Government bonds rose and the yen strengthened as investors weighed the timing of the Federal Reserve’s next increase in interest rates and the outlook for inflation. Commodities slid, led by metals, while stocks in Europe declined. Treasury 30-year yields fell for a third day. The yen rose from near this month’s low. Futures on the S&P 500 also declined after initially jumping higher in thinly traded, illiquid tape.
Update: after widening by 2bps earlier, Malaysia CDS is now +4 at 167bps and starting to move as macro "analysts" finally catch up on the entire story and comprehend the implications.
Malaysian CDS rose to near 3-month highs and the Ringgit has spiked over 300 pips - back near recent lows - after the Malaysian slushfund government investment fund 1MDB is reportedly in default. This is exactly the scenario we laid out last week that initially sent the currency lower and CDS higher, as the Abu Dhabi sovereign wealth fund has by all appearances started a potential waterfall default on Malaysian sovereign debt (due to cross-default triggers at the sovereign).
Irrational market exuberance hits its zenith after Doha talks fail as oil prices rise, instead of fall, because of minor Kuwait oil strike, then stay up after the strike fails within a day, then rise more when Saudis promise to retaliate with more production and stay up when Russians promise to retailiate with still more production.
The dispute between an Abu Dhabi sovereign fund and Malaysia’s troubled state fund 1MDB over more than $1bn in missing payments hit a crescendo on Monday when the Emirates investment vehicle said its Malaysian counterpart was “in default” on an agreement between the two and terminated the deal. Promptly thereafter, Malaysia 5 year CDS spiked by 11 bps, the most since March 21, to 163 bps as the market starts to quietly ask whether this ongoing scandal may just drag down the entire Malaysian state.
- China trade surprise gives stocks a lift (Reuters)
- JPMorgan profit hurt by drop in investment banking revenue (Reuters)
- About 40,000 Verizon workers launch strike (Reuters)
- Regulators Set to Reject Some Big Banks’ ‘Living Wills’ (WSJ)
- More Startups Are Getting Lower Valuations Than Joining the Billion-Dollar Club (BBG)
- Closures and court cases leave Turkey's media increasingly muzzled (Reuters)
Luxury real estate developer Extell Development Co can’t sell luxury condos at what may be New York's premier ultra luxury destination, the One57 tower, which it is attributing it to the fact that there is an abundant supply of condos already on the market. As a reminder, One57 is where Bill Ackman paid $91.5 million in April 2015 for a condo (which he hoped to flip), just a few months before Valeant, and his fund, suffered staggering losses. Perhaps that should have been the tell.
"We do not expect the meeting to deliver a bullish surprise as we believe production cuts make little sense given it has taken 18 months for the rebalancing to finally start. In addition, any resolute agreement that would support prices from current levels would prove self-defeating, in our view, as we believe that sustained low prices are required for the nascent non-OPEC supply adjustments to deliver a deficit in 2H16. Finally, a production freeze at recent production levels would not accelerate the rebalancing of the oil market as OPEC (ex. Iran) and Russia production levels have this year remained close to our 2016 average annual forecast of 40.5 mb/d." - Goldman
According to the state-run Oil Marketing Co., Iraq increased crude output to a record level in March, ahead of the long-awaited April 17 meeting in Qatar where OPEC members and other producers may or may not (they won't) agree to cap production to curb a global glut. Crude output in OPEC’s second-biggest producer rose to 4.55 million barrels a day last month from 4.46 million barrels in February, while exports increased to 3.81 million barrels a day in March from 3.23 million the previous month.
Lars Schall explores the time-honored tradition of following the money in an attempt to discover answers to yet unresolved questions regarding the terrorist attacks of 9/11 in New York City. Mr. Schall is an independent investigative journalist that has produced many hard-hitting pieces regarding Central Bankers' manipulation of gold prices, and the failure of the US Central Bank (The Federal Reserve) to return all of Germany's gold reserves in the past.
"...the inquiry was abandoned after Blackwater’s top manager there issued a threat: “that he could kill” the government’s chief investigator and “no one could or would do anything about it as we were in Iraq," according to department reports. There’s only one way to stop a guy like this - lock him up. For once, do your job Department of Justice.
By late January, Tim Leissner was irritated. So was Goldman. And so was the FBI.
"It’s not a crisis, but it is tightening"
Regular readers know Tim Leissner. Leissner was the powerful Goldman banker responsible for financing Malaysian PM Najib Razak’s giant slush fund, known as 1MDB. On Wednesday, the bank has confirmed his exit, just as authorities across the globe probe the fund's financing for evidence of malfeasance.
WTI crude prices are up almost 6% this morning with April (the new front-month) trading above $33.50 - testing post-DOE plunge stops. The irony of the ramp is that it comes amid terrible global PMIs (demand), a report from IEA of oil staying in glut for longer than expected (supply), and warnings from Abu Dhabi's biggest bank that $20 oil is possible. Oh well, we are sure the algos know what they are doing... despite veterans of the 1980s oil glut warning it could take 7 to 10 years to emerge from the current slump.
Last month, JPMorgan estimated that persistently low oil prices will likely force sovereign wealth funds to sell some $75 billion in global equities in 2016. According to the Sovereign Wealth Fund Institute, that figure is off. By a lot.