DAILY MARKET REPORTS
- U.S. stocks slipped on Monday, dragged down by technology shares, after an unexpected drop in China’s exports in December fanned worries of a slowdown in global economic growth.
- Data early Monday showed China’s exports and imports both fell in December from a year ago as the impact of U.S. tariffs started to kick in and demand weakened.
- Adding to the downbeat mood was a partial government shutdown, which entered its 24th day, making it the longest shuttering of federal agencies in U.S. history.
- Bank shares were broadly higher, with Citigroup rising 2% after swinging to a profit in the fourth quarter.
- The bank’s shares had initially fallen after its earnings report also showed a marked drop in its trading business.
- JPMorgan and Wells Fargo are set to report their results on Tuesday.
- Analysts expect S&P 500 companies to post a 14.3% growth in fourth-quarter earnings.
- Profit for 2019 is likely to increase by 6.3% 2019, much slower than 23.4% growth in 2018.
- Among other stocks, PG&E plunged 48.12% after the biggest U.S. power utility said it is preparing to file for Chapter 11 bankruptcy for all of its businesses.
US FINANCIAL MARKET
Citigroup Swings to Profit Despite Trading Weakness
- Citigroup bounced back from a year-earlier loss, but its vital trading business struggled under tough market conditions.
- Overall revenue at the bank was $17.1 billion, down 2% from a year ago and below expectations of $17.6 billion.
- That decline was led by a 14% drop in the trading business, where revenue fell to $2.6 billion.
- Fixed-income trading, normally a stalwart for Citigroup, was off by 21% from a year earlier. Citigroup’s equity-trading revenue rose 18% from a year ago, to $668 million, bolstered by removing a one-time loss from the fourth quarter of 2017.
- The bank’s net income was $4.3 billion in the latest quarter, versus a loss of $18.9 billion a year earlier, when it took a large one-time charge related to the 2017 corporate tax cut.
PG&E Prepares for Bankruptcy Amid Wildfire Fallout
- PG&E plans to file for bankruptcy protection by the end of the month as it faces more than $30 billion in potential liability costs related to its role in sparking deadly California wildfires.
- California’s largest utility said Monday that it intends to file for chapter 11 on or about Jan. 29, capping a tumultuous 12 hours for the company, which announced Sunday evening that Chief Executive Geisha Williams was stepping down amid the crisis.
- The potential liabilities from all the fires combined could exceed $30 billion, the company said in a securities filing Monday, more than it could handle.
Lululemon raises fourth-quarter forecast, shares up
- Canadian athletic apparel maker Lululemon Athletica raised its fourth-quarter profit and revenue forecasts, driven by strong sales during the holiday season.
- Lululemon now expects revenue in the range of $1.14 billion to $1.15 billion in the fourth quarter compared with its previous forecast of $1.12 billion to $1.13 billion.
- Lululemon, which has witnessed significant comparable store sales growth in the past few quarters, now expects earnings of $1.72 to $1.74 per share, compared with $1.64-$1.67 per share estimated previously.
OECD Sees Further Slowdown in Global Economy This Year
- The U.S. and many other large economies are set for a further slowdown this year, although there are signs of stabilization in China, according to leading indicators released Monday by the Organization for Economic Cooperation and Development.
- The leading indicators are designed to provide advance signals of the acceleration and slowdown of economic activity, and are based on a variety of data series that have a history of anticipating such swings.
- The indicators released Monday are based on data from November.
- The U.S. indicator fell for the third straight month, and to 99.6, further below the 100 mark that points to steady growth.
- By contrast, China’s indicator rose slightly to 98.8, a sign its slowdown may be coming to an end.
- The leading indicator for the eurozone was below 100 for a fourth straight month, pointing to a continuation of the slowdown that began last year.
Newmont to Buy Goldcorp in Deal Valued at $10 Billion
- Newmont Mining agreed to buy gold producer Goldcorp in a $10 billion, all-stock deal that would create the world’s largest miner and intensify a consolidation wave triggered in part by languishing prices and dwindling supplies of easy-to-find gold.
- The move comes on the heels of another gold-mining blockbuster: Barrick Gold in September agreed to buy Randgold Resources for $6 billion in an all-share merger.
- Newmont, the U.S.’s largest miner measured by market capitalization, said it would acquire each Goldcorp share for 0.328 of their own stock. That represents a 17% premium to the Canadian company’s 20-day volume weighted average share prices.
Viacom Weighs Majority Stake Sale of China Operations
- Media giant Viacom is in talks to sell a majority stake in some of its China operations after running into difficulties trying to scale its business in the world’s second-largest economy, according to people familiar with the matter.
- The Viacom talks have involved the potential sale of a majority share in its channel brands, such as MTV and Nickelodeon, in China, an arrangement similar to the company’s joint venture with Reliance Industries in India.
- Selling a controlling stake in its China business to a domestic investor could help Viacom reduce its potential regulatory risk in the country at a time of high trade and political tensions between Beijing and Washington, while still allowing it to profit.
Cockpit Voice Recorder Recovered from Indonesia’s Lion Air Crash
- Divers recovered the cockpit voice recorder from a Lion Air jetliner that crashed in the Java Sea in October, a potentially important step in helping to understand what happened in the minutes before the new Boeing 737 MAX 8 plane went down.
- The cockpit conversations may be most important in helping investigators determine why the cockpit crew, after counteracting automated nose-down commands about two dozen times, apparently stopped opposing them before the jet started its fatal dive.
- The voice recorder may also shed light on the checklists and troubleshooting the pilots relied on as the months-old plane’s flight-control system started responding to erroneous sensor signals about the angle of the plane’s nose.
SpaceX to Cut 10% of Workforce
- Elon Musk’s SpaceX plans to reduce its workforce by 10%, or roughly 600 employees, even as the company seeks to ramp up ambitious projects to develop a super-powerful rocket and deploy thousands of advanced satellites.
- The move, believed to be the most significant cutback since SpaceX gained international prominence about a decade ago, is the latest sign of major strategic and technical challenges roiling the closely held Southern California company.
- In a statement, SpaceX indicated payroll savings are now part of its financial realignment. The company also said action to reduce head count “is taken only due to the extraordinarily difficult challenges ahead and would not otherwise be necessary.”
US ECONOMY & POLITICS
Shutdown Pinches Economic Growth
- The partial federal government shutdown that became the longest on record Sunday is curtailing infrastructure projects, food-processing inspections and economic data used by Wall Street.
- But on a more micro level, it is showing signs of disrupting commerce as hundreds of thousands of federal workers missed out on their first payday of the closure late last week.
- Economists estimate the furlough of 380,000 federal workers—meaning they take unpaid leave—costs $1 billion to $2 billion a week in lost economic output.
China’s Annual Trade Surplus with U.S. Hits Record Despite Trump’s Tariff Offensive
- China’s trade surplus with the U.S. hit a record last year, as robust American demand for Chinese goods undercut the Trump administration’s tariff offensive aimed at narrowing the countries’ lopsided trade gap.
- China recorded $323.32 billion in surplus with the U.S. in 2018, representing a 17% jump from the figure in the previous year, according to Chinese government trade data released Monday.
- China’s exports to the U.S. rose 11.3% in 2018, while imports from the U.S. inched up 0.7%, data from China’s General Administration of Customs showed.
- The Trump administration’s phased deadlines for tariffs, along with threats of more for this year, also sent Chinese exporters racing to fill orders, and a weakening Chinese currency kept the prices of those goods competitive.
EUROPE & WORLD
China’s Exports Take a Surprising Fall in December
- The Trump administration’s trade tactics, which have piled uncertainty onto a slowing Chinese economy, dented another growth driver last month: China’s juggernaut exports.
- After steaming ahead, Chinese exports unexpectedly tumbled in December, declining 4.4% from a year ago, according to data from China’s customs administration released Monday.
- China’s imports, which have been weakening, fell 7.6% in December, according to Monday’s trade data.
- Despite December’s fall, China’s exports rose 9.9% for the full year of 2018, beating a 7.9% increase in 2017, while imports surged 15.8% on year, on par with 2017’s growth.
Spy Charges Put Huawei’s European Ambitions in Jeopardy
- In the decade since arriving in Poland, Huawei has established itself as a pillar of the country’s telecommunications network and one of its most high-profile foreign corporations.
- But in recent months, Polish authorities had quietly grown concerned that the nation’s deep reliance on Huawei has exposed it to espionage threats from Beijing. Those worries burst into the open Friday with the arrest of a Huawei employee in Poland.
- Polish officials said over the weekend they had been examining the security issues linked to the use of Huawei equipment for some time and were considering whether to restrict the company’s ability to sell in Poland.
Huawei Fires Executive Charged in Poland With Espionage
- Huawei fired a sales director who was arrested in Poland on espionage charges, saying he brought the Chinese telecom company “into disrepute.”
- Polish authorities said Friday they had arrested Wang Weijing, known locally as Stanislaw Wang, on charges of conducting espionage on behalf of China.
- China’s Foreign Ministry said it is highly concerned that Mr. Wang was detained. The ministry said China’s embassy in Warsaw is in touch with Polish authorities and said it is requesting updates, consular access to Mr. Wang and the protection of his rights.
Chinese Court Sentences Canadian National to Death for Drug Crimes in Retrial
- A Chinese court ordered the death penalty for a Canadian national after convicting him in a hurried retrial that legal experts called an attempt by Beijing to up its leverage over Ottawa for the arrest of a prominent Chinese executive.
- The decision by the Intermediate People’s Court in this seaside city came after a one-day retrial that found Canadian Robert Schellenberg guilty of participating in an international drug ring.
- A higher court’s decision less than three weeks ago to retry his case, after rejecting his appeal, and to hold the retrial in short order have been cited as unusual by Chinese legal experts.
Vote on Brexit Deal Set to Leave U.K. No Clearer on EU Exit
- Theresa May prepares for a vote Tuesday on her plan to leave the EU, facing what could be the heaviest legislative defeat of any government since World War II, demonstrating how Brexit has tested the U.K.’s institutions and unwritten constitution.
- The vote is expected to leave the status of Brexit in doubt just over 10 weeks before Britain’s scheduled departure from the bloc.
- But despite what promises to be serious political turmoil in Europe’s second biggest economy, some expect Mrs. May to take a rerun at the parliamentary hurdle with an amended divorce deal in the days after Tuesday’s vote.
- Still, the fissures in British politics are so deep that officials on both sides increasingly expect that Britain’s scheduled departure date of March 29 might be delayed while lawmakers find a path forward.
Glencore Gave Loans to Businesses Linked to Suspect Congo Dealings
- Swiss mining giant Glencore provided nearly $1 billion in loans and advances to companies associated with an Israeli businessman accused of having corrupt ties to government officials in the Democratic Republic of Congo.
- The loans, made over a roughly 10-year period starting in 2007, were designed in part to help finance investments by the businessman, Dan Gertler, in copper-mining operations in Congo alongside Glencore, the documents show.
- The amount of the loans highlights the financial ties between Glencore and Mr. Gertler during their decadelong partnership in Congo.
- The relationship has been a focus of U.S. and Canadian authorities, who have been investigating the company’s Congo operations and ties to Mr. Gertler.
China car sales hit reverse for first time since 1990s
- Car makers in China will face more fierce competition this year, after a tough 2018 when the world’s biggest auto market contracted for the first time in more than two decades, the country’s top auto industry association said on Monday.
- China car sales fell 13% in December, the sixth straight month of declines, bringing annual sales to 28.1 million, down 2.8% from a year earlier, China’s Association of Automobile Manufacturers (CAAM) said.
- This was against a 3-percent annual growth forecast set at the start of 2018 and is the first time China’s auto market has contracted since the 1990s.
TODAY in HISTORY
- The United States ratified treaty with England ending the Revolutionary War. (1784)
- President Roosevelt and Prime Minister Churchill meet at the Casablanca Conference. (1943)
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