Good morning! Here’s what you need to know in markets on Monday.
1. The Trump administration has reportedly drafted a bill that would abandon the US’ commitment to the World Trade Organisation’s rules. Trump has recently been angling to withdraw the US from the WTO altogether – though Congress is unlikely to approve such a measure.
2. Asian shares were subdued early Monday ahead of a week packed with major economic events, while the euro was briefly shaken by signs a German political deal on immigration might be in trouble. Japan’s Nikkei closed down 2.29%, while China’s Shanghai Composite index is down 2.43% at the time of writing (7.25 a.m. BST/2.25 a.m ET). The euro is down 0.32% against the dollar to $US1.1647 at the same time.
3. Nissan has cancelled a potential $US1 billion sale of its electric battery business to GSR Capital, citing a lack of funds with the Chinese investment firm to make the purchase. The Japanese automaker had announced in August last year its plan to sell Automotive Energy Supply Corp, which includes battery plants in the United States, England and Japan, for an undisclosed sum.
4. Billionaire investor Daniel Loeb on Sunday urged Nestle to split itself into three divisions, telling the Swiss group’s board that it needs to be “sharper,” “bolder,” and “faster” in overhauling the company. Loeb, whose hedge fund Third Point has invested more than $US3 billion in Nestle, said in a letter to the board that the company should divide itself internally into three units: beverages, nutrition, and grocery in order to help “simplify its overly complex organizational structure.”
5. Manufacturing data is coming. IHS Markit releases its manufacturing PMIs for June from 8.15 a.m. BST (3.15 a.m. ET) onwards this morning. The data provider will put out figures for Spain, Italy, France, Germany, the UK, and the eurozone as a whole.
6. China Merchants Group has teamed up with a London-based firm to launch a new Rmb100bn ($US15 billion) technology investment fund with aim of becoming China’s answer to the near-$US100 billion Vision Fund created by Japan’s SoftBank. The Financial Times reports that the state-owned conglomerate, along with other unnamed Chinese groups, has pledged to invest up to Rmb40bn of the fund, in what would be a huge pool of capital primarily designed to target investments in Chinese technology companies.
7. Institutional asset managers with large fixed-income portfolios are vulnerable to a snapback in interest rates, according to the Bank for International Settlements. These managers, including pension funds, ventured into riskier debt and increased the duration of their bond holdings in their hunt for higher yields, the BIS said in its annual economic report.
8. Investors have sharply increased their use of hedging strategies, signalling concerns that the intensifying trade battle between the United States and China might hit economies from Germany to South Korea. Money managers say that mounting barriers to trade between the United States and trading partners – Washington’s latest proposal for tariffs on $US675 billion of Chinese goods is expected to elicit a response from Beijing – is prompting them to look for ways to protect profits in the event equity markets take a dive after years of growth.
9. Dell is nearing a deal to buy out the holders of shares that track the performance of VMWare using a mix of cash and equity in Dell, sources said on Sunday. The move will mark the culmination of a strategic review that Dell has been conducting for several months.
10. Morgan Stanley raised its price target on three security firms after a survey of IT executives indicated that data regulations like GDPR will drive big cybersecurity spending in 2018 and beyond. In the 2018 State of Security Spending report, published Monday, analyst Melissa Franchi wrote that Varonis, SailPoint, and CyberArk will be the big winners as chief security officers (CSOs) scramble to ensure that their companies are compliant with data governance laws.
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