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WALL STREET STARTS NEW YEAR WITH A SLIGHT DROP ON GLOBAL SLOWDOWN JITTERS

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US FINANCIAL MARKET | US ECONOMY & POLITICS
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DAILY MARKET REPORTS

Tesla Shares Dive After Model 3 Delivery Falls Short of Estimates, Cuts Prices 

  • Tesla shares sank after the electric car maker delivered fewer-than-expected Model 3 sedans in the fourth quarter and cut prices for all its vehicles in the United States in response to the loss of a green tax credit.
  • The company said it delivered 63,150 Model 3s in the quarter, falling short of estimates of 64,900.
  • The company produced 61,394 Model 3s, up from a total of 53,239 Model 3s in the third quarter, but showed no improvement on the 5,000 per week rate it finally achieved at the end of the third quarter.
  • The company’s full-year total deliveries reached 245,240.
  • In 2017, the auto maker sold 102,807 vehicles after struggling to increase production of the Model 3.

US FINANCIAL MARKET

Roku, Taking Cues from Amazon, Adds Premium Subscriptions

  • The company said it would allow its users to buy pay-TV subscriptions through The Roku Channel, its TV- and movie-streaming service, in a manner similar to the way Amazon sells access to premium channels like HBO through its Prime Video platform.
  • The feature, which is scheduled to launch in late January, will include channels such as CBS’s Showtime, Lions Gate Entertainment’s Starz and MGM Holdings’ Epix, Roku said.
  • There are some holdouts. Roku hasn’t yet reached agreements to sell subscriptions to popular services like Hulu or Netflix through The Roku Channel.

Netflix Hires Activision CFO

  • Netflix is expected to name Activision Blizzard Chief Financial Officer Spencer Neumann as its new chief financial officer as early as this week, a person familiar with the matter said.
  • Activision Blizzard said in a securities filing Monday that it was putting Mr. Neumann on paid leave and that he would subsequently be fired for cause unrelated to the company’s financial reporting or disclosure procedures.
  • Before working for Activision Blizzard, Mr. Neumann held multiple positions at Walt Disney in its theme-park and television divisions. He also had stints at private-equity firms Providence Equity Partners and Summit Partners.

Equifax Is Back in Washington’s Crosshairs

  • The credit-reporting industry has largely escaped new oversight from Washington following the 2017 hack of Equifax that exposed the personal information of millions of Americans. That could change in 2019 when Democrats take over the House.
  • House Democrats have put legislation responding to the Equifax hack at the top of their agenda for this year.
  • A handful of proposals, some bipartisan, offer a road map for possible changes to how the industry handles consumer information, including tougher cybersecurity standards and making it easier for consumers to fix errors on their credit reports.
  • Lawmakers from both parties harshly criticized Equifax after the company announced the data breach that resulted in the loss of Social Security numbers and other sensitive personal information of 147.9 million people.

Drugmakers Raise Prices on Hundreds of Medicines

  • Pharmaceutical companies are ringing in the new year by raising the price of hundreds of drugs, with Allergan setting the pace with increases of nearly 10% on more than two dozen products, according to a new analysis.
  • More than three dozen drugmakers raised the prices on hundreds of medicines in the U.S. on Tuesday, according to an analysis from Rx Savings Solutions, which sells software to help employers and health plans choose the least-expensive medicines.
  • The average increase was 6.3%, according to the analysis, including increases on different doses for the same drug.

Behind Lumber’s Collapse: A Perfect Storm of Housing and Trade

  • Lumber futures reached a record in May that was 30% above the old all-time high set in the early 1990s. Still, lumber ended the year as one of the worst-performing commodities.
  • The trade dispute with China sharply reduced U.S. exports, eliminating a big outlet for oversupply. U.S. mills revved up to take advantage of a historic glut of pine trees in the South.
  • Meanwhile, rising interest rates and surging home prices in many of the hottest job markets strained affordability. Housing starts, which had reached a post-recession high in May, slid lower.
  • Since hitting $639 per 1,000 board feet on May 17, futures lost nearly half their value. Lumber ended at $332.50 on the Chicago Mercantile Exchange on Monday, down 26% on the year.

Crypto’s 2019 Goal: Technology People Can Use

  • At the beginning of 2018, the question was whether bitcoin could live up to the hype of 2017’s manic rally. At the end of 2018, the answer seems to be an emphatic “no.”
  • After rising nearly 1,400% in 2017, bitcoin reversed hard in 2018, falling about 70% and erasing some $160 billion worth of value, exposing the budding cryptocurrency market’s shaky footing.
  • For all the hype, bitcoin and the hundreds of other digital currencies that have popped up over the years are still largely usable only by developers.
  • While almost anyone can go online and find tools to build an app for iOS or Android, building a similar app for the Ethereum platform involves developing an entire suite of tools to connect the app to the platform itself.

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US ECONOMY & POLITICS

US Trade Rep. Lighthizer thinks more tariffs could be needed to get meaningful China concessions

  • U.S. Trade Representative Robert Lighthizer has warned President Donald Trump that additional tariffs on Chinese imports may be needed to get meaningful concessions in trade negotiations, according to The New York Times.
  • Lighthizer, who is taking the lead in trade negotiations with China, has told friends and associates he is intent on preventing Trump from accepting “empty promises” like temporary increases in soybean purchases, the newspaper said.
  • In order to avoid this, the U.S. may have to slap tariffs on more Chinese goods, Lighthizer reportedly said.

EU’s High Trade Surplus With the U.S. Poses Risk to 2018 Tariff Truce

  • The European Union narrowly avoided a bruising economic war with the U.S. in 2018 by vowing to rebalance trade. In 2019, the EU faces headwinds to fulfilling its promise and satisfying President Trump’s demands.
  • EU and U.S. negotiators missed a self-imposed November deadline to deliver quick results on removing nontariff barriers. Their talks on a broader free-trade deal appear doomed amid sparring over the scope of any pact.
  • And the EU trade surplus in goods with the U.S.—a top concern for Mr. Trump—is on track for a record for 2018.
  • U.S. Trade Representative Robert Lighthizer is slated to meet EU Trade Commissioner Cecilia Malmström in Washington on Jan. 9 to continue talks.

Tariff Exclusions for Certain Steel Imports Sow Confusion

  • Steel importers are winning most of their requests for tariff exclusions for products they say they can’t find in the U.S., but the process is riddled with inconsistencies and frequent procedural changes, according to manufacturers and importers.
  • The Commerce Department as of Dec. 17 granted about 75% of the 19,000 requests it processed to exclude products from tariffs on foreign steel that took effect in March, according to a Wall Street Journal analysis of those applications.
  • Exclusions issued so far cover 3.8 million tons of steel, or about 16% of the finished foreign steel entering the U.S. through 11 months of 2018.
  • In cases the department rejected, a U.S. metal producer often objected. More than 15,000 objections also have been filed on some 9,000 still-pending exclusion requests.
  • Most of these objections were filed by five steel companies: Nucor, US Steel, AK Steel, TimkenSteel and Webco Industries

Kim Jong Un Extends Peace Overture to U.S.

  • North Korean leader Kim Jong Un offered a new peace overture in his New Year’s address, saying his country is refraining from producing nuclear weapons, a gesture some experts interpreted as a potential opening for resuming talks with President Trump.
  • While North Korea has refrained from nuclear testing and missile launches since Mr. Trump’s Singapore meeting with Mr. Kim in June, no discernible progress has occurred since then.
  • His declaration was the first of its kind from Pyongyang in a quarter-century, said Robert Carlin, a former U.S. intelligence analyst who has been involved in negotiations with North Korea.

Shutdown Shapes Up as Day-One Test for New Congress

  • When the new, politically divided Congress convenes Thursday, its ability to govern will immediately be put to the test as a partial government shutdown enters its 13th day.
  • House Democrats, who have regained control of the chamber, plan to put forward a package of six, full-year spending bills that would fund most of the rest of the government through September.
  • Separately, they will propose a short-term patch extending current funding through Feb. 8 for the Department of Homeland Security, which would provide more time to negotiate a settlement over funding for a border wall.
  • Senate Majority Leader Mitch McConnell (R., Ky.), who has led his party in the chamber since 2006, has put the onus of finding a solution to the deadlock on Senate Democrats and President Trump.

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EUROPE & WORLD

China December factory activity shrinks for first time in 19 months: Caixin PMI

  • China’s factory activity contracted for the first time in 19 months in December as domestic and export orders continued to weaken, a private survey showed, pointing to a rocky start for the world’s second-largest economy in 2019.
  • The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for December fell to 49.7 from 50.2 in November, marking the first contraction since May 2017. Economists had forecast only a marginal dip from November to 50.1.
  • New orders — an indicator of future activity — fell for the first time in two and a half years, with companies reporting subdued demand despite some price discounting. New export orders shrank for the ninth month in a row.
  • The gloomy readings largely dovetailed with an official survey on Monday which showed growing strains on China’s manufacturing sector, a key source of jobs. The findings reinforce views the economy is losing more steam.

U.S.-China trade war takes toll on global manufacturing

  • Factory activity weakened across much of Europe and Asia in December as the U.S.-China trade war and a slowdown in demand hit production in many economies, offering little reason for optimism as the new year begins.
  • PMI surveys showed Italy remained in contraction territory and was joined by France, where data showed a first deterioration in operating conditions for 27 months.
  • Manufacturing growth in both Germany and Spain was modest, easing to the weakest in around two-and-a-half years.
  • British factories, however, ramped up stockpiling as they prepared for possible border delays when Britain leaves the European Union in less than three months’ time. The UK manufacturing PMI rose to a six-month high, stronger than all forecasts.
  • China’s weakness spilled over to other Asian economies. Malaysian manufacturing slowed to its weakest pace of expansion since the survey began in 2012, and Taiwan fell to its lowest since September 2015.

Tencent Not Yet Winning Even as China’s Game-Approval Freeze Melts

  • Regulators ended their freeze on new videogames approvals, though left industry giants Tencent and NetEase out in the cold when giving the first group the green light.
  • Small and medium games companies seemed to be the beneficiaries of the approval of 80 new titles, according to a list published by regulators. By doing so, regulators may be throwing a lifeline first to smaller companies, which have struggled since the freeze started last March.
  • The freeze began in a reshuffling of the bureaucracies responsible for overseeing games, which have been criticized in state media for violent content and being addictive for young people. It battered the world’s largest videogame market, where players spent a projected $37.9 billion last year, according to research firm Newzoo.

Taiwan Leader Rejects Unification Under Heightened Pressure From China’s Xi

  • The leaders of China and Taiwan sparred over the prospects of unifying the two territories, showing the decades-old split remains potentially volatile under intensifying pressure from Chinese President Xi Jinping to change the status quo.
  • In a speech meant as an address to Taiwan, Mr. Xi said differences in political systems can’t be used to resist unification. He promised a peaceful and prosperous future with the mainland while suggesting that Beijing’s patience would wear thin.
  • His remarks were seen as a direct response to Taiwan President Tsai Ing-wen, who said Tuesday in her New Year’s Day address that the island’s people want to preserve their own political system.
  • While bringing Taiwan under Communist Party control has been a longstanding priority for Communist leaders, Mr. Xi has pressed the issue with greater urgency, portraying unification as a marker of national greatness.
  • His government has exerted political and economic pressure on Ms. Tsai since her election three years ago, to punish her for refusing to acknowledge that the mainland and the island are part of “one China”—which her predecessor did.

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TODAY in HISTORY

  • Louis Jacques Mandé Daguerre took the first photograph of the Moon. (1839)
  • The Bruno R. Hauptmann trial began for the kidnap and murder of the Lindbergh baby. (1935)

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