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WALL STREET DROPS ON PALTRY JOBS GROWTH, GLOBAL SLOWDOWN WORRIES

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US FINANCIAL MARKET | US ECONOMY & POLITICS
 EUROPE & WORLD | TODAY IN HISTORY

DAILY MARKET REPORTS

  • Wall Street declined on Friday after data showed U.S. job growth almost stalled in February, adding to concerns of a slowdown in global growth sparked by weak China export data and a prolonged slowdown in eurozone.
  • The U.S. economy created only 20,000 jobs in February, compared with expectations of non-farm payrolls rising by 180,000 jobs.
  • However, other details of the closely followed employment report were strong.
  • The unemployment rate fell back to below 4% and annual wage growth was the best since 2009.
  • Worries about global growth gained ground after exports in China, the world’s second largest economy, tumbled the most in three years in February.
  • Chinese exports slid 20.7% in February from a year earlier—a much steeper decline than expected, while imports tumbled 5.2%, also a bigger drop than expected.
  • The data pushed shares of Chinese companies lower, with major indexes suffering their worst day since October. The Shanghai Composite Index fell 4.4% and its smaller Shenzhen counterpart dropped 3.8%, their biggest single-day falls in five months.
  • Shares in Costco rocketed 5% in early trading after sharply beating earnings consensus on higher gross margins, a reversal from 3 consecutive quarters of shrinking margins.

US FINANCIAL MARKET

Costco Raises Minimum Wage to $15 an Hour

  • Costco Wholesale said it has raised starting wages for store workers to $15 an hour, as a tight U.S. labor market continues to drive fierce competition for hourly staffers.
  • Total revenue rose 7% to $35.4 billion, compared with $32.99 billion a year earlier, but came in below estimates of $35.67 billion.
  • Same-store sales rose 5.4%, boosted by 4.9% more traffic to stores and websites. Online sales rose 20.2%.
  • The company’s gross margin increased 31 basis points to 11.29%. Profit margins had fallen in the prior three quarters.
  • The company reported a profit of $889 million, compared with $701 million the year prior.

LaCroix’s Sales Bubble Pops; Stock Tumbles

  • National Beverage, the maker of LaCroix sparkling water, reported a drop in quarterly sales for the first time in five years, sending the company’s share price tumbling Friday.
  • The company’s revenue was $220.9 million in the quarter, down about 3% from a year ago and sharply below the nearly $300 million it booked in the July-ended quarter.
  • Profit fell 39% from a year ago.
  • In the four weeks ended Feb. 23, National Beverage’s U.S. retail sales slid 7%, while Nestlé and Polar increased 11% and 17%, respectively, according to a Wells Fargo analysis of Nielsen data.
  • After years of explosive growth, sales of LaCroix have slowed in recent months as the seltzer has faced increased competition and questions about its ingredients.

Airbnb buys HotelTonight in deeper expansion into hotel-booking business

  • Home-renting company Airbnb has bought HotelTonight, an app for finding hotel rooms at a discount, as it wades deeper into the hotel-booking business to attract a wider variety of travelers ahead of a hotly anticipated initial public offering.
  • The acquisition expands the company’s inventory by adding listings from hotels, long viewed as the arch enemy of Airbnb, and is part of a strategy to win over travelers who have shied away from the risks and quirks of renting a stranger’s home.
  • HotelTonight has raised more than $115 million in funding and was last valued at $463 million in a funding around in 2017.

Tesla Reaches Deal With Lenders in China

  • Tesla reached an agreement with lenders in China to receive as much as a half-billion dollars to invest in its Shanghai factory currently under construction.
  • The electric-car maker said in a securities filing Thursday that a syndicate of lenders agreed to provide up to 3.5 billion yuan ($521 million) for construction and production expenses at its so-called Gigafactory Shanghai.
  • Tesla expects to begin production of the Model 3 sedan for the local market by the end of this year, targeting 10,000 vehicles a week, and mass production by next year, ultimately reaching 500,000 cars a year.

SpaceX CEO Musk’s security clearance under review over pot use: official

  • SpaceX Chief Executive Elon Musk’s security clearance is being reviewed by the Pentagon after the billionaire smoked marijuana on a California comedian’s podcast in September, a U.S. official said on Thursday.
  • An incident report was started by the Pentagon some time after the marijuana event, according to the official, who spoke on condition of anonymity. The review was first reported by Bloomberg.
  • Musk has a security clearance as SpaceX provides satellite launch services to the U.S. government.

Oil drops more than 3% as economic outlook weakens, U.S. supply surges

  • Oil prices dropped more than 3% on Friday on a worsening economic outlook after the European Central Bank warned of continued weakness and fresh data showed U.S. job growth almost stalled in February.
  • So far oil demand has held up, especially in China, where imports of crude remain above 10 million barrels per day (bpd).
  • Yet a slowdown in economic growth is likely to dent fuel consumption and pressure prices at some point.

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US ECONOMY & POLITICS

Hiring Growth Slowed in February as Employers Struggled to Find Workers

  • Hiring growth slowed sharply in February, a sign that weakening global economic growth could be touching the U.S. economy, though strong wage growth and robust job gains in earlier months suggest the U.S. still has significant momentum.
  • U.S. nonfarm payrolls rose a seasonally adjusted 20,000 in February, marking the slowest pace for job growth since September 2017, when hurricanes skewed the data, and falling well below economists’ expectations for 180,000 new jobs.
  • Wages rose 3.4% from a year earlier in February, a pace last matched in April 2009.
  • Despite the weakness in hiring, the unemployment rate fell two-tenths of a percentage point to 3.8% in February as federal government workers who were temporarily unemployed during a 35-day partial shutdown returned to work.
  • A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, dropped to 7.3% after hitting an 11-month high of 8.1% in January because of the government shutdown.
  • The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was unchanged last month at more than a five-year high of 63.2%.

U.S. Housing Starts Jumped in January

  • Housing starts rose 18.6% in January from the prior month to a seasonally adjusted annual rate of 1.230 million.
  • Residential building permits, which can signal how much construction is in the pipeline, rose a more modest 1.4% from December to an annual pace of 1.345 million.
  • That topped economists’ expectations for a 9.5% increase for starts and a 2.7% decrease for permits.
  • Starts were up 25.1% in January from the prior month for single-family construction and up 4% for construction of buildings with five or more units.
  • Permits in January were up 4.8% for buildings with five or more units but down 2.1% for single-family homes

U.S.-China Trade Deal Isn’t Imminent So No Summit Date Set, Envoy Says

  • The U.S. and China have yet to set a date for a summit to resolve their trade dispute, the U.S. ambassador to China said Friday, as neither side feels an agreement is imminent.
  • Mr. Branstad said negotiators need to further narrow the gap in their positions, including on enforcement of an eventual deal, before summit arrangements are made.
  • “Both sides agree that there has to be significant progress, meaning a feeling that they’re very close before that happens,” Mr. Branstad said. “We’re not there yet. But we’re closer than we’ve been for a very long time.”

Paul Manafort Sentenced to 47 Months

  • A federal judge sentenced Paul Manafort, who served as Donald Trump’s 2016 campaign chairman, to 47 months in prison on Thursday for dodging taxes and committing bank fraud, much less than he could have faced.
  • U.S. District Judge T.S. Ellis ordered the sentence, saying guidelines calling for Mr. Manafort to spend between 19 and 24 years in prison were “out of whack” and calling the roughly 4-year sentence a suitable punishment for the crimes committed.
  • Judge Ellis also ordered Mr. Manafort to pay up to $25 million in restitution, but he gave the former lobbyist credit for the nine months he has already spent in prison in connection with the case.
  • Manafort also faces up to 10 additional years in prison after pleading guilty to conspiracy against the U.S. and to obstruct justice, with a possible sentencing next Wednesday.

House Is Set to Pass Election Overhaul Package

  • The House of Representatives is expected to pass legislation overhauling election rules that is likely to stall in the Senate, setting up the bill itself to be a key issue in the 2020 campaign battle between Democrats and Republicans.
  • The bill, known as H.R. 1, includes a range of measures concerning voting rights, election security and campaign finance.
  • Republicans say it is largely a power grab by Democrats and the American Civil Liberties Union criticizes some of its provisions as overly broad.
  • One of the measures in the bill mandates a nationalized system to finance federal elections publicly. It would allocate federal money to match certain small-dollar donations 6-to-1 and deposit those funds in campaign accounts.
  • Democrats argue such a program would encourage grass-roots campaigning.

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EUROPE & WORLD

Chinese Exports Plunge as Slowdown Deepens

  • Exports tumbled 20.7% from a year earlier in February, after jumping 9.1% in January, according to data from the General Administration of Customs released Friday.
  • The disappointing trade data reflect weaker global demand and distortions from the Lunar New Year holiday, said economists, who were expecting a far smaller drop for February.
  • The country’s exports to the U.S. fell 26.2% last month, while imports from the U.S. dropped 28.6%, leading to a bilateral trade surplus of $14.72 billion, a two-year low.
  • China’s total trade surplus stood at $4.12 billion, narrowing sharply from the $39.16 billion surplus in January.

Airbus shares fall after weak set of orders

  • Airbus shares fell on Friday after the European planemaker reported weak order figures.
  • Two months into 2019, Airbus SE has logged cancellations for 103 jetliners and garnered a grand total of four new sales — and the sales were for the A220 plane manufactured in Canada by Bombardier.
  • Cancellations last month included 42 A350 wide-bodies jettisoned by unprofitable Persian Gulf carrier Etihad Airways and 25 single-aisle A320neos that had been ordered by Germania, which has filed for bankruptcy.

Deutsche Post plays down impact of trade tensions on its business

  • Deutsche Post DHL forecast profit growth for this year that lagged analysts’ expectations, but played down concerns over global trade, saying more complex supply chains could in the near term benefit its business.
  • The German postal and logistics group reported a 5.1% rise in fourth-quarter sales to 16.9 billion euros ($19.11 billion), versus analysts’ forecast for 16.65 billion, while operating profit was in line at 1.1 billion euros.
  • Deutsche Post said operating profit should rise to between 3.9 billion euros and 4.3 billion euros in 2019, and confirmed its guidance for the metric to reach at least 5 billion by 2020.
  • The 2019 guidance compares to average analyst forecasts for 4.1 billion euros, but includes a 400 million-euro gain from the disposal of its China supply chain business.

Canada Posts Another Surprise Gain in Employment

  • Canada surprised with a sizable gain for February jobs, all of them full-time, as the labor market continued to outperform in the face of a weakening domestic outlook.
  • The economy added a net 55,900 jobs in February on a seasonally adjusted basis, well above expectations for a flat reading.
  • The unemployment rate in February remained unchanged at 5.8% because more people entered the labor force.
  • The February jobs report also included an encouraging sign on wages. Annual wage growth rose 2.3% in the month, or the best gain since September.

Venezuela Blackout Stretches Across Country, Closing Schools and Businesses

  • Venezuela suspended classes and work on Friday as it grapples with the biggest blackout in recent memory, raising tensions in a heated political crisis and angering residents already struggling with Latin America’s worst economic collapse on record.
  • Electricity went out Thursday because of problems at the massive El Guri hydroelectric dam in eastern Venezuela that supplies most of the country’s power, Electricity Minister Luis Motta said.
  • The blackout was unprecedented as it hit almost the entire country at once, plunging some 30 million people into darkness.
  • Mr. Motta initially said the issue would be resolved in three hours. But residents and local media were reporting early Friday that the lights were still out, more than 15 hours after the outage began.

China Pushes Ahead With New Foreign-Investment Law

  • China’s legislature made scant changes to a proposed law on foreign investment criticized by business groups as vague, as Beijing hurries the bill’s passage to ease trade tensions with the U.S. while leaving key complaints unaddressed.
  • The latest draft took another step forward Friday, being formally introduced to the country’s ceremonial legislature, which is all but certain to pass it next week when its annual session ends.
  • Once passed, the law will replace three separate statutes governing foreign companies and promises to better protect proprietary technology and make goods produced in China by foreign companies eligible for government procurement.

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TODAY in HISTORY

  • Russia’s February Revolution, which eventually led to the overthrow the csarist government, began. (1917)
  • The Soviet Union claimed to be in possession of the atomic bomb. (1950)
  • First U.S. combat troops arrived in Vietnam. (1965)

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