DAILY MARKET REPORTS
- The S&P 500 index hit a record high on Wednesday, led by defensive sectors, as bets of an interest rate cut rose on fears of a slowing global economy due to simmering trade tensions.
- The benchmark U.S. 10-year Treasury yields slipped to their lowest since November 2016, while euro zone yields tumbled to record lows on bets the European Central Bank’s next chief would stay a dovish course.
- Analysts anticipate Ms. Lagarde will oversee further quantitative easing, following her statement after the G-20 meeting that the global economy has hit a rough patch, with trade as the primary risk.
- Traders bet for about a 25% chance the Federal Reserve would cut borrowing costs by half a percentage point at its July 30-31 policy meeting, compared with 20% late on Monday.
- The ADP National Employment Report, often considered a precursor to the Labor Department’s more comprehensive monthly non-farm payrolls data, showed U.S. private employers added 102,000 jobs in June, well below economists’ expectations.
- Another set of data showed the U.S. trade deficit jumped to a five-month high in May as imports of goods increased and new orders for U.S.-made goods fell for a second straight month May while shipments barely rose.
- Among stocks, Symantec surged 14.5%, the most on the S&P, after sources told Reuters that chipmaker Broadcom is in advanced talks to buy the cybersecurity firm. Broadcom fell 3.6%.
- Tesla rose 6.4% after the electric carmaker set a record for quarterly vehicle deliveries in a triumphant response to months of questions about demand for its luxury electric cars.
US FINANCIAL MARKET
Tesla Deliveries Reach Record Quarter After Questions About Demand
- Tesla returned to growth mode in the second quarter, setting a record for deliveries and beating Wall Street’s expectations, relieving some pressure on Chief Executive Elon Musk to prove that demand remains strong for the electric-car maker’s vehicles.
- The auto maker delivered a total of 95,200 vehicles in the quarter, beating expectations of 90,680, a sharp increase from a year ago as the company worked to boost production.
- Tesla also said that the total includes deliveries of 77,550 Model 3 compact cars, beating the 74,100 expected by analysts.
- In total, Tesla built 87,048 vehicles during the second quarter compared with about 77,100 vehicles in the first quarter.
- That figure includes 72,531 Model 3s compared with 62,950 for the previous three months.
Broadcom in advanced talks to buy Symantec: sources
- Chipmaker Broadcom is in advanced talks to buy cybersecurity firm Symantec, according to sources familiar with the matter, as Broadcom seeks to diversify beyond semiconductors.
- A deal would expand Broadcom’s push into software a year after its $18.9 billion deal to buy business software company CA.
- Symantec, which is being investigated by U.S. regulators over an accounting irregularity, has seen a slew of key executive departures since late last year, including CEO Greg Clark, who abruptly stepped down in May.
- In August last year, Symantec said it would cut 8% of its workforce worldwide after it slashed its revenue forecast.
U.N. aviation agency to review global pilot training in shadow of 737 MAX crashes
- Global regulators will meet in Montreal next week to review pilot licensing requirements, the U.N.’s aviation agency said, as part of a discussion that has gained urgency following two fatal crashes of Boeing 737 MAX aircraft in the past year.
- It is the first time that the International Civil Aviation Organization (ICAO), which sets global standards for 193 member countries, will undertake such a broad review on training requirements.
- While the meeting was not called in response to the MAX crashes in Indonesia last October and in Ethiopia in March, it coincides with a larger debate on whether increasingly automated commercial jets are compromising pilot skills.
Deutsche Bank restructuring to cost up to $5.6 billion: source
- Deutsche Bank expects the cost of a major overhaul in the works to be up to 5 billion euros.
- The lender is planning on cutting between 15,000 and 20,000 jobs, or more than one in five of its 91,500 employees.
- A spokesman for Deutsche declined to comment on the expected cost of the restructuring.
- The bank said it was working on measures to accelerate its transformation so as to improve its sustainable profitability.
U.S. judge to slash $80 million Roundup jury verdict: court hearing
- A U.S. judge on Tuesday said he would reduce an $80 million damage award against Bayer to $50 million or less in the case of a man who blamed his cancer on glyphosate-based weed killer Roundup.
- U.S. District Judge Vince Chhabria in San Francisco said the jury’s $75 million punitive damages award to plaintiff Edwin Hardeman in March could not stand.
- Following a four-week trial, a federal jury on March 27 awarded $5 million in compensatory and $75 million in punitive damages to Hardeman, who was diagnosed with non-Hodgkin’s lymphoma in 2014.
- U.S. Supreme Court rulings limit the ratio of punitive to compensatory damages to 9 to 1.
US ECONOMY & POLITICS
U.S. Private Sector Added 102,000 Jobs in June, Missing Estimates
- The U.S. private sector added 102,000 nonfarm jobs for June, less than economists were expecting, with growth being driven by the service-producing sector and hurt by small businesses.
- The ADP National Employment Report showed that growth in nonfarm private-sector jobs was fueled by both large and midsize businesses, which added 65,000 and 60,000 jobs respectively.
- The service-producing sector added 117,000 jobs whereas the goods-producing sector lost 15,000 jobs.
- Economists were expecting 135,000 jobs in total.
- Small businesses, or those with between one and 49 employees, lost 23,000 jobs in June.
- That figure included a 37,000 drop at companies with one to 19 employees, partially offset by 14,000 new jobs at companies with 20 to 49 employees.
U.S. Jobless Claims Fell by 8,000 in June 29 Week
- Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased by 8,000 to a seasonally adjusted 221,000 in the week ended June 29, the Labor Department said Wednesday.
- Economists surveyed by The Wall Street Journal had expected 225,000 new claims.
- The overall number of Americans on unemployment rolls, known as continuing claims, fell by 8,000 to 1,686,000 in the week ended June 22.
- Continuing claims, which are reported on a week delay, are down from 1,745,000 a year earlier.
U.S. Service-Sector Activity Slowed in June
- The Institute for Supply Management (ISM) on Wednesday said its nonmanufacturing index—tracking industries including health care, finance, agriculture and construction—fell to 55.1 in June from 56.9 in May.
- The June reading was the lowest in about two years.
- Economists had expected a June reading of 55.8.
- A number above 50 indicates expansion, while a number below 50 signals contraction.
U.S. Trade Gap Widened Sharply in May
- The U.S. trade gap widened sharply in May as firm domestic spending underpinned the biggest monthly rise in imports in more than four years, while exports saw more moderate growth amid a cooling global economy.
- The trade deficit in goods and services jumped 8.4% in May from a month earlier to a seasonally adjusted $55.52 billion in May.
- Economists had projected a $54.4 billion trade gap for May.
- Imports rose 3.3% in May from April, the fastest monthly growth since March 2015, to $266.16 billion, led by a 7.5% rise in automotive imports, to a record $33.23 billion, as well as an 11% jump in crude-oil imports, to $13.02 billion.
- Exports, meanwhile, increased 2% to $210.64 billion, the biggest monthly increase in a year, boosted by a 41% jump in exports of soybeans, which have been volatile in the past year after being targeted by China for retaliatory tariffs.
- The bilateral goods deficit with China widened by 12% from April to $30.2 billion, as both imports and exports rose sharply despite a new round of tariffs that took effect in the first half of the month.
U.S. factory orders fall for second straight month
- New orders for U.S.-made goods fell for a second straight month May while shipments barely rose, pointing to continued weakness in manufacturing.
- Factory goods orders decreased 0.7%, weighed down by weak demand for transportation equipment.
- Data for April was revised sharply down to show factory orders falling 1.2% instead of slipping 0.8% as previously reported.
- Economists had forecast factory orders falling 0.5% in May. Factory orders rose 0.9% compared to May 2018.
Christopher Waller, Judy Shelton Are Trump’s Latest Picks for Fed Board
- President Trump plans to nominate economists Judy Shelton and Christopher Waller to fill two board vacancies at the Federal Reserve, after months of pressing the central bank to lower interest rates.
- Mr. Trump announced his intentions, noting that Ms. Shelton currently serves as U.S. executive director at the European Bank for Reconstruction and Development, while Mr. Waller is director of research at the Federal Reserve Bank of St. Louis.
- Ms. Shelton served as an economic adviser on Mr. Trump’s transition team and has worked for the Atlas Network, a think tank that has been critical of the Fed’s monetary policy and that has advocated for a return to the gold standard.
- On Bloomberg Radio last week, Mr. Waller expressed skepticism about a popular economic model known as the Phillips curve that finds low unemployment to be linked with higher inflation.
- But while that stance might overlap with Mr. Trump’s desire for lower interest rates, Mr. Waller has also touted the importance of the central bank’s ability to operate independently of politics.
EUROPE & WORLD
EU leaders choose France’s Lagarde for ECB after marathon summit
- European Union leaders agreed on Tuesday to name France’s Christine Lagarde as the new head of the European Central Bank and sealed a deal on filling the EU’s other top four jobs after marathon talks that have exposed deep divisions in the bloc.
- Three days of summit negotiations that at times looked close to collapse ended with a deal that now must be approved by the European Parliament and was immediately rejected by the socialist and green bloc in the assembly in Strasbourg.
- Under the deal, von der Leyen, a close ally of German Chancellor Angela Merkel, will replace Jean-Claude Juncker as president of the European Commission, the EU’s executive arm.
China Hardens Line on Hong Kong Protests, Hinting It Could Intervene
- China’s government signaled its fraying patience with protesters in Hong Kong after they stormed the city’s legislature, calling the violent turn a direct challenge to Beijing’s authority and suggesting it would have to be answered.
- Public statements from Beijing marked a shift in Chinese leaders’ attitude toward the crisis in the semiautonomous territory, indicating they may be forced to step in if events spiral on.
- They stopped short of suggesting any need for immediate intervention, however.
- The Chinese government’s Hong Kong and Macau Affairs Office called the protests a “blatant challenge to the bottom line of ‘one country, two systems’”—Beijing’s framework for governing the city as a semiautonomous territory.
Iran Says It Will Enrich Uranium Beyond Nuclear Deal Limits
- Iranian President Hassan Rouhani said his country would enrich uranium beyond the 2015 nuclear deal, which would be closer to weapons-grade, just days after exceeding a limit on its stockpile as it pushes Europe for relief from crippling U.S. sanctions.
- Iran will take steps Sunday to increase enrichment of uranium beyond limits set in the 2015 deal to curb Tehran’s nuclear program, Mr. Rouhani said.
- He also said Iran would restart work on a never-completed plutonium reactor complex in Arak, which was suspended as part of the nuclear agreement, known as JCPOA, if Europe didn’t fulfill its commitment to redesigning a new reactor.
TODAY in HISTORY
- Commander in chief George Washington took command of the Continental Army at Cambridge, Mass. (1775)
- The Battle of Gettysburg (1863)
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