Monday Morning Prepper
Top News and Reads
Oil prices have jumped 5% to over $54/bbl after OPEC and non-OPEC producers signed their first deal to cut output since 2001. Led by Russia, non-OPEC nations agreed to reduce production by 558K barrels per day, falling just short of the 600K target envisioned by OPEC. But following the meeting in Vienna, the Saudi Energy minister Khalid Al-Falih said everyone is committed to making sure the levels are enforced.
The yield on the 10-year Treasury note is above 2.5% for the first time since October 2014, as investors eye a key Federal Reserve meeting which begins tomorrow. The next notable yield is 3%, last hit in 2013. In equities: U.S. stocks are at all-time highs, with the Dow in striking distance of 20,000, but futures are sliding lower to start the week. Will expectations of a Fed rate hike put a dent in the Trump rally?
Shares in China tumbled overnight after Beijing imposed regulatory curbs on stock purchases by insurers, while President-elect Trump questioned nearly four decades of policy in the Far East. "I don't know why we have to be bound by a 'one China' policy unless we make a deal with China having to do with other things, including trade," he said in an interview with Fox News.
IMF Managing Director Christine Lagarde heads to court today to stand trial over her role in a €400M payment to businessman Bernard Tapie when she was France's finance minister. Lagarde could face up to a year in jail and a fine of €15,000 if convicted. A guilty verdict would also risk a new leadership crisis at the IMF, which she took over in 2011 after her predecessor Dominique Strauss-Kahn quit amid a sex scandal.
Italian Foreign Minister Paolo Gentiloni has been chosen as the country's next premier, but his role won't be official until he chooses a cabinet and secures a vote of confidence in parliament. The biggest and most immediate crisis facing him is a financial one. On Friday, the ECB rejected a request by Monte dei Paschi (OTCPK:BMDPY) for more time to arrange a capital infusion from private investors.
As mandated by the country's creditors, Greece's parliament has passed a 2017 budget of continued austerity, which Prime Minister Alexis Tsipras dubbed the nation's "final exit" from its nearly decade-long financial crisis. After a small recession this year, the budget foresees the economy expanding by 2.7% in 2017, but more austerity and tight credit conditions mean the forecast could be too optimistic.
Brexit opponents will launch a new legal challenge today, according to The Sunday Times, seeking a judicial review that would give MPs a new power to veto terms on which Britain leaves the EU. The court case will hinge on whether the government has to trigger another legal measure - Article 127 of the European Economic Area agreement - in order to quit the single market.
New Zealand's finance minister Bill English has been sworn in as the country's 39th prime minister following last week's surprise resignation of John Key. He has held several ministerial posts across education, health and finance since he joined parliament in 1990. Two other challengers for the role conceded on Thursday, saying that English had secured majority support from his 58 National Party colleagues.
Venezuela will pull its largest bill, the 100-bolivar, from circulation this week, as the country introduces new higher-value notes. Venezuelans will then have 10 days to exchange the currency at the central bank in a move that will likely worsen the country's cash crunch. The bolivar, worth just $0.02 on the black market, has fallen 55% against the dollar in the last month.
A twin bomb attack outside a stadium in Turkey's capital killed 38 people and injured more than 160 others on Saturday night following a soccer match by Istanbul's championship team. Some linked the explosions to military operations in Syria, where Turkey is combating both ISIS and Kurdish fighters linked to the PKK, but others related them to a proposal submitted on Friday on changing Turkey’s parliamentary system to one that would further empower President Erdogan.
Donald Trump has praised Exxon Mobil (NYSE:XOM) CEO Rex Tillerson as a "world class player" who has "made massive deals" after an NBC News report suggested the President-elect will nominate him as Secretary of State. The oil executive has no government or diplomatic experience, but he has overseen operations in more than 50 countries, including Russia. In 2013, the Kremlin bestowed its "Order of Friendship" honor upon Tillerson. XOM +1.7% premarket.
Trump has also narrowed his search for energy secretary to four people, with former Texas Governor Rick Perry the leading candidate. Sources told Bloomberg that two Democratic senators from energy-producing states - Heidi Heitkamp of North Dakota and Joe Manchin of West Virginia - are also in the mix, along with Ray Washburne, a Dallas investor and former chairman of the RNC.
Iran has finalized a $16.6B deal with Boeing (NYSE:BA) to purchase 80 passenger planes, a deal made possible by last year's landmark nuclear agreement. In a sign of how politically sensitive the transaction is, Boeing said it "coordinated closely with the U.S. government throughout the process." President-elect Trump and several Republican lawmakers have criticized the nuclear accord, but it's unclear whether they would scrap the agreement.
A source told Reuters that IranAir is also at the "very final stage" of formalizing a deal with Airbus (OTCPK:EADSY), which led Western companies back into the Islamic Republic - with a provisional agreement for 118 planes - after Tehran emerged from global sanctions in January. The transaction, which is expected to involve a first batch of 50-60 jets, should be completed in the next couple of days.
Goldman Sachs CEO Lloyd Blankfein is considering splitting the president and COO roles following Gary Cohn's expected departure to join the Trump administration, NY Post reports. The top contenders for the No.2 position at Goldman (NYSE:GS) are David Solomon, co-head of investment banking, and CFO Harvey Schwartz. Cohn's relationship with Blankfein has also been rocky of late, sources said. "They tolerated each other, but they're not best friends."
Italian banks are performing well today on news the Italian Treasury will step in to recapitalize Monte dei Paschi (OTCPK:BMDPY) if its plan to raise private funds fails. But BMPS is still making a final push to raise €5B to avoid a bailout. The eleventh-hour solution being drawn up by the bank involves reopening a debt-to-equity swap offer to 40K retail investors holding €2.1B of its subordinated bonds.
Unicredit has reached a deal to sell its asset manager Pioneer to France's Amundi for more than €3.5B, according to multiple reports. The sale is said to involve a special dividend of about €500M to be paid to Unicredit (OTC:UNCFY) and comes as CEO Jean-Pierre Mustier seeks to boost capital levels at Italy's largest lender.
London is backing Deutsche Boerse (OTCPK:DBOEY) and LSE (OTCPK:LNSTY) in resisting German pressure to reopen the exchanges' planned €28B merger and force the combined company to be based in Frankfurt. Any suggestion that the headquarters location could be switched because of Brexit would be politically problematic for Theresa May, who has played down the risk to the City of London regarding life outside the EU.
A Brazilian judge has given Vale (NYSE:VALE) another 30 days to deposit part of 1.2B reais ($355M) in reparation guarantees related to a dam accident at Samarco. The world's No. 1 iron ore producer halted operations almost 13 months ago following a deadly dam break that destroyed a city and killed 19 people. Vale has reiterated its support for Samarco, in which it and BHP Billiton (NYSE:BHP) each own a 50% stake.
Various media sources have reported some shareholders are unhappy over 21st Century Fox's (FOX, FOXA) £18.5B offer for Sky (OTCQX:SKYAY), with Reuters reporting that at least one major shareholder will vote against it. Rupert Murdoch's Fox offered £10.75 a share in cash on Friday in its second attempt to buy the 61% of the business that it doesn't already own.
President-elect Donald Trump sent invites to key tech leaders last week for a high-profile roundtable discussion this Wednesday at Trump Tower. Among the Silicon Valley leadership that will reportedly be attending: Tim Cook (NASDAQ:AAPL), Larry Page and Eric Schmidt (GOOG, GOOGL), Sheryl Sandberg (NASDAQ:FB), Jeff Bezos (NASDAQ:AMZN), Elon Musk (NASDAQ:TSLA), Satya Nadella (NASDAQ:MSFT), Chuck Robbins (NASDAQ:CSCO), Ginni Rometty (NYSE:IBM), Brian Krzanich (NASDAQ:INTC) and Safra Catz (NASDAQ:ORCL).
As an auction of the New Jersey drug-capsule maker draws to a close, private equity firm KKR is nearing a deal to sell Capsugel to Lonza Group (OTCPK:LZAGY) for more than $5B. An agreement could come as early as this week and would follow Lonza's unsuccessful talks to buy U.S. drug delivery technology company Catalent (NYSE:CTLT) earlier this year. KKR acquired Capsugel from Pfizer (NYSE:PFE) for $2.4B in 2011.
Philips is turning the lights off, selling its majority stake in LED components supplier Lumileds to affiliates of Apollo Global Management (NYSE:APO). The $1.5B transaction is expected to be completed in the first half of 2017 and will see Philips (NYSE:PHG) retain the remaining 19.9% interest in Lumileds. PHG -1.2% premarket.
Michigan makes self-driving car history... The state has become the first to establish comprehensive statewide self-driving regulations in the U.S. The rules allow for the testing of autonomous cars without a human in the front seat, permit firms to use self-driving cars for ride-sharing services and be sold to the public once the tech is tested and certified. Ford (NYSE:F), General Motors (NYSE:GM), Google (GOOG, GOOGL), Fiat Chrysler (NYSE:FCAU), Toyota (NYSE:TM), GM, UBER and LYFT helped shape the legislation.
In Asia, Japan +0.9%. Hong Kong -1.4%. China -2.5%. India -0.9%.
In Europe, at midday, London -0.3%. Paris flat. Frankfurt -0.2%.
Futures at 6:20, Dow -0.1%. S&P -0.2%. Nasdaq -0.5%. Crude +5% to $54.02. Gold -0.3% to $1158.10.
Ten-year Treasury Yield +5 bps to 2.51%.
Today's Economic Calendar
1:00 PM Results of $24B, 3-Year Note Auction
1:00 PM Results of $20B, 10-Year Note Auction
2:00 PM Treasury Budget