Following opposition from U.S. and European antitrust regulators, Halliburton (NYSE:HAL) has officially abandoned its pursuit of rival Baker Hughes (NYSE:BHI), leaving it to pay a $3.5B breakup fee as a result of the deal falling apart. The cash-and-stock acquisition - valued at $34.6B when it was announced in November 2014, and now worth about $28B - would have brought together the world's No. 2 and No. 3 oil services companies, raising concerns about higher prices in the sector.
Economy
Puerto Rico will miss a $422M bond payment due to its Government Development Bank today, registering the largest default to date for the fiscally struggling U.S. territory. "Faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice,” Governor Garcia Padilla said via a televised address in Spanish. "I decided that essential services for the 3.5M American citizens in Puerto Rico came first."
Japanese stocks fell more than 3% overnight as domestic manufacturing activity contracted at its fastest pace since 2013 and the yen hit a fresh 18-month high against the greenback. The move saw the dollar drop as far as ¥106.14, extending its slump of nearly 5% last week - a percentage fall not seen since 2008 - after the Bank of Japan refrained from adding fresh stimulus. Note: Over the last seven days the Nikkei has tumbled more than 8%.
The weak dollar is sending gold above $1,300 an ounce for the first time since January 2015, as prices advance 23% YTD, rebounding from three straight annual declines. Investors have flooded back to the yellow metal as risks to the global economy prompt the Fed to take a slower approach to further interest-rate increases.
The powers the U.S. Federal Reserve can use to aid a faltering financial institution are still flawed more than seven years after the crisis, NY Fed President William Dudley said on Sunday, warning of holes in the central bank's ability to provide emergency funding. "Providing these firms with access to the discount window might be worth exploring," he declared at the Atlanta Fed’s annual conference on financial markets. "In the U.S., some significant gaps remain."
Factory activity in China edged down in April, signaling a modest weakening of momentum for the world’s second-largest economy despite easy-credit policies. The country's official manufacturing PMI fell to 50.1 from 50.2 the previous month, according to the National Bureau of Statistics. "This really highlights the fact that the stimulus we saw in the first quarter has a limited time frame," said IG Markets analyst Angus Nicholson.
The ECB's swathes of cheap loans and interest rate cuts, alongside a boost to its monthly bond purchases, appear to be having little effect on inflation or private sector growth. Markit's Composite Flash Purchasing Managers' Index for the eurozone dipped to 53.0 last month from March's 53.1, matching a 13-month low in February. "The PMI has now edged higher for two successive months, but has improved only marginally from what was a worryingly low base earlier in the year," anounced Chris Williamson, chief economist at Markit.
Talks for a free trade deal between the U.S. and Europe face a serious impasse with "irreconcilable" differences, according to leaked negotiating texts discussing the Transatlantic Free Trade Agreement. The two sides are at odds "over U.S. demands that would require the EU to break promises it has made on environmental protection," while talks on engineering are being "characterized by continuous reluctance on the part of the U.S. to engage in this sector."
Oil prices are retreating from 2016 highs as rising production in the Middle East outweighed a decline in U.S. output and a slide in the dollar. OPEC crude production rose in April to 32.64M barrels per day, close to the highest level in recent history. Meanwhile, International Energy Agency chief Fatih Birol said on Sunday that oil prices may have bottomed out, providing that the health of the global economy does not pose a concern. Crude futures -0.7% to $45.58/bbl.
Stocks
How much would Marissa Mayer get to leave Yahoo? A new SEC filing reveals that the company's board has agreed to a $55M severance package for the embattled chief executive if its Internet operations auction ends in a sale that ousts Mayer from her job. That's a lot of money for a CEO who hasn't been able to keep Yahoo's (NASDAQ:YHOO) stock from falling. In 2015, the value of the firm's stock fell by a third, while her "actual" compensation totaled $14M, well above the $12M median paid to top executives in the S&P 500.
The world's biggest sovereign wealth fund is launching a crackdown on executive pay, targeting high salaries at firms around the globe in an attempt to exert its influence in a debate that has been increasingly gathering pace. Although previously refusing to interfere in the matter, Norway's $870B oil fund is reportedly gearing up to publicly target a company on pay in the coming months. The fund's influence is significant given it owns an average of 1.3% of every listed company in the world.
Berkshire Hathaway held its annual shareholders meeting over the weekend, with attendees listening closely to Warren Buffett and Charlie Munger at what observers called the "Woodstock for Capitalism." The Oracle of Omaha defended his stock picks and took aim at hedge funds, encouraging investors to ditch their money managers. Preliminary numbers: Berkshire's (BRK.A, BRK.B) operating earnings of $3.737B in Q1 dipped from $4.24B a year ago. Net earnings of $5.59B rose from $5.16B thanks to that investment income.
Italian banks had a difficult start Monday as the country's €4.25B bank bailout fund undertook its first rescue mission, after a closely-watched €1.75B capital raise at regional lender Popolare di Vicenza flopped. Only 7% of the IPO was taken up and now the government rescue fund, Atlante, will be forced to scoop up the rest. The outcome of the cash call had been viewed as a barometer of sentiment in Italy’s banking sector, which is sitting on a €360B backlog of bad loans. UniCredit (OTC:UNCFY) -2.4%, MedioBanca (OTCPK:MDIBY) -2.2% , Banco Popular (OTCPK:BPESF) -3.1%, BMPS -3% in Milan.
Unloading a large chunk of its stake in China's PICC Property and Casualty Co., AIG has raised $1.25B through the sale of 740M shares at HK$13.08 apiece, near the low end of its marketed range. The transaction is among the largest block deals in Asia this year and comes at a time when several European and U.S. financial institutions have been trimming their exposure to Chinese banks and insurers.
Verizon is deploying "thousands" in extra personnel, as a strike of nearly 40K wireline workers drags on in its third week with few signs of resolution. Some employees are on special assignment and others are coming out of Verizon's technical training in Virginia. On Thursday, the company made a "last, best and final offer" to leaders of the CWA and IBEW, but union leaders responded that Verizon (NYSE:VZ) needs to "get serious about negotiations."
Hulu is designing a subscription service that would stream feeds of popular broadcast and cable TV channels, WSJ reports, in a move that would make the company a competitor to traditional pay-TV providers and other new digital entrants. Until now, Hulu has offered on-demand programming from major networks, similar to Netflix (NASDAQ:NFLX). The company, co-owned by Disney (NYSE:DIS), Comcast (NASDAQ:CMCSA) and Fox (FOX, FOXA) hopes to launch the new online service in the first quarter of 2017.
The first Zika-related death has been reported in the United States, after a Puerto Rican man, in his 70s, died from internal bleeding caused by a rare immune reaction to the virus. "This demonstrates that there can be severe manifestations that result from infection," the Centers for Disease Control's Tyler Sharp told NBC News. The CDC expects Zika to create a "small number" of U.S. cases, and a cure "to take time." Related tickers: SNY, INO, AEMD,XON, CEMI, BCRX, TMO, OTCQB:GOVX
Ending years of speculation, Australian entrepreneur Craig Wright has publicly identified himself as Bitcoin (COIN, OTCQB:BTCS) creator Satoshi Nakamoto. "I have not done this because it is what I wanted," he said. "There are lots of stories out there that have been made up and I don't like it hurting those people I care about." The crypto currency is now accepted as payment for a vast variety of goods and services. There are about 15.5M Bitcoins in circulation, each currently worth about $449.
Sony is developing a pair of intelligent contact lenses. The tech nerds are calling them "smart eyes," and they're supposed to measure a person's blink, wink, and tilt of the eye to figure out when to record, save and delete video. Sony's (NYSE:SNE) contacts include a camera, a wireless processing component and a storage unit, and differ from Samsung's (OTC:SSNLF) smart lenses patented earlier this month, which rely on a smartphone.
After failing to reach a debt restructuring deal with its lenders and bondholders, Ultra Petroleum (NYSE:UPL) has filed for Chapter 11 bankruptcy, the latest victim of depressed oil and gas prices. The company reportedly listed $1.3B in assets and $3.9B in debt, and will ask the bankruptcy court for permission to continue a surety bonding program that secures its obligations on the environment, road damage and plugging of wells.
Air France-KLM's board has officially picked Jean-Marc Janaillac, head of bus and train operator Transdev, to replace Chief Executive Alexandre de Juniac, who is due to leave by August after struggling to restructure the ailing carrier. The move comes amid Air France-KLM's (OTC:AFRAF) delicate negotiations with unions over cost-cutting as it slowly recovers from years of losses following an improving environment for the air transportation business.
Takata shares plunged as much as 16% overnight on reports that the company, already at the center of the biggest safety crisis in automotive history, will soon get hammered by regulators. The NHTSA has told automakers that recalls will expand to all cars with Takata (OTCPK:TKTDY) air bags lacking a moisture-absorbing desiccant that keeps the devices from deteriorating. There are more than 100M such vehicles worldwide.
Today's Markets
In Asia, Japan -3.1% to 16147. Hong Kong closed. China closed. India -0.7%to 25437.
In Europe, at midday, London closed. Paris +0.4%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude -0.7% to $45.58. Gold +1% to $1303.40.
Ten-year Treasury Yield flat at 1.81%
Today's Economic CalendarIn Europe, at midday, London closed. Paris +0.4%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude -0.7% to $45.58. Gold +1% to $1303.40.
Ten-year Treasury Yield flat at 1.81%
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