“Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” — John Templeton

1. Facebook Releases Plan for Libra Crypto — it could amount to the biggest catalyst for digital assets in their decade-long existence. Facebook (NASDAQ:FB) has unveiled a consortium to create an open-source digital currency called Libra, set to launch in the first half of next year, which would allow consumers to send money around the world easily and for free. While Libra won’t be run by Facebook – but rather by a nonprofit association and backed by relatively stable government money – the company does have a plan to profit from it with a new subsidiary, Calibra, which is building a digital wallet for storing and exchanging the currency. Furthermore, U.S. lawmakers from both sides of the aisle are forming a growing group calling for hearings on Facebook’s (NASDAQ:FB) Libra cryptocurrency. Democrat Maxine Waters, chairwoman of the House Financial Services Committee, said she wants Facebook to testify about the plans and the company should put them on hold for a review, while she’s also received a letter from the committee’s top Republican, Patrick McHenry, calling for a hearing. Many have additionally cited concerns about the social network’s checkered past when it comes to trust and privacy.
2. Boeing Gets Zero New Orders at Paris Air Show Day One — Boeing (NYSE:BA) didn’t announce a single new order on the first day of the expo, while rival Airbus (OTCPK:EADSF) recorded orders and options for 123 planes, according to CNBC. The report reinforces Boeing CEO Dennis Muilenburg’s view that this year’s Paris Air Show would be less about orders and more about reassuring customers and suppliers that the company is making progress on getting the grounded 737 MAX back in the air.
3. Rocket Explodes Near Exxon Site in Iraq — a rocket struck the site of the residential and operational headquarters of several global major oil companies in southern Iraq early Wednesday, including ExxonMobil (NYSE:XOM), but had no effect on oil fields or exports, sources told Bloomberg. The incident in the Basra province injured three Iraqi workers, however, prompting Exxon to evacuate 20 foreign employees. While attacks on energy facilities, including a Saudi Arabian pipeline and several oil tankers, as well as a U.S. military buildup, are stoking concerns, a considerable ratcheting of tensions will likely be required to drive prices higher.
4. FOMC Monetary Policy Meeting — as the Fed latest FOMC meeting, the yield on the benchmark 10-year Treasury dropped below 2% overnight for the first time since November 2016. The FOMC left interest rates unchanged at its monetary policy meeting last Wednesday, dropped the word “patient” from its statement and said it would “act as appropriate” to sustain the economy. The Fed Funds Futures pointing to a 100% chance of monetary policy easing in July.

The week ahead — Economic data from Econoday.com:

“One learns the most from mistakes, not successes.” — Paul Tudor Jones

1. Raytheon and United Technologies Agree to Merge — United Technologies and Raytheon have agreed to an all-stock merger, creating the second-largest defense-and-aerospace company in the U.S. after Boeing (NYSE:BA) with combined annual sales of around $74B. The deal won’t include United Tech’s (NYSE:UTX) elevator (Otis) and air conditioning units (Carrier), which it plans to spin off in 2020. Raytheon’s (NYSE:RTN) Tom Kennedy will become executive chairman of the combined company, to be called Raytheon Technologies, while UTX’s Greg Hayes will be named CEO. Two years after the deal closes, Hayes will assume the role of chairman and CEO.
2. Beijing Offers Support to Local Government — Beijing encouraged local governments to use special bonds for infrastructure projects in a bid to shore up economic growth. That helped offset President Trump’s threat to raise tariffs again if President Xi Jinping doesn’t meet with him at the G-20 summit at the end of June. The onshore yuan also bounced off its closing low of the year as the PBOC set its reference rate higher than forecast and announced plans to sell bills this month after the currency was hit in May.
3. Hong Kong Protests Intensify — Protests against Hong Kong’s controversial extradition law shut down key parts of the city, with police firing tear gas and rubber bullets to drive away thousands of demonstrators. Financial institutions also scrambled for liquid assets, triggering interbank interest rates in the territory to shoot up across the curve, with the one-month and two-month HIBOR reaching their highest level since late 2008. Hong Kong Chief Executive Carrie Lam argues the legislation is necessary to close a legal loophole that makes the city a refuge to criminals, but opponents say its approval would tear down the legal wall intended to keep Hong Kong’s justice system separate from China’s.
4. FTC Opposes Qualcomm Antitrust Request — the FTC has asked District Judge Lucy Koh to deny Qualcomm’s (NASDAQ:QCOM) request to delay enforcement of an antitrust ruling handed down in May, announcing that it was in the public interest because an appeal could take years. LG Electronics (OTC:LGEAF) reiterated the view of the FTC, saying it could be forced into signing another unfair deal unless Koh’s protections remain in place. On May 28, Qualcomm asked to put the sweeping antitrust decision on hold as it would “radically restructure its business relationships” in ways that would be impossible to reverse if it wins an appeal.
5. AAII Weekly Sentiment Survey — last week’s rally has reversed this build-up of bearish sentiment to a small degree, as the percentage of investors reporting as bulls in this week’s AAII survey grew to 26.84% from 22.53% last week. While this is an improvement, investors have been hesitant to rush back, as bullish sentiment remains low relative to history. This week’s reading is still over one standard deviation below the historical average of 38.19%.

Bearish sentiment, on the other hand, saw a sharper move, falling to 34.2% versus 42.58% last week. That is the largest decline in bearish sentiment since February 7th of this year, when it had fallen just under 9%, from 31.76% to 22.78%. Similar to bulls, while this is an improvement, bearish sentiment remains elevated above its historical average.

The week ahead — Economic data from Econoday.com:

“If it is abvious, it is obviously wrong” — Joe Granville

1. FTC Takes on Amazon, DOJ to Oversee Google — Amazon (NASDAQ:AMZN) could face heightened antitrust scrutiny under a new agreement between the government’s twin antitrust agencies that puts it under closer watch by the Federal Trade Commission, The Washington Post reported. The move would divvy up competition oversight of two of the country’s top tech companies, with the U.S. Justice Department having more jurisdiction over Google (GOOG, GOOGL) and paving the way for a potential investigation of the search-and-advertising giant.
2. Big Tech Faces Congressional Probe — the House Judiciary Committee unveiled a sweeping “top-to-bottom” review of unnamed tech companies early last week as reports surfaced of a dual effort from the DOJ and the FTC to tackle the perceived dominance and potential abuses of Big Tech. “The growth of monopoly power across our economy is one of the most pressing economic and political challenges we face today,” said David Cicilline, who chairs the Antitrust Subcommittee, adding that “market power in digital markets presents a whole new set of dangers.”
3. Trump Touted Progress in Mexico Talks — “Progress is being made” in talks with Mexico, according to President Trump, but “not nearly enough!” Discussions will continue , but “unless an agreement is reached a 5% tariff on Mexican goods would begin on Monday.” The peso slid as much as 1.3% as credit ratings agency Fitch downgraded the nation’s sovereign debt near junk status – citing risks posed by heavily indebted oil company Pemex and trade tensions – while Moody’s lowered its outlook to negative. Where would the levies hit hardest? Mexico is the world’s biggest exporter of beer (BUD, STZ), selling $3.6B worth to the U.S. last year, along with $2B in avocados (CVGW, FDP) and $2B in tomatoes. Corporations are also speaking out. Chipotle (NYSE:CMG) estimated a $15M hit, but said it could cover that by raising burrito prices by around 5 cents, while auto parts maker Aptiv (NYSE:APTV) said a 5% tariff would cost the company $17M per month.
4. US/China Trade War – China has lots of policy room according to PBOC — PBOC Governor Yi Gang declared if the trade war with the U.S. deepens, “we have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous,”. The yuan has stabilized in recent weeks as authorities voiced support for the currency, following a rapid selloff that pushed it near 7 per dollar – a level not breached since the global financial crisis.
5. Theresa May to step down as Tory leader — after 1,059 days in charge, U.K. Prime Minister Theresa May has officially stepped down as leader of the ruling Conservative Party. The race has already started to replace her, with 11 contenders and Boris Johnson the current favorite. Starting next week, the party’s 300 or so MPs will whittle down the field of candidates to two through successive rounds of voting. After that, the party’s rank-and-file members, an estimated 124K people, will decide which of those two finalists gets to be leader.

The week ahead — Economic data from Econoday.com: