Market Morning: BoJo Brexit Blowout, Maybe China Deal, Major League Cannabis, Aramco Shenanigans

BoJo Blowout, Britons Back Brexit (Again)

Story continues below

Boris Johnson and his Tory Conservatives completely trounced Jeremy Corbyn’s Labour last night in a landslide victory that saw the Tories win the most seats since the days of Iron Lady Margaret Thatcher. With all but two seats declared, the Tories are up on 363 to Labour’s 203, an enormous 108-seat swing in favor of the Tories. This gives Johnson a clear majority to get his Brexit deal through Parliament without much trouble from the opposition. Even worse for the Remainers, the Liberal Democrats are down to 11 seats with their leader Jo Swinson unable to even retain her seat in Parliament. The Lib Dems ran on a promise to revoke Brexit entirely, which the British people don’t seem quite interested in doing at this point. Swinson has stepped down as party leader. Corbyn, meanwhile, has said that he will not lead Labour into the next elections either.

Besides the Conservatives, the other major victor in the elections was Scotland’s Nicola Sturgeon and her Scottish National Party. Sturgeon followed up the victory by insisting on a new independence referendum and denying that Johnson has a mandate to take Scotland out of the European Union. Cable (NYSEARCA:FXB) skyrocketed on the result, gaining 4 cents to $1.34 per pound. Expect British stocks (NYSEARCA:EWU) to fly higher on the day.

Trump Secures Trade Deal With China, But Maybe Not

Headlines are confused about President Trump’s phase one trade deal with China. On the one hand, a commitment to roll back tariffs and suspend the implementation of new ones was supposedly reached, and on the other hand, it wasn’t yet. The South China Morning post reports that Ministry spokeswoman Hua Chunying did not quite say that the two sides had reached a deal. She did, however, point to the surge in the US stock market when news of a potential ceasefire in the trade war broke. “As soon as reports suggesting the phase one deal was reached emerged, the major stock markets in the US and Europe jumped. This illustrates that a deal through negotiation is beneficial to both nations and their peoples, and it is what the international community wants,” Hua said. Chinese stocks (NYSEARCA:FXI) were up about 2% yesterday.

The substance of the trade deal, however, is a bit confusing, since it requires China buy a certain amount of goods from the United States. This seems unenforceable, since it isn’t the Chinese government that actually buys things from American exporters, but private Chinese companies who make these decisions without a central authority directing them to do so. How Beijing can commit to any amount of US goods is questionable. What equities seem to be happy about is a rollback in tariffs on both sides, which should stimulate trade between the two countries, regardless of the specific amounts going in each direction.

Major League Baseball Says Yes to Natural Cannabis, No to Synthetic

Are you a Major League baseball player who likes to smoke cannabis? You’re in luck, because now you can. MLB and is accompanying players’ union announced Thursday that marijuana will be removed from the list of banned substances. Further, players will not be disciplined for testing positive for cannabis or opioids alone, but for how they behave while under the influence of these drugs. Players will be tested for fentanyl, cocaine and synthetic THC in random tests, then sent to treatment before disciplinary action is taken. So if you want to smoke a joint, make sure it’s from a natural plant source and not an artificial lab-created version of THC. “In agreeing to these modifications to the Program, MLB and the MLBPA continue to favor a treatment-based approach to Drugs of Abuse, with a particular emphasis on protecting Players from lethal and addictive substances, and providing effective and confidential care and support to Players who need it,” MLB said.

Aramco Trades Limit Up, Government Hand Suspected

Aramaco shares broke higher limit up, meaning they rose to the maximum allowable 10% in a day, after what was suspected to be government intervention on the Saudi Tadawul exchange to goose the price higher so Muhammad bin Salman could gloat about how successful he is. “It’s not exactly what you might call a free market price,” John Rutledge, Safanad CIO, told CNBC. “I think it was a managed sale with a lot of government involvement. They managed creating the book of buyers, but they also determined how many shares were sold. And so with that, you’ve got both levers. You can make the market cap almost whatever you want at that level.” His sentiments were echoed by Ellen Wald, author of Saudi, Inc.  “The 10% rise in share price upon opening isn’t unsuspected, but given all the news and what we know about the original investments, it’s inevitable to suspect that there is the heavy hand of government behind all of this.” How so? Wealthy Saudi families connected to the Royal family were pressured to buy shares, as well as public institutions controlled by the Crown. Oil (NYSEARCA:USO), meanwhile, continues to trade at just under $60 a barrel, a 6 month high.

Facebook Dips On FTC Injunction Rumors

Does Facebook (NASDAQ:FB) have a monopoly problem with the Federal Trade Commission? Might be, thanks to how its various social media products interact, including Facebook proper, Instagram, and WhatsApp. The issue is how these various products allow competitors to work with them, or not. Facebook wants the three applications to work in tandem with one another on a private network, locking the three into what could be considered an anticompetitive block according to the antitrust people at the FTC. Facebook joins Apple (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) are all being investigated by the FTC for anticompetitive practices, leaving only Netflix (NASDAQ:NFLX) of the FAANG stocks out of the FTC’s circle of interest.

An ad to help with our costs