As global markets calmed in the wake of the United Kingdoms referendum results, the leadership struggle in Britain, with all its political and macroeconomic consequences, continued at a fever pitch. The latest: A shockingly Machiavellian move by U.K. Justice Secretary Michael Gove that ended former London Mayor Boris Johnsons campaign to replace Prime Minister David Cameron and set Gove up as a contender against Home Secretary Theresa May. Gove, who has said he was not qualified for the job, had been running Johnsons campaign; both men were Conservative Party advocates of Brexit. Meanwhile, multiple economists including St. Louis Federal Reserve President James Bullard, have argued that the ultimate impact on the U.S. domestic economy will be manageable at worst. As U.S. investors prepare for the long 4th of July holiday, there are signs that panic over the effect of the U.K.s departure from the European Union is fading.
Puerto Rico suspends debt payments. On the same day that President Barack Obama signed a bill that will allow Puerto Rico to restructure debt under federal oversight, Governor Alejandro Garcia Padilla announced a moratorium on servicing the territorys general-obligation debt. The new federal law will allow a court-ordered restructuring similar to a municipal bankruptcy while a federally appointed board oversees Puerto Ricos budget and negotiations with creditors.
Japanese pension fund faces draw down on stock exposure. According to estimates by analysts, Japans Government Pension Investment Fund, the worlds largest pension fund by assets, is likely to see the value of its portfolio decline by more than $40 billion in the current quarter due to declines in equity investments. The funds total exposure to Japanese stocks, at more than 20 percent, has been politically controversial.
Prices continue to fall in Japan. May consumer price data released today by Japans Statistics Bureau confirmed a third consecutive month of falling prices at the cash register in that country. Headline CPI contracted by 0.4 percent year-over-year while the Tokyo specific index for June registered at -0.5 percent versus the same month in 2015. The data underscores the challenges facing Bank of Japan policymakers as they attempt to achieve a 2 percent inflation target.
Mixed purchasing data from China. Purchasing-manager index data released today by Caixin registered at a deeper contraction than forecast with a reading of 48.6, while the official National Bureau of Statistics measure remained flat at 50. Sluggish international demand was the primary driver of slowing activity in the industrial sector. Meanwhile, NBS service sector results improved for the month with the headline non-manufacturing index at 53.7 versus a prior 53.1.
Apple in discussions with Tidal. On Friday the Wall Street Journal, citing unnamed sources, reported that Apple is in talks to acquire the music-streaming service Tidal, which is controlled by hip hop mogul Jay Z. The talks occur as the tech giant works to revamp Apple Music, its own streaming service introduced last year, which has failed to gain critical mass.
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