Americans’ Hiring Rose in February to the Highest Since Before the Recession More Americans were hired to start a new job in February than in any month since before the recession that began in 2007—about 5.4 million people.
Tuesday’s report also showed an increase in the number of people who voluntarily quit a job in February, which rose to about three million from 2.9 million. Labor economists generally regard the overall rate of quitting as a sign of the labor market’s health. When the economy is thriving, more people have the opportunity or the confidence to search for a better job. (…)
The number of job openings was unchanged in February.
Note the flattening in the number of job openings since the middle of 2015 while hires kept climbing, (Chart from Doug Short)
BTW, yesterday’s ISM Non-Manufacturing Index rose but its Employment index, which sank below 50.0 in February, barely moved, seemingly more in sync with Markit’s Services PMI…(Chart from CalculatedRisk)
Russia sees oil price of $45-$50 per barrel ‘acceptable’ as it prepares for freeze deal – sources
(…) “The level of $45-50 (per barrel) is acceptable from the point of view of market balance: if prices go higher shale oil production could start to recover.”
A Russian Energy Ministry spokeswoman confirmed that the information provided by the sources was correct. (…)
The sources who discussed Moscow’s position said they believed Iran would struggle to quickly reach levels it has announced. They said Iranian growth is now coming mostly from selling oil from storage and putting easy-to-launch fields on stream.
“A freeze without Iran is being discussed. At the moment we don’t see tough conditions (from others) for Iran to join,” one of the sources said. (…)
The Russian sources said that the deal to freeze oil output is expected to speed up rebalancing of oil supply and demand by around half a year. (…)
SENTIMENT WATCH
Equities firm as risk appetite recovers Better China data and rising oil prices ease growth fears
Global bond yields plunge to record-low 1.3 percent.
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German Yields Join March to Zero A surge in government-bond prices has taken 10-year yields in Europe’s strongest economy to the brink of once-unthinkable territory: negative interest rates.
The German bund’s yield hit 0.08% Tuesday, the lowest in a year and just a hair short of the all-time low for a closing yield of 0.073%, according to Tradeweb.
The plunge in German bond yields has resulted from the latest bout of aversion to risk on the part of investors, as well as an increase in the European Central Bank’s bond-buying program and the ECB’s embrace of negative rates. The programs increase demand for debt and drive down yields, which fall when prices rise.
Tumbling European bond yields could add to pressure on U.S. interest rates, even at a time when Federal Reserve officials are going out of their way to warn the markets that they may be underestimating the likelihood of further Fed rate increases this year. (…)
Around one-quarter of global government bonds have been trading at yields below zero, including German bonds that mature in less than 10 years. Japan’s 10-year government bond dropped below zero for the first time earlier this year, after the Bank of Japan adopted a negative-rate policy. Even yields on some European firms’ bonds have dipped below zero recently.
On Tuesday, the U.S. 10-year yield slipped to 1.727%, down sharply from 2.273% at the end of last year. (…)
The Fed’s holdings of Treasury debt account for close to 20% of U.S. government bonds outstanding, according to data from the Fed. The Bank of England’s holdings account for 26% of U.K. government debt outstanding at the end of March, and the Bank of Japan has gobbled up 30% of Japanese government debt outstanding, according to data from HSBC Holdings PLC.
In the eurozone, holdings of German government debt by the European Central Bank and the euro area’s national central banks accounted for 10% of German sovereign debt outstanding, according to HSBC. (…)
Default Tsunami Brewing
Investors worried by a potential second wave of defaults in the U.S. should be even more concerned about emerging markets.
Moody’s Investors Service says default rates currently stand at about 4 percent and could soar to as high as 14.9 percent by the end of the year under the most pessimistic scenario, Bloomberg News reports today. Its best-case projection is a 5.05 percent rate.
Edward Altman, New York University professor and creator of the widely used Z-Score method for predicting bankruptcies, has also forecast rising U.S. defaults this year, saying in January that recession could follow even with a rate of less than 10 percent, given the increase in debt since the financial crisis.
(…) According to Standard & Poor’s, emerging markets recorded their highest number of defaults for 11 years in 2015, a tally of 26. The Bank of America Merrill Lynch High Yield Emerging Markets Corporate Plus index currently comprises 696 bonds, a number that’s risen from 346 eight years ago. Based on those numbers, the delinquency rate stands at only 3.7 percent (though the S&P figures don’t capture the entire universe of defaults). (…)
A further cause for concern: Fitch Ratings said in January that 24 percent of companies in seven of the biggest emerging markets have raised money offshore. That increases their vulnerability to weakening currencies, an issue that’s dogging Chinese issuers. Fitch also said that the share of banks and sovereign ratings on negative outlook is at the highest since 2009.
The rating company’s analysis of Brazil, India, Indonesia, Mexico, Russia, South Africa and Turkey shows that private-sector debt rose to an estimated 77 percent of GDP at the end of 2014, up from 46 percent in 2005.
Corporate defaults increased to a record in Brazil last year. China has also seen delinquencies climb exponentially, with at least 12 companies missing payments on bonds in the past two years.
If history is any guide, there’s a lot more to come. Another wave of defaults in the U.S. will trigger a tsunami in emerging markets.
Pfizer Terminates $160 Billion Allergan Merger
U.S. Prepares Suit to Block Halliburton-Baker Hughes Deal
What are the Panama papers and why do they matter?
(…) Companies such as Mossack specialise in helping foreigners hide wealth. Clients may want to keep money away from soon-to-be ex-wives, dodge sanctions, launder money or evade taxes. The main tools for doing so are anonymous shell companies (which exist only on paper) and offshore accounts in tax havens (which often come with perks such as banking secrecy and low to no taxes). These structures obscure the identity of the true owner of money parked in or routed through jurisdictions such as Panama.
(…) Over 11m documents have been leaked from Mossack’s secretive offices. The International Consortium of Investigative Journalists (ICIJ) this weekend went public with its findings that the firm had, wittingly or unwittingly, helped clients evade or avoid tax, launder money or mask its origins. More astonishing than their methods, which are well known, was the scale of activity and the people involved. The 2.6 terabytes of data are thought to contain information about 214,500 companies in 21 offshore jurisdictions and name over 14,000 middlemen (such as banks and law firms) with whom the law firm has allegedly worked.
Although by no means all of these are criminal or even shady, the first public examples make for telling reading. On the naughty list are people such as Ukraine’s president, Petro Poroshenko, who promised to sell his business interests on taking office. He seems to have merely transferred assets to an offshore shell. Other heads of government, such as Russia’s Vladimir Putin and Iceland’s Sigmundur David Gunnlaugsson are suspected of hiding ownership of offshore assets by putting them in the names of friends or relatives. Mossack denies any wrongdoing, as does Mr Gunnlaugsson. A spokesman for Mr Putin has denounced the allegations as a case of “Putinophobia”.
After the initial naming and shaming, it will become clearer in the coming weeks who was using these structures for dodgy reasons. While examples of the offshore industry enabling dictators, terrorists and drug cartels will (rightly) capture much of the attention, it would be a shame if other miscreants escape. The global industry of service providers, which sell financial secrecy to those who can afford it, have in some cases done more than just feast on poorly designed tax policies. The Panama documents suggest that some actively looked the other way when faced with a less-than-clean client. An estimated 8% of the world’s wealth ($7.6 trillion according to Gabriel Zucman, an economist) is stuffed away in offshore accounts, most of it done perfectly legally, as a raft of public relations people hasten to say as their clients’ names are flung around in the press. But legal or not, the newspapers taking aim at Mossack and the like will strike a chord. They are in tune with contemporary sentiment: the fundamental disconnect between global elites and the rest, for whom taxes are as certain as death.
From a WSJ editorial:
(…) The scale is eye-popping. Longtime friends and associates of Russian President Vladimir Putin channelled $2 billion through Panama over the years, ICIJ says in its report on the documents. A Kremlin spokesman described the report as “Putinphobia.” A family member of Chinese President Xi Jinping allegedly has a Panama connection, as do the Saudi king and the son of Malaysian Prime Minister Najib Razak. Mr. Xi’s brother-in-law and the Saudi government declined to comment to ICIJ, while Mr. Najib’s son told the group he had used a Panamanian company “for international business.”
Some Western leaders also are mentioned in the leaks, including Iceland’s Prime Minister Sigmundur David Gunnlaugsson, and several former British members of Parliament as well as the deceased father of Prime Minister David Cameron. ICIJ says it has found evidence that some 140 leaders and politicians, and potentially hundreds of other individuals, established companies in Panama over the nearly 40 years for which it has obtained records.
The fact that an individual created such a company, or opened bank accounts in Panama, is not proof of any wrongdoing, and some individuals in the documents have said they had legitimate business dealings that warranted a Panamanian presence. The Mossack Fonseca law firm responded that it “does not foster or promote illegal acts.” It will take significantly more parsing, beyond the year ICIJ and its partners already have devoted, to determine any criminal liability.
That’s not stopping the media from jumping to conclusions, and many are oddly focusing on tax avoidance. The claim is that these leaks show how easily wealthy individuals have been able to use Panamanian bank-secrecy laws—long a target of global tax campaigners—to “conceal” their wealth. (…)
Governments have to enforce their tax laws. But it’s hard to see how the big question in this story is whether everyone with a company in Panama paid the correct amount of tax. The far more important question is how so many public officials in so many governments managed to accumulate so much money.
It’s no surprise that the world’s undemocratic and nontransparent regimes figure prominently in the Panama Papers. The leak offers new insights into how the powerful few enriched by such regimes deploy their cash.
Western governments should be particularly alert to the ICIJ’s suggestion that some of the transactions it identified were intended to circumvent Western sanctions on regimes or individuals. Russian and Chinese citizens in particular deserve to know more about their leaders’ finances, and the good news of the Internet era is that they’ll find out despite their government’s efforts to suppress the news.
All of these angles warrant further exploration, in the press and among voters and perhaps also in courtrooms around the world. The mistake now would be to narrow the focus prematurely, zeroing in on tax avoidance that is a hobbyhorse of the political class but in this case is a distraction. The real news here are the incomes and far-flung bank accounts of the political class.
