Market Snapshot
Asia: Japan +0.4% to 20809. Hong Kong -0.1% to 24521. China +4.9% to 3928. India -0.5% to 28101.
Europe: London -0.8%. Paris +0.3%. Frankfurt +0.2%.
Futures: Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude -0.3% to $43.76. Gold flat at $1093.90.
Ten-year Treasury Yield +2 bps to 2.19%
Economic News
None
Key earnings before the open
ACHN, AKBA, ALSK, BDSI, BIOS, CNP, DF, DXPE, ECPG, ENDP, EVEP, HPT, ICON, IPXL, MNKD, MPAA, NAT, NRZ, PDCE, PGEM, POZN, RDNT, RESI, SYY, TPH, WAC
Key earnings after the close
ALIM, AMBC, APEI, BDE, CALL, CARA, CHMI, CLDX, CUI, DTSI, ENV, FF, FNV, FRSH, FTEK, OTCQB:GSAT, GTY, HALO, ICUI, IFF, IMN, KEYW, KHC, KITE, LNCE, LOPE, LYV, MCC, MDR, MM, MODN, MR, MXL, NSPH, NVAX, OMED, OMER, OTC:PFIE, PRAA, RAX, REN, RENT, SCLN, SF, SFXE, SHAK, TDW, TTWO, TUBE, VIPS, XON, XONE, YUME, ZGNX
Markets
Stock-index futures jumped Monday after a Federal Reserve official suggested that the U.S. central bank might wait until inflation returns to normal before raising interest rates. Recently,the markets have been weighed by concerns over the prospect of U.S. monetary policy tightening, but comments from Federal Reserve Vice Chairman Stanley Fischer this morning on Bloomberg TV may have helped ease some of those worries. He said he doesn’t expect the first interest-rate hike to occur until after inflation returns.
Greece is heading closer to a fresh €86B rescue package after the country’s creditors reportedly agreed on a draft deal this weekend. German and Greek media said 27 pages of “substantial” and “far-reaching” reforms had been approved following marathon talks between Greek finance minister Euclid Tsakalotos and the country’s creditors. Athens hopes to get the first disbursement of aid by Aug. 20, when it faces its next debt payment to the European Central Bank.
Ukraine and international creditors will also seek to hammer out a debt deal this week, in what many see as the last opportunity for an agreement before a $500M bond matures next month. The country has been looking to reduce its debt burden by $15.3B over the next four years as part of the $40B IMF rescue plan aimed at stabilizing its economy. If a restructuring deal is not reached, Ukraine has threatened to impose a debt moratorium in September.
More disappointing data reports are coming out of China, reinforcing expectations that Beijing will roll out more stimulus to support the world’s second-largest economy. Exports tumbled 8.3% in July, their biggest drop in four months, as weaker global demand and a strong yuan policy hurt manufacturers. Imports also fell heavily, dropping 8.1% from a year earlier. China’s central bank has already lowered interest rates four times since November, but more cuts and other support measures may now be on the way. Shanghai +4.9%; Shenzhen +4.3%; Chinext +5%.
Japanese consumer sentiment tumbled in July to the lowest in six months, raising the risk of weakness in spending that could weigh on its economy this quarter. According to data released by the Cabinet Office, the consumer confidence index fell to 40.3 from 41.7 in June, after rising slightly in the prior month. Worsening sentiment is also likely to dampen personal consumption, which has failed to fully recover from a sales-tax hike last year.
It appears that prices in the oil market will stay lower for longer, as traders and oil companies see the global glut of crude persisting beyond this year. Benchmark U.S. oil futures for September delivery are nearing the six-year low struck in March, but contracts for delivery in later years have taken an even bigger hit, with prices for 2016 and 2017 already trading below their March lows. Crude futures -0.3% to $43.76/bbl.
Stocks
Alibaba and Suning Commerce are buying stakes in each other to develop what they are billing as a “new commerce model” that integrates online and offline retailing. Alibaba (BABA) will pay 28.3B yuan ($4.63B) on a 19.99% stake in Suning, making it the company’s second-largest shareholder. At the same time, Suning will spend up to 14B yuan ($2.28B) on newly issued Alibaba shares, translating into a 1.1% stake in the Chinese e-commerce giant.
Former Twitter CEO Dick Costolo will step down from the company’s board once a permanent CEO is named, Re/code reports. According to sources, the selection of a new CEO will likely take place by September, with Twitter (TWTR) sales head Adam Bain and interim CEO Jack Dorsey as lead candidates. Instagram (FB) CEO Kevin Systrom is also being considered.
Sumitomo Life Insurance is in talks to buy U.S. life insurer Symetra Financial (SYA) for about ¥400B-¥500B ($3.2B-$4B), joining several other Japanese insurers that are expanding abroad to counter a shrinking domestic market. Over the past year, Meiji Yasuda acquired StanCorp Financial (SFG) for $5B, Tokio Marine Holdings (TKOMY) bought HCC Insurance (HCC) for $7.5B, and Dai-Ichi Life Insurance (OTC:DLICY) paid $5.5B for Protective Life (PL).
As early as this week, Pearson (PSO) is expected to announce the sale of its 50% stake in The Economist for about £400M. A sale would see the De Rothschild family and Exor (EXOSF) emerge as the largest single shareholders in the Economist Group, although negotiations are still on the table. Last month, Pearson sold the Financial Times and related titles to Japan’s Nikkei for £844M.
Shares in Afren, the embattled Africa-focused oil and gas explorer, have been delisted from the London Stock Exchange, ending a desperate battle for survival by the scandal-hit company. Afren (AFRNY) began insolvency proceedings last month following a collapse in oil prices, corporate governance abuses and a mountain of debt. The company’s final demise occurred after it failed to secure a refinancing agreement with lenders.
AstraZeneca has landed its third deal in less than a week aimed at bolstering its cancer drug pipeline by signing up rights to an experimental immunotherapy from Inovio Pharmaceuticals (INO). Depending on the success of INO-3112 (which targets cancers caused by human papillomavirus types 16 and 18), Inovio will get $27.5M upfront and potential future payments of up to $700M, The deal builds on AstraZeneca’s (AZN) immuno-oncology tie-ups last week with Sosei subsidiary Heptares and Mirati. INO +9.4% premarket.
CVR Partners has agreed to buy Rentech Nitrogen Partners (RNF) for $533M, excluding debt and Rentech’s Pasadena plant. Under terms of the deal, Rentech Nitrogen shareholders will receive 1.04 units of CVR Partners (UAN) and $2.57 cash for each unit held, representing a premium of 33% to Rentech Nitrogen’s closing price on Friday. “Once the merger is complete, we will be the second largest producer of urea ammonium nitrate in North America,” said CVR Chief Executive Jack Lipinski.
CenturyLink, the largest public company based in Louisiana, is eliminating 1,000 jobs companywide (about 2.3% of its total workforce). Although it didn’t specify where the cuts will come from, the company reaffirmed its commitment to expand its headquarters and create 800 new jobs by next summer. CenturyLink (CTL) shares are down 3.2% since disappointing Q2 results last Wednesday, and are down 30% YTD.
The Department of Labor will hold four days of public hearings this week to discuss its proposed fiduciary rule, which is aimed at requiring brokers to put client interests ahead of their own when handling retirement money. The DOL asserts that the lack of consumer protection costs investors as much as $17B annually, or 1% of their assets, but the industry says it’s too expansive and would significantly increase liability risk and regulatory costs.