TheChek News Flow

European Central Banks Face Added Political Constraints

The banks’ own rules, along with wider political trends and mixed economic signals complicate any move to tighten policy

Central bankers around the world are grappling with a common problem: when and how to normalize monetary policy at a time of normal levels of economic growth, normal levels of unemployment but abnormal levels of wage growth that is keeping inflation lower than their economic models predict.

Policy makers at the European Central Bank and Bank of England are facing political challenges that are making their task even harder.

At the ECB, the political constraint is its own self-imposed rules setting limits on the size and scale of its quantitative easing program.

To avoid getting foul of the European Union treaty prohibition on direct financing of governments by the central bank, the ECB limits itself to buying government bonds strictly in proportion to each eurozone member’s ECB shareholding and capping its ownership of any individual bond at 33%. As a result, its QE program will soon run into capacity constraints—starting as soon as this summer with Germany, Spain, Ireland and Portugal. That leaves it little option but to taper its current €60 billion ($68 billion) monthly purchases next year, says Gilles Moec, senior European economist at Bank of America Merrill Lynch.

That’s a problem, however, because the case for normalizing eurozone monetary policy is particularly weak, despite a recovery whose strength continues to take most economists by surprise. The economy has now expanded for 16 consecutive quarters, creating 6.4 million jobs. Consumer confidence is also at a 16-year high.

The sharp reduction in Eurozone political risks following the defeat of populist parties in recent elections in Austria, the Netherlands and France could lead to further upward surprises in growth it leads to a pickup in business confidence and investment. Yet unemployment in parts of the eurozone remains high—suggesting substantial spare capacity—wage increases are low even in Germany and inflation itself fell to 1.3% in June from 1.4% in May, well below the ECB’s target of close to but below 2%.

The ECB’s challenge is therefore to construct a narrative that allows it to taper without provoking a taper tantrum that sends eurozone financing costs soaring and undermines the recovery.

Last week, ECB President Mario Draghi attempted to meet the challenge by declaring that “the threat of deflation has gone and reflationary forces are at play. As these reflationary forces emerge, the ECB can adjust the parameters of QE to offset an automatic real-terms loosening of monetary policy.

Balancing this subtle message was one that ECB would need to be “persistent” and “prudent” in maintaining highly accommodative monetary policy to support the recovery. The jump in eurozone-government bond yields last week, led by a sharp rise in German bund yields, suggests Mr. Draghi’s rhetorical balancing act wasn’t entirely successful.

The Bank of England’s political difficulties are equally daunting.

On the face of it, the case for a tightening of monetary policy in the U.K. looks strong. Inflation is well above target at 2.9% and forecast to remain so beyond the BOE’s two-year forecasting horizon. Inflation expectations have risen 0.4 percentage points since July. Unemployment is just 4.7%, and the economy is growing in line with its potential, helped by a growing global economy.

A recent hawkish speech by BOE chief economist Andrew Haldane, coming after three members of the BOE’s rate-setting committee unexpectedly voted to raise bank rate in June, has fueled speculation the BOE could vote to raise rates later this year.

Yet hanging over the U.K. economy is the uncertainty of Brexit. Much of the rise in inflation is the result of the one-off devaluation of sterling after the 2016 referendum. The economy has proved remarkably resilient since the Brexit vote, thanks in large part to a surge in consumer spending to a 10-year high and accompanying collapse in household saving to a 50-year low.

Yet there are signs that falling real wages as result of higher inflation are starting to hurt consumer spending and confidence, which is reflected in falling retail sales, car registrations and house prices. At the same time, fears of a chaotic or badly managed Brexit that creates new barriers to EU trade may be deterring business spending. The U.K. economy grew by just 0.2% in the first quarter. Surveys suggest a subdued second quarter and start of the third.

That all points to the heightened risk of a premature normalization of monetary policy in the eurozone and UK.

Those risks could be heightened by action elsewhere. Should the Federal Reserve respond to a softening in recent data by delaying the three rate increases expected this year, a weaker dollar against the euro and sterling means an effective further tightening of euro-area and U.K. financing conditions. Both the euro and pound appreciated against the dollar last week.

That in turn highlights what may be the biggest challenge facing the ECB and BOE as they contemplate their plans for policy normalization: the need to reassure markets by explaining how they would respond if indeed they do make a mistake.

Saudi Arabia Moves to Silence Deposed Prince, Dissidents

Royal court limits movements of Mohammed bin Nayef, infiltrates social-media accounts of activists and religious figures

The new heir to Saudi Arabia’s throne has launched a crackdown on dissent in recent weeks, attempting to silence activists and critical clerics as well as his deposed predecessor, according to U.S. and Saudi officials familiar with the events.

King Salman upended Saudi Arabia’s succession order last month by naming his 31-year-old son, Mohammed bin Salman, crown prince and next in line to the throne, and sidelining his nephew and heir apparent, Mohammed bin Nayef, who has deep ties to U.S. intelligence and is widely viewed by U.S. officials as a stabilizing force in the region.

The newly elevated crown prince has limited the movements of Mohammed bin Nayef, the officials said. He has also replaced Mohammed bin Nayef’s guards with ones loyal to the royal court, they said, in a bid to ensure that Mohammed bin Nayef doesn’t take any steps to rally support.

“They want to make sure nothing is being plotted,” one of these people said.

Referring to Mohammed bin Nayef, a representative of the Saudi royal court said in a text message that there were “no restrictions on his movement whatsoever, either in or outside of Saudi Arabia.” The prince has hosted guests since the leadership change, the representative wrote in an emailed statement.

U.S. and Saudi officials said the royal court’s efforts to stifle dissent within the kingdom include monitoring and in some cases infiltrating the social media accounts of some activists and bloggers.

Some activists and religious figures viewed as stirring protest on social media have also been summoned in person to meet with interior ministry officials, and at least one of those people was told by officials to quiet down or face jail time, according to people familiar with the matter.

The royal court official didn’t respond to questions about the broader attempt to stifle dissent that the people familiar with the situation described.

Political parties are banned in Saudi Arabia as are protests, unions are illegal, the press is controlled and criticism of the royal family can lead to prison. Since the 2011 Arab Spring, the kingdom has stepped up efforts to curb dissent with tough laws, sentencing offenders to prison terms for Web posts deemed insulting to rulers or threatening to public order.

The recent crackdown follows the royal power shuffle and a move earlier in June by the kingdom to lead an economic blockade of neighboring Qatar, and is raising concerns among U.S. officials and observers that more political upheaval may be on the way, since the aging King Salman consolidated power in the hands of Mohammed bin Salman.

The Qatar blockade was championed by Mohammed bin Salman, while Mohammed bin Nayef favored a more tempered approach through diplomatic channels. That difference of opinions contributed to the timing of the power shuffle, The Wall Street Journal has reported.

The elevation of a new crown prince who backs a newly aggressive foreign-policy approach has concerned career U.S. officials who have long looked to Saudi Arabia as a source of stability in the Middle East.

Mohammed bin Nayef was a trusted contact for those officials. U.S. President Donald Trump has appeared to embrace Mohammed bin Salman by meeting with him in both Riyadh and Washington, D.C., before his elevation to the crown prince role.

The White House didn’t respond to requests for comment.

Mohammed bin Nayef “and his U.S. counterparts tended to see eye to eye on things,” said Steven Simon, who worked on Middle East security issues as a senior director at the National Security Council during the Clinton and Obama administrations.

One former diplomat said of the sidelined prince that in Saudi Arabia and the U.S., “the whole security apparatus has been dependent on him.”

Complaints about the escalating clash with Qatar led Saudi officials to boost efforts to monitor dissident communications and halt public criticism last month, in the weeks leading up to the power shuffle. Officials working for Mohammed bin Salman used technology from Hacking Team, an Italian company that provides surveillance tools to governments, according to people familiar with the matter.

Hacking Team didn’t return a call and emails seeking comment.

Some critics have left social media. Cleric Bader al-Amer told his followers on June 14 that he will stop posting on Twitter and other social media indefinitely. His announcement came after he tweeted that several clerics and intellectuals believe Qatar’s claim that it doesn’t sponsor terrorism.

Ibrahim al-Modaimegh, a former legal adviser to the government, said on June 27 that he was leaving Twitter temporarily for health reasons and hoped the new Saudi leadership would free people imprisoned for their political views.

A key official in the effort to quell social-media protest, according to activists and journalists, is an employee of the new crown prince named Saud al Qahtani. Mr. Qahtani, an adviser to the royal court who gained the title of minister in 2015, launched a vocal Twitter campaign against Qatar at the time of the June 4 blockade, accusing Qatar of having plotted years ago to kill the late King Abdullah. Mr. Qahtani couldn’t be reached for comment.

Officials at the kingdom’s ministry of the interior have also been directly involved in the effort to suppress dissenting voices. A few weeks ago, they began summoning journalists, activists, preachers and others who were viewed as being publicly critical to meetings in which they were told to stop expressing these views, according to people familiar with these meetings.

The crackdown continued as the end of Ramadan approached, and then, on June 21, the leadership shift promoting his young son and sidelining his nephew.

The shuffle followed a series of moves that built up the power base of the younger Mohammed bin Salman, who is leading a plan to overhaul the economy that includes selling shares in the state-owned oil company on a public exchange in 2018.

France’s Total Set to Invest $1 Billion in Giant Iranian Gas Field

Deal will mark the first major investment in years by a Western company in the country’s oil sector

LONDON—France’s Total SA said it will sign a deal on Monday that completes a $1 billion investment in a giant Iranian gas field, capping months of negotiations over the first big move by a Western oil company into the country in years.

Total will be the lead operator in a partnership with China National Petroleum Corp. and Iran’s Petropars to develop South Pars—a gas field under the Persian Gulf that is one of the world’s largest. Iran’s oil ministry said the contract would be signed Monday afternoon.

The Paris-based oil giant has led the charge to return to the oil-rich country since Western sanctions over its nuclear program were lifted. Monday’s deal will be the culmination of months of negotiations after Total signed a preliminary $4.8 billion agreement to develop the giant gas deposit alongside its partners late last year.

Total Chief Executive Patrick Pouyanné has indicated the first $1 billion to be pledged on Monday would go toward funding the project’s first phase.

Total said the gas from the Pars field will supply the domestic market from 2021. The company had been in talks with Iran to create the country’s first liquefied natural gas export system but they couldn’t agree on a gas price, people familiar with the matter said.

International oil companies have been slow to re-enter Iran following a landmark deal with world powers in 2015 that lifted many Western sanctions on Tehran. The energy business remains politically fraught in a country that needs international investment to develop its resources but also sees oil and gas as a vital national asset that shouldn’t be turned over to foreigners.

With U.S. sanctions over terrorism, weapons and human rights still remaining, many banks have refused to deal with Iran, and Tehran’s hard-liners have pushed back against attempts by President Hassan Rouhani’s administration to sweeten the terms for international oil companies in Iran. Discussions between oil companies and Tehran have also been complicated by the election of U.S. President Donald Trump, who has been critical of the nuclear agreement.

Total’s Anglo-Dutch rival Royal Dutch Shell PLC has also signaled interest in returning to Iran. In December it signed a preliminary deal to explore future projects in the country, but has yet to make a more concrete commitment.

A Total spokesman said its planned investment would remain in strict compliance with all applicable sanctions and regulations.

Investors have been closely watching to see the terms western companies will get to return to the country.

Total’s deal will be the first Iranian Petroleum Contract signed in Iran, and the company said the 20-year contract came “with very attractive commercial terms,” without disclosing more details.

The terms of the deal appear more flexible than previous arrangements Iran signed before sanctions. The 20-year time frame, for instance, is longer than the five-year deals Iran previously allowed.

Foreign companies have frequently complained they were unable to recoup their investments in previous contracts signed in the 1990s because Iran had set a fixed amount for project costs.

Dollar Gets Squeezed From All Sides

Greenback is down 5.6% this year, its worst two-quarter decline since 2011, as investors see more growth overseas

The dollar suffered through its worst stretch in six years during the first half of 2017, as investors turned more confident that economic recoveries around the world are gaining on or surpassing growth in the U.S.

The currency lost 1% last week against a basket of major peers tracked by The Wall Street Journal, bringing its decline for the year to 5.6%. That is the dollar’s largest two-quarter percentage decline since 2011.

The dollar has come under fresh pressure after central-bank officials in Europe and Canada last week offered some of their strongest signals yet that they could soon begin winding down monetary policy measures designed to spur economic growth.

Investors, viewing these statements as a sign of strength and a possible portent of higher interest rates in those countries, rushed to buy the currencies. The euro soared to its highest level against the dollar in more than a year, while sterling and the Canadian dollar both rallied more than 2%.

The developments marked the latest bad news for the dollar, now the worst-performing of the major currencies this year.

Few had expected such a turnabout even six months ago. Investors had driven the dollar to a 14-year-high after the November U.S. presidential election on hopes that Donald Trump’s plans for a tax overhaul, deregulation and fiscal stimulus would accelerate growth while the Federal Reserve also raised interest rates.

Instead, the Trump administration’s plans have repeatedly hit political roadblocks while U.S. growth, employment and inflation data have begun to soften.

Even the Federal Reserve continuing to raise U.S. interest rates—one of the few positives for the dollar this year—is no sure thing. Some Fed officials recently have expressed concern about pushing up rates amid weakening inflation. The latest was Federal Reserve Bank of St. Louis President James Bullard, who said on Thursday that he doesn’t support raising short-term interest rates again this year.

“I think we have been overly hawkish, especially with regard to our future plans,” he told reporters during a London presentation.

Markets are pricing in a roughly 54% chance that the Fed sticks to its projection for at least one more rate increase in 2017, according to fed-funds futures contracts tracked by CME Group . That is down from 62% in March.

Meanwhile, investors are growing more bullish about economic recoveries in Europe and parts of the developing world, even as they fear a U.S. slowdown.

After years in which the U.S. economy outpaced growth in the eurozone, the 19-country currency bloc pulled ahead last year, and recent forecasts have its growth essentially even with that of the U.S. this year and next.

Emerging-market economies are expected to expand at the even faster rate of 4.7% this year, more than double the pace of U.S. and Europe, according to J.P. Morgan .

“The rest of the world’s tone is improving while the U.S. is decelerating, and the dollar is reflecting that,” said Mark McCormick, North American head of foreign-exchange strategy at TD Securities.

Some investors believe the dollar’s performance this year could spell the end for the bull market in the greenback. Periods of dollar strength have typically lasted for around seven years.

“We’re at this pivotal moment now where we’re in the midst of a major turn lower in the dollar,” said Bilal Hafeez, head of foreign-exchange strategy for Nomura Securities in London.

Alessio de Longis, a portfolio manager at OppenheimerFunds, entered the year betting on a broadly stronger dollar but now expects the dollar to trade sideways this year.

“The growth momentum in the U.S. is fading,” Mr. de Longis said. “Without a reinvigoration of tax reform, which doesn’t seem likely this year, the dollar bull market is probably over.”

Hedge funds and other speculative investors built up more than $28 billion in bullish bets on the dollar at the end of last year, according to Commodity Futures Trading Commission data. As of June 27, bullish bets on the dollar had shrunk to a net $2.7 billion.

Not everyone has lost confidence in a strong dollar: James Athey, a senior investment manager at Aberdeen Asset Management , still expects the dollar to rise against developed-market currencies such as the yen in the months ahead.

“The dollar has suffered greatly,” said Mr. Athey, who thinks dollar investors are too pessimistic about the Fed’s interest-rate path.

“We think the U.S. economy is still the most robust,” he added.

A weaker U.S. currency could help support the recent recovery in corporate profits, which grew at the fastest pace in nearly six years in the first quarter of the year. A falling dollar makes U.S. multinationals’ exports more competitive abroad.

A weaker dollar also would relieve pressure on emerging-market nations by making their dollar-denominated debts easier to service and relieving downward pressure on their currencies. Since many developing countries are also commodities producers, a weaker dollar helps these economies because it makes their materials cheaper for nondollar buyers.

Even in Europe, where exports to the U.S. have become more expensive as a result of the euro’s 8.6% rise against the dollar this year, signs of growth slowly picking up could mean European companies are better able to withstand a weakening dollar than in previous years. The benchmark Stoxx Europe 600 index has rallied 5% this year.

US central bank appears unshaken by market turbulence and soft inflation readings

A sustained run of weak US inflation readings has yet to derail the Federal Reserve’s plans to start unwinding quantitative easing as soon as September. 

The sensitivity of efforts to unwind crisis-era stimulus has been underscored in recent days as top officials in the euro area and the UK struggled to fine-tune their messages, triggering a bond-market sell-off. In the US core inflation retreated further on Friday, reinforcing calls from Fed critics for the central bank to shelve its tightening campaign.

But recent comments from US officials suggest they are sticking to their basic case that falling unemployment will eventually drive up price growth and that ultra-gradual tightening remains in order. Janet Yellen, the Fed chair, on Wednesday reiterated plans for gradual rate rises and said the Fed’s balance sheet plans were “well understood” by markets. 

“They have effectively made their decisions on running down the balance sheet already, so they only need to decide when, and September is certainly possible,” said Roberto Perli, an economist at Cornerstone Macro. “Part of the motivation is to start the process this year before new leadership comes in in 2018. Meanwhile it is prudent to take a break from rate hikes to clarify what is happening on inflation.”

Minutes from the Fed’s latest policy meeting on Wednesday will shed more light on how the Federal Open Market Committee views sub-par inflation. Ms Yellen appeared sanguine about low price growth in June when the Fed lifted short-term interest rates by a quarter point, saying the process of shrinking the balance sheet could start “relatively soon”. 

Patrick Harker, the Philadelphia Fed president, told the FT last month that he believed the Fed should hold fire on rates while moving forward with balance sheet rundown given his view — shared by many Fed policymakers — that the latter process will have only a modest tightening impact. This could point to a possible September move on the balance sheet with a rate rise on the cards in December, when policymakers will have a clearer sense of how inflation readings are panning out. 

If inflation data were to disappoint persistently, or if the market sell-off were to gather steam, that would begin to shift more Fed officials towards a dovish stance. Some rate setters have cited the benign market conditions of recent months as a supportive factor to be balanced against soft inflation readings.

But it remains an article of faith among Fed rate-setters including Ms Yellen that once unemployment gets low enough it will trigger higher wages and inflation, arguing for a very gentle tightening in monetary policy. 

The Fed has played down the significance of its balance sheet rundown, with Ms Yellen saying it will be as uneventful as watching paint dry, but that does not make the timing of the decision straightforward. 

Leaving the kick-off as late as December, as some economists predict, could mean commencing a delicate process only seven weeks before the possible departure of Ms Yellen, who may not win a second term as Fed chair from President Donald Trump. Those weeks would be an anxious time in markets as investors anticipate a change of direction at the top of the Fed. 

On the other hand, September, which is the other most likely moment to begin the balance sheet rundown, could be clouded by a debt ceiling showdown, something that would also prove destabilising to markets. The Congressional Budget Office last week said the Treasury may run out of cash in early- or mid-October if the debt limit is not lifted. The Fed’s next policy decisions are due on July 26 and September 20. 

The Fed has to date been satisfied with the way the markets have digested its balance sheet communications, but it has bitter experience from 2013, when then-chair Ben Bernanke inadvertently triggered a bond market ‘tantrum’ by foreshadowing the tapering of bond purchases. 

It is hard to know exactly how much of the Fed unwinding plan is already priced into markets. When the starting gun is fired, it will commence a process that would only be halted in the case of a nasty downturn. That could in itself mark an inflection point as traders are forced to adjust to a seemingly inexorable, multiyear process. 

Mr Harker said in the FT interview that the decision on timing has yet to be made. With their favoured measure of core inflation now at just 1.4 per cent, Fed officials will be watching subpar inflation data closely and further disappointments would prompt doves to start calling for a change of view. 

Policymakers will have three more consumer price index reports under their belt by the time they hold their September deliberations. Just as critical are employment readings, with the next jobs report due on Friday in the wake of a slowdown in business hiring over recent months. 

With almost 800 trials under way observers warn scientific rigour is being compromised

It might sound like a strange complaint against an industry often accused of scrimping on research to fund marketing efforts, but some executives and scientists say drugmakers are doing too many clinical trials in the hot new field of immunotherapy.

Merck and Bristol-Myers Squibb have dominated the first wave of immunotherapy with their “checkpoint inhibitors”, which release brakes in the immune system so that it can attack tumours, while Roche, AstraZeneca and Pfizer are trying to catch up by launching rival versions. Almost $9bn worth of these checkpoints have been sold since they went on sale two years ago. 

Early enthusiasm for the medicines has given way to a determination to push response rates substantially higher. Although a minority of about 20 to 30 per cent of patients respond extremely well to the drugs — living for months or years longer than their doctors would expect — the majority derive no benefit. 

“There is some pushback,” said Jill O'Donnell-Tormey, chief executive of the Cancer Research Institute. “Are there too many trials? Are we just throwing spaghetti at the wall, by taking compound ‘X’ or ‘Y’ and adding it together just to see what happens?” 

Most scientists say checkpoints do not need to be replaced with something else, but rather augmented with new drugs that can further cajole the immune system into fighting cancer. This has led to an unprecedented amount of clinical research sponsored by drugmakers, which are combining checkpoints with other medicines to try to find a magic bullet to treat cancer. 

The sheer number of studies has sparked fears that some companies are engaging in a medical gold rush, hoping to chance upon the right cocktail without doing the appropriate scientific groundwork. 

Almost 800 clinical trials involving a checkpoint are under way in the US, according to a government database, more than 700 of which are testing the drugs in combination with one or more additional medicines. This compares with about 200 in 2015.

Some investors are unnerved by such haste, says Brad Loncar, who runs an exchange-traded fund focused on immunotherapy: “People are concerned there is not as much scientific rigour as there should be.” 

Pascal Soriot, chief executive AstraZeneca, which is trialling its own immunotherapy combination, admitted as much in a recent interview with the Financial Times. 

“The field is very competitive. Right now you have a lot of companies that take bets . . . without a lot of data,” he said. “So we also have to consider the speed, and sometimes we’re going to have to take educated risks with maybe not as much conviction or data to support the clinical programme, but enough of it.” 

While Mr Loncar believes that the recent surge in clinical trials is fundamentally a good thing for patients, he says the field should move at a speed that allows scientists to fully understand the reasons behind a particular success or failure. 

“When trials fail there’s not enough time or effort to look at the details to understand why things are not working,” he says. 

With five checkpoints on the market, the class of medicines is well-established, but many drugmakers are nonetheless developing their own versions, such as Novartis, Eli Lilly and Regeneron. In total, there are roughly 50 of these medicines, pejoratively known as “me too” products, in the pipeline. 

Some executives say the latecomers may find it increasingly difficult to fill their trials with “naive” patients who have not already been treated with a checkpoint. Many will have taken the drugs already, either because they have completed one of the hundreds of existing studies, or because their doctor has prescribed the medicine to them on an “off-label” basis, whereby they are given an immunotherapy to treat a cancer for which it is not approved.

“The level of pre-treatment and controlling for that is something we want to be cognisant of, because we want to ensure we have a consistent set of baseline patients to evaluate,” says Vas Narasimhan, global head of drug development at Novartis. “And I would say that’s getting more complex.” 

Theoretically, it should not be difficult to recruit participants given that only 4 per cent of cancer patients end up on a trial in the US. But the pharma industry has struggled to widen the pool beyond highly educated people who live in urban centres. 

Patients can also be reluctant to enter a randomised trial because they might end up in the control group that does not receive the drug, a fear that some companies have tried to assuage by allowing people to cross over into the treatment arm once their cancer worsens. Designing trials in this way can cloud the results significantly, however. 

Dr Roger Perlmutter, the top scientist at Merck, has little sympathy for laggard companies, arguing they should instead focus their efforts on unearthing new drugs or looking for biological clues that might predict which patients are most likely to respond. 

“It’s going to be difficult for those who are coming in late, but really that’s the way it should be,” he says. “The world doesn’t need any more [checkpoints]. We need other things. We should be finding a way to develop other medicines beyond these.” 

And some investors fear that the proliferation of checkpoints could end up commoditising one of the most promising drug classes in years. 

The rush to develop so many “me-too” drugs is best explained by the widely held belief that checkpoints will form the backbone of combination immunotherapies in the future. 

Those companies without their own in-house versions will have to strike deals with a rival company every time they discover a promising molecule that might be used in a cocktail, reducing their flexibility and wasting time in a highly competitive field. 

“We fully recognise there are others out there, but we decided to develop our own because we felt it was a necessary ingredient,” says Dr Israel Lowy, a vice-president at Regeneron. “We wanted the flexibility to trial it in combinations.” 

He adds: “There is a lot of room to improve if we do come up with the right combination. That’s the future. We are only at chapter one in the book of immunotherapy.” 

Watchdog wants to to intervene earlier in potential antitrust cases

The EU’s competition watchdog is considering tough new powers to intervene earlier in antitrust problems in an effort to avoid the type of delays it faced in the Google investigation.

Margrethe Vestager, the EU’s competition commissioner, told the Financial Times she was looking at broader powers to impose so-called interim measures, which order companies to cease suspected anti-competitive behaviour even before there is a formal finding of wrongdoing. 

“The French have been very successful in doing interim measures for quite some time and that is, of course, of interest to us,” said the commissioner. 

A move by the European Commission to adopt such powers would give the world’s most active antitrust authority a much wider range of options to impose itself on dominant companies and shape behaviour in fast-moving markets such as the digital sector. 

The commission at present must prove a company is causing “irrevocable harm” before imposing “interim measures” — a high threshold that means it is virtually impossible to use. 

“If you have a tool in the toolbox of interim measures then of course you should consider why is it that it’s never used,” said Mrs Vestager. 

The commission is watching other jurisdictions to learn how to have a “more workable” tool. “To boil it down, it’s not being used because of the very, very high bar of irreparable harm,” she added. 

However, there were no concrete plans to change the rules just yet. She said the commission “had a lot of thinking to do” and was still trying to be “rather thorough than quick in this”.

Comparison shopping rivals had asked EU authorities to intervene to stop Google’s behaviour years ago, at a much earlier stage in the commission’s eight-year probe into the search giant.

Some rivals claim they were run out of business during the years it took to reach a decision, saying the abusive behaviour drained their sites of traffic, revenue and investment. 

Brussels has gradually attempted to strengthen the legislative framework for antitrust enforcement, but big changes are rare. New EU regulations came into force this year that gave parties additional powers to seek damages based on antitrust decisions. 

Mrs Vestager pointed out that anyone who had suffered damage from Google’s illegal behaviour could “claim compensation from Google before national courts” when she announced her decision to fine Google €2.4bn. “So, this decision requires Google to change the way it operates and face the consequences of its actions.”

Also under consideration is a new merger threshold that would require companies to seek European approval for acquisitions where the price paid was over a certain amount. Currently companies only need to seek approval for a deal when both generate sufficient sales in the EU. 

“We had a public consultation on, among other things, merger thresholds working from the hypothesis that we may have a merger that does not meet our thresholds because turnover has not showed yet, but you still have a very valuable company because of the potential of data and how it will work in the future,” said Mrs Vestager. 

German authorities have put in place a new rule to examine takeovers of companies active in the country where the price is more than €400m. The commission is watching Berlin closely and evaluating the responses to its public consultation on merger control that ended in January. 

“It is a very good thing for us to see what works well in member states, both when it comes to merger thresholds but also, for instance when it comes to the use of interim measures,” said the commissioner.

Verizon Communications’ Lowell McAdam could be hiking the Sawtooth Mountains in Sun Valley next week, perhaps in search of his next deal now that the phone company closed its acquisition of Yahoo.

One rumor making the rounds last week was that Verizon may be eyeing a Disney purchase. While that sounds fantastical, a well-placed banker told On the Money not to count Verizon out.

“It feels like Verizon is playing checkers while AT&T is playing chess,” said one media observer, reflecting the view that Verizon needs more content assets to shore up its mobile ad ambitions.

Meanwhile, AT&T CEO Randall Stephenson, who is bagging Time Warner, is also slated to attend Allen & Co.’s annual Sun Valley mogulfest, along with Time Warner’s CEO Jeff Bewkes and his three divisional chiefs: John Martin, Richard Plepler and Kevin Tsujihara.

The three amigos will be part of AT&T’s Dallas-headquartered telecom universe come fall. We’d love to hear if the gang goes whitewater rafting together in Sun Valley and what news they’ll discuss.

The high-octane deal-making powwow will be absent Disney CEO Bob Iger, Twitter boss Jack Dorsey and former Uber chief Travis Kalanick.

They’re not on the attendee list, though they could always just show up. In the case of Kalanick, however, we hear the Allen & Co. hosts are very buttoned up and do not tolerate bad-boy behavior from those on the invite list — hence his absence.

There’s a sprinkling of businesswomen on the attendee list this year: Sara Blakely of Spanx, GM’s Mary Barra and IBM’s Virginia Rometty.

Could Barra be in the driver’s seat and headed to replace Kalanick at Uber? On the Money hears she is certainly a candidate. Tipsters also shared that ViaSat, a global broadband company that among other things is used to “empower international war fighters on the front lines of battle,” will be part of the new tech breed lined up to present.

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An aggressive backup in global interest rates headlined a week that also saw a significant rebound in oil prices and bifurcated trading in US stocks. Hawkish central bank commentary complemented hotter than expected CPI readings in Europe, which induced a mid-week rotation out of sovereign bond markets, driving up yields. The spread between European and US Treasury yields narrowed, pressuring the Dollar Index, and pushing the Euro to a 1-year high. Higher rates and encouraging CCAR announcements powered equity flows into the banks and financials. In Washington, doubts about the fate of the Senate healthcare bill injected more uncertainty about the Republican legislative agenda, as GOP leaders continued to woo votes from their own caucus and were forced to push back the vote until after the 4th of July break. 

By Friday, WTI crude extended to a 7-day winning streak, adding 6.5% on the week, and buoyed equity flows. Despite the positive sentiment in those sectors, continued aggressive selling in the high beta, high profile technology stocks resulted in another notable spike in NASDAQ volatility, allowing for a mid-week dip in US stock trade. Much of the equities weakness was blamed on the likelihood that algorithmic trading along with thin quarter end/holiday conditions exacerbated a rotation out of big-cap tech into other areas of the stock market. Ultimately, stock indices were lower on the week, with the DJIA off 0.2%, the S&P500 down 0.6%, and the Nasdaq falling 2%.

Macro :

- EU’s Vestager Says Received No U.S. Reaction to Google Fine

- Emerging-Market Assets Trim Biggest Rally Since 2009: Inside EM

- Hedge Funds Cut Nasdaq Futures Holdings to 12-Month Low: CFTC

Keep an eye on :

- AMUN FP : Amundi to Expand Its Business Via ’Organic Growth,’ Sole Reports

- BA/ LN : BAE Systems Wins GBP3.7b Ship Deal From U.K. Defence Ministry

- BAYN GY : Bayer Warning Has Mosaic, Compass, Agrium Read-Through: Stifel

- BBVA SM : BBVA Frances Offers up to 95m Shares; Indicative Price: $6.23

- DEDRL IT : Delek Drilling Says Tamar Reserve 13% Bigger Than Pvs Estimate

- DROPBOX IPO : Dropbox Said to Be Seeking to Hire IPO Underwriters: Reuters

- ELAL IT : El Al Agrees on Terms to Merge Its Sun D’Or Unit With Israir

- EOAN GY : E.ON CEO Teyssen Rejects SPD Proposal to Cap Salaries: Focus

- GTO NA : Gemalto’s Potential Deal Could Be Valued Up To EU75/Share: UFP

- GSK LN : GSK Signs Drug Discovery Collaboration Deal With Exscientia

- GOOG US : Alphabet Says EU Antitrust Fine to Cut Profit by $2.74b

- LISN VX : Lindt’s Russell Stover Plans Stevia Chocolate in U.S., SamW Says

- OPTI BB ; Option Targets Up To EU9M in Revenue for 2017, De Tijd Says

- RNO FP : Renault Samsung to Recall 62,000 Cars Over Sensor Defects

- SBRY LN : Sainsbury May Be Interested in Supply Deal With McColl’s: Mail

- SRT3 GY : Sartorius Has EU1.5 Bln Leeway for Acquisitions, CFO Tells BZ

- STL NO : Statoil Evaluating New Co2 Storage Project Offshore Norway

- TELE2 SS : Tele2 Says Court Rejects Its Claim for Interest Deduction

- TKA GY : Thyssenkrupp, Tata Seek Clarity on Steel Merger This Month: HB

- TKO FP : Tikehau Must Pay EU0.28m in French Markets Regulator Probe

- FP FP : Iran, Total to Sign S. Pars Gas-Field Deal on Monday: Official

- UN01 GY : Uniper Could Invest in Sweden Reactor After Tax Agreement: CEO

- VWS DC : Vestas Gets 200-Megawatt Order in U.S.; Total 2Q Orders 1,956 MW

- VOW3 GY : Volkswagen to Recall 385,000 Cars in Germany: Bild

- VOW3 GY : VW’s France Sales Numbers Were Falsified for Years, Spiegel Says