After remaining mostly undecided since the market open, European shares are starting to feel the effects from Friday's historic drubbing. According to Standard & Poor's, $2.08T of stock market value were wiped out across the globe in the previous session, marking the largest ever daily sell-off in dollar terms. Today's aftershocks are also weighing on U.S. equity futures and sent sterling down another 3.1%, as investors seek safety in gold and low-risk government debt.
Any good hangover cures? U.K. 10-year Gilt yields have dropped below 1% for the first time to hit a new record low. The fall came after Moody's downgraded its U.K. sovereign rating to negative from stable, citing diminished policy predictability and economic effectiveness. Meanwhile, 10-year U.S. Treasury yields have extended their fall to 1.47%, tumbling 10 basis points this session.
The U.K. is ready to face the challenges thrown up by the vote to leave the EU, U.K. Chancellor George Osborne told a press conference today, but cautioned it would not be "plain sailing" in the days ahead. "Our economy is about as strong as it could be to confront the challenge our country now faces," he declared, adding that the result was not the one he "campaigned for" but the will of the people "had to be respected."
Brexit comments from around the world... Boris Johnson: "I cannot stress too much that Britain is part of Europe, and always will be." Nicola Sturgeon: "We will explore all possible options to protect Scotland's place in the EU." Francois Hollande: "What was once unthinkable has become irreversible." Angela Merkel: Exit talks "shouldn't drag on forever." Barack Obama: "One thing that will not change is the special relationship that exists between our two nations."
More remarks... Jean-Claude Juncker: I would like Brexit proceedings "to get started immediately." Christine Lagarde: Brexit fallout hinges on what "policy makers do in coming days." George Soros: The decision makes "the disintegration of the EU practically irreversible." Deutsche Bank: London's role as a financial center will "weaken, but won't die." Goldman Sachs: The U.K. is now likely to enter a "mild recession" by early 2017.
The Nikkei regained some lost ground overnight after Japanese PM Shinzo Abe instructed his finance minister to intervene in the currency markets if needed in the wake of Brexit the vote. Analysts have also raised the possibility of the BOJ holding an unscheduled policy review ahead of its regular meeting in July to offer additional stimulus. Nikkei +2.4%.
Adding to political uncertainty in Europe, Spain's weekend elections delivered a hung parliament for the second time in six months. Acting Prime Minister Mariano Rajoy's People's Party again emerged with the single biggest bloc of seats but fell short of a majority, leaving the eurozone's fourth-largest economy at risk of another lengthy political stalemate. Moving further north, Gudni Johannesson won Iceland's general election, becoming the country's first new president in 20 years after riding a wave of anti-establishment sentiment.
Saudi Arabia has appointed JPMorgan (NYSE:JPM), HSBC and Citi (NYSE:C) to arrange its debut international bond as the kingdom presses ahead with fundraising efforts amid an oil price slump. Lenders were summoned to Riyadh last month to submit proposals on how they would help the country to raise money internationally. At the time, bankers said that the kingdom was seeking to raise as much as $15B.
Israel and Turkey have agreed to restore full diplomatic ties after relations ruptured six years ago following the "Gaza flotilla raid." The two countries will rebuild military/intelligence connections and send ambassadors back to each others' capitals. A deal could also pave the way for multibillion-dollar energy contracts as Israel seeks to export fuel and Turkey looks to reduce its reliance on Russian gas.
Janet Yellen is speaking again. The world's top central bankers are beginning the week with a three-day ECB summit in Sintra, Portugal. Investors will be tuning in to what might have previously sounded like a dry subject - "The Future of the International Monetary and Financial Architecture" - with global financial markets in disarray in light of the Britain's EU referendum.
Banks across the globe are taking another serious beating post-Brexit. The sector is getting battered on fears that fragile recoveries at many financial institutions will be delayed and that volatile markets could claim scalps. Several sources have also revealed that Italy is considering a €40B capital infusion into its banks. Premarket movement: BCS -21%, RBS -15%, LYG -17%, DB -9%, UBS -6%, HSBC -5%, C -2%, MS -2%, BAC -2%, JPM -1%, WFC -1%, GS -1%.
Two additional SolarCity board members are recusing themselves from making decisions regarding Tesla's (NASDAQ:TSLA) offer to buy the solar power firm since they sit on the boards of both companies. The announcement by Musk relative Peter Rive and Tesla CTO JB Straubel means the majority of SolarCity's (SCTY) seven-person board will be sitting out the vote on whether to be acquired by Tesla.
TransCanada is formally requesting arbitration under NAFTA provisions against President Obama's rejection of the Keystone XL pipeline, seeking $15B for costs and damages. TransCanada (NYSE:TRP) argues it had every reason to believe it would win approval to build the pipeline and claimed the U.S. spent seven years delaying a final decision with multiple rounds of "arbitrary and contrived" analyses.
Panama officially opened an addition to its legendary sea canal on Sunday, capping a nine-year, $5.4B expansion project that will double shipping capacity and affect global trade routes. A third lane has been added to the waterway that can accommodate a new generation of super cargo ships large enough to carry up to 14K containers, compared with around 5K currently. Related tickers: MATX, KEX, CMRE, SSW, DAC, NMM, SINO, SB, DCIX, GOGL, ALEX, DAC, GSL, ESEA, EURN, NAT, OSGB, TGP
Finding Dory is the big kahuna of the summer box office. Disney's (NYSE:DIS) animated sequel to Finding Nemo just kept swimming into its second weekend, harpooning $73.2M in U.S. and Canadian theaters. That was enough to capsize Independence Day: Resurgence - a big summer release from 20th Century Fox (FOX, FOXA) - which sank with $41.6M to the No. 2 slot. The first Independence Day opened with $50.2M in 1996, or about $77M in inflation-adjusted dollars.
Some of the web's biggest destinations for watching videos, including YouTube (GOOG, GOOGL) and Facebook (NASDAQ:FB), have quietly started using automation to remove extremist content from their sites, sources told Reuters. The technology looks for "hashes," a type of unique digital fingerprint that internet companies automatically assign to specific videos, allowing all content with matching fingerprints to be removed rapidly.
Amazon is doubling down on its Dash ordering devices, getting firms to invest in the tools even amid evidence that customers are cool to them. According to the WSJ, Amazon (NASDAQ:AMZN) will announce plans this week to add dozens of new consumer-product brands to its Dash feature. The thumb-drive-sized gadgets enable Prime subscribers to reorder a product simply by pressing a button.
China's internet regulator has issued new guidelines for online search and advertising about six weeks after it opened an investigation into Baidu's (NASDAQ:BIDU) practices following the death of Wei Zexi, a college student who underwent an experimental cancer therapy found through an online ad. The rules require search companies to provide "objective, fair and authoritative results," identify and label paid ads clearly and limit the number of them per page.
Intel is looking at options for its cyber security unit, including potentially selling the antivirus software maker formerly known as McAfee which it bought for $7.7B in 2010, FT reports. Intel (NASDAQ:INTC) has been trying to refocus its business toward selling chips for cloud computing rather than PCs, announcing plans this year to cut 12,000 jobs in its largest workforce reduction in a decade.
Strengthening their economic ties, Russia and China sealed a raft of energy deals during President Vladimir Putin's visit to Beijing on Saturday. ChemChina agreed to take a 40% stake in Rosneft's (OTCPK:RNFTF) planned petrochemical complex VNHK in Russia's Far East and signed a new one-year supply contract. The Russian firm also committed to negotiating the sale of 20% of its Verkhnechonsk unit to Beijing Enterprises (OTCPK:BJINY) and signed a framework agreement with Sinopec (NYSE:SNP).
BHP Billiton plans to boost its exploration budget by 29% to around $900M next year, as the global miner counts on new finds of oil and copper to drive growth rather than M&A. The figure represents 18% of the company's total capital budget of $5B over fiscal 2017. BHP -2.9% premarket.
Research to be presented this week at a teratology conference in San Antonio suggests that serious joint problems, seizures, vision impairment and other medical issues can be added to the list of risks from Zika exposure in the womb. The new findings also confirm that even when Zika-exposed babies are born without microcephaly, developmental delays may appear in the weeks or months following birth. Related tickers: SNY, INO, AEMD, XON, CEMI, BCRX, TMO, CERS, OTCQB:GOVX
Volkswagen should offer European drivers similar compensation for its emissions scandal to what it's expected to pay U.S. customers, Europe's Industry Commissioner Elzbieta Bienkowska told the Welt am Sonntag. VW (OTCPK:VLKAY) is expected to agree this week to pay nearly $10.3B, including offers to buy back nearly 500K polluting American vehicles and pay an average compensation to owners of around $5K, to settle claims by U.S. regulators.
New York's landmark Waldorf Astoria hotel plans to close for up to three years starting next spring so owner Anbang Insurance can begin converting most of its more than 1,400 rooms into luxury condominiums, WSJ reports. Anbang and Hilton Worldwide (NYSE:HLT), which will continue to manage the property when it reopens, are said to have reached severance agreements with hundreds of the hotel's 1,500 employees at a cost of $100M or more.
In Asia, Japan +2.4% to 15309. Hong Kong -0.2% to 20227. China +1.5% to 2896. India flat at 26403.
In Europe, at midday, London -1.7%. Paris -1.9%. Frankfurt -1.9%.
Futures at 6:20, Dow -0.6%. S&P -0.6%. Nasdaq -0.8%. Crude -0.7% to $47.30. Gold +0.9% to $1333.70.
Ten-year Treasury Yield -10 bps to 1.47%
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