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WALL STREET TREADS WATER AS TRADE TALKS REACH CRUCIAL STAGE

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

DAILY MARKET REPORTS

  • U.S. stocks were nearly flat in choppy trading on Wednesday, ahead of a crucial round of trade talks that will be held against the backdrop of additional tariffs on Chinese goods due later this week.
  • The United States will raise tariffs to 25% from 10% on $200 billion worth of Chinese imports effective Friday, days after President Donald Trump threatened the duties after China backtracked on almost all aspects a trade deal.
  • Still, the top Chinese trade negotiator, Vice Premier Liu He, will go to Washington for the talks on Thursday and Friday, setting up a last-ditch bid to salvage the negotiations.
  • The spike in tensions between the world’s two largest economies has renewed fears of a global economic slowdown and encouraged investors to seek low-risk government bonds, resulting in longer-dated U.S. Treasury yields dropping.
  • With results entering the final stretch, first-quarter earnings are now expected to rise 1.2%, a sharp improvement from the 2.3% decline expected at the start of the season.
  • Of the 426 S&P companies that have reported so far, about 75% have beaten profit estimates.

US FINANCIAL MARKET

Lyft sees ‘peak losses’ this year, says ride hailing has path to profit

  • Lyft posted strong growth in its first quarterly report as a public company, with revenue nearly doubling from the year before, even as losses continued to mount.
  • The company, which says it has nearly 40% of the U.S. ride-hailing market, said increased demand helped push revenue up 95% to $776 million in the quarter, above analysts’ average estimate of $739.4 million.
  • Lyft posted revenue of $37.86 from each of its 20.5 million active riders during the first quarter, a 34% increase in revenue and a 46% increase in riders over the same period in 2018.
  • Lyft’s loss ballooned to $1.1 billion, largely due to $859 million of stock-based compensation—an expense related to the company’s initial public offering in March.
  • Its adjusted loss was $211.5 million, versus $228.4 million a year earlier, versus an expected an adjusted loss of $274 million.
  • Lyft projects revenue of at least $800 million in the second quarter, up roughly 60% from a year ago, and as much as $3.3 billion for the year. Both amounts are above what analysts had been expecting.

EA revenue beats estimates on ‘Apex Legends’ boost, shares jump

  • Electronic Arts posted better-than-expected quarterly revenue on Tuesday, riding on the popularity of its battle royale game, “Apex Legends”, sending its shares up.
  • On an adjusted basis, EA’s fourth-quarter revenue was $1.36 billion, beating analysts’ average estimates of $1.20 billion.
  • Net income dropped substantially to $209 million, compared to $607 million a year ago, due to a drop in revenue and a rise in operating expenses.
  • EA forecast first-quarter adjusted revenue of $690 million, well below analysts’ estimates of $807.8 million.
  • Its full-year adjusted revenue forecast of $5.10 billion was also below estimates of $5.16 billion.

Sprint Reports Steepest Decline of Cellphone Customers in Years

  • Sprint reported deeper losses than feared of monthly phone subscribers despite discount offerings, raising concerns that the wireless carrier may not be sustainable if its pending merger with T-Mobile is not approved.
  • Revenue rose 4.4% to $8.44 billion, up from $8.08 billion a year ago and above expected revenue of $8.21 billion.
  • Sprint said it lost a net 189,000 phone subscribers during its fiscal fourth quarter. Analysts were expecting a net loss of 117,000.
  • Sprint’s net loss was $2.17 billion for the quarter, including an after-tax, noncash goodwill impairment charge of $2 billion, compared with a profit of $69 million during the same period a year earlier.
  • If the T-Mobile merger doesn’t get regulatory approval, Sprint may have to narrow its coverage, CEO Michel Combes said, and “reposition the company and how we play and which battlefield will be ours.”

AECOM Earnings and Revenues Surpass Estimates

  • AECOM topped expectations for net income and revenue in its second quarter thanks to growth in its Management Services and Design businesses, sending shares up modestly in early trading.
  • Revenue increased 5% to $5.04 billion, surpassing expectations of $4.93 billion.
  • The company’s backlog increased 22% year over year to a contract value of $61.01 billion on a constant currency basis.
  • AECOM posted a profit of $77.85 million in the quarter, compared to a loss of $119.73 million in the same period a year ago, the year ago quarter had an asset impairment of $168 million.

Papa John’s International Swings to Quarterly Loss

  • Papa John’s swung to a loss largely tied to legal costs and financial assistance to North American franchisees in the latest period.
  • Revenue fell to $398.4 million from $450.1 million a year earlier. Analysts expected $384.7 million in revenue.
  • Sales at existing restaurants in North America fell 6.9% from a year earlier, the sixth consecutive year-over-year quarterly decline since founder John Schnatter in 2017 blamed weaker pizza sales on the NFL’s handling of its players’ national-anthem protests.
  • The company reported a first-quarter loss of $1.7 million, compared with a year earlier profit of $17.4 million.
  • Papa John’s affirmed projections for the year of break-even to 50 cents a share profit, or $1 to $1.20 a share as adjusted, with comparable sales in North America falling 1% to 5%.

Coty’s quarterly revenue falls short of estimates, hit by supply chain problems

  • Cosmetics maker Coty reported quarterly revenue that missed Wall Street expectations on Wednesday, hit by supply chain disruptions and lower demand for its beauty products that includes Cover Girl and Rimmel brands.
  • Net revenue fell 10.4% to $1.99 billion, hit by changes in revenue recognition accounting, missing estimates of $2.06 billion.
  • Net loss narrowed to $12.1 million in the third quarter, from $77 million a year earlier on lower restructuring costs.

Chesapeake net loss, bigger-than-expected capex send shares down 4%

  • Oil and gas producer Chesapeake Energy reported a bigger first-quarter net loss, as it spent more than analysts had expected and took a hit from lower natural gas and crude prices, sending its shares down 4%.
  • Chesapeake’s daily average production fell 12.6% to 484,000 barrels of oil equivalent per day (boepd) in the quarter, but beat analysts expectations 466,169 boepd.
  • Average realized prices for natural gas fell 12% to $3.07 per thousand cubic feet, natural gas liquids fell 21% to $20.03 per barrel, while oil prices fell marginally to $56.86 per barrel.
  • Net loss widened to $44 million in the first quarter, from $6 million a year earlier.

Sinclair Revenue Rises as It Bets Big on Sports

  • Sinclair Broadcast Group posted stronger revenue in the latest quarter as the television station owner looks to its purchase of a suite of sports networks to bolster its business.
  • The company reported first-quarter revenue rose 8.5% to $722.1 million, above the consensus forecast of $706.7 million.
  • Sinclair posted a profit of $21.7 million, down from $43.1 million a year ago, as higher costs weighed on the bottom line.
  • Sinclair reached a deal last week to buy 21 regional sports networks from Disney, which was valued at $10.6 billion and is slated to close in the third quarter, making the nation’s largest owner of local television stations a stronger force in cable programming.

New York Times profit beats estimates as digital subscriptions surge

  • The New York Times reported better-than-expected quarterly profit and revenue on Wednesday as it signed up more digital subscribers, sending its shares up 3% before the bell.
  • Total revenue rose to $439.1 million from $414.0 million a year earlier. Analysts on average estimated revenue of $435.8 million.
  • The Times added 223,000 digital subscribers in the quarter, compared with the 139,000 it added last year, taking the total subscriptions to 4.5 million.
  • Net income rose to $30.2 million in the first quarter, from $21.9 million a year earlier.

Wendy’s revenue, profit beat on new burgers, higher royalties

  • Wendy’s reported better-than-expected quarterly revenue and profit, as the U.S. burger chain benefited from higher royalty fees and the launch of its premium burgers that come with avocado, bacon and barbecue chicken.
  • Total revenue rose 7.4% to $408.6 million, beating analysts’ estimates of $399.8 million.
  • Wendy’s same-store sales rose 1.3% in North America in the quarter, largely in-line with the estimate of 1.28% growth.
  • Net income rose to $31.9 million in the first quarter, from $20.2 million a year earlier.

Match Group adds more Tinder subscribers, shares surge

  • Match beat quarterly profit and revenue estimates, as more people joined its popular dating app, Tinder, sending shares up as much as 8% in extended trading.
  • Revenue rose about 14% to $464.6 million, slightly better than the average analyst expectation of $463.7 million.
  • Average subscribers for the company increased to 8.6 million in the quarter, up 16%.
  • Tinder, which according to recent reports accounts for about two-thirds of Match’s overall valuation, reported 4.7 million average subscribers in the quarter, 1.3 million higher than last year.
  • Net income rose to $123 million, from $99.7 million a year ago.

Bunge posts profit on higher soy crush margins, appoints new CFO

  • U.S. agricultural commodities trader Bunge reported a first-quarter profit on Wednesday as higher soy crush margins in the United States, Brazil and Europe lifted results for its agribusiness unit, which the company said it is restructuring.
  • Revenue fell 6.6% from a year ago to $9.93 billion. Analysts expected $10.76 billion in sales.
  • The company reported net profit of $45 million, compared with a loss of $21 million a year earlier and ahead of expectations.

Google launches $399 Pixel phone, more U.S. carriers will sell it

  • Google launched more affordable versions of its Pixel smartphone at about half the price of its current models, and dropped an exclusive U.S. distribution deal with Verizon, signaling a major shift in the tech giant’s hardware strategy.
  • The new Pixel 3a is priced as low $399, compared with $799 for last year’s Pixel 3.
  • The cheaper version will have one front camera instead of two and no wireless charging, and will sell in the same 13 countries as the Pixel 3.

FAA convenes multi-agency board to review Boeing software fix

  • The Federal Aviation Administration said on Tuesday it had convened a multi-agency Technical Advisory Board to review Boeing’s proposed software fix on the grounded 737 MAX.
  • The board consists of experts from the FAA, U.S. Air Force, NASA and Volpe National Transportation Systems Center that were not involved in any aspect of the Boeing 737 MAX certification.
  • The board’s recommendations will “directly inform the FAA’s decision concerning the 737 MAX fleet’s safe return to service.”
  • A separate joint review by 10 governmental air regulators started last week and is expected to last about 90 days, but the FAA has said that a decision on ungrounding the plane is not contingent on that review being completed.

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US ECONOMY & POLITICS

U.S. Files Paperwork to Raise China Tariffs on Friday

  • The U.S. Trade Representative’s office filed paperwork to formally raise tariffs to 25% from 10% on about $200 billion a year of Chinese imports effective on Friday, carrying through on a threat made by President Trump over the weekend as talks with Beijing enter their final stage.
  • The USTR had first imposed 10% tariffs on the goods in September, with an original plan to raise the rate to 25% in December. But as negotiations got under way with the Chinese, the USTR delayed the tariff increase.
  • The USTR filing also said the agency would launch a process by which companies could apply for exclusions from the tariffs. Companies could apply for an exclusion from the tariff, particularly if the tariff would be unduly damaging for their business.
  • The $200 billion worth of goods whose tariff rate will rise to 25% from 10% have had no such process.

China backtracked on almost all aspects of U.S. trade deal – sources

  • The diplomatic cable from Beijing arrived in Washington late on Friday night, with systematic edits to a nearly 150-page draft trade agreement that would blow up months of negotiations between the world’s two largest economies, according to three U.S. government sources and three private sector sources briefed on the talks.
  • The document was riddled with reversals by China that undermined core U.S. demands, the sources told Reuters.
  • In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: Theft of U.S. intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation.
  • China’s Vice Premier Liu He is set to arrive in Washington on Thursday for two days of talks that just last week were widely seen as pivotal – a possible last round before a historic trade deal.
  • Now, U.S. officials have little hope that Liu will come bearing any offer that can get talks back on track, said two of the sources.

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EUROPE & WORLD

Siemens wins over investors with spin-off plan, industrial profit

  • Siemens cheered investors on Wednesday by saying it would spin off its faltering 30 billion euro ($34 billion) gas-turbines business and posting better-than-expected quarterly earnings.
  • Revenue rose 4% to 20.9 billion euros, matching estimates, while orders rose 6% to 23.6 billion euros.
  • The company also reported its industrial profit rose 7% to 2.4 billion euros in the quarter, beating estimates of 2.24 billion euros.
  • The company said it would hand over to existing investors shares in the Gas and Power unit that has suffered from collapsing demand and cut-throat price competition as customers abandon fossil fuels and switch to renewable energy.

Vale iron ore output slumps 11% after deadly Brazil dam burst

  • Brazil’s Vale said that its iron ore production slumped 11% in the first quarter from a year earlier, reflecting the impact of the deadly collapse of a tailings dam at Brumadinho in late January.
  • The drop to 72.87 million tonnes of iron ore output followed the closure of various mines as authorities scrambled to make sure that its other facilities were safe.
  • The world’s largest iron ore exporter also reported that sales of the commodity slid 22% in the three-month period to 55.416 million tons.

Trade Shifts From Growth Engine to Potential Drag for China

  • China’s exports dropped unexpectedly in April, likely adding a further complication to Beijing’s efforts to stabilize growth amid renewed trade tensions with the U.S.
  • China’s exports declined 2.7% from a year earlier in April, reversing a 14.2% gain in March, according to government data released Wednesday.
  • China’s total imports rose 4.0% from a year earlier in April, after declining 7.6% in March, the customs data showed. Economists had forecast a modest drop in Chinese imports.
  • China’s exports to the U.S. fell 13.1% on-year in April, following a 3.7% increase in March, while imports from the U.S. dropped 25.7% on year, on par with a 25.8% decline recorded in March.

Iran to Stop Complying With Some Nuclear Deal Commitments

  • Iran said Wednesday it is suspending some commitments under the 2015 nuclear deal, in an effort to pressure European powers into aiding its economy as tensions soar with the U.S.
  • Iranian President Hassan Rouhani said Iran will begin stockpiling heavy water and lowenriched uranium, dropping two key pieces of the accord that keep Iran from building an atomic bomb.
  • Mr. Rouhani gave Europe, Russia and China 60 days to help it thwart American sanctions on oil sales and banking transactions or Iran would forge ahead with additional measures like enriching uranium to more dangerous forms and rebuilding a closed nuclear facility—moves that could jeopardize the deal altogether.

Tencent pulls blockbuster game PUBG in China, launches patriotic alternative

  • Tencent shut down its test version of global blockbuster “PlayerUnknown’s Battlegrounds” in China and shifted users to a similar, more patriotic video game which, unlike PUBG, has regulatory approval to generate revenue.
  • The Chinese video gaming leader has waited in vain for over a year for approval to earn money on PUBG via in-app purchases, having given the gory, South Korean-made game a socialist makeover to meet stringent government rules.
  • In a post on the game’s official account on China’s Twitter-like Weibo platform, Tencent said it would end testing for PUBG.
  • It also said it had launched an anti-terrorism-themed “Game for Peace”, for which it gained monetization approval in April.

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TODAY in HISTORY

  • Antoine Laurent Lavoisier, the father of modern chemistry, was guillotined during the Reign of Terror. (1794)
  • V-E Day marks the European victory of the Allies in World War II. (1945)

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