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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • U.S. stocks fluctuated at the open, hitting an intraday record high for the seventh time in eight sessions on Thursday after the European Central Bank cut rates to record lows and outlined further accommodative monetary policy actions.
    •     Draghi said the ECB will introduce new, “targeted” offerings of liquidity to banks to encourage them to lend money to the real economy.
    •     The ECB also cut growth forecasts for 2014, while raising its target for euro-zone GDP in 2015.
    •     The S&P 500 has rebounded 6.2 percent since a selloff in small-cap and Internet shares spread to the broader market, dragging the index to a two-month low in April.
  • GM probe cites ‘incompetence, neglect’ in recall scandal.
    •     CEO Mary Barra said 15 employees found to have “acted inappropriately” have been fired. She did not name individuals.
  • Sprint agrees to pay about $32 billion to buy T-Mobile.
    •     Sprint has agreed to pay about $40 per share, which represents a 17 percent premium to T-Mobile’s closing share price on Wednesday. The offer is about 50 percent stock and 50 percent cash for T-Mobile.
    •     Japan’s Softbank, which owns 80 percent of Sprint, and Deutsche Telekom, which owns 67 percent of T-Mobile, still have to negotiate on the details.
    •     Under the proposed sale to Sprint Deutsche Telekom is expected to keep a 15 to 20 percent stake in the combined company.
    •     Three years ago regulators rejected AT&T’s agreed $39 billion bid for T-Mobile.
    •     T-Mobile has about $14.5 billion of debt and $5.5 billion of cash, meaning the deal implies a theoretical enterprise value for T-Mobile of about $40 billion.
    •     The U.S. telecommunications sector is already in the throes of a major, broader consolidation, with AT&T seeking to buy DirecTV and cable company Comcast trying to merge with rival Time Warner Cable.
  • Amazon planning to unveil smartphone to vie with Apple’s.
    •     Amazon is entering a smartphone market that grew 21 percent last year to $338.3 billion, according to researcher IDC.
    •     Amazon tweeted yesterday that it was holding an event in Seattle on June 18 hosted by Chief Executive Officer Jeff Bezos for a product unveiling.
    •     The post included a picture of a black, thin device with Amazon’s name in silver emblazoned on it.
    •     A smartphone from Amazon would ramp up its rivalry with Apple.
    •     The companies are increasingly going head-to-head in devices such as tablets and in Web services including online entertainment, as they strive to be digital gateways to consumers.
    •     Mobile is central to that effort as more people carry gadgets and do their computing on the go.
    •     In April, Amazon introduced a $99 TV box for watching digitally delivered shows and movies, called Fire TV.
  • Twitter in talks to buy online music firm SoundCloud, the Financial Times reported.
    •    SoundCloud, a Berlin-based audio sharing website, is a platform that enables people to upload, record, promote and share their music and other audio files.
    •     Twitter has weighed up deals worth billions of dollars and has also considered buying music-streaming service Spotify and internet-radio provider Pandora, the newspaper.
  • Americans aided by Fed favoring record REITs.
    •     Almost 35 percent of the money going into U.S. sector-focused ETFs, or $5.6 billion through June 3, was for real estate, according to Bloomberg.
    •     The Fed’s policy of keeping the federal funds rate near zero since 2008 while signaling that it won’t climb quickly has helped attract investors to real estate investment trust ETFs, because their payouts are better than investors can get from fixed income.
    •     U.S. commercial real estate is benefiting from high occupancies and rising rents for most property types. The average effective rent, the amount after any landlord concessions, for U.S. office space in the first quarter was $23.66 a square foot, compared with $23.14 a year earlier.
    •     The vacancy rate declined to 16.8 percent from 17 percent a year earlier.
  • Donald Sterling agreed to the $2 billion sale of Los Angeles Clippers to former Microsoft CEO Steve Ballmer, Sterling’s lawyer, said yesterday in an e-mail.

US ECONOMY & POLITICS

  • Fewest Americans filed jobless claims over past month since 2007.
    •     Initial claims for state unemployment benefits increased 8,000 to a seasonally adjusted 312,000 for the week ended May 31.
    •     Economists had forecast first-time applications for jobless aid rising to 310,000 last week.
    •     The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, fell 2,250 to 310,250, the lowest level since June 2007.
    •     The claims report also showed the number of people still receiving benefits after an initial week of aid declined 20,000 to 2.60 million in the week ended May 24. That was the lowest level since October 2007.
  • The Fed’s Beige Book of anecdotal economic reports for May, which was released on Wednesday, said the U.S. labor market “generally improved.”
    •     The Fed also said that the economy expanded at a modest to moderate pace last month as auto sales led household spending and the labor market improved.

EUROPE & WORLD

  • Draghi unveils historic measures on deflation threat.
    •     ECB hurls cash at sluggish euro zone economy, seeks to force bank lending.
    •     The ECB cut rates including the deposit rate to -0.10 percent and will move further to persuade banks to lend. In other words, it will charge banks 0.10 percent for parking funds at the central bank overnight.
    •     The ECB also cut its main refinancing rate to 0.15 percent, and the marginal lending rate – or emergency borrowing rate – to 0.40 percent.
    •     Draghi outlined a four-year 400 billion euro ($544.86 billion) scheme giving banks that have been holding back credit due to looming stress tests.
    •     Projections published by the ECB showed inflation would be just 0.7 percent this year, 1.1 percent next year and 1.4 percent in 2016.
  • China state media calls for ‘severe punishment’ for Google, Apple, U.S. tech firms.
    •     Chinese media have repeatedly attacked American tech companies for aiding the U.S. government’s cyber espionage since U.S. National Security Agency (NSA) contractor Edward Snowden revealed widespread spying programs.
    •     Chinese state-owned firms have since begun dispensing with the services of U.S. companies such as IBM, Oracle, and Cisco in favor of domestic technology.
  • Deutsche Bank offers stock in $11.6 billion capital boost.
    •     Deutsche Bank, Europe’s biggest investment bank, offered shareholders a discount of more than 20 percent to buy new stock as it sought to raise a total of 8.5 billion euros ($11.6 billion) to strengthen its finances.
  • South Korea eyes thaad, Patriot-3 Missile Systems, U.S. Says.
    •     Government has received information on both Lockheed Martin’s Patriot Pac-3 and its longer-range Terminal High-Altitude Area Defense system, known as Thaad, a U.S. Defense Department official said yesterday.
    •     The Pentagon has no preference as to which system South Korea should purchase. The United Arab Emirates is the only U.S. ally to purchase the Thaad system.

TODAY in HISTORY

  • Joseph and Jacques Montgolfier gave the first successful balloon flight demonstration (1783)
  • The United States went off the gold standard (1933)
  • Sen. George Marshall proposed a plan (Marshall Plan) to help Europe recover financially from the effects of World War II (1947)
  • The Arab-Israeli Six-Day War began (1967)
  • Sen. Robert F. Kennedy was shot by an assassin and died the next day (1968)
  • The Centers for Disease Control published the first report about the disease that would later become known as AIDS (1981)
  • Former president Ronald Reagan died (2004)

This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S & P 500, are unmanaged and may not be invested into directly. Sources: Reuters, Bloomberg. 

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