Daily Agenda: Markets Resist Rising Risk Sentiment

U.S. markets remain resilient; U.K. employment improves despite Brexit fears; Monsanto rejects second Bayer bid; VW profits improve.


Geopolitics continued to overshadow economic and financial news for market-risk narratives after U.S. real estate mogul Donald Trump officially secured the Republican Party presidential nomination in Cleveland and Turkish President Recep Tayyip Erdogan pursued massive reprisals after a failed coup attempt that drew protests from global leaders. Meanwhile, reverberations of the Brexit vote continue to cause concerns, with a report issued today by the International Monetary Fund that included lowered global growth projections. The IMF cut its target for total gross domestic product in 2017 from 3.5 percent to 3.4 percent as the United Kingdom’s departure hits Europe’s economies. Despite concerns cast by these factors, few investors in U.S. markets have rushed to the exits as earnings season continues with results that are generally better than diminished expectations.

Despite Brexit fears, employment situation improves in the U.K. New figures released today by Britain’s Office for National Statistics revealed that unemployment in the U.K. declined to the lowest level since 2005 during the three months ending in May, at an average of 4.9 percent. Separately, on Wednesday the Bank of England released sentiment data that indicated the Britain’s vote to depart the European Union has not yet affected the decision making of business managers with respect to new hires.

Volkswagen profits rebound as company moves beyond scandal. Financial results released on Wednesday by Volkswagen included an operating profit of $7.5 billion for the first half of 2016, versus $7 billion during the same period in 2015, exceeding consensus analyst estimates. Despite the rebound in profits, the German automaker also announced more than $2 billion to be set aside to handle legal costs globally because of the ongoing emissions-testing scandal. A full earnings release by the company, which will provide greater details, is due on July 28.

Monsanto rejects second Bayer offer. On Tuesday, Monsanto announced that it would decline the second offer in as many months by German health care and chemical giant Bayer. In the statement, the ST. Louis-based company said it would continue talks with Bayer while exploring other options. The offer, at $125 per share, was the largest all-cash acquisition bid in history.

Singapore’s sovereign wealth fund to buys its SMRT stake. In a deal announced on Wednesday, Temasek Holdings, Singapore’s state investment arm, announced it would acquire the remaining minority stake in SMRT Corp. that it does not already own. The transaction, valued at more than $800 million, will value the Singapore mass-transit operator at more than $2.5 billion. SMRT has been heavily criticized in recent years for frequent service outages which have drawn the scrutiny of government regulators.

Dollar Shave acquired for $1 billion. On Tuesday, Unilever announced the acquisition of Dollar Shave Club in a transaction reported to be worth $1 billion. Dollar Shave, which built its franchise through quirky online viral advertising featuring the company’s boot-strapping origins, will continue to be managed by founder and spokesman Michael Dubin. With the deal, Unilever has entered into more direct competition with Procter & Gamble and Edgewell, makers of Gillette and Schick brand razors, respectively.