In a far-reaching government shakeup, Saudi Arabia has replaced Ali al-Naimi, who had been oil minister since 1995, with Khalid al-Falih, chairman of state-owned oil company Aramco. Although many are questioning whether the new oil boss will bring big changes to OPEC's June meeting, it looks like the Kingdom is sticking to its current strategy. "Saudi Arabia will maintain its stable petroleum policies," Al-Falih said in a statement. Since 2014, the nation has led OPEC through a new survival-of-the-fittest strategy aimed at defending market share rather than reducing production to support crude prices.
Economy
Oil is climbing higher after the huge wildfire in Canada knocked out over a million barrels in daily capacity as eleven production firms and three pipeline operators curbed their activities and officials warned they could be fighting the blaze for weeks. The lost output is equivalent to well over a third of the country's typical daily production, with almost all of Canada's crude from the oil sands region exported to the U.S. Oil futures +2.3% to $45.70/bbl.
Chinese trade shrank in April, cooling hopes of a recovery in the world's second-largest economy despite ongoing stimulus efforts. Exports fell 1.8% from a year earlier, while imports dropped 10.9%, leaving a trade surplus of $45.6B. Weak domestic and global demand is hampering government efforts to reverse an economic slowdown that dragged growth to a seven-year low of 6.7% in Q1. Shanghai -2.8%.
How about the country's foreign exchange reserves? They rose, albeit marginally, for a second consecutive month in April, indicating an easing in capital outflows, According to the PBOC, the world's largest stockpile of foreign currency grew by $7.09B to $3.22T. The increase comes after forex reserves began falling dramatically late last year as the central bank intervened in the market to defend the yuan amid a dim outlook for China's growth and currency.
"For Japan, excessive volatility in yen moves that affect Japan's trade, economic and fiscal policies - be it yen rises or yen falls - is undesirable. If such moves occur, Japan is ready to intervene in the market," Japanese Finance Minister Taro Aso told parliament. The greenback hit an 18-month low of ¥105.55 last week after the U.S. added Japan to a list of countries it was monitoring over foreign exchange policies. The yen, which currently trades at 107.60 per dollar, has so far appreciated 12% in 2016.
Helped by surging demand from outside the eurozone, German manufacturing orders sharply rebounded in March, suggesting the trend may continue into the second quarter. Contracts for 'Made in Germany' goods - adjusted for seasonal swings and calendar effects - were up 1.9% on the month, marking the biggest increase since last June. "Overall, it was a solid start to the year," the ministry noted, adding that it expected the moderate pace of growth to continue.
U.K. Prime Minister David Cameron made a "big, bold, patriotic case" today for Britain to stay in the European Union, saying its relationship helped protect the country and boosted its power on the world stage. "Our membership of the single market is one of the reasons why our economy is doing so well," he told diplomats and campaigners. "Isolationism has never served this country well." The highly watched vote will take place on June 23.
The next prime minister of Australia will likely be aiming for something that has eluded recent predecessors: surviving a full term after years of revolving-door leadership. Prime Minister Malcolm Turnbull on Sunday called for a July 2 election, seeking a fresh mandate for the conservative government he took the helm of nearly eight months ago in an economy roiled by the end of a long resources boom.
Voting has begun in the Philippines in a hotly contested presidential election that's seen Rodrigo Duterte, the controversial mayor of Davao City, head to the front of the pack with his tough talk and incendiary rhetoric. The political establishment has warned that years of solid economic growth is threatened and foreign governments have looked on with trepidation as the country is a key regional player in the South China Sea dispute with Beijing.
Greece's parliament has approved a bill reforming the debt-laden country's pension and tax systems ahead of an emergency meeting between the Eurogroup and IMF officials that aims to complete the first review of Athens' €86B bailout. The legislation, which will increase social security and pension contributions, and raise taxes for most people, took place amid a crippling general strike and protests that briefly turned violent on Sunday.
Congress needs to restructure Puerto Rico's debt, otherwise the U.S. territory will need a bailout, Puerto Rico Governor Alejandro Garcia Padilla warned in an interview with CNBC. "It's not an issue of politics. It's not even an issue of policy. It's a mathematical issue. We do not have the money. It's as simple as that." Meanwhile, Puerto Rico's Planning Board has released its fiscal 2017 forecast, estimating the island's economy to contract for a fifth straight year.
U.S. futures are wading into the green after Friday's weaker than expected non-farm payrolls number caused investors to revise down the likelihood of the Fed hiking rates in June. The U.S. economy created 160K jobs in April, less than the 202K Wall Street had been expecting, while the jobless rate remained unchanged at 5%. A whole list of Fed speakers will also be hitting the podium this week, and could provide more color about an upcoming rate decision.
Stocks
Saudi Arabia is hoping to lure ExxonMobil (NYSE:XOM), Sinopec (NYSE:SNP) and BP into buying stakes of state-run oil company Aramco, when it sells 5% of its equity, according to the U.K.'s Telegraph newspaper. The country is planning a three-way listing for London, Hong Kong, and New York as early as 2017 that would be 5x larger than any IPO in history (shares could be valued at $100B-$150B). Deputy Crown Prince Mohammed bin Salman first announced the decision in April, looking to spearhead his "2030 Vision" by diversifying and breaking the country's addiction to oil.
Total has agreed to buy Saft Groupe (OTC:SGPEY) for €36.50 a share, valuing the battery manufacturer's equity at €950M. "The combination will enable Saft to become the group's spearhead in electricity storage," Total (NYSE:TOT) Chief Executive Patrick Pouyanne said. Last month, the company announced the creation of a new division to help drive its ambition to become a top renewables and electricity trading player within twenty years.
Due to the complexity of the regulatory process, Cigna (NYSE:CI) is cautioning that its acquisition by health-insurance rival Anthem (NYSE:ANTM) may not be approved this year, but could rather close in 2017. The two agreed to a $48B cash-and-stock merger deal last July. The transaction, along with Aetna's (NYSE:AET) pending acquisition of Humana (NYSE:HUM), would reduce the number of big U.S. health insurers from five to three.
The U.S. Centers for Disease Control and Prevention has pushed back against complaints from Chipotle (NYSE:CMG) that said the health agency misinformed the public last year with its reporting of certain E. coli cases linked to its stores. Chipotle requested a correction in December, arguing that the updates were inaccurate, confusing and "unnecessarily intensified the public's concern" about health risks associated with the restaurant. The negative attention led to the burrito chain's first quarterly loss as a public company, and wiped out billions of dollars in market value.
The trial over Sumner Redstone's mental competence could end as early as today when a California judge is expected to announce whether he will throw out a lawsuit from the 92-year-old media mogul's former girlfriend. Manuela Herzer contends Redstone, the controlling shareholder of Viacom (VIA, VIAB) and CBS, was not mentally competent when he removed her as his designated healthcare agent last October.
A key figure in Facebook's virtual reality ambitions is leaving the social-networking giant after a little more than a year on the job. Mary Lou Jepsen, who heads up display technology for the Oculus VR division, plans to depart in August to develop imaging technologies for treating and curing diseases. "We're very excited to see what she invents next," Facebook (NASDAQ:FB) said in an emailed statement.
Twitter is barring U.S. intelligence agencies from a service that sifts through the entire output of its social-media postings, the latest example of tension between Silicon Valley and the federal government over terrorism and privacy. Dataminr - in which Twitter owns a 5% stake - is the only firm that Twitter (NYSE:TWTR) allows to see a real-time feed of every tweet across its network and sell that information on to clients.
Despite an $8M campaign by ride-hailing businesses, Austin-area voters on Saturday rejected a proposal by Uber (Private:UBER) and Lyft (Private:LYFT) to self-regulate their drivers and mandated stricter rules on the companies, including fingerprint background checks and emblems on cars. The two firms will now cease operations in Austin, stating the new laws make it harder for "drivers to get on the road" and "passengers to get a ride." The election was being closely across the nation as other cities grapple with how best to regulate the industry.
Honda will likely call back an additional 20M Takata-made (OTCPK:TKTDY) air bags globally, the Nikkei reports, in a widening scandal that has led to the biggest auto recall in U.S. history. The plan to recover the defective devices, including in areas where there are few reports of accidents, will probably cost the company about ¥200B ($1.87B). Last Wednesday, Honda (NYSE:HMC) announced that two more people in Malaysia died in accidents linked to the faulty air bags.
Meanwhile, Takata's recall woes are severely biting into its bottom line. The Japanese air bag supplier has warned it would post an annual net loss of ¥13B ($120M) for the past financial year, revising its previous estimate for a ¥5B profit. Takata (OTCPK:TKTDY) also cut its estimates for full-year revenue and recurring earnings, although it raised its operating profit estimate by 5% to ¥42B.
Today's Markets
In Asia, Japan +0.7% to 16216. Hong Kong +0.3% to 20163. China -2.8% to 2832. India +1.8% to 25689.
In Europe, at midday, London +0.6%. Paris +1.4%. Frankfurt +2%.
Futures at 6:20, Dow +0.2%. S&P +0.3%. Nasdaq +0.3%. Crude +2.3% to $45.70. Gold -1.3% to $1277.70.
Ten-year Treasury Yield flat at 1.78%
Today's Economic CalendarIn Europe, at midday, London +0.6%. Paris +1.4%. Frankfurt +2%.
Futures at 6:20, Dow +0.2%. S&P +0.3%. Nasdaq +0.3%. Crude +2.3% to $45.70. Gold -1.3% to $1277.70.
Ten-year Treasury Yield flat at 1.78%
5:10 Fed's Evans speech
10:00 Labor market condition index
12:30 PM TD Ameritrade IMX
1:00 PM Fed's Kashkari speech
Companies reporting earnings today10:00 Labor market condition index
12:30 PM TD Ameritrade IMX
1:00 PM Fed's Kashkari speech
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