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WALL ST. FLAT AT THE OPEN; NASDAQ HITS RECORD HIGH

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WALL ST. FLAT AT THE OPEN; NASDAQ HITS RECORD HIGH  

  • U.S. stocks had been on a tear since Donald Trump’s surprise victory in the presidential election last week as his proposals to increase infrastructure spending and reduce taxes are seen benefiting the economy.
  • The rally took a breather this week as investors sought more clarity regarding Trump’s policies.
  • Gap fell 10% after the apparel chain said it expected a further drop in traffic during the crucial holiday shopping season.
  • Abercrombie & Fitch 11% after the teen apparel retailer posted a bigger-than-expected drop in quarterly sales.
  • Salesforce.com rose 5%, a day after it forecast current-quarter revenue above analysts’ estimates.

US FINANCIAL MARKET

Dollar Pushes to New Highs—With New Risks  

  • The ICE U.S. Dollar Index, which measures the U.S. currency against six others, reached its highest level in more than 13 years Thursday.
  • It is up 3% since the presidential election.
  • The gains are even greater against many emerging-market currencies.
  • The Mexican peso has fallen 10% against the dollar to record lows since the election, while the Brazilian real has tumbled 7.3%.
  • Dollar-denominated debt has become more expensive to pay back at a time when these countries are bingeing on it.
  • Emerging-market debt issuance in dollars in 2016 is the largest on record, at $409 billion, eclipsing the previous high of $403 billion set two years ago.
  • U.S. consumers may welcome a mighty dollar, which makes foreign goods and travel abroad cheaper.
  • But a strengthening currency poses problems, too.
  • Investors already are betting on companies that generate most of their revenue in the U.S. and are less exposed to currency fluctuations.
  • Beverage maker Coca-Cola forecasts that currency swings will cut as much as 9% from its pretax profit this year.
  • Apple said in an earnings call last month that it expects the dollar’s strength to shave $650 million from its revenue in the current quarter.
  • Cisco said it has seen weakened demand from customers abroad, in part because of “incredible currency headwinds.”

Salesforce Posts Rising Revenue, Lifts Outlook  

  • Business software provider says it will reach $10 billion in annual revenue by January 2018.
  • The quarter’s performance, which included a 25% rise in revenue over the year-earlier period, put Salesforce on track to meet its long-term goal.
  • For the year, Salesforce forecast revenue of $10.1 billion to $10.15 billion, an increase of 21% over the year-earlier period.
  • Salesforce for the quarter reported revenue of $2.14 billion, compared with $1.71 billion in the same period a year earlier.

GAP Profit Drops as Sales Slump Continues  

  • GAP posted an 18% drop in quarterly profit. Gap’s profit was $204 million, down from $248 million a year ago.
  • Sales fell 2% to $3.80 billion in the quarter.
  • The apparel maker had its seventh straight period of declining sales and absorbed costs tied to store closures.

Abercrombie Warns Of Challenging Holiday Quarter  

  • Net income fell to $7.88 million from $41.89 million a year earlier.
  • Abercrombie’s net sales fell 6.5 percent to $821.73 million.
  • Abercrombie has been investing in its online business and closing underperforming stores to cope with rapidly changing consumer tastes and stiff competition from online rivals and fast-fashion retailers such as H&M.

Tesla, SolarCity $2.1 Billion Merger Approved  

  • The new entity, led by Elon Musk, would sell emissions-free cars and rooftop solar panels that produce the electricity to power them.
  • Mr. Musk, currently the chief executive officer of Tesla as well as the chairman and the largest shareholder of both companies, aims to create an integrated clean-energy company.

Chipotle, Ackman near Settlement  

  • Chipotle and William Ackman are nearing a settlement that would give the activist investor a say in the boardroom at the beleaguered burrito chain.
  • The Denver company and Mr. Ackman’s Pershing Square, which disclosed a 9.9% stake two months ago, have been discussing changing the board and could reach an agreement soon.

McDonald’s Table Service: Fast Food Redefined  

  • McDonald’s is updating U.S. restaurants with self-service kiosk ordering, mobile payments, “smartmenu boards, custom sandwiches and table service.
  • The company that derives nearly 70% of its sales from the drive-through is hoping changes to the restaurants themselves will help lift sales.
  • Test runs at more than 500 restaurants in Southern California, New York and Florida showed an increase in foot traffic and contributed to a mid-single-digit percentage increase in restaurant sales, lifting the $5 to $6 average check by $1, on average.

Airbnb offers travel services in push to diversify  

  • Airbnb launched a new program on Thursday called Trips to transform itself into a travel company.
  • Through Trips, customers can book a range of local activities – from a cooking class in Florence to a violin-making workshop in Paris – and find attractions that are not on the tourist circuit.
  • Airbnb, with some 100 million users in 34,000 cities, drew throngs of hosts from around the world to the event in Los Angeles on Thursday.

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US ECONOMY & POLITICS

Donald Trump Begins Filling Cabinet with Offers to Jeff Sessions, Mike Pompeo  

  • Donald Trump began filling his Cabinet, offering Attorney General to Sen. Jeff Sessions (R., Ala.) and director of the Central Intelligence Agency to Rep. Mike Pompeo (R., Kan.).
  • Mr. Trump previously has announced that Reince Priebus will be chief of staff, Steve Bannon will be chief strategist, and Gen. Flynn will be national security adviser.

What a Privately Funded Infrastructure Push Could Add to GDP  

  • A well-design infrastructure improvement program relying heavily on private financing could boost the U.S. economy by up to 0.2 percentage points, according to a new report from the McKinsey Global Institute.
  • Private investors are sitting on $120 trillion in assets for which they are looking for reliable returns, the institute says.
  • With rates at historically low levels, it makes sense for them to invest in infrastructure projects.

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EUROPE & WORLD

Canada manufacturers put U.S. ahead of Mexico if Trump ends NAFTA  

  • Canadian Manufacturers and Exporters group is lobbying Canada’s Liberal government to prioritize the U.S.-Canada trade relationship, saying a bilateral side deal with Mexico could be worked out separately.
  • Some 75% of Canadian exports go to the United States.

Mexico Lifts Rates amid Peso’s fall, Trump’s Rise  

  • A weaker peso and the U.S. election weigh on the economy, driving action by the central bank.
  • Mexico’s central bank raised interest rates on Thursday as the country grapples with a weaker peso and uncertainty over the future of its relationship with its largest trading partner.
  • For the Bank of Mexico, which raised its overnight rate half a percentage point to 5.25% on Thursday, a weaker peso poses an inflation risk by pushing up prices of imports.
  • Inflation sits just above the bank’s 3% target, despite three rate increases this year.
  • Mexico sends 80% of its exports to the U.S. market.

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Asian Central Banks Struggling to Defend Currencies

  • Central bankers throughout Asia are digging deep into their policy tool kits to find novel ways to respond to a wave of sharp market movements since Donald Trump’s surprise U.S. presidential election victory.
  • Policy makers in emerging economies like Indonesia and Malaysia have been fretting about large slides in their currencies as investors pile into the U.S. dollar, while their peers in Japan have been trying to keep a lid on rising bond yields amid a global bond selloff.

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Volkswagen Set to Slash Up to 30,000 Jobs  

  • Volkswagen announced a sweeping restructuring of its embattled VW passenger-car brand including up to 30,000 job cuts over five years, part of efforts to boost profits in the wake of the company’s damaging emissions-cheating scandal.
  • The VW brand, the German automotive giant’s biggest business by sales, has struggled for years to stay profitable.
  • Since admitting last year to rigging nearly 11 million diesel cars to cheat on emissions tests, the company has been forced to pay settlement costs and compensation to consumers of more than €18 billion ($19 billion).
  • With the job cuts, 23,000 of which are set to go in Germany, and other efficiency measures, VW aims to increase productivity of its German factories by 25% in the coming years.

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TODAY in HISTORY

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Captain Nathaniel Palmer discovered Antarctica (1820)

Standard time began in the United States (1883)

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Chester A. Arthur, the 21st president of the United States (1881–1885), died in New York at 56 (1886)

Mickey Mouse made his debut in Steamboat Willie (1928)

boy-in-streets-during-spanish-transition-to-democracy

Spain’s parliament approved a bill to establish a democracy after 37 years of dictatorship (1976)

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