Market Morning: Europe Fights Iran Sanctions, California Burns, Icahn Fights Cigna/Express Scripts Deal

Europe Forbids European Companies from Complying with US Sanctions Against Iran

US economic sanctions against Iran have begun being partially applied today at midnight, with oil-specific sanctions to be applied only after the midterm elections, so as to placate potential voters of the Republican party into thinking that the GOP does not cause gasoline prices to rise too precipitously. Meanwhile, Europe has applied a 1996 “Blocking Statute” preventing European companies from complying with the US sanctions, though there is no way to force European companies to do business with any specific country.

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European officials, quite understandable, are decrying the unlawful reach of US sanctions beyond US borders, effectively mandating how other countries do business with Iran that have nothing to do with the US. Words, though, may not be enough, because European companies who work with the US dollar will be subject to sanctions if they do business with Iran, by virtue of them using the world’s reserve currency. Alternatively, they could use gold or the euro, which would be very bearish for the dollar (NYSEARCA:UUP), as it would signal that there are alternatives to the world’s reserve currency. Oil (NYSEAERCA:USO), unsurprisingly, has jumped overnight in response to the beginning of renewed sanctions.

Alibaba To Raise Billions to Counter Tencent

Alibaba (NYSE:BABA) is looking to raise between $3-5 billion in an attempt to counter competition from Tencent Holdings (PNK:TCEHY) by merging its food businesses Koubei and Ele.me food delivery services. The market here is the online-to-offline where apps link consumers with brick and mortar business which make deliveries. The combined value of this industry in China is about $146 billion according to recent estimates.

California Keeps Burning

The 8 wildfires raging in California are now the worst in recorded state history, burning a combined near half million acres in the state. 7 deaths have been blamed on the fires so far, temperatures near the fires may range around 110oF, and President Trump has still managed to rouse those involved in fighting the fire, tweeting that bad environmental policies preventing water resources from being used to fight the fire are to blame for the fire’s spread. Officials involved in fighting the fire chose not to respond to the tweet. Trump is referring to environmental protection laws in California preventing some aquifers from being tapped.

 

Berkshire Hathaway Now Owns $50B Worth of Apple

Warren Buffett’s firm Berkshire Hathaway (NYSE:BRK-B) now owns about $50 billion worth of the world’s most valuable and only trillion dollar company, Apple (NASDAQ:AAPL). The massive investment company owns nearly 240 million shares of the iPhone maker, which makes it greater than a 5% owner. Slowing smartphone sales this last quarter were countered by generally higher prices for smartphones, indicating possible signs of consumer price inflation and slowing economic activity, at least insofar as iPhones are concerned.

Cigna is Buying Express Scripts, Icahn Demurs

Insurance giant Cigna (NYSE:C) is buying healthcare middleman Express Scripts (NASDAQ:ESRX) for $54 billion and Icahn Enterprises’s (NASDAQ:IEP) Carl Icahn is not happy about it. Icahn believes the price to be “ridiculous” according to an open letter he penned on the deal. Icahn’s MLP owns just over half a percent of Cigna, a valuation of about $250 million. Icahn cites existential problems for Express Scripts, and not the philosophical kind, including competition from Amazon (NASDAQ:AMZN) and regulatory issues from the Trump Administration in its attempt to lower drug costs through regulatory tweaking. Icahn said he would prefer a long term partnership over an acquisition, and is now on a campaign to rally Cigna shareholders to his viewpoint before the deal is approved.

 

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