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DAILY MARKET REPORTS

  • Rising shares of energy companies led the S&P 500 higher Thursday, putting the index on pace for its first gain in three days.
  • Crude prices rose as much as 4%, a day after hitting five-month lows, after a suspected attack on two tankers in the Gulf of Oman near Iran and the Strait of Hormuz, through which a fifth of global oil consumption passes.
  • Wall Street’s main indexes have had a strong start to the month on hopes that the Federal Reserve will act to counter a slowing global economy due to the escalating trade war with China.
  • The benchmark S&P 500 index has risen 5% so far in June.
  • U.S. consumer prices data on Wednesday pointed to a moderate rise in inflation, adding to expectations of an interest rate cut as early as July.
  • The Fed policymakers are set to meet on June 18-19 and markets have priced in at least three rate cuts in 2019.
  • In Asia, stocks in Shanghai and Shenzhen posted modest advances, while Japan’s Nikkei fell 0.5%.
  • Hong Kong’s Hang Seng was down 0.1% after paring back heavier early losses amid violent protests in the city against unpopular legislation that would make it easier to extradite people to China.

US FINANCIAL MARKET

Lululemon beats quarterly estimates, raises full-year forecast

  • Canadian athletic apparel maker Lululemon Athletica’s first-quarter profit and revenue beat analysts’ expectations on Wednesday, as efforts to boost sales at its stores and online investments paid off.
  • The company’s revenue rose to $782.3 million in the quarter, from $649.7 million a year ago.
  • Analysts on average had estimated revenue of $755.3 million.
  • Lululemon’s total comparable sales rose 14%, while analysts on average had expected a rise of 11.6%.
  • Online sales increased 33%, representing nearly 27% of total quarterly revenue.
  • Net income rose to $96.6 million from $75.2 million a year earlier.
  • For the year, the company now expects revenue of $3.73 billion to $3.77 billion, compared with its previous forecast of $3.70 billion to $3.74 billion.
  • Lululemon forecast earnings per share between $4.51 and $4.58, higher than its previous estimate of $4.48 to $4.55.

Oil Tankers Off Iran Hit by Suspected Torpedoes

  • Two oil tankers were damaged in attacks off the coast of Iran early Thursday, including one operated by a Japanese company, on a day when Tehran rebuffed attempts by Japan’s Prime Minister Shinzo Abe to ease a military standoff with the U.S.
  • The incidents sent oil prices sharply higher, reigniting fears of trade disruptions in the Strait of Hormuz, through which over a third of the world’s seaborne crude oil is shipped.
  • The attacks appeared to use relatively sophisticated weapons, and came within roughly 45 minutes of each other in the Gulf of Oman, where four tankers were attacked last month in an incident the U.S. blamed on Iran, which Tehran denied.
  • Damage to one of the tankers was extensive, including a fire and a hole at the water line that was consistent with a hit by a torpedo or other projectile, according to early assessments.
  • The other ship, a Japanese tanker, was hit with a projectile in a series of assaults, Japanese officials said Thursday.

Huawei asks Verizon to pay over $1 billion for over 230 patents: source

  • Huawei has told Verizon that the U.S. carrier should pay licensing fees for more than 230 of the Chinese telecoms equipment maker’s patents and in aggregate is seeking more than $1 billion, a person briefed on the matter said on Wednesday.
  • The patents cover network equipment for more than 20 of the company’s vendors including major U.S. tech firms but those vendors would indemnify Verizon, the person said.
  • Huawei and Verizon representatives met in New York last week to discuss some of the patents at issue and whether Verizon is using equipment from other companies that could infringe on Huawei patents.

Facebook Worries Emails Could Show Zuckerberg Knew of Questionable Privacy Practices

  • Facebook uncovered emails that appear to connect Chief Executive Mark Zuckerberg to potentially problematic privacy practices at the company, according to people familiar with the matter.
  • Within the company, the unearthing of the emails in the process of responding to a continuing federal privacy investigation has raised concerns that they would be harmful to Facebook if they were to become public, one of the people said.
  • Facebook is operating under a 2012 consent decree with the agency related to privacy, and the emails sent around that time suggest that Mr. Zuckerberg and other senior executives didn’t make compliance with the FTC order a priority, the people said.
  • The potential impact of the internal emails has been a factor in the tech giant’s desire to reach a speedy settlement of the investigation by the Federal Trade Commission, one of the people said.

FAA says has no timetable for Boeing 737 MAX’s return to service

  • The Federal Aviation Administration said on Wednesday it does not have a specific timetable on when Boeing’s troubled 737 MAX jet would return to service after two fatal crashes led to the airplane’s worldwide grounding in March.
  • Bloomberg reported earlier that the troubled 737 MAX aircraft will be back in the air by December, citing a top Federal Aviation Administration safety official.
  • Boeing is not expected to submit its formal software fix to the FAA this week or conduct a certification test flight that is required before it can submit the fix and training upgrade for approval, two people briefed on the matter told Reuters.

Uber, Lyft Drivers Face Stiffer Regulations in New York City

  • New York City intends to renew its cap on new for-hire vehicle licenses, part of a push to tighten its rein on companies like Uber and Lyft, and help protect the city’s troubled taxi industry.
  • The cap, first introduced in August, barred any new for-hire vehicle licenses, which includes app-based driver cars.
  • It was the first of its kind in the country.
  • Mayor Bill de Blasio said Wednesday that the city plans to extend the limit for another year, with exemptions for wheelchair-accessible cars and fully electric vehicles.
  • Officials said in the future they would evaluate whether to renew the cap on an annual basis.

Tyson’s New Nuggets Swap in Peas for Chicken, as Meatless Frenzy Grows

  • Tyson Foods, which slaughtered and processed nearly 2 billion chickens last year, this summer plans to introduce nuggets made from peas, flaxseed and other plants.
  • The new nuggets will compete with patties and sausages made by startups and large food companies vying for a slice of the fast-growing plant-based foods business.
  • About 21% of consumers identify as “flexitarian,” or partially vegetarian, according to market-research firm Mintel.

 ‘Fortnite’ Maker Epic Games Scoops Up Houseparty App

  • The maker of “Fortnite” has acquired the video-chat app Houseparty, uniting two tech properties that seize on teenagers’ affinity for socializing in intimate groups online.
  • Houseparty and “Fortnite” are among a new breed of social network that appeals to a much younger demographic than users on Facebook.
  • They both provide an intimate “third space” where small groups of true friends can gather online.
  • With “Fortnite,” that happens inside a game, while in Houseparty it is a living-room-style video-chat.
  • Houseparty’s app has been installed 35 million times since launching across iOS and Android in 2016, according to estimates from Sensor Tower, but installs fell nearly 38% to 2.3 million new users in the first quarter, down from 3.7 million a year earlier.
  • Epic counts 250 million “Fortnite” players.

CFM wins blockbuster jet engine order from IndiGo: sources

  • Engine maker CFM International is poised to announce one of the world’s largest jet engine orders with a deal for more than 600 engines from India’s IndiGo, industry sources said.
  • The French-U.S. engine maker has been competing with the airline’s existing engine supplier, Pratt & Whitney, to provide the power for 280 twin-engine A320-family jetliners already on order from Airbus by the Delhi-based budget carrier.
  • The airline has selected CFM for the order, which is expected to rise above 600 engines including spares, the sources said.
  • It was unclear if this includes previous options.

Lockheed Martin says F-35 cost cuts a year ahead of plan

  • Lockheed Martin is a year ahead of schedule with its plan to cut the cost of its F-35 A fighter jet variant to $80 million by 2020, the U.S. company said on Thursday.
  • “We have beaten the goal by a full year,” Lockheed Martin campaign manager Mark Pranke told a news conference in Helsinki, where the company is seeking a deal worth an estimated 7-10 billion euros ($7.9-11.3 billion) to replace Finland’s ageing 64 Hornet fighter jets.
  • Finland’s new government said last week it would pick new fighter jets in 2021 from five shortlisted options, including Boeing’s F/A-18 Super Hornet, Dassault’s Rafale, the Eurofighter Typhoon and Swedish firm Saab’s Jas Gripen, as well as the F-35.

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US ECONOMY & POLITICS

U.S. Jobless Claims Rose Last Week

  • Initial jobless claims, a measure of how many workers were laid off across the U.S., increased 3,000 to a seasonally adjusted 222,000 in the week ended June 8, the Labor Department said Thursday.
  • Economists surveyed by The Wall Street Journal had expected 215,000 new claims.
  • The report also showed so-called continuing claims—those filed by workers unemployed for longer than a week—increased 2,000 to 1,695,000 in the week ended June 1. That figure is reported with a one-week lag.

U.S. Budget Deficit Grew 39% in First Eight Months of Fiscal Year

  • Government tax revenue continued to rise in May thanks to a sturdy labor market, but not enough to offset higher federal outlays, the Treasury Department said Wednesday.
  • The government ran a $739 billion deficit from October through May, compared with $532 billion during the same period a year earlier, the Treasury said.
  • Federal outlays rose 9%, to $3 trillion, reflecting higher spending on federal retirement and health benefits, the military and interest on the debt.
  • Receipts increased 2%, to $2.3 trillion, as job gains and rising wages contributed to higher individual income tax revenue, offsetting a decline in corporate income tax receipts following the 2017 tax law overhaul.
  • About half of the increase in the deficit was due to a shift in the timing of certain federal payments, which made the deficit appear larger, the Treasury said.
  • If not for those calendar quirks, the deficit would have risen 19% in the first eight months of fiscal 2019, which started Oct. 1.

WSJ Survey: Most Economists Say Fed’s Next Move Is Rate Cut

  • More than three quarters of economists surveyed by The Wall Street Journal expect the Federal Reserve’s next move will be to lower interest rates, which most expect to happen by the fall.
  • That compares with roughly half who said in May they thought the next Fed rate adjustment would be a cut.
  • But few see an imminent move: Just two of the 46 economists projecting a rate cut in this month’s poll said they expected the Fed to lower rates at its next meeting, June 18-19.
  • Nearly 40% of the 46 economists anticipated the central bank would act in July, while roughly 30% expected a rate cut in September.

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EUROPE & WORLD

Chinese vice premier urges more support for economy amid trade war

  • Chinese regulators should step up support for the economy and keep ample liquidity in the financial system, Vice Premier Liu He said on Thursday, suggesting Beijing would soon unveil more policies to bolster growth amid rising U.S. trade pressure.
  • The government will announce more strong measures to promote reforms and opening up of its markets, added Liu.
  • Earlier on Thursday, China Daily, citing economists, said China is expected to adjust money and credit supply in coming weeks, including cuts to interest rates or reserve ratio requirements, to counter risks if the trade outlook deteriorates.
  • Further cuts in Chinese banks’ reserve requirement ratios (RRR) and various forms of cash injections by the central bank had already been expected this year before trade ties soured.
  • It has now cut RRR times six since early 2018, and has also guided short-term interest rates lower.

China’s Trade Frontman Points, With Laser, to Bright Side of U.S. Tensions

  • China’s point man on trade talks with the U.S., Vice Premier Liu He, said external pressure serves his nation’s long-term interests, providing rare insight into how he frames the high-stakes tussle between the world’s two biggest economies.
  • Mr. Liu told that such pressures, which he didn’t specify, are spurring China to create stronger domestic capital markets and more innovative industrial supply chains while making financial risks and domestic consumption high priorities.
  • From the stage Thursday, facing China’s chief banking, securities and currency regulators, Mr. Liu spoke confidently as he aimed a laser pointer at complex economic charts. “We can clearly see that structural changes are taking place,” he said.
  • China is no longer a nation dependent on exports, he said, but a domestically driven economy featuring a sizable middle class and what he called the largest growth market in the world, presenting “huge opportunity for companies around the world.”

China chip industry insiders voice caution on catch-up efforts

  • Since the U.S. government put Huawei on a trade blacklist, effectively banning American firms from doing business with it, China’s leaders have spoken boldly about achieving self-sufficiency in the critical semiconductor business.
  • But industry insiders are less optimistic that Chinese chip makers can quickly meet the challenge of supplying all the needs of Huawei and other domestic technology firms.
  • The prospectuses of Chinese chip companies preparing to list on a new tech-focused stock exchange are blunt, characterizing the domestic industry as “relatively backward”, lacking in talent and requiring “a long time to catch up”.
  • Chip industry officials outside China caution that the country is making good progress in some areas and should not be under-estimated. For a key type of memory chip known as NAND, for example, Chinese firms are closing the gap.

Airbus delivers first A350 to Japan after landmark deal

  • Airbus delivered its first A350 aircraft to Japan Air Lines on Thursday, saying the specially tailored version would start operating on Japan’s busy domestic routes.
  • The aircraft is also expected to serve demand during the 2020 Olympics and Paralympics, Japanese officials said.
  • The $9.5 billion deal came after a lengthy campaign to woo JAL officials who were unfamiliar with Airbus aircraft, including their distinctive side-stick controls.

Alibaba Files Plans to List in Hong Kong

  • Alibaba has filed confidential paperwork for a Hong Kong listing, according to people familiar with the matter, kicking off a process that could see the Chinese internet giant raise billions of dollars from a large stock sale in the coming months.
  • The proposed stock offering is being led by investment banks China International Capital and Credit Suisse.
  • Given Alibaba’s large market capitalization, an offering of just 5% of the company’s shares would equate to roughly $20 billion in stock.

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TODAY in HISTORY

  • The Boxer Rebellion began in China. (1900)
  • The U.S. Supreme Court set forth in Miranda v. Arizona that the police must advise suspects of their rights upon taking them into custody. (1966)
  • Thurgood Marshall was nominated to become the first African American on the S. Supreme Court. (1967)
  • The New York Times began publishing the “Pentagon Papers.” (1971)

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