Market Snapshot
Asia: Japan +0.5% to 20620. Hong Kong -0.7% to 23815. China +0.7% to 3994. India -0.7% to 27878.
Europe: London -0.1%. Paris +0.4%. Frankfurt +0.4%.
Futures: Dow flat. S&P -0.1%. Nasdaq flat. Crude -1.1% to $42.04. Gold +0.3% to $1116.
Ten-year Treasury Yield -2 bps to 2.17%
Economic News
8:30 Empire State Mfg Survey
10:00 NAHB Housing Market Index
10:00 E-Commerce Retail Sales
4:00 PM Treasury International Capital
Markets
Japan’s economy contracted in Q2 as overseas demand for Japanese goods slumped and households spent less, raising the possibility the government will act to bolster the country’s weak recovery. GDP shrank 1.6% on an annualized basis in the April-June quarter, versus a 1.9% contraction expected by economists. The slowdown is a major setback for Prime Minister Shinzo Abe, who has been trying to combat two decades of deflation through a stimulus program known as Abenomics.
The yuan started the week on stable footing after the People’s Bank of China set the currency’s daily reference rate at 6.3969 per dollar – in line with Friday’s close. The move signals Beijing is willing to cede more control to market forces, following last week’s record devaluation that saw the currency plunge 3.6%.
Rounding up support for Greece’s fresh aid package, German Chancellor Angela Merkel said she expects the IMF to take part in the new bailout – ahead of Wednesday’s crucial vote on the deal in the Bundestag. “Ms. Lagarde has made very clear,” Merkel said, that if certain improvements are made, “she will give the word that the IMF in October enters the program.” Merkel also reiterated that a so-called haircut remained out of the question for Germany, but extending debt maturities and tweaking rates remained possibilities.
Hundreds of thousands of Brazilians took to the streets on Sunday calling for the impeachment of President Dilma Rousseff, although turnout appeared significantly lower than the two massive protests staged earlier this year. Demonstrators denounced widespread corruption among the country’s political and business elites and called for the end of more than 12 years of Workers’ Party rule. Barely seven months into her second term, Rousseff has seen her approval rating drop to just 8%, while the Ibovespa stock index has plunged 10% over the same period.
The Obama administration will now allow limited sales of U.S. crude to Mexico for the first time, marking another milestone in loosening a contentious ban on exporting domestic oil. The shipments, likely to be high-quality shale oil, would help Mexico’s aging refineries produce more premium fuels, while U.S. refiners would continue to get Mexican heavy oil, a better match for them than the light oil coming from Texas and North Dakota.
Stocks
Jeff Bezos is hailing Britain’s regulatory regime for drones, throwing hints that Amazon (AMZN) may launch its flying delivery service in the U.K. before initiating lift-off worldwide. The country has been pretty progressive regarding drone regulation: Britain’s Civil Aviation Authority has already allowed more than 850 commercial groups to conduct aerial work using the machines. Bezos still cautions the system won’t be seen in the skies for many years, but “one day Prime Air deliveries will be as common as seeing a mail truck.”
An Indonesian search and rescue team has spotted debris in a Papua province believed to be from this weekend’s crashed Trigana Air flight carrying 54 people. Sources indicate that weather in the mountainous region was “very bad” at the time the plane went down. The aircraft involved in the crash is a twin-turboprop ATR 42-300, built by Airbus (EADSY) and Alenia Aermacchi (FINMY).
Chinese authorities have ordered the evacuation of everyone within two miles of the Tianjin blast site after fires reignited and several additional explosions rocked the area on Saturday. Media reports have now confirmed the presence of more than 100 tons of deadly sodium cyanide stored at two separate sites at the location. Meanwhile, Toyota (TM) is the latest manufacturer to pause production in the area. More than 50 of its local employees were hurt in last week’s explosions, which killed over 100 people and injured over 700.
America Movil is removing Mexico-U.S. roaming charges for 40M Mexican prepay clients, after AT&T (T) bought two domestic wireless operators looking to steal market share on its rival’s home turf. Carlos Slim is also under additional pressure. America Movil (AMX), which is facing a regulatory crackdown in Mexico, must lower its 70% mobile market share under new antitrust rules.
Easing a standoff that threatened access to local TV channels, Dish Network (DISH) and Sinclair Broadcast Group (SBGI) have agreed on a short-term retransmission contract extension as they negotiate an agreement to replace their current accord. Dish has also asked the FCC to stay action on its complaint filed Saturday, which stated the latter violated good faith negotiation requirements and threatened “the largest local channel blackout in retransmission history.”
While it has been long known that American telecommunications companies worked closely with the NSA, newly disclosed documents show that a relationship with AT&T (T) has been especially productive, NYT reports. The company has given the NSA access to billions of emails that have flowed across its networks and permitted the wiretapping of all Internet communications at United Nations headquarters, among other activities.
Expanding into the seafood industry, Cargill has agreed to acquire EWOS from private-equity firms Altor Equity and Bain Capital for $1.5B. EWOS, which is based in Norway, produces more than 1.2M metric tons of fish feed a year and accounts for one-third of the world’s market for salmon and trout feed. The deal is expected to close by the end of the year.
Israel’s cabinet has approved a regulatory framework that will pave the way for development of the hotly discussed Leviathan natural gas field. The plan will allow Texas-based Noble Energy (NYSE:NBL) and Israel’s Delek Group (DGRLY) to keep ownership of the massive offshore deposit, but will require them to sell off other assets, including stakes in another large field called Tamar. Leviathan, with estimated reserves of 22T cf of gas, is slated to begin production in 2018 or 2019.
Alstom (ALSMY) shares are riding high, following Friday’s report that suggested GE (GE) will secure EU approval for its proposed €12.4B acquisition of the French firm’s power unit. Italian company Ansaldo Energia (ASDOF) is considered the preferred buyer for the assets GE has offered regulators to clear the deal.