Saturday, May 28, 2016

Weekly Commentary: Just the Facts

For the week:

The S&P500 jumped 2.3% (up 2.7% y-t-d), and the Dow gained 2.1% (up 2.6%). The Utilities increased 1.0% (up 11.7%). The Banks jumped 3.2% (down 2.8%), and the Broker/Dealers surged 4.5% (down 5.8%). The Transports gained 1.3% (up 3.5%). The S&P 400 Midcaps advanced 2.9% (up 6.7%), and the small cap Russell 2000 rose 3.4% (up 1.3%). The Nasdaq100 jumped 3.4% (down 1.8%), and the Morgan Stanley High Tech index rose 3.0% (unchanged). The Semiconductors surged 4.6% (up 4.9%). The Biotechs jumped 4.2% (down 16.7%). With bullion down $40, the HUI gold index sank 8.1% (up 79%).

Three-month Treasury bill rates ended the week at 31 bps. Two-year government yields gained three bps to 0.91% (down 14bps y-t-d). Five-year T-note yields added a basis point to 1.38% (down 37bps). Ten-year Treasury yields increased one basis point to 1.85% (down 40bps). Long bond yields increased two bps to 2.65% (down 37bps).

Greek 10-year yields dropped 24 bps to 7.07% (down 25bps y-t-d). Ten-year Portuguese yields declined seven bps to 3.01% (up 49bps). Italian 10-year yields dropped 12 bps to 1.35% (down 24bps). Spain's 10-year yields fell eight bps to 1.48% (down 29bps). German bund yields dipped two bps to 0.14% (down 48bps). French yields slipped three bps to 0.47% (down 52bps). The French to German 10-year bond spread narrowed one to 33 bps. U.K. 10-year gilt yields declined two bps to 1.43% (down 53bps).

Japan's Nikkei equities index increased 0.6% (down 11.6% y-t-d). Japanese 10-year "JGB" yields slipped a basis point to 0.13% (down 39bps y-t-d). The German DAX equities index rallied 3.7% (down 4.3%). Spain's IBEX 35 equities index jumped 3.8% (down 4.6%). Italy's FTSE MIB index recovered 2.1% (down 15.1%). EM equities were mostly higher. Brazil's Bovespa index declined 1.6% (up 13.2%). Mexico's Bolsa gained 2.1% (up 7.3%). South Korea's Kospi index rallied 1.1% (up 0.4%). India’s Sensex equities index surged 5.3% (up 2.1%). China’s Shanghai Exchange slipped 0.2% (down 20.3%). Turkey's Borsa Istanbul National 100 index gained 2.2% (up 8.8%). Russia's MICEX equities index advanced 1.9% (up 9.4%).

Junk funds saw outflows of $562 million (from Lipper).

Freddie Mac 30-year fixed mortgage rates rose six bps to 3.64% (down 33bps y-o-y). Fifteen-year rates jumped eight bps to 2.89% (down 37bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates up six bps to 3.84% (down 24bps).

Federal Reserve Credit last week dropped $15.7bn to $4.431 TN. Over the past year, Fed Credit declined $6.9bn. Fed Credit inflated $1.620 TN, or 58%, over the past 185 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt last week slipped $1.7bn to $3.218 TN. "Custody holdings" were down $109bn y-o-y, or 3.3%.

M2 (narrow) "money" supply last week jumped $26.8bn to a record $12.734 TN. "Narrow money" expanded $793bn, or 6.6%, over the past year. For the week, Currency increased $2.8bn. Total Checkable Deposits slipped $2.5bn, while Savings Deposits surged $30bn. Small Time Deposits were little changed. Retail Money Funds declined $3.1bn.

Total money market fund assets gained $14.2bn to $2.733 TN. Money Funds rose $119bn y-o-y (4.6%).

Total Commercial Paper dropped $19.6bn to $1.079 TN. CP expanded $134bn y-o-y, or 14%.

Currency Watch:

May 25 – Bloomberg: “China’s central bank weakened its currency fixing to the lowest since March 2011 as the dollar strengthened. The reference rate was set 0.3% weaker at 6.5693 per dollar. A gauge of the greenback’s strength rose to a two-month high Tuesday… A resurgent greenback is shaking up a strategy that the People’s Bank of China pursued over the past three months -- a steady rate against the dollar, combined with depreciation against other major currencies.”

The U.S. dollar index increased 0.4% this week to 95.7 (down 3.0% y-t-d). For the week on the upside, the British pound increased 0.8% and the Canadian dollar gained 0.7%. For the week on the downside, the Brazilian real declined 2.6%, the euro 1.0%, the New Zealand dollar 0.9%, the Mexican dollar 0.7%, the Australian dollar 0.6%, the South African rand 0.6%, Swiss franc 0.4%, the Swedish krona 0.4%, the Norwegian krone 0.1% and the Japanese yen 0.1%. The Chinese yuan declined 0.3% versus the dollar.

Commodities Watch:

The Goldman Sachs Commodities Index gained 1.2% (up 19.3% y-t-d). Spot Gold fell 3.2% to $1,212 (up 14%). Silver declined 1.8% to $16.25 (up 18%). WTI Crude gained another $1.58 to $49.33 (up 33%). Gasoline slipped 0.2% (up 28%), while Natural Gas rallied 5.9% (down 7%). Copper recovered 2.9% (down 1%). Wheat jumped 2.9% (up 2%). Corn surged 4.6% (up 15%).

Fixed-Income Bubble Watch:

May 23 – Bloomberg (Tracy Alloway): “Bond investors appear to have placed their faith in commodities exceptionalism, with many positing that the recent pick-up in U.S. default rates will defy historical trends and remain confined to that industry. New research from Deutsche Bank AG pours cold water on that idea, arguing that there are already signs of contagion in junk-rated debt outside of the commodities space. A look at previous peaks in default rates shows the potential for more pervasive corporate stress. While default rates were higher amongst particular sectors—such as telecoms in the early 2000s or financials during the 2008 crisis—the rate for junk bonds excluding these specialized industries also increased significantly.”

May 24 – Financial Times (Eric Platt): “The triple A rated company is nearly extinct. Just a handful of companies in the world retain the coveted rating from Standard & Poor’s after ExxonMobil was downgraded last month. In the US, the number has fallen to two — Johnson & Johnson and Microsoft. In 1992, there were 98 US companies that held the highest credit rating from S&P. The demise of triple A-rated companies reflects a dramatic rise in the use of debt to help bolster shareholder returns and fund takeover activity.”

May 26 – Reuters (Suzanne Barlyn): “New York state's financial regulator, which recently launched a probe into LendingClub Corp, is preparing to look into the activities at other online lenders and whether they should be licensed in New York… Last week, NYDFS subpoenaed San-Francisco based LendingClub, a so-called peer-to-peer lender…”

May 25 – Bloomberg (Matt Scully): “Some of Wall Street’s biggest banks are making contingency plans to cut their exposure to online consumer loans if the market deteriorates further after the recent crisis at LendingClub Corp., people with knowledge of the reviews said. While firms including Credit Suisse Group AG and Deutsche Bank AG haven’t scaled back exposure, they’re concerned about financing they provide to institutional investors that buy loans from companies like LendingClub and Prosper Marketplace Inc., the people said.”

May 25 – Associated Press (Stan Choe): “CEOs at the biggest companies got a 4.5% pay raise last year. That’s almost double the typical American worker’s, and a lot more than investors earned from owning their stocks — a big fat zero. The typical chief executive in the Standard & Poor’s 500 index made $10.8 million… That’s up from the median of $10.3 million the same group of CEOs made a year earlier. The raise alone for median CEO pay last year, $468,449, is more than 10 times what the typical U.S. worker makes in a year. The median full-time worker earned $809 weekly in 2015, up from $791 in 2014.”

May 22 – Wall Street Journal (Sam Goldfarb): “The esoteric securities market underpinning demand for the riskiest corporate loans is perking up, raising hopes that it could become easier for banks to sell a range of loans, including those that they failed to syndicate last year. More corporate loans are being bundled this spring into collateralized loan obligations, which buy loans from junk-rated companies and repackage them into securities that pay varying levels of interest based on which get paid off first if the underlying loans go bad.”

May 25 – Bloomberg (Elizabeth Campbell): “Illinois lawmakers have been busy in the last week of the regular legislative session. They moved to establish a youth-only turkey hunting season, set standards on where podiatrists can perform amputations and allowed for the adoption of retired police dogs. Yet, the Land of Lincoln remains the only state in the nation without a budget, mired in the longest such standoff in its history… If no deal is struck, the consequences will become more dire: Prisons may run out of food, schools may not open on time, and the state’s credit rating -- already the lowest in the U.S. -- is at risk of falling even further as the government’s deficit continues to grow.”

Global Bubble Watch:

May 26 – Financial Times (Robin Harding): “The global economic outlook is as grim as it was after the Lehman Brothers crisis in 2008, Shinzo Abe claimed on Thursday, as the Group of 7 revealed its stark divisions on economic policy. Seeking to rally support for a global fiscal stimulus at the G7 summit, the Japanese prime minister showed his fellow world leaders a series of alarming graphs comparing today’s economic conditions with those of 2008. But, according to people close to the discussions, Mr Abe struggled to win over opponents such as Germany’s chancellor Angela Merkel or UK Prime Minister David Cameron.”

May 26 – Reuters (Chris Gallagher and William Mallard): “Japanese Prime Minister Shinzo Abe warned his Group of Seven counterparts of a crisis on the scale of Lehman Brothers, Nikkei reported, offering a potential justification to again delay an increase in the national sales tax. Abe presented data at a Thursday session of the G7 summit he is hosting, showing that commodities prices have fallen 55% since 2014, the same margin they fell during the global financial crisis, the newspaper said, interpreting this as ‘warning of the re-emergence of a Lehman-scale crisis’.”

May 26 – Bloomberg (Claire Boston and Sally Bakewell): “A borrowing binge by companies globally is poised to make May one of the the busiest months ever, thanks to investors who continue to devour the relatively juicy yields on corporate debt in a negative-rate world. Global issuance of non-financial company debt will be in excess of $236 billion by month-end… In Europe, companies sold 48.5 billion euros ($54.2 billion) making it the busiest May on record.”

May 23 – Reuters (Anjuli Davies): “Revenue at the world's 12 largest investment banks fell 25% in the first quarter from a year ago as economic uncertainty and investor caution led to the slowest start since the financial crisis, a survey showed… Investment banks have been hit by a steep decline in oil prices, near-zero interest rates and worries about China's economy, which triggered a wave of volatility in financial markets at the start of the year, normally the most lucrative period when investors put their money to work. Trading in fixed income, currencies and commodities (FICC) divisions… declined 28% year-on-year to $17.8 billion, data from… Coalition shows.”

May 26 – Financial Times (Joe Rennison): “Global equity markets experienced further strong outflows this week, despite soothing economic data and rising stock prices. Equity funds suffered their seventh consecutive week of outflows, shedding another $9.2bn for the week ending May 25, taking their total outflows for the year above $100bn, according to data from EPFR.”

U.S. Bubble Watch:

May 23 – CNBC (Jeff Cox): “That American companies have been wadding up huge amounts of cash is no secret. What may be less well-known is that they're also accumulating debt at a much faster pace. Total debt among more than 2,000 nonfinancial companies swelled to $6.6 trillion in 2015, dwarfing the $1.84 trillion in cash on their balance sheets, according to a study… by S&P Global Ratings. The ratio of cash to debt is the lowest it's been in about 10 years, or just before the global financial crisis. As financial markets came to grips with the prospect of higher rates ahead, corporate America went on a debt bonanza. Debt grew 50 times that of cash, with companies rolling up $850 billion of new IOUs compared to just $17 billion, or 1%, cash growth.”

May 26 – MarketWatch (Ciara Linnane): “First-quarter earnings season is close to over, and the numbers it’s produced are as gloomy as they have been since the Great Recession. Overall profit for S&P 500 companies was the weakest in 6 1/2 years. The financial sector showed a double-digit percentage decline, while even stodgy utilities saw earnings fall into the red as unusual weather weighed. After selling assets, cutting capital expenditures and buying back their own shares at a record pace in recent years, companies are now clearly struggling to produce any kind of growth… A full 98.4% of S&P 500 companies have now reported through early Thursday, and profit measured by earnings per share is down 7% from a year ago, according to FactSet. On the heels of a 3.2% decline in the fourth quarter, that marks the fourth straight quarter of year-over-year earnings declines, and it was the biggest drop since the third quarter of 2009.”

May 25 – Bloomberg (Jeanna Smialek): “A substantial share of Americans lacked retirement savings and fewer households were confident in the outlook for their income at the end of last year. That’s according to a Federal Reserve report on the economic well-being of U.S. households in 2015… The findings show that while respondents increasingly reported that they are ‘doing OK’ or ‘living comfortably,’ a smaller share said they expected income growth than in the prior year’s survey. Thirty-one percent of non-retired Americans said they had no retirement savings at all, unchanged from 2014.”

May 26 – Wall Street Journal (Jesse Newman): “Banks are tightening credit for U.S. farmers amid a rise in delinquencies, forcing some growers to turn to alternative sources of loans. When U.S. agriculture was booming this decade, banks doled out ample credit to strong performers and weaker growers alike, said Michael Swanson, an agricultural economist at Wells Fargo & Co. But with the farm slump moving into its third year, banks have become pickier, requiring some growers to cough up more collateral and denying financing outright to some customers who need it to pay for seeds, crop chemicals and rent.”

May 27 – Bloomberg (Romy Varghese): “California’s three-year boom run is showing signs of fatigue. Shaking off recession-era comparisons to Greece, the most-populous U.S. state rebounded with surpluses and an economy fueled by the fast-growing technology industry, which garnered it eight bond-rating upgrades. Governor Jerry Brown is now forecasting that revenue growth is slowing along with the economy after April’s income-tax collections lagged expectations, in part because of the sputtering stock market. Even if voters in November decide to keep a temporary income-tax increase from ending -- a measure that Brown hasn’t endorsed -- the budget would ‘barely be balanced, his administration said…”

May 27 – Bloomberg (Prashant Gopal): “Miami’s crop of new condo towers, built with big deposits from Latin American buyers and lots of marketing glitz, are opening with many owners heading for the exits. A third of the units in some newly built high-rises are back on the market, though most are listed for more than their owners paid in the pre-construction phase. At the current sales pace, it would take 29 months to sell the 3,397 condominiums available in the downtown area, according to South Florida development tracker With the U.S. dollar strong, South American investors who piled into the downtown Miami market after the real estate crash are now trying to unload their recently built condos, adding inventory to an area where 8,000 units are under construction and nine towers were completed since the end of 2013.”

May 24 – Bloomberg (Michelle Jamrisko): “Purchases of new homes in the U.S. surged in April to the highest level since the start of 2008, pointing to a robust spring selling season for builders… (Sales) Rose 16.6% to 619,000 annualized rate (forecast was 523,000). Monthly increase was biggest since 1992, while pace was strongest since January 2008. Median selling price jumped 9.7% to a record $321,100.”

May 25 – Bloomberg (Prashant Gopal): “U.S. home prices rose 5.7% in the first quarter from a year earlier as buyers competed for a limited supply of listings. Prices climbed 1.3% on a seasonally adjusted basis from the previous three months, the 19th consecutive quarterly gain... There were 1.98 million houses for sale at the end of March, down 1.5% from the same month last year… While the U.S. has a whole had robust gains, prices fell from the previous quarter in 12 states and the District of Columbia, the FHFA said.”

May 25 – Wall Street Journal (Louise Radnofsky): “Big health plans stung by losses in the first few years of the U.S. health law’s implementation are seeking hefty premium increases for individual plans sold through insurance exchanges in more than a dozen states. The insurers’ proposed rates for individual coverage in states that have made their 2017 requests public largely bear out health plans’ grim predictions about their challenges under the health-care overhaul. According to the insurers’ filings with regulators, large plans in states including New York, Pennsylvania and Georgia are seeking to raise rates by 20% or more.”

China Bubble Watch:

May 24 – Bloomberg (Paul Panckhurst): “Charlene Chu, a banking analyst who made her name warning of the risks from China’s credit binge, said a bailout in the trillions of dollars is needed to tackle the bad-debt burden dragging down the nation’s economy. Speaking eight days after a Communist Party newspaper highlighted dangers from the build-up of debt, Chu… said she was yet to be convinced the government is serious about deleveraging and eliminating industry overcapacity. She also argued that lenders’ off-balance-sheet portfolios of wealth-management products are the biggest immediate threat to the nation’s financial system, with similarities to Western bank exposures in 2008 that helped to trigger a global meltdown.”

May 26 – Bloomberg: “China’s government still has room to borrow more to finance the investment and construction needed to shore up economic growth, the Ministry of Finance said. Overall risks associated with government debt, which amounted to 26.66 trillion yuan ($4.1 trillion) at the end of last year, are under control, the ministry said in a statement late on Thursday. The government can add leverage gradually because its debt ratio is still below international warning levels, it said.”

May 25 – Bloomberg (Lisa Pham): “In the creative world of Chinese lending, there’s a new trade in town: the cow leaseback. China Huishan Dairy Holdings Co., which operates the largest number of dairy farms in the country, is selling about a quarter of its herd -– some 50,000 animals -- to Guangdong Yuexin Finance Lease Co. for 1 billion yuan ($152 million) and then renting them back. With an estimated $1.3 trillion of risky loans in the country, Chinese banks are becoming more cautious about lending, forcing some companies to look for new ways to borrow. Finance leasing has been growing in popularity, especially for purchases of equipment. But cows?”

May 24 – Bloomberg (Zhe Huang and Justina Lee): “The People’s Bank of China scrapped its market-based mechanism for managing the yuan on Jan. 4 and returned to setting the exchange rate based on what suits authorities the best, the Wall Street Journal reported, citing unidentified people close to the central bank. An unidentified official from the PBOC in March told economists and bankers that ‘the primary task is to maintain stability’ when they asked the central bank to stop fighting markets and let the yuan’s value fall at a closed door meeting, citing previously undisclosed minutes of the gathering.

May 26 – Reuters (Elias Glenn): “Profit growth at China's industrial firms slowed in April, in line with other data for the month which suggested the economy may be losing steam again after picking up earlier in the year. China's industrial firms made 502 billion yuan ($76.59 billion) in profits last month, up 4.2% from the same period last year and compared with growth of 11.1% in March…”

EM Bubble Watch:

May 26 – Bloomberg (Matthew Martin, Archana Narayanan and Deema Almashabi): “Banks in Saudi Arabia are coming under fresh pressure over products that allow speculators to bet against the kingdom’s currency peg, according to people with knowledge of the matter. The Saudi Arabia Monetary Agency has asked lenders to explain why they are offering dollar-riyal forward structured products to customers less than four months after the regulator banned options contracts that let speculators place wagers on a currency devaluation, the people said. The authority, known as SAMA, didn’t reply to requests for comment. Hedge funds… have made bets that the country’s peg to the dollar will be broken as oil revenue plunges…”

May 24 – Bloomberg (Onur Ant): “Turkey’s central bank cut its overnight lending rate for a third month on Tuesday, calling the reduction a ‘measured’ step toward simplifying its monetary policy. The bank lowered the rate by 50 basis points to 9.5%...”

May 22 – Bloomberg (Kartik Goyal): “Massive, game-changing and overwhelming were among the descriptions investors used for Indian Prime Minister Narendra Modi’s election victory in May 2014. Two years on, the slow pace of implementing policy threatens to sap interest. The rupee is the worst performer among currencies of the four biggest emerging markets this year. Indian sovereign bonds have lagged peers in Brazil and Russia this quarter, after delivering the best returns among the BRIC nations since the election win.”

Japan Watch:

May 22 – Reuters (Stanley White): “Japanese manufacturing activity contracted at the fastest pace in more than three years in May as new orders slumped… putting fresh pressure on the government and central bank to offer additional economic stimulus. The Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index (PMI) fell to 47.6 in May…”

May 22 – Reuters (Tetsushi Kajimoto and Leika Kihara): “Japan's exports fell sharply in April and manufacturing activity suffered the fastest contraction since Prime Minister Shinzo Abe swept to power in late 2012, providing further evidence that the premier's Abenomics stimulus policy is struggling for traction. The bleak readings on the health of the world's third-largest economy follow Japan's failure last week to win support from its global counterparts to weaken the strong yen, which Tokyo fears could do further damage to the sputtering economy… Data on Monday showed Japan's exports fell 10.1% in April from a year earlier…”

ECB Watch:

May 24 – Bloomberg (Alessandro Speciale): “The European Central Bank warned that risks of financial-market turmoil have increased amid slower growth in emerging economies, weak bank profitability and the rise of populist movements across the 19-nation euro region. ‘A sharper-than-expected fall in Chinese growth could well lead to a synchronized downturn across other emerging-market economies, particularly commodity-exporting economies,’ the ECB wrote in its twice-yearly Financial Stability Review… ‘Under such a scenario, the financial systems of advanced economies may be challenged by a reduction in consumer and business confidence, and renewed financial-market volatility potentially intensified by sudden stops in or reversals of cross-border capital flows.’”

Europe Watch:

May 24 – Bloomberg (Laura J Keller, Stephen Morris and Macarena Munoz Montijano): “Deutsche Bank AG Chief Executive Officer John Cryan said his bank has never had more capital and could easily repay its debt many times over, responding to a credit-rating cut by Moody’s… The ratings company on Monday said the German lender faces mounting challenges in carrying out its turnaround, and cut the bank’s senior unsecured debt metric one level to Baa2, two grades above junk. The firm’s long-term deposit rating fell to A3 from A2.”

May 25 – Bloomberg (Thomas Penny, Patrick Donahue and Ian Wishart): “When Germany hosted last year’s Group of Seven summit, European leaders assured President Barack Obama they were up to dealing with the crises on their doorstep. Twelve months on, Europe’s challenges have multiplied to an extent that questions the wisdom of making the 6,000-mile trip to Japan for the G-7. From Brexit to migration, home-grown terrorism to the destabilizing impact of surging populism, Europe has seldom looked in more need of political leadership at home. Global summits usually provide an opportunity for heads of government to play the role of international dealmakers. But right now Prime Ministers David Cameron and Matteo Renzi, Chancellor Angela Merkel and President Francois Hollande are faced with coalescing crises -- and restive electorates -- that demand attention in their own countries”

Brazil Watch:

May 23 – Bloomberg (Carla Simoes, Arnaldo Galvao and Mario Sergio Lima): “Brazil’s newly-appointed Budget Minister Romero Juca said he will take a leave of absence after allegations surfaced that he wanted to obstruct the sweeping corruption probe known as Carwash. Juca, the leader of Acting President Michel Temer’s political party, will return to his former job as senator and make room for Dyogo Oliveira to take the helm of the Budget Ministry… The surprise announcement on Monday afternoon capped a day of speculation about Juca’s future in the cabinet after he initially refused to step down. The dramatic departure highlights the challenges facing Temer…”

Leveraged Speculation Watch:

May 25 – Bloomberg (Scott Deveau and Devin Banerjee): “The $2.9 trillion hedge-fund industry may lose about a quarter of its assets in the next year as performance slumps, said Tony James, Blackstone Group LP’s billionaire president. ‘It’s kind of a day of reckoning that we face here,’ James said… ‘There will be a shrinkage in the industry and it will be painful. That’s going to be pretty painful for an awful lot of places.’ The hedge-fund industry is having its worst start to a year in performance and investor withdrawals since global markets reeled after the financial crisis.”

May 24 – Financial Times (John Authers and Mary Childs): “It was the shot heard around the hedge fund world. After the New York City Employees’ Retirement System decided to cash all its investments inhedge funds, Letitia James, the city’s public advocate, delivered a message to the industry straight out of Occupy Wall Street: ‘Let them sell their summer homes and jets and return those fees to their investors.’ Hedge funds, she said last month, ‘believe they can do no wrong, even as they are losing money’… ‘Let’s face it: if you go back to the 1990s, hedge funds delivered something very special: high returns or very differentiated returns that you could not get elsewhere, and that is what hedge fund investors have been looking for,’ said Neil Chriss, founder of Hutchin Hill Capital… ‘The problem is, since the crisis, a lot of hedge funds have not been delivering. Returns have been mediocre,” he told the Milken Global Conference…”

Geopolitical Watch:

May 27 – Reuters (David Lawder): “Corrosion-resistant steel from China will face final U.S. anti-dumping and anti-subsidy duties of up to 450 percent under the U.S. Commerce Department's latest clampdown on a glut of steel imports, the agency said… The department also issued anti-dumping duties of 3% to 92% on producers of corrosion-resistant steel in Italy, India, South Korea and Taiwan… China's Commerce Ministry said it was extremely dissatisfied at what it called the ‘irrational’ move by the United States, which it said would harm cooperation between the two countries.”

May 26 – Reuters (Thomas Wilson and Kiyoshi Takenaka): “Group of Seven (G7) leaders agree… on the need to send a strong message on maritime claims in the western Pacific, where an increasingly assertive China is locked in territorial disputes with Japan and several Southeast Asian nations. The agreement prompted a sharp rejoinder from China, which is not in the G7 club but whose rise as a power has put it at the heart of some discussions at the advanced nations' summit in Ise-Shima, central Japan.”

May 22 – Associated Press (Suzan Fraser and Geir Moulson): “German Chancellor Angela Merkel told Turkey’s president on Monday that Ankara must fulfill all the European Union’s conditions to secure visa-free travel for its citizens, but Turkey responded that it would suspend agreements with the EU if the bloc does not keep its promises. The EU says Turkey must narrow its definition of ‘terrorist’ and ‘terrorist act.’ The bloc is concerned that journalists and political dissenters could be targeted. But Turkish president Recep Tayyip Erdogan has said that is out of the question.”

May 26 – MarketWatch (Nicole Perlroth and Michael Corkery): “Security researchers have tied the recent spate of digital breaches on Asian banks to North Korea, in what they say appears to be the first known case of a nation using digital attacks for financial gain. In three recent attacks on banks, researchers working for the digital security firm Symantec said, the thieves deployed a rare piece of code that had been seen in only two previous cases: the hacking attack at Sony Pictures in December 2014 and attacks on banks and media companies in South Korea in 2013. Government officials in the United States and South Korea have blamed those attacks on North Korea…”