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Daily Agenda: Equities and Oil Retreat

European stocks reverse course; Brazil’s impeachment drama comes to a head; Disney down; Staples and Office Depot call off merger; Spain issues 50-year bonds.

Both oil futures and European equities retreated on Wednesday morning, dragging U.S. stock futures lower. With national politics taking center stage in the U.S., Brazil and elsewhere, portfolio managers continue to ponder when global growth can hit a pace that will spur inflation and raise yields to levels within historic bands. For those investors attending the SALT conference in Las Vegas today, the topic of discussion may not be limited to how long extraordinary central bank policies may endure but also how long investors will be willing to pay large management and incentive fees after a prolonged period of modest returns for alternative-asset investors.

Disney earnings disappoint. On Tuesday, Walt Disney Co. released financial results for the first quarter that fell short of consensus analyst estimates with a profit of $1.36 per share versus an anticipated $1.40. A 12 percent year-over-year decline in returns from the company’s cable network division was a primary cause of the shortfall, but Disney executive’s reiterated expectations for mid-single digit growth on average for the company.

Mega-retail merger scuttled. Executives for Staples and Office Depot announced on Tuesday that the proposed merger between the two firms has been called off after the U.S. District Court in Washington agreed with antitrust arguments brought by the Federal Trade Commission. Lawyers representing the office supply-store chains unsuccessfully argued that competition from online retailers would offset the reach of the combined companies. The derailed deal had been valued at more than $6 billion.

Day of judgment in Brazil. A session for an impeachment vote by the Brazilian Senate on Wednesday is expected to conclude by early evening. Initial indications suggest that a majority in favor of ousting President Dilma Rousseff exists. In recent days, labor unions have taken to the streets in defense of Rousseff’s Workers’ Party, offset by hundreds of thousands of unemployed and underemployed demanding a change in government. Currency, fixed income and equity trading briefly halted on Wednesday morning after some media outlets reported that a resignation announcement was imminent.

Rising yen hurts Toyota profits. On Wednesday, Toyota Motor Corp. guided expectations lower with projections for a decline in net income of 35 percent year-over-year, the first decline in five years. According to a statement by President Akio Toyoda, the massive benefits reaped by the company in recent years as the yen declined are likely to reverse as Japan’s currency rebounds against those of major trading partners.

Soybeans jump on USDA report. Soybean futures rose sharply in trading in Chicago on Tuesday after a report from the U.S. Department of Agriculture indicated that supplies of the staple would decline by more than 20 percent after low prices curtailed production. Front-month delivery contracts reached over $10.80 per bushel to hit daily exchange price move limits and to lock in a 25 percent return year-to-date. In response, officials at the CME Group agreed to raise initial margin levels to enter the market by 15 percent to discourage excessive speculation.

Spain issues 50-year bonds. On Wednesday Spain became the latest European nation to take advantage of ultra-low rates by issuing sovereign debt with a 50-year maturity—the country’s first 50-year issue since 2014. The announcement of the upcoming auction for bonds maturing in July 2066 drove yields on Spain’s 30-year treasuries up only slightly, indicating that the European Central Bank’s easing program is trumping macro concerns among investors.

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