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U.S. STOCKS, BOND YIELDS SLIP AS TRADE OPTIMISM WANES

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US FINANCIAL MARKET | US ECONOMY & POLITICS
 EUROPE & WORLD | TODAY IN HISTORY

DAILY MARKET REPORTS

  • U.S. stocks edged lower on Tuesday, a day after a record-setting rally, as optimism sparked by the U.S.-China trade truce waned after Washington threatened tariffs on $4 billion of additional EU goods.
  • Just as trade tensions with China seemed to be easing, the U.S. government ratcheted up pressure on Europe by threatening to slap tariffs amid a long-running dispute over aircraft subsidies.
  • Government bond yields around the world slipped. The yield on the 10-year U.S. Treasury note fell to 2.012% in recent trading, near its low for the year, from 2.033% on Monday.
  • Investors will be watching out for the monthly jobs report on Friday, which is expected to show that the private sector added 160,000 jobs in June, after a sharp slowdown in jobs growth in May.
  • The report will follow a batch of discouraging manufacturing data in the past 24 hours from around the world that has rekindled growth fears.

US FINANCIAL MARKET

Exxon quarterly profit to feel pinch of weaker natural gas, chemical earnings

  • Exxon Mobil said on Monday lower natural gas and chemical margins in its second quarter would offset improved crude and refining operations, pointing to flat profits sequentially and down from a year-earlier.
  • Exxon said it expected improved crude prices to boost second-quarter profit by $400 million to $600 million.
  • However, natural gas prices which have dropped to multi-year lows in the face of tepid demand, were expected to offset it by an equal measure.
  • Exxon said weaker margins in its chemical business is expected to reduce second-quarter profit by $100 million to $300 million over the first quarter. It also estimated a potential gain of $200 million over the first quarter from a lack of impairment charges.

Budweiser Readies Year’s Biggest IPO, Tapping Asia’s Growing Thirst

  • The Asia-Pacific unit of Anheuser-Busch InBev is seeking to raise as much as $9.8 billion in what could be the largest initial public offering so far this year and the biggest-ever listing of a food or drink company.
  • Budweiser Brewing on Tuesday started taking orders from investors for the IPO that would debut on the Hong Kong stock exchange on July 19 and valued at up to $63.7 billion, according to a deal document reviewed by The Wall Street Journal.
  • AB InBev’s Asia business made up about 18% of its total volume for the first quarter and includes brands like Budweiser, Stella Artois and Corona.
  • The unit reported an 8.6% rise in revenue last year to $8.46 billion and its major markets are China, Australia, South Korea, India and Vietnam. Budweiser is the third-largest beer brand in China by retail sales, according to Euromonitor.

Decline in Share Buybacks Poses a Hurdle for Stock Market

  • Some companies are easing up on share repurchases this year, potentially removing a pillar of support from the stock market as executives contend with the consequences of trade tensions and slowing economic growth.
  • Share repurchases contracted for the first time in seven quarters, with S&P 500 companies spending $205.8 billion to buy back stock in the first three months of the year, according to the latest S&P Dow Jones Indices data.
  • While still robust, that is down from a record $223 billion in the fourth quarter, and analysts say the contraction could continue as companies show signs of tightening their purse strings.
  • Buybacks have been one of the biggest sources of equity demand throughout much of the bull-market run, analysts say, with companies spending more than $800 billion last year alone on share repurchases—the most ever in a single year.

OPEC, Russia Formalize Cooperation Pact

  • OPEC sealed a long-term cooperation pact with Russia on Tuesday, extending a partnership set up two years ago to fight a surge of U.S. oil that has upset the cartel’s pricing power, OPEC officials said.
  • The 14 crude-producing nations of the Organization of the Petroleum Exporting Countries and a Russia-led group of 10 countries also completed a nine-month agreement to curb oil production by a combined 1.2 million barrels a day, rolling over a previous deal, officials said.
  • The pact ensures that the so-called OPEC+ coalition will continue coordinating on oil production once the current deal to curb output ends in nine months.

Drugmakers Push Their Prices Higher

  • Drugmakers initiated a new round of price increases on their products Monday, with some of them affecting generic hospital-administered injectable drugs that are in short supply.
  • All told, 20 companies increased the list prices of over 40 prescription drugs by an average of 13.1%, according to Rx Savings Solutions, which sells software to help employers and health plans choose the least-expensive medicines.
  • On July 1 last year, 16 companies raised the list prices of dozens of drugs by an average 7.8%.

Shipping Blockchain Initiative Gathers Steam

  • A blockchain initiative for seaborne cargo aimed at cutting costs and improving tracking of shipments is getting a boost with the addition of two big container shipping operations.
  • Germany’s Hapag-Lloyd and Japan’s Ocean Network Express said Tuesday they will join the TradeLens platform launched by A.P. Moller-Maersk and IBM, giving the program five of the six largest carriers controlling about 60% of the oceangoing container cargo capacity.
  • Switzerland-based Mediterranean Shipping and France’s CMA CGM, the world’s second and third biggest box-ship operators behind Maersk, joined the effort in May.
  • For ocean carriers, blockchain technology allows participants to share information as goods move through maritime-focused supply chains.
  • The system also promises to reduce the cost of paperwork. Maersk said the maximum cost of the required documentation to process and administer many of the goods shipped each year makes up roughly one-fifth of the physical transportation costs.

Square Faces Lawsuit Over Misfired Medical Receipt

  • A California man accused Square of violating privacy laws after the payments company mistakenly forwarded a digital receipt containing details of his medical history to one of his friends.
  • A. Trent Ruark, a resident of San Diego County, paid a bill in early May at a health-care provider that used a Square device to process credit cards, his attorneys said in a filing in state court in May.
  • Shortly thereafter, Square allegedly sent a text message linking to a digital invoice with information about the treatment he received to the friend, an act that his attorneys said was a breach of rules guarding patients’ confidentiality.
  • Misfired receipts issued by Square have ruined surprise gifts, spilled secrets, informed spouses of the spending habits of their significant others and unnerved consumers who wondered how stores got their contact information when they don’t remember providing it, The Wall Street Journal reported in June.

Fiat Chrysler and Hyundai report rise in U.S. sales in June

  • Fiat Chrysler Automobiles and Hyundai reported a nearly 2% rise in U.S. sales for the month of June, helped by strong demand for sport utility vehicles and trucks.
  • Fiat Chrysler said its sales rose to 206,083 vehicles in the month from 202,264 units a year earlier, driven by a 45% surge in sales of its Ram trucks.
  • Hyundai said its sales rose to 64,202 vehicles in the month from 63,256 units a year earlier, boosted by a 36% increase in the sales of its Santa Fe sport utility vehicles.

After explosions, Brazil power transmission companies remove GE equipment

  • After an unusual number of explosions, several Brazilian power transmission companies have started removing a piece of equipment made by General Electric, a blow for GE’s Brazil unit as it battles competing suppliers from China and India.
  • Brazil’s grid operator ONS recommended replacing GE’s CTH-550 transformer model after registering 53 explosions, as Reuters exclusively reported in January.
  • ONS said then that the equipment showed “a failure rate that is superior to what is expected” for such a device.
  • There are close to 700 pieces of that equipment in Brazil’s grid, each costing up to 100,000 reais ($26,000).
  • Power transmission companies have already launched tenders to buy replacement transformers while they discuss the costs and a schedule for the changes with GE and regulators.

Nike Nixes ‘Betsy Ross Flag’ Sneaker After Colin Kaepernick Intervenes

  • Nike is yanking a U.S.A.-themed sneaker featuring an early American flag after NFL star-turned-activist Colin Kaepernick told the company it shouldn’t sell a shoe with a symbol that he and others consider offensive.
  • The sneaker giant created the Air Max 1 USA in celebration of the July Fourth holiday, and it was slated to go on sale this week.
  • The heel of the shoe featured a U.S. flag with 13 white stars in a circle, a design created during the American Revolution and commonly referred to as the Betsy Ross flag.
  • After images of the shoe were posted online, Mr. Kaepernick, a Nike endorser, reached out to company officials saying that he and others felt the Betsy Ross flag is an offensive symbol because of its connection to an era of slavery, the people said.

Germany fines Facebook for under-reporting complaints

  • German authorities have fined Facebook 2 million euros ($2.3 million) for under-reporting complaints about illegal content on its social media platform in breach of the country’s law on internet transparency.
  • In a statement on Tuesday, Germany’s Federal Office of Justice said that by tallying only certain categories of complaints, the web giant had created a skewed picture of the extent of violations on its platform.
  • Facebook did not immediately respond to requests for comment on the ruling, which it can appeal.

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US ECONOMY & POLITICS

U.S. Proposes More European Tariffs Pending Airbus Case

  • The U.S. widened its threat to impose tariffs against the European Union, pending the outcome of a World Trade Organization case over the EU’s subsidies of the airplane manufacturer Airbus.
  • The Office of the U.S. Trade Representative said that as part of a long-running dispute over aircraft subsidies it would consider tariffs on an additional 89 items with an annual trade value of $4 billion, including cheese, pasta and Scottish and Irish whiskies as well as chemicals and metals.
  • The announcement expands the USTR’s earlier threat, and now leaves items with a trade value of about $21 billion a year under consideration for tariffs, according to the statement.
  • The European Commission’s president, Jean-Claude Juncker, and President Trump agreed to negotiate a trade pact last summer, but the two sides have made little progress in their negotiations.

American Suburbs Swell Again as a New Generation Escapes the City

  • After several years of surging urban growth, suburbs now account for 14 of the 15 fastest-growing U.S. cities with populations over 50,000, according to the census.
  • Millennials priced out of popular big cities are flocking to Frisco, Texas, Nolensville, Tenn., Lakewood Ranch, Fla., and Scottdale, Ga.—not exactly household names but among the fastest-growing destinations in the U.S.
  • Millennials, the generation now ages 23 to 38, are no longer as rooted as they were after the economic downturn.
  • Many are belatedly getting married and heading to the suburbs, just as their parents and grandparents did.

Trump Campaign Second-Quarter Fundraising Eclipses Obama’s From Same Period

  • President Trump’s re-election campaign and the Republican National Committee said Tuesday that they raised $105 million in the second quarter of 2019.
  • The haul eclipses President Obama’s re-election fundraising during the same period eight years ago.
  • The entities had $100 million cash on hand at the end of the quarter.
  • The campaign said President Trump and his committees had raised $54 million and the RNC $51 million.
  • The campaign had $56 million in cash and the RNC $44 million.
  • During the same period in 2011, Obama’s campaign raised $47 million and the Democratic National Committee $38 million.

You Filed Returns. The IRS Compiled the Data. Here’s How the New Tax Law Is Working.

  • The first tax-filing season under the new law jostled the upper-middle class, as people making between $100,000 and $250,000 became less likely to receive refunds and more likely to owe money with their returns.
  • About two-thirds of households received tax cuts under the law Congress passed in December 2017, and about 6% paid more, according to an estimate from the Tax Policy Center.
  • In the aggregate, the tax-filing season looked the same as it did the year before, with 79% of taxpayers getting refunds averaging $2,879, down only slightly from 80% and $2,908.
  • The fresh data shows that while refund statistics barely budged for lower- and middle-income workers, real movement occurred toward the upper end of the income distribution.
  • Average refunds for taxpayers making between $100,000 and $250,000 dropped 10%, while average refunds for those between $250,000 and $500,000 rose by 11%.
  • So far, 90% of tax returns have claimed the standard deduction, up from 70% the year before.
  • That is about on target with predictions and represents a simplification that the law’s authors intended.
  • Before the new tax law, the AMT was the predominant tax system for households making between $250,000 and $500,000, and it showed up on 80% of returns in the prior year’s mid-May data.
  • Now, it is virtually gone for households making under $1 million.

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EUROPE & WORLD

China Accelerates the Opening of Its Financial Sector to Foreigners

  • China will speed up the timeline for opening its financial sector, Premier Li Keqiang said, an effort to attract more business and investment as the trade dispute with the U.S. continues.
  • In a speech to the World Economic Forum on Tuesday, Mr. Li said China would let foreigners freely invest in futures, securities and life insurance in 2020, one year ahead of Beijing’s previous schedule, to show its commitment to opening up.
  • He also pitched China to foreigners broadly, saying the country would continue to improve the business environment for all sorts of companies and relax restrictions in the services sector.

EU says it is open to talks with U.S. in row over aircraft subsidies

  • The European Union said on Tuesday it is open to talks with United States in a row over aircraft subsidies but said figures quoted by Washington as it threatened more tariffs were based on internal U.S. estimates.
  • “The EU remains open for discussions with the U.S., provided these are without preconditions and aim at a fair outcome,” a spokesman for the EU executive said.

Merkel ally von der Leyen being considered for EU Commission head: Welt

  • Germany’s Defense Minister Ursula von der Leyen is being touted by Donald Tusk, the president of the European Council, as a potential successor to Jean-Claude Juncker as head of the European Commission, Die Welt reported on Tuesday.
  • According to the newspaper, the conservative von der Leyen, a close ally of Chancellor Angela Merkel, would be the president of the bloc’s executive.
  • Christine Lagarde, head of the International Monetary Fund, was being considered for the presidency of the ECB, it added.
  • Other candidates being discussed included Belgium’s Prime Minister Charles Michel as a possible successor to Tusk as European Council president, the newspaper said.

EU watchdog says banks face 135 billion euro capital shortfall

  • Major banks in the European Union would face a collective shortfall of 135 billion euros ($152.51 billion) to comply in full with global Basel III bank capital requirements by 2027, the bloc’s banking watchdog said on Tuesday.
  • This would mean a “conservative” 24.4% increase in capital overall, the European Banking Authority said in a statement.
  • The EBA is finalizing its recommendations to the EU on how the remaining elements of the Basel III bank capital requirements should be implemented in the bloc.

Hong Kong Protests’ Violent Turn Tests Limits of Public Support

  • As they rampaged through Hong Kong’s legislature, the young protesters of the city’s antigovernment uprising fulfilled a dream of having their revolution televised—but the vivid images seen around the world have jeopardized the public goodwill that once lent them strength.
  • Business and community leaders, activists and academics say the violent storming of government headquarters Monday night and defacement of legislative offices are difficult to defend.
  • But some also say that many people in the city still share the sense of frustration that drove thousands of black-clad activists toward anarchy.

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TODAY in HISTORY

  • Congress passed the Sherman Antitrust Act. (1890)
  • President Johnson signed the Civil Rights Act of 1964 into law. (1964)

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