Good morning,
It looks like a world-wide market rout, following the sharp drop in China. The STOXX Europe 600 is down more than 1% and U.S. futures are heading in the same direction; last week, the S&P 500 fell 2.2%. Oil also got hit by the apparent slowdown in China, and is trading around $48/barrel. Earnings week continues nonetheless, with Baidu on deck. Analysts will be picking apart its new online-to-offline strategy, which is costing it plenty in upfront costs. Tuesday, Wednesday, Thursday the kings of social media report: Twitter, Facebook, LinkedIn. At 8:30 a.m. ET, watch for June durable goods orders. The Federal Reserve policy making committee begins its two-day meeting on Tuesday and is scheduled to make an announcement Wednesday at 2 p.m. ET.
Chinese equity markets slammed in worse one-day performance in eight years. First, the numbers: The Shanghai Composite fell nearly 8.5% to close at its two-week low. The selloff spilled onto Hong Kong and Shenzhen as well, with the Hang Seng Index slipping nearly 3.3% — its second-largest drop for the year — while the Shenzhen composite sank 7%. Japan’s Nikkei Average meanwhile slid 1%. Interestingly, the Aussie strongly clung to its inverse correlation with the nation and turned sharply up just as Chinese shares fell.
Was it weak industrial profits or too much government intervention? Signalling how definitely unwell things are in fair China, industrial profits slipped 0.3% in June, a 0.9% deline from May and a 2.9% drop from April. That could be part of the reason for the rout in China. But it could also be that the heavy-handed government intervention has spooked investors. Note: Brokerage stocks got hit the most. Reuters, Quartz
Teva becomes a major player in pharma with Allergan $40.5 billion deal. The Israeli drug maker is taking a stake in Allergan’s generic drug business. It has officially dropped its unwanted bid for Mylan NV, which analysts say wasn’t as good a fit. Reuters
JGB rates soar after BOJ Deputy Governor signals the limits of easing. Hiroshi Nakaso said the BOJ doesn’t really have much reason to expand its already gigantic monetary easing program. He also appeared optimistic about inflations. Traders sent the 2-, 10-, and 20-year Japanese government bond yields up a half a basis points. The 10-year now yields 0.410%. Wall Street Journal (paywall)
UBS earnings beat forecasts. UBS shamed more than a few analysts today as the Zurich-based bank blew away forecasts and reported $1.26 billion in net profits for the second quarter. MarketWatch
Fiat Chrysler slapped with record $105 million fine. The US National Highway Traffic Safety Administration levied the penalty, saying the Italo-American carmaker has dealt “inadequately” with recall issues. Fiat Chrysler will be required to fix several messes that the recall problems have made, including “slow repairs, insufficient response to regulators and poor notification to owners and dealers.” Financial Times (paywall)
Yanis Varoufakis hacked into the Greek finance ministry. Former Greek finance minister Yanis Varoufakis recently admitted to having a five-man team hack his former offices systems in order to create a “contingency plan to create euro liquidity if the European Central Bank cut off emergency funding to the Greek financial system.” The Telegraph
Chinese venture capital firm plans on investing $5 billion overseas. GSR Ventures is raising money from investors and is targeting Internet, technology, and biotechnology startups. Wall Street Journal (paywall)
Photo: Aaron Goodman