DAILY MARKET REPORTS
- U.S. stocks extended their gains, as supportive commentary from central banks continued to buoy investor confidence.
- Stocks have climbed in recent sessions amid indications that the Fed might cut interest rates to boost the economy.
- Investors received further signs of accommodative policy from other central banks Thursday after the ECB said it was keeping interest rates unchanged for now. Policy officials extended the period during which they expected to leave rates on hold from the end of 2019 to at least through the first half of 2020.
- Trump said he would decide on more China tariffs “probably right after the G20,” which follows his threat overnight to hit tariffs on “at least” another $300 billion worth of Chinese goods.
- The U.S. and Mexico were set to enter the second day of negotiations on Thursday that could avert tariffs.
- President Trump’s spat with Mexico is likely to mean an immediate spike in car prices, according to some economists.
- Autos are one of the biggest exports into the U.S. from its southern neighbor.
US FINANCIAL MARKET
Stitch Fix spikes after beating earnings and revenue expectations
- Shares of Stitch Fix soared 25% in after-market trading Wednesday after the online personal styling company reported it beat earnings and sales expectations in the fiscal third quarter of 2019.
- Sales in the third quarter of 2019 grew 29% to $408.9 million, widely beating the $394.9 million analysts expected.
- Its active clients — people who received a box of clothing in the preceding 12-month period — came in at 3.1 million, an increase of 17% year over year.
- For the third quarter, Stitch Fix said net income dropped to $7 million, from $9.5 million a year ago.
- The company raised its revenue forecast for 2019 to a range of $1.57 billion to $1.58 billion, up from previous estimates of $1.53 billion to $1.56 billion.
- For the fourth quarter, revenue will be between $425 million and $435 million.
- EBITDA will be between $5 million and $10 million in the fourth quarter and between $38 million and $43 million for the year.
Fiat Chrysler Withdraws Merger Offer for Renault
- Fiat Chrysler Automobiles withdrew its proposal to merge with Renault after the French government balked at the deal because it lacked the support of Nissan, according to people familiar with the matter.
- The French state, Renault’s top shareholder, went into a marathon board meeting Wednesday evening saying its prime condition for approving the $40 billion merger was that the deal fit within the framework of Renault’s decadeslong alliance with Nissan.
- Nissan’s two representatives on Renault’s board planned to abstain in the vote, the people said, raising doubts about Nissan’s commitment to preserving the alliance if the merger were to proceed, the people said.
YouTube Bans Hateful Videos from Platform
- YouTube said it is stepping up efforts to scrub hateful content from its platform, including videos that deny historical events like the Holocaust, taking on more of the task of judging the validity of information on its popular video-streaming site.
- The unit of Google will bar videos claiming that any group is superior to others to justify discrimination, segregation or exclusion based on qualities like age, gender, race, caste, religion, sexual orientation or veteran status, YouTube said in a blog post.
- It said this would include videos that promote or glorify Nazi ideology, for example, and could affect thousands of channels.
- The company also said it would remove content that falsely denied the existence of factual violent incidents, like the shooting at Sandy Hook Elementary School in Connecticut and the Nazis’ mass murder of Jews and other groups in World War II.
Google to Acquire Data Analytics Firm Looker for $2.6 Billion
- Google has reached a deal to acquire Looker, a business-intelligence software and big-data analytics platform, for $2.6 billion in cash.
- As part of the deal, Looker will join Google Cloud, bringing together analytics and cloud infrastructure, Google said Thursday.
- The acquisition is expected to be completed later this year.
Stakes Are High as Nations Seek Accord on Taxing in Digital Age
- International negotiators are making progress on rewriting rules for how countries tax multinational corporations, marching toward consensus on how to respond to increasing digitalization even as trade and climate policy divide developed nations.
- The U.S., which has pursued more unilateral approaches in other arenas, is at the center of advancing these talks.
- There are messy details ahead in the next 18 months, as countries and companies analyze who might pay more and which nations might lose revenue.
- But for now, participants and observers are optimistic they can improve a system that is worrying companies that fear double taxation and frustrating Europeans who see U.S. tech companies profiting off their citizens without paying enough in taxes.
Boeing’s 777X faces engine snags, questions rise over delivery goal
- Boeing’s effort to build the world’s largest twin-engined jet, the 777X, continues to be hampered by challenges with General Electric’s new GE9X turbine engine, a top Boeing executive said on Wednesday.
- Boeing is facing testing glitches on the GE9X after assembly delays on the engine and the plane’s carbon-composite wings.
- These issues, coupled with the crisis over its 737 MAX in the wake of deadly crashes, leaves the world’s largest planemaker less leeway to deliver on its official 2020 target for entry into service, industry sources say.
- GE began flight trials of the turbine engine, the world’s largest, in March after a three-month delay caused mainly by a problem in its compressor.
JPMorgan Scraps a New App Service for Young People
- JPMorgan Chase is killing an experiment to attract younger customers to a new digital-banking app a year after making it available nationwide.
- The nation’s largest bank began informing clients Thursday that it is shutting down Finn, the no-fee banking brand designed to meet the financial needs of younger consumers, and transferring their funds to new Chase checking and savings accounts.
- It is a quick about-face for a product JPMorgan hoped would help it lure new customers to its online and mobile banking options, a hot spot of competition among the nation’s banks and financial-technology startups.
US ECONOMY & POLITICS
Fed’s Beige Book Sees Modest Growth
- Economic activity picked up slightly this spring as firms largely shrugged off the effect of tariffs, according to a Federal Reserve report released Wednesday.
- The Fed’s 12 regional districts reported modest growth in April and May, “a slight improvement over the previous period,” the central bank said in its “beige book” report collecting anecdotes from business contacts from around the country.
- The report suggests the renewal of trade tensions with China has yet to have much of a significant impact on American manufacturers, although many expressed worries about the future.
- The report was based on information collected through May 24, before President Trump announced plans for new tariffs on Mexico.
U.S. Worker Productivity Is Revised Downward Slightly
- The improvement in U.S. worker productivity was slightly less robust than initially estimated in the first quarter, though the year-over-year gain was still the best in nearly a decade.
- The productivity of nonfarm workers, measured as the output of goods and services for each hour on the job, increased at a 3.4% seasonally adjusted annual rate in the first quarter from the previous three months, the Labor Department said Thursday.
- That’s down for last month’s initial estimate of a 3.6% gain.
- Compared with a year earlier, the revised data showed that productivity still rose 2.4%.
U.S. first-quarter unit labor costs revised down sharply
- U.S. unit labor costs were weaker than initially thought in the first quarter and costs declined in the prior period, suggesting inflation could remain moderate for a while.
- The Labor Department said on Thursday unit labor costs, the price of labor per single unit of output, dropped at a 1.6% annualized rate, instead of falling at a 0.9% as reported last month.
- Data for the fourth quarter was revised to show unit labor costs falling at a 0.4% rate in the October-December period, rather than increasing at a 2.5% pace as previously reported.
- Compared to the first quarter of 2018, unit labor costs fell at a rate of 0.8%, revised down from the 0.1% increase estimated last month.
U.S. Jobless Claims Hold Steady Near Historic Low
- Initial claims for unemployment benefits, a proxy for layoffs across the U.S., were unchanged at a seasonally adjusted 218,000 in the week ended June 1, the Labor Department said Thursday.
- Economists expected 212,000 new claims last week.
- Thursday’s report showed the number of American on unemployment rolls for more than a week rose by 20,000 to 1,682,000 in the week ended May 25.
U.S. Trade Gap Narrowed in April
- The foreign-trade gap in goods and services contracted 2.1% from the prior month to a seasonally adjusted $50.79 billion in April, the Commerce Department said Thursday.
- That was in line with expectations; economists had forecast a trade deficit of $50.8 billion.
- Imports decreased 2.2% in April to $257.638 billion. Exports also fell by 2.2%, to $206.847 billion.
- The trade deficit in goods with China widened 7.6% on the month in April to a seasonally adjusted $29.41 billion, while the trade deficit in goods with Mexico narrowed 6.4% from the prior month.
Trump Pressures Mexico as Second Day of Border Talks Begin
- President Trump said Thursday that progress was being made in border-security talks between Mexican and U.S. officials, but warned that Mexico must “step up to the plate” if it wants to head off tariffs planned for next week on $350 billion in imports.
- Officials were set to begin a second day of talks in Washington on Thursday, after a first day of negotiations ended with no deal.
- Mexican President Andrés Manuel López Obrador said Thursday that Mexico’s delegation had presented a plan to address immigration issues to their counterparts in Washington, and said he was optimistic a deal would be struck to avoid the tariffs.
- The tariffs, which would be paid by U.S. importers of Mexican goods, would begin at 5% on Monday, double to 10% on July 1 and continue escalating to 25% by October.
Trump threatens China with tariffs on further $300 billion of goods
- U.S. President Donald Trump threatened to hit China with tariffs on “at least” another $300 billion worth of Chinese goods but said he thought both China and Mexico wanted to make deals in their trade disputes with the United States.
- While Trump said on Thursday that talks with China were ongoing, no face-to-face meetings have been held since May 10, the day he sharply increased tariffs on a $200 billion list of Chinese goods to 25%, prompting Beijing to retaliate.
- U.S. Treasury Secretary Steven Mnuchin is scheduled to meet People’s Bank of China Governor Yi Gang this weekend at a gathering of G20 finance leaders in Japan, the first face-to-face discussion between key negotiators in nearly a month.
U.S. pursues sale of over $2 billion in weapons to Taiwan, sources say, angering China
- The United States is pursuing the sale of more than $2 billion worth of tanks and weapons to Taiwan, four people familiar with the negotiations said, sparking anger from Beijing which is already involved in an escalating trade war with Washington.
- The potential sale included 108 General Dynamics M1A2 Abrams tanks worth around $2 billion as well as anti-tank and anti-aircraft munitions, three of the sources said.
- The United States is the main arms supplier to Taiwan, which China deems its own and has never renounced the use of force to bring the self-ruled island under its control.
EUROPE & WORLD
Euro rises as ECB pushes back rate hike deadline; raises inflation forecast
- The euro climbed higher against the U.S. dollar on Thursday, after the European Central Bank (ECB) said it would delay its first post-crisis interest rate hike until at least the middle of next year.
- The central bank said interest rates on its marginal lending facility and deposit facility would remain unchanged at 0%, 0.25% and -0.40%, respectively.
- In a surprise revision to its forward guidance, the ECB said in a statement that the governing council “now expects the key ECB interest rates to remain at their present levels at least through the first half of 2020.”
- Meanwhile, Draghi also presented a fresh round of forecasts for economic growth as well as inflation.
- The ECB sees GDP growth of 1.2% in 2019, up 0.1 percentage points from its previous forecast in March.
- For 2020, the ECB forecast the economy to grow at 1.4%, down 0.2 percentage points as compared to its previous forecast.
India Cuts Key Lending Rate as Economic Growth Slows
- India’s central bank cut its key lending rate as Prime Minister Narendra Modi begins his second term in office trying to boost a slowing economy.
- India’s growth slowed to 5.8% last quarter on lower consumer and company spending, and for the year ended March 31, India’s economy expanded 6.8%, its slowest rate in five years.
- The government last month released unemployment figures for the year through June 2018 showing the jobless rate at 6.1% in that period – the official unemployment number had been below 3% for decades.
- The Reserve Bank of India has cut rates three times since Gov.
- Shaktikanta Das took the helm of the central bank in December, including Thursday’s quarter-percentage point cut to 5.75%.
- The central bank revised down its growth forecast for this financial year to 7% from 7.2% and said low inflation and concerns over growth justified its move.
China says will fight to end if U.S. escalates trade tensions
- China will fight to the end if the United States decides to escalate trade tensions, the Commerce Ministry said on Thursday, as U.S. President Donald Trump reiterated his threat to levy additional tariffs on $300 billion of Chinese goods.
- The United States’ use of “ultimate pressure” has caused serious setbacks to trade negotiations, and the future direction of talks would depend on the Washington, Gao Feng, the ministry’s spokesman, said at a weekly media briefing.
- China will have to adopt the necessary countermeasures if the US decides to unilaterally escalate trade tensions, Gao said.
China Grants 5G Commercial Licenses to Its Biggest Wireless Carriers
- China is granting 5G licenses for commercial use to its biggest wireless carriers, opening the next phase in the race with the U.S. to dominate the next-generation mobile technology.
- The Ministry of Industry and Information Technology said that the country’s three state-owned carriers, China Mobile Communications, China Telecommunications, and China United Network Communications, would receive licenses, as would cable-network giant China Broadcasting Network.
- U.S. and South Korean carriers have already launched 5G service in limited areas in their own countries.
- But while American carriers are using a piecemeal approach, introducing 5G to one city at a time, industry executives say China is instead focused on a nationwide coverage in 2020.
China’s Didi Chuxing starts ride-hailing services in Chile, Colombia
- Chinese ride-hailing giant Didi Chuxing said on Thursday that it had launched services in Chile and Colombia, as part of its push into Latin America.
- The company kicked off operations of Didi Express in the two countries earlier this week and plans to launch a taxi-hailing service in Colombia later this year, it said in an e-mailed statement.
TODAY in HISTORY
- The Securities and Exchange Commission (SEC) was established to protect investors and maintain the integrity of the securities markets. (1934)
- Thousands of Allied troops invaded the beaches of Normandy, France, on D-Day. (1944)
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