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Wall Street at Breakfast

News From WS

Sell before summer fell short this year with solid gains in the U.S., traders are already looking ahead to see what June will bring for stocks and the markets. They’ll get a head start this week with an economic data deluge ranging from the monthly jobs report to figures on inflation, manufacturing, and the services sector, plus an ECB meeting an OPEC gathering. Janet Yellen’s comments from Friday are also on investors’ minds, which suggested a rate hike could be on the table “in the coming months.”

 

Today’s Markets

In Asia, Japan +1% to 17235. Hong Kong +0.9% to 20815. China +3.3% to 2917. India -0.2% to 26668.
In Europe, at midday, London -0.1%. Paris -03%. Frankfurt -0.3%.
Futures at 6:20, Dow +0.2%. S&P +0.1%. Nasdaq +0.2%. Crude +0.3% to $49.46. Gold -0.3% to $1213.70.
Ten-year Treasury Yield +4 bps to 1.87%

Today’s Economic Calendar

8:30 Personal Income and Outlays
9:00 S&P Case-Shiller Home Price Index
9:45 Chicago PMI
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
10:30 Dallas Fed Manufacturing Survey
3:00 Farm Prices

Economy

Euro area inflation stayed negative in May, according to a flash estimate from Eurostat, edging up to -0.1% from -0.2% the month before. The latest figure is a far cry from the 2% inflation target set by the ECB, and comes after the central bank announced further stimulus measures in March in a bid to stimulate the bloc’s economy. Meanwhile, the eurozone’s jobless rate came in flat at 10.2% for April, as unemployment dropped by 63,000.

In a letter written to its European and IMF creditors, Greece said it cannot implement some of the extra changes sought in exchange for fresh bailout loans, including banking regulation, sales of bad loans, pension reforms and privatization. The disagreement could further delay the disbursement of bailout funds which Athens badly needs to pay off IMF loans in June, bonds of the ECB maturing in July and increasing state arrears.

Portugal’s finance minister is urging policymakers and investors to be patient as the country tackles its burgeoning debt issue and sluggish economic growth. “We are working very hard on the public finances dimension to curb the deficit,” Mario Centeno said on the outskirts of the OECD meeting in Paris. Portuguese GDP is expected to be flat this year, according to European Commission forecasts. Debt is near 130% of GDP, one of the highest in the eurozone.

Global markets appear to be “well-prepared” for a summer interest rate hike, according to St. Louis Fed President James Bullard, although he didn’t specify a date for the policy move. “As far as a rate hike in June or July, I would prefer to reserve judgment,” he told a news conference yesterday in Seoul. Bullard added that a rebound in U.S. GDP seems to be materializing in the second quarter, and described last week’s Q1 growth figure of 0.8% as “encouraging” but “still weak.”

Chinese stock futures flash-crashed on extreme volume overnight, marking the second sudden swing to rattle traders this month. Contracts on the CSI 300 Index erased three months of gains by plunging over 12.5% at 10:42 a.m. local time, but recovered almost all of the losses within a minute. The swing follows a similarly unexplained drop in Hang Seng China Enterprises Index futures on May 16, a move that heightened anxiety among investors facing slower Chinese economic growth and a weakening yuan.

While sudden price swings are hardly unique to Chinese exchanges, the country’s markets have come under increased scrutiny as MSCI considers adding mainland shares to its international indexes. The Shanghai Compositerallied 3.3% today after Goldman Sachs increased the probability that Chinese A-shares will be included in MSCI’s indexes to 70%, citing recent measures to curb trading halts and clarify beneficial ownership rules. A final decision will be announced on June 14.

Japan’s factory output remained resilient in April, rising 0.3% from the previous month despite a series of earthquakes in the southern part of the country. Household spending fell by a less than expected 0.4% and job availability hit a 24-year high, a relief for Prime Minister Shinzo Abe who is expected to delay a sales tax hike next year to maintain the nation’s fragile recovery. The better-than-expected data also triggered a brief rebound in the yen that pushed the dollar off its one-month high against the Japanese currency.

The chief Syrian opposition negotiator in Geneva has resigned, throwing into doubt the future of United Nations-mediated peace talks to end the country’s five-year conflict. In his resignation letter, Mohammed Alloush cited the international community’s failure to make concrete progress toward ending the violence and continuing hostilities by the Syrian regime.

Iraq will supply 5M barrels of extra crude to its partners in June, according to industry sources, joining other Middle East producers by lifting market share ahead of an OPEC meeting this week. Saudi Arabia, Kuwait, Iran and the United Arab Emirates also plan to raise supplies in the third quarter. Despite the news, OPEC will continue to “discuss issues including an output freeze when the group gathers June 2,” said Fayyad Al-Nima, Iraq’s Deputy Oil Minister.

Stocks

Nearly 40,000 striking Verizon employees will return to work on Wednesday after reaching a tentative contract agreement that includes 1,300 new call center jobs, nearly 11% in raises over four years and the first contract for Verizon Wireless workers. The pact, announced by the Communications Workers of America union, stands to end a six-and-a-half-week work stoppage and one of the longest U.S. strikes in recent years. VZ-0.4% premarket.

It could be a long time before investigators complete the analysis of data seized in last week’s raid of Google’s (GOOG, GOOGL) Paris headquarters, which resulted from a probe into suspected tax evasion. “We have collected a lot of computer data,” French financial prosecutor Eliane Houlette said on Sunday. “We need to analyze (the data)… (it will take) months, I hope that it won’t be several years, but we are very limited in resources.”

Viacom’s board members are not exiting without a fight. Anticipating being pushed out by controlling shareholder and former chairman Sumner Redstone, lead independent director Frederic Salerno said in a letter to Viacom (VIA,VIAB) constituencies that independent directors are preparing for a legal battle to keep their seats because they don’t believe the business mogul has the mental competency to act of his own free will.

Cracking down on rising online racism and the recent wave of radicalization, Google (GOOG, GOOGL), Facebook (NASDAQ:FB), Twitter (NYSE:TWTR) and Microsoft (NASDAQ:MSFT) have signed up for new EU rules on taking down hateful content posted on their platforms. The “code of conduct” will require the companies to “review the majority” of flagged speech within 24 hours – and remove it, if necessary – and even develop “counter narratives” to combat the growing problem.

The U.S. auto industry’s home state of Michigan is preparing for the advent of self-driving cars by pushing legislation to allow for public sales and operation of the vehicles. The move is a significant expansion beyond existing state laws which currently sanction such cars for testing only. “It’s coming. It’s coming fast,” Michigan Department of Transportation Director Kirk Steudle said regarding the emerging technology.

Takata has ruled out using bankruptcy as a way of mitigating liabilities from its record air bag recalls and is instead seeking buyers that could take a controlling stake and carry the company through its safety crisis. According to Bloomberg, Lazard, Takata’s (OTCPK:TKTDY) financial adviser, will meet manufacturers as well as financial firms with the aim to find buyers by the fall.

Struggling to move past its emissions crisis, Volkswagen (OTCPK:VLKAY) swung back to profit in Q1 following a record loss last year after setting aside €16.2B to cover costs of its scandal. The world’s largest carmaker by sales reported a 20% drop in net profit to €2.31B, on revenues that fell 3.4% to €50.96B. “In light of the wide range of challenges we are currently facing, we are satisfied overall with the start we have made to what will undoubtedly be a demanding fiscal year 2016,” said Chief Executive Matthias Muller.

The Peugeot family plans to hold informal talks with the French government today to discuss the future of its stake in automaker Peugeot PSA Citroen (OTCPK:PEUGF). Economy Minister Emmanuel Macron said last week in an interview with newspaper Les Echos that the state, which holds a 14% stake in PSA, was weighing the possible sale of part or all of its shareholding.

Global demand for air travel may be “shifting down a gear,” according to global aviation group IATA, which signaled a cautious outlook for passenger traffic after growth in April rose just 4.6% on year – the lowest pace since January 2015. While some of the slowdown could be attributed to the Brussels terror attacks, there are still signs that underlying traffic growth could be decelerating, Director General Tony Tyler said. “The stimulus from lower oil prices appears to be tapering off. And the global economic situation is subdued.”

Lufthansa will suspend flights to Venezuela next month “until further notice” as it struggles with the country’s economic downturn and strict currency controls. Lufthansa (OTCQX:DLAKY) says it is owed $100M in ticket revenue. American Airlines (NASDAQ:AAL) also canceled its Caracas route (to New York) recently, just three months after reinstating it. According to the IMF, Venezuela’s economy is projected to contract by 8% in 2016, with the average rate of inflation expected to surge to near 500%.

Former Zurich Insurance CEO Martin Senn has committed suicide, becoming the second top executive at the group to take his own life in less than three years. In August 2013, finance chief Pierre Wauthier killed himself after writing a suicide note in which he described becoming demoralized by what he called a new aggressive tone at Zurich (OTCQX:ZURVY) under then-chairman Josef Ackermann. Ackermann, a former head of Deutsche Bank (NYSE:DB), denied any wrongdoing but quit after Wauthier’s death.

Around 16M Australian dollars worth of confiscated Bitcoins (COIN,OTCQB:BTCS) will be auctioned in Sydney next month, marking the first such auction outside the U.S. Auction organizer Ernst and Young said the Bitcoins were seized as “proceeds of crime,” referring to the now-defunct online dark market Silk Road. As demand surges to its highest level since August 2014, Bitcoin prices have been on the rise – climbing to $530 before the weekend.

Looking to mix things up, SodaStream (NASDAQ:SODA) has released a home beer system called the Beer Bar. “Our core carbonation technology and distribution infrastructure provide a great platform for us to extend our business into this emerging category,” said CEO Daniel Birnbaum. The product enables consumers to make home-crafted brew using sparkling water and a beer concentrate. SODA +6.6% premarket.

Suncor Energy facilities north of Fort McMurray are expected to partially restart by the end of the week, the latest sign Canadian oil sands producers are coming back online after a massive wildfire. The inferno has charred more than 1,930 square miles across the northern part of Alberta and crossed into the neighboring province of Saskatchewan, taking a million barrels a day of Canadian oil output offline. “There has been no damage to Suncor’s (NYSE:SU) assets,” the company said.

Petrobras has appointed Pedro Parente as CEO to succeed Aldemir Bendine, who resigned from the post at Brazil’s national oil company. Many of the country’s top ministerial jobs and government roles have been recently swapped by Interim President Temer, after Dilma Rousseff was suspended from office for allegedly breaking budget laws. Petrobras (NYSE:PBR) has been heavily scrutinized under that massive corruption probe.

Already hit by a recession and political turmoil, Brazil has also come under more pressure from 150 health experts who have called for the postponement or relocation of the 2016 Olympics in Rio de Janeiro because of the Zika epidemic. The World Health Organization rejected the idea, however, and said that suspending the Olympics or staging them elsewhere would “not significantly alter” the spread of the virus, which is linked to serious birth defects.

Celator is likely to be purchased today by Jazz Pharmaceuticals (NASDAQ:JAZZ) for $1.5B, or about double its market cap – a huge premium even in biotechnology, where acquirers often pay for promising new drugs. About three months ago, Celator (NASDAQ:CPXX) said its Vyxeos treatment helped older high-risk patients with a deadly form of leukemia live longer than those who received the standard of care regimen, sending its stock price soaring. CPXX +73.3% premarket.

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