The extended ceasefire agreement between the Ukrainian government and separatists has ended with a new call from President Petro Poroshenko to go to battle and "free our lands". After a four-way phone call with Vladimir Putin and German and French leaders, Poroshenko accused separatists of not staying on track with his proposed peace plan. Russia will also not likely face new sanctions, due to its cooperation with Poroshenko's peace efforts.
The Iraqi parliament will convene today with the objective of establishing a new leader, and the hope of ending sectarian division causing violence and instability in the country. Current Iraqi Prime Minister Nouri al-Maliki is still eligible to run for a third term. Yesterday, President Obama ordered another 200 troops to Iraq to protect American property and citizens, bringing the total U.S. troop count to 700.
Emerging market bond sales have soared past analyst estimates for the first half of 2014, as investors flock to higher yields. $268B of bonds sold so far this year, compared to the $240B sold in the same period of 2013. Due to a dovish Fed, U.S. yields have fallen this year to 2.5% from end-2013 levels of 3%. As a result, increased demand for higher yield has investors trading emerging market bonds despite geo-political risks.
The International Monetary Fund has verified that Cyprus is heading in the right direction regarding the specified requirements under its bailout program. As a result, the country will receive an immediate payment of €84M ($114M). The total bailout program from the IMF and EU totals €9B over the course of three years, and is aimed at helping Cyprus's economy and financial system recover.
BNP Paribas is settling its "sanctions lawsuit" for $8.9B, after pleading guilty to two criminal charges of falsifying business records and conspiracy. The bank has also agreed to suspend parts of its U.S. dollar clearing operations for one year. The ban will start on January 1, 2015, and will greatly impact the bank's oil and gas finance business. BNP Paribas (OTCQX:BNPQF) has also declared the termination of 13 senior execs.
A week after announcing a $5.3B deal to buy Micros, Oracle (NYSE:ORCL) has sold $10B in new debt. The sale is the 2nd-largest dollar-denominated corporate bond offering in 2014, behind Apple's (NASDAQ:AAPL) $12B April offering. Aside from financing the Micros (NASDAQ:MCRS) deal, there's a good chance some of the funds will be used on buybacks. The company spent $2B on buybacks in both the February and May quarters.
Hormel is buying CytoSport Holdings, maker of Muscle Milk protein drinks and other high-protein products, for $450M. With CytoSport expected to have 2014 sales of $370M, Hormel (NYSE:HRL) is paying approximately 1.2x forward sales. The deal is expected to be neutral to FY14 (ends Oct. '14) EPS, and be accretive to FY15 EPS by $0.05.
Pinnacle Foods says it is terminating its merger agreement with Hillshire Brands (NYSE:HSH) and expects to receive a $163M cash payment. Hillshire withdrew support for the merger two weeks ago, choosing a $7.7B takeover offer from Tyson Foods (NYSE:TSN). Pinnacle (NYSE:PF) also reaffirms FY 2014 EPS guidance of $1.70-$1.75 vs $1.74 analyst consensus estimate.
After another six recalls yesterday, the total amount of additional vehicles being taken back by GM (NYSE:GM) will now be around 8.2M. The recalls were issued after another seven crashes and three deaths were linked to the ignition switch defect. GM has now recalled more cars this year than the entire U.S. industry did in 2013. For the first half of this year, write-downs for the automaker are expected to total $2.5B.
Chrysler has widened its ignition switch recall, affecting an additional 696k vehicles. The U.S. safety agency is also investigating Chrysler (FIATY) trucks over an issue which may cause the rear axle to lock up or even disconnect. The issue seems to be caused by loose pinion nuts, and mostly affects truck models from 2005. In February 2013, the company recalled 370k vehicles for similar issues.
TransCanada faces a new regulatory hurdle in its effort to build the Keystone XL pipeline, with the news that it will now have to recertify the Alberta-to-Nebraska conduit where it passes through South Dakota. Anti-pipeline group Bold Nebraska says it plans to take advantage of TransCanada's (NYSE:TRP) re-certification process to challenge the permit on grounds of tribal rights, water protection and the need to avoid the Sandhills that reach into South Dakota.
Ousted CEO Dov Charney is attempting to gain a 50% stake in American Apparel (APP), in a struggle to reinstate himself to the board. Standard Capital has just acquired 25-30M shares for the ex-CEO, increasing his stake to 44%. The grab comes after the company adopted a poison pill designed to prevent Charney from gaining increased control in the company. American Apparel shares fell almost 7% on Monday, closing at 90 cents, and have dropped 53% this past year.
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In Asia, Japan +1.1%% to 15326. Hong Kong -0.1% to 23191. China +0.1% to 2050. India +0.4% to 25516.
In Europe, at midday, London +0.4%. Paris +0.7%. Frankfurt +0.3%.
Futures at 6:20: Dow +0.2%. S&P +0.2%. Nasdaq +0.3%. Crude +0.4% to $105.76. Gold +0.4% to $1327.80.
Ten-year Treasury Yield +2 bps to 2.55%
Today's economic calendar:
7:45 ICSC Retail Store Sales
8:30 Gallup US ECI
8:55 Redbook Chain Store Sales
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
11:00 Global Manufacturing PMI
Notable earnings before today's open: AYI
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