The stakes couldn't be higher given the current Brexit turmoil as Britain's highest court begins hearing arguments today on whether the government's decision to suspend Parliament was lawful (judges in England and Scotland previously came to contrasting conclusions). Boris Johnson argues that he asked the Queen to prorogue the lower house in order to introduce a new legislative agenda, but critics accuse him of attempting to stymie debate and push through a no-deal Brexit before an Oct. 31 deadline.

Crude slips, prices still elevated

The rally in oil prices is taking a breather after yesterday's historic 14.7% gain, with October WTI down 1.8% to $61.80/bbl. Investors are awaiting clarity on how long it'll take Saudi Arabia to restore output that was cut in half by the attacks on its production facilities as Aramco (ARMCO) grows less optimistic about a quick recovery. The state-owned operator may face weeks or months before the majority of output is restored, but other nations, including the U.S., could offset supply losses if the disruption lasts longer than initially expected.
 

Futures lower as Fed meets

Traders are still in risk-off mode due to the surge in oil prices and associated geopolitical concerns, though U.S. stock index futures are pointing to an only modestly lower open, currently down 0.2%. The FOMC will also start its two-day policy meeting this morning against the backdrop of fading hopes for an interest rate cut. The Fed Funds Futures market on Monday was pricing in a 34% chance that the Fed will stay put on rates; the probability was zero a month ago and just 5.4% a week ago, according to the CME.

Trade deal reached with Japan

The U.S. has inked initial trade agreements with Japan on tariff barriers and digital trade that won't require congressional approval. Not so many other details were provided, including whether President Trump had agreed to rule out imposing tariffs on Japanese automobiles. Coming to terms with Japan is seen as especially important because Trump withdrew from the Trans-Pacific Partnership on his fourth day in office.
 

California targets vaping

There are new developments in the war on vaping, with California Governor Gavin Newsom becoming the third state to issue an executive order to "reduce youth vaping consumption." While an outright ban on flavored products fell short during a legislative session, state regulators may find ways to ban illegal and counterfeit vaping products. California will also conduct a significant review regarding warning labels on e-cigarette packages and spend $20M on an advertising campaign to target the epidemic.

Apple has day in court

The EU's order for Apple (NASDAQ:AAPL) to pay €13B in back taxes to Ireland "defies reality and common sense," the tech giant declared as it launched a legal challenge against the 2016 ruling. The case is key to European Competition Commissioner Margrethe Vestager's crackdown on sweetheart deals for multinationals. Apple CFO Luca Maestri is leading a six-strong delegation to the General Court, Europe's second-highest, where a panel of five judges will hear arguments from both sides, as well as Ireland, Luxembourg, Poland and the EFTA Surveillance Authority, over two days.
 

IPO postponed

WeWork had planned to begin a roadshow this week, but that seems to have been delayed as the office-sharing company postpones its IPO until October at the earliest. That comes amid growing questions about governance and WeWork's eventual path to profitability, WSJ reports. We Co. (WE), as the company is officially known, had been valued at $47B in a fundraising round with SoftBank (OTCPK:SFTBY) this year, but that figure now appears to be something closer to $15B-$20B or possibly lower.

IPO revived

Anheuser-Busch InBev (NYSE:BUD) is making another attempt at spinning off its Asian business in Hong Kong with the launch of an IPO that could be worth up to $6.6B. The unit, Budweiser Brewing APAC, plans to sell 1.26B new shares at an indicative range of 27 to 30 Hong Kong dollars (US$3.45 to US$3.84), and may include a rare "upsize" option that will enable the sale of up to 40% more shares. Proceeds will help AB InBev reduce its debt burden of over $100B, which it accumulated following the purchase of rival SABMiller in late 2016.

Sony rejects Loeb proposal

Three months after Daniel Loeb's Third Point launched his second campaign against Sony (NYSE:SNE), the company has rejected the activist's call to spin off its image sensor business. In an 8-page statement, Sony said the unit was a "crucial growth driver" and cited costs of separating the business, such as an increase in patent licensing fees and difficulty in recruiting talent. In addition to calling for a spinoff, Loeb pressured the group to sell its stakes in non-core assets to focus on being a global entertainment company.
 

737 MAX crisis

New FAA chief Stephen Dickson will travel to Seattle this week to test "newly configured" 737 MAX software changes and meet with Boeing (NYSE:BA) officials. It's still not clear when Boeing will conduct a key certification test flight, a step needed before the agency can return the plane to service. Meanwhile, reports suggest that a panel of international air safety regulators will soon criticize the initial U.S. approval process for the 737 MAX, while urging a wide-ranging reassessment of how complex automated systems should be certified on future jetliners.

Today's Markets

In Asia, Japan +0.1%. Hong Kong -1.2%. China -1.7%. India -1.7%.
In Europe, at midday, London +0.2%. Paris +0.1%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.2%. S&P -0.1%. Nasdaq -0.2%. Crude -1.8% to $61.80. Gold -0.4% to $1505.40. Bitcoin -1.2% to $10175.
Ten-year Treasury Yield -2 bps to 1.83%

Today's Economic Calendar

FOMC meeting begins
8:55 Redbook Chain Store Sales
9:15 Industrial Production
10:00 NAHB Housing Market Index
4:00 PM Treasury International Capital