The European Central Bank's cut to its main lending rate and institution of negative interest rates earlier this month has spelled trouble for the euro. After hitting a 2-1/2 year high in early June, the euro has declined over 3%, due to monetary easing and increase in carry trades. Data released last week shows the net short position for the euro/dollar reaching its highest level since late May 2013.
Chances of an Argentinian sovereign default have been raised after President Cristina Fernandez said the country cannot pay the $1.5B it owes to a group mostly consisting of hedge funds by June 30. The statement follows a U.S. Supreme Court ruling that orders the country to repay its holdout investors before restructuring its debt. “What I cannot do as president is submit the country to such extortion,” says Fernandez.
The International Monetary Fund has reduced its 2014 U.S economic growth forecast to 2% from the 2.8% it predicted in April, due to a weak first quarter, although the fund has maintained its 3% growth outlook for 2015. Markets are predicting the Fed to start raising rates in the middle of next year, although the IMF related that it is not certain about the expected increase. Rates have been near zero since late 2008.
Japanese shares rose today, with the Nikkei climbing 0.3% to 14975.97, after dropping 1.1% on Monday. Trading volume hit its two month low amid escalating tensions in the Middle East and Ukraine. The Topix rose 0.3% to 1,238.20 at the close of trading in Tokyo, with 1.68B shares changing hands. JPX-Nikkei Index 400 also ended up 0.3% at 11,275.02. The dollar/yen slid back 0.1% to ¥101.91, after rising 0.2% yesterday.
Apple has agreed to settle an antitrust lawsuit regarding e-book price fixing, effectively avoiding a trial. The case was filed by U.S. states and other complainants, hitting Apple (NASDAQ:AAPL) with $840M in claims. The lawsuit was connected to a case filed by the Justice Department in April 2012 that charged Apple and five American book publishers of conspiring to fix e-book prices and attempting to break Amazon's hold on the market with its Kindle.
PayPal is expanding today into 10 new countries in sub-Saharan Africa, Eastern Europe and Latin America. The expansion brings the total amount of territories PayPal serves to 203. Customers that have web access and a bank card authorized for Internet transactions in the new regions will now be able to sign up for accounts. PayPal (NASDAQ:EBAY) reported revenue of $1.8B for the first quarter of 2014, and 148M active accounts worldwide.
BP has won its first new energy contract from the Pentagon since the lifting of U.S. government sanctions imposed after the 2010 Gulf of Mexico oil spill - a $43M natural gas deal awarded by the Defense Logistics Agency. BP (NYSE:BP) had regularly been among the Pentagon's top three energy suppliers by value before the Deepwater Horizon rig explosion and spill, but it secured just $30M in follow-on business in FY 2013 after having been awarded $2.5B in new work the previous year.
Another BP deal will be signed later today, when the company signs a LNG supply deal worth approximately $20B with Cnooc (NYSE:CEO). "It is a 20-year supply agreement on LNG. It is a fair price for them and a fair price for us. It is a good bridge between the UK and China in terms of trade," says BP CEO Bob Dudley. BP (BP) already supplies Cnooc with LNG from Indonesia.
Citigroup has purchased a new headquarters in Hong Kong for almost $700M, making it the largest ever single-block office acquisition in the city. The new 21-floor office building in the Kowloon district will become the bank's new center for all its businesses in the area. Citigroup (NYSE:C) currently employs close to 5,000 people in Hong Kong.
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In Asia, Japan +0.3% to 14976. Hong Kong -0.4% to 23204. China -0.9% to 2067. India +1.3% to 25521.
In Europe, at midday, London +0.1%. Paris +0.2%. Frankfurt +0.4%.
Futures at 6:20: Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude -0.4% to $106.47. Gold -0.8% to $1265.10.
Ten-year Treasury Yield flat at 2.6%
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