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  • Stocks and bond yields around the world fell Friday after President Trump threatened to impose escalating tariffs on Mexico, capping a brutal month for markets as rising trade tensions roiled investor confidence.
  • Mr. Trump said late Thursday that the U.S. would impose escalating tariffs on its southern neighbor starting June 10, unless the country takes action to deter the flow of Central American migrants passing through its borders.
  • The levies could hit 25% by October if Mexico fails to satisfy the White House’s demands.
  • The yield on 10-year U.S. Treasurys declined to 2.178% from 2.227% on Thursday, hitting a fresh 20-month low. Yields on German 10-year bunds fell to minus 0.208%, matching an all-time low reached in July 2016.
  • Elsewhere, official data showed Chinese factory activity dropped by more than expected in May.
  • Adding to risks was Beijing’s warning on Friday that it would unveil an unprecedented hit-list of “unreliable” foreign firms, as a slate of retaliatory tariffs on imported U.S. goods was set to kick in at midnight.
  • Among other stocks, Gap tumbled 16%, the most among S&P 500 companies, after the apparel retailer cut its 2019 profit forecast.
  • Constellation Brands, which has substantial brewery operations in Mexico, slid 8.2%.


Uber loses $1 billion in quarter, hitting forecast, as revenue rises 20% 

  • Uber’s loss topped $1 billion in its first quarterly report as a public company, affirming its continuing challenge of spending heavily to fend off ride-hailing and delivery competitors.
  • Revenue of $3.1 billion matched the high end of the range Uber forecast for the quarter while analysts expected $3.04 billion.
  • Adjusted revenue for the Uber Eats meal-delivery service, to which executives have pointed as a source of growth, rose 31% to $239 million, from $183 million a year ago.
  • Uber said its monthly active users rose to 93 million globally, from 91 million at the end of the fourth quarter.
  • Gross bookings, the total value of rides before driver costs and other expenses, rose 34% from a year ago to $14.6 billion.
  • Bookings were up 3.4% from the previous quarter, showing the difficulty of recruiting new riders in saturated markets.
  • Uber swung to a loss of $1.01 billion, though the profit of $3.75 billion a year ago included a massive gain on the sale of assets.
  • Uber’s loss from operations was $1.03 billion, wider than the $478 million a year earlier.

Costco looking at alternative sourcing, price hikes as tariffs loom

  • Costco Wholesale reported quarterly profit and revenue that beat Wall Street estimates and said it would tackle the proposed round of tariffs on Chinese imports by sourcing goods from other countries and possible price increases.
  • Total revenue rose 7.4% to $34.74 billion. Analysts, on average, had expected the company to post revenue of $34.71 billion.
  • Overall comparable-store sales, excluding the impact of fuel and currency, rose 5.6%, above analysts’ estimate of a 5.48% rise.
  • E-commerce sales rose 20% during the quarter.
  • Profits rose to $906 million, up from $750 million in the year-ago period and ahead of consensus on a per share basis.

Gap cuts 2019 profit forecast after ‘extremely challenging’ quarter

  • Gap cut its full-year earnings forecast and reported bigger-than-expected declines in same-store sales, especially at its Gap brand outlets, on Thursday, sending its shares down nearly 10% after hours.
  • Revenue declined 2% compared to last year to $3.7 billion in the quarter.
  • Overall same-store sales fell 4%, bigger than the 1.2% drop analysts had expected.
  • Sales at established Gap brand stores fell 10% in the first quarter, steeper than the 4% decline analysts had estimated.
  • Adding to the worries, Old Navy, a bright spot for the company in recent years and which is being separated as a publicly listed company, reported a surprise drop in same-store sales.
  • Comparable store sales slipped 1% in the reported quarter, compared with estimates of a 0.8% rise.
  • Net income increased to $227 million, from $164 million a year ago.
  • The company cut its 2019 adjusted earnings forecast to $2.05 to $2.15 per share, from a previous range of $2.40 to $2.55.

Dell revenue rises 3% as Windows refresh spurs PC demand

  • Dell Technologies reported a 3% rise in first-quarter revenue on Thursday, as more customers upgraded their systems ahead of Microsoft’s planned phase out of Windows 7 and strong performance in its VMware unit.
  • Dell’s total net revenue rose 2.6% to $21.91 billion in the quarter, but below expected revenue of $22.24 billion.
  • Client Solutions Group, which consists of Dell’s desktop PCs, notebooks and tablets, as well as its branded peripherals business, reported a 6% rise in revenue to $10.91 billion. Analysts had expected the segment to report revenue of $10.58 billion.
  • The company also swung to a profit, reporting net income of $293 million, compared with a loss of $636 million a year earlier.

Kate Spade Gives Downbeat Guidance as Margins Remain Pressured

  • Kate Spade said that revenue rose more than expected, though it offered downbeat sales guidance as it pointed to a planned pullback in promotions and the impact of foreign-currency exchange rates on its business in Japan.
  • Sales rose 45% to $399 million. Analysts had predicted earnings of 28 cents a share on revenue of $389 million.
  • The handbag and fashion company said its higher revenue was due mostly to a 51% sales jump at Kate Spade North America and 56% growth at Kate Spade International. Direct-to-consumer growth was 28%.
  • Overall, Kate Spade posted a fourth-quarter profit of $127 million, up from $29 million a year earlier.
  • The company projected sales for 2019 of $1.2 billion to $1.275 billion, below the $1.28 billion that analysts had forecast.

Amazon interested in buying Boost from T-Mobile, Sprint

  • is interested in buying prepaid cellphone wireless service Boost Mobile from U.S. carriers T-Mobile and Sprint, two sources familiar with the matter said on Thursday.
  • Amazon is considering buying Boost – currently one of Sprint’s prepaid brands – mainly because the deal would allow it to use the new T-Mobile’s wireless network for at least six years, one of the sources said.
  • T-Mobile and Sprint have already pledged to sell Boost as part of measures to reduce their market share in the prepaid wireless business and gain regulatory approval for their planned $26 billion merger.
  • This month, analysts at Cowen estimated Boost has 7 million to 8 million customers and a transaction could be valued at $4.5 billion if the deal included wireless spectrum, or the airwaves that carry data, and facilities.

U.S. Auto Makers Sweat Under Threat of Tariffs on Mexican Imports

  • President Trump’s threat to impose escalating tariffs on Mexican imports foists fresh bad news on the U.S. auto industry, which had pinned hopes on a tentative deal reached last year to preserve free trade between the countries.
  • Mexico-built cars accounted for 17% of Detroit auto makers’ overall U.S. sales in 2018, including some of the industry’s biggest moneymakers, large pickup trucks.
  • Overall, the U.S. imported $52.6 billion of vehicles and $32.5 billion in auto parts last year from Mexico, the highest totals of any country, according to Commerce Department data.
  • GM sold about 663,000 Mexico-built vehicles in the U.S. last year, or 22% of its domestic sales, according to an estimate from research firm LMC Automotive.
  • About 18% of Fiat-Chrysler Automobile’s U.S. sales were imported from Mexico last year, including about a quarter of its profitable Ram pickup trucks, while Ford’s Mexican imports accounted for about 10% of U.S. sales, according to LMC.

FedEx to Deliver Packages 7 Days a Week

  • FedEx said it would start offering Sunday deliveries to most U.S. homes, the latest sign that the U.S.’s online shopping habits are pressuring companies to revamp their operations to fulfill orders almost as fast as they are placed.
  • The package giant, which only recently added Saturday ground deliveries, plans to offer seven-day residential delivery in the U.S. next year as it seeks to capture more of the e-commerce surge.
  • Until recently, UPS and FedEx have taken steps to outsource last-mile delivery to the Postal Service or others, worried that home deliveries would be less profitable than shipments between businesses.

Oil Prices Slide on Trade Tensions and China Fears

  • Oil prices slumped to a three-month low Friday as concerns about President Trump’s trade policy and the slowdown in the Chinese economy cast doubt on the outlook for global demand.
  • U.S. benchmark WTI dropped 2.4% to $55.25, its cheapest price since early March.
  • The combination of U.S. sanctions on Venezuela and Iran, along with tariffs on Chinese and Mexican goods, is harming investor confidence in the global economy, analysts said.

Tesla Begins Taking Orders on Its Cheaper China-Built Model 3s

  • Tesla promised to start delivering Model 3 sedans built at its new Shanghai plant within six to 10 months—and priced them well below U.S. imports—as the electric-vehicle maker races to capitalize on booming Chinese demand.
  • Tesla said prices for the locally built Model 3 will start from about $47,500 for the Standard Range Plus version, a significant discount on the $58,900 Chinese buyers currently pay for a basic Model 3 imported from the U.S.
  • The company is starting to take orders for the local Model 3, and the first Shanghai-built cars are scheduled for delivery late this year or early next year, the company said in a post on its social media account.

Juul considers opening retail stores in United States: source

  • Juul Labs is considering opening retail stores in the United States, a source familiar with the matter said on Thursday, a move that would help the controversial company cash in on the booming popularity of its e-cigarettes.
  • The company has not made a final decision on the stores, which would only admit people aged 21 and above, the source added.
  • The company plans to only sell tobacco, mint and menthol flavors in its stores. The first store would open in Texas, if the company were to go through with its plan, the source said, adding that Juul is eyeing cities with high smoking rates.

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Trump Threatens Tariffs on Mexican Imports in Response to Migrant Surge

  • President Trump said Thursday the U.S. would impose escalating tariffs on all Mexican imports beginning June 10, in an effort to push the country to deter the flow of asylum-seeking Central American families to the southern border.
  • Reacting to what he described as “Mexico’s passive cooperation in allowing this mass incursion,” the president said the tariff on America’s third-largest trading partner would begin at 5% and grow steadily, hitting 25% on Oct. 1 unless Mexico takes satisfactory action to halt the migrants.
  • “This is a misuse of presidential tariff authority and counter to congressional intent,” said Sen. Chuck Grassley, chairman of the Senate Finance Committee. “I support nearly every one of President Trump’s immigration policies, but this is not one of them.”

U.S. Consumer Spending Cools in April

  • Personal-consumption expenditures (PCE), a measure of household spending on everything from carpet cleaning to computers increased a seasonally adjusted 0.3% in April from March and rose 1.5% from a year earlier.
  • The report showed personal income, which includes Americans’ pretax earnings from wages, salaries and investments, advanced 0.5% in April from the prior month.
  • Economists had expected consumer spending would rise 0.2% in April and incomes would increase by 0.3%.
  • Excluding volatile food and energy costs, prices were up 0.2% on the month and rose 1.6% from a year earlier.
  • Revised data showed consumer spending increased 1.1% in March from the February, versus a previous estimate of a 0.9% rise.

Trump Administration Lifts Summer Ethanol Ban

  • The Trump administration has decided to approve expanded use of ethanol fuel, a move that will help corn farmers hurt by the trade conflict with China—and that might pay political dividends for President Trump in farm-belt states such as Iowa.
  • Under the decision to be made public Friday, the EPA will allow gasoline with a 15% mix of ethanol to be sold year-round, instead of just eight months a year, effective as soon as it is published in the Federal Register, expected to happen within days.
  • The move has been opposed by oil companies and environmentalists, who object that it could lead to higher prices at the gas pumps and increase air pollution during the summer months when 15% ethanol fuels had been banned.
  • The decision could be a boon to farmers in places like Iowa, the No. 1 corn and ethanol-producing state that Mr. Trump won in the 2016 election and needs in the 2020 election.

Administration Nears Plan to Return Fannie, Freddie to Private Ownership

  • Trump administration officials are putting the finishing touches on a plan to return mortgage-finance giants Fannie Mae and Freddie Mac to private-shareholder ownership, people familiar with the matter said.
  • The proposal, more than a decade after the government seized the firms to save them from collapse, would seek to put the companies on a sounder financial footing and then release them from government control.
  • The proposal is expected to include a version of what has been called “recap and release,” which would ensure the firms have adequate capital to absorb loan losses in a future housing slump and thus avoid needing another taxpayer-backed bailout.

U.S. Delays Petrochemical Sanctions on Iran

  • The Trump administration has delayed new, tougher sanctions on Iran’s petrochemical sector, said people familiar with the matter, as it seeks to dial back tensions that have threatened to spiral out of control.
  • The pivot came after heated rhetoric between Washington and Tehran over U.S. accusations that Iran was likely behind the sabotage of Saudi oil tankers, including a warning last week from Trump that a war could see the “official end of Iran.”
  • The U.S. Treasury had planned to implement new sanctions in mid-May that for the first time detailed which Iranian petrochemical entities are off limits to foreign companies, and could still move forward with them.
  • Petrochemical sales are Iran’s second biggest export after crude oil, and the country hopes to generate an annual $36 billion in such sales by 2021, up from $19 billion in 2015, Iranian Oil Minister Bijan Zanganeh said at an oil and gas conference this month.

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Gazprom reports 44% jump in first-quarter net profit, promises higher dividends

  • Gazprom reported a 44% jump in first-quarter net income to 536 billion rubles ($8.3 billion), boosted by higher gas sales volumes and prices, and promised to increase dividends in coming years.
  • Revenue in the January-March quarter rose to 2.29 trillion rubles from 2.14 trillion a year earlier.
  • The volumes of gas shipped to Europe declined in the first quarter to 62.4 billion cubic meters (bcm) from 71.5 bcm in January-March 2018, the firm said on Thursday.
  • A Gazprom manager said the company was sticking to its forecast of 194 – 204 billion cubic meters of gas exports to Europe this year at an average price of up to $235 per 1,000 cubic meters.

India Just Lost Its Title as World’s Fastest-Growing Big Economy

  • India’s gross-domestic-product (GDP) expansion dipped below 6% last quarter, forcing it to surrender its title as the world’s fastest-growing large economy as citizens and companies held back on spending.
  • The GDP of Asia’s third-largest economy climbed 5.8% in the three months through March, putting it behind China’s 6.4% growth for the same period.
  • For the full fiscal year that ended March 31, India’s economy expanded 6.8%, its slowest since the year ended March 31, 2014.
  • India needs annual growth of 10% for several years to really upgrade the standard of living of its 1.3 billion citizens.

China’s Factories Take a Bigger-Than-Expected Hit from U.S. Trade Battle

  • Activity in Chinese factories slumped in May, according to a key measure, as new orders for goods fell in response to uncertainties created by the escalating trade dispute with the U.S.
  • The official manufacturing purchasing managers index fell to 49.4 in May from 50.1 in April.
  • The drop-off was expected, but the fall was more precipitous than many economists forecast.
  • Some economists said the bleaker reading is likely to exert more pressure on Beijing to boost pro-growth measures to stabilize the economy and invigorate domestic demand.
  • A World Bank report released Friday said domestic demand is key if the Chinese economy is to sustain rapid growth.
  • It estimates that the latest increase in U.S. tariffs on $200 billion of Chinese goods, which went into effect on May 10, would decrease China’s gross domestic product by about 0.2%.

After U.S. Blacklisting of Huawei, China Plans ‘Unreliable’ Foreigners List

  • China escalated an already spiraling trade dispute with the U.S., saying it would create a blacklist of foreign entities that harm Chinese businesses, in apparent retaliation for Washington’s clampdown on Huawei Technologies.
  • China’s Commerce Ministry will set up an “unreliable entity list” of foreign companies, organizations and individuals.
  • Named to the list will be entities that violate market rules and contracts, disrupt supplies to Chinese companies for “non-commercial purposes” and otherwise damage Chinese business and national interests.
  • Chinese state media and its well-policed social media crackled with speculation about potential targets.
  • The Global Times, a tabloid that is an offshoot of the Communist Party’s People’s Daily, suggested companies including Alphabet’s Google and U.K.-based chip-design company ARM Holdings.

Pompeo to Germany: Use Huawei and lose access to our data

  • The United States raised the pressure on Western allies in a war of attrition over next-generation networks on Friday, saying countries that allow China’s Huawei to build their telecoms infrastructure could be cut off from crucial intelligence data.
  • Secretary of State Mike Pompeo issued the warning after meeting Foreign Minister Heiko Maas of Germany, which has so far stood with Britain and France in declining calls to ban the state-owned manufacturer from the 5G networks now being built.
  • Pompeo later met Chancellor Angela Merkel for brief talks before flying on to Switzerland, describing Germany as “a great, important partner and ally of the United States.”

Rogers vice chairman calls for banning Huawei from Canada’s 5G network

  • Canadian telecom provider Rogers Communications’ vice chairman, Philip Lind, said that Huawei should be banned from Canada’s 5G network, Bloomberg reported.
  • While Huawei is cheaper and sophisticated compared with other alternatives, its close relationship to the Chinese government is troubling, Lind told BNN Bloomberg in a TV interview.
  • U.S. Vice President Mike Pence and Canadian Prime Minister Justin Trudeau are expected to discuss about the dispute with China over Huawei during a meeting in Ottawa.

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  • The first U.S. Copyright Law was enacted, protecting books, maps, and other original materials. (1790)
  • The hull of the Titanic was launched in Belfast. At the ceremony, a White Star Line employee claimed, “Not even God himself could sink this ship.” (1911)

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