A bullish CEO Charles Payne at Wall Street Strategies wrote:

“Oil takes out $50, the Dow takes out 18,000, and the S&P looks convincing above 2100. While virtually every measure of the broad market is at the top of its trading range, there are still lots of stocks with room to the upside. As the breakout action is confirmed by closing above key levels, it becomes a self-fulfilling prophecy as shorts are forced to cover and money comes off the sidelines."

German growth has picked up despite or perhaps because of negative interest rates for bonds with duration below 10 years. And as BofA-Merrill Lynch writes, the 10-yr bund yields all 0.05%. The Thundering Herd also noted that Toyota Finance Corp issued ¥20 bn in 3-yr unsecured bonds bearing a coupon of 0.0001%. The European Central Bank will start buying corporate bonds July 18, with the terms published. Bonds have to be out already and actively traded, denominated in euros and be issued in the eurozone, and be rated investment grade. Little wonder that Japanese and German bond-buyers are moving instead to buying US bonds, despite the Fed hinting at further rate hikes this summer or fall. If interest rates rise, existing bond prices will fall.
 

Marc Chandler, the currency expert at Brown Brothers Harriman, wrote on seekingalpha.com:

“China's May trade surplus stood at $49.98 bn. This is larger than April's $45.56 bn surplus but less than the median expectation of $55.7 bn. Exports fell 4.1% year-over-year, a touch more than expected and follows a 1.8% decline in April. Imports were more surprising. They were off only 0.4%. The market had been looking for a 4% fall after dropping 10.9% in April.

“There are at least two important takeaways from the Chinese trade figures. Imports have been contracting since October 2014. The 0.4% decline is the smallest in more than a year and a half. The news seems too good to believe. Consider that imports from Hong Kong reportedly increased by $2.48 bn. This is the most since 1999 and represents more than a 240% increase from a year ago. The suspicion is that this reflects over-invoicing to disguise capital exports.

“The other important takeaway is that China's steel exports rose 3.7% in May and in the first five months are running 6.4% above year ago levels.The US and EU are already taking action to deter a further surge of Chinese steel imports. China's surplus capacity is likely to be a source of tensions for years to come.”

A broker I know has rescheduled his July wedding to Long Island from the US Virgins because of fear of Zika. Many of the bride's friends are pregnant or trying to become pregnant.

*Tencent (TCEHY) is viewed by the Financial Times' gossip columnist Lex as a play on bank card use picking up in China, leading to payments from both merchants and buyers on WeBank. TCEHY is only now charging buyers a fee, of 0.1%, which can be combined with lucrative loans to both partners. The problems in Chinese "shadow" banking have led Beijing to ban foreign investment in WeBank which is now raising money, meaning TCEHY, owner of a third of WeBank, and the other partners will be able to pay in less than if there is real offer for WeBank. Lex writes: “Outsiders can get access only via Tencent shares. Unsurprisingly these just hit an all-time high.” Remember the backdoor to TCEHY via Naspers, NPSNY.

Health Breakthroughs

*French device-maker Withings which is to be acquired by Nokia (NOK), released its most advanced upgrade which measures pulse wave velocity to determine the risks of high blood pressure, stroke, or heart attacks. NOK which is now experienced in buying in France (after Alcatel-Lucent) expects to buy Withings for $191 mn in Q3. The app is called Health Mate and it will signal blood pressure problems before the wearer or his doctor know about them. It adjusts readings for patient age and size, and works out how ling it takes for blood to flow to the wearers feet from the aorta. It also offers other readings and costs $179.95.

*Two US FDA drug products advisory panels meeting jointly, on anesthesia and drug safety recommended approval of Teva's (TEVA) hydrocodone bitartrate extended release tablets for chronic severe pain, Vantrela. It was deemed abuse-deterrent by its formulation for use by nose or mouth or IV. The vote was 14 to 3. Normally the FDA would allow a product with Vantrela's score to come to market. TEVA's chief scientist Dr Michael Hayden said “we are encouraged by the advisory committee support” for labeling it as abuse-deterrent. Dr Hayden is building out the central nervous system arm of Teva's patented pharma products to balance its increased presence in generics, with the takeover of Allergan (Activis generics).

My July 1 note in this newsletter about how it is a good time to buy Teva was reprinted by Nancy Zambell in WallStreetsBestDividendStocks issue 285. TEVA, despite falling slightly, is well up for that buy recommendation. WSBDS is a publication of the Cabot group of newsletters.

*The Teva entrant spells trouble eventually for our Indivior sub-lingual delivery system for opioids to treat addiction, also abuse-deterrant, which rose on news of its patent expiry delay to 2024earlier this week which stopped Actavis and Par from filing FDA ANDAs for its suboxone product. INVVY was down to GBX 211 in UK trading. My account is in transit between brokerages but otherwise I would lighten up on INVVY. Of course its products treat addicts while TEVA's may help prevent addiction in the first place, but there are clear links between the two needs.

*GlaxoSmithKline (GSK) announced results of a phase III trial of subcutaneous sirukumab, a human kappa antibody that binds to interleukin-6 monoclonal cytokine, to treat rhuematoid arthritis. It met both primary and secondary end-points in the trial which will be presented at the European Rheumatology Congress in London Saturday. X-rays of those treated with LgG1 Kappa showed joint destruction progression was significantly more inhibited in treated patients than for those given placebos, both those getting it monthly or fortnightly. Secondary endpoints were also met with statistical significance: less disability and improvement in RA symptoms and signs. The numbers look good but there are adverse side-effects. The drug is being developed with Johnson & Johnson's (JNJ) Jensen sub in Europe.

GSK also will present at the same conference how patients with highly active systemic lupus erythematosus responded to being treated with Benlysta (belimumab) injections plus standard care achieved significantly lower disease activity than those treat with placebo plus standard care. This subset of patients in the ongoing trial with highly active SLE marked by low C3/C4 complement plus positive anti-double stranded DNA had below half the level of severe flares in their disease (14.1%) compared to 31.5% in the control group. Moreover 20.7% of those given the injection were able to cut their steroid dose by 25% or over vs only 11.4% of those getting the placebo. In this population adverse events from administration of the jab was comparable to that of the control group, namely infections at the site of the injection and infestations.

While these new drug finds are appealing, I worry that the British firm faces RICO claims for how it marketed Avandia for diabetes.

*The latest rise in the warrants of Benitec Biopharma from Australia may relate to another hepatitis B Heplisav-B vaccine in development by Dynavax Tech, DVAX, which requires two jabs, but is not yet approved by any country. The current vaccine from Engerix distributed by GSK needs 3 doses over 6 months which is tough for patient compliance.

BNTC's BB-HB-331 vaccine using DNA-directed RNA interference requires only one injection to remove 98.5% of the hep B virus (in mice) hitting three different targets with one jab. Compliance is bound to be easier with a one-shot cure than if you need 2 or 3. Hep B is very contagious and can live outside the human body for a week and infect others. As I keep predicting someone is going to buy the company on the cheap but the warrants will live on.

Las Latinas

*The Chinese push to export more steel goods is good news for Vale (VALE), the Brazilian iron-ore pellet miner whose prices are lowest in the world thanks to its Carajas mine. VALE was up 4% not on the Chinese news alone but because it successfully raised $1.25 bn in a 5-yr issue in eurodollars which was 3x oversubscribed despite potshots against it by rating agencies.Before the bond issue closed, Moody's also gave it a Ba# rating with negative outlook, following Fitch and S&P but the market is yield-hungry. Vale will pay 5.875% in interest which is well below the payout level on the earlier issues it can now repay. There is nothing sinister in this; it happens daily as bond yields drop.

And what of Zika? Vale, unlike some other Brazilian ADRs, is not directly involved in consumer spending or tourist receipts. Its up-country mine is heavily mechanized and partly linked to the export port by railroad.

*Cosan (CZZ), another Brasileira, rose 3.7% on gas price rises. It runs a gas ute, service stations, and biofuel business to produce ethanol and coal replacement for power stations from sugar cane. It is marginally more vulnerable to Zika virus, but not excessively so. CZZ.

*Oil producer Ecopetrol (EC) of Colombia is up with the oil price, gaining 3% in European trading. It issued a statement on implementing its foreign exchange hedging reports to reduce volatility in non-operational results but I am uncertain if this means actual US$ forex hedging will be less volatile against the Colombia peso. It will adjust for greenback fluctuations only if the positions to hedge its US$ debt and earnings from subs when they are sold. The new policy went into effect June 7. To some extent EC is naturally hedged already because its exports of crude and refined oil are priced in dollars, and therefore offset its debt in our currency.

Canada-List

*Argentina has created a state entity to buy 1000 megaWatts of renewable energy plus a system of guarantees from a trust fund to cover electricity payments for solar, biomass, hydroelectric, and biogas generators. The system, to be put in place starting Aug. 22, does not cover our green investment in Argentina, Australian-owned and Canada-listed Orocobre, which extracts lithium via solar pools for car batteries. ORL-Toronto.

*CAE will use Britannica Knowledge Systems' Fox Training Management System at its Dothan training facility in Alabama for the C-12 fixedwing fighter plane. That is the old encyclopedia firm whose tests help determine if army and air force students have learned how to fly the plane initially or after changes in its systems. CAE was recommended by Motleyfool of Canada. We told you first.

Israel Shoots Itself in the Foot, Again

*After barely giving permits to Delek Group (DGRLY) to proceed with developing offshore Israeli gas fields and requiring divestiture and conditions to get a green light, Benjamin Natanyahu invited Gazprom of Russia to cooperate in developing Israeli gas finds. This in a press conference during his visit to Moscow. The Israeli President cited Russian experience and said “our doors are open to every company” and “there are no legal obstacles” after meeting with Pres. Putin.

OGZPY tried to set up in Israel 4 years ago and was blocked from becoming a partner with DGRLY in the Leviathan field only now being funded by Delek and its partners. Pres. Putin wants to hurt countries which have suffered from Gazprom cutting supplies to impose price hikes, notably Poland and Ukraine. He stated that Gazprom (supposedly a private company from Putindonesia) wants more European partners when these contracts expire in 2022. The Spanish and Italian companies thinking of using Delek's Leviathan gas transported to the Nile Delta gasification plants to enhance their supply security must be rethinking their plans now. Russia is swinging its weight in defending “Basher” Al-Assad's regime in Syria and nobody can imagine he is a good guy in the Middle East. Russia is also making nice to Saudi Arabia over oil prices and Syrian targets.

According to Globes Israel website, Putin even had the chutzpah to suggest that Israel could buy Russian gas and resell it to Poland after 2022. Motivating Netanyahu is his opposition to the French-led attempt to restart direct negotiations between Israel and the Palestinians. 
 

Brexit Tip

*Martin Ferrera writes that I failed to stress in my note that Renishaw gets over 90% of its sales from outside the UK so if sterling plunges post-Brexit it should benefit RSW. I don't think I made it clear enough myself.

Fund Fun

*Canadian General Investments borrowed C$75 mn from an unnamed Canadian bank for 3 years at an unspecified fixed rate to redeem its earlier 3.9% cumulative series 3 class A preferreds which cost it 3.9%. CGI (CGIRF) like most closed-end funds, uses leverage to boost its earnings and firepower with borrowings.

No Regrets on Cable, Foodies

*The ultimate insider there John Malone has sold $7.27 mn worth of shares in Liberty Media, which we exited too soon, in Sept 2014, worried by the leverage.

*The first major 2016 ADR to come to market, Coca-Cola European Partners plc, on which I reported Monday, got canned with a lower consensus estimate for the current year, according to Zacks, now down 15% from prior levels. InvestorsIntelligence, with which we trade ideas, thinks now is the time to buy Coca Cola Hellenic, the other European bottling arm of Coke, which is at GBX 1410. II's target price is GBX1630. Of course if Britain leaves the EU this stock, now incorporated in Zug, Switzerland (an expat from Greece) will probably regret dropping its ADR.

*G Willi Foods announced that Ukrainian board member Shneor Zalman Vigler has resigned. We resigned ages ago when the Russians moved on WILC, a distributor of Kosher processed food which was a favorite of a Seventh Day Adventist Paris friend, who keeps Kosher (as I don't).

*Domino's Pizza Group, DOM-LSE, its British sub which I briefly considered buying before I tasted their product in London, is becoming bigger, gobbling minority stakes in Norway, Sweden, and Iceland, in order to take control. The one thing you can be sure of is that distant management will fail to keep up quality and taste.

*InvestorsIntelligence keeps saying it is shorting Greencore but it never actually sell the stock short. My taste tests the last time I was in London are why I tipped the stock, along with its plans to sell through US Starbucks. GNCGY will be made to do another taste test next week when I land in London.