Yesterday the Washington Post reported that Elon Musk had “stopped engaging in certain discussions around funding for the $44 billion deal” and that the deal was in serious jeopardy, so this news isn’t out of the blue.

Twitter shares were down 5.35% on the report today and closed at $34.84 — far below the $54.20 agreement. For more than a month, there have been signs that Musk has a bad case of buyer’s remorse.

What’s far less clear is that he will be able to walk away from the deal.

He accused Twitter of being “in material breach of multiple provisions” of the  merger  agreement.

“Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect (as that term is defined in the Merger Agreement)”

However he signed an agreement to complete a purchase of Twitter. It wasn’t an agreement to think about buying Twitter and the social media company has said it will enforce the deal.

Delaware courts, where this will be adjudicated, have been consistent in ruling that the bar for breaking a merger agreement is extraordinarily high. Musk has said the bot count is too high but Twitter this week released a presentation saying it was below 5%. Legal expert say that even if it was 20% it will be tough to argue it’s a material adverse clause. (more…)

• Employment gains are slowing, and we view this as inevitable as more of the unemployed have found jobs and the unemployment rate has dropped well below 4%.
• Strong employment, however, is how we interpret an increase of nearly 300K jobs in a month.
• Trucking, delivery, food services and healthcare remain areas of recovery and growth for job markets.
• We expect the unemployment rate to edge back down to 3.5% for June, possibly very soon.
• A rising labor force participation rate (more people entering the labor force) is one pro-growth factor that can steady the unemployment rate, preventing a decline, even when the economy is strong. Later, as businesses reduce their demand for labor, smaller job gains are why the unemployment rate stabilizes or begins to rise.”

Westpac:

• payrolls should reflect moderating but still healthy jobs growth in June (Westpac f/c: +300k, market f/c +268k),
• keeping pressure on the unemployment rate (Westpac & market f/c: 3.6%)
• and supporting robust growth in average hourly earnings (Westpac & market f/c: 0.3%).

• FOMC minutes … unsurprisingly hawkish
• Fed appears set on hiking the policy rate by either 50bps or 75bps at the upcoming meeting later this month
• a restrictive policy stance was seen as warranted given the strength of inflation and tightness in the labour market
• the minutes flagged the possibility of an “even more restrictive stance” if elevated inflation pressures were to persist
• there was no sign in the minutes that the Fed is thinking of wavering from its strategy, even with a growth slowdown in train and equity markets in ‘bear market’ territory … participants “recognized that policy firming could slow the pace of economic growth for a time, but they saw the return of inflation to 2% as critical to achieving maximum employment on a sustained basis.”

Daily USD index: