Morning Note: A Round-up of Global Financial Market News.
Market News
Brent Crude dropped about 6% to $83 a barrel, as President Trump announced that peace talks with Iran will resume today after he cancelled a planned military strike against the Islamic Republic. Trump said key Middle Eastern allies, including Saudi Arabia, urged him to suspend the attacks and prioritise negotiations, while reiterating his call for the swift reopening of the Strait of Hormuz. Major OPEC+ producers agreed to raise output quotas by 188,000 barrels a day in September, a move that will complete the unwinding of 2023 production cuts.
Fed Chair Kevin Warsh is said to have floated changes to the Fed’s meeting schedule, including cutting annual policy decisions to six from eight while reserving two gatherings for in-depth discussions of economic issues. This week is a busy one for US labour market data, highlighted by Friday’s closely watched monthly jobs report. The yield on the US 10-year Treasury is 4.70%, while gold is trading slightly higher at $4,060 an ounce.
The Japanese yen strengthened toward 155 per dollar, bringing its gains to about 5% over three sessions, after the Finance Ministry confirmed it carried out coordinated yen-buying operations with the US Treasury last week following the currency’s slide to 40-year lows. Japanese authorities also warned they stand ready to conduct additional coordinated interventions if needed, adding that they remain in close contact with their US counterparts.
In Asia this morning, the Korean Kospi (-5.1%) closed heavily lower, while other equity markets were mixed: Nikkei 225 (-0.9%); Hang Seng (+0.4%); Shanghai Composite (-0.6%). The futures market is currently predicting a 0.5% rise on the S&P 500 at the open this afternoon. The FTSE 100 is currently little changed at 10,870. Sterling trades at $1.3460 and €1.1675, while the 10-year Gilt yields 4.98%.
AstraZeneca (AZ) has been exploring a deal to combine with US rival Bristol Myers Squibb (BMS), the Financial Times reported. The deal could create one of the world's biggest pharmaceutical groups with a combined value of nearly $400bn. The companies have held talks on a potential tie-up in recent months, the report said, adding that a deal could materialise soon, but could also be delayed or fall apart. This follows AZ’s move last year to create a direct US listing, aiming to capitalise on stronger valuations in the US market while remaining listed in London. On the face of it, given AZ’s strong growth outlook, with a 2030 sales target of $80bn, this move would be a strange one with a high level of regulatory and integration risk. The market has responded by marking the shares down by 6% in early trading.
On the corporate front, the Q2 earnings season continues this week, with releases from BP, Smith & Nephew, Vonovia, Heineken, Glencore, Marriott, and Diageo.
Source: Bloomberg
