Bayer, Monsanto in $88b deal that could reshape the world’s food supply

From Drew Harwell:

The German chemical company Bayer said it will take over US seed giant Monsanto to become one of the world’s biggest agriculture conglomerates.

The $US66 billion ($88 billion) deal – the largest corporate mega-merger in a year full of them – could reshape the development of seeds and pesticides necessary to fuelling the planet’s food supply…..

Bayer in the US is known largely for its pharmaceuticals, with scientists who developed modern Aspirin and Alka-Seltzer. But the deal would pivot the 117,000-employee company more towards its farm-targeting business in agriculture chemicals, crop supplies and compounds that kill bugs and weeds.

Monsanto is the world’s largest supplier of genetically modified seeds, which now dominate American farming but are still a major source of environmental protests in Europe and abroad. The 20,000-employee company also develops Roundup, the weed-killing herbicide.

This is a merger of two giants in the agricultural and chemicals sectors and could lead to some interesting new developments in the future.

Source: Bayer, Monsanto in $88b deal that could reshape the world’s food supply

Europe on the mend

Germany’s DAX is holding above its new support level at 10500. Respect, with follow-through above 10800, would confirm the primary up-trend.

DAX

* Target calculation: 10500 + ( 10500 – 9500 ) = 11500

France’s CAC-40 Index is consolidating in a narrow band between 4400 and 4500. Upward breakout would suggest a primary up-trend. Follow-through above 4600, completing a broad double bottom, would confirm. Rising Twiggs Money Flow reflects buying pressure.

CAC-40

The Footsie retreated from resistance at 7000 but short candles and strong Twiggs Money Flow, high above zero, suggest long-term buying pressure. Expect strong resistance between 7000 and 7100. Correction to 6500 would establish a more stable base for further advances.

FTSE 100

* Target calculation: 6500 + ( 6500 – 5900 ) = 7100

Europe strengthens

Germany’s DAX respected its new support at 10500. Follow-through above 10800 would confirm the primary up-trend.

DAX

* Target calculation: 10500 + ( 10500 – 9500 ) = 11500

Italy’s FTSE MIB (Milano Italia Borsa) Index remains in a primary down-trend. Breakout above 17000 and the descending trendline, however, would suggest that a base is forming. Rising Twiggs Money Flow highlights buying pressure.

FTSE MIB

The Footsie retreated from resistance at 7000 but short candles and rising Twiggs Money Flow suggest buying pressure. Expect another test of 7000/7100 but resistance is strong. Correction to 6500 would establish a more stable base for further advances.

FTSE 100

* Target calculation: 6500 + ( 6500 – 5900 ) = 7100

How Global Elites Forsake Their Countrymen | WSJ

Great column by Peggy Noonan in the Wall Street Journal on the growing detachment between political and cultural elites and the problems facing ordinary citizens on the lower rungs of society. There is plenty of evidence of out-of-touch elites, including Brexit and Angela Merkel’s unilateral decision to allow 800,000 migrants and refugees from Muslim countries.

Nothing in their lives will get worse. The challenge of integrating different cultures, negotiating daily tensions, dealing with crime and extremism and fearfulness on the street — that was put on those with comparatively little, whom I’ve called the unprotected. They were left to struggle, not gradually and over the years but suddenly and in an air of ongoing crisis that shows no signs of ending — because nobody cares about them enough to stop it.

The powerful show no particular sign of worrying about any of this. When the working and middle class pushed back in shocked indignation, the people on top called them “xenophobic,” “narrow-minded,” “racist.” The detached, who made the decisions and bore none of the costs, got to be called “humanist,” “compassionate,” and “hero of human rights.”

Surprising support for Donald Trump and Bernie Sanders also reflect the disillusionment of the bottom half with leadership by the 1 percent. They feel they have been taken for granted — if not shafted — and their anger will be reflected at the ballot box. Hopefully we can avoid the rise of tyranny as in the 1930s — after the last financial crisis — but these are dangerous times.

Source: How Global Elites Forsake Their Countrymen – WSJ

Gold shudders on strong jobs numbers

Long-term interest rates surged on strong jobs numbers, well above the estimate of 180,000. From the WSJ:

Nonfarm payrolls rose by a seasonally adjusted 255,000 last month, the Labor Department said Friday. Revisions showed U.S. employers added 18,000 more jobs in May and June than previously estimated.

10-Year Treasury yields strengthened to 1.58 percent in response, from a record low of 1.33 percent four weeks ago. Expect a test of the descending trendline at 1.66 percent.

10-Year Treasury Yields

Gold fell to $1335/ounce on expectations of higher interest rates. Penetration of the rising trendline would suggest a correction to test primary support at $1200/ounce. Follow-through below $1300 would confirm.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1050 ) = 1550

At present I don’t see much threat to support between $1300 and $1310. Especially with safe-haven demand for gold enhanced by European uncertainty over Brexit, the dilemma of US November elections (a choice between two equally undesirable alternatives), and a declining Yuan encouraging capital flight from China.

USDCNY

Alex White on BREXIT

Alex White, Head of Country Analysis at The Economist Intelligence Unit: “We see an EEA- deal as highly likely…..we are reasonably optimistic about the breakup.”

Michael Pettis: Brexit could speed breakup of the Euro

On secular stagnation: “I don’t see growth picking up until you either redistribute income downwards — which is politically quite difficult and slow — or developed countries which are credible borrowers engage in massive infrastructure spending — which would be a great idea but politically difficult — so I’m afraid secular stagnation is going to last several more years.”

On BREXIT: “I’m not to optimistic that the Euro will be around in 10 years…BREXIT could speed up the process if England does well.”

On future crises: “It’s always the same thing: a huge switch from New York to Washington (in American terms) where policy begins to dominate the whole process…because the solutions to the problems are political solutions, not really economic or financial solutions…”

Gold surges as the Pound and Yuan fall

The Yuan is sliding against the Dollar, with USDCNY breaking through resistance at 6.60. Expect further capital flight, both from residents and offshore investors. Borrowers will also seek to repay Dollar-denominated loans and replace them with facilities in the local currency, adding further pressure on the Yuan.

USDCNY

The PBOC has been encouraged by fading prospects of further rate rises from the Fed, with 10-year Treasury Yields falling to a new all-time low of 1.37 percent, compared to 1.40 percent in 2012.

10-Year Treasury Yields

….And the Pound falling to a 30-year low.

GBPUSD

Falling currencies and lower long-term interest rates are both good news for gold bugs, with spot gold surging to $1370/ounce. Expect retracement to test the new support level at $1300/ounce. Respect of the band of support at $1280/$1300 is likely and would signal another advance, with a target of $1400/ounce*.

Spot Gold

* Target calculation: 1300 + ( 1300 – 1200 ) = 1400

Don’t blame demographics, blame the government

Niels Jensen’s Absolute Return monthly newsletter raises one of the major structural impediments to growth in Europe:

As [economist Woody Brock] pointed out when in London, ageing has only had a modest impact on GDP growth and inflation so far. Governments have ruined economic growth in Europe; demographics haven’t. If employment laws are such that employment is virtually for life, companies stop hiring. If you can’t fire, you don’t hire, as Woody pointed out….

Similar impediments are evident in Australia. If developed economies want to compete in global markets, they need to get their house in order. Raising barriers to free trade is not a sustainable alternative but will instead destroy any remaining semblance of competitiveness. Trade barriers result in a limited choice of products, forcing customers to pay higher prices and accept inferior quality. Lack of competition leads to the death of innovation. Quality deteriorates and we soon face another zombie industry dependent on government support. A prime example would be the motor industry — in Europe, North America, even Australia — over the last half-century.

Brexit: An Indictment of Direct Democracy or Vulgar Politics as Usual? | The Diplomat

By Ankit Panda:

Consider Boris Johnson, the man who appears best positioned to emerge as the UK’s next prime minister. In becoming the public face of the Brexit campaign in defiance of fellow Tory Prime Minister David Cameron, Boris seized on the opportunity he saw in the aftermath of the Cameron government’s own politically cynical ploy to hold a non-binding referendum on EU membership…. Boris, heeding Machiavelli’s warning that “there is nothing more important than appearing to be religious,” took on the role of the high priest of Tory euroskeptics in favor of leaving the European Union.

….Direct democracy by mean of referendum, in the context of Brexit, was a tool evoked of political necessity (Cameron seeking temporary political ballast) and taken advantage of for political ambition (Boris’ skewering of Cameron). That the people of the UK voted and told us what they really think is ultimately a neutral event, on balance.

…..The takeaway from ‘Brexit’, thus, shouldn’t be a hardening of contempt for popular will and the one-person-one-vote principle that underwrites all forms of modern democracy, but to continue to expect politicians to be politicians.

I’ll leave it to Boris Johnson to prove me right.

Source: Brexit: An Indictment of Direct Democracy or Vulgar Politics as Usual? | The Diplomat