At least one uncertainty in the U.K. has been settled: Home Secretary Theresa May looks set to become the U.K.’s prime minister tomorrow, replacing the outgoing David Cameron, who said he would leave after losing the Brexit vote. The Conservative Party’s May, who opposed the U.K. leaving the European Union, will have to grapple with negotiating Brexit. In comments to the press earlier today, EU Economic Affairs Commissioner Pierre Moscovici reiterated calls from EU leaders for a rapid departure in response to May’s comments that the U.K. may not officially break ties until 2017. In comments today before Parliament, Bank of England governor Mark Carney defended the central bank yet again against criticism that its perceived anti-Brexit bias was inappropriate. In notes released this morning by the Bank of England, Carney also underscored possible risks to reducing capital requirements for U.K. banks. While so much uncertainty hangs over the fate of the U.K.’s economy, traders today drove the pound sterling higher by roughly 1 percent versus the U.S. dollar in a possible signal that more investors are willing to wager that the situation will resolve itself soon.
IMF warns over Italian bank risks. In a report issued this morning, analysts at the International Monetary Fund warned that nonperforming loans held by Italian banks represent a major risk. The IMF estimates that the total percentage of bad loans in Italy is running at 18 percent. Discussions between Italian banking authorities and EU regulators over a bailout of the troubled banks have been held up over whether bondholders should share in the losses.
Yen continues to decline. In reaction to the victory of Japanese Prime Minister Shinzo Abe and his Liberal Democratic Party over the weekend, the yen continued to slide against the U.S. dollar today, bringing the week-to-date decline to 3 percent. Traders are wagering that the victory will lead to more stimulus as the Abe administration and Bank of Japan struggle with deflation.
China rebuked over South China Sea claims. The Permanent Court of Arbitration at The Hague today ruled in favor of the Philippines in a claim against China over its attempts to establish control over disputed portions of the South China Sea. The ruling, which does not have a mechanism for enforcement, is the latest chapter in the ongoing tensions between China and its southern neighbors over ownership of the waters.
Comac receives order for new jet. China Aircraft Leasing Group Holdings announced today that it will purchase up to 60 new regional jets from Commercial Aircraft Corp. of China, better known as Comac, in a deal valued at more than $2 billion. The orders for the ARJ21 come only months after the new model’s maiden flight. The aircraft will be operated by Indonesian carriers.
FDA approves new Shire eye drops. Shares of Shire rose sharply in trading in London today after the U.S. Food and Drug Administration approved a new treatment for dry eyes. The drug, Xiidra, is a topical treatment for an eye condition estimated to affect more than 15 million Americans.