DAILY MARKET REPORTS
- U.S. stocks treaded water on Monday as a tech boost was offset by declines in energy companies, as investors wait for Alphabet’s results after the bell following mixed earnings from other FAANG stocks.
- With just weeks to go until tariffs are supposed to rise once more, investor sentiment has been buoyed by comments from officials on both sides of trade talks between the U.S. and China.
- Many investors now say that reaching a deal is in the interest of both parties—particularly Beijing, given concerns around an economic slowdown in China.
- The latest data showed Chinese manufacturing contracting, with the Caixin/Markit Manufacturing Purchasing Managers’ Index falling to the lowest level in around three years.
- Berlin slashed its growth forecast for 2019 to 1% from 1.8% on geopolitical risks.
- Nearly half of the S&P 500 companies that have reported fourth-quarter earnings so far, 71.4% beat analysts’ estimates.
- Since earnings kicked off three weeks ago, estimates for fourth-quarter profit growth have risen to 15.4% from 14.3%, but forecast for 2019 earnings growth fell to 4.9% from 6.3%.
US FINANCIAL MARKET
Starboard CEO Jeffrey Smith Becomes Chairman of Papa John’s
- Activist investor Starboard Value is making a $200 million investment in Papa John’s and that its chief executive is becoming chairman of the pizza chain.
- The pizza chain for more than a year has suffered from declining same-store sales, which the company has attributed, in part, to controversies involving its founder and largest shareholder, John Schnatter.
- Starboard, well known in the restaurant industry for its 2014 board coup at Olive Garden parent company Darden Restaurants, has secured the board chairmanship for its CEO, Jeffrey Smith, who founded the firm in 2002.
Tesla to buy battery tech maker Maxwell Technologies for $218 million
- Tesla is buying Maxwell Technologies for $218 million in an all-stock deal that will help the electric car maker beef up its battery technology at a time when it is ramping up production of its crucial Model 3 sedan.
- Maxwell, whose customers include General Motors and Lamborghini, makes ultracapacitors that are used in automobile batteries to lengthen their lives. They are also used for electric energy storage on power grids.
- The offer values each Maxwell share at $4.75, representing a 55% premium to the stock’s closing price on Friday, the companies said. Maxwell shares rose to trade at $4.72.
Ultimate Software agrees to $11 billion buyout by investor group
- Ultimate Software, a cloud-based human resources applications developer, agreed to be bought by an investor group led by private equity firm Hellman & Friedman for about $11 billion.
- The $331.50 per share all-cash offer is at a premium of 19% to the HR software provider’s closing share price on Friday.
- Ultimate Software, which generated more than $1.1 billion in 2018 revenue, expects the deal to close in mid-2019.
- The company can also consider alternative offers in a 50-day “go-shop” period.
Spotify in Talks to Buy Gimlet Media
- Spotify Technology is in talks to purchase podcasting giant Gimlet Media, according to people familiar with the matter, a move that would give a boost to the music-streaming company’s narrative-audio ambitions.
- Talks are ongoing and it is still possible that a deal won’t happen, the people said.
- Gimlet Media, which was co-founded by former “This American Life” producer Alex Blumberg and former Boston Consulting Group consultant Matthew Lieber in 2014, is the producer of popular podcasts like “Reply All,” “StartUp” and “The Nod.”
Bill Gross Retiring from Janus
- William “Bill” Gross, co-founder of Pimco and portfolio manager at Janus Henderson, is retiring from Janus, the firm said.
- Mr. Gross has been at Janus since 2014. The 74-year-old co-founded Pimco in 1971.
- Mr. Gross said in his prepared remarks that he looks “forward to continuing to work with my son Jeff and daughter Jennifer in identifying and supporting worthy and important causes that are creating better lives locally and around the world.”
US ECONOMY & POLITICS
White House adviser says work ongoing in China trade talks
- White House economic adviser Kevin Hassett on Monday said it remained to be seen how much progress has been made in U.S.-China trade talks but that U.S. President Donald Trump still hoped to make a deal by the March 1 deadline.
- “There’s still a lot of work to do,” Hassett, chairman of the White House Council of Economic Advisers, told CNBC.
The FBI reportedly raided a Huawei lab and set up a sting at CES as part of a previously unrevealed investigation
- The FBI raided a Huawei lab in San Diego and set up a sting operation at CES in Las Vegas in January as part of a third investigation into the smartphone maker, according to a new report by Bloomberg Businessweek.
- The newly reported third investigation deals with trade secrets, but carries the added weight of federal regulations around technologies with the potential for use in defense.
- Executives for an electronics components company, Akhan Semiconductor, aided an FBI investigation into whether Huawei attempted to steal Akhan’s smartphone glass technology that it says is resistant to scratches and is practically unbreakable.
- The Akahn glass, called Miraj, features a layer of artificial diamond that could also hold implications for defense technology.
- The executives were briefed on the lab raid, which took place last week, and wore wires to a meeting with Huawei executives during the annual CES convention last month, according to the Businessweek report.
Virginia Governor Rebuffs Fellow Democrats, Risks Undermining Party in 2020
- Virginia’s Democrat Gov. Ralph Northam met with top aides amid calls to resign over a racist photograph, that has pressured a party that has promoted a zero-tolerance policy against members who have been accused of bigotry and sexual misconduct.
- After party leaders urged the governor to step down after the photo surfaced from his 1984 medical-school yearbook—showing one person in blackface and another wearing a white Ku Klux Klan uniform—he refused, saying the depiction is horrible but that he isn’t in the photograph. He said earlier that he was in the photo.
- An extended face-off over Mr. Northam’s status risks undercutting a key Democratic message as the 2020 race for the White House gets under way, party officials and advocates said.
Foxconn Says It Will Move Forward with Wisconsin Plant After Conversation with Trump
- Foxconn Technology, a major supplier to Apple, said that it has decided go ahead with the construction of a liquid-crystal display factory in Wisconsin, two days after saying building such a plant would be economically unfeasible.
- The company said it is moving forward with a planned facility that would make small LCD screens after productive discussions with the White House and “a personal conversation between President Donald J. Trump and Chairman Terry Gou.”
- Foxconn, formally known as Hon Hai Precision Industry Co., announced 18 months ago that it would invest $10 billion, build a 22-million-square-foot LCD panel plant and hire 13,000 employees, primarily factory workers.
Chuck Schumer and Bernie Sanders call for restricting corporate share buybacks
- Senate liberals are proposing legislation that would prevent companies from buying back their own shares unless they first pay workers $15 an hour and offer paid time off and health benefits.
- Senate Democratic leader Charles Schumer of New York and Sen. Bernie Sanders of Vermont outlined their plan in a New York Times op-ed published Sunday. The proposal would slap “preconditions” on a company’s ability to buy its own shares.
- “The goal is to curtail the overreliance on buybacks while also incentivizing the productive investment of corporate capital,” they wrote.
EUROPE & WORLD
Growth in Activity in China’s Service Sector Slowed in January
- Growth in activity in China’s service sector slightly slowed in January, a private gauge showed on Sunday, contrasting with official data that pointed to a faster expansion in the sector.
- The Caixin China services purchasing managers’ index slipped to 53.6 in January from 53.9 in December, Caixin Media and research firm Markit said.
- The sub-index of business expectations declined from the previous month, indicating services providers’ weakening confidence in the outlook of their operation for the coming 12 months.
Panasonic cuts profit outlook on slowing China demand; Tesla business a bright spot
- Japan’s Panasonic cut its annual profit outlook after disappointing quarterly earnings it blamed on a slowing Chinese economy hit by a trade war with the United States that hurt demand for auto components and factory equipment.
- The energy division, which includes its battery business with Tesla, provided some good news in a bleak quarter, posting its first operating profit in three quarters.
- Panasonic’s operating profit for the quarter fell 19% to 97.6 billion yen, far below the average 122.35-billion-yen estimate.
- Panasonic forecast an operating profit of 385 billion yen ($3.51 billion) for the year ending March, down from the previously predicted 425 billion yen and missing the 420.25-billion-yen average.
Ryanair sees fares falling further; O’Leary to stay on
- A 6% drop in fares plunged Ryanair to its first quarterly loss since 2014 and Europe’s biggest budget airline said overcapacity was likely to continue driving ticket prices lower, albeit at a slower pace.
- In its fiscal third quarter, Ryanair said an 8% rise in passenger numbers was offset by a 6% decline in average fares, while a 26% increase in ancillary revenues to 557 million euros was offset by higher fuel and staff costs.
- The quarterly loss of 20 million euros ($23 million), excluding 46.5 million euro start-up losses, compared with a 106 million euro profit in the same period a year earlier.
- Ryanair reiterated its 2018-19 profit forecast of 1-1.1 billion euros, which would be down by as much as 31% on the previous year.
Two Huawei staff expelled from Denmark after work permit inspection
- Danish authorities have expelled two Huawei Technologies staff after an inspection at the company’s Copenhagen office showed they failed to comply with laws covering residence and work permits, police said on Monday.
- Police said the inspection of Chinese company’s Copenhagen office was part of a “routine investigation” done by authorities at locations with many foreign workers.
- Four Huawei staff were charged following Thursday’s inspection, of which two were later expelled from the country, a Copenhagen police spokeswoman said.
Mobile network operator’s body GSMA considers crisis meeting over Huawei
- Mobile communications industry body GSMA has proposed its members discuss the possibility that Chinese network vendor Huawei is excluded from key markets, amid concerns such a development could set operators back by years.
- The European Commission is weighing a de facto ban on Huawei’s 5G network equipment for next-generation mobile networks in the European Union due to security concerns, sources in Brussels have told Reuters.
- GSMA Director General Mats Granryd has written to members proposing to put the debate around Huawei onto the agenda of its next board meeting, a spokesman for the federation told Reuters on Saturday.
Investigators Expected to Probe Deutsche Efforts to Shed Loan to Russian Bank
- Congressional investigators expect the House Financial Services Committee to examine Deutsche Bank’s efforts after the 2016 election to shed a loan it made to VTB Group, a large Russian state-owned bank.
- The Wall Street Journal reported Saturday that Deutsche Bank, seeking to slash its exposure to Russia in late 2016, scrambled to sell a $600 million loan it had outstanding to VTB, according to documents and people familiar with the funding.
- Deutsche Bank’s effort to unload the VTB loan came as the German bank worried about its financial contacts with Russia, which U.S. intelligence officials accused of interfering in the 2016 presidential election while the campaign was still under way.
TODAY in HISTORY
- England proclaimed the formal end to the hostilities with the United States. (1783)
- George Washington and John Adams are elected the president and vice president of the United States. (1789)
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