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A big oil merger is off, Puerto Rico is set to default and yen strength hits Japanese stocks. Here are some of the things people in markets are talking about today.
Halliburton/Baker Hughes merger off
The $28 billion merger of the second- and third-largest oil-service companies is not going ahead, both companies announced yesterday. Dave Lesar, Halliburton Co.’s chairman blamed "regulatory approvals and general industry conditions." Halliburton will have to pay Baker Hughes Inc. a $3.5 billion termination fee by May 4. Since the deal was originally announced in November 2014, the price of a barrel of oil has dropped from almost $80 to $45.
Puerto Rico to default
The commonwealth of Puerto Rico will default on a $422 million bond payment for its Government Development Bank after Governor Alejandro Garcia Padilla invoked a debt moratorium law and said that he decided "that essential services for the 3.5 million American citizens in Puerto Rico came first” in a televised address yesterday. The debt that will be defaulted on last traded at 32 cents on the dollar, with an effective yield of about 1,600 percent.
The continuing strength of the Japanese yen, which was trading at 106.38 to the dollar at 5:43 a.m. ET, is putting pressure on Japanese stocks with the Topix index adding to last week's 4.8 decline with an overnight drop of 3 percent. The wider MSCI Asia Pacific Index lost 1.3 percent. In Europe, the Stoxx 600 Index was virtually unchanged at 5:27 a.m. ET with Markit Economics describing growth in the euro-area as 'anemic' while Italian bank shares were tumbling after investors snubbed an initial public offering by Banca Popolare di Vicenza SpA with Atlante, the country's recently established bank-rescue fund having to buy almost all the shares. S&P 500 futures were close to unchanged.
Gold futures for June delivery traded at $1,301.80 an ounce at 5:35 a.m. ET on the Comex in New York, climbing above $1300 for the first time since January 2015. The precious metal has gained 23 percent this year, a rally that hedge funds seem to have mostly missed out on. Oil, meanwhile is slipping for a second day following data showing Iraqi exports are approaching a record high.
The annual Berkshire Hathaway Inc. shareholder meeting was held in Omaha, Nebraska on Saturday and as usual, Chairman Warren Buffett had plenty to say. He said that hedge funds get 'unbelievable' fees for bad results, warned on the potential 'time bomb' in banks derivatives holdings and described the business model of Valeant Pharmaceuticals International Inc. as 'enormously flawed.' Berkshire Hathaway announced an increase in profits of 8.2 percent in the first quarter on gains at manufacturing units and in the investment portfolio Buffett oversees.
What we've been reading
This is what's caught our eye over the weekend.
- The world's longest negative rate experiment shows trouble ahead...
- ...While JPMorgan predicts a global bond shortage.
- May is the best month, historically, to be long the dollar.
- The good, the bad and the €500 note.
- Green Zone breach exposes Iraq's growing political paralysis.
- Bernie Sanders still thinks he can win.
- Australian academic outs himself as creator of bitcoin.