Market Snapshot
Asia: Japan -0.1% to 20543. Hong Kong -0.5% to 27467. China +1.7% to 4912. India -2.4% to 27188.
Europe: London -0.5%. Paris +0.2%. Frankfurt -0.3%.
Futures: Dow -0.1%. S&P -0.2%. Nasdaq -0.1%. Crude +1.1% to $60.84. Gold -0.1% to $1187.80.
Ten-year Treasury Yield +3 bps to 2.22%
Economic News
Auto sales
8:55 Chain Store Sales
10:00 Factory Orders
Key earnings before the open
CBRL, CONN, DAKT, DG, MDT, SOL
Key earnings after the close
ABM, AMBA, ASNA, GES, GIII, GWRE, NCS, VMEM
Markets
U.S. stock futures eased Tuesday, tracking declines in European markets as Greece’s debt standoff continued.
European stocks and bonds fell Tuesday amid a flurry of diplomatic activity in the months-long standoff between Greece and its international creditors. Following late night talks in Berlin, European leaders and Greece’s international creditor institutions agreed to intensify talks in the coming days as they try to clinch a debt deal with Athens. Tensions are running high ahead of the €300M repayment that falls due to the IMF on Friday, with some Greek officials declaring there is no more room for compromise. While Greece says it can make the payment, it’s the smallest of four totaling almost €1.6B this month.
Euro-area consumer prices rose for the first time in six months in May, suggesting that the ECB’s trillion-euro stimulus program has brought rapid results. Following a flat reading in April, eurozone inflation rose 0.3% last month, while core prices (excluding energy and unprocessed food) climbed 0.9%, accelerating from 0.7% in April. The ECB’s governing council will meet in Frankfurt later this afternoon to discuss monetary policy.
The dollar soared above ¥125 yen this morning for the first time since late 2002, after a survey showed a pick-up in U.S. construction spending and manufacturing, holding views steady that the Fed will begin to hike interest rates by the end of the year. With the yen at a 12-1/2 year low, Japan’s Prime Minister Shinzo Abe and central bank chief Haruhiko Kuroda met today to discuss the global economy. Meanwhile, the Nikkei share average snapped its 12-day record run, ending its longest winning streak since February 1988.
The Reserve Bank of India cut interest rates for the third time this year, lowering its key repo rate by 25 bps to 7.25%, in a move that appears at odds with recent data showing the country’s economy has become one of the fastest-growing in the world. Data on Friday showed India’s output expansion accelerated to 7.5% last quarter, outpacing China in terms of growth. Meanwhile, the Reserve Bank of Australia kept rates unchanged at a record low of 2.0% today, in line with analysts’ expectations.
M&A activity hit an all-time monthly record in May, surpassing the previous highs seen during the height of the dot-com bubble and peak of the debt boom that led to the 2008 financial crisis. The overall value of U.S.-bound deal-making amounted to $243B in May, compared to $226B during the same month in 2007 and $213B in January 2000, the previous biggest and second biggest months respectively. The boom comes amid a borrowing binge by U.S. companies as they lock in on cheap funding before the Fed hikes rates.
Stocks
Apple (AAPL) is expected to unveil its new subscription music streaming service at the June 8-12 WWDC conference. The service will be priced at $10/month, on par with Spotify and other rivals. Apple also plans to update its iTunes Radio service to include “channels programmed and hosted by human DJs.”
GoPro (GPRO) shares surged 5.5% yesterday, after the wearable camera maker unveiled its newest camera. The HERO+ LCD includes a touchscreen, costs $299.99 and features built-in Wi-Fi/Bluetooth. GoPro is now again close to the 4-month highs it reached last week after CEO Nick Woodman disclosed the company is working on a drone and a 6-camera array.
HSBC has been ordered to face three U.S. lawsuits accusing it of breaching its duties as a trustee overseeing residential mortgage-backed securities that suffered more than $34B of losses during the financial crisis. The news follows a report yesterday which stated that HSBC (HSBC) is planning to announce massive layoffs next week totaling between 10K-20K.
Marking their first detailed rebuttal, Kraft Foods (KRFT) and Mondelez (MDLZ) have petitioned a judge to dismiss two counts of manipulating grain prices, stating they acted rationally in the face of a “dysfunctional” wheat market. In April, the U.S. Commodity Futures Trading Commission accused the two of devising a strategy to depress the cash price of wheat, while inflating the prices of futures contracts.
Enhancing its line of mobile apps, Microsoft (MSFT) has agreed to buy 6Wunderkinder, the German developer behind popular to-do list app Wunderlist, for between $100M-200M. Wunderlist claimed 10M users as of last December for its apps, which are offered on iOS, Android, Windows Phone, and the Web.
Mylan (MYL) has accused Teva Pharmaceutical (TEVA) which made a $40B unsolicited offer for the company in April, of violating U.S. anti-trust rules through its recent purchase of a 1.35% stake in the company. Mylan, which is attempting to buy Perrigo (PRGO) for $34B, also told Teva to “stop playing games” and either turn its $40B approach into a formal bid or walk away. A takeover by Teva would torpedo any Mylan deal with Perrigo.
Following the U.K. general election in May, British Chancellor George Osborne is expected to lay out plans for privatizing Royal Bank of Scotland (RBS) in next week’s Mansion House speech. Yesterday, the U.K. Treasury committed to selling another chunk of Lloyds, which was also bailed out during the financial crisis, over the next 12 months. The British government currently owns 80% of RBS and an 18.99% stake in Lloyds (LYG).
As it prepares for a congressional hearing today, Takata (TKTDY) has vowed to change the design of its driver-side inflators, but said it would continue producing air bags that use ammonium nitrate propellant – a chemical compound experts declare as dangerous. The Japanese supplier is at the center of a global recall of tens of millions of vehicles, and its inflators have so far been linked to six deaths and hundreds of injuries.
Tesla’s (TSLA) Elon Musk called into CNBC yesterday to take issue with a detailed Los Angeles Times article on the large amount of subsidies his companies have taken in or are set to earn, declaring that the incentives it receives are helpful, but aren’t necessary for their survival. The LA Times came up with a $4.9B figure for government support when adding all incentives for Tesla, SolarCity (SCTY), and SpaceX – although Musk said the payments are spread out over 20 years and based on financial performance.