PBoC May Be Cooking Up QE; Greece Shuffles Negotiating Team

Economic Data

- (UK) Apr CBI Industrial Trends Total Orders: 1 v 4e; Selling Prices: -3 v +2e; Business Optimism: 3 v 19e
- (BR) Brazil Apr FGV Construction Costs M/M: 0.7% v 0.8%e
- (BR) Brazil Apr FGV Consumer Confidence: 85.6 v 82.9 prior
- (BR) Brazil Mar Total Federal Debt (BRL): 2.316T v 2.329T prior
- (IL) Israel Central Bank left Base Rate unchanged at 0.10%
- (MX) Mexico Mar Unemployment Rate (Seasonally Adj): 4.20% v 4.2%e; Unemployment Rate NSA (unadj): 3.86% v 4.2%e
- (US) Apr Preliminary Markit Services PMI: 57.8 v 58.8e; Composite PMI: 57.4 v 59.2 prior
- (US) Apr Dallas Fed Manufacturing Activity: -16 v -12.0e

The Shanghai Composite surged 3% on Monday on reports the PBoC was talking about another round of QE stimulus and European indices saw very strong gains on the Chinese news and some positive developments on the Greek front. Trading has been a bit choppy in the US, with participants eyeing Wednesday's FOMC decision and tons of big earnings report, not the least Apple today after the close. As of writing, the DJIA is up 0.22%, the S&P500 is up 0.21% and the Nasdaq is up 0.05%.

Greek PM Tsipras reshuffled his team handling talks with Europe and the IMF after Finance Minister Varoufakis was sharply criticized for his performance negotiations last week. Deputy Finance Minister Tsakalatos was tapped to replace Varougakis as the main Greek negotiator, and Tsipras was reportedly preparing labor and pension concessions to satisfy European demands. The euro rose to a near three-week high on the news, above 1.0905, while yields on Greek government bonds are down sharply.

CTFC data showed that traders were stepping away from WTI short positions last week and moving into long bets. Last Friday, Baker Hughes reported the number of US oil rigs in use fell to 734, the lowest total since October 2010. Since hitting a peak of 1,609 rigs last October, the number of oil rigs at work in the US is down more than 55% (in past oil downturns, this decline has been 40% to 60%). WTI remains just above $57 today, after making a run for $58 earlier, while Brent is just above $65.

Iron ore and copper prices are up for the third consecutive session as investors bet China will take more action support the economy with stimulus of one kind or another. The reports out on Sunday suggested the PBoC might consider unconventional policies to buy assets from banks or directly buy bonds to rebuild balance sheets and reinvigorate economy. A wide range of names with China and resource exposure are up again today, including JOY +5.7% and CLF +5%.

The DoJ has another trophy on its wall this morning: the $29 billion Applied Materials/Tokyo Electron merger has been called off. Remedies proposed by the two firms were not enough to replace the competition lost, and the deal has been scrapped due to DoJ resistance. Applied Materials added $3 billion to its stock buyback program as a result, but shares of AMAT are off 7%. In other deal news, France's Cap Gemini reached a deal to buy IGATE for $4 billion. Cap Gemini will pay $48 per share for IGATE, a 4.7% premium to Friday's closing price.

For-profit education provider Corinthian College is winding down operations and said it has already discontinued instruction at its remaining 28 campuses. The company is working with other schools to provide continuing educational opportunities for its approximately 16,000 students. The outcome was all but inevitable after the Federal government shut off the taps of cheap student loan financing for the scandal-ridden institution last year. Competitors seen as more responsibly run, including ESI and LINC, are up on the news, while CECO is down nearly 4%.

Looking Ahead

- 12:00 (FR) France Mar Net Change Jobseekers: No est v +12.8K prior; Total Jobseekers: 3.500Me v 3.494M prior
- 13:00 (US) Treasury to sell $26B in 2-Year Notes
- 13:30 (BR) Brazil Mar Tax Collections (BRL): 94.7Be v 90.0B prior
- 16:00 (US) Crop Condition Report
- 19:50 (JP) Japan Mar Retail Sales M/M: 0.6%e v 0.7% prior; Retail Trade Y/Y: -7.5%e v -1.7% prior (revised from -1.8%); Large Retailers' Sales: -10.9%e v 1.3% prior
- 21:00 (PH) Philippines Feb Trade Balance: -$0.3Be v -$0.8B prior; Imports Y/Y: -3.1%e v -14.2% prior