DAILY MARKET REPORTS
- U.S. stocks posted broad-based declines on Tuesday, led by tariff-sensitive industrial companies, as renewed worries over trade negotiations with China stoked global growth worries and kept investors away from risky assets.
- The declines follow a surprise pair of tweets by President Donald Trump on Sunday announcing an increase in tariffs on Chinese goods set to come into force Friday. Other White House officials echoed Mr. Trump’s threats late on Monday.
- Chinese Vice Premier Liu He will visit the United States this week for trade talks, Beijing said on Tuesday, playing down a sharp increase in tensions after U.S. President Donald Trump vowed to impose new tariffs.
- Adding to growth worries, the European Commission revised down euro area growth forecasts and cut its already gloomy outlook on Italy.
- The earnings season has now reached its homestretch.
- Of the 392 S&P companies that have reported earnings so far, about 75% have surpassed analysts’ estimates.
- The upbeat reports have turned around earnings estimates for the first quarter to an almost 1% rise, a huge improvement from the 2.3% decline expected at the start of the earnings season.
US FINANCIAL MARKET
AIG Notches Turnaround in Key Unit
- Insurer American International Group reported first-quarter earnings that trounced Wall Street estimates on Monday, as its general insurance business posted its first underwriting profit since the financial crisis.
- The general insurance unit’s underwriting income, which is the difference between premiums an insurer collects on policies and claims it pays out, was $179 million in the latest quarter, compared with an underwriting loss of $251 million a year earlier.
- The general insurance unit’s accident year combined ratio – which excludes changes from losses incurred in past years – was 96.1 for the quarter, compared with 99.7 a year earlier.
- The bright spot was adjusted after-tax income, the benchmark followed by Wall Street analysts and investors, increased to $1.39 billion, from $963 million year earlier.
Allergan raises 2019 forecasts as Botox boosts results
- Allergan raised its profit and revenue forecasts for the year on Tuesday as it beat expectations for quarterly profit, fueled by higher sales of its blockbuster anti-wrinkle injection Botox.
- Revenue fell 2% to $3.59 billion but beat the average Wall Street estimate of $3.54 billion.
- Total Botox sales rose 6.3% to $868.4 million. Sales of dry-eye drug Restasis, which is expected to face competition from cheaper generic drugs, fell 11.7% to $242.1 million, because of lower net pricing.
- Allergan now expects 2019 profit to be greater than $16.55 per share, compared with a profit greater than $16.36 per share, and expects 2019 sales between $15.13 billion and $15.43 billion, compared with its prior forecast of $15.00 billion to $15.30 billion.
- The company posted a loss of $2.4 billion, compared to a loss of $332 million a year ago, due to a $2 billion impairment charge but results were ahead of estimates after adjustments.
Mylan revenue misses on Morgantown plant issues, shares fall 8%
- Mylan missed first-quarter revenue estimates on Tuesday, hurt by lower demand for its products and manufacturing problems at its Morgantown plant, sending its shares down nearly 8%.
- Total revenue fell 7% to $2.50 billion and missed estimates of $2.69 billion.
- Revenue from its North America business fell 6% to $922.9 million and missed estimates of $952.43 million, and was also impacted by a 14% drop in sales at its Europe business to $895.3 million, partly due to a stronger dollar.
- The company reported a net loss of $25 million in the first quarter, compared with profit of $87.1 million a year earlier.
Jacobs Engineering Misses Revenue Estimates
- Revenue increased 7.7% to $3.1 billion, narrowly missing estimates.
- The company’s backlog increased 8% year over year to a total of $20.7 billion.
- Net income increased to $166 million, compared to $124 million a year ago, exceeding estimates on a per share basis.
- Jacobs increased their expected full year earnings per share to a range of $4.45-$4.85.
GM’s Driverless-Car Unit Receives $1.2 Billion Equity Investment
- General Motors’s Cruise division has landed another $1.2 billion in outside financing, bringing the value of the driverless-car developer to $19 billion.
- Cruise received an equity investment from a group of institutional investors, including mutual-fund company T. Rowe Price.
- The funding round also included current Cruise investors, including Japan’s SoftBank Group, Honda and GM, Cruise’s majority owner.
US ECONOMY & POLITICS
China Agrees to Resume U.S. Trade Negotiations
- China is sending its top trade envoy to Washington to resume negotiations and confront U.S. demands that Beijing detail the laws it would change as a part of a trade deal, despite a threat by President Trump to raise tariffs on Chinese goods.
- Vice Premier Liu He will travel to Washington for negotiations starting Thursday, a day later than planned.
- At the top of the agenda is a U.S. demand that a trade agreement lay out an inventory of laws and regulations that Beijing must revise for compliance, according to people briefed on the negotiations. China has objected to including the list, the people said.
- The U.S., though, sees it as essential to ensuring China delivers on promises of structural change.
- The disagreement over the text of the trade agreement adds to a pile of still-to-resolve issues that include China’s subsidies to domestic companies and opening key Chinese markets, such as cloud computing.
U.S. Job Openings Increase by Most in a Year, Topping Estimates
- U.S. job openings rebounded more than expected in the biggest gain in a year, indicating demand for workers remains healthy in a tight labor market.
- The number of positions waiting to be filled rose by 346,000 in March to 7.49 million, from an upwardly revised 7.14 million in the prior month, according to the Labor Department’s Job Openings and Labor Turnover Survey released Tuesday.
- The quits rate remained at 2.3%, matching the highest level of the economic expansion and signaling confidence from workers that prospects remain strong.
- Vacancies exceeded the number of jobless Americans by about 1.28 million.
A $2 Million Drug Is About to Hit the Market
- A new treatment for an infant muscle-wasting disease is about to go on sale at a potential cost of $2 million, a record price tag likely to fuel the continuing scrutiny of how companies price their drugs and how insurers pay for them.
- Novartis has yet to set a price for the gene therapy called Zolgensma, but executives say the drug’s potential to cure spinal muscular atrophy, an inherited disease that typically kills babies before they turn two, justifies a seven-figure price.
- Gene therapies target diseases that result from a faulty gene by introducing a working version into the body. They are attracting interest, both for their ability to cure otherwise devastating illnesses in one treatment and also for their high cost.
- Luxturna, the only gene therapy on sale in the U.S. so far to treat a form of inherited sight loss, costs $850,000 a patient.
- The Food and Drug Administration expects to approve 10 to 20 gene and cell therapies a year by 2025.
EUROPE & WORLD
German bond yields, Italy bank shares down on European Commission forecasts
- German government bond yields hit five-week lows on Tuesday and Italian shares fell, led by the country’s banking index, after the European Commission revised down euro area growth forecasts and cut its already gloomy outlook on Italy.
- The euro zone economy will rebound next year from a slow-down in 2019 and unemployment will fall further, but inflation is likely to stay at this year’s levels and below the European Central Bank’s target, the European Commission said on Tuesday.
- It forecast domestic euro zone growth of 1.2% this year, slower than the 1.3% it predicted in February.
- The Commission also cut Italy’s growth forecast to 0.1%, down from 0.2% and said the country’s deficit could widen further beyond the 3% ceiling set by the European Union.
Ferrari shares race ahead after fast start to 2019
- Ferrari beat forecasts on Tuesday with a 14% rise in first-quarter core earnings, boosting its shares on growing expectations the Italian luxury carmaker might soon raise its full-year financial targets.
- Net revenues rose 13% to 940 million euros, topping the average estimate of 864 million euros, while shipments rose in all regions, with China and America up 79% and 27% respectively.
- Adjusted EBITDA came in at 311 million euros ($348 million) in January-March, above the average forecast of 284 million euros.
- Ferrari stuck to its full-year targets, but analysts said an increase might be in store.
Investments, legal charge put brakes on BMW
- BMW’s first-quarter operating profit fell 78% to 589 million euros, despite higher deliveries of luxury vehicles, as the carmaker felt the effects of higher investment spending and a 1.4 billion euro ($1.6 bln) legal provision.
- Adding to the downbeat tone, the company reiterated that it expects group profit before tax to be well below the previous year.
- It also sees weaker car sales in the first half of 2019 as factories are retooled to produce a new 1-series and 3-series.
- The carmaker stuck to its full year outlook of an increase in vehicle deliveries, and its goal of aiming for an EBIT margin of between 8% and 10%.
Images show construction on China’s third and largest aircraft carrier: analysts
- Construction of China’s first full-sized aircraft carrier is well under way, according to images obtained by a U.S. think tank.
- The images from April, provided to Reuters by the Center for Strategic and International Studies (CSIS) in Washington, reveal considerable recent activity during the last six months on a large vessel at the Jiangnan shipyard outside Shanghai.
- Both Asian and Western militaries, and regional security analysts, are seeking information on the carrier, which is expected to be China’s first large, modern platform capable of leading a full range of strike group operations.
Samsung Electronics says no anticipated shipping date yet for Galaxy Fold
- Samsung Electronics said on Tuesday it cannot confirm the shipping date for its foldable device Galaxy Fold yet and apologized to its pre-order customers in the United States for the delay.
- The world’s top smartphone maker delayed global sales of the splashy $1,980 foldable phone after reviewers discovered problems with its display, dealing a setback to Samsung and its efforts to showcase its innovation.
- Though the issue does not hurt Samsung’s balance sheet, the postponement damages the firm’s efforts to portray itself as an innovative first-mover, analysts have said.
TODAY in HISTORY
- Beethoven’s 9th Symphony premiered in Vienna. (1824)
- The British ocean liner Lusitania was sunk by a German submarine in World War I off the coast of Ireland. (1915)
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