Credit Bubble Bulletin

Saturday, April 14, 2018

Weekly Commentary: Bizarre and Ominous

Please join me and David McAlvany for the MWM Tactical Short Second-Quarter 2018 Conference Call: "Market Structure, Trump Tariffs, Higher Rates… Markets at a Precipice?" Thursday, April 19th, at 4:30pm EST (2:30pm MST): Click here to register:

Things have gone from surreal to the bizarre. The President points blame directly at Putin for a chemical attack in Syria. Russia threatens to shoot down any missiles fired into Syria. President Trump tweets "Get ready Russia, because [missiles] will be coming, nice and new and 'smart!'" A presidential tweet the next morning provided an unequivocal update: "Could Take Place Very Soon Or Not So Soon At All." Russia claims false flag. "U.S. Says Syria Has Used Chemical Weapons at Least 50 Times During War." Missiles were flying Friday night.

The President's personal attorney, target of a criminal investigation, had his office and residences raided by the FBI. An enraged President is said to be considering firing the special counsel and/or the Deputy Attorney General. "Trump Sees Inquiry Into Cohen as Greater Threat Than Mueller." The Speaker of the House announces he's through with Washington.

The former Director of the FBI will release his memoirs next week, with interviews lined up. It's not going to be pretty. Leaks began to flow this week. James Comey likens the "unethical" President to a "mob boss." The President tweeted that Comey is an "untruthful slime ball."

Department of the Treasury announced the U.S. budget deficit had reached $600 billion during the first-half of the fiscal year. March's deficit of $209 billion was 12% above the consensus estimate. Federal spending during the month was up 7% y-o-y, while revenues increased 2.7%. The CBO announced that Trillion dollar annual deficits will commence soon - about two-years sooner than expected only recently.

"President Xi Jinping presided over the Chinese navy's largest-ever military display on Thursday…, the country's latest show of force in the disputed South China Sea." On board a navy destroyer dressed in full military garb, XI announced China would hold live-fire military drills in the Taiwan Strait next week. "…The task of building a strong navy 'has never been as urgent as present.'"

Russian stocks sank 4.5% this week. Russian bond yields surged 43 bps to 7.49%, and the ruble fell 6.2%. Russia canceled a ruble bond auction, as Russian sovereign CDS posted their biggest jump in five years. "The Russian government on Monday called the latest US sanctions against the country 'scandalous' and 'illegal' and vowed it would retaliate…" Russia is putting together a list of banned U.S. imports, including rocket engines and titanium. With the lira down another 1.3% to record lows, Turkish President Erdogan warned that those committing "economic terror" would pay a steep price.

"Vitaly Churkin, Russia's ambassador at the United Nations, said he unfortunately 'cannot exclude any possibilities' when asked about the danger of war between the US and Russia." An ominous Friday evening Bloomberg headline: "Russia, U.S. Near Brink in Syrian Standoff With Nuclear Risks."

The Hong Kong Monetary Authority intervened three straight sessions to support the Hong Kong dollar peg against the U.S. dollar. It was their first currency intervention since 2005.

Aluminum prices surged 15% this week. Palladium jumped 9.2%, and Nickel increased 3.0%. Crude (WTI) surged 8.6%, trading at a three-year high. "Americans Face Highest Pump Prices in Years." Gasoline rose 5.7% this week, and heating oil jumped 7.3%. The GSCI Commodities index jumped 5.5% this week to the high since December 2014.

FOMC minutes offered added confirmation that the Powell Fed is not rushing to coddle the markets. Increasingly, they see upside risks to both growth and inflation. Rates remain much too low. "Fed Leans to Faster Pace of Hikes…" "Excluding food and energy, the core consumer-price index rose 2.1% from March 2017, the most in a year…" "U.S. wholesale prices advanced in March by more than forecast, reflecting broad increases in the costs of services and goods…" Even Chicago Fed President Charles Evans is calling for more hikes.

April 11 - Wall Street Journal (Nick Timiraos): "Federal Reserve officials at their meeting last month expressed greater confidence inflation would rise to their 2% target over the coming year, a development that could affect how much they raise interest rates in coming years. They also debated the costs and benefits of allowing the economy to run hot and discussed how they might need to later raise rates to a level that would deliberately slow growth… The minutes highlight just how much Fed officials' outlook has changed since last fall, when surprisingly slow inflation raised questions about the need for continued rate increases."

April 10 - Bloomberg (Alexandre Tanzi): "Global debt rose to a record $237 trillion in the fourth quarter of 2017, more than $70 trillion higher from a decade earlier, according to… the Institute of International Finance. Among mature markets, household debt as a percentage of GDP hit all-time highs in Belgium, Canada, France, Luxembourg, Norway, Sweden and Switzerland. That's a worrying signal, with interest rates beginning to rise globally… Still, the ratio of global debt-to-gross domestic product fell for the fifth consecutive quarter as the world's economic growth accelerated. The ratio is now around 317.8% of GDP, or 4 percentage points below the high in the third quarter of 2016…"

Failing to make the top 1000 newsworthy items of the week, Chinese Credit data nonetheless continue to fascinate. China's March growth in total Social Finance was reported much weaker than expect. At $212 billion (1.33 trillion yuan), growth was about 25% below estimates. Bank loan growth ($180bn) slightly missed estimates. The big story is the intensifying slowdown in shadow lending, which posted a net contraction during the month. Total Social Finance has expanded about $1.49 TN over the past six months, down 17% from the comparable year ago period.

The marked slowdown in system lending is leading a deceleration in money supply growth. March saw a notable slowdown. M2 money supply expanded 8.2% y-o-y versus estimates of 8.9%. And at this point it would appear the slowdown in money and Credit has impact general pricing pressures. March CPI was reported up 2.1% y-o-y versus estimates of 2.6%. PPI came in up 3.1% y-o-y against estimates of 3.3%.

Curiously, China also report disappointing March trade data. China posted a trade deficit of $5.8 billion, the first deficit since February 2017. Imports surged a stronger-than-expected 14.4% y-o-y, while imports were down 2.7% (after a huge February). It's worth noting that China's first quarter trade surplus with the U.S. was up 19.4% to $58.25bn.

Stocks, well, they enjoyed just a splendid week. The S&P500 rose 2.0%, outdone by the Nasdaq100's 3.0% jump. The Biotechs surged 8.6%, and the Semiconductors advanced 5.0%. The DJIA was up about 440 points at Monday's trading highs following Chinese President Xi's "conciliatory" weekend speech. Not enamored with the interpretation, Chinese officials pushed back: "Beijing says Xi speech wasn't a concession to US, it's ready to hit back at any escalation." With option expiration next Friday, it's been another month to tease - then torment - put buyers.

Earnings season started off with a bang. "JPMorgan Q1 Earnings Beat on Better Rates and Trading." "Citi beats, profits jump 13%." "Wells Fargo beats by $0.05 and beats on revenue." On Friday's earnings reports, JPMorgan's stock fell 2.7%, Citigroup dropped 1.6% and Wells Fargo sank 3.4%. Mark Zuckerberg travels to the nation's capital and is grilled for 10 hours. My nine-year-old son asked me why the Democrats were meaner to him than the Republicans. Reasonable question. Facebook rallied 4.7% this week.

Treasuries were a little worried that stocks remain oblivious to an extraordinary host of mounting risks. Ten-year Treasury yields added five bps to 2.83%. Two-year yields jumped nine bps to 2.36%, the high since August 2008.

It will be interesting to see how markets respond to tonight's missile strikes on Syria. It appears as many as 100 missiles hit at least three targets, in a more intensive operation than a year ago.

"Russia's ambassador in Washington Anatoly Antonov said in a statement on Friday immediately after the first strikes on Syria. 'The worst expectations have materialized. Our warnings fell on deaf ears. A pre-planned scenario is being acted on. We are being threatened again. We have warned that such actions will not remain without consequences. All responsibility for them rests upon Washington, London and Paris. Antonov stressed that insulting the Russian president was inadmissible.'"

The week was bizarre and ominous. Reports had President Trump livid after Monday's FBI raid on his personal attorney. I can imagine Putin is absolutely livid in Moscow. For different reasons, I worry increasingly about them both.

For the Week:

The S&P500 jumped 2.0% (down 0.6% y-t-d), and the Dow rose 1.8% (down 1.5%). The Utilities fell 1.4% (down 5.9%). The Banks gained 1.2% (down 0.3%), while the Broker/Dealers rose 1.5% (up 7.2%). The Transports rallied 2.2% (down 2.3%). The S&P 400 Midcaps gained 1.6% (down 0.9%), and the small cap Russell 2000 jumped 2.4% (up 0.9%). The Nasdaq100 recovered 3.0% (up 3.6%). The Semiconductors surged 5.1% (up 6.1%). The Biotechs jumped 8.6% (up 9.5%). With bullion up $12, the HUI gold index advanced 3.3% (down 4.6%).

Three-month Treasury bill rates ended the week at 1.72%. Two-year government yields jumped nine bps to 2.36% (up 47bps y-t-d). Five-year T-note yields gained nine bps to 2.67% (up 47bps). Ten-year Treasury yields rose five bps to 2.83% (up 42bps). Long bond yields added a basis point to 3.03% (up 29bps).

Greek 10-year yields jumped nine bps to 4.07% (unchanged y-t-d). Ten-year Portuguese yields declined four bps to 1.65% (down 29bps). Italian 10-year yields added one basis point to 1.80% (down 22bps). Spain's 10-year yields increased a basis point to 1.24% (down 33bps). German bund yields gained a basis point to 0.51% (up 8bps). French yields rose one basis point to 0.74% (down 7bps). The French to German 10-year bond spread was unchanged at 23 bps. U.K. 10-year gilt yields rose four bps to 1.44% (up 25bps). U.K.'s FTSE equities index advanced 1.1% (down 5.5%).

Japan's Nikkei 225 equities index rose 1.0% (down 4.3% y-t-d). Japanese 10-year "JGB" yields were down one basis point to 0.04% (down 1bp). France's CAC40 gained 1.1% (unchanged). The German DAX equities index rose 1.6% (down 3.7%). Spain's IBEX 35 equities index increased 0.9% (down 2.8%). Italy's FTSE MIB index jumped 1.7% (up 6.8%). EM equities were mixed. Brazil's Bovespa index slipped 0.6% (up 10.4%), while Mexico's Bolsa rose 1.8% (down 1.2%). South Korea's Kospi index gained 1.0% (down 0.5%). India’s Sensex equities index advanced 1.7% (up 0.4%). China’s Shanghai Exchange rallied 0.9% (down 4.5%). Turkey's Borsa Istanbul National 100 index sank 4.5% (down 5.0%). Russia's MICEX equities was hit 4.6% (up 3.1%).

Investment-grade bond funds saw inflows of $3.346 billion, and junk bond funds posted inflows of $989 million (from Lipper).

Freddie Mac 30-year fixed mortgage rates added two bps to 4.42% (up 34bps y-o-y). Fifteen-year rates were unchanged at 3.87% (up 53bps). Five-year hybrid ARM rates slipped a basis point to 3.61% (up 43bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates down one basis point to 4.48% (up 33bps).

Federal Reserve Credit last week declined $9.6bn to $4.342 TN. Over the past year, Fed Credit contracted $92.2bn, or 2.0%. Fed Credit inflated $1.531 TN, or 54%, over the past 284 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt jumped $12.4bn last week to $3.450 TN. "Custody holdings" were up $238bn y-o-y, or 7.4%.

M2 (narrow) "money" supply added $4.5bn last week to a record $13.940 TN. "Narrow money" gained $575bn, or 4.3%, over the past year. For the week, Currency increased $0.3bn. Total Checkable Deposits fell $7.9bn, while savings Deposits rose $10.0bn. Small Time Deposits gained $3.6bn. Retail Money Funds dipped $1.5bn.

Total money market fund assets declined $5.3bn to $2.827 TN. Money Funds gained $183bn y-o-y, or 6.9%.

Total Commercial Paper gained $10.0bn to $1.058 TN. CP gained $72.9bn y-o-y, or 7.4%.

Currency Watch:

April 11 - Bloomberg (Justina Lee and Emma Dai): "Hong Kong's dollar fell to the weak end of its permitted band for the first time since the range was imposed in 2005, a warning sign for a city where easy money has stoked a property boom and underpinned the stock market's record rally. The spot rate reached HK$7.85 per dollar on Thursday… The Hong Kong Monetary Authority, which is obligated to defend the band, said in a statement that it stands ready to fulfill any requests from banks to support the currency."

The U.S. dollar index slipped 0.3% to 89.80 (down 2.5% y-t-d). For the week on the upside, the New Zealand dollar increased 1.4%, the Canadian dollar 1.4%, the Mexican peso 1.4%, the Australian dollar 1.0%, the British pound 1.0%, the Norwegian krone 0.7%, the euro 0.4% and the Singapore dollar 0.3%. For the week on the downside, the Brazilian real declined 1.6%, the Swedish krona 1.0%, the Japanese yen 0.4%, the South African rand 0.3%, and the Swiss franc 0.3%. The Chinese renminbi gained 0.45% versus the dollar this week (up 3.69% y-t-d).

Commodities Watch:

April 11 - Bloomberg (Thomas Wilson): "Aluminum approached a six-year high after top exchanges said they'll stop accepting metal from United Co. Rusal, increasing concerns about how the market will replace supplies from the Russian smelting giant hobbled by U.S. sanctions."

The Goldman Sachs Commodities Index surged 5.5% (up 5.8% y-t-d). Spot Gold added 0.9% to $1,345 (up 3.3%). Silver gained 1.8% to $16.658 (down 2.8%). Crude jumped $5.33 to $67.39 (up 12%). Gasoline surged 5.7% (up 15%), and Natural Gas gained 1.3% (down 7%). Copper increased 0.4% (down 7%). Wheat jumped 3.6% (up 15%). Corn declined 0.6% (up 13%).

Trump Administration Watch:

April 11 - Wall Street Journal (Michael R. Gordon, Sune Rasmussen and Thomas Grove): "A series of exchanges between President Donald Trump and Moscow raised the prospect of a clash between U.S. and Russian military forces in Syria, a confrontation that would pit advanced American missile technology against Russia's integrated air defense. After a Russian diplomat said his country's forces would shoot down U.S. missiles launched at Syria, Mr. Trump in three tweets said U.S.-Russian relations were worse than ever, including during the Cold War, and said missiles 'will be coming.' 'Get ready, Russia,' he wrote. The saber rattling on Wednesday morning threatened to elevate U.S. outrage over a suspected Syrian chemical attack into a potential military skirmish between the two military powers. Mr. Trump vowed that U.S. technology would prevail, although current and former U.S. military officials acknowledge that Russian defenses are formidable…"

April 9 - CNBC (Berkeley Lovelace Jr.): "White House economic advisor Larry Kudlow told CNBC on Monday that President Donald Trump is warning China about its trade practices with tariffs. 'This president's got some backbone, others didn't and he's raising the issue in full public view, setting up a process that may include tariffs. Hopefully, it will be mostly negotiations,' Kudlow said… 'I don't know if we'll have tariffs or not… [Trump] is responding to decades of misdeeds by China [on] trade… It's high time we did that… Somebody's got to do it. Somebody's got to say to China, 'you are no longer a Third World country. You are a First World country and you have to act like it… The president's got to stick up for himself and the United States.'"

April 10 - Bloomberg (Keith Zhai): "Trade talks between the world's biggest economies broke down last week after the Trump administration demanded that China curtail support for high-technology industries, a person familiar with the situation said, signaling that a resolution may be some ways off. Liu He, a vice premier overseeing economics and finance, told a group of officials… that Beijing had rejected a U.S. request to stop subsidizing industries related to its 'Made in China 2025' initiative, the person said. The U.S. has accused China of using the policy to force companies into transferring technology in areas like robotics, aerospace and artificial intelligence."

April 11 - Bloomberg (Justin Sink, Billy House, and Anna Edgerton): "House Speaker Paul Ryan said… he won't seek re-election in November, dealing a blow to congressional Republicans already facing a possible Democratic takeover of the House in the November elections and setting off a GOP leadership battle. 'I will be retiring in January, leaving this majority in good hands with what I believe is a very bright future,' Ryan, 48, said… 'I think we have achieved a heck of a lot.'"

April 9 - CNBC (Erik Wasson and Sarah McGregor): "The U.S. budget deficit will surpass $1 trillion by 2020, two years sooner than previously estimated, as tax cuts and spending increases signed by President Donald Trump do little to boost long-term economic growth, according to the Congressional Budget Office. Spending will exceed revenue by $804 billion in the fiscal year through September, jumping from a projected $563 billion shortfall forecast in June… In fiscal 2019, the deficit will reach $981 billion, compared with an earlier projection of $689 billion… The report includes new projections for the effects of the tax legislation -- saying it will increase the deficit by almost $1.9 trillion over the next 11 years…"

April 10 - Wall Street Journal (Rebecca Ballhaus, Del Quentin Wilber and Kristina Peterson): "The White House said… that President Donald Trump believes he has the authority to fire special counsel Robert Mueller, as lawmakers from both parties warned against doing so one day after the FBI raided properties tied to the president's longtime lawyer. Senate Majority Leader Mitch McConnell (R., Ky.) said that Mr. Mueller 'should be allowed to finish his job,' though he rebuffed calls for legislation to protect the special counsel."

April 9 - CNBC (Dan Mangan): "The FBI on Monday raided the New York City office and residence of President Donald Trump's personal attorney Michael Cohen, seeking evidence related to the payment Cohen made to porn star Stormy Daniels on the eve of the 2016 presidential election. The Washington Post… reported that Cohen is being investigated for crimes possibly related to bank fraud and campaign finance violations. The raids came after federal prosecutors in New York City obtained a search warrant following a referral from special counsel Robert Mueller, Cohen's lawyer said."

April 10 - Politico (Andrew Restuccia and Nancy Cook): "The Trump White House punched back at its own Justice Department on Tuesday, with President Donald Trump and senior officials expressing outrage over law enforcement raids on lawyer Michael Cohen - and making thinly veiled threats to fire Russia special prosecutor Robert Mueller. 'We've been advised the president certainly has the power to make that decision,' White House press secretary Sarah Huckabee Sanders said when asked whether Trump could fire Mueller… Trump began the day tweeting in defense of Cohen, a longtime Trump Organization associate. 'A TOTAL WITCH HUNT!!!' Trump tweeted... He added: 'Attorney-client privilege is dead!'"

Federal Reserve Watch:

April 11 - Bloomberg (Craig Torres): "Federal Reserve officials leaned toward a slightly faster pace of policy tightening at their March meeting as their growth outlook and confidence in hitting their inflation target strengthened, according to minutes of the gathering… A number of officials viewed a stronger economic outlook and greater confidence for higher inflation implying 'the appropriate path for the federal funds rate over the next few years would likely be slightly steeper than they had previously expected,' the Federal Open Market Committee said in the records of its March 20-21 meeting. The minutes showed U.S. central bankers wrestling to match a policy to an economy that is receiving a boost from tax cuts and government spending at a time when unemployment is low and growth, by their estimate, is above its long-run speed limit."

U.S. Bubble Watch:

April 11 - Reuters (David Lawder and Lindsay Dunsmuir): "The U.S. government ran a $209 billion budget deficit in March as outlays grew and receipts fell… That compared with a budget deficit of $176 billion in the same month last year, according to Treasury's monthly budget statement."

April 11 - Bloomberg (Sarah McGregor): "The U.S. budget deficit widened to $600 billion halfway through the fiscal year, as spending growth outstripped revenue. Receipts rose by 1.6% to $1.5 trillion between October and March compared with a year earlier, while outlays climbed by 4.8% to $2.1 trillion, the Treasury Department said in its monthly budget statement on Wednesday. Corporate income taxes fell to $78.6 billion in the first half of fiscal 2018, from $100.2 billion a year earlier."

April 11 - Bloomberg (Sho Chandra): "A key measure of U.S. inflation finally got a bump in March thanks to a fading drag from mobile-phone service costs, bearing out the Federal Reserve's forecast for a pickup in price gains. Excluding food and energy, the core consumer-price index rose 2.1% from March 2017, the most in a year and matching the median estimate…, after a 1.8% gain in February… Including all components, the CPI was down 0.1% from February on a drop in gasoline costs; overall prices were up an annual 2.4%, also the biggest advance in a year."

April 10 - Wall Street Journal (Laura Kusisto and Christina Rexrode): "More Americans are stretching to buy homes, the latest sign that rising prices are making homeownership more difficult for a broad swath of potential buyers. Roughly one in five conventional mortgage loans made this winter went to borrowers spending more than 45% of their monthly incomes on their mortgage payment and other debts, the highest proportion since the housing crisis… That was almost triple the proportion of such loans made in 2016 and the first half of 2017, CoreLogic said. Economists said rising debt levels are a symptom of a market in which home prices are rising sharply in relation to incomes, driven in part by a historic lack of supply that is forcing prices higher."

April 10 - Bloomberg (Jesse Hamilton): "Wall Street banks could face higher capital hurdles under a Federal Reserve proposal that would mark the most significant rewrite of requirements put in place after the 2008 financial crisis. The new 'stress capital buffer' announced by the Fed… is meant to streamline competing regulatory demands on lenders and better tailor standards to each bank's specific business. The central bank's proposal would also relax parts of its annual stress tests. For financial firms anticipating a deregulatory wave under President Donald Trump, it's a mixed bag. The proposal could make capital requirements a bit tougher for megabanks but the industry's overall demands may fall by tens of billions of dollars."

April 10 - Bloomberg (Sho Chandra): "U.S. wholesale prices advanced in March by more than forecast, reflecting broad increases in the costs of services and goods… Producer-price index rose 0.3% m/m (est. 0.1%) after 0.2% gain the previous month. PPI climbed 3% from a year earlier, the most since November, after 2.8% gain in prior 12-month period."

April 10 - Bloomberg (Matthew Boesler): "One sign U.S. inflation may be heading higher, from the NFIB monthly survey of small businesses: the net percentage of respondents saying they're raising prices. That number rose to 16% in March, the highest level since September 2008."

April 10 - Wall Street Journal (Peter Rudegeair, Rachel Louise Ensign and Coulter Jones): "These days, Wells Fargo… and Citigroup Inc. are unlikely to make a $14,000 auto loan to a borrower with a subprime credit score. That is now the domain of direct lenders such as Exeter Finance LLC, based in Irving, Texas. But where does Exeter get the money to make subprime auto loans? From Wells Fargo and Citigroup. They have helped lend Exeter $1.4 billion for that very purpose. Bank loans to Exeter and other nonbank financial firms have increased sixfold between 2010 and 2017 to a record high of nearly $345 billion… They are now one of the largest categories of bank loans to companies."

China Watch:

April 9 - Reuters (Kevin Yao and Lindsay Dunsmuir): "China stepped up its attacks on the Trump administration on Monday over billions of dollars worth of threatened tariffs, but U.S. President Donald Trump again voiced optimism the two sides would hammer out a trade deal. The comments from both countries followed a week of escalating tariff threats sparked by U.S. frustration with China's trade and intellectual property policies, worrying financial markets over potential damage to global growth. 'When we do a deal with China, which, probably, we will - if we don't, they'll have to pay pretty high taxes to do business with our country,' Trump said…"

April 10 - Bloomberg: "Chinese President Xi Jinping reiterated pledges to open sectors from banking to auto manufacturing in a speech that also warned against returning to a 'Cold War mentality' amid trade disputes with U.S. counterpart Donald Trump. Xi pledged a 'new phase of opening up' in his keynote address… to the Boao Forum for Asia, China's answer to Davos. While the speech offered little new policy, Xi affirmed or expanded on proposals to increase imports, lower foreign-ownership limits on manufacturing and expand protection to intellectual property -- all central issues in Trump's trade gripes."

April 10 - Politico (Megan Cassella and Adam Behsudi): "Chinese President Xi Jinping's promise to reduce auto tariffs is not the win for President Donald Trump that it appears to be. While Trump praised Xi's proposals on Twitter - 'Very thankful for President Xi of China's kind words on tariffs and automobile barriers,' he posted - analysts and business leaders shrugged off Xi's promises to open markets as old pledges that have yet to be fulfilled. They also dismissed his vow to reduce auto tariffs as inconsequential without other, larger changes. 'The Chinese are great at saying what folks want to hear,' said a U.S. industry aide… 'Hope springs eternal, and it would be great if the takeaway from this speech is that the Chinese are truly now committed to a level playing field. I think it's really, quite frankly, a stretch to make that case.'"

April 9 - Bloomberg: "China is evaluating the potential impact of a gradual yuan depreciation, people familiar with the matter said, as the country's leaders weigh their options in a trade spat with U.S. President Donald Trump that has roiled financial markets worldwide. Senior Chinese officials are studying a two-pronged analysis of the yuan that was prepared by the government, the people said. One part looks at the effect of using the currency as a tool in trade negotiations with the U.S., while a second part examines what would happen if China devalues the yuan to offset the impact of any trade deal that curbs exports."

April 10 - Bloomberg (John Ruwitch): "Chinese investment in the United States fell more than a third last year to $29 billion from a record $46 billion in 2016, the first major correction in a decade, a report by the Rhodium Group and the National Committee on U.S.-China Relations showed."

April 8 - Reuters (Kevin Yao and Stella Qiu): "China should make better use of the country's funds by looking to invest its large capital reserves in real assets, not United States Treasury bonds, an adviser to China's central bank said… 'We are a low income country, but we are a high wealth country...we should make better use of the capital. Rather than investing in U.S. government debt, it's better to invest in some real assets,' Fan Gang, director of the National Economic Research Institute and a member of the People's Bank of China's (PBOC) Monetary Policy Committee, said."

April 10 - Bloomberg: "China's factory inflation slowed for a fifth month while the consumer price index retreated from a four-year high. The producer price index rose 3.1% in March from a year earlier, compared with the projected 3.3 percent rise in a Bloomberg survey and 3.7% in February. The consumer price index climbed 2.1%... versus a forecast of 2.6% and 2.9% in February."

Global Bubble Watch:

April 9 - Bloomberg (Cormac Mullen): "A breakdown in the relationship between dollar weakness and Asian central bank intervention poses a risk to Treasuries, stocks and all risky assets, according to Deutsche Bank AG. Attempts by the Trump administration to clamp down on currency manipulation have limited the ability of central banks across the region to buy U.S. assets when the dollar weakens, and dampen the appreciation of their currencies, strategist Alan Ruskin wrote… These purchases have historically limited the greenback's downside and acted as a 'put' on Treasury market weakness, he wrote."

April 8 - Reuters (Hideyuki Sano): "Japanese investors sold a record amount of U.S. dollar bonds in February as the soaring cost of currency-hedging undercut yields while they extended their purchases of euro-denominated bonds… Investors sold 3.924 trillion yen ($36.68bn) of U.S. dollar bonds in February but scooped up 1.059 trillion yen (8.06 billion euros) of euro-denominated bonds - which offer higher yields after currency hedging."

EM Bubble Watch:

April 9 - Bloomberg (Ksenia Galouchko): "Russian stocks had their biggest drop in four years and the ruble slumped the most in the world after the U.S. slapped new sanctions on Kremlin-connected billionaires and tensions with the U.S. spiraled following the latest chemical attack in Syria. The benchmark MOEX Russia Index sank 8.7% on Monday, the steepest slide since March 2014, when Moscow's annexation of the Crimean peninsula triggered international penalties. The ruble and local bonds had their biggest drop since 2016 and the cost of insuring sovereign notes against default was set for the sharpest increase since December 2014."

April 10 - Financial Times (Kathrin Hille and Max Seddon): "It was standing room only at Russia's largest stock exchange on Tuesday as the country's top economic policymakers faced an unenviable job: trying to persuade a crowd of skittish investors that the economy can weather the latest sanctions imposed by the US. Even while officials including Maxim Oreshkin,economy minister, made their pitch at the Moscow Exchange, the rouble fell nearly 5% in less than an hour to more than 63 to the dollar. Bankers made frantic phone calls and streamed out of the room."

April 11 - Bloomberg (Constantine Courcoulas): "Shorting the Turkish lira is becoming one of the easiest trades in town. The wager is simple: the central bank is going to hesitate to defend the currency by raising interest rates given President Recep Tayyip Erdogan's explicit criticism of high borrowing costs. And that's allowing hedge funds and other speculators to pile up one-sided bets against the lira as it extends one of the biggest declines in emerging markets this year, hitting record lows against both the dollar and euro."

April 12 - Bloomberg (Selcan Hacaoglu and Cagan Koc): "Turkish President Recep Tayyip Erdogan said his government will punish anyone attempting to exploit developments in neighboring Syria in order to wage 'economic terrorism' on Turkey. The warning was directed specifically at actors in business and financial markets. 'Those playing an active role in the economy, those within the financial system, if you are attempting to wage economic terror against our country by using developments in Syria as pretext, you'll be making a mistake,' the president said… 'When the time comes, you'll be held accountable and pay the price.'"

Leveraged Speculator Watch:

April 9 - Bloomberg (Ivan Levingston): "The outlook for one of the most popular currency-trading strategies is in doubt, even after a two-week rebound, so one analyst says investors should consider the reverse approach. The carry trade, where investors borrow in low-yielding currencies to buy assets where rates are higher, has pared its loss for the last year to about 6%, according to a Deutsche Bank AG index. Nonetheless, the potential for volatility ahead means the strategy is likely to underperform and possibly unwind, according to Alice Leng, an FX strategist at Bank of America… 'The current movement is the opposite of what you would want from a carry trade,' Leng said. 'The opposite of a carry strategy should be able to perform well from a systematic perspective.'"

April 10 - Bloomberg (Lananh Nguyen): "After suffering unprecedented losses last year, currency-focused hedge funds were hoping a bit of market turbulence would help them get back on track in 2018. Things could hardly have gone worse. A BarclayHedge gauge of foreign-exchange trading programs slumped 2.5% over the first three months of 2018, extending last year's record 11% plunge. Even FX stalwarts… haven't been immune, sliding along with peers after years of dominant returns."

Geopolitical Watch:

April 9 - Financial Times (Kathrin Hille): "The Russian government on Monday called the latest US sanctions against the country 'scandalous' and 'illegal' and vowed it would retaliate and protect those hit by Washington's measures from the fallout. Russian prime minister Dmitry Medvedev ordered the cabinet to start work on a list of potential retaliatory measures. He also ordered that a plan be worked out to support sanctioned companies."

April 10 - Bloomberg (Natasha Doff): "The trail of destruction left by U.S. sanctions against Russia's most influential oligarchs spread to President Vladimir Putin's government as surging borrowing costs forced the Finance Ministry and the biggest state bank to pull bond sales. It's the first debt auction Russia abandoned since cancellations in 2014 and 2015, when Putin's annexation of Crimea soured relations with the U.S. and European Union. Growing panic over how far America will go at blacklisting wealthy Russians and their businesses sent the ruble and bonds tumbling."

April 9 - Reuters (Michelle Nichols): "Russian U.N. Ambassador Vassily Nebenzia said on Monday that Moscow has warned the United States of 'grave repercussions' if it carries out an attack against Syrian government forces over reports of a deadly chemical weapons attack. 'There was no chemical weapons attack,' Nebenzia told the U.N. Security Council. 'Through the relevant channels we already conveyed to the U.S. that armed force under mendacious pretext against Syria - where, at the request of the legitimate government of a country, Russian troops have been deployed - could lead to grave repercussions,' he said."

April 9 - Wall Street Journal (Michael R. Gordon and Jeremy Page): "China has installed equipment on two of its fortified outposts in the Spratly Islands capable of jamming communications and radar systems, a significant step in its creeping militarization of the South China Sea, U.S. officials say. The move strengthens China's ability to assert its extensive territorial claims and hinder U.S. military operations in a contested region that includes some of the world's busiest shipping routes."

April 10 - Bloomberg (Karen Lema): "In a span of 20 minutes, 20 F-18 fighter jets took off and landed on the USS Theodore Roosevelt aircraft carrier, in a powerful display of military precision and efficiency. The nuclear-powered warship, leading a carrier strike group, was conducting what the U.S. military called routine training in the disputed South China Sea on Tuesday, headed for a port call in the Philippines, a defense treaty ally. The United States is not alone in carrying out naval patrols in the strategic waterway, where Chinese, Japanese and some Southeast Asian navies operate, possibly increasing tensions and risking accidents at sea."

Friday, April 13, 2018

Friday Evening Links

[Bloomberg] U.S., Britain, France launch air strikes in Syria

[Bloomberg] U.S. Stocks Tumble With Banks Leading the Way Down: Markets Wrap

[Bloomberg] Oil Posts Biggest Weekly Gain Since July Amid Global Conflict

[CNBC] An ominous start to an earning season that was supposed to save this bull market

[Bloomberg] Fed's Rosengren Digs In Over Warning U.S. Economy May Overheat

[Reuters] With Russia on his mind, Trump looks for tougher approach on Syria: sources

[WSJ] Trump Seeks Large Strike in Syria; Mattis Urges Caution

Thursday, April 12, 2018

Friday's News Links

[Bloomberg] Stocks Drop as Investors Turn on Banks, Financials: Markets Wrap

[Bloomberg] Oil Set for Biggest Weekly Gain in 9 Months Amid Supply Risks

[Bloomberg] Aluminum Set for Best Week in Three Decades

[Bloomberg] Americans' Sentiment Falls More Than Forecast on Trade

[CNBC] White House reportedly to increase trade pressure on China through new tariffs, investment barriers

[Reuters] China's first quarter trade surplus with U.S. rises 19.4 percent year on year

[Bloomberg] China's Credit Growth Trails Estimates Amid Debt Cleanup

[Reuters] U.S. will not cede leadership in Latin America to 'authoritarian' states: commerce chief

[Bloomberg] Trading Volumes Are at 2018 Lows as U.S. Investors Wait on Earnings

[Bloomberg] JPMorgan Finds Goldilocks Moment in First-Quarter Volatility

[Reuters] Threat of U.S.-Russia clash hangs over Syria

[Reuters] Russian companies will feel severe effect from U.S. sanctions: Fitch

[NYT] Trump Wants Back Into the TPP. Not So Fast, Say Members.

[Reuters] China's Xi presides over large-scale naval display in South China Sea

[WSJ] China Delays Deal Reviews as U.S. Trade Frictions Build

[WSJ] White House Plans to Escalate Trade Pressure on China

[WSJ] Global Banks Face Chill of Russian Sanctions

[FT] China’s navy to conduct live-fire drills in Taiwan Strait

[FT] There’s still a lesson Jay Powell could learn from Greenspan

Thursday Evening Links

[Reuters] Wall Street higher on earnings optimism, Syria worries ebb

[CNBC] President Trump will meet with Defense Secretary Mattis, says decision on Syria strikes coming 'fairly soon'

[Bloomberg] Fed's Core-Inflation Gauge Expected to Round Up to 2% Goal in March

[CNBC] House GOP pushes back plans to vote on making individual tax cuts permanent

[Bloomberg] Japanese Hunger for U.S. CLOs Exposes Market to More Volatility

[CNBC] Subprime mortgages make a comeback—with a new name and soaring demand

[WSJ] What Happened to the Oil Glut?

[FT] Syrian military braces for potential strikes

Wednesday, April 11, 2018

Thursday's News Links

[Bloomberg] U.S. Stocks Advance as Syria Stress Eases: Markets Wrap

[Bloomberg] Trump Weighs Strike Options on Syria as Allies Rally Over Attack

[Reuters] Beijing says Xi speech wasn't a concession to US, it's ready to hit back at any escalation

[CNBC] Trump economic advisor Larry Kudlow: Tariffs might come before negotiations with China

[Bloomberg] China Says It Has a Detailed Plan to Hit Back at U.S. on Tariffs

[Reuters] Chinese ambassador warns U.S. not to drag Latam into trade dispute

[Bloomberg] China's New Crackdown on Regional Debt May Curb Bond Sales

[Bloomberg] ECB Pushed for Continued Stimulus While Fretting Over Trade

[Bloomberg] BlackRock ETF Flows Fall 46% as Volatility Hits Global Markets

[SCMP] Hong Kong Monetary Authority holds fire as currency slumps to red line for the first time

[Bloomberg] Erdogan Says Those Attempting to Wage ‘Economic Terror’ Will Pay

[Bloomberg] Struggling Asia Dollar Bonds Face Pressure From China Supply

[NYT] Missiles ‘Will Be Coming’ at Syria, Trump Says. Beyond That Lies Uncertainty.

[WSJ] U.S., Russia Trade Threats Over Syria Strikes

[FT] How a volatility virus infected Wall Street

[FT] IMF’s Lagarde warns China on Belt and Road debt

Wednesday Evening Links

[Bloomberg] Asia Stocks Set for Lower Start; Treasuries Climb: Markets Wrap

[Bloomberg] Stocks Mixed as Middle East Tension Upstages Fed: Markets Wrap

[Bloomberg] Crude Hits Three-Year High as Global Tensions Rock Oil Markets

[Bloomberg] Hong Kong Dollar Falls to Key Level for First Time Since 2005

[Bloomberg] Fed Leans Toward Faster Pace of Hikes as Trade War Poses Risk

[Reuters] Federal Reserve policymakers all saw strengthening economy, inflation: minutes

[CNBC] Fed: Investors taking market volatility 'in stride'

[Bloomberg] U.S. Budget Gap Hits $600 Billion in First Half of Fiscal Year

[Reuters] U.S. government posts $209 billion deficit in March

[Bloomberg] Once-Surging Crypto Stocks Face Delisting and the End of an Era

[Bloomberg] Aluminum Nears Highest Since 2012 as U.S. Rusal Sanctions Bite

[WSJ] Fed Minutes Signal Greater Confidence in Reaching 2% Inflation

[WSJ] The Fed’s Inflation Target Is Getting Close—Now What?

[FT] Fed minutes discuss possibility of steeper rate rises

Tuesday, April 10, 2018

Wednesday's News Links

[Bloomberg] Trump Syria Tweets Shake Stocks, Boost Treasuries: Markets Wrap

[Bloomberg] Trump Tells Russia to ‘Get Ready’ for Missiles Coming at Syria

[Bloomberg] Ruble Slumps to 16-Month Low After Trump’s Syria Warning

[MarketWatch] Gold advances sharply as Syrian tension sparks flight to safety

[Bloomberg] U.S. Core Inflation Accelerates as Drag From Phone Costs Fades

[Bloomberg] Fed Minutes to Hint at How Trade Spat Could Affect Outlook

[Bloomberg] House Speaker Paul Ryan Won't Seek Re-Election in Blow to GOP

[CNBC] Stocks haven’t seen this much volatility since the financial crisis

[Bloomberg] China’s Factory Inflation Slows as Consumer Price Gains Ease

[Bloomberg] Flood of Junk Issuance Raises Risks in China's Bond Market

[AP] As Russia warns against US strike, Trump threatens missiles

[CNN] Trump's perceived persecution fuels unrest

[Bloomberg] Lira Slide Becomes One-Way Bet as Traders Test Central Bank

[WSJ] Beijing’s Trade Straddle

[WSJ] White House Says Trump Has Power to Fire Mueller

[WSJ] U.S. Presses Allies to Back a Military Strike on Syria

[FT] Moscow urges calm as chill hits from new round of US sanctions

Tuesday Evening Links

[Bloomberg] Asia Stocks to Start Mixed After Risk Assets Gain: Markets Wrap

[Bloomberg] Stocks Rally Amid U.S., China Conciliatory Remarks: Markets Wrap

[Bloomberg] Wall Street Faces Higher Capital Demands Under Fed Proposal

[CNBC] Can President Trump fire special counsel Robert Mueller? Here's what could happen if he tries

[Politico] Xi’s vow to cut auto tariffs is less than meets the eye

[Politico] White House puts Mueller on notice after raid

Monday, April 9, 2018

Tuesday's News Links

[Bloomberg] Traders Turn Risk-On as U.S.-China Standoff Eases: Markets Wrap

[Bloomberg] Oil Rises After Xi's Speech on Optimism U.S.-China Spat May Ease

[Bloomberg] Wholesale Prices in U.S. Climbed More Than Forecast in March

[Reuters] China's Xi promises to lower tariffs this year, open economy further

[Bloomberg] Xi Warns Against Returning to a ‘Cold War Mentality’

[Bloomberg] U.S.-China Talks Broke Down Over Trump’s Demands on High-Tech Industries

[Reuters] Chinese investment into U.S. slumps in 2017 on policy changes: report

[Bloomberg] ‘New Normal’ of U.S.-China Tensions May Put Up to $400 Billion in Investment at Risk

[Bloomberg] Small U.S. Businesses Are Increasingly Raising Prices: Chart

[Bloomberg] Global Debt Jumped to Record $237 Trillion Last Year

[Bloomberg] U.S. Sanctions Inflict Pain on Putin as Russia Pulls Bond Sale

[Bloomberg] FX Hedge Funds Trampled by Bad Volatility in Dreadful Start to 2018

[CNBC] Trump cancels South America trip to 'oversee the American response to Syria'

[Reuters] After China's massive drill, U.S. patrols disputed South China Sea

[WSJ] Rising Home Prices Push Borrowers Deeper Into Debt

[WSJ] Xi’s Friendship With Trump Only Goes So Far

[WSJ] Big Banks Find a Back Door to Finance Subprime Loans

[FT] Xi Jinping speech offers no big concessions to Donald Trump

Monday Evening Links

[Bloomberg] Asian Stocks Edge Lower After U.S. Rally Ebbs: Markets Wrap

[Bloomberg] Bulls Lose Nerve and Another Rally Crumbles on a Volatile Monday

[CNBC] FBI raids the office of Trump lawyer Michael Cohen

[CNBC] Trump vents against Attorney General Sessions and ponders firing special counsel Mueller

[CNBC] Washington could be epicenter of market risks Tuesday

[Bloomberg] U.S. Deficit to Surpass $1 Trillion Two Years Ahead of Estimates

[CNBC] The GOP tax plan means short-term gains for the economy, but federal debt is primed to explode, CBO analysis says

[Bloomberg] Carry Trade's Struggles Have One Analyst Saying Do the Opposite

[Bloomberg] Russian Corporate Bonds Get Hammered After Fresh U.S. Sanctions

[Bloomberg] Ray Dalio Says Odds Are Rising for Trade and Other Types of Wars

[Reuters] Russia says it warned U.S. of 'grave repercussions' if Syria attacked

[NYT] F.B.I. Raids Office of Trump’s Longtime Lawyer Michael Cohen

[WSJ] Trump Says He Will Decide Soon on Response to Syria Chemical Attack

Sunday, April 8, 2018

Monday's News Links

[Bloomberg] U.S. Stocks Rise as Xi Seen Calming Waves: Markets Wrap

[Bloomberg] Russian Stocks Take Worst Hit Since Crimea on Sanctions, Syria

[CNBC] Trump economic advisor Larry Kudlow bashes China for 'decades of misdeeds' on trade

[Bloomberg] China Is Studying Yuan Devaluation as a Tool in Trade Spat

[Reuters] China blames U.S for trade frictions, says negotiations currently impossible

[Bloomberg] Bond Traders Are About to Grasp the Magnitude of the Treasuries Deluge

[Bloomberg] Trump's Trade War Threatens Central Bank `Put,' Deutsche Says

[Reuters] Japanese investors dump record amount of U.S. bonds in February

[Reuters] Kuroda says BOJ eventually needs to consider how to normalize policy

[Reuters] China should invest in assets other than Treasuries: central bank adviser

[Bloomberg] Deutsche Bank Solves One Crisis With New CEO. Now Onto the Next

[Bloomberg] Venezuela Debt Crisis Nears New Low as Riskiest Bond Matures

[CNN] Crises, confrontations envelop Trump at home and abroad

[Reuters] Syria, Russia accuse Israel over strike on Syrian air base

[WSJ] Europe’s Boom Reawakens the Ghost of Crisis Past: Debt

[WSJ] China Installed Military Jamming Equipment on Spratly Islands, U.S. Says

[FT] Russia labels latest US sanctions “scandalous” and “illegal”

Sunday Evening Links

[Bloomberg] Asia Stocks Mixed as Trade in Focus; Dollar Steady: Markets Wrap

[Bloomberg] Trump’s ‘Art of the Deal’ Bombast Faces Ultimate Test With China

[Bloomberg] Trump Vows China ‘Will Take Down Its Trade Barriers’

[Reuters] Trump predicts trade concessions by China, despite rising tensions

[The Hill] Mnuchin: There could be a trade war

[Bloomberg] Bad Omen for Markets From First Signs of Yield Curve Inversion

[Bloomberg] Suspected Poison Gas Kills At Least 40 in Damascus Suburb

[WSJ] Trump Officials Soften Tone on Trade Dispute With China

[WSJ] Americans Face Highest Pump Prices in Years

[WSJ] Trump Warns of ‘Price to Pay’ After Suspected Gas Attack in Syria

[FT] What could a US-China trade war do?

Saturday, April 7, 2018

Sunday's News Links

[Bloomberg] Xi Takes Center Stage to Defend China's Trade From Trump Barrage

[Reuters] China's state media urges U.S. industry to rally against Trump tariff threat

[CNBC] US farmers in 'precarious position' with China as trade war fears escalate

[Bloomberg] China’s Foreign Reserves Rise on Yuan Gains, Capital Curbs

[CNBC] Trump slams Putin for backing Syria after suspected chemical attack, vows 'big price' to pay

[Bloomberg] Russia Warns Against Strike in Syria as U.S. Calls for Response

[WSJ] Cracks Form in Global Growth Story, Rattling Investors

[FT] Xi Jinping to outline economic reforms amid trade tension

Saturday's News Links

[Reuters] Trump administration mulls stiffer rules for imported cars

[Reuters] High stakes, high expectations as earnings season heats up

[CNBC] President Trump's trade policy is 'difficult to follow,' top EU official says

[Reuters] Fed's Evans says he's optimistic on inflation, wants rate hikes

[Reuters] Japan activates first marines since WW2 to bolster defenses against China

[NYT] U.S. and China Play Chicken on Trade, and Neither Swerves

[FT] Soyabean wars: China tries to hit Donald Trump where it hurts

Friday, April 6, 2018

Weekly Commentary: Market Realities

For the Week:

The S&P500 declined 1.4% (down 2.6% y-t-d), and the Dow slipped 0.7% (down 3.2%). The Utilities were about unchanged (down 4.6%). The Banks lost 1.3% (down 1.5%), and the Broker/Dealers declined 0.9% (up 5.6%). The Transports dropped 2.4% (down 4.4%). The S&P 400 Midcaps fell 1.3% (down 2.4%), and the small cap Russell 2000 declined 1.1% (down 1.4%). The Nasdaq100 dropped 2.2% (up 0.6%). The Semiconductors sank 4.8% (up 1.0%). The Biotechs fell 5.5% (up 0.8%). With bullion up $9, the HUI gold index rallied 1.2% (down 7.7%).

Three-month Treasury bill rates ended the week at 1.68%. Two-year government yields were unchanged at 2.27% (up 38bps y-t-d). Five-year T-note yields added two bps to 2.59% (up 38bps). Ten-year Treasury yields rose three bps to 2.77% (up 37bps). Long bond yields rose four bps to 3.02% (up 28bps).

Greek 10-year yields sank 30 bps to 3.99% (down 9bps y-t-d). Ten-year Portuguese yields rose eight bps to 1.69% (down 25bps). Italian 10-year yields were unchanged at 1.79% (down 23bps). Spain's 10-year yields gained seven bps to 1.23% (down 34bps). German bund yields were unchanged at 0.50% (up 7bps). French yields added two bps to 0.74% (down 5bps). The French to German 10-year bond spread widened two to 24 bps. U.K. 10-year gilt yields rose five bps to 1.40% (up 21bps). U.K.'s FTSE equities index gained 1.8% (down 6.6%).

Japan's Nikkei 225 equities index increased 0.5% (down 5.3% y-t-d). Japanese 10-year "JGB" yields were about unchanged at 0.05% (unchanged). France's CAC40 rose 1.8% (down 1.0%). The German DAX equities index gained 1.2% (down 5.2%). Spain's IBEX 35 equities index increased 0.9% (down 3.6%). Italy's FTSE MIB index jumped 2.3% (up 4.9%). EM equities were mixed. Brazil's Bovespa index slipped 0.6% (up 11.0%), while Mexico's Bolsa surged 3.9% (down 2.9%). South Korea's Kospi index dipped 0.7% (down 1.5%). India’s Sensex equities index rose 2.0% (down 1.3%). China’s Shanghai Exchange fell 1.2% (down 5.3%). Turkey's Borsa Istanbul National 100 index dipped 0.2% (down 0.5%). Russia's MICEX equities added 0.5% (up 8.1%).

Investment-grade bond funds saw inflows of $1.554 billion, while junk bond funds suffered outflows of $573 million (from Lipper).

Freddie Mac 30-year fixed mortgage rates fell four bps to 4.40% (up 30bps y-o-y). Fifteen-year rates declined three bps to 3.87% (up 51bps). Five-year hybrid ARM rates dropped four bps to 3.62% (up 43bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates unchanged at 4.49% (up 30bps).

Federal Reserve Credit last week declined $5.5bn to $4.352 TN. Over the past year, Fed Credit contracted $83.0bn, or 1.9%. Fed Credit inflated $1.541 TN, or 55%, over the past 283 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt fell $6.4bn last week to $3.438 TN. "Custody holdings" were up $223bn y-o-y, or 7.0%.

M2 (narrow) "money" supply jumped $34.8bn last week to a record $13.936 TN. "Narrow money" gained $534bn, or 4.0%, over the past year. For the week, Currency increased $2.3bn. Total Checkable Deposits slipped $1.1bn, while savings Deposits rose $31.7bn. Small Time Deposits increased $0.9bn. Retail Money Funds added $1.0bn.

Total money market fund assets added $3.1bn to $2.832 TN. Money Funds gained $184bn y-o-y, or 7.0%.

Total Commercial Paper contracted $13.7bn to $1.048 TN. CP gained $55.1bn y-o-y, or 5.6%.

Currency Watch:

The U.S. dollar index was little changed at 90.108 (down 2.2% y-o-y). For the week on the upside, the Canadian dollar increased 0.9%, the British pound 0.6%, the New Zealand dollar 0.4%, the Norwegian krone 0.1% and the Australian dollar 0.1%. For the week on the downside, the Brazilian real declined 1.8%, the South African rand 1.6%, the Japanese yen 0.6%, the Mexican peso 0.6%, the Swedish krona 0.6%, the Swiss franc 0.5%, the euro 0.4%, and the Singapore dollar 0.3%. The Chinese renminbi declined 0.44% versus the dollar this week (up 3.23% y-t-d).

Commodities Watch:

The Goldman Sachs Commodities Index dropped 2.0% (up 0.3% y-t-d). Spot Gold gained 0.7% to $1,334 (up 2.3%). Silver increased 0.6% to $16.362 (down 4.6%). Crude sank $2.88 to $62.06 (up 3%). Gasoline dropped 3.3% (up 9%), and Natural Gas fell 1.2% (down 9%). Copper gained 1.1% (down 7%). Wheat surged 4.7% (up 11%). Corn jumped 2.4% (up 13%).

Market Dislocation Watch:

April 5 - CNBC (Kellie Ell): "UBS Financial Services Managing Director Art Cashin said this year's market volatility reminds him of the 1987 stock market crash. 'It's a good deal more volatile than almost anything else you've seen,' said Cashin, who began his career at Thomson McKinnon in 1959. 'It is unfortunately reminiscent of some of the volatility we saw in '87,' he said…"

April 4 - Bloomberg (Gregory Calderone): "A survey of Morgan Stanley prime brokerage clients shows that U.S. equity long-short gross leverage on a weighted average basis is back to post-crisis highs and at the highest levels since technology, media and telecommunications growth stocks tanked in March 2014. Net exposures remain higher than the beginning of the year at 51%. The technology sector is still 37% of that total… Away from hedge funds, total technology exposure by exchange-traded funds is about 31%, the highest since September 2014, and the over-weighting of technology increased recently."

April 2 - Bloomberg (Sarah Ponczek): "Trend-following momentum stocks are starting the second quarter the same way they ended the first -- with little momentum. The iShares Edge MSCI USA Momentum Factor ETF, ticker MTUM, fell 3.2% Monday, more than the 2.2% decline in the S&P 500 Index. It's the exchange-traded fund's seventh drop of more than 2% in a single day this year. In 2017, a loss of that magnitude never happened. '[Momentum] was the strongest part of the market for the last two to three years -- now they're the weakest part,' said Paul Nolte, a portfolio manager at Kingsview Asset Management…"

April 2 - Bloomberg (Rachel Evans): "So much for a quiet session in U.S. stock markets. With the Cboe Volatility Index rising the most in more than a week amid an equity-market rout, three of Monday's 10 most-traded exchange-traded products bet on higher volatility… The VelocityShares Daily 2x VIX Short Term ETN, ticker TVIX, was the third-most traded ETP of the day, lagging only State Street Corp.'s SPY and the PowerShares QQQ. The iPath S&P 500 VIX Short-Term Futures ETN (VXX) was No. 6, while the ProShares Ultra VIX Short-Term Futures (UVXY) -- which seeks to return 1.5 times a volatility gauge -- saw the seventh-largest volume."

April 3 - Bloomberg (Dani Burger): "Fear of missing out has turned into fear of getting caught. In a sign of the times, a strategy that buys the most heavily-traded U.S. stocks was the worst-performing among 10 quantitative factors tracked by Bloomberg on Monday. In fact, the market-neutral gauge has declined for the past three weeks, its biggest slump since March 2017. That the most actively-traded shares are now the market's worst performers may be a sign that fast-money investors who jumped on the bandwagon in technology stocks are the same ones driving the selling."

Trump Administration Watch:

April 4 - Bloomberg: "Chinese state media hailed their leaders' quick counteroffensive in the brewing trade war with the U.S. and said America would learn a 'painful lesson' by tangling with China. The articles and editorials across the Communist Party's media stable came even as the country started a long holiday weekend. They emphasized that China was acting only in self-defense, and that the Trump administration's move to levy a 25% tariff on about 1,300 types of Chinese imports was opposed by many in the U.S. 'As China deploys its counterattack, the pleasure that the U.S. achieved from those tariffs will now cause them suffering as their financial and political gains diminish to zero,' the Global Times wrote… The tabloid, which sometimes takes more hawkish positions, has run five editorials on the trade issue since Monday."

April 6 - Bloomberg (Lyubov Pronina): "China called on the European Union to aid the Asian nation in rejecting protectionism from the U.S. and upholding the international trade order. China and the EU 'need to stand up together with a clear-cut position against protectionism, and need to work with each other to uphold the rules-based multilateral trade order,' Zhang Ming, the head of the Chinese Mission to the EU, said… Recent U.S. actions go 'completely against the fundamental principles and values of the World Trade Organization,' he said."

April 3 - CNBC (Liz Moyer and Jacob Pramuk): "President Donald Trump unveiled a list Tuesday of Chinese imports his administration aims to target as part of a crackdown on what the president deems unfair trade practices. Sectors covered by the proposed tariffs include products used for robotics, information technology, communication technology and aerospace. The U.S. Trade Representative, which announced the list, says it targets products that benefit China's industrial plans 'while minimizing the impact on the U.S. economy.' Specifically, it takes aim at China policies that 'coerce' American companies from transferring technology and intellectual property to local Chinese companies."

April 4 - Financial Times: "The good news is that both sides still have time to back down. Neither the latest round of tariffs proposed by the Trump administration (a 25% levy on $50bn-worth of industrial and technology products) nor the retaliatory move China announced on Wednesday (a matching 25% on $50bn-worth of soyabeans, cars, chemicals and other products) have been imposed yet. The US has said it will consult with businesses for a month before instituting the tariffs. China has indicated it will wait for the US. The bad news is that, according to US president Donald Trump's team, the two sides were already at the negotiating table, and purportedly making progress, before the latest escalations were announced. And there is reason to think that there may not be much regress from here, given the conflicting objectives and preconceptions of the two nations."

April 2 - Bloomberg (Eric Martin): "The Trump administration is pushing for a preliminary Nafta deal to announce at a summit in Peru next week and will host cabinet ministers in Washington to try to achieve a breakthrough, according to three people familiar with the talks. The White House wants leaders from Canada and Mexico to join in unveiling the broad outlines of an updated pact at the Summit of the Americas that begins April 13, while technical talks to hammer out the finer details and legal text could continue…"

April 5 - CNBC (Jeff Daniels): "Fears of an expanded trade war with China are spreading across the farm economy after Beijing announced it might slap a 25% tariff on American soybeans and other farm products. Affected agricultural products also include U.S. corn, beef, cotton, tobacco, sorghum and orange juice. However, China's Ministry of Commerce is targeting not only U.S. agriculture but other items such as automobiles on its wide-ranging list of more than 100 American products."

Federal Reserve Watch:

April 3 - Bloomberg (Jeanna Smialek): "John Williams would have preferred one of his 20 pairs of tennis shoes. The U.S. central banker has a set for every occasion. But a recent Friday found the incoming Federal Reserve Bank of New York president in dress loafers, speaking to bankers and entrepreneurs at the City Club in Los Angeles. Currently San Francisco Fed chief, he delivered a rare blend of economics dissertation and stand-up comedy… The style differences are about to gain a wider audience as the Californian takes the helm of the New York Fed, one of the most powerful positions in global central banking that sits at the intersection of Wall Street and the economy. His nonconformity is relevant to the future of Fed policy, because it extends to his economics. While he's a centrist when it comes to interest rates, Williams made a name for himself from within the Fed system by poking holes in central bank doctrine. His pet project lately centers on convincing his colleagues to rewrite their entire inflation approach ahead of the next recession."

April 2 - Reuters (Karen Brettell): "The New York Federal Reserve launched a benchmark U.S. rate on Tuesday to potentially replace Libor, and market participants hope it will prove more reliable after a long and complex switchover. The Secured Overnight Financing Rate (SOFR) set at 1.80%. SOFR is based on the overnight Treasury repurchase agreement market, which trades around $800 billion in volume daily. Publishing the rate is the first step in a multi-year plan to transition more derivatives away from the London interbank offered rate (Libor), which regulators say poses systemic risks if it ceases publication."

April 3 - CNBC (Jeff Cox): "Even with this year's correction, stocks and other assets are still high by historical standards, Fed Governor Lael Brainard said… Brainard became the latest central bank official to express caution about the level of the 9-year-old bull market. 'Valuations in a broad set of markets appear elevated relative to historical norms, even after taking into account recent movements,' Brainard said during a speech… Prices for multi-family homes and commercial real estate also have risen, while capitalization rates, a key determinant for how properties are performing value wise, 'have reached historical lows,' she added."

U.S. Bubble Watch:

April 5 - Bloomberg (Katia Dmitrieva): "The U.S. trade deficit widened by more than forecast to a fresh nine-year high in February amid broad-based demand for imports, ahead of Trump administration tariffs that have raised the specter of a trade war. The gap increased 1.6% in February to $57.6 billion, compared with the median estimate of economists for $56.8 billion… It was the sixth straight month with a wider deficit, the longest streak since 2000. Imports and exports both registered gains of 1.7%..."

April 1 - Bloomberg (Vince Golle): "More American consumers than at any time in 27 years are convinced that it's better to make big purchases now because retailer discounts and deals won't be around much longer. Some 21%, the largest share since November 1990, said in March that conditions to buy appliances, electronics and other household durable goods are currently 'good' because prices won't fall further, according to the University of Michigan's latest survey of consumer sentiment. 'When asked about buying conditions, the appeal of low prices has largely disappeared,' Richard Curtin, director of the Michigan survey, said… 'For durables, it has been replaced by favoring buying in advance of anticipated price increases.'"

April 5 - USA Today (Paul Davidson): "This spring home-buying season should be a coming-out party for Millennials, many of whom are finally ready to make a purchase after hunkering down for years in their parents' basements or expensive apartments. The only problem: Much of the food at the party is gone, and what's left is priced like caviar. Although solid job and income growth is emboldening many prospective home buyers, record low housing supplies are driving up prices and curbing sales, especially for Millennials looking to buy starter homes. 'For home buyers, this is shaping up to be one of the most difficult years in recent memory,' says Ralph McLaughlin, chief economist of Veritas Urbis Economics, which studies the housing market."

April 5 - Bloomberg (Vince Golle): "Small-business owners in the U.S. are becoming more aggressive with their pay packages as the tight job market makes it difficult to attract talent. The National Federation of Independent Business said… a net 33% of small firms raised compensation in March, the largest share since November 2000, as hiring plans picked up."

April 4 - MarketWatch (Andrea Riquier): "As interest rates rise, fewer households refinance their mortgages. And the refinances that do get done are often very different than those initiated during low-rate periods. 'When rates are low, the primary goal of refinancing is to reduce the monthly payment,' wrote researchers for the Urban Institute… 'But when rates are high, borrowers have no incentive to refinance for rate reasons. Those who still refinance tend to be driven more by their desire to cash out.' 'Cashing out' is shorthand for taking out a new mortgage that's bigger than the remaining balance on the old one and using the money that makes up the difference for discretionary purchases. As of the fourth quarter of last year, the share of all refinances that were cash-outs rose to the highest since 2008…"

April 2 - Bloomberg (John Lippert and Jamie Butters): "The American consumers who were stretching themselves to buy or lease a new car are starting to go missing from showrooms. Rising interest rates and new-vehicle prices are squeezing shoppers with shaky credit and tight budgets out of the market. In the first two months of this year, sales were flat among the highest-rated borrowers, while deliveries to those with subprime scores slumped 9%, according to J.D. Power. The researcher's data highlights what's happening beneath the surface of a U.S. auto market in its second year of decline after a historic run of gains."

April 2 - Bloomberg (Luke Kawa and Lu Wang): "The stock market's missing a key participant as the second quarter kicks off with a rout. Corporate America is stuck on the sidelines as the S&P 500 Index plunges to its lowest level since early February. That's to comply with regulations under which companies refrain from discretionary stock buybacks for about five weeks before reporting earnings through the 48 hours that follow. So, with first-quarter reporting season kicking into high gear in two weeks, companies must sit on their hands while the market fizzles. The timing of discretionary buybacks has gained traction in recent years with corporate appetite dwarfing all other investors as the biggest source of demand for U.S. stocks… S&P 500 firms have bought back almost $4 trillion of their own shares since the bull market began nine years ago…"

April 3 - Bloomberg (Elizabeth Campbell): "Illinois's finances are so troubled that investors can make nearly as much money betting on the worst-rated U.S. state as they can on the American Dream mall project, perhaps the most despised structure in New Jersey. An unfinished, multicolored hulk in the Meadowlands beside the Turnpike, former Governor Chris Christie called it 'the ugliest damn building in New Jersey, and maybe America.' Yet bondholders are asking to get paid nearly as much to own Illinois's debt as they are demanding in return for holding the long-delayed mall's unrated revenue bonds… The yield on Illinois general-obligation bonds that mature in 2028 averaged 4.5% in March…"

April 2 - Bloomberg (Oshrat Carmiel): "Home sales in Manhattan plunged by the most since the recession as buyers at all price levels drove hard bargains and were in no rush to close deals. Sales of all condos and co-ops fell 25% in the first quarter from a year earlier to 2,180, according to… appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest annual decline since the second quarter of 2009, when Manhattan's property market froze in the wake of Lehman Brothers Holdings Inc.'s bankruptcy filing and the global financial crisis that followed. The drop in sales spanned from the highest reaches of the luxury market to workaday studios and one-bedrooms."

China Watch:

April 6 - Associated Press (Jill Colvin and Gillian Wong): "China's government vowed Friday to 'counterattack with great strength' if President Donald Trump goes ahead with plans to raise U.S. tariffs on an additional $100 billion worth of Chinese goods and said negotiations were impossible under current conditions. Trump's surprise move Thursday to instruct the U.S. trade representative to consider additional tariffs came a day after Beijing said it would tax $50 billion in American products, including soybeans and small aircraft, in response to a U.S. move this week to impose tariffs on $50 billion in Chinese imports… In Beijing, a Commerce Ministry spokesman said China doesn't want a trade war - but isn't afraid to fight one. 'If the U.S. side announces the list of products for $100 billion in tariffs, the Chinese side has fully prepared and will without hesitation counterattack with great strength,' spokesman Gao Feng said."

April 5 - New York Times (Steven Lee Myers): "China's leaders sound supremely confident that they can win a trade war with President Trump. The state news media has depicted him as a reckless bully intent on undermining the global trading system, while presenting the Chinese government as a fair-minded champion of free trade. And China's leader, Xi Jinping, has used the standoff to reinforce the Communist Party's message that the United States is determined to stop China's rise - but that it no longer can. China is already too strong, its economy too big. 'China is not afraid of a trade war,' the vice minister of finance, Zhu Guangyao, declared at a news conference to discuss possible countermeasures. More than once, he cited the history of the 'new China' - which began its extraordinary economic revival four decades ago - as evidence that it would 'never succumb to external pressure.'"

April 5 - Reuters (Michael Martina and Susan Heavey): "It took China just 11 hours to retaliate against the United States for proposing tariffs on some 1,300 Chinese products, but Chinese officials are holding back on taking aim at their largest American import: government debt. In a tit-for-tat response to the Trump administration's plan for 25% duties on $50 billion of Chinese imports, China hit back with its own list of similar duties on key American imports including soybeans, planes, cars, beef and chemicals… China held around $1.17 trillion of Treasuries as of the end of January, making it the largest of America's foreign creditors and the No. 2 overall owner of U.S. government bonds after the Federal Reserve. Any move by China to chop its Treasury portfolio could inflict significant harm on U.S. finances and global investors, driving bond yields higher and making it more costly to finance the federal government."

April 5 - Reuters (Michael Martina and Susan Heavey): "China would win any trade war with the United States, the country's state media said on Thursday, as U.S. officials sought to ease market jitters over escalating tensions between the world's two biggest economies. After Washington and Beijing targeted each other with planned steep tariffs, Chinese state media declared that the country never surrendered to external pressure and would prevail in any tit-for-tat on trade. In Washington, U.S. officials publicly encouraged negotiations as a way to ease or avert punishing tariffs and get the two countries off a trade war footing."

April 2 - Bloomberg: "China's biggest lenders are increasingly using short-term financing to meet demand for loans, in a development that could push up money-market rates. The banks are rushing to sell negotiable certificates of deposit, an instrument that sounds like a saving account but is actually more like a bond. Issuance of these by the five largest lenders more than doubled to 424 billion yuan ($68bn) in the first quarter from a previous record in the three months ended Sept. 30… Banks are taking this approach as deposit growth dwindles and the government curbs the sale of wealth management products. While new lending in China rose to an all-time high of 2.9 trillion yuan in January, deposits increased at the slowest pace ever last year and WMPs rose just 1.7%."

March 30 - Bloomberg: "A gauge of activity at China's manufacturers posted its first gain since November, as factories recovered from a seasonal dip at the start of the year and export demand shrugged off threats of a trade war. The manufacturing purchasing managers index rose to 51.5 in March versus the 50.6 estimate in Bloomberg's survey and 50.3 last month. The non-manufacturing PMI, covering services and construction, stood at 54.6… compared with 54.4 in February."

April 2 - Reuters: "Regional offices of China's banking regulator have begun inspections of banks' loans to large clients, two sources with knowledge of the development told Reuters… The move comes amid a wide-ranging crackdown on risk in China's financial sector that has netted top regulatory officials for corruption and curbed abuses in shadow banking. Local banking regulatory bureaus have been asked to select a company at random, check the value of loans taken by it at the end of 2017, all new credit last year, the number of lending entities and the level of soured debt…"

April 1 - Financial Times (Emily Feng): "Thousands of online lenders could be facing extinction as China rolls out a new licensing framework, amid complaints about a lack of clarity on how the regime will work. The peer-to-peer, or P2P, lending sector is braced for a second regulatory crackdown as a new 'record filing' system kicks off in April. But with the first batch of approvals expected by the end of the month, lenders say they are still in the dark on the filing process itself. 'No one even knows what this record filing form looks like yet,' said Spencer Li, a vice-president at online lending platform Fincera. P2P platforms match borrowers with investors online. China's P2P lending industry recorded transactions valued at $445bn in 2017…"

Central Bank Watch:

April 4 - Bloomberg (Toru Fujioka and Masahiro Hidaka): "The Bank of Japan is likely to raise its yield target within a year, according to the central bank's former chief economist, who says inflation is accelerating faster than expected. The BOJ will adjust its target for 10-year government bond yields after gains in consumer prices excluding fresh food and energy reach 1%, said Hideo Hayakawa, who left the BOJ in 2013 after more than three decades. This 'core core' inflation gauge is now at 0.5%."

Global Bubble Watch:

April 4 - Bloomberg (Chikako Mogi and Takako Taniguchi): "The ripple effects from Libor's surge have traveled as far as regional Japan. As the benchmark for U.S. borrowing costs climbs, it becomes more expensive to hedge dollar-denominated investments back into yen. That's prompted the country's regional banks to reduce overseas holdings to the lowest in more than three years… The higher hedging costs, a re-ignition of bullish sentiment toward the yen and increased scrutiny from the Financial Services Agency have prompted a reassessment, according to three money managers at the lenders… Foreign securities, mostly bonds with some stocks, held by the lenders shrank more than 9% in February to 9.5 trillion yen ($89 billion), the lowest since November 2014…"

March 30 - Wall Street Journal (Ira Iosebashvili, Amrith Ramkumar and Daniel Kruger): "Investments that typically serve as havens in times of stress are moving in strange ways, highlighting the unsettled condition of financial markets as they head into the second quarter. The dollar and the yen have both strengthened recently, which is typical when investors are looking to unwind risk. But other assets that usually rally for similar flight-to-safety reasons haven't fared so well. Gold, the Swiss franc and Treasurys have fallen since the Dow Jones Industrial Average slumped 9.4% from its Jan. 26 high. That divergence is confounding analysts and investors. It marks a stark reversal from other recent periods of market disruption in 2011 and late 2015-early 2016."

April 3 - Wall Street Journal (Jean Eaglesham and Coulter Jones): "When the messaging app Telegram set out to raise billions of dollars this year for a project to launch a cryptocurrency, it shunned the stock market and instead invited a select group of firms to invest in its virtual coins. These investors would be backing a project yet to be built. Little was known about the private company's ownership or finances. Even so, 81 investors stepped forward to pour in $850 million, with other financing rounds still to come. It was a mark of the dramatic rise of private capital markets, which have leapfrogged public markets to become the most popular way for companies to raise money… Private markets have 'reshaped the financial landscape,' said Jason Thomas, director of research at private-equity firm Carlyle Group LP. 'The growth of private capital is across the economy.' … At least $2.4 trillion was raised privately in the U.S. last year. That widened a gap that emerged in 2011 with the public markets, which raised $2.1 trillion…"

Fixed-Income Bubble Watch:

April 5 - Financial Times (Michael Mackenzie): "A key lesson of the financial crisis was that the credit market matters more than others. Equities and credit have endured a tough year so far as global trade tension, the gradual unwinding of central bank support and the risk of a regulatory hand around the throat of the tech sector, leave investors wary. Several measures of the credit market are flashing amber. The Markit CDX index - an indicator of what investors must pay to insure against a default in the US investment-grade market - is back up at levels previously seen a year ago. There has been a bigger breakdown in US high yield, the speculative area of the debt market."

April 3 - Bloomberg (Brian W Smith): "The high-grade bond market has turned from borrower paradise to borrower ... purgatory. Investors have forced investment grade-bond issuers in the U.S. to pony up more money to sell top-notch bonds over the past month. After paying little in so-called new issue concessions, borrowers are now regularly forking over a premium of more than 10 bps as more investors become choosy about the debt they buy. This is a major shift that has put buyers in the driver's seat after companies paid almost nothing to sell a massive amount of debt over the last two years."

April 1 - Wall Street Journal (Asjylyn Loder and Sam Goldfarb): "The exodus from junk-rated debt funds accelerated in the first quarter as rising interest rates cut into investors' appetite for taking on greater credit risk. Investors in the first three months of 2018 yanked $6.5 billion from the five largest exchange-traded funds that invest in bonds issued by less creditworthy companies… March was the fifth consecutive month of outflows from high-yield ETFs."

Japan Watch:

April 3 - CNBC (David Reid): "The Bank of Japan (BOJ) is currently discussing how to exit its massive stimulus program, but it's too early to reveal any of the details. That was the statement made by Governor Haruhiko Kuroda to Japanese lawmakers in parliament Tuesday. 'Internally we're conducting various discussions,' said Kuroda…, when asked about an exit strategy from its easy monetary policy. However, he quickly noted that Japanese inflation was still running well below target. He added that any 'open talk' of tapering or ending its stimulus would confuse markets."

EM Bubble Watch:

April 1 - Financial Times (Kate Allen): "Emerging market investors are showing signs of caution as the hefty pace of debt sales by companies, banks and governments has combined with a negative performance for bond prices since the start of the year. EM syndicated borrowing totalled $382bn in the year to March 23, according to… Dealogic - just $35bn below the record amount issued in the first quarter of 2017. Once last week's deals are finalised, banks expect a record total. 'We are set for a record-breaking Q1,' said Nick Darrant, executive director of fixed income syndicate at JPMorgan. Persistent dollar weakness has buoyed dealmaking in recent months, but flows of money into EM are slowing…"

April 3 - Bloomberg (Natasha Doff): "There's a flipside to the market's biggest 'pain' trade against the dollar: emerging-market gains. Foreign holdings of local-currency debt of developing nations have swelled to near a record $745 billion, according to… Deutsche Bank AG. With much of their buying at the expense of the greenback, according to this metric investors have never been so exposed to a sudden turnaround in the U.S. currency. The trade has been lucrative, handing investors returns of more than 13% in the past year and a 4.7% gain in the first quarter as most risk assets succumbed to losses."

Leveraged Speculator Watch:

April 5 - CNBC (Thomas Franck): "Bill Ackman has seen his hedge fund's assets cut more than in half from their peak above $20 billion in 2015 as institutional investors flee Pershing Square's abysmal returns amid a roaring bull market. Most of the outside investors have departed as restrictions have lifted, a person familiar with the matter told CNBC. The defectors include longtime partner Blackstone Group. Pushing them out the door is an 8.6% negative return this year through the end of March, which followed a 4% losing return in 2017."

Geopolitical Watch:

April 2 - Reuters (Jeanny Kao): "Taiwan's government said… that China was stirring up its media to threaten the self-ruled island after a major state-run newspaper said China should issue an international arrest warrant for Taiwan's premier for his comments on independence. Taiwan is one of China's most sensitive issues. The island is claimed by Beijing as its sacred territory and China has never renounced the use of force to bring under Chinese control what it considers to be a wayward province."

April 5 - Reuters (Michelle Nichols): "Russia told Britain at the United Nations Security Council on Thursday that 'you're playing with fire and you'll be sorry' over its accusations that Moscow was to blame for poisoning a former Russian spy and his daughter."