China's February trade performance was far worse than economists had expected, days after top leaders at the National People's Congress sought to reassure investors about the world's second-largest economy. Exports fell 25.4% from a year earlier, the biggest drop since May 2009, while imports slumped 13.8%, leaving a trade surplus of $32.59B. "It's easy to blame Chinese New Year distortions, but there is a much deeper malaise that is becoming apparent in the numbers," said Frederic Neumann, co-head of Asian economic research at HSBC.
Economy
Longer dated Japanese government bond yields declined to new depths overnight, with the 7-, 10-, and 30-year benchmark yields all setting new record lows. Although the JGB market figures are not unusual since the BOJ cut interest rates below zero, the scale of the rally for the 30-year bonds was pronounced, suggesting investors are scrambling for yield against a backdrop of poor economic data and deflationary pressures. U.S. treasuries gained with the Japanese bonds, as stock-market declines drove demand for the relative safety of sovereign debt. 10-year treasury yield -6 bps to 1.84%.
After a long wait for inflation to accelerate, Fed officials face a complex and possibly divisive debate over whether recent evidence of rising prices is strong enough to move ahead with planned rate hikes. In separate statements on Monday, policymakers at the core of that debate staked out starkly different views, with Fed Vice Chairman Stanley Fischer saying economic data now points to the "first stirrings" of inflation, while Fed Governor Lael Brainard countered that the evidence was not yet so clear cut.
Michael Bloomberg has announced that he will not mount an independent bid for the U.S. presidency because of fears that it would increase the chances of Republicans Donald Trump or Ted Cruz ending up in the White House. "That is not a risk I can take in good conscience," he wrote on Bloomberg View. "I love our country too much to play a role in electing a candidate who would weaken our unity and darken our future."
Wall Street bonuses are down for the second straight year, and recent market volatility and cutbacks suggest 2016 will be difficult as well. According to the New York State comptroller, the average bonus paid in the securities industry last year fell 9% to $146,200, while the bonus pool for employees who work in NYC shrank 6% to $25B. Thomas DiNapoli also noted that recent job gains might not be sustainable, given the early weakness in the financial markets and increasing provisions for bad loans to the energy sector.
German industrial production jumped by the most in more than six years in January, in a sign that strong domestic demand may be helping to underpin output even as external trade cools. Production, adjusted for seasonal swings, climbed 3.3% from the prior month after retreating a revised 0.3% in December. German firms had "a very good start" to the year, the economics ministry said, predicting a "moderate recovery" in industrial activity in the first quarter.
Does the market believe in Mario Draghi? The euro is not moving much before Thursday's ECB meeting, but investors may be looking at what happened in Japan. "The BOJ made their rates even more negative and what happened to the yen? It strengthened," said Ewen Cameron Watt, Chief Investment Strategist at BlackRock. Euro flat at $1.1013.
Cyprus has become the fourth eurozone nation to exit an EU-IMF bailout, as finance ministers gave the green light to leave its program without a follow-up fund. The Mediterranean country was forced into a €10B bailout in March 2013, due to a toxic combination of broken banks, a soaring deficit and an inability to access market financing. By contrast with Cyprus, Greece (the only eurozone country left in a rescue program) was caught yesterday in a new row between the EU and IMF regarding the strength of its bailout reform commitments.
European Union leaders have welcomed Turkey's offer to take back all migrants who cross into Europe from its soil by agreeing in principle to Ankara's demands for an extra €3B, visa waivers, and faster EU membership talks. However, other details remain to be worked out. European officials hope to reach an ambitious accord with Turkey at their next scheduled summit, on March 17-18.
Bank of England Governor Mark Carney is backing Prime Minister David Cameron's European Union deal, saying the agreement allows the central bank to do its job. "The settlement addresses the issues the Bank identified as being important, given the likely need for further integration of the euro area, to maintaining its ability to achieve its objectives," Carney told British lawmakers. Despite a positive assessment of the EU settlement, the governor said he would not make any recommendation about how to vote in the country's June 23 membership referendum.
Oil's 2016 roundtrip is nearly complete...WTI crude started the year at about $40 per barrel, and bottomed well below $30 in mid-February. After another 5.5% gain on Monday, the price returned to just a few pennies shy of $38. Brent crude, in the meantime, has touched $40 per barrel for the first time in 2016.
Stocks
Nike has suspended ties with tennis star Maria Sharapova after she tested positive for an illegal heart drug at the Australian Open. Sharapova said she's taken meldonium for over a decade, long before a 2016 ban by the World Anti-Doping Agency, which outlawed the substance as a performance-enhancer. How big is her contract? Sharapova brings in a reported $30M per year in endorsements, much of that from Nike (NYSE:NKE), with whom she has a reported $70M mega-deal.
A mystery investor has built up a stake of close to 5% in Burberry (OTCPK:BURBY), according to the FT, prompting Britain's best-known luxury fashion brand to arm itself against a possible takeover bid by seeking help from its financial advisors. A source close to the company said it had unsuccessfully attempted to reveal the client by asking HSBC, which is listed as the custodian for the position. Burberry shares +5.8% in London.
Nippon Telegraph & Telephone is expected to offer more than ¥400B ($3.5B) to buy Dell's Perot Systems in a move aimed at bolstering the Japanese company's presence abroad, Nikkei reports. NTT Data President Toshio Iwamoto will formally present an offer to Dell executives this week, and is expected to enter into exclusive negotiations on the purchase. While the price may change before a deal is concluded, the acquisition appears likely to go down as NTT's third-largest ever.
In the latest volley in its high-profile fight with Apple (NASDAQ:AAPL), the Justice Department has appealed a decision that protects the tech giant from unlocking an iPhone in a New York drug case. Prosecutors, who say Apple has unlocked at least 70 iPhones in the past, are relying on the same "All Writs Act" in a California court, where a judge ordered the company to unlock a device belonging to one of the San Bernardino shooters. The clash has intensified a long-running debate over how much law enforcement and intelligence officials should be able to monitor digital communications.
Exelon and Pepco are making a last-ditch proposal to save their planned $6.8B merger, outlining three options to prevent the loss of customer benefits. The utility companies are not offering Washington D.C. any more money, but say they would support efforts by regulators and politicians for a plan on how to distribute $78M they offered the city in exchange for its support. EXC-4.7%; POM unchanged premarket.
The U.S. Air Force has selected Pratt & Whitney (NYSE:UTX) to build the engines for Northrop Grumman's (NYSE:NOC) new $80B long-range strike bomber program. Analysts had expected Pratt to be chosen as the supplier since the company already builds engines for Lockheed Martin's (NYSE:LMT) F-35 combat jet. Other key suppliers for "airframe or mission systems" include BAE Systems (OTCPK:BAESY), GKN (OTC:GKNCF), Spirit AeroSystems (NYSE:SPR), Orbital ATK (NYSE:OA), Rockwell Collins (NYSE:COL) and Janicki Industries.
German prosecutors have widened an investigation into alleged fraud and unfair competition at Volkswagen (OTCPK:VLKAY) related to the automaker's diesel-emissions scandal. The prosecutor's office is now probing 17 suspects, up from six previously, said spokesman Klaus Ziehe, however, no current or former management board members are currently under investigation.
Following years of running only on Windows-based operating systems, Microsoft's (NASDAQ:MSFT) is making its SQL Server database available for Linux. "We are bringing the core relational database capabilities to preview today, and are targeting availability in mid-2017," EVP Scott Guthrie disclosed. The announcement follows a deal to support Red Hat Enterprise Linux (RHEL) on Azure, as Microsoft continues showing a greater willingness to support rival platforms in the Satya Nadella era.
China's ZTE Corp. is an unfamiliar name to many American consumers, but it is well known among U.S. technology vendors, who face a sudden roadblock in selling to the big customer. On Monday, the U.S. imposed export restrictions on the telecoms equipment maker over an alleged scheme to re-export controlled items to Iran. While ZTE (OTCPK:ZTCOY) isn't big enough that its loss would be a major financial blow to U.S. businesses, the big worry is about a possible backlash from China that could squelch demand for foreign components there.
Today's Markets
In Asia, Japan -0.8% to 16783. Hong Kong -0.7% to 20016. China +0.1% to 2901. India +0.1% to 24659.
In Europe, at midday, London +0.8%. Paris +1.4%. Frankfurt +1.3%.
Futures at 6:20, Dow -0.6%. S&P -0.7%. Nasdaq -0.8%. Crude -0.8% to $37.60. Gold +0.9% to $1275.60.
Ten-year Treasury Yield -6 bps to 1.84%
Today's Economic CalendarIn Europe, at midday, London +0.8%. Paris +1.4%. Frankfurt +1.3%.
Futures at 6:20, Dow -0.6%. S&P -0.7%. Nasdaq -0.8%. Crude -0.8% to $37.60. Gold +0.9% to $1275.60.
Ten-year Treasury Yield -6 bps to 1.84%
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
1:00 PM Results of $24B, 3-Year Note Auction
Companies reporting earnings today8:55 Redbook Chain Store Sales
1:00 PM Results of $24B, 3-Year Note Auction
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