Chinese shares battered, Treasurys hit 2-year high. The great global sell-off has continued today, with the focus of the angst turning from Japan to China, where shares (FXI) slumped 5.3% due to ongoing fears about the cash crunch in the banking sector, as well as about the ending of the Fed's QE policy. European shares, U.S. stock futures, copper and government bonds caught the downbeat mood, helping to send 10-year Treasury yields to a two-year high of 2.61%.
PBOC happy with liquidity in Chinese markets. With fears increasing about the credit crunch at Chinese banks, the People's Bank of China didn't do much to ease those concerns - as can be seen from what shares did today - saying that liquidity is "overall at a reasonable level." In a move interpreted as an attempt to rein in ballooning credit, the PBOC last week let inter-bank funding rates hit record highs before stepping in to ease the pressure.
Vodafone confirms to buy Kabel Deutschland. Vodafone (VOD) has agreed to acquire Kabel Deutschland (OTCPK:KBDHY) for €7.7B in what will be the U.K. operator's largest acquisition since its entry into India in 2007. Vodafone will pay €87 a share, just above Kabel's close of €86 on Friday. A major question is what John Malone's Liberty Global (LBTYA) will do now that its €7.5B bid has been superseded.
Top Stock News
Jefferies to lend Icahn $5.2B for Dell bid. Jefferies is reportedly providing Carl Icahn with $5.2B worth of term loans to support his Dell (DELL) bid. Icahn recently stated he would soon have such financing for his offer - which is worth $14 a share for 62% of the company - and reiterated he would throw in $2B of his own money if necessary. Jefferies has already committed to providing Icahn with $1.6B for the deal.
Telefonica to sell Irish unit. Telefonica (TEF) has agreed to sell its Irish subsidiary to Hutchison Whampoa for up to €850M as the Spanish company continues to shed assets. The money will help Telefonica meet its target of cutting its debt to under €47B by the end of the year from €51.2B. With Hutchison already owning Three Ireland, the third-largest mobile-phone operator in the country, antitrust issues may arise.
Diamonds are forever after all at Rio Tinto. Rio Tinto (RIO) has halted a 15-month effort to sell its $1.3B diamonds business after being unable to find a buyer. It's a setback for the company's plan to divest assets as it looks to reduce its $19B debt, lower costs and increase shareholder returns. However, Rio isn't the only miner to fail in trying to sell one of its operations, with Barrick Gold (ABX) and Peabody Energy (BTU) experiencing similar difficulties.
Boeing 787 problems continues. Is there no end to the glitches affecting Boeing's (BA) Dreamliner? In the latest in a series of incidents since commercial 787 flights resumed recently, a United Airlines (UAL) jet traveling from Houston to Denver returned to Texas due to a brake indicator issue. The question is whether the 787's glitches are relatively routine but getting more attention than they would with other planes, or whether they really are out of the ordinary.
Big Pharma makes diabetes progress. Major drug and medical-device companies reported promising results from various trials at the American Diabetes Association's annual meeting over the weekend. Eli Lilly's (LLY) Dulaglutide injection for Type 2 diabetes performed well in a Phase III study, as did Sanofi's (SNY) U300 "next-generation insulin," while pump devices from Medtronic (MDT) and Johnson & Johnson (JNJ) have made good progress. However, there was disappointment for Bristol-Myers Squibb's (BMY) and AstraZeneca's (AZN) Onglyza.
FTC to review Google's acquisition of Waze. The FTC plans to look at Google's (GOOG) purchase of Waze, which isn't a surprise given Google's dominant online/mobile maps position and a general belief it's buying Waze in part to keep the latter's increasingly accurate crowd-sourced traffic/point-of-interest data out of Apple (AAPL) and Facebook's (FB) hands. The FTC may have asked Google not to integrate Waze's data with Google Maps until the review is complete.
Top Economic & Other News
German business confidence improves slightly. The Ifo index of German business confidence has edged up to 105.9 in June, as expected, from 105.7 in May. The German economy is holding its course, Ifo says, with manufacturers once again "slightly more satisfied with their current business situation" and "more optimistic about future business developments." Retailers still remain optimistic, although wholesalers and construction contractors are more skeptical about what's in store.
BIS warns on risks to growth, stability. Central banks "cannot do 'whatever it takes' to return still-sluggish economies to strong and sustainable growth," says the Bank for International Settlements. In its annual report, the BIS blames unconventional monetary policy for delaying private sector deleveraging and for making countries especially vulnerable to rising interest rates, which, "without an equal increase in the output growth rate will further undermine fiscal sustainability."
EU fails to agree on rules for bank bailouts. European finance ministers are due to reconvene on Wednesday after failing to agree on rules about who should bear the brunt of rescuing failing banks in the EU so that taxpayers don't have to. Germany and other eurozone countries want to use Cyprus as a template and impose losses on shareholders, bondholders and then deposits of over the €100,000. France, Britain, Denmark and Sweden want flexibility in whether to take such steps.
Alpha-Rich Stock Movers and Great Calls
1) On Friday, Spreadtrum (SPRD) announced it had received a cash acquisition offer. The stock closed +35% from when Ashraf Eassa called out its significant upside on June 10. Read article »
2) Money Investor highlighted two reasons Ryland (RYL) was overvalued on May 20th. The homebuilder is -23% since. Read article »
Alpha-Rich Stocks To Watch
1) Ultra Petroleum (UPL). A low-cost producer with a stable balance sheet, UPL is positively levered to a likely rise in natural gas prices. Read article »
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In Asia, Japan -1.3% to 13063. Hong Kong -2.2% to 19814. China -5.3% to 1963. India -1.2% to 18541.
In Europe, at midday, London -1.5%. Paris -1.4%. Frankfurt -0.9%.
Futures at 6:20: Dow -0.7%. S&P -0.7%. Nasdaq -0.5%. Crude -0.1% at $93.62. Gold -0.8% to $1281.90.
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