Puerto Rico is set for its largest default to date as $1.9B in debt payments come due today, including more than $1B in general obligation bonds, the island's highest tiered credit that carries a constitutional lien on revenues. Governor Alejandro Garcia Padilla declared the moratorium on GO debt payments just minutes after President Obama signed a law giving the territory access to a restructuring process that will put its finances under a federal oversight board.

Economy

The U.K.'s 10-year government yield sank another 6 basis points overnight to a fresh low of 0.81% after Mark Carney suggested the BoE could cut rates this summer if the economy suffers from "post-traumatic stress disorder." Gilt yields on short-term paper also fell into negative territory for the first time. U.S. Treasury prices joined the party ahead of the New York open, with the 10-year yield dropping 11 bps to a decade low of 1.378% this morning.

Britain's Daily Mail newspaper is backing Theresa May's bid to become the next prime minister, saying she's the only Tory Party candidate who is up to the job. The other contenders are Michael Gove, Liam Fox, Stephen Crabb and Andrea Leadsom. Brexit figurehead Boris Johnson surprisingly dropped out of the race yesterday "in view of the circumstances in Parliament."

Eurozone manufacturing grew faster than initially estimated in June, recording its best performance this year. Markit's Manufacturing Purchasing Managers' Index rose to 52.8 from 51.5, slightly higher than the flash estimate of 52.6. "Any Brexit impact is yet to be seen," said Chris Williamson, chief economist at Markit. "It seems likely that business and consumer spending will be adversely affected across the euro area in the short term at least."

Asia markets traded higher on the first day of the new quarter, tracking global stocks' third day of recovery despite a slew of downbeat manufacturing data. The Nikkei Japan Manufacturing PMI came in at 48.1 in June, marking the fourth straight month of contraction. Twin surveys from China also showed its factory sector still in a rut, with the government's official PMI easing to 50.0 and Caixin's figure dropping to 48.6.

Japan's public pension fund, the world's largest, logged more than $50B in investment losses last fiscal year as the yen surged and Tokyo stocks fell amid global market turmoil. The $1.4T Government Pension Investment Fund recently took a more aggressive stance into stocks, in line with PM Shinzo Abe's push to deploy more financial assets in riskier investments and boost economic activity.

The Obama administration is considering a plan to coordinate strikes against terrorist groups in Syria with Russia if Moscow agrees to use its leverage with Syrian President Bashar al-Assad to stop bombing U.S.-backed rebels. Under the proposed plan, the American military and Russian Air Force would expand joint airstrikes against Islamic State and al Qaeda-linked Jabhat al-Nusra.

A string of embarrassing incidents five weeks before the Olympics kick off in Rio has put organizers on edge as Brazil suffers its worst recession in decades. This week, a human foot washed ashore just yards from where beach volleyball players will compete, several muggings of athletes took place, and the country's top antidoping official was replaced after Rio's testing facility was suspended by international authorities. "I hate to use this phrase again, but it's like another perfect storm," announced organizing committee spokesman Mario Andrada.

Stocks

U.S. safety officials have opened a preliminary investigation into 25K Model S cars after Tesla's (NASDAQ:TSLA) Autopilot recorded its first fatality. Joshua Brown's death will likely add fuel to the debate over the safety of autonomous systems. In its news release, Tesla announced, "neither Autopilot nor the driver noticed the white side of the tractor-trailer against a brightly lit sky... Autopilot is not perfect and still requires the driver to remain alert." TSLA -3.2% premarket

The NHTSA is also advising owners of 313K recalled Honda (NYSE:HMC) and Acura vehicles (from 2001-2003) to replace their Takata-made (OTCPK:TKTDY) air bags immediately after testing showed there's as high as a 50% chance of them rupturing in a crash. According to the regulator, eight of the 10 U.S. deaths caused by Takata air bags occurred in these models.

After a year of meetings with potential customers, Boeing (NYSE:BA) is advancing toward developing a new jetliner with up to 270 seats that would target mid-range flights of up to 10 hours. The proposed plane would enter service around the middle of the next decade. A new larger version of the 737 Max is also being considered, and according to Boeing marketing chief Randy Tinseth, doing both planes remains an option.

Facebook now has over 11K bots and 21K developers building them on Messenger, VP of Messaging Products' David Marcus told CNBC. The company opened the platform just over 10 weeks ago, and the latest figures appear to suggest enthusiasm from the developer community. In other news, a Brazilian court has blocked over $6M of Facebook (NASDAQ:FB) money held in the country after WhatsApp failed to turn over a message exchange between drug traffickers to the police.

Airbnb's reportedly proposed $30B valuation may not hold up if illegal listings in New York and San Francisco are removed, said Bradley Tusk, a former aide to Mayor Michael Bloomberg who specializes in helping startups navigate regulatory environments. Airbnb (Private:AIRB) has continued to raise funding - enabling the home-sharing service to put off an eventual IPO - even as it remains locked in disputes with lawmakers.

Big money: Hershey (NYSE:HSY) has rejected a $23B bid from Mondelez (NASDAQ:MDLZ) which would have created the world's largest candy maker. A California jury has ordered Oracle (NYSE:ORCL) to pay Hewlett Packard Enterprise (NYSE:HPE) $3B in damages in a case over HP's Itanium servers. Disney (NYSE:DIS) is taking a 33% stake in streaming pioneer MLB Advanced Media, in a deal that values the business at about $3.5B.

Nearly half of the directors of Williams Cos. (NYSE:WMB) have stepped down after they failed to remove CEO Alan Armstrong following the company's collapsed merger with Energy Transfer Equity (NYSE:ETE). Chairman Frank MacInnis was among the directors that resigned, as were activist investors Keith Meister and Eric Mandelblatt, who had championed the combination with ETE.

BHP Billiton is appealing the decision by a Brazilian court to reinstate a $6.2B public civil claim over last year's Samarco iron ore mine disaster. BHP and joint-venture partner Vale (NYSE:VALE) had agreed on a $2.3B settlement in March, but Brazil's Superior Court responded to an appeal from the Federal Prosecutor's Office by issuing an interim order suspending its ratification.

A week after Democrats staged a nearly 26-hour sit-in demanding a vote on gun control measures, Speaker Paul Ryan said the House will vote on legislation to block suspected terrorists from buying guns next week. It's still unclear, however, if the proposal would include the broad "no fly, no buy" proposal Democrats have supported or a more limited version endorsed by the NRA. The House will also take up a bipartisan mental health bill. Related tickers: SWHC, RGR, VSTO

Macau posted a gambling revenue drop of 8.5% to 15.9B patacas ($2B) in June, marking the 25th consecutive month of decline suffered by the world's biggest casino hub. Monthly revenues have now shrunk by half in the last two years, as wealthy gamblers continue to stay away from the southern Chinese territory. Related stocks: WYNN, LVS, MGM, OTCPK:GXYEF, OTCPK:SJMHF.

Efforts to regain customer trust at Chipotle (NYSE:CMG) could suffer a setback after the company put its top marketing executive on administrative leave. Mark Crumpacker was one of 18 alleged buyers indicted in an NYC cocaine ring and is expected to be arraigned in the coming days. Fox Business (FOX, FOXA) producer Katie Welnhofer was also named as an alleged "key repeat customer" and is being held on $15K bail.

Nintendo has expressed concerns about introducing virtual reality products, a likely sign that it won't include the technology in its next-generation console, code-named "NX," when it's released in March. "We've been looking at the technology, but we should also see how it fits into our products and how parents would feel about their children mounting VR devices," Shigeru Miyamoto said at Nintendo's (OTCPK:NTDOY) annual shareholder meeting this week.

Apple is in talks to acquire Tidal, the struggling music streaming service launched by Jay Z, WSJ reports. That means a strong roster of artists tied to Tidal could give a boost to Apple Music (NASDAQ:AAPL). Jay Z bought the service for $56M in March 2015, and has given 19 famous artists and bands small stakes in the company, promising each millions of dollars worth of marketing.

Thursday's Key Earnings

ConAgra Foods (NYSE:CAG) +0.4% following in-line earnings.
Micron (NASDAQ:MU) -8.9% AH on another sales decline.

Today's Markets

In Asia, Japan +0.7% to 15682. Hong Kong closed. China +0.1% to 2932. India +0.5% to 27142.
In Europe, at midday, London +0.6%. Paris +0.3%. Frankfurt +0.4%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude -0.4% to $48.14. Gold +1.1% to $1335.60.
Ten-year Treasury Yield -8 bps to 1.41%

Today's Economic Calendar
Auto Sales
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
11:00 Fed's Mester: Economic Outlook and Monetary Policy
1:00 PM Baker-Hughes Rig Count