Stocks continue to “bounce” after the Brexit selloff. The Dow gained another 284 points to 17,694 on heavy volume. It has gained back half of what it lost from the Brexit vote.
Low oil prices have claimed another victim as Energy Transfer Partners, ETE, has terminated its $33 billion dollar takeover of Williams Companies. A year and a half ago ETE made the move to buy Williams but then with oil prices dropping and issues arising from taxation ETE sought to back out of the deal and today made it official after a court ruled they had the right to walk away without having to play “whip out” with a bunch of lawyers. ETE had stated the case that in trying to go through with the merger at current prices it would have caused an “implosion” of the financials.
Amazon today announced it was opening its first AWS cloud operation in Mumbai, India. Last September Microsoft started offering cloud services in India followed by IBM but with Amazon entering the space plus laying the foundation for retail sales in India down the road.
Leaders from Italy, Germany and France will meet today and one topic of discussion will be the Italian banking system which is under stress and needing a capital infusion. Two banks have already failed this year and Unicredit, Italy’s largest bank has lost 50% market value and needs an estimated 10 billion euro infusion to stay afloat. The Brexit vote complicated matters and over the weekend it was suggested that the Italian banking system needs an injection of at least $44 billion but EU regulations prevent this unless current restrictions are waived. Mama Mia!
Gold continued to creep higher today gaining $2.50 an ounce to finish at $1,320. What is most unusual about gold these days is that it normally moves in the opposite direction of the US dollar but since the Brexit vote both gold and the dollar have been moving higher which signals fear and uncertainty. The only other times gold and the dollar moved together like dates at a prom was in 2008 and in the 1930’s. The fact that they are moving in tandem could signal that foreign investors are losing confidence in local central bank monetary policy and thus replacing local paper currency with gold and dollars.