The Rio de Janeiro Olympics are now in full swing, with well-publicized facilities problems for both athletes and tourists highlighting the divide between the health of emerging and of developed economies. With export demand down by more than 25 percent over the past five years, Brazil has become a poster child for commodity-centric emerging economies that racked up rapid growth in a debt-fueled cycle of investment, then endured five consecutive quarters of contracting gross domestic product. Meanwhile, much stronger than forecast payroll figure in the U.S. and surprising resilience in activity indicators in the euro zone (despite the shock of the Brexit vote) suggest that some wealthier economies remain relatively insulated from the woes of by slack emerging-market demand. Critically, some observers note that the isolationist politics espoused by many First World leaders could exacerbate this divergence. In a note to clients over the weekend, Robert Savage, CEO of foreign-exchange hedge fund CCTrack Solutions noted, “The fragility of global trade, the rising tide of national and populist politics in the U.S. and elsewhere, the ongoing rise of terror and concern about security, the rising tensions over disputed territory – from the South China Sea to the Ukraine – all this leaves clear that the peace that has held the world together since World War II is at risk in the years ahead,” while adding that, “the relationship of global trade to global GDP and thus to an improving world is clear from the charts.”
Trump to call for halt to new financial rules. Advance copies of a speech to be delivered today by Republican presidential nominee Donald Trump indicate that he will call for a temporary ban on additional financial regulation in an attempt to lower hurdles for small business operators. In the past, Trump has proposed repealing the Dodd-Frank Act. Among other pro-business proposals Trump is expected to call for corporate tax rates to be lowered significantly and to streamline intellectual property laws.
Mattress merger. On Monday, South African retailer Steinhoff International Holdings announced an agreement to acquire Houston, Texas- based Mattress Firm Holding Corp. in a deal valued at $2.4 billion, or more than $3.5 billion, including assumed debt. For Mattress Firm shareholders, the deal represents a robust premium a bit over twice the closing price of Mattress Firm on Friday. In late 2015, Mattress Firm acquired rival discount retailer Sleepy’s to create a company with nearly 3,500 locations.
Wal-Mart said to announce Jet.com acquisition. In a move that appears to be a defensive reaction to Amazon.com’s growing retail dominance, Bentonville, Arkansas-based Wal-Mart Stores is expected to announce a deal to acquire Hoboken, N.J. startup Jet.com in the coming days, according to multiple reports. Jet.com’s strategy to date has involved discounted shipping through higher volume per-customer and rewarding payment methods without chargebacks to sellers. Wal-Mart’s online sales by notional value are currently less than 15 percent of those of Seattle-based Amazon.
Chinese FX reserves flat for month. In a statistical release on Sunday, the People’s Bank of China indicated that capital outflows have remained steady, with currency reserves for July stabilized at $3.2 trillion, roughly in line with consensus economist forecasts. Strengthening yen and euro valuations may have aided the stockpile, helping keep the decrease over the prior month to slightly more than $4 billion.
Factory activity picks up in Germany. Data released on Monday by the Statistisches Bundesamt Deutschland revealed stronger than forecast activity on factory floors in Germany in June. The headline production index increased by 0.8 percent for the month. Despite resilient signals from the sector, many economists anticipate that initial GDP figures for the second quarter slated for release on Friday will indicate muted growth during the period for the euro zone’s largest economy.
