Good morning! Here’s what you need to know.
There’s An Enormous Typhoon Heading For Japan. A “once in a decade” typhoon is barreling toward the country’s southern islands. “I can’t stress enough how dangerous this typhoon may be when it hits Okinawa,” wrote Brigadier General James Hecker on the base’s Facebook page on Sunday per Reuters. “This is not just another typhoon.” There are no nuclear plants on Okinawa, but there are two on Kyushu island and one on nearby Shikoku island.
Archer Daniels Midland Buys WILD. The Illinois foods giant beat out a Japanese competitor with a $US2.99 billion offer for the maker of a popular Stevia product and Capri Sun.
Goldman Ratchets Rate Calendar. The investment bank now says the Fed will likely raise rates in Q3 2015 instead of Q1 2016, after stronger jobs data. Goldman joins JP Morgan, Bank of America Merrill Lynch, and Capital Economics in raising this warning flag.
Welcome To Q2 Earnings Week. Nothing today, but Alcoa kicks things off tomorrow after the bell. “People said the U.S. earnings would be bad for January-March but in the end the profits were up. I would expect decent results (this time),” Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management, told Reuters.
Repo Alarm. More trades are going uncompleted, causing short-term cash crunches, as repurchase agreement volumes fall to record lows, Bloomberg says, thanks to intense demand for U.S. notes. Failures to deliver Treasuries have averaged $US65.6 billion a week this year, reaching as high as $US197.6 billion late last month. Compare that with $US51.6 billion in 2013, and $US28.8 billion in 2012. “The effect of all the collateral issues we see now is an indication of not so much how things are, but how bad things will be when you really need liquidity,” Jeffrey Snider, chief investment strategist at West Palm Beach, Florida-based Alhambra Investment Partners LLC, told Bloomberg. “That’s when you get into potentially dire situations.”
Oil Rally Fades. Brent was trading as low as $US110.59 Monday, nearly 4% lower than mid-June levels, as fears of Iraq outages have been assuaged for now. Meanwhile Libya is set to open new oil terminals.
German Output Drops Again. German production data fell 1.8% in May, the third straight month of declines . “There was a little dent in the second quarter,” Jens-Oliver Niklasch, a fixed-income strategist at Landesbank Baden-Wuerttemberg in Stuttgart, told Bloomberg. “But generally speaking, the German economy is in quite good shape and there’s no reason for concern as growth rates will remain solid.”
Deflation in Sweden? The kroner fell 0.2% after dropping 1.6% last week, giving the sovereign its worst run of the year. The Swedish Central Bank cut rates 5o bps to 0.25% last week as the specter of deflation spooked regulators, the FT said.
Markets. U.S. futures were lower. Stocks in Europe and Asia were both down.
No Major Economic Data. Hope you had a great 4th.
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