Happy NCAA Championship day.  Bloomberg is picking Villanova over North Carolina, but the story only appeared on the BB terminal so I can’t send a link.  You’ll have to take my word for it.  Ohio Governor John Kashich was on the cover of Barron’s this weekend and the accompanying story endorsed him as the best presidential candidate for the markets and the economy, http://bit.ly/BarronsOnKasich.   My first reaction was “why bother” to make case, with Kashich so far behind, until I read this from the article:  “It isn’t unprecedented for a candidate sharply trailing in the delegate count on the first ballot to eventually emerge victorious. It has happened more than a dozen times. In 1860, Abraham Lincoln was a distant second to New York Sen. William Seward after the first-ballot tally of delegates at the GOP convention. But Lincoln won the nomination on the third ballot and went on to become arguably the best president in U.S. history.”  So you never know.

A huge cache of documents was released relating to the offshore financial wealth of politicians and celebrities (first story).  Its wasn’t Wikileaks this time, but the exposure is being credited to the “International Consortium of Investigative Journalists”, I group I’ve certainly never heard of before this story broke.  The ramifications of this will take some time to play out, but is already causing for the PM of Iceland, among others.  Wikileaks was also active, releasing a transcript of an International Monetary Fund call that exposes ongoing trouble with the Greek bailout (last story).   The transcript implies the IMF is using pressure tactics on Germany regarding debt relief (shocking!), which IMF chief Lagarde denies.  These two events show that Wikileaks is still out there looking for secrets and that its  tactics are being emulated by other groups.

For more on convertible bonds, the subject of last Friday’s factoid, see Market volatility drives issuance of convertible securities, below.  A classic case of reversion to the mean is playing out in the business world as Alaska Air buys Virgin America for $4 billion.

Here are the market returns for Friday in the US and Monday overseas.  

S&P	Dow	Nasdaq	Shanghai	Japan	EuroTop100
13, .6%	108, .6%	45, .9%	closed	-41, -.2%	24, .9%

US markets had a good week last week with the S&P up 1.7%, and the Nasdaq up 3%.  Markets were somewhat mixed Monday in Asia, but Europe is following the US lead with green prints in every market. US equity futures are pointing to a slightly positive opening.

Here’s the news for the first Monday of April:

Panama papers

Leaked files from a Panamanian law firm show that politicians, celebrities and criminals worldwide have used banks and shadow companies to hide their wealth, according to a series of reports by the International Consortium of Investigative Journalists. The reports have piled pressure on Iceland's prime minister, who faces a no-confidence motion in parliament today, and have led to denials from Argentina's president while Andrey Kostin, chief executive officer of VTB Group, Russia’s second-largest lender said allegations against Russian President Vladimir Putin are "bulls**t" in a Bloomberg Television interview. 

Saudi overhaul

Saudi Arabia is planning the country's biggest ever economic shake-up which would see the burden of low crude prices spread to the population, Deputy Crown Prince Mohammed bin Salman said in an exclusive Bloomberg interview. He said the package of measures is expected to raise $100 billion by 2020. For investors, the first sign of the new Saudi Arabia will be the country's debut international bond program, which could launch as soon as September. In the immediate term, the fallout in the oil market from the prince's statement that his country would only freeze production if Iran did too continues to put pressure on the oil price, with a barrel of WTI crude trading at $36.79 at 10:41 a.m. London time.

Source: Bloomberg, BI, WSJ

Commodity slump continues

Unemployment in the euro area fell to 10.3 percent in February, its lowest level since 2011, according to data from Eurostat, the European statistics agency. The jobless rate in Germany held at 4.3 percent while in Spain, which still has no government following last December's inconclusive election, unemployment fell more than expected in March.

Time to worry about inflation?

Morgan Stanley is following BlackRock Inc., and Pacific Investment Management Co. in recommending Treasury Inflation Protected Securities as it sees Federal Reserve policy remaining “decidedly dovish.” In Japan and the euro area, the opposite problem exists, with Japanese companies cutting their inflation forecasts for the next five years and European Central Bank Executive Board Member Peter Praet saying the central bank will continue to act forcefully to counter the risk of low inflation in the single currency area becoming entrenched. The great divergence, it seems, is set to continue for some time.

Eurozone unemployment is at its lowest in almost five years. Unemployment in the eurozone slipped to 10.3% in February, down from 10.4% in January. The reading was the lowest for the euro area since August 2011. The lowest unemployment rate was in Germany (4.3%), while the highest was in Greece (24%). The euro is down 0.3% at 1.1362.
Greece and its creditors are returning to the negotiating table. Greece, the European Union, and the International Monetary Fund this week resume relief talks for the debt-ridden country. The discussions will focus on Greece's fiscal and reform progress with the goal of reaching a compromise before the April 22 meeting of eurozone finance ministers, Reuters reports. Greece's 10-year yield is higher by 28 basis points at 8.63%.
A new poll shows Brexit is gaining popularity. The latest poll taken by Opinium for the Observer newspaper shows 43% of Brits support a British exit from the European Union. That's 4 percentage points higher than the 39% who support staying in the EU. Eighteen percent of respondents were undecided. A referendum on the issue will take place June 23. The British pound is little changed at 1.4228.
Iran is pumping more oil. Iran's oil minister, Bijan Zanganeh, said, "Iran's oil and gas condensate exports are now at more than 2 million barrels per day." The country has managed to increase its production by 250,000 barrels a day over the past month, according to AFP. West Texas Intermediate crude oil is lower by 0.5% at $36.58 a barrel.
Deutsche Bank has lost its position as a top-three investment bank. The latest investment-bank rankings released by the research house Coalition reveal that the German investment bank fell to fifth place, slipping behind Citigroup and Bank of America. Deutsche Bank had held a spot in the top three since before the 2007-2008 financial crisis. JPMorgan took the top spot, followed by Goldman Sachs.
Alaska Air is buying Virgin America for $4 billion. The deal amounts to $57 a share, a 46.5% premium to Friday's closing price. Once completed, the deal would make the combined airline the fifth largest in the US, ahead of JetBlue. "With an expanded West Coast presence, a larger customer base, and an enhanced platform for growth, Alaska Airlines will be positioned to provide more choices for customers, increase competition, and deliver attractive returns to investors," the statement said.
Europe’s Homegrown Terror
Investigators are homing in on the scope of the terror network behind the attacks in Brussels and Paris. At least 22 radical Islamists from Europe linked to the attacks are suspected to be still at large, putting security services on high alert. Many of the fugitives have been involved in previous Islamic State plots, and almost all of them have spent months or years fighting in Syria. Interviews and confidential court documents portray them as part of an extensive web of young men who developed a deep hatred of the West after embracing radical Islam at underground mosques and clandestine meetings in Molenbeek, a heavily Muslim district in the heart of Brussels. While authorities try to track down the fugitives, Belgians are also attempting to root out radicalization in Muslim communities before it poses a threat

Alaska Air to buy Virgin America is a deal valued at $4 billion.

After a disastrous year, these bond traders become world-beaters.

Orange-Bouygues deal collapse ends months of tense diplomacy.

Cash is still king in Switzerland.

Lagarde says Greek deal far off as talks roiled by leaks.

The earnings calendar is blank. Earnings reporting picks back up Tuesday as Darden Restaurants and Walgreens Boot Alliance report ahead of the opening bell.
Global stock markets trade mixed. France's CAC (+1%) paces the gains in Europe after Japan's Nikkei (-0.3%) led the decline in Asia. Markets in China and Hong Kong were closed. S&P 500 futures are up 3.75 points at 2,068.75.

US economic data is light. Factory orders will be released at 10 a.m. ET. The US 10-year yield is unchanged at 1.77%.

The Underdog’s Bite
Sen. Bernie Sanders’s fundraising defies political gravity. Despite remaining a clear underdog in the race for the Democratic nomination, the Vermont senator continues to rake in contributions: his latest fundraising haul in March was $44 million. When candidates start losing primaries, as Mr. Sanders did during the first half of the month, the flow of donations typically slows significantly. But his fundraising has continued apace, fueled largely by small-dollar online donors. He now holds a narrow lead over Hillary Clinton in polling for Tuesday’s Wisconsin primary. Meanwhile, the two candidates continue to spar over whether they will debate before the New York primary, a pivotal showdown in two weeks. And in the GOP race, Wisconsin’s conservative political network and its sophisticated Republican electorate could prove to be front-runner Donald Trump’s worst nightmare heading into an important primary.

Chinese Check-In
When Starwood’s big suitor from Beijing came unexpectedly calling again last month, its proposal eventually included an extraordinary clause to allay the Americans’ wariness: along with its $14 billion offer, Anbang Insurance Group agreed to pay even if Chinese regulators blocked the tie-up. We report on the behind-the-scenes of the Chinese company’s curious Starwood courtship. In ways small and large, Anbang’s approach to the hotel company was unorthodox, from surprise meetings to its shifting offers and a level of scrutiny of Starwood’s books that, to some involved, seemed less intense than expected. With Marriott now the winner after Anbang walked away, the episode raises central questions about China’s ability to play on the global M&A stage. In other China news, government efforts to tackle a glut of vacant housing by spurring home lending have triggered a bigger problem: a surge in risky subprime-style loans.

Nova Nation
Despite having all of the hallmarks of a team that would flop in the NCAA men’s basketball tournament, the Villanova Wildcats are on the verge of historic greatness. Villanova is the exact opposite of a team that should be alive this late in the season, writes our sports columnist Ben Cohen. But that’s what makes their loud romp this year one of the craziest runs ever in college basketball. With no players projected as NBA draft picks this season, the team’s average margin of victory in its last five games was 24.2 points, the most since the 1985 expansion. A win over North Carolina tonight would not only make the Wildcats the national champions. It would make Villanova’s unlikely case as a historically great NCAA tournament team.

Deutsche Bank slips to fifth-largest investment bank

Deutsche Bank has dropped from the third-largest investment bank by total revenue from fees and trading to fifth, behind Citigroup and Bank of America, which formerly shared third place, according to Coalition data. No. 1, JPMorgan Chase, and No. 2, Goldman Sachs Group, retained their rankings.

Reuters (03 Apr.),  Financial Times (tiered subscription model)

Market volatility drives issuance of convertible securities

Embedded call options make convertible securities attractive investments in volatile debt and equity markets, analysts say. The $7.4 billion in issuance of convertible securities in 2016 is 31% less than a year earlier but is considerably better than that of high-yield bonds, which is down 57%.

Bloomberg (04 Apr.) 

Alaska Air to buy Virgin America is a deal valued at $4 billion.

After a disastrous year, these bond traders become world-beaters.

Orange-Bouygues deal collapse ends months of tense diplomacy.

Cash is still king in Switzerland.

Lagarde says Greek deal far off as talks roiled by leaks.

The earnings calendar is blank. Earnings reporting picks back up Tuesday as Darden Restaurants and Walgreens Boot Alliance report ahead of the opening bell.
Global stock markets trade mixed. France's CAC (+1%) paces the gains in Europe after Japan's Nikkei (-0.3%) led the decline in Asia. Markets in China and Hong Kong were closed. S&P 500 futures are up 3.75 points at 2,068.75.

US economic data is light. Factory orders will be released at 10 a.m. ET. The US 10-year yield is unchanged at 1.77%.

Tuna and Gunships: How $850 Million in Bonds Went Bad in Mozambique

Cyberthieves’ Latest Target: Your Tax Forms

Lagarde: IMF won't threaten to pull out of Greek rescue

Lagarde (Mandel Ngan/AFP/Getty Images)

International Monetary Fund Managing Director Christine Lagarde said IMF staff won't use the threat of sending Greece into default by pulling out of its bailout program as a negotiating tactic. The statement followed the leak of a transcript that indicated IMF staff might do so to put pressure on Greece's European creditors to grant more debt relief. "Any speculation that IMF staff would consider using a credit event as a negotiating tactic is simply nonsense," Lagarde said in a letter to Greek Prime Minister Alexis Tsipras.

Reuters (03 Apr),  Bloomberg (04 Apr.) 

Documents published by Wikileaks on Saturday revealed that officials at the International Monetary Fund recently discussed putting fresh pressure on German Chancellor Angela Merkel to provide debt relief for Greece. In the transcript of the conversation, officials cited the ongoing refugee crisis, the U.K. "Brexit" vote and a July Greek debt payment as possibly creating a good moment for getting Germany to yield on this issue. It appears safe to say that once again, Europe will be a major source of our attention this summer. The refugee story isn't going away. Greece still isn't solved. And as noted above, there's Brexit to watch for. Expect a lot of interesting headlines in the weeks and months ahead.

 

Source: Bloomberg, BI, WSJ, FT, Reuters, CFA Fin. Newsbrief