Market Morning: Trump v Iran, Toronto Shooting, Poison Pizza Pill, Japanese Yields Rise

Market Morning

Shooting in Toronto Kills One, Shooter Dead, Gun Stocks in Focus

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A man fired a handgun into a Toronto café this morning, killing one and injuring 14, before being killed himself in a shootout with the police. His motive is unclear so far, and Canadian authorities are not ruling out nationalistic motives. Several months ago, a driver of a fan plowed into a crowd on a Toronto sidewalk, killing 10, though no motive was disclosed there either. A push for more gun control in Canada is now likely, which has pushed up gun stocks in the past.

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Trump, Iran, Sharpen War Rhetoric With Oil at $68

The language coming out of the White House and Iran’s leadership does not sound very encouraging as both sides have taunted the other of cowardice, using strong language of intimidation and generally just not being very nice, you could say. Using schoolyard language, President Trump warned Iran’s President Rouhani to “never ever” threaten the United States, which raises the question of what Trump may do now that the Iranians have practically been goaded into at least threatening, just for the sake of not looking weak. Iran has already threatened to block the Straits of Hormuz, which would paralyze exports out of the Persian Gulf and probably cause a scary spike in oil prices. Even if Iran does not actually succeed in blocking them or actually make concrete efforts to do so, oil prices could still spike if American warships are required as a security measure to accompany oil tankers out of the straits.

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Credit Conditions Beginning to Tighten? Credit Experts Say Yes

The Fed is tightening, interest rates are headed higher, and the era of easy money since the financial crisis may be ending. So says a survey released released last week by the International Association of Credit Portfolio Managers. According to the survey, the percentage of investors expecting credit spreads to widen over the next three months was the highest since the second quarter of 2008. The credit spread is the spread between US Treasury rates and private loans. If the spread widens, that means private loan rates are going up faster than treasury rates, which are also on an uptrend anyway since 2016.

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Papa John’s Takes Poison Pill To Prevent Hostile Schnatter Takeover

The company may be named after you and you may have founded the whole thing, but once you’re out, any takeover would by definition be hostile. John Schnatter, the founder and former CEO and Chairman of the Papa John’s (NASDAQ:PZZA) pizza chain, is upset about being forced out of his own company for mentioning a racial slur on a phone call which was, according to him, quoted out of context. He still owns about 30% of the company and could try to mount a hostile takeover through open market operations by acquiring a lot of shares. In the event that he tries though, the company has a plan to dilute the stock so that he won’t acquire a majority stake in the company. It will be interesting to see if a bidding war starts for a controlling stake.

Japan Hints at slowing money printing, JGB Yields Skyrocket

Yields on Japanese government 10Y bonds have skyrocketed 146% today, which sounds like a lot but it’s only 5 basis points, considering how close to zero long term Japanese yields have been since 2016. 5 basis points is still a lot considering Japan’s debt to GDP ratio is the highest in the world at 253%. The jump happened after the Bank of Japan hinted that it would modify its existing money printing program. We wonder what will happen to bond markets once these inflationary programs are actually stopped, either by necessity if and when inflation gets too strong, or voluntarily.

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