World Markets Live - July 5 - CNBC Live Events
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World Markets Live - July 5

We’ll be updating you throughout the day with essential breaking news, data alerts, earnings reports and all the major market movements.

  • Good morning and welcome to World Markets Live. We hope our American readers had a great 4th of July holiday!
     
    Here are the opening calls for Europe.
     
     
     
     
  • Asian markets have had a subdued session. Geopolitical tensions created by North Korea's launch of a ballistic missile, which it claims can carry a nuclear warhead, weighed on sentiment. Also, with U.S. markets closed and a lack of major data across Asia, market activity was quiet.
     
     
    The tensions did add to demand for safe-haven assets. Gold prices are up about 0.2 percent, while the yen gained against the dollar, although it has pared back some of these gains.
     
  • These are the top headlines this morning:
     
    • Rome pumps 5.4 billion euros into Monte dei Paschi, as the EU approves the state bailout, which means Italian taxpayers are now on the hook for more than 20 billion euros to cover the latest interventions.
    • Qatar signals its open to talks, but warns it will not accept any intervention in its domestic affairs, as Saudi Arabia and its Gulf allies get ready to meet to discuss their demands on Doha.
    • The U.S. calls for international action to respond to the global threat of North Korea, as it confirms Pyongyang fired its first intercontinental ballistic missile.
    • "Prepare for higher rates" - that's the message from Bank of England policymaker Michael Saunders, who says the central bank should not wait for Brexit to unfold.
  • The European Commission has given the greenlight to Italy's 5.4 billion euro bailout of Banca Monte dei Paschi. EU regulators approved the rescue after the bank agreed to a major overhaul, including transferring bad loans, and capping pay for senior managers.
     
    The BMPS move follows the Italian government committing up to 17 billion euros to wind up the troubled Veneto banks. More details of BMPS five-year restructuring plan will be released later today.
     
     
    The bank has revealed a drastic restructuring plan for the next four years. It plans to sell 28.6 billion euros of gross and bad debts.
     
    The plan sees the sale of junior and mezzanine securities to Atlante II at a price of 21 percent of the gross value. By 2021, the bank sees a CET1 ratio of 14.7 percent and net profit above 1.2 billion euros, as well as a return on equity of 10.7 percent.
     
    Monte dei Paschi adds that its plan sees a reduction in the number of branches from 2,000 in 2016 to around 1,400 in 2021. Its headcount will reduce by about 5,500 by 2021, with one-off costs of 1.15 billion euros.
     
    The bank's CEO says there are no mergers planned and there is no Plan B on the table.
  • Gildas Surry, senior analyst at Axiom Alternative Investments, explains why the EU Commission has agreed to Italy’s state bailout of BMPS.
     
    Monte dei Paschi is the oldest bank in Europe. It’s probably the oldest restructuring story as well we’ve had since the crisis ten years ago. In Monte dei Paschi, when you look at the capital structure, you’ve got another Tier 2 which is a type of bank capital instrument that has been placed with retail investors.
     
    So the state, the Bank of Italy, we are in a difficult position to actually bail in, so they had to resort to some kind of state aid.
     
     
     
  • Gildas Surry, senior analyst at Axiom Alternative Investments, recommends potentially buying Monte dei Paschi shares as a consolidation play.
     
    Ultimately the bank will be clean and definitely there is consolidation to take place in Italy from the 400 plus institutions down to probably 150. We’ve seen Spain go down from 70 to probably a dozen banks, but the authorities in Europe setting the tone of those consolidation trends in Germany cannot lead by example, because in Germany you have more than 6,000 institutions.
     
    Here are the outlines of the state bailout, according to Italian finance minister Pier Carlo Padoan. 
     
     
     
  • International Energy Agency chief Fatih Birol says the global oil market should rebalance in the second half of the year under the present conditions. Speaking on the sidelines of an Energy Institute event, Birol warned, however, that further output increases from producers Libya and Nigeria could complicate things. 
     
    Prices are a little lower today.
     
     
  • Moody's has changed Qatar's credit rating outlook to negative from stable, citing the growing financial risks surrounding the country's diplomatic dispute with its Arab neighbours. Moody's affirmed the country's Aa3 debt ratings, while adding that the likelihood of a prolonged period of uncertainty extending into 2018 had increased. 
     
    Meanwhile, the foreign ministers of Saudi Arabia, the UAE, Bahrain and Egypt are set to meet in Cairo to discuss whether to continue sanctions on Qatar.

    CNBC’s Willem Marx reports from Doha.
     
    They’ve received the response from the Qataris via the emir of Kuwait and they’ve promised this morning that they will respond in a timely manner.
     
    What that means on the ground, not very clear at this stage. 
  • The U.S. calls for international action to respond to the global threat of North Korea, as it confirms Pyongyang fired its first intercontinental ballistic missile.
     
    An ICBM has a range capable of hitting parts of the U.S.
     
    North Korea claims its latest missile can carry a nuclear warhead. U.S. Secretary of State Rex Tillerson says the latest test represents a new escalation of the threat and is calling for global action.
     
    Kim Jong-Un reacting after the test-fire of the intercontinental ballistic missile Hwasong-14 
     
  • NBC's Chris Pollone filed this report on the diplomatic reaction to North Korea's latest provocation.

  • JP Morgan has released a set of new stock ratings. Here are some of the highlights.
     
    • Qinetiq - cuts target price to 295p from 305p
    • BT Group - cuts target price to 290 p from 330p
    • Rolls-Royce - raises target price to 950p from 780p
    • Dassault Aviation - cuts to neutral from overweight and cuts target price to 1405 euros from 1460 euros
  • The South Korean President Moon Jae-in is due to arrive in Germany later today, where he will seek to rally international support behind a plan to impose fresh sanctions against the North Korean regime. The South Korean government says it remains open to dialogue with Pyongyang, despite the latest missile launch.

    Jonathan Wood, director of global risk analysis at Control Risks, discusses the situation in the Korean peninsula.
     
    The main players are China, the U.S and South Korea in this particular issue and the short issue there is no near term or easy resolution to North Korea’s weapons program. China could certainly do more to increase economic pressure and we’re likely to see that.

    Wood says China doesn’t want to destabilize the North Korean regime or cause it to collapse, which is why it is slow to enact economic measures.
     
     
  • Monte dei Paschi is discussing the bailout plan. It says the 2017-2021 plan includes the sale of 28.6 billion euros of gross and bad debts, 26.1 billion euros of which through securitization.
     
    The plan sees the sale of junior and mezzanine securities to Atlante II at a price of 21 percent of the gross value.
     
    By 2021, the bank sees a CET1 ratio of 14.7 percent and net profit above 1.2 billion euros, as well as a return on equity of 10.7 percent.
     
  • Deutsche Bank has released a series of new ratings and target prices for stocks. Here are some highlights:
     
    • Tencent - Deutsche Bank gives this a buy rating, raises its price target 7.4 percent to HK$320
    • Ryanair - target price is raised to 18.10 euros from 17.60
    • RBS - a small target price cut to 275p from 277p
    • EasyJet - target price raised to 1290p from 1200p
    • Statoil - target price cut to 120 Norwegian krona from 125 krona
    • Shell - target price cut to 2400p from 2500p
     
  • Monte dei Paschi adds that its plan sees a reduction in the number of branches from 2,000 in 2016 to around 1,400 in 2021. Its headcount will reduce by about 5,500 by 2021, with one-off costs of 1.15 billion euros.
  • Preliminary data from U.K. car industry body SMMT says new registrations for June dropped about 5 percent. Year to date registrations are down 1 percent.
  • These are the top headlines for 0700 BST
     
    • Rome pumps 5.4 billion euros into Monte dei Paschi, as the EU approves the state bailout, which means Italian taxpayers are now on the hook for more than 20 billion euros to cover the latest interventions.
    • Qatar signals its open to talks, but warns it will not accept any intervention in its domestic affairs, as Saudi Arabia and its Gulf allies get ready to meet to discuss their demands on Doha.
    • The U.S. calls for international action to respond to the global threat of North Korea, as it confirms Pyongyang fired its first intercontinental ballistic missile.
    • "Prepare for higher rates" - that's the message from Bank of England policymaker Michael Saunders, who says the central bank should not wait for Brexit to unfold.
  • Russian services PMI for June falls to 55.5 in June from 56.3 in May, according to Markit, Reuters reports.
  • Persimmon says the group's trading performance in the first half of the year has been excellent.
     
    It says it has increased legal completion volumes by 8 percent to 7,794 new homes. Average sale price increased by 3.5 percent to around £213,000 and revenue by 12 percent to reach £1.66 billion.
     
    The house builder sees first half operating margin of more than 25.7 percent.
  • Ocado says first half revenue came to £713.8 million, with pretax profit of £7.7 million.
     
    It says retail revenue increase 12.5 percent to £659.6 million. Profit before tax decreased by £1.7 million to £7.7 million, with net debt increased to £102.4 million due to significant capital investment in innovation and capacity.
  • John Studzinski, vice-chairman of The Blackstone Group, discusses Ocado following its H1 results and the food retail space.
     
    In a broader sense, if you look at the announcement last week with respect to Amazon’s purchase of Whole Foods, that was a strong signal. If you look at what happened to the food retail space just at the time of that announcement it dropped precipitously. It was a strong signal that Jeff Bezos was looking at Amazon.
     
    Remember, 50 percent of retail sales are food. Therefore that is a strong signal that he is going to be strong in food. Whole Foods is very much going to be a laboratory; it’s going to drive margins down for the manufacturers as well as the retails.
     
     
  • Aeon's first quarter operating profit increased 11.4 percent to 36.63 billion yen and it forecasts full year profit of 195 billion yen.
     
    The company achieved a net result of 3.68 billion yen versus a loss of 6.25 billion yen previously. Revenue for the quarter was 2.07 trillion yen. 
  • Moody's has changed Qatar's credit rating outlook to negative from stable, citing the growing financial risks surrounding the country's diplomatic dispute with its Arab neighbours. Moody's says the likelihood of a prolonged period of uncertainty extending into 2018 has increased. 

    Meanwhile, the foreign ministers of Saudi Arabia, the UAE, Bahrain and Egypt are set to meet in Cairo to discuss whether to continue sanctions on Qatar. 
     
    Willem Marx reports from Doha.
     
    In theory we should get a response from the Saudi led bloc at some point soon. There was a statement at the wee hours of this morning after they received the Qatari response to their initial 13-point list of demands. They said they would respond in a timely and appropriate manner. What that means of course we don’t know.

    Marx says Moody’s downgraded Qatar back in late May, before the crisis began in June. He says the crisis is causing concerns to credit agencies.
     
     
  • John Studzinski, vice-chairman of The Blackstone Group, says the Qatar situation is not going to get resolved quickly.
    It’s not going to get resolved by public ultimatums. This is like a long-standing family feud.
     
    You’ve got a lot of issues here and when you look at major confrontations in history, there are certain themes that underline them. Common border; issues of natural resources, one is extremely strong in gas; the other in oil; different views on religion; different views on the rights of women.
     
    Remember, Qatar was a province of Saudi Arabia at one point and of course it became independent. Even within Saudi Arabia, the notion that there is a king of Saudi Arabia, the Emir of Qatar in the mind-set of the Saudis is a prince, he doesn’t have the status of a king.
     
    Studzinski says the situation will be resolved through quiet diplomacy.
  • Swedish services PMI came in at 57.3 points in June according to SILF and Swedbank.
  • There's a new man at the helm of Burberry. So we thought we'd take a look at how Burberry has performed under the outgoing CEO Christopher Bailey. His departure was announced in July last year following an over 20 percent drop in the stock. But since the announcement, shares have gone up more than 40 percent. 
     
     
    His time as CEO was marked by headwinds after the devaluation of the yuan in the summer of 2015 and a string of stock downgrades earlier last year. 
     
    Bailey will be replaced by the Italian businessman Marco Gobbetti who was Celine's Chief Executive since 2008. He has also ran the Italian fashion house Moschino from 1993 until 2004.
     
    Outgoing CEO Christopher Bailey in November 2016
  • Chairman of Ericsson Leif Johansson says he will not stand for re-election, according to Reuters.
  • Ocado's CEO Tim Steiner tells investors and journalist that he sees the Amazon-Whole Foods deal as positive for Ocado.
     
    He says the firm has seen a pick-up in interest from U.S. players since Amazon acquired Whole Foods.
     
    Ocado posted its latest earnings this morning, including a pretax profit of £7.7 million.
  • Less than 10 minutes to the start of the European trading session and the markets look set for a mixed open, according to the futures.
     
     
  • President Donald Trump is gearing up for a busy week of diplomacy. He'll travel to Poland, before visiting Germany for the G-20 summit. He celebrated his first Independence Day as president at a White House picnic for military families. He told guests "our country is doing really, really well." NBC's Kristen Welker reports.

  • The European Commission President has criticised MEPs saying they don't take smaller countries seriously. A furious Jean-Claude Juncker called the parliament ridiculous after only about 30 members showed up for a speech by Malta's prime minister.

  • True Religion Brand Jeans has reached an agreement with lenders. Its restructuring will be facilitated through a Chapter 11 bankruptcy filing, which will reduce debt by over 75 percent or $350 million. The company says Citizens Bank will provid $60 million in DIP and exit financing.
  • European markets are now open for Wednesday's session. The Stoxx 600 finished yesterday's session down 0.29 percent. 
     
    The pan-European index opened the session slightly lower.
     
     
  • Banks and basic resources are the only sectors in the green. Defensive sectors are leading losses on the market.
     
  • A mixed start for the individual European bourses. The major markets are broadly flat, while the Italian FTSE MIB is down around 0.2 percent.
     
  • These are the stocks at the top and bottom of the Stoxx 600.
     
    Persimmon is topping the index. Political uncertainty arising from the U.K.'s snap general election is having little impact on the British property market. That's according to the homebuilder Persimmon, which has posted a 12 percent increase in first half revenues. The FTSE-listed company also reported a near 4 percent pickup in the average sale price for its properties over the period.   
     
    Ocado is also doing well after its earnings results.
     
    Meanwhile, Domino's Pizza received a sell rating and a price target of 250p from Liberum, leading it to the bottom of the market.
     
     
  • The Thai central bank has decided to keep its policy rate unchanged at 1.5 percent, as expected. The policy committee voted unanimously to hold the rate.
  • Seema Shah, global investment strategist at Principal Global Investors, says market sentiment is fairly robust, but there are concerns.
     
    What I’ve seen from the clients that I speak to is that, compared to a few months ago where all the talk was about politics, the next election, etc. now it’s all about central banks.
     
    The more central bank speak we get, we’re still going to have a few tremors, but hopefully at the time they’ll realize it. More central bank speak is good because we need more communication, especially considering we’re moving into more of a normalization cycle.
     
    Shah says these market tremors will continue for a little while, but will smooth out. 
     
     
  • Spain's June services PMI rises to 58.3 from 57.3 in May. That's the highest reading in 22 months.
     
    Spain's services employment index rises to 55.4 in June, its highest since July 2016.
  • The Thai central bank says it sees 2017's exports up 5 percent, higher than the 2.2 percent seen in March.
     
    It expects headline inflation for the year at 0.8 percent, which is down from the 1.2 percent seen in March.
     
    The central bank says the economic recovery is clearer and monetary policy remains accommodative. 
  • Let's take a look at some stocks moving markets.
     
    First-half pre-tax profit at online grocery delivery service Ocado fell to £7.7 million, down from £8.6 million a year prior. The company cited the opening of a new distribution centre and other investments as having weighed on profits, despite revenue growth.
     
    Ocado also said it would pursue further international partnerships, after it secured its first overseas deal with an unnamed European retailer last month.
     
     
    Meanwhile, today is Marco Gobbetti's first day in charge at Burberry. In a shake-up announced last year, the former Celine chief takes over as CEO, while Chris Bailey is staying at the British design house, taking up the roles of president and chief creative officer. The shares are flat so far today.
     
     
  • Seema Shah, global investment strategist at Principal Global Investors, says there’s a different story going on between the Europe and U.S. markets.
     
    We talk about this normalization for the U.S. and Europe, but actually there’s a big difference. The U.S. is looking to reduce their balance sheet; Europe is still going to be increasing their balance sheet, just at a slower rate. That’s really important.
     
    Normalisation has a very different meaning across the Atlantic.
     
    Shah also said equities have room to go further, but the momentum has gone, so the rate of gains will run out.
  • Some economic data is out for Sweden.
     
    Swedish industrial production in May grew 2.1 percent month on month and 8.0 percent year on year. Beating forecasts.
     
    Swedish industrial orders grew 7.6 percent year on year in May.
     
    Swedish service sector production grew 4.5 percent year on year in May, according to the country's Stats Office.
  • These are the top stories following the European market open:
     
    • U.K. homebuilder Persimmon rallies to the top of the Stoxx 600, as it says political uncertainty isn't hurting revenue.
    • It's buying time in the retail sector. Adidas and Moncler catch a bid thanks to newly issued buy ratings, while a new CEO gets to work at Burberry.
    • Rome pumps 5.4 billion euros into Monte dei Paschi, as the EU approves the state bailout, which means Italian taxpayers are now on the hook for more than 20 billion euros to cover the latest interventions.
    • Qatar signals its open to talks, but warns it will not accept any intervention in its domestic affairs, as Saudi Arabia and its Gulf allies get ready to meet to discuss their demands on Doha.
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