Global Economic and Market Update

Economy
Bond yields across global markets continued their sell-off into Thursday as a six-week-long bond rout rumbled on. Yesterday, ECB President Mario Draghi said asset prices tend to be more volatile in a low interest rate environment and policymakers were prepared to look through the sharp rise in yields. With the ECB seeing no reason to adjust its stance on monetary policy, German 10-year Bund yields rose to fresh 2015 highs today at 0.95% (up from near zero in mid-April). U.S. 10-year yield +3 bps to 2.4%.

 

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Greece’s creditors stuck to a hard line but made some concessions in the outlines of a final deal presented to Athens on Wednesday, although differences between the two sides still remain. “Our proposal continues to be the only realistic and constructive proposal. The discussions will continue,” tweeted Greek PM Alexis Tsipras this morning. According to a Dow Jones newswire report, Athens is now planning to make a new counter-offer.

Whether it’s concerns of margin tightening and liquidity or simply a correction, Chinese stocks had yet another volatile session today, keeping the week’s roller coaster ride on high speed. Plunging as far as 4% at one point in the session, the Shanghai Composite ended the day in the green, up 0.8%. Last Thursday, the index tumbled 6.5%, but rose 4.7% the following Monday.

Dozens of people were reportedly killed or injured around the city of Donetsk on Wednesday in one of the bloodiest battles between Ukrainian forces and Russia-backed militias since a fragile ceasefire began in February. “Russia bears direct responsibility for preventing these attacks…any attempts to seize additional Ukrainian territory will be met with increased costs,” said Marie Harf, spokeswoman for the U.S. Department of State. The scale of the violence spooked investors, with the Russian stock market falling more than 2.5% and the ruble losing 2% vs. the dollar.

Nearly a year after oil markets entered a deep downward spiral, some OPEC members are publicly talking for the first time about a new “fair” price for their crude. Oil ministers from Iraq, Venezuela and Angola said in Vienna this week that a price of $75-$80 a barrel could be just fine, however, Saudi Arabia – which has for years pointed to $100 a barrel as a “fair price for producers and consumers” – has given no indication that it subscribes to this view. Whatever the case may be, there is a reported consensus among the 12-country group to leave the current production ceiling of 30M bpd unchanged at their meeting tomorrow.

Stocks
Dish Network and T-Mobile are in talks to merge, WSJ reports, in what would be the latest multi-billion dollar consolidation move in the media and telecom industry. The two aren’t far apart about the resulting company’s look: Dish’s (NASDAQ:DISH) Charlie Ergen would become chairman and T-Mobile’s (NYSE:TMUS) John Legere the CEO. Talks are still in the “formative stage,” so price and cash/stock mix have not yet been determined. TMUS +13%; DISH +6.4% premarket.

Apple has canceled plans to unveil a revamped Apple TV set-top at the Worldwide Developer Conference next week, NYT and Re/code both report. Sources say Apple (NASDAQ:AAPL) planned as recently as mid-May to reveal the set-top, along with a new remote and developer SDK, but changed its mind “partly because the product was not ready for prime time.” Re/code also recently reported that Apple won’t announce its rumored Web TV service at WWDC since licensing deals haven’t yet been finalized.

After thirteen months in the position, Chris O’Neill, the business chief for Google (GOOG, GOOGL) Glass, is stepping down, although he will still be staying with the company. Separately, Sergey Brin said one of the company’s driverless car has been involved in another rear-end accident, bringing the total number of accidents over the last six years of testing to 12. Defending the prospects for the self-driving technology, Brin said he’s “very proud of the record of the cars” and his goal is to “beat human drivers.”

Molycorp plans to file for Chapter 11 bankruptcy protection as soon as this month, after skipping a $32M bond interest payment this past Tuesday, WSJ reports. The plan marks a dramatic turn for Molycorp (NYSE:MCP), which rode temporary concerns of a shortage in rare earths elements to a $6B market capitalization in 2011. Since then, China has relaxed restrictions on exports of rare earths, oversupplying the market.

European oil majors are openly declaring interest in returning to Iran, with leaders of Royal Dutch Shell (RDS.A, RDS.B), BP (NYSE:BP) and Total (NYSE:TOT) all saying they are ready to return as soon as international sanctions are lifted. U.S. oil companies remain somewhat more cautious on Iran, although “certainly we would think about it,” said ConocoPhillips (NYSE:COP) CEO Ryan Lance.

Activist Investor Elliott Associates has acquired a 7.1% stake in Samsung C&T, stating that a proposed takeover of the company by the Samsung Group’s de facto holding company, Cheil Industries, wasn’t in the best interests of shareholders. Elliott’s move will likely increase the pressure on Cheil to improve its offer for the affiliate and could complicate the path for management succession as the founding Lee family looks to extend its grip on the conglomerate.

With just weeks to go before he steps down, Ben Lawsky, New York’s top financial regulator, released the final set of rules governing virtual-currency businesses in the state, concluding a nearly two-year effort to regulate the growing Bitcoin (COIN, OTCQB:BTCS) industry. Lawsky said that the final form of the so-called BitLicense would put in place crucial guidelines for protecting consumers and preventing money laundering.

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