DAILY MARKET REPORTS
- Shares of the world’s largest planemaker tumbled after a second deadly crash in just five months, but a jump in technology stocks helped cap some losses and lift the broader markets.
- Shares of Boeing slumped 8%, after falling about 12% in early trading after China and Indonesia grounded all of their Boeing 737 Max 8 aircraft following Sunday’s deadly crash of an Ethiopian Airlines jet of the same type.
- Meanwhile, hopes were lifted that a U.S.-China trade could soon be reached after Beijing’s top central banker said Sunday that China had agreed not to devalue its currency to support its exporters.
- U.S. consumers ramped up their spending in January, a sign of solid economic growth in the first quarter following a mixed jobs report Friday that raised fresh concerns about U.S. growth.
- In Europe, market participants were readying for a busy week of Brexit news.
- The British parliament is set to vote on Prime Minister Theresa May’s Brexit deal on Tuesday, with expectations high that it will be rejected for a second time, and further votes on Wednesday and Thursday likely.
- Nvidia agreed to buy computer-networking supplier Mellanox Technologies in an all-cash deal valued at roughly $7 billion.
US FINANCIAL MARKET
Indonesia Follows China in Grounding Boeing 737 MAX 8 Jets After Fatal Crash
- Indonesia joined China in grounding Boeing 737 MAX 8 aircraft on Monday following Sunday’s deadly Ethiopian Airlines crash, a sharp break from traditional air-safety practice that divided experts and ratcheted up pressure on the U.S. plane maker.
- China’s Civil Aviation Administration on Monday ordered airlines to suspend use of the 737 MAX 8.
- Ethiopian Airlines also grounded its fleet of MAX aircraft a day after its plane crashed minutes after takeoff from Addis Ababa, Ethiopia, killing all 157 aboard, the second deadly disaster involving the new model in recent months.
- Six minutes after departure, communication was lost, and the plane plunged to the ground.
- Indonesia, where a Lion Air 737 MAX 8 crashed in October, killing 189 people, followed suit.
- Boeing shares fell more than 11% in early trading Monday. In a statement, the company said the investigation was in the early stages and that the available information didn’t warrant any new guidance to carriers.
- As of January, Boeing reported that it had delivered 350 of the single-aisle jets to 46 airlines.
- In total, orders from more than 80 operators exceed 5,000 planes. Most sales are the Max 8, the model involved in both crashes.
Nvidia to Acquire Mellanox for Roughly $7 Billion
- Nvidia agreed to acquire networking firm Mellanox Technologies in a deal valued at $6.9 billion, as it seeks to use its largest acquisition ever to bolster its position in the fast-growing market for chips used in cloud computing.
- The deal takes Nvidia beyond its core business of designing semiconductors by bringing in a company that mainly sells devices that transport data within and between computers in the cloud.
- The deal would immediately add to Nvidia’s gross margin and bottom line once completed, the company said.
- Nvidia, will pay $125 a share in cash, a 14% premium to Mellanox’s closing price Friday of $109.38.
Tesla, in Reversal, to Keep More Stores Open
- Tesla said it would raise prices on a few of its electric vehicle models as the company changes some of its plans to close its stores in a shift to selling online only.
- Tesla’s decision to keep some of its stores open has prompted the company to raise its vehicle prices by about 3% on average world-wide, the company said in a blog post.
- There won’t be a price increase to its Model 3, though more expensive variants of the model, as well as its Model S and X vehicles will see a price bump.
Second Wave of U.S. Shale Revolution Is Coming, Says IEA
- The U.S. is on track to become a net petroleum exporter by 2021 and will soon after surpass Russia and rival Saudi Arabia, currently the world’s largest oil exporter, the International Energy Agency said Monday.
- The U.S. is expected to double its gross crude oil exports to 4.2 million barrels a day by 2024, while total exports of crude and refined products should reach 9 million barrels a day, the IEA said in its annual five-year oil outlook report.
- U.S. crude production, driven by relentless growth in shale oil, is expected to account for 70% of the total increase in global production capacity over the next five years, the agency added.
Barrick Gold, Newmont Mining Agree to Joint Venture
- Barrick Gold and Newmont Mining have agreed to form a joint venture, a move that cancels Barrick’s nearly $18 billion offer to buy its rival but creates the world’s single largest gold-producing operations in Nevada.
- On Monday, the two sides said they had sealed a joint venture that will allow them to save an estimated $500 million in average annual pretax costs in the first five full years of the combination, which is projected to total $5 billion over a 20-year period.
- The merged operations produced more than four million ounces on a pro forma basis in 2018 and contain 48 million ounces of reserves, Barrick said in a press release.
Levi Strauss seeks $6.2 billion valuation in market return
- Levi Strauss expects to raise as much as $587 million through an initial public offering (IPO), giving it a value of up to $6.17 billion as the jeans maker returns to the market after three decades.
- The company, which has 385.5 million shares outstanding, expects to offer 36.7 million shares between $14 and $16 per share.
- The 165-year-old company, known for inventing blue jeans, said it wants to evolve into a full-fledged global lifestyle leader for both men and women.
- Levi Strauss, which also sells footwear, belts and wallets, reported annual net revenue of $5.6 billion in 2018.
US ECONOMY & POLITICS
U.S. Retail Sales Rebound at Start of the First Quarter
- Consumers in the U.S. picked up their spending at the beginning of the year, a sign of solid economic momentum in the first quarter.
- Retail sales, a gauge of spending at restaurants, bricks-and-mortar establishments, and online stores, rose a seasonally adjusted 0.2% in January from a month earlier to $504.4 billion, the Commerce Department said Monday.
- Economists expected flat sales in January.
- Outlays at gas stations dropped 2%, largely because of erratic energy prices.
- Sales at car and vehicle parts dealers dropped a hefty 2.4%, but when removing these two categories from the mix, which tend to be volatile, sales rose a solid 1.2% from December, the largest monthly gain since May 2018.
- Monday’s report showed December sales were revised even lower to a 1.6% drop, from an initially published 1.2% decline.
U.S. business inventories rise, sales drop biggest in three years
- U.S. business inventories increased in December as sales recorded their biggest drop in three years, potentially pointing to an unplanned piling up of unsold goods.
- The Commerce Department said on Monday that business inventories rose 0.6% after being unchanged in November.
- Retail inventories excluding autos increased 1.0% in December as reported last month.
- Business sales tumbled 1.0% in December, the most since December 2015, after dropping 0.6% in November.
Trump to Request $8.6 Billion for Border Wall in 2020 Budget
- President Trump plans to seek $8.6 billion for additional barriers along the southern U.S. border as part of his budget proposal to be released Monday, a potential prelude to another fight over funding the president’s long-promised border wall.
- The budget document will propose $2.7 trillion in cuts to nondefense discretionary spending over the next decade, in part by reducing such spending by 5% next year below current federal spending caps, the president’s top budget official said Sunday.
- It would increase spending on national defense, such as artificial intelligence and hypersonic weapons and provide more than $80 billion for veteran’s health, a nearly 10% increase from fiscal 2019, according to OMB.
- The White House forecasts the economy will grow about 3% annually over the next decade, though it expects a bigger near-term boost, with output rising 3.2% this year before declining to 3.1% in 2020, 3.0% in 2021 and 2.8% in 2026.
- The assumption for growth is much higher than that of independent forecasters.
Drop Huawei or See Intelligence Sharing Pared Back, U.S. Tells Germany
- The Trump administration has told the German government it would limit the intelligence it shares with German security agencies if Berlin allows Huawei to build Germany’s next-generation mobile-internet infrastructure.
- The U.S. Ambassador to Germany wrote to Germany’s economics minister that the U.S. wouldn’t be able to keep intelligence and other information sharing at their current level if Germany allowed Huawei or other Chinese vendors to participate in building the country’s 5G network.
- This marks the first time the U.S. has explicitly warned its allies that refusing to ostracize Huawei could have consequences on these countries’ security cooperation with Washington.
- European security agencies have relied heavily on U.S. intelligence in the fight against terrorism for instance.
U.S., China Near Currency Deal; Beijing Vows Not to Devalue Yuan to Help Exports
- China’s top central banker signaled that Beijing and Washington are getting close to reaching a currency deal as part of their continuing negotiations to settle a yearlong trade battle.
- “Both sides have reached consensus on many crucial and important issues,” People’s Bank of China Gov. Yi Gang said at a news conference Sunday, held on the sidelines of the nation’s annual legislative session.
- How China manages its currency has been a point of contention between Washington and Beijing for years, and a vocal talking point throughout President Trump’s election campaign.
Biden tops 2020 Iowa presidential poll, Sanders gains momentum
- Former U.S. Vice President Joe Biden topped a poll of Iowa voters on Saturday that also showed Senator Bernie Sanders gaining momentum against him in the No. 2 spot.
- Biden, who has not announced whether he is running in the 2020 election, is the first choice for president of likely Iowa Democratic caucus-goers with 27% in the Des Moines Register/CNN/Mediacom Iowa Poll.
- Bernie Sanders got 25%, up gained 6% from the group’s previous poll released in December, while Biden fell 5% from 32%.
- The newspaper’s Iowa poll has a long track record of relative accuracy in the state that kicks off the presidential nominating process.
- In this cycle, Iowa will hold the first contest in the Democratic race in February 2020.
Hackers Breach College-Applicant Databases, Seek Ransom
- Hackers breached the system that houses applicant information for three U.S. colleges in recent days and demanded thousands of dollars in ransom from prospective students for personal information they claimed to have stolen.
- The schools include Oberlin College in Ohio, Grinnell College in Iowa and Hamilton College in New York. All three use a system called Slate to track information about students who have applied for admission.
- A copy of the note confirmed by one school said students could “purchase your entire admission file,” including “comments by admissions officers, assigned ratings, interview report, teacher recommendations, tentative decision” admission.
- It sought a ransom of 1 bitcoin, or more than $3,800, but a later email lowered the price to $60 for more limited information.
U.S. Bulks Up Ukraine’s Navy to Thwart Russia
- The U.S. is channeling support to Ukraine’s navy to help counter Russian efforts to choke its neighbor’s economy and destabilize its pro-Western government by blocking access to ports.
- U.S. training and equipment have helped strengthen Ukraine’s army in its five-year conflict with Russia, but the fresh U.S. focus reflects concern over the Kremlin’s new maritime efforts to halt Ukraine’s westward integration and keep it in Russia’s influence.
- The U.S. is transferring two Coast Guard cutters to Kiev and plans to send coastal radars to Ukraine and three Black Sea neighbors, and helping construct a maritime operations center for Ukraine near Odessa and sending naval ships on port visits.
- The North Atlantic Treaty Organization is also preparing a package of measures to strengthen its posture in the Black Sea, to be announced at a meeting of the 29-member alliance’s foreign ministers in Washington in April, diplomats said.
EUROPE & WORLD
May Asks Parliament to Back Her Brexit Deal (Again)
- The British government is struggling to secure concessions from the EU on a critical Brexit divorce bill, raising the prospect of another bruising parliamentary defeat for Prime Minister Theresa May when U.K. lawmakers vote on the deal Tuesday.
- With the Brexit talks deadlocked and the U.K. due to leave the bloc on March 29, pressure is rising on Mrs. May to show some way out of the impasse, though what form of her deal they will be asked to vote on remains unclear.
- Mrs. May is battling to avoid a repeat of the defeat in January, when Parliament rejected her Brexit deal by a record 230 votes.
- Mrs. May promised British lawmakers that if she failed to secure passage on Tuesday of her Brexit deal, they could vote on whether to extend negotiations beyond the March 29 deadline.
Chinese Banks Scaled Back Lending in February, PBOC Says
- Chinese banks sharply scaled back lending in February after issuing record-high loans at the start of the year, according to official data released on Sunday.
- Banks issued 885.8 billion yuan ($131.8 billion) worth of new yuan loans in February, down significantly from 3.23 trillion yuan in January and below economists’ expectations, data from the People’s Bank of China showed.
- Newly extended loans in February were below the 900 billion yuan forecast by economists.
- Total social financing, a broader measurement of credit in the economy, came to 703 billion yuan in February, down from 4.64 trillion yuan in January.
Alibaba invests $693 million for stake in Chinese courier STO Express
- Alibaba will take a 14% stake in STO Express through a $693 million deal, the e-commerce giant’s fourth significant investment in a Chinese courier company.
- STO Express is Alibaba’s fourth investment in the Chinese courier sector after minority stakes in YTO, Best and ZTO Express.
- STO Express is one of several companies that works with Alibaba under Cainiao, its logistics division launched in 2013.
Indian Election Dates Set for April and May
- India announced the rolling dates Sunday for national elections, setting the stage for the world’s biggest democracy to decide this spring whether to leave popular Prime Minister Narendra Modi and his conservative party in power.
- Elections will be held in seven stages starting on April 11 and ending May 19, with counting of votes to begin May 23.
- With 900 million eligible voters, more than in any previous election, India conducts polling in stages so that the thousands of security personnel involved can go from region to region.
- After a landslide victory five years ago, Mr. Modi’s party, the Bharatiya Janata Party, has been struggling with criticism that it hasn’t delivered the jobs and growth it promised.
TODAY in HISTORY
- William Howard Taft became the first U.S. president to be buried in the National Cemetery in Arlington, Virginia. (1930)
- President Roosevelt signs the Lend-Lease Bill. (1941)
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