DAILY MARKET REPORTS
- U.S. stocks rose Friday, bouncing back from their worst two-day start to a year since 2000 as stronger-than-expected hiring in December signaled a strengthening U.S. labor market.
- The numbers suggest a healthier U.S. economy than some investors and economists anticipated after waves of volatility swept through stock and bond markets in recent weeks amid fears of slowing growth around the world.
- Stocks extended their gains as Federal Reserve Chairman Jerome Powell spoke in Atlanta.
- Mr. Powell said in his remarks at a conference that U.S. data seems to be on track to sustain good momentum into the new year, but that he is prepared to adjust policy quickly and flexibly if necessary.
- U.S. nonfarm payrolls increased a seasonally adjusted 312,000 in December, the biggest jump since February.
- Average hourly earnings rose a seasonally adjusted 0.4% from November and 3.2% from December 2017, the best full-year gain since 2008.
- Markets rallied ahead of the release of those U.S. jobs figures, after China’s commerce ministry said that a U.S. trade delegation led by Deputy Trade Representative Jeffrey Gerrish will visit China on Monday and Tuesday.
US FINANCIAL MARKET
Bayer Shares Jump After Monsanto Weedkillers Court Ruling
- Bayer shares rose by more than 4% Friday after the German chemicals company scored a court victory in the run-up to crucial trials over whether recently acquired Monsanto weedkillers can cause cancer.
- U.S. District Judge Vince Chhabria granted a request late Thursday from Bayer to stagger the submission of evidence in the so-called bellwether trials, potentially limiting the evidence presented by the plaintiff’s lawyers to the jury.
- Bellwether cases are selected to test arguments and gauge possible recoveries for other similarly situated plaintiffs in an attempt to reach a large-scale resolution.
- Lawyers for the plaintiff must demonstrate that the chemical glyphosate in the weedkillers caused his cancer, before they can present evidence that manufacturer Monsanto, now owned by Bayer, acted with malice.
Marriott Says Hackers Swiped Millions of Passport Numbers
- Marriott said fewer were affected in a massive data breach than initially feared but confirmed that hackers had compromised the passport numbers of millions in what security analysts have described as a potential foreign-intelligence gold mine.
- The company said early Friday in a release that the number of guests involved in the data breach is lower than the original 500 million, but it didn’t specify a number.
- Marriott said a total of about 383 million records was “the upper limit” for the number potentially compromised in the incident. That figure includes passport numbers, email addresses and payment-card data of some guests, the company said.
Qualcomm heads to trial in crucial fight with U.S. antitrust regulator
- The U.S. Federal Trade Commission’s antitrust case accusing Qualcomm of abusing a monopoly on mobile chip technology is expected to head to the courtroom on Friday for a trial whose outcome could have a major impact on the smartphone industry.
- If the government prevails in the non-jury trial before U.S. District Judge Lucy Koh, Qualcomm could be forced to change its practices for licensing a trove of patents to manufacturers like iPhone maker Apple.
- The FTC’s 2017 lawsuit alleged San Diego-based Qualcomm maintains an anticompetitive “no license, no chips” policy under which it only supplied processors to phone manufacturers if they agree to inflated patent licensing terms.
Apple Beware: Samsung’s Great Fall in China Was Swift
- Five years ago, the South Korean technology giant sat atop the Chinese market, selling nearly one of every five smartphones there. Today, Samsung is an also-ran, controlling less than 1% of the world’s largest smartphone market.
- Though few expect Apple’s sales in China to fall so dramatically, some of the reasons triggering Samsung’s missteps offer a cautionary tale for foreign smartphone makers.
- Samsung, which remains the world’s largest smartphone maker, was outmaneuvered by Chinese rivals that sold comparable devices at lower prices.
- The iPhone uses the Apple-developed iOS operating system, so jumping to rivals is more onerous than from Samsung, which uses Google’s Android.
- That said, the Apple ecosystem exerts less control over Chinese consumers who spend a large chunk of their time inside WeChat, a chat, payments and social-media app from Tencent.
Tesla to start delivering Model 3 to China buyers in March
- Tesla said on Friday it plans to start delivering Model 3 cars to customers in China in March, cementing a time frame that the U.S. electric vehicle (EV) maker’s chief executive, Elon Musk, tweeted about late last year.
- The firm, which aims to accelerate Chinese sales that have been hit hard by the impact of trade tension between Washington and Beijing, said in a statement the starting price for a Model 3 in China would be 499,000 yuan ($72,000).
- Tesla has opened a tender process to build a $2 billion plant in Shanghai – dubbed a Gigafactory – and at least one contractor has started buying materials, Reuters reported earlier last month.
Google shifted $23 billion to tax haven Bermuda in 2017: filing
- Google moved 19.9 billion euros ($22.7 billion) through a Dutch shell company to Bermuda in 2017, as part of an arrangement that allows it to reduce its foreign tax bill, according to documents filed at the Dutch Chamber of Commerce.
- For more than a decade the arrangement has allowed Google owner Alphabet to enjoy an effective tax rate in the single digits on its non-U.S. profits, around a quarter the average tax rate in its overseas markets.
- The subsidiary in the Netherlands is used to shift revenue from royalties earned outside the United States to Google Ireland Holdings, an affiliate based in Bermuda, where companies pay no income tax.
Detroit Three ready for 2019 rumble over lucrative pickup trucks
- The battle for profits from sales of large pickup trucks is intensifying among the Detroit Three automakers as sales of small cars in the United States shrivel.
- For decades Ford has had the single best-selling truck brand in its F-Series trucks. General Motors’ Chevrolet brand was a solid No. 2, and Fiat Chrysler Automobiles’ Ram brand was a distant third.
- Now, that hierarchy may be in flux. Sales figures for December and the fourth quarter released on Thursday show FCA’s Ram brand tied with GM’s Chevy brand for the No. 2 spot during the fourth quarter, as sales of the redesigned Ram pickup surged, fueled in part by demand for an optional 12-inch (30.48 cm) dashboard screen.
- Large pickups generate at least $17,000 a vehicle in pretax profit for GM, the company has indicated in disclosures to investors. By contrast, many Detroit Three sedans are so unprofitable, their manufacturers have decided not to build them anymore.
Square Chooses Blizzard Entertainment Executive to be New CFO
- Square said that Amrita Ahuja agreed to join the financial-technology company as chief financial officer starting later this month.
- Ms. Ahuja most recently served as finance chief at Blizzard Entertainment, the videogame maker behind “World of Warcraft” and a unit of Activision Blizzard.
- Square, which is led by Twitter Chief Executive Jack Dorsey, had been searching for a permanent CFO since Sarah Friar announced she was leaving the company this past October to run neighborhood social network Nextdoor.
Car Sales Keep Pace in 2018, Defying Predictions of a Downturn
- The industry sold about 17.3 million vehicles in 2018, up less than 1% from a year earlier. For the year, the auto makers reported mostly flat sales, with the exception of Fiat Chrysler’s 9% sales gain and Nissan’s 6% decline.
- That marked a record fourth straight year surpassing the 17 million level, a resilient showing for an industry prone to boom-and-bust cycles.
- Still, auto executives remain wary of a market slowdown in the U.S., as rising interest rates on car loans and lofty new-vehicle prices make it more difficult for American buyers to afford new wheels.
- Analysts again see a decline in U.S. sales this year. The dealer association predicts 16.8 million vehicle sales for 2019.
US ECONOMY & POLITICS
U.S. December Nonfarm Payrolls Grew by 312,000; Jobless Rate Rose to 3.9%
- U.S. nonfarm payrolls increased a seasonally adjusted 312,000 in December, the biggest jump since February.
- Average earnings rose 0.4% from November and 3.2% from December 2017, the best full-year gain since 2008.
- A separate survey showed the unemployment rate at 3.9% from 3.7% in November, mainly due to more workers entering the workforce.
- Economists had expected the economy to add 176,000 new jobs, wages to rise 0.3% and the jobless rate to fall to 3.6%.
- Helping to explain the uptick in joblessness, the labor force participation rate rose to 63.1%, matching its highest level since 2014, from 62.9% in November.
- Employers added an average of 220,000 jobs a month in 2018, running ahead of the previous year’s pace of 182,000 per month and the best job growth since 2015.
Fed Chairman Powell Sees Flexibility on Rates This Year
- Federal Reserve Chairman Jerome Powell said Friday that muted inflation readings will give the central bank greater flexibility to set policy in the year ahead and that the Fed wasn’t on a fixed path to push its benchmark interest rate higher.
- Mr. Powell said markets have tumbled in recent weeks and aren’t expecting any Fed rate increases this year because they are placing greater weight on downside risks that haven’t yet materialized.
- U.S. data remains “on track” to sustain recent economic momentum, he said.
China and U.S. to hold trade talks in Beijing on January 7-8
- China and the United States will hold vice ministerial level trade talks in Beijing on Jan. 7-8, as the two sides look to end a dispute that is inflicting increasing pain on both economies and roiling global financial markets.
- A working team led by Deputy U.S. Trade Representative Jeffrey Gerrish will come to China to have “positive and constructive discussions” with Chinese counterparts, China’s commerce ministry said in a statement on its website.
- The ministry said the two sides “confirmed” the dates in a phone call on Friday morning, but did not provide other details.
China warnings signal Trump’s trade war finally hitting home
- Weak sales at Apple and Cargill, U.S. giants of technology and agriculture, may be the clearest sign yet that President Donald Trump’s quest to reset world trade carries costs at home and could isolate the United States as the increasingly fragile engine for global economic growth.
- China, the world’s second largest economy, likely expanded at more than 6 percent last year, reflecting a slowdown from years past and, in recent months, its most tepid rate since the depths of the global financial crisis a decade ago.
- The sharp slowdown in China and weakness elsewhere also threaten to leave U.S. consumers, whose spending accounts for more than two-thirds of U.S. economic activity and who so far have been eager to spend in an era of rising household incomes and wages, as the chief bulwark against a broader world downturn.
Nancy Pelosi Elected Speaker as House Votes for End to Shutdown
- Nancy Pelosi was elected House speaker as the 116th Congress convened Thursday and Democrats passed bills aimed at ending the partial government shutdown, but those measures were expected to stall in the GOP-controlled Senate.
- The House passed on Thursday night a series of bills that would reopen the government after 13 days. But Senate Majority Leader Mitch McConnell said he wouldn’t hold votes on the Democratic bills, and there are few signs of a resolution to the standoff as Democrats resist Mr. Trump’s demand for $5 billion to build a wall along the U.S.-Mexico border.
- On the legislative front, House Democrats plan to focus on measures to lower prescription-drug prices, ramp up spending on the nation’s infrastructure and overhaul ethics and campaign-finance rules in Washington.
More First-Time Home Buyers Are Turning to the Bank of Mom and Dad
- More than 26% of mortgage borrowers who used Federal Housing Administration-insured loans got assistance from a relative to make the down payment in the 12 months through September, up from about 22% in 2011.
- While conventional mortgages can require buyers to put down as much as 20% of the purchase price upfront, FHA buyers can pay as little as 3.5%. Such loans make up about a 10th of all U.S. home-loan originations, a share that has declined recently.
- In recent years, the credit quality of FHA borrowers has declined. The average borrower had monthly debt that was equal to 43% of income in 2018, marking the sixth straight annual rise in that measure of creditworthiness, according to the FHA report.
- The credit score of the average borrower declined to 670, the lowest level since 2008. Credit-reporting firm Experian PLC considers scores under 670 subprime.
Slowing Mall Rent Growth Poised for a Challenging 2019
- The average rent for malls in the fourth quarter rose 0.2% to $43.35 a square foot, up from $43.25 in the third quarter, according to data from real-estate research firm Reis.
- Mall rents grew by 0.8% in the fourth quarter from a year earlier, down from the 1.5% and 2.0% seen in 2017 and 2016, respectively.
- Landlords filled more empty spaces in their centers in the final months of 2018. The vacancy rate for malls fell to 9.0% in the fourth quarter from 9.1% in the third quarter, which was the highest vacancy rate since the third quarter of 2011 at 9.4%.
Democratic-Led States Appeal Ruling Invalidating Affordable Care Act
- Sixteen states on Thursday appealed a Texas judge’s ruling that invalidated the Affordable Care Act, opening the next phase of legal proceedings over the fate of the Obama-era health-care law.
- The ACA, which overhauled the nation’s health insurance system in 2010, will remain in effect during the appeals process, which could last a year—or potentially longer if the case lands at the Supreme Court.
- That timeline also means the health-care law will likely continue to be a major political issue, including in the 2020 presidential campaign.
- The appeal will go to the Fifth U.S. Circuit Court of Appeals, based in New Orleans, which will soon set out a schedule to consider the case.
EUROPE & WORLD
China Moves to Ramp Up Lending to Small Businesses
- China stepped up efforts to boost lending in its flagging economy, with the central bank freeing up new funds and the country’s premier ordering big banks to lend to cash-starved small businesses.
- In separate meetings, Premier Li Keqiang ordered the heads of the biggest state-owned banks to allocate 30% of new lending to small businesses and to do so at low rates. He called such support crucial to stabilizing economic growth and employment.
- The People’s Bank of China, whose governor sat in on the meetings, later said it would reduce the amount of reserves Chinese banks are required to hold for the fifth time since the start of 2018.
- The 1 percentage point reduction—to be carried out in two equal cuts on Jan. 15 and Jan. 25—will free up a net 800 billion yuan ($116.6 billion) for lending, according to the central bank.
In Privacy-Minded Germany, a Massive Leak Strikes the Political Class
- German authorities were investigating the leak of private data belonging to hundreds of politicians in one of the country’s largest cyber leaks.
- The leak affected Chancellor Angela Merkel, according to German authorities. A government spokeswoman said no sensitive information regarding the government or Ms. Merkel was leaked.
- All political parties were hit by the latest disclosure except the anti-immigrant Alternative for Germany, or AfD, according to a person familiar with the investigation. An AfD spokesman confirmed the party wasn’t affected by the data leak.
- Public broadcaster rbb said hackers leaked mobile numbers and addresses but also internal documents from hundreds of members of the Bundestag, parliament’s lower house, as well as credit-cards, bills and chats with family members.
TODAY in HISTORY
- President Johnson outlined his “Great Society” in his State of the Union address. (1965)
- California Democrat Nancy Pelosi becomes the first woman U.S. Speaker of the House of Representatives. (2007)
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