Stocks across the globe are lit up green as a dovish tone from Janet Yellen cooled near-term U.S. rate hike bets and WTI came closer to $50 a barrel. At yesterday's speech in Philadelphia, the Fed chief called the recent U.S. jobs numbers "concerning" and omitted her last message that rates could rise again "in the coming months," but warned against attaching too much significance to the payrolls data in isolation. Bye-bye summer rate hike?
Economy
Final tallies in the Virgin Islands and Puerto Rico suggest that Hillary Clinton has won enough delegates to become the presumptive Democratic presidential nominee as candidates head into their final round of primaries. However, Bernie Sanders' campaign was quick to condemn the media for its "rush to judgment," stating that superdelegates should not automatically be counted before they "actually vote at this summer's convention."
The Republican chairman of the House Financial Services Committee, Jeb Hensarling, plans to outline a legislative proposal today that aims to dismantle significant portions of Dodd-Frank. The plan, which would also repeal the Volcker Rule and eliminate the authority of the FOSC, has little chance of passing Congress this year, but the proposal may influence the presidential debate and shape the GOP agenda in the next term.
Puerto Rico's next governor and Congressional representative plan to travel to Washington this week to speak out against a bill that would create a federal control board for the island - but the opposition may be too late. The House Rules Committee will meet tomorrow to consider the amendment process for legislation that would give the U.S. territory tools to restructure about $70B in debt, with a House debate on the relief bill likely to happen on Thursday.
China's foreign exchange reserves slipped last month to the lowest level since 2011, likely due to the impact of a stronger dollar. The world's largest currency hoard fell by $28B to $3.2T in May, after rising by $7.1B in April and $10.3B in March. Despite fresh weakness against the greenback, the PBOC didn't have to blow cash to support the yuan as some stability returned to the currency.
Australia's central bank held its powder dry overnight as the nation's robust Q1 report card curbed the need for additional monetary stimulus. The RBA left its benchmark cash rate unchanged a month after it unveiled a 25 basis point cut, which took rates to their current record low of 1.75%. The Reserve Bank of India also kept its key lending rate unchanged - at 6.5% - stating it would monitor economic developments for any further actions.
Even before Mario Draghi starts his corporate-bond buying program tomorrow, he's pushed down borrowing costs in Europe toward unprecedented levels, with the average yield on euro investment-grade company notes tumbling to 1%. "The prospect of average yields below 1% is very scary," said Juan Esteban Valencia, a credit strategist at Societe Generale. "Investors are being pushed outside their comfort zone to sectors like high-yield debt, where they may not have expertise."
German industrial production rebounded in April, suggesting that the motor of Europe's largest economy was humming along at the start of the second quarter. According to the Economy Ministry in Berlin, output rose 0.8% from March, when it dropped a revised 1.1%. The euro is again in positive territory against the dollar in the wake of the slightly better-than-expected data.
Eurostat doesn't appear able to make up its mind about the quarter-on-quarter eurozone GDP growth in Q1. The first estimate was 0.6%, which was revised down to 0.5% in the second round, and now in the third report - which includes details on GDP components - the figure has been revised back to its original estimate. Annual growth was 1.7%, unchanged from the fourth quarter, driven by a jump in consumer spending and investment.
Sterling climbed as much as 1.4% overnight to a June high of $1.4643, more than recovering from yesterday’s losses, after polls showed a shift in favor of a Brexit. Surveys published late last night by YouGov and The Timesputs the "Remain" camp at 43% and "Leave" at 42%, while a telephone poll from ORB and The Telegraph puts the figures at 48% and 47%, respectively.
Saudi Arabia has approved its 'National Transformation Plan' - a series of economic reforms intended to increase the government's non-oil income and reduce public spending. Among them: Boost non-crude revenues to $141B by 2020, creation of 450K non-government jobs, private sector to fund 40% of 500+ new projects and the local production of goods and services worth $72B.
Stocks
According to a new report in the WSJ, Verizon (NYSE:VZ) on Monday planned to submit a second-round offer of about $3B for Yahoo's (NASDAQ:YHOO) core internet business. Private-equity firm TPG was also expected to submit another bid for the assets before yesterday's deadline. Yahoo is projected to hold at least one more cycle of bidding, and the offers could change by the final round.
U.S. investigators are trying to determine whether Goldman Sachs (NYSE:GS) violated the Bank Secrecy Act when it didn't sound an alarm over a suspicious transaction involving Malaysia's state fund 1MDB. After raising $3B via a bond issue for the troubled fund, Goldman sent the proceeds to a Swiss bank account controlled by 1MDB, with half of the money disappearing offshore within days and some reappearing in the prime minister's bank account.
On the oil major's capital markets day, Shell (RDS.A, RDS.B) declared it was still on track to sell assets worth $30B by 2018 and pledged to save up to $4.5B thanks to synergies from its takeover of BG. Shell further anticipates the potential for $20-25B of organic free cash flow - based on a $60 oil price environment - and 10% ROACE around the end of the decade. It also said its priorities were to reduce debt, pay dividends and achieve a "balance between capital investment and share buy backs."
Daimler is laying off more than 1,200 workers at three plants in the U.S. and one in Mexico, the second such cut this year in response to falling demand for commercial trucks. Last month, Daimler (OTCPK:DDAIY) projected a 15% decline in North America sales of medium and heavy-duty trucks, warning that a slump in the market would significantly lower its earnings before interest and tax in 2016.
Pharma bad boy Martin Shkreli pleaded not guilty Monday to a new conspiracy charge filed by Brooklyn federal prosecutors, but unloaded once he left the courthouse, where a judge delayed the scheduling of his trial. "It went great, the judge bitch-slapped the government, again," Shkreli said, bragging to several customers at a Manhattan Dunkin' Donuts where he was live-streaming his coffee purchase on Periscope.
U.S. District Judge Beth Labson Freeman has found a pattern of misconduct by Merck & Co (NYSE:MRK) including lying under oath and other unethical practices, freeing Gilead Sciences (NASDAQ:GILD) from paying damages for infringing on Merck's patents with its hepatitis C treatments - Sovaldi and Harvoni. The ruling comes after a federal jury on March 24 ordered Gilead to pay $200M in damages, based on findings that Merck's patents were valid.
Shall we try this again? Investors are hoping the sequel is better than the original when Valeant Pharmaceuticals (NYSE:VRX) posts its much-delayed Q1 results this morning. The earnings report will be the second since a scandal last fall surrounding the drugmaker's relationship with mail-order pharmacy Philidor triggered a free fall in its stock. It will also be the first since new CEO Joseph Papa took over last month.
The U.S. Drug Enforcement Administration's Chuck Rosenberg will testify at a Senate Judiciary Committee hearing today entitled "Deadly Synthetic Drugs: The Need to Stay Ahead of the Poison Peddlers." The DEA has been cracking down on synthetic drugs over the past few years, but they made headlines again recently with the news that musician Prince died from an accidental overdose of synthetic opiate fentanyl.
In its latest media drama, Sumner Redstone's National Amusements (owns 80% of Viacom and CBS's voting stock) has amended Viacom's (VIA, VIAB) bylaws to require unanimous board approval for a full or partial sale of Paramount Pictures. Separately, a Massachusetts judge is expected to grant a motion today to expedite a hearing over whether Redstone was mentally competent when he removed Viacom CEO Philippe Dauman from the seven-person trust.
Two new Samsung smartphones featuring bendable OLED screens are expected to be released as soon as early 2017, Bloomberg reports. One model is said to fold in half like a cosmetic compact, while the other has a 5-inch display that "unfurls" into a tablet-sized 8-inch panel. Samsung's (OTC:SSNLF) new devices, which are codenamed "Project Valley" and won't be dubbed Galaxy S models, may be unveiled as soon as the Mobile World Congress.
Today's Markets
In Asia, Japan +0.6% to 16675. Hong Kong +1.4% to 21328. China +0.1%to 2936. India +0.9% to 27010.
In Europe, at midday, London +0.4%. Paris +1.2%. Frankfurt +1.7%.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +0.5% to $49.95. Gold -0.3% to $1244.10.
Ten-year Treasury Yield +1 bps to 1.73%
Today's Economic CalendarIn Europe, at midday, London +0.4%. Paris +1.2%. Frankfurt +1.7%.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +0.5% to $49.95. Gold -0.3% to $1244.10.
Ten-year Treasury Yield +1 bps to 1.73%
8:30 Productivity and Costs
8:30 Gallup US ECI
8:55 Redbook Chain Store Sales
1:00 PM Results of $24B, 3-Year Note Auction
3:00 PM Consumer Credit
Companies reporting earnings today »8:30 Gallup US ECI
8:55 Redbook Chain Store Sales
1:00 PM Results of $24B, 3-Year Note Auction
3:00 PM Consumer Credit
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