DAILY MARKET REPORTS
- Wall Street’s main indexes dipped on Wednesday as worries of a protracted U.S.-China trade war were heightened by Washington’s tough stance, but losses were limited by a tame inflation report that supported the case for an interest rate cut.
- Data showed consumer prices edged up 0.1% in May, in line with expectations of economists polled by Reuters and pointed to moderate inflation. Excluding the volatile food and energy components, the CPI nudged up 0.1%.
- Fed policymakers will meet on June 18-19 and markets have priced in at least two rate cuts by the end of 2019.
- Fed fund futures imply around an 80% chance of an easing as soon as July.
- Fresh worries erupted on the trade front after President Donald Trump said he was holding up a deal with China and had no interest in moving ahead unless Beijing agrees to four or five major points.
- With under three weeks to go before proposed talks between the United States and Chinese leaders, sources say there has been little preparation for a meeting even as the health of the world economy is at stake.
US FINANCIAL MARKET
U.S. antitrust chief says past enforcement could presage new probe of current digital giants
- The top U.S. antitrust enforcer said that studying enforcement actions against Standard Oil and AT&T decades ago can help lay the groundwork for looking at possible anti-competitive behavior at today’s tech giants such as Google and Facebook.
- The Justice Department and the Federal Trade Commission have divided potential investigations of the four companies, with Google and Apple being probed by the Justice Department and the FTC looking at Amazon and Facebook.
- Makan Delrahim, assistant attorney general, noted in a video speech to a conference in Israel that the Justice Department had previously fought giant corporations in court and prevailed.
- Delrahim pointed to past big antitrust victories, like the breakup of Standard Oil early in the last century and AT&T, which agreed to be broken up in 1982.
Boeing May deliveries fall 56% as 737 MAX grounding continues to weigh
- Boeing said on Tuesday it handed over 56% fewer airplanes in May compared with a year earlier, as deliveries of its top-selling 737 MAX jet remained suspended following a deadly crash in March.
- Total deliveries fell to 30 planes, compared with 68 in 2018.
- Net orders for the first five months remained in negative territory, with a total of minus 125 net orders.
- Airbus delivered 81 aircraft in May, up 59% from last year and 313 in the January-May period, a rise of 40%.
Google Axes Lobbyists Amid Growing Government Scrutiny
- Google has fired about a half-dozen of its largest lobbying firms as part of a major overhaul of its global government affairs and policy operations amid the prospect of greater government scrutiny of its businesses.
- In the past few months, the company has shaken up its roster of lobbying firms, restructured its Washington policy team and lost two senior officials who helped build its influence operation into one of the largest in the nation’s capital.
- The firms Google has dumped make up about half of the company’s more than $20 million annual lobbying bill.
- People familiar with the matter say the revamp is part of a continuing modernization of the influence operation Google built over the last 15 years, but it comes as Google faces a number of government investigations into its affairs.
Google Is Moving More Hardware Production Out of China
- Alphabet’s Google is moving some production of Nest thermostats and server hardware out of China, avoiding punitive U.S. tariffs and an increasingly hostile government in Beijing, according to people familiar with the matter.
- Google has already shifted much of its production of U.S.-bound motherboards to Taiwan, averting a 25% tariff, said the people, asking not to be identified discussing internal matters.
- Tariffs have also pushed American-bound production of its Nest devices to Taiwan and Malaysia, the people said.
Nintendo Moves Some Switch Production Out of China, Adapting to Tariff Threat
- Nintendo is shifting some production of its Switch videogame console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics, said people who work on Nintendo’s supply chain.
- Taiwan’s Foxconn said Tuesday that it was ready to move assembly of Apple’s iPhones out of China if necessary, and Japan’s Sharp, controlled by Foxconn, said last week that it planned to move production of personal computers to Taiwan or Vietnam.
- People involved in the supply chain said production in Southeast Asia has started for the Switch, including the current type and the two new models, suggesting Nintendo is getting ready to introduce them soon.
- They didn’t give specific volume figures but said Nintendo wanted to have enough units to sell in the U.S., the largest market for videogame consoles, when the new products go on the market.
Ford to spend $180 million to fix suspension issue in Explorer vehicles
- Ford said on Wednesday its North American unit will spend $180 million to correct a suspension issue in Explorer vehicles.
- The suspension issue is in certain Explorer models made from 2011 through 2017, the automaker said in regulatory filing.
- The expense will be reflected in the company’s second-quarter 2019 results, Ford said.
- For the full year, the company said it continues to expect adjusted EBIT to be higher than in 2018, it added.
No meat please! Nestle may extend plant-based burger partnerships
- Nestle could expand its plant-based burger sales partnership with fast food chain McDonald’s beyond Germany and is also looking for other partners, the Swiss food giant’s head said on Tuesday.
- Nestle launched its plant-based Incredible Burger in April under the Garden Gourmet brand in several European countries.
- The same month, McDonald’s started selling the patties as “Big Vegan TS” in its 1,500 restaurants in Germany.
- Nestle has also announced plans to launch a plant-based burger in the U.S. later this year, where it will compete with products made by Beyond Meat and Impossible Foods.
KKR Doubles Down on House Flippers
- The investment house known for corporate takeovers has agreed to pump another $250 million into Toorak Capital Partners, which buys short-term loans made to real-estate investors who purchase, renovate and resell residential properties.
- Flip loans, which usually have a maturity of a year, have become sought after on Wall Street for the big yields that they pay, often between 8% and 11%.
- KKR’s additional investment enables another $1.5 billion injection into the pool of financing available to flippers, which is already at its highest level since early 2007.
- In the first quarter, the cumulative value of homes purchased by flippers with financing was $6.4 billion, according to Attom.
Oil falls almost 2% on weaker demand growth, rising U.S. inventories
- Oil prices fell almost 2% on Wednesday, weighed down by a weaker outlook for demand and a rise in U.S. crude inventories despite expectations of extended supply cuts led by OPEC.
- U.S. crude inventories rose by 4.9 million barrels in the week ended June 7 to 482.8 million barrels, data from the American Petroleum Institute (API) showed on Tuesday.
- That compared with analyst expectations for a decrease of 481,000 barrels.
- The U.S. Energy Information Administration (EIA) cut its forecasts for 2019 world oil demand growth and U.S. crude production on Tuesday.
US ECONOMY & POLITICS
U.S. Consumer Prices Edged Higher in May
- U.S. consumer prices inched up in May, held down by a decline in energy prices.
- The consumer-price index, which measures what Americans pay for household goods and services such as toys or electricity, rose a seasonally adjusted 0.1% in May from the previous month, the Labor Department said Wednesday.
- Excluding volatile food and energy prices, costs were also up 0.1% on the month.
- On an annual basis, inflation cooled in May. Prices rose 1.8% from the previous year, a slower pace than in April, when they were up 2% on the year.
- Prices excluding food and energy so-called core were up 2% in May.
- Economists had expected a 1.9% rise in prices from a year ago and a 2.1% rise in core prices.
- Energy prices were down 0.6% on the month and gasoline prices fell 0.5%, the first decline in prices at the pump after three months of strong increases.
U.S. mortgage lenders optimism on profits return: survey
- U.S. mortgage lenders turned optimistic about profits in the second quarter for the first time in nearly three years as tumbling interest rates led to a jump in demand for home loans, a survey from Fannie Mae showed on Wednesday.
- The share of lenders surveyed who said they expect their profits to increase in the next three months exceeded the share of those who expect a decrease by 29 percentage points.
- The reading was the second most positive since the survey began in the first quarter of 2014.
U.S. economic growth forecast ‘not contingent’ on China trade deal: Kudlow
- White House economic adviser Larry Kudlow said the U.S. economy will likely still achieve a 3% pace of growth this year even without a trade deal with China.
- “That 3% forecast is not contingent” on a China deal, Kudlow said in an interview with CNBC.
- Kudlow, director of the White House’s National Economic Council, said he is hopeful that U.S. President Donald Trump and Chinese President Xi Jinping will meet at the G20 summit and the two sides can resume trade discussions.
U.S. Commerce Secretary says Fed’s last rate hike was ‘premature’
- U.S. Commerce Secretary Wilbur Ross said in a television interview on Wednesday the Federal Reserve should reconsider its last rate increase, which he said was premature.
- “I think the Fed taking a more cautious attitude on rates and reconsidering, in effect, the last rate increase that they put in, I think that’s good. I think they should reconsider. I think it’s quite likely that that last increase was, at best, premature.”
- After two days of policy-setting meetings this week, Fed officials will soon issue updated rate projections.
- The Fed has come under pressure amid President Donald Trump’s trade wars and other signs of economic weakness.
Treasury Finishes Rules Ending Blue-State Tax-Cap Workarounds
- The Treasury Department released final rules that shut down a tax-planning strategy for residents of high-tax states, nixing a workaround that could have helped New York, New Jersey and Connecticut residents skirt the new cap on SALT deductions.
- The regulations effectively nullify state laws passed in response to the 2017 tax law and pinch similar programs in Georgia, Arizona and elsewhere that predate the federal tax changes and benefit private schools, rural hospitals and other charities.
- The rules apply to contributions made after Aug. 27, 2018, and generally prevent taxpayers from converting their nondeductible state tax payments into deductible charitable contributions.
EUROPE & WORLD
Hong Kong Police Fired Tear Gas, Rubber Bullets at Protesters
- Hundreds of police fired tear gas and rubber bullets to clear protesters demonstrating against China’s encroachment on the city’s legal autonomy, signaling that Beijing won’t let up in its efforts to tighten control over the financial center.
- Hours after thousands of protesters blocked streets and forced the city’s legislature to postpone debate on a widely unpopular bill that would allow extradition of alleged criminals to China, plumes of smoke from tear gas filled the air as officers drove back crowds of mostly young demonstrators, some wearing masks, goggles and helmets.
- The protest, which followed a mass demonstration by up to a million people on Sunday, is the biggest outbreak of public unrest in years and comes as the administration of Xi Jinping moves to bring the former British colony closer to the mainland.
- The extradition law, which would allow people to be sent to China for trial, has struck a nerve among local people who view it as eroding their freedoms, and revived an opposition movement that was floundering just months ago.
Japan’s Abe Looks to Mediate Between U.S., Iran
- Japanese Prime Minister Shinzo Abe will seek to open a channel of communication between Iran and the U.S. as part of a diplomatic effort to prevent a military standoff between Tehran and Washington from tipping into conflict.
- Mr. Abe arrived in Iran on Wednesday amid a bitter confrontation between the Trump administration and Tehran that has raised fears of war between the longtime enemies.
- Mr. Abe is scheduled to hold talks with Iranian President Hassan Rouhani later in the day and Supreme Leader Ayatollah Ali Khamenei on Thursday.
- Expectations are low for a major breakthrough, with Iran’s leaders maintaining a defiant position in response to President Trump’s offer of talks.
Skoda Auto’s May deliveries drop 6.6% on weaker Chinese market
- Global deliveries for Skoda Auto, part of the Volkswagen group, dropped by 6.6% to 104,900 vehicles in May, pulled down by a weaker overall market in China, its biggest sales destination, the company said on Wednesday.
- Deliveries in China alone, which accounted for about a fifth of May deliveries, fell 31.5% year-on-year while the Czech carmaker said its European markets increased in the month.
Iran-Allied Rebels Strike Saudi Airport
- A missile fired Wednesday by Iran-allied militias in Yemen injured 26 civilians in Saudi Arabia, according to a U.S.-backed military coalition fighting the insurgents, an attack that comes amid heightened tensions between Washington and Tehran.
- The Saudi-led coalition said the projectile struck an arrivals hall at Abha airport in the southern part of the kingdom in what it said was a deliberate targeting of civilians that could amount to a war crime.
- The Houthi insurgents said they had targeted the airport with a cruise missile in self-defense against Saudi aggression and a yearslong blockade, including of the capital’s airport.
Italy seeks delay to EU budget decision, awaiting tax data
- Italy aims to convince the EU to delay until the autumn a decision on whether to open a disciplinary procedure over its finances, which are expected to look healthier after-tax revenue data in July, four coalition sources said on Wednesday.
- The current European Commission, whose term ends in November, will also look more like a lame duck after the summer and Rome will have more time to argue its case for a reform of EU fiscal rules, two of the sources said.
- The executive Commission said last week that action against Rome was warranted because its debt had risen in 2018 instead of falling as promised, and would continue to do so this year and next.
- On Tuesday, finance officials from euro zone governments agreed with that assessment, but said there was still room for negotiations to prevent the procedure, which could eventually end in fines and closer scrutiny of Italy’s budgets.
Chinese Brokerage’s $2 Billion Offering Kick-Starts Stock Link With London
- Chinese brokerage Huatai Securities plans to raise as much as $2 billion selling London-listed share-backed instruments this week, reviving a delayed financial link between China and the U.K.
- The Shanghai-London Stock Connect aims to make Chinese shares available to British investors, and vice versa.
- For China, the tie-up, which was four years in the making, demonstrates a commitment to opening up its markets and economy despite trade tensions with the U.S.
- For the U.K., it could help boost business with China and bolster London’s financial-center credentials as Brexit looms.
TODAY in HISTORY
- Anne Frank received a diary for her birthday. (1942)
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