| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Top News
• Markets Brebound (or, That Cat Looks Dead to Me)
Financial markets have paused for breath at the end of a headlong two-day rout this morning, but the bounce looks decidedly of the dead cat variety, as the political chaos unleashed by the vote shows no sign of abating. U.S. stock futures are called to open around 1% higher, and European indices are posting gains of over 2%, while the dollar, Treasury bonds and other ‘safe haven’ assets are giving back some—but only some--of their gains. Crude oil is back above $47 a barrel. The worst of the carnage was again in banks—the U.K. has now put on ice any further sales of its stakes in Lloyds and RBS, while there is speculation about an emergency rescue of some of Italy’s largest lenders (see below). One factor supporting markets in London may be the feeling that things now can’t possibly get worse after England’s soccer team was knocked out of the 2016 Euro championships last night by Iceland (pop. 330,000) a country with more volcanoes than professional soccer players. Reuters
• Wishful Thinking about Bremaining?
One of the reasons for the modest rise in the markets’ mood is a flurry of pieces in world media yesterday about how the complexity of the political solution may give the U.K. and EU a chance to patch up their differences after all. There is, after all, a powerful economic imperative to find the best solution, that will remain after the surge of anger that fueled last week’s protest vote subsides. But such optimism needs to be discounted heavily, given how out of touch with voter sentiment most mainstream commentators proved to be last week. At the moment, the EU is trying to press the U.K. into starting the clock on exit negotiations. The U.K. will want to delay that until markets show that this is as much of a problem for the Eurozone as for the British (see below). The reality in any case is that negotiations always start with the two sides at their furthest apart, so expect the first waves of political rhetoric to be discouraging. Fortune Fortune
• Tremors Reach the Eurozone
No prizes for guessing where the Eurozone’s Achilles Heel may be in all this. The Financial Times reports that Italy is looking to use the crisis to sidestep European rules on state aid and government bailouts to shore up its banks with a multi-billion euro capital injection. Shares in the country’s biggest banks Unicredit and Intesa Sanpaolo fell over 30% in the two days since the referendum, amid concerns that their balance sheets still aren’t strong enough to cope with a new recession. A new wave of bailouts by a government whose debt/GDP ratio is already higher than Greece’s was in 2010 is likely to convince even more Germans that they shouldn’t be backstopping such a slow-motion train-wreck—even though German debt guarantees for all of the Eurozone is now probably its last hope of survival. FT, metered access
• VW to Pay $15 Billion
Volkswagen will announce the terms of its settlement with U.S. authorities and customers for its deception in trying to cover up excess emissions from its supposedly ‘clean’ diesel vehicles. According to Reuters, the total bill will be over $15 billion--$5 billion more than initial leaks had suggested late last week. Over $10 billion of that is in respect of a buyback offer for cars that are can’t be fixed, and nearly $5 billion to offset excess emissions and invest in zero-emission technology. The latter part of that is a commercial necessity for VW in any case, now that the technology it built its global empire upon has been exposed. CEO Matthias Müller gave no indication that the company would ever sell diesels again in the U.S. in a recent interview, and said a (still unspecified) time would come when it would no longer invest in the technology. The settlement does not address lawsuits from investors or a criminal investigation by the Justice Department.
Around the Water Cooler
• EU to Expand Google Complaint
The European Union is likely to step up its campaign against Google parent Alphabet next month with new accusations that it abused its market power in online advertizing and shopping, reports the Financial Times. Given the position of advertizing in Google’s business model, this could be a serious escalation of a dispute that had initially concentrated on alleged distortions of its less significant Google Shopping tool. Through services such as AdWords and AdSense, Google acts as a middleman between advertisers and more than 1m third-party sites, the FT notes. Alphabet is of course also under antitrust investigation in the EU for allegedly discriminating against third-party apps in its Android mobile operating system. FT, metered access
• Lyft May Be Looking for a Buyer
The Wall Street Journal reports that Lyft has hired Qatalyst Partners as financial advisers. Qatalyst is a specialist in helping tech companies find buyers, and the WSJ reports that Qatalyst CEO and Frank Quattrone has approached major automakers about taking a stake. Perhaps not coincidentally, Lyft has agreed with Uber to settle out of court a dispute that could have resulted in embarrassing details about the two companies being aired in public. Lyft has been comprehensively out-funded by Uber, raising less than 20% of the money its bigger rival has gathered in. It’s not clear whether GM, which took a 10% stake in Lyft earlier this year, would have preferential rights, or even be interested in raising its stake. What is clear, as ever, is that looking for a buyer is not something you do from a strengthening position. WSJ, subscription required, Fortune
• My Bad, Vlad
Some unambiguously good news: Turkey’s President Recep Tayyip Erdogan has apparently apologized to Russia’s Vladimir Putin for shooting down his warplane as it flew over a strip of Turkish territory last year en route to bomb Turkish-backed rebels in Syria. The rapprochement paves the way for an easing of vital Turkish exports (especially food and tourism) to Russia, easing food price inflation and allowing some relief in the form of summer vacations to citizens hard pressed by the ongoing recession. Russia’s GDP shrank by 1% year-on-year in the first five months of the year, much worse than expected. It’s not clear what, if anything, Russia has conceded in return. If Putin can restore relations with Turkey, it will allow him to focus more on using the current Brexit-related tensions to break the ring of western sanctions. Reuters
• Will StubHub Stop the Rot at the Yankees?
The New York Yankees have agreed to a partnership with StubHub, the nationwide ticket-resale broker, making it the team’s official ticket re-seller. The deal will start next month and will run until the 2022 season. The new product will allow StubHub to be completely integrated into the Yankees ticket system, replacing the Yankees Ticket Exchange. Although financial terms were not available, a source close to the negations said that the price of the deal will depend on revenue share, or how many Yankee’s tickets are sold on StubHub. The deal comes after dwindling attendance and criticism from fans about the Yankee’s ticket policy. According to the New York Times, the Yankees have long accused StubHub of underselling the value of their tickets by making them cheaper on a secondary market, where as the Yankees have been accused of making their tickets too expensive. NYT
