Summary

On Tuesday of last week, Monsanto rejected Bayer's $62 billion hostile bid offer but agreed to hold further talks with Bayer to see if they can agree on better terms. While on the sidelines of conference in New York, the president of Monsanto - Brett Begemann was heard stating four words that might really indicate Begemann’s true sentiments - “There is nothing there”. His words were uttered to a small group on investors and a Reuters reporter when he was asked about how a Bayer acquisition would fit with Monsanto. Of note: the $62 billion bid for Monsanto is the largest all-cash corporate takeover offer on record. Both companies had initially declined to comment as to whether or not any talks were taking place but when Begemann made his comments on May 18th sources shared that Monsanto’s securities attorney was concerned that Begemann’s statements could be construed as denial that any talks were going on. The SEC disclosure rules seek to protect investors from being misled by companies. In an effort to head off any potential SEC scrutiny, Monsanto issued a statement within a few hours of Begemann’s comments acknowledging that Bayer had approached the company about the possible takeover. Bayer soon followed with its own statement acknowledging the potential transaction. The two companies will now try to carry out negotiations privately, without making further statements until there is an outcome, according to the sources.

Late in 2013, the US Department of Defense had authorized $641 million worth of cluster bombs to Saudi Arabia. At the time opponents maintained that move ran counter to a push to outlaw the use of cluster bombs around the world (aimed at reducing impact on civilian safety) while also contradicting a vote in early 2013 by both the US and Saudi governments who were critical of the use of such munitions . Both the US and Saudi Arabia had condemned the use of cluster munitions by the government of Syria but Daryl Kimball, executive director of the Arms Control Association, a watchdog group in Washington called out the authorization as inconsistent. Fast forward a few years and we find that tensions between the US and Saudi Arabia are rising. Crude Oil has mounted a historical decline over the past few years and American energy independence largely seen as viable these days. Congress has moved to allow the Saudi’s to be sued in US courts over the 9/11 terrorist incident and almost exactly three years from when it was authorized, the US is cutting off its provisions of cluster bombs to Saudi Arabia. The explanation that was offered for the move was reports of civilian casualties in Yemen.

Last week on Thursday front month Crude Oil futures traded at the $50 a barrel mark for the first time since November 5th of last year. Heavy volume has been seen in the options markets last week as it has been perceived that speculators and producers were protecting themselves from potential declines from current resistance levels. The strength of this really near these prices is starting to be in question. An uptick in deep out of the money put options is signaling that producers are looking to lock in profits in the event of a potential deep correction. Prices have rallied almost 59% off of the January 20th low. Whether you are bearish or bullish, a near-term topping formation is forming on the daily technical chart that should not be ignored.

Federal Reserve Chair Janet Yellen’s recent comments that another increase in interest rates could be “appropriate” in coming months boosted support for the US Dollar on Friday and overnight on Sunday through early trading on Monday sparking a strong rally during both sessions. Crude Oil futures were a bit weaker capping off what had been otherwise a strong week for Crude Oil.