-Packard (HPQ) agreed to pay $57M to settle a shareholder lawsuit, Reuters reports
BHP Billiton (BHP) considering spin-off of unwanted businesses, Reuters reports
Sources: Yahoo (YHOO) in talks to buy online video service NDN, WSJ says
Yahoo (YHOO) considers plans to close Shine, sources say, Re/code reports
FBI probing high frequency traders, WSJ says
Microsoft (MSFT) drops Azure prices in response to Google (GOOG), Amazon (AMZN), TechCrunch says
GM’s (GM) Chevrolet Cobalts were seen as lemons for years, NY Times says


1347 Property Insurance (PIH) 1.89M share IPO priced at $8.00
Euroseas (ESEA) files to sell 28.41M shares of common stock for holders
Kindred Biosciences (KIN) files to sell $50M of common stock
Magnum Hunter (MHR) files to sell 4.3M shares of common stock for holders
McDermott (MDR) files to sell 10M tangible equity units


via Zero Hedge Tyler Durden

“Best Month For Stocks” Begins With Modest Overnight Futures Levitation

Yesterday was window dressing day (facilitated at just the right time by Yellen’s most dovish commentary to date) not only for the hedge fund and vacuum tube community, but also for banks, which as we reported received a record $242 billion in Treasurys from the Fed via an all time high reverse repo. Which means that today, as the repo unwinds, the system will be flooded with over $100 billion.

This brings us to the topic of what stocks may do today – while futures are already solidly in the green, perhaps on the abysmal Japanese Tankan results, or China’s Schrodinger economy, which has been growing and contracting ever since 2012, and posted PMIs that both beat and missed, or maybe it was the record high Italian unemployment reported overnight – will likely focus on just one thing: how to frontrun April performance in the first millisecond of trading. And since April is conventionally the stronger month of the year, and since all bad news are both ignored and priced in at the same time, expect yet another levitation day courtesy of our friends, the high freaks, whose time may be drawing to a close not because of the FBI investigation, which is a joke, but because Goldman has now picked a side, and it is not that belonging to the vacuum tubes.


Among the key overnight events was the February Euro area unemployment report, which was unchanged at 11.9%, lower than the 12% median estimate; in Italy it rose to a record 13% while in Germany the locally defined jobless rate for March stayed at the lowest in at least two decades Euro zone PMI held at 53 in February, unchanged from January and matching median estimate in a Bloomberg survey HSBC/Markit’s China PMI fell to 48 in March, the lowest reading since July, from 48.5 in February; a separate PMI from the government, with a larger sample size, was at 50.3 from 50.2 the previous month NATO foreign ministers meet today to discuss their next steps after Putin began withdrawing forces stationed on Ukraine’s border Gazprom raised prices for Ukraine 44% after a discount deal expired, heaping financial pressure on the government in Kiev as it negotiates international bailouts.

RanSquawk confirms that overall, it has been a quiet session in Europe this morning, with the sentiment towards riskier assets supported by the release of an encouraging set of EU related PMIs and also lower than expected German unemployment rate, which fell to the lowest since German unification in 1989.

Looking at the day ahead, there are plenty of activity indicators to digest on the data docket. Beginning in Europe, the final Euroarea and UK PMIs will be released today together with the PMIs for Italy and Spain. Stateside, the focus will be on the ISM manufacturing and US auto sales data. There is market chatter that a number of US automakers will report strong March sales following the winter slump (Bloomberg). Right, onto the performance review.

Bulletin headline summary from Bloomberg and RanSquawk

  • Treasuries decline, led by 10Y and 30Y; curve spreads steepen as unwind of post-Fed flattening continues; data and Fed speaker calendar light as market focuses on Thursday’s ECB meeting, Friday’s U.S. payrolls.
  • Unemployment in the euro area was at 11.9% in February, lower than the 12% median in a Bloomberg News survey; in Italy it rose to a record 13% while in Germany the locally defined jobless rate for March stayed at the lowest in at least two decades
  • Euro zone PMI held at 53 in February, unchanged from January and matching median estimate in a Bloomberg survey
  • HSBC/Markit’s China PMI fell to 48 in March, the lowest reading since July, from 48.5 in February; a separate PMI from the government, with a larger sample size, was at 50.3 from 50.2 the previous month
  • NATO foreign ministers meet today to discuss their next steps after Putin began withdrawing forces stationed on Ukraine’s border
  • Gazprom raised prices for Ukraine 44% after a discount deal expired, heaping financial pressure on the government in Kiev as it negotiates international bailouts
  • Japan’s economy will probably withstand a sales tax increase that takes effect today as Prime Minister Shinzo Abe prepares economic stimulus measures and companies raise wages, the country’s new bank lobby chief said
  • The first phase of Obamacare ended yesterday much the same way it began: The federal website drew 1.2 million visitors by noon and crashed at least twice
  • Federal agents are investigating whether high-frequency trading firms break U.S. laws by acting on nonpublic information to gain an edge over competitors
  • Sovereign yields higher. Asian stocks mostly higher. European equity markets, U.S. stocks futures gain. WTI crude and copper lower, gold gains


US Event Calendar

  • 9:45am: Markit U.S. Manufacturing PMI, March final, est. 56 (prior 55.5)
  • 10:00am: ISM Manufacturing Index, March, est. 54 (prior 53.2)
  • ISM Prices Paid, March., est. 59.5 (prior 60)
  • 10:00am: Construction Spending, m/m, Feb., est. 0.0% (prior 0.1%)
  • 10:00am: IBD/TIPP Economic Optimism, April, est. 46.0 (prior 45.1
  • TBA: Domestic Vehicle Sales, March., est. 12.3m (prior 11.98m); Total Vehicle Sales, March., est. 15.8m (prior 15.27m) Central Banks
  • EU finance ministers, central bankers meet in Athens Supply
  • 11:30am: U.S. to sell $25b 52W bills, $25b 4W bills


Asian Headlines

JGBs traded higher overnight in Asia, with the swaps curve bull flattening following 10y JGB auction (first in new fiscal year) and also after the BoJ’s Tankan survey missed expectations, with the drop in sentiment larger than when the sales tax was last hiked in 1997. Prices were also supported by the release of somewhat mixed macroeconomic data from China, with Manufacturing PMI coming in at 50.3 vs. Exp. 50.1 (Prev. 50.2) and HSBC Manufacturing coming in at 48.0 vs. Exp. 48.1 (Prev. 48.1).

EU & UK Headlines

The release of an encouraging set of EU related PMIs and better than expected German jobs report (with unemployment rate at its lowest since German unification in 1989), combined with further unwind of built in expectation of easing by the ECB meant that Bunds traded lower since the open. Looking elsewhere, UK Gilts failed to benefit from the release of weaker than expected UK Manufacturing PMI and in fact underperformed EU peers, with markets focusing on the latest comments by BoE’s Carney who said financial markets should be prepared for higher interest rates in the future.

US Headlines

Attention now turns to the release of the latest ISM Manufacturing PMI and the weekly API reports.


Stocks in Europe gapped higher at the open (Eurostoxx50 +0.5%), benefiting from the carry-over of sentiment following dovish comments by Yellen yesterday and also a raft of positive corporate related news flow pre-market. The move higher in stocks was led by basic materials sectors, with BHP Billiton among the best performing stocks following reports that the company is considering spinning off non-core assets worth up to USD 20bln.


EUR outperformed GBP this morning, supported by the release of weaker than expected UK Manufacturing PMI and also the ongoing unwind of bearish positions ahead of the ECB governing council meeting this week. EUR/GBP also benefited from M&A related flows following reports that Metso may be acquired by UK listed Weir Group. Of note overnight, the Reserve Bank of Australia kept rates unchanged at 2.50%, alongside expectations, the central bank also noted that AUD is high by historical standards and that the boost from lower AUD to be less due to recent FX gains.


Little in terms of commodity related news flows this morning, but analysts at Deutsche Bank raised 2014 gold price estimate by 10% to USD 1,261 and see 2014 Brent price forecast at USD 106.50bbl, WTI price forecast at USD 96.60bbl. Elsewhere, a Libyan tribal leader has claimed a deal is ‘imminent’ to open Rebel-held oil ports in the Country. Also of note, Gazprom has raised its Ukrainian NatGas prices 44%, to USD 385.5 pre 1,000 cubic metres, after a discount deal expired, also stating that Ukraine’s debt for unpaid gas bills stand at USD 1.711bln.

* * *

We complete the overnight summary with Jim Reid’s recap of the past 24 hours.

Yesterday was a day for the doves as the combination of a weaker than expected Euro CPI and a less-hawkish sounding Yellen gave a boost to equities, EM and carry assets. Yellen’s speech at an interagency development conference was titled “What the Federal Reserve Is Doing to Promote a Stronger Job Market” so it was clear from the outset that it would have a dovish bias. Nevertheless, the content on the speech turned out to have a number of dovish elements to it and was perhaps useful in highlighting Yellen’s own biases relative to those of the Committee that she highlighted a couple of weeks ago at her post-FOMC press conference. In her speech yesterday, the Fed Chair indicated a number of times that she thought that “the U.S. economy is still considerably short of the two goals assigned to the Federal Reserve by the Congress”. She noted that “The recovery still feels like a recession to many Americans, and it also looks that way in some economic statistics.” On the jobs side, she focused on the “slack” in the jobs sector which she said she measured in four ways, outside of the unemployment rate. They were – the number of part-time workers who would like a full time job, low wage growth, share of long-term unemployed and the falling participation rate. On the unemployment rate itself, Yellen said that the full employment would be reached with unemployment between 5.2% to 5.6% (versus 6.7% in February).

Yellen’s comments gave equities a small lift but the dovish sentiment started earlier in the day with the keenly awaited Euroarea March inflation report. We learnt that headline March CPI fell to 0.5%, lower than the 0.6% consensus estimate, and the lowest reading since October 2009. Core CPI came in at 0.8%, and although it was consistent with Bloomberg consensus, it was still lower than last month’s 1.0% reading, and very much near the post-crisis lows. Interestingly, the Euro immediately printed at a low of 1.372 post-CPI, but the initial weakness was quickly unwound in a matter of minutes and the Euro finished the day at 1.377 (or +0.12% on the day). It was a similar story in bunds with yield ticking down to a low of around 1.55%, but promptly retracing the move and more, before finishing at 1.565%. Perhaps markets were already conditioned for a low CPI print following last Friday’s weaker than expected German inflation report, or perhaps markets were mindful of weekend’s hawkish comments from the Bundesbank’s Weidmann. Alternatively, it’s possible that the inflation number was not weak enough to prompt the ECB to act come Thursday. Nevertheless over the past week it does feel that expectations are rising again for an unconventional policy response from the ECB later in the year.

Across the Atlantic, there was more data weakness for the doves after the US Chicago PMI came in at YTD low of 55.9, almost 4 points lower than expectations and prior month’s number. DB US economics team notes that the slowdown came from a drop in new orders (58.8 vs. 63.6) and employment (50.0 vs. 59.3) but they expect some of these components to stabilise in the coming months as weather-induced effects wear off. The backdrop of weak inflation data and a dovish Yellen saw a number of EM and carry assets perform well. Italian and Spanish bond yields compressed by a basis point, despite the slightly higher bond yields in the core. Turkish and Russian USD bonds rallied by around 15bp apiece. The TRY (+2.3%) and RUB (+1.6%) both strengthened against the USD. The latter was helped by news that Russian President Putin had ordered a partial withdraw of troops from Ukraine’s eastern border. But the positive sentiment was partially offset by fears that Russia could focus on the Moldovan breakaway region of Transnistria, towards Ukraine’s south east, and the Russian Prime Minister’s appearance in Crimea only served to inflame tensions with Ukraine and the West. In France, there were political developments of a different kind as France’s president appointed a new prime minister (Manuel Valls, a former interior minister) after the previous PM resigned amid the Socialist’s poor showing at local elections. President Hollande pledged tax cuts to a bid to boost growth, and said that the government has work to do in convincing the EU that its efforts to boost growth “should be taken into account in how it respects its commitments” (Reuters).

Overnight markets are trading with a firmer tone today, with some relief after a consensus beating Chinese PMI. The official PMI came in at 50.3, against expectations of 50.1 and slightly better than February’s 50.2. Offsetting this partially, the final HSBC manufacturing PMI was revised down to 48.0 versus the preliminary reading of 48.1. Chinese equities have started the quarter on a positive note with the HSCEI (+0.15%) and Shanghai Comp (+0.7%) recording modest gains. On the topic of China, the domestic bond market recorded yet another default with small construction materials firm Xuzhou Zhongsen defaulting on a small US$30m bond today, according to the 21st Century Business Herald. The default is apparently the first in the country’s high yield market which was launched in June 2012, and it’s fair to say that we can probably expect more of these to occur during the year. In Japan, the tankan survey indicated that big manufacturers’ sentiment rose by one point from three months ago to 17, the 5th consecutive quarter of improvement but slightly short of a median market forecast of 18. On a less positive note, both big manufacturers and non-manufacturers expect conditions to worsen three months ahead, possibly related to the sales tax hike which came into force today.

Looking at the day ahead, there are plenty of activity indicators to digest on the data docket. Beginning in Europe, the final Euroarea and UK PMIs will be released today together with the PMIs for Italy and Spain. Stateside, the focus will be on the ISM manufacturing and US auto sales data. There is market chatter that a number of US automakers will report strong March sales following the winter slump (Bloomberg). Right, onto the performance review.


via Zero Hedge Tyler Durden

Read Reason’s Complete March 2014 Issue

Reason April 2014Our entire April
2014 issue is now available online. Don’t miss: a three-way debate
over mandatory vaccination among Ronald Bailey, Jeffrey A. Singer,
and Sandy Reider (come for the owies, stay for the stickers); Paul
Detrick on cellphone justice and the killing of Kelly Thomas; Brian
Doherty on what the courts still have to decide about the Second
Amendment; Abby Wisse Schachter on the war on fun; Chris Kjorness
on how newcomers threaten to regulate the Big Easy’s music culture
into extinction; Matt Welch on the end of Obama’s dreams of being a
Democratic Ronald Reagan; plus our complete Citings and Briefly
Noted sections, the Artifact, and much more.

Click here to read
Reason’s complete April 2014 issue.

from Hit & Run

Brickbat: Holding Out for a Hero

Heather Watts says her daughter was asked to
write a paper on a hero for a class at North Carolina’s Cerro Gordo
Elementary School. But when the girl turned in a paper
on Jesus,
her teacher asked her to write about someone else, Watts says. In a
statement, school officials said students in the class face no
restrictions on who they could write about. But Watts says her
daughter is still being asked to write about something

from Hit & Run