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Just three weeks after the U.K. voted in favor of leaving the EU, Theresa May will today take over from David Cameron to become the 54th British prime minister. While financial markets are cheering the appointment, with sterling trading above $1.32, many analysts have said the implications for the U.K. economy could be much bigger due to uncertainty about her policies. Speculation is also mounting over the top jobs in her cabinet. Will Treasury chief George Osborne make the cut?
Economy
Global crude markets have undergone an "extraordinary transformation," swinging from a major surplus to near balance in Q2, according to the IEA, but record high oil stocks are threatening the "recent stability of prices." Middle Eastern output exceeded 31M bpd for a third month in June, while U.S. oil production slid 140K bpd to 12.45M, the agency said in its monthly report, which largely kept forecasts for supply and demand unchanged.
The Fed is coming up short on both its employment and inflation goals, and can be patient in raising interest rates, according to Minneapolis Fed President Neel Kashkari. On the other side of the spectrum sits Cleveland Fed President Loretta Mester, who also spoke Tuesday evening, but continues to expect gradual interest rate rises. "Hiring rebounded in June, alleviating concerns" that the country's labor market had regressed.
Donald Trump will showcase his vice presidential choice at a public event on Friday, multiple sources told NBC News. His possible picks are thought to be narrowed to three candidates: Mike Pence, Newt Gingrich and Chris Christie. Meanwhile, the Republican Platform Committee has adopted policy language that largely adheres to Trump's "America First" trade language, and a tougher stand on illegal immigration and China relations.
Puerto Rico could be shut out of debt markets for two more years as it battles with fiscal challenges, warned Governor Alejandro Garcia Padilla, dubbing the recent emergency fiscal measures enacted by Washington as unsustainable. "Puerto Rico will not endure any more austerity," he declared. Padilla hasn't been able to turn around the island's economy during his three years in office and won't be running for re-election in November.
Germany has sold 10-year Bunds with a zero percent coupon, issuing benchmark debt with a negative yield for the first time in history. The €4.038B sale came with a yield of -0.05%, meaning that investors who hold the paper until maturity in August 2026 will receive back less money than they paid.
In another sign the mainland's factory floors are continuing to slow, China's exports fell more than expected in June, while imports also saw a steeper fall than forecast. U.S. dollar terms: exports fell 4.8% Y/Y, while imports declined 8.4%. Yuan terms: exports rose 1.3% from a year ago, while imports declined 2.3%. The trade situation will be "severe" this year, the customs administration said in a statement.
Beijing has reiterated it will ignore an unfavorable court ruling on its South China Sea maritime claims, warning neighbors it would "take all necessary measures" to protect interests there. China's pursuit of 85% of the territory in the South China Sea was badly dented on Tuesday by the Permanent Court of Arbitration in the Hague, which ruled in favor of the Philippines in a case brought three years ago.
Stocks
There is "big money" to be made by shorting stocks if equities pull back from current peaks, according to famed investor Jeffrey Gundlach who says he has been selectively betting against shares in the S&P 500 and continues to favor emerging market bonds over junk debt. The Dow joined the S&P in yesterday's session to post a new all-time closing high, while the Nasdaq finished in positive territory for the first time this year.
Prime Day sales got off to a slow start on Tuesday, hampered by technical glitches, but a few hours later the issues involving Lightning Deals were resolved. "Led by strong growth internationally, we are seeing more than 30% increase over last year in the number of items sold by small businesses and sellers on Prime Day," Amazon (NASDAQ:AMZN) said reflecting sales as of 3 p.m. ET. "We are expecting a record."
Line Corp. shares are getting popular in the gray market ahead of this week's trading debut, which will mark the largest initial public offering for a tech company in 2016. According to Cantor Fitzgerald, investors are willing to buy shares for ¥3,800 ($36), 15% higher than the IPO price. Line (Private:LIN) will debut in a dual listing in the U.S. tomorrow and Tokyo on Friday.
Colorado pot businesses are increasingly coming under scrutiny from the IRS due to the industry's focus on cash and reporting requirements such as Form 8300, sources told Marijuana Business Daily. Dispensaries and cannabis companies are known to deal predominantly in cash as continued U.S. banking restrictions make it difficult for them to have bank accounts with federally chartered financial institutions. Related tickers: OTC:AEGY, OTCQB:CNAB,OTCPK:ERBB, OTCPK:GRNH, OTCPK:HEMP, OTCPK:HPNN, OTCPK:LATF,OTCPK:MJNA, OTCPK:PLPL, OTCQB:VAPE, OTCPK:VAPR, VPCO
The FTC has requested additional information from Abbott Laboratories (NYSE:ABT) and St. Jude Medical (NYSE:STJ), which are attempting to complete a $25B deal combining two of the leading makers of heart-related devices. The request extends the waiting period - the time frame before companies can close a transaction - by 30 days.
A bidding war in the making? Exxon Mobil (NYSE:XOM) has tabled an offer to buy InterOil (NYSE:IOC), topping the $2.2B deal from Australia's Oil Search (OTCPK:OISHF), Reuters reports. Exxon's interest is comprised of shares as well as a contingent value right, which may give IOC shareholders cash on a sliding scale depending on the worth of a pending gas deposit discovery.
McDonald's is struggling to attract the caliber of bidders it envisioned in the sale of its China and Hong Kong franchise, FT reports. Pressure from investors for better quality control in Asia has been reflected in the terms of the deal, according to sources, who said some of McDonald's (NYSE:MCD) conditions, such as keeping management intact for two years and a restriction on taking the franchise public, are onerous.
Looking to combat runway overruns, Honeywell (NYSE:HON) and Airbus (OTCPK:EADSY) have agreed to develop an integrated system to keep jetliners from careening off the ends of landing strips, WSJ reports. The French planemaker also announced at the Farnborough Airshow it would cut its delivery target on the A380 superjumbo by more than half, committing to supply just 12 planes a year from 2018, down from 27 in 2015.
One year after hackers showed they could control a moving Jeep, Fiat Chrysler (NYSE:FCAU) has a new solution to get computer whizzes to work more closely with the company: pay them. The automaker is launching a so-called bug bounty program aimed at compensating hackers between $150 and $1,500 every time they uncover potential cybersecurity flaws in vehicles and alert the company.
Elon Musk has no plans to disable Tesla's (NASDAQ:TSLA) Autopilot function in the wake of a fatal Model S crash in May that used the technology, and instead plans to redouble efforts to educate customers on how the system works. Tesla also confirmed that the weekend crash involving Autopilot in Montana, the third serious accident tied to the self-driving feature, resulted from the driver's hands not being on the wheel ahead of the collision.
Today's Markets
In Asia, Japan +0.8% to 16231. Hong Kong +0.5% to 21322. China +0.4%to 3060. India flat at 27815.
In Europe, at midday, London +0.2%. Paris +0.5%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude -1.4% to $46.17. Gold +0.4% to $1340.10.
Ten-year Treasury Yield -2 bps to 1.48%
Today's Economic CalendarIn Europe, at midday, London +0.2%. Paris +0.5%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude -1.4% to $46.17. Gold +0.4% to $1340.10.
Ten-year Treasury Yield -2 bps to 1.48%
7:00 MBA Mortgage Applications
8:30 Import/Export Prices
9:00 Fed's Kaplan: Monetary Policy
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $12B, 30-Year Note Auction
2:00 PM Treasury Budget
2:00 PM Fed's Beige Book
6:30 PM Fed's Harker: Economic Outlook
Companies reporting earnings today »8:30 Import/Export Prices
9:00 Fed's Kaplan: Monetary Policy
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $12B, 30-Year Note Auction
2:00 PM Treasury Budget
2:00 PM Fed's Beige Book
6:30 PM Fed's Harker: Economic Outlook
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