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WALL STREET RISES ON TRADE HOPES, CHIP STOCKS AT RECORD HIGHS

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

DAILY MARKET REPORTS

  • New York’s main stock indexes rose on Wednesday, extending a strong start to the quarter as a rally in chipmakers added to optimism over trade talks between the United States and China.
  • Wednesday’s advance came after the Financial Times reported the U.S. and China have resolved most of the sticking points preventing an agreement to end their months long tariff dispute.
  • White House economic adviser Larry Kudlow said on Tuesday that the two countries “expect to make more headway” in trade talks this week, leading to hopes of a resolution to their months-long trade war.
  • Chipmakers, which get a large part of their revenue from China, boosted the main U.S. indexes.
  • AMD jumped 10%, becoming the top gainer on the S&P 500, while Micron gained 4.5% and Intel rose 1.9%.
  • Global growth slowdown fears receded after a report which showed China’s services sector rose to a 14-month high in March, following upbeat manufacturing data from China and the United States earlier in the week.
  • Data Wednesday showed eurozone service-sector activity in March rose at the strongest rate since last November, though gauges of manufacturing activity in the region remain weak.
  • Stocks gave up some gains after the Institute for Supply Management came out with its March U.S. services sector PMI, which was below estimates, and was at its lowest since August 2017.
  • GameStop fell 8.5% after the videogame retailer forecast current-quarter profit below analysts’ estimates.

US FINANCIAL MARKET

GameStop forecasts surprise first-quarter loss, shares fall

  • GameStop warned of a potential first-quarter loss as the world’s largest video game retailer wrestles with slowing sales of video games and consoles at its stores.
  • Net sales fell 7.6% to $3.06 billion, missing estimates of $3.28 billion.
  • Same store sales increased 1.4% which GameStop attributed to its fiscal calendar and the timing of the launch of Call of Duty.
  • The company posted a greater net loss of $187.7 million in the quarter, compared to $105.9 million in the same quarter a year ago. GameStop had $413 million in goodwill impairments not present a year ago.
  • The company said it now expects earnings of breakeven to a loss of 5 cents per share for the quarter, adding that it would not provide annual earnings forecast at this time. Analysts on average were expecting a profit of 17 cents per share.
  • The company also forecast a 5 to 10% drop in total and same-store sales for 2019.

Hudson’s Bay Sales Fall, Profit Rises

  • Hudson’s Bay reported same-stores sales fell in its latest quarter, missing analyst expectations, as growth in digital sales and at Saks Fifth Avenue partially offset declines at other brands.
  • The Canadian retailer, which also owns department-store chain Lord & Taylor, said Wednesday fourth-quarter retail sales dropped 5.5% to C$2.9 billion ($2.18 billion), below the consensus forecast of C$3.18 billion from analysts.
  • Same-store sales fell 1.4%, compared with the estimate of a 1.1% increase. Overall comparable digital sales increased 8.7%.
  • The company posted a profit of C$286 million, up from C$84 million a year earlier, well ahead of consensus on a per share basis.

Ethiopian Airlines Pilots Initially Followed Boeing’s Required Emergency Steps to Disable 737 MAX System

  • Pilots at the controls of the Boeing 737 MAX that crashed in Ethiopia initially followed emergency procedures laid out by the plane maker but still failed to recover control of the jet, according to people briefed on the probe’s preliminary findings.
  • After turning off a flight-control system that was pushing down the plane’s nose shortly after takeoff, the crew couldn’t get the aircraft to climb and ended up turning it back on and relying on other steps before the final plunge killed all on board.
  • The sequence of events, still subject to further evaluation, calls into question assertions by Boeing and the FAA that by following established procedures to turn off the stall-prevention feature, pilots could overcome a misfire of the system and avoid a crash.
  • The latest details are based on data downloaded from the plane’s black-box recorders, and come as Ethiopian investigators prepare to release their report about their preliminary conclusions from the accident, anticipated in the coming days.

Intel Grabs New CFO From Qualcomm

  • Intel said George S. Davis will join the company as its new chief financial officer, stepping into the role vacated by now Chief Executive Bob Swan.
  • Mr. Davis, 61 years old, for the past six years worked as CFO at Qualcomm, and will oversee Intel’s global finance organization, the company said, adding he will also oversee its information technology organization.

Express Scripts to Offer a Way to Lower Insulin Costs

  • Express Scripts, a pharmacy-benefit manager owned by health insurer Cigna, will begin offering employers, labor unions and others the option to cap at $25 a month the copayments and other costs that diabetics must pay to fill their insulin prescriptions.
  • The cap, if picked up by employers, would save the average patient about a $15 a month, or 40%, and even more for patients covered under a typical high-deductible health plan, according to Express Scripts
  • Express Scripts and Cigna insure about 700,000 patients taking insulin.

P&G Faces Backlash Over Diaper, Sanitary Waste

  • Procter & Gamble is facing pressure to deal with the waste generated by used diapers and sanitary pads, propelling the owner of Pampers and Always to find ways to collect and recycle these products.
  • Diaper and sanitary pad makers are grappling with scrutiny elsewhere too amid rising concerns about single-use plastic.
  • The European Union, by 2021, will require labels for sanitary pads describing recommended disposal and their negative environmental impact.
  • The Canadian province of Ontario is seeking public comment on whether diapers and sanitary waste should be banned from landfills, while the Pacific island of Vanuatu will from December ban children’s disposable diapers.

Viacom signs content distribution deal with T-Mobile

  • Viacom signed a content distribution agreement with T-Mobile, under which the media company’s brands including MTV and Nickelodeon would be available to the wireless carrier’s 80 million customers, the companies said on Wednesday.
  • The deal enables T-Mobile to bring together live feeds of Viacom’s channels as well as a broad range of on-demand content to T-Mobile’s customers.

Blackstone raises $22 billion fund, its largest ever: source

  • Blackstone Group, the world largest alternative asset manager, has so far raised over $22 billion for its latest flagship private equity buyout fund, a person familiar with the matter said on Wednesday.
  • The New York-based firm expects to conclude the fundraising later this year for its eighth buyout fund, said the source.
  • Blackstone does not have a firm target in mind but it anticipates the fund will be the largest ever of its kind, overtaking the $24.6-billion fund raised by Apollo Global Management in 2017, the source added.

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US ECONOMY & POLITICS

White House’s Kudlow says U.S.-China talks are progressing

  • Trade talks between the United States and China are progressing and both sides hope to get closer to a deal this week, White House economic adviser Larry Kudlow said on Wednesday as negotiators prepared to start a fresh round of talks in Washington.
  • Talks between the two economic powerhouses made good headway last week in Beijing, Kudlow told reporters.
  • Kudlow said China has acknowledged problems of intellectual property theft, forced technology transfer and hacking for the first time as a result of the trade talks, and that U.S. charges against Huawei has generally not come up during trade talks.

U.S. Private Sector Added 129,000 Jobs in March

  • The U.S. private sector added 129,000 jobs in March, according to the ADP National Employment Report, below expectations.
  • Economists were expecting the addition of 173,000 jobs.
  • The March additions were down from a seasonally adjusted gain of 197,000 jobs in February.
  • The ADP report, which is based on private-payroll data in addition to government data, comes ahead of the monthly jobs report from the U.S. Bureau of Labor Statistics on Friday.
  • Economists expect 175,000 new nonfarm jobs to be added to the economy and an unemployment rate of 3.8%.

U.S. Services Sector Growth Cooled in March

  • The U.S. services sector expanded at a slower pace in March, a sign that a key segment of the economy continues to cool.
  • The ISM’s nonmanufacturing purchasing managers index fell to 56.1 in March from 59.7 in February.
  • Economists surveyed by had expected the index to fall to 58.
  • Readings above 50 are a sign of expansion, while readings below 50 show a contraction.

Trump to Fed Chairman Powell: ‘I Guess I’m Stuck with You’

  • President Trump is blaming the Federal Reserve for holding back the economy and stock market despite the central bank’s recent decision to do two things he wanted—halt rate increases and stop shrinking its asset portfolio.
  • The president blasted the Fed and Powell at three meetings in the past week alone, telling Republican senators, and staffers that if it wasn’t for the rate increases, economic output and stocks would be higher and the U.S. budget deficit would be rising less.
  • “He was pretty rough,” said one person who directly heard the comments at one of the meetings.
  • Mr. Trump also blamed Treasury Secretary Steven Mnuchin for recommending Mr. Powell for the top Fed job. “Mnuchin gave me this guy,” Mr. Trump said.

Young Americans Faring Less Well in Credit Markets, New York Fed Report Finds

  • The central bank’s finding came in a report that detailed the growth of credit access and borrowing levels, which particularly called out student loan and auto loan levels.
  • The New York Fed said that while overall debt levels have surpassed their prior peak, overall borrowing quality has improved and has become more sustainable.
  • The New York Fed report said while overall credit may be bigger in dollar terms, its share relative to the size of the overall economy is smaller than its last peak. And by and large, credit is of higher quality.
  • Student loans now make up 10.7% and auto loans 9.3% of household debt following a prolonged period of strong growth in both categories,” the report said, adding “that is much higher than in years past, and show little signs of abating, particularly the level of student loan debt, which has never fallen.”

China Threat Rises to NATO’s Agenda

  • The North Atlantic Treaty Organization is putting new attention on potential security threats from China, a challenge for an alliance whose members have conflicting attitudes about Beijing.
  • After five years focused on Russia, NATO ministers this week hold their first formal discussion on a perceived threat from China that ranges from the Arctic Circle to members’ own communication networks.
  • The U.S. has flagged Chinese investments in European infrastructure and pressed allies—largely unsuccessfully—to join its effective blacklisting of Huawei over concerns that Beijing could force the company to spy or disrupt communications.
  • Officials at NATO said they worry about their militaries being able to communicate securely and move unimpeded by private ownership of transport infrastructure.

Woman Arrested After Entering Mar-a-Lago, Allegedly with Malware

  • A woman carrying two Chinese passports was arrested and charged with unlawfully entering President Trump’s Mar-a-Lago resort with a thumb drive containing malware and lying to federal agents about her plans, according to a criminal complaint.
  • She had with her four cellphones, a computer, a hard drive and a thumb drive loaded with malware, the affidavit said.
  • Yujing Zhang entered the Trump luxury resort on Saturday after showing the two passports and told a Secret Service agent she was going to the club’s pool, but she didn’t have any swim clothes with her, the document said.

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EUROPE & WORLD

Euro Area Gets Some Good News to Offset Manufacturing Gloom

  • The euro-area economy got a modest lift as activity in services came in stronger than anticipated at the end of the first quarter.
  • The headline services gauge for the euro area jumped to 53.3, the highest since November. That lifted a composite measure for manufacturing and services to 51.6 — better than the flash reading but still lower than the previous month.
  • The figures from Europe followed bright news in Asia, where China’s services PMI jumped to the highest since June.

Theresa May Courts Opposition in Bid to Break Brexit Impasse

  • Theresa May made an about-face in her Brexit strategy Tuesday by saying she would pursue a different deal with the opposition Labour Party, an approach that could keep the country more closely bound to the EU than she previously envisioned.
  • Mrs. May outlined plans to request a short extension of Brexit negotiations, ideally no longer than to May 22, to give the government time to hammer out an agreement with Labour and avoid leaving the bloc without a deal to smooth the U.K.’s exit.
  • The plan, which will likely lead to a softening of her Brexit deal, marks a last-hour roll of the dice for Mrs. May as she tries to find a path out of the Brexit logjam that has dominated her tenure.
  • The Labour Party has pushed for the U.K. to remain in a customs union with the EU, in stark contrast with her Conservative Party, and a significantly different vision for Brexit than Mrs. May has espoused.

Channeling China, Russia Eyes Its Own Great Firewall

  • Russian authorities are seeking unprecedented control over the internet with a new law that would more effectively filter information coming into the country and allow Russia to cut itself off from global online traffic in a crisis.
  • President Vladimir Putin has presented the bill as a necessary measure to fight the threat of U.S. cyberattacks on Russia’s internet infrastructure, but free-speech activists say the law, expected to be passed, is an attempt to clamp down on online dissent.
  • The bill will give the agency that censors Russia’s communications power to more effectively control proscribed websites and direct access to the flow of information passing into the country’s internet infrastructure from abroad and between domestic internet exchange points.

Toyota to give royalty-free access to hybrid-vehicle patents

  • Japan’s Toyota will offer free access to its hybrid-vehicle patents through 2030, it said on Wednesday, seeking to expand use of the lower-emission technology even as the global industry shifts toward fully electric cars.
  • The pledge by one of the world’s biggest automakers to share its closely guarded patents, the second time it has opened up a technology, is aimed at driving industry uptake of hybrids and fending off the challenge of all-battery electric vehicles (EVs).
  • Toyota would grant licenses on nearly 24,000 patents used in its Prius, the world’s first mass-produced “green” car, and offer to supply competitors with components including motors, power converters and batteries used in its lower-emissions vehicles.

Commerzbank stake sale would cost German taxpayers billions of euros

  • German taxpayers would lose billions of euros if the state sold its stake in Commerzbank ahead of a possible merger with Deutsche Bank, a government document showed, highlighting the risks of government involvement in the sector.
  • Berlin owns 15.6% in Commerzbank after a bailout a decade ago, and lawmakers have called on Finance Minister Olaf Scholz to get rid of the stake to avoid future risks for the budget if Commerzbank should merge with its larger rival.
  • In an answer to a parliamentary request seen by Reuters, the Finance Ministry said that the Commerzbank share price, or the price offered in any takeover deal, would have to be some 26 euros to avoid a loss for the state.
  • The Commerzbank shares are currently worth some 7 euros.

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TODAY in HISTORY

  • First pony express service began. (1860)
  • President Truman signed the Marshall Plan, which would foster the recovery of war-torn Europe. (1948)

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