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  • U.S. stocks slipped on Monday as internet giants Alphabet and Amazon tumbled on regulatory concerns, but hopes that the United States would settle its dispute with Mexico helped limit some losses.
  • Alphabet declined 6.4% after sources said the U.S. Justice Department is preparing an investigation of the Google-parent to determine whether the company broke antitrust laws in operating its online businesses.
  • slipped 3.5% after a report that the e-commerce giant could face heightened antitrust scrutiny under a new agreement between U.S. regulators.
  • Weak data also weighed on sentiment. The latest ISM survey showed U.S. manufacturing growth surprisingly slowed in May to its weakest pace in more than two-and-a-half years.
  • Offering some respite, Mexican officials said the country could reach an agreement with the Unites States to resolve a dispute over migration that prompted President Donald Trump to threaten punitive tariffs last week.
  • Cypress Semiconductor surged 23.2% after German chipmaker Infineon Technologies agreed to buy the U.S. peer in a deal valued at €8.4 billion ($9.4 billion).


Google Gets Ready for Legal Fight as U.S. Mulls an Antitrust Probe

  • The Justice Department is preparing to launch a fresh antitrust probe into Google, setting up a potential clash over how to regulate one of the world’s most powerful companies and perhaps the tech industry more broadly.
  • In their early deliberations, Department of Justice officials have expressed interest in Google’s dominance in a broad range of markets, including the third-party ad business in which it is both a giant platform for selling ads on sites across the web and a dominant conduit for marketers to purchase online ads, people familiar with the matter said.
  • Officials are interested in the lack of transparency in the digital ad business, and how Google uses its powerful position to extract a premium cut of online ad dealings.

U.S. regulators divide scrutiny of Amazon and Google: Washington Post

  • U.S. antitrust regulators have divided oversight of and Alphabet’s Google, putting Amazon under the watch of the Federal Trade Commission and Google under the Justice Department, the Washington Post said on Saturday.
  • Amazon could face heightened antitrust scrutiny under a new agreement between U.S. regulators which puts the e-commerce giant under the watch of the trade commission, the newspaper reported, citing people familiar with the matter.
  • The development is the result of the FTC and Justice department quietly dividing up competition oversight on both of the American tech giants, Amazon and Google, the newspaper said adding that the FTC’s plans for Amazon and the Justice Department’s interest in Google were not immediately clear.

German Chip Maker Infineon Buys U.S. Rival in $9.4 Billion Deal

  • German chip maker Infineon Technologies said Monday it would acquire Cypress Semiconductor for €8.4 billion ($9.4 billion), the latest in a series of transactions that have been reshaping the industry.
  • Infineon’s offer of $23.85 a share represents a 46% premium to Cypress’s unaffected 30-day volume weighted average price.
  • The proposed deal, which requires regulatory approval, dragged down Infineon shares more than 6% in early morning trade, as analysts said the price offered could be too high, especially in light of current market volatility.
  • By acquiring Cypress, Infineon would boost its position in connected devices, notably by adding Cypress’s connectivity chips, which enable devices to hook up to the web.
  • The deal would also make Infineon the world’s largest provider of chips to the automotive sector, an area that already makes up over 40% of the German chip maker’s sales.

Amazon, in War with Walmart, Touts One-Day Delivery Gains

  • on Monday said it has made more than 10 million products available for free one-day delivery to Prime members in the U.S., the latest salvo in a battle over speedier shipping speeds with rival Walmart.
  • The e-commerce giant is touting the arbitrary milestone about three weeks after Walmart announced it would begin offering free next-day delivery shipping on about 200,000 products for shoppers on some orders in a handful of cities.

Blackstone Strikes $18.7 Billion Deal for U.S. Warehouse Network

  • Blackstone Group is buying a network of U.S. industrial warehouses from Singapore-based GLP for $18.7 billion, in the largest private real-estate transaction ever and a big bet on the continued explosion of e-commerce.
  • The deal price includes about $8 billion of debt, one of the people said, which Blackstone plans to refinance.
  • The portfolio includes about 1,300 properties across the country, many of them near population centers.
  • GLP had been gearing up to take its U.S. business public this year, but drew buyout interest and chose to take that route instead.

Humana Says It Won’t Do Deal with Centene

  • Humana said it won’t propose a deal to combine with Centene, as the health insurer sought to end recent speculation that it could potentially take over the company.
  • Humana said Monday in a filing with the Securities and Exchange Commission that its policy isn’t to comment on speculation regarding mergers and acquisitions but that it was making an exception in commenting on the Centene speculation.
  • Centene reached a deal earlier this year to buy WellCare Health Plans for around $15.3 billion but the plan has been questioned by activist investors.

Google says issues affecting YouTube, Gmail, Google Cloud in U.S. resolved

  • Alphabet’s Google said on Sunday it had resolved the network congestion in the eastern United States that affected services in Google Cloud, G Suite and YouTube.
  • Google said it would conduct an investigation of the outage and make appropriate improvements to the company’s systems to prevent or minimize future recurrence.
  • Earlier on Sunday, Google said it was experiencing high levels of congestion, adding that the incident began at 3:25 p.m. EDT.

Trade Tensions, Rising Costs Hit Profit Outlook for Airlines

  • Airline industry earnings this year are expected to fall 21% short of expectations with global trade tensions and rising costs denting the outlook for collective profits, the industry’s leading trade group said Sunday.
  • Airlines this year should post $28 billion in collective net profit, down from $35.5 billion forecast six months ago, said the International Air Transport Association that represents more than 200 airlines.
  • Carriers last year returned a combined net profit of $30 billion.
  • IATA now expects fuel to represent about 25% of average airline costs, up from 23.5% last year.
  • Nonfuel unit costs are expected to rise 39.5%, IATA said.
  • Cost increases of $822 billion across the industry are outpacing $865 billion in higher sales.

EU reserves right to take own decisions on Boeing 737 MAX

  • The European Union will work with other regulators on the approval of new software for the Boeing 737 MAX but reserves the right to take its own decision on when to return the grounded jet to service, the bloc’s transport chief said on Sunday.
  • “Certainly EASA will take a very close look at the results (of proposed design changes) and then make a decision and that message was very clearly passed,” Transport Commissioner Violeta Bulc said, referring to the European Aviation Safety Agency.
  • Asked how long it would take to resolve the Boeing crisis, she said, “I hope as soon as possible because we do need to restore order and trust and move on”.

U.S. regulators say some Boeing 737 MAX planes may have faulty parts

  • The U.S. FAA disclosed a new problem involving Boeing’s 737 MAX, saying that more than 300 of that plane and the prior generation 737 may contain improperly manufactured parts and that the agency will require these parts to be quickly replaced.
  • The FAA said up to 148 of the part known as a leading-edge slat track that were manufactured by a Boeing supplier are affected, covering 179 MAX and 133 NG aircraft worldwide.
  • In a statement issued after the FAA announcement, Boeing said it has not been informed of any in-service issues related to this batch of slat tracks.
  • Boeing said it has identified 20 737 MAX airplanes most likely to have the faulty parts and that airlines will check an additional 159 MAXs for these parts.

China to probe FedEx after Huawei says parcels diverted

  • China will investigate whether FedEx damaged the legal rights and interests of its clients, the official Xinhua news agency said on Saturday, after Chinese telecoms giant Huawei said parcels intended for it were diverted.
  • Huawei told Reuters on Friday that it was reviewing its relationship with FedEx which it alleged had diverted two parcels destined for Huawei addresses in Asia to the United States and had attempted to reroute two others.
  • FedEx said the packages were “misrouted in error”.
  • Xinhua, without elaborating, said FedEx recently did not deliver to the right addressees and addresses in China.

Facebook in talks with U.S. derivatives regulator over digital currency plans: FT

  • Facebook is in talks with the U.S. derivatives regulator, the Commodity Futures Trading Commission (CFTC), over the social media company’s plans for a digital currency, the Financial Times reported on Sunday.
  • The regulator is in the early stages of talks with Facebook in an effort to understand whether the company’s plans for digital coin would fall under the CFTC’s scope, the FT reported, citing Christopher Giancarlo, the head of the CFTC.
  • In May, Facebook set up a financial technology company in Switzerland focusing on blockchain and payments as well as data analytics and investing.

Trump tariffs worth an extra nickel per burrito, says Chipotle

  • Chipotle Mexican Grill estimated the cost of President Donald Trump’s proposed tariffs on its business at around $15 million on Monday and said it could cover them by raising burrito prices by around 5 cents.
  • The chain’s finance chief Jack Hartung said its margins would be reduced by 20-30 basis points if the tariffs suggested by Trump are enacted, pushing up prices of avocados and other imports.
  • Mexico is the largest supplier of agricultural produce to the United States, exporting more than $8 billion worth of avocados and other vegetables north last year.

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Manufacturing gauge hits lowest level since October 2016

  • U.S. manufacturing growth slowed further in May to its weakest pace of activity in more than two-and-a-half years, defying expectations for a modest rebound, a national purchasing managers’ survey showed on Monday.
  • The Institute for Supply Management said its U.S. Manufacturing Purchasing Managers Index declined to 52.1 from 52.8 in April, marking the lowest level since October 2016.
  • Wall Street economists had a consensus forecast of 52.3.
  • Factories reported the weakest output growth last month since August 2016 with a production index reading of 51.3, down from 52.3 in April.
  • New orders recovered modestly, but the backlog of orders contracted for the first time since January 2017.

China, Mexico Signal Willingness to Step Up Trade Talks with U.S.

  • China signaled a willingness to negotiate with Washington over escalating trade issues, while the Trump administration took to the airwaves to defend its use of tariffs to gain concessions from trading partners.
  • Beijing released a government policy paper on trade issues, accusing Washington of scuttling the negotiations, saying the Trump administration’s “America First” program and use of tariffs are harming the global economy and that China wouldn’t shy away from a trade war if need be.
  • But throughout the document and at a briefing, the government suggested a willingness to return to negotiations.
  • A possible meeting between Mr. Trump and President Xi Jinping of China at the G-20 summit is seen by many analysts on both sides as a chance to put talks back on track.

Reeling from tariff threat, Mexico begins immigration talks in Washington

  • Fighting to stave off punitive tariffs announced by U.S. President Donald Trump, a senior Mexican delegation was set to begin high level talks on Monday in Washington, where it will be pushed to do more to hold back Central American migrants.
  • Mexico faces the possibility of hefty new tariffs in the coming weeks, with the U.S. threatening to apply an escalating 5% tariff on all Mexican imports, or about $350 billion of goods, starting June 10.
  • The U.S.-Mexican talks begin on Monday with a meeting between Mexican Economy Secretary Graciela Marquez and U.S. Commerce Secretary Wilbur Ross. On Wednesday, Foreign Minister Marcelo Ebrard meets U.S. Secretary of State Mike Pompeo.
  • With just a week until the first tariffs, the delegation may have a hard time convincing U.S. officials that Mexico is doing enough on immigration to avoid punishment, despite having signaled in recent days it was prepared to further tighten security.
  • Mexico’s economy, which is heavily reliant on exports to the United States, shrank in the first quarter and would suffer a lot more if Trump were to jack tariffs up all the way to 25 percent.

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Global recession fears grow as factory activity shrinks

  • Factory activity contracted across Asia and Europe last month as an escalating trade war between Washington and Beijing raised fears of a global economic downturn and heaped pressure on policymakers to roll out more stimulus.
  • IHS Markit’s May final manufacturing Purchasing Managers’ Index for the euro zone was 47.7, below April’s level and only just above a six-year low in March.
  • In Britain, the Brexit stockpiling boom of early 2019 gave way last month to the steepest downturn in British manufacturing in almost three years as new orders dried up, boding ill for economic growth in the second quarter.
  • After an official gauge on Friday showed contraction in China, Asia’s economic heartbeat, the Caixin/IHS Markit Manufacturing PMI showed modest expansion, offering investors some near-term relief.
  • The outlook, however, remained grim as output growth slipped, factory prices stalled and businesses were the least optimistic on production since the survey series began in April 2012.

India’s Modi Feels More U.S. Pressure to Open Nation’s Markets

  • President Trump’s move to pressure India to do more to open its markets will force Prime Minister Narendra Modi to walk a careful line as he balances a fresh mandate for his nationalist policies against efforts to build closer ties with the U.S.
  • Mr. Trump on Friday said India would be removed from the U.S.’s privileged-trading program called the Generalized System of Preferences on Wednesday.
  • Under the decadelong program meant for some developing economies, the U.S. had allowed India to avoid tariffs on certain exports to the U.S. in the interest of promoting tighter trade ties and development.
  • Mr. Trump’s move will add tariffs of as much as 7% on Indian exports of goods like chemicals, auto parts and tableware to the U.S., which in 2018 accounted for more than 11%, or $6.3 billion, of India’s total exports of goods valued at $54.4 billion, according to the Congressional Research Service, a research agency for the U.S. Congress.

Huawei Selling Stake in Undersea-Cable Firm as U.S. Pressure Mounts

  • China’s Huawei plans to sell its majority stake in an undersea-cable venture, in a move that follows a U.S. pressure campaign against Huawei and efforts to block the cable venture’s projects.
  • Hengtong Optic-Electric, one of China’s biggest makers of electric power and optical-fiber networks, said in a filing that it signed a letter of intent Friday to buy the 51% stake in Huawei Marine Systems via cash and share issuance.
  • The planned sale comes after U.S. and some allied officials have pointed to the company’s role in building undersea cables as potentially enhancing China’s ability to spy on or disable communications networks.
  • Huawei and Huawei Marine have denied that they pose any security threat.

Huawei trade secrets lawsuit opens in Texas amid spying allegations

  • Huawei kicks off a trade secrets lawsuit in the United States on Monday against a former employee who has sought to turn the case into a referendum on Huawei’s corporate behavior.
  • Jury selection begins on Monday in a federal court in Texas, with the trial expected to last about three weeks.
  • The judge in the case, Amos Mazzant, is also separately hearing Huawei’s bid to overturn the Trump administration’s ban on its sales to government agencies and contractors.
  • Huawei’s lawsuit against former employee Ronnie Huang and his startup, CNEX Labs, claims an “an illegal pattern of racketeering” by the ex-manager to steal its technology and poach its staff, according to court documents.
  • A Huawei official posed as a potential buyer and the company used ties to a Chinese university to gain access to CNEX designs, Huang’s countersuit claims.
  • Among its accusations: Huawei rewarded staff for stealing rivals’ trade secrets and stores the pilfered technology in a secret database for its use.

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  • The world’s worst oil spill occurred when an exploratory oil well, Ixtoc 1, blew out, spilling over 140 million gallons of oil into the Bay of Campeche off the coast of Mexico. (1979)
  • Chinese army troops head to Beijing to crush student-led pro-democracy demonstrations. (1989)

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