Monday Morning Reads
- Iron Grip on Its Finances Faces Questions
- OPEC Plus Agrees on Oil Production Increase
- Record Steel Prices
- The Pandemic Safety Net
- Yellen Expresses Doubts
- What China Expects
- China Frictions S
- The Failure of China’s Microchip Giant
- Biden’s Antitrust Initiative
- Regulators Probe SPAC Plan
- Robinhood Seeks Up to $35 Billion
- $6.7 Billion Fortune With a Hot App
- Tesla Unveils $199-A-Month Full Self-Driving Subscription Plan h
- Malaysian Police Destroy 1,069 Bitcoin Mining Rigs
Open Interest Changes:
It's "Freedom Day" in the U.K., which just lifted the majority of its remaining coronavirus restrictions, but investors seem to be more nervous there, as well as across the globe. The rise of the rapidly spreading Delta variant is threatening to derail many efforts towards a full economic reopening as worsening outbreaks continue to cloud the once-promising outlook. U.S. stock index futures are also joining the global selloff after the major averages posted their first negative week in four: Dow -1.1%; S&P 500 -0.8%; Nasdaq -0.4%.
Mixed feelings: "If we don't do it now we've got to ask ourselves, when will we ever do it? This is the right moment, but we've got to do it cautiously," British Prime Minister Boris Johnson said in a statement. It's a continuing argument that's playing out worldwide. Some have warned that hospitalizations could rise substantially over the coming weeks, jeopardizing the progress made in containing the pandemic, while others have put more of a focus on personal responsibility, saying there were worse consequences for the economy, livelihoods and mental health.
Just weeks after they celebrated their "Freedom Days," the Netherlands and Israel reimposed COVID restrictions as Delta variant cases rose throughout the countries. Over in Australia, Sydney and Melbourne are tightening lockdowns, while more athletes are testing positive for COVID-19 upon arrival in Japan, challenging the Tokyo Olympics in a region that just declared a coronavirus state of emergency. In the U.S., more states are also reinstating restrictions that had been lifted since late April, including Arizona, California, Colorado, Florida, Louisiana, Michigan, New Mexico and Texas.
Go deeper: Delta isn't the only thing weighing on investors' minds. Inflation fears resurfaced on Friday after data from the University of Michigan showed that consumers believed prices would jump 4.8% over the next year, marking the steepest climb since August 2008. There's also worries about a peak in economic activity, tapering talk, the Q2 earnings season and whether the bullish sentiment in markets has reached a tipping point.
Facebook (FB) is pulling out the big guns following continuous comments from the Biden administration over coronavirus vaccine misinformation. On Saturday, the president told reporters the social media networks are "killing people," while press secretary Jen Psaki said that health misinformation is "leading to people not taking the vaccine, and people are dying as a result." Surgeon General Dr. Vivek Murthy has even called online vaccine misinformation "an urgent threat to public health" in his first formal advisory.
Response from FB: "At a time when COVID-19 cases are rising in America, the Biden administration has chosen to blame a handful of American social media companies. While social media plays an important role in society, it is clear that we need a whole of society approach to end this pandemic. And facts - not allegations - should help inform that effort."
Doesn't stop there: Facebook cites data that shows 85% of users in the U.S. have been or want to be vaccinated against COVID-19. "President Biden's goal was for 70% of Americans to be vaccinated by July 4. Facebook is not the reason this goal was missed," reads a zinger from Guy Rosen, Facebook's VP of Integrity. According to the CDC, deaths from COVID-19 are rising again in the U.S. as Delta hits largely unvaccinated pockets of the country (American vaccinations averaged 530K per day over the past week). (375 comments)
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OPEC and its allies have reached a deal to raise crude production in response to "oil demand showing clear signs of improvement and OECD stocks falling." Starting in August, they'll pump out an extra 400K barrels a day through the end of 2022, restoring all the cuts they made at the start of the COVID-19 pandemic. The modest increase suggests that producers are still concerned about the strength of the global economic recovery, but that they're comfortable with the current price of crude.
Bigger picture: The deal resolves an internal dispute that had tested the unity of the alliance. OPEC+ abandoned talks two weeks ago after the UAE rejected proposed production plans, saying its current baseline was too low. The new agreement saw OPEC leader Saudi Arabia meet the UAE halfway in its demand for a more generous output limit, with other members of the group also being awarded higher production baselines, or the level at which output deals are calculated.
Brent crude futures (CO1:COM) fell 2.7% to $71.64/bbl on the news, while WTI crude (CL1:COM) slipped 2.9% to $69.49/bbl. "The deal reached over the weekend is likely to lead to some further weakness in the short term, as investors unwind positions on the prospects of higher supply," wrote Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group. "Ultimately, the market is still relatively tight, which should see a relatively short-lived selloff."
Back on board: "We appreciate the constructive dialogue we had with his highness and OPEC," Emirati Energy Minister Suhail Al Mazrouei told journalists, referring to Saudi Energy Minister Prince Abdulaziz bin Salman. "I confirm that the UAE is committed to this group and will always work with it and within this group to do our best to achieve the market balance and help everyone. The UAE will remain a committed member in the OPEC alliance." (5 comments)
Zoom (ZM) became a household name during the pandemic as video conferencing became all the more important in a world without social contact. The company even saw explosive revenue growth of 326% in 2020, given the shift to remote work and distance schooling. As the economy reopens amid a broad vaccine rollout, some of those streams drying up and organic growth is unlikely to placate Wall Street. The stock has even tumbled 36% since reaching its peak in October after surging nearly 400% last year.
Where does the company turn? Zoom is spending big on M&A, scooping up Five9 (FIVN) in an all-stock transaction that values the company at $14.7B. Five9 is a provider of cloud-based call center technology, which allows representatives to do their jobs from home. The transaction is expected to close in the first half of 2022, though Five9 stockholders still have to approve the deal and it will require regulatory clearance. FIVN +8% premarket.
"We are continuously looking for ways to enhance our platform, and the addition of Five9 is a natural fit that will deliver even more happiness and value to our customers," Zoom CEO Eric Yuan declared. The acquisition is Zoom's first billion-dollar purchase and is the second-largest U.S. tech deal this year, behind Microsoft's (MSFT) planned $16B deal for Nuance Communications (NUAN).
Cisco in the mix: Zoom CEO Eric Yuan, who founded Zoom in 2011, helped build WebEx, which Cisco (CSCO) bought in 2007 for $3.2B (he ended up staying at Cisco until he left to start Zoom). Five9 CEO Rowan Trollope also joined Cisco in 2012, and eventually became in charge of all of Cisco's collaboration products (some even saw him as the top deputy to CEO Chuck Robbins). Trollope left the networking giant to take the CEO role at Five9 in 2018, and will remain CEO under the new deal, as well as president of Zoom. (18 comments)
In Asia, Japan -1.3%. Hong Kong -2.2%. China flat. India -1.1%.
In Europe, at midday, London -2.1%. Paris -2.1%. Frankfurt -2%.
Futures at 6:20, Dow -1.1%. S&P -0.8%. Nasdaq -0.4%. Crude -2.9% at $69.49. Gold -0.7% at $1802.90. Bitcoin -1% at $31327.
Ten-year Treasury Yield -4 bps to 1.26%
Today's Economic Calendar
What else is happening...
Interest in "shroom stocks" rises over potential for psychedelic therapy.