DAILY MARKET REPORTS
- U.S. stocks fell on Monday, dragged down by losses in Apple and Boeing and as investors cut back bets of an aggressive interest rate cut by the Federal Reserve later this month.
- A surprisingly strong June jobs data on Friday has forced traders to reassess expectations of an aggressive rate cut, even as a reduction is still expected at the Fed’s July 30-31 policy meeting.
- Bets of a 50-basis point cut now hover around 7%, down from about 20% a week ago, according to CME Group.
- Fed Chairman Jerome Powell’s semi-annual testimony to the U.S. Congress on July 10-11 will give investors an opportunity to gauge near-term monetary policy thinking.
- In South Korea, technology stocks led the broader market down due to fresh concerns about Japan’s export curbs on some semiconductor and display materials after a survey of Japanese voters showed broad support for the decision to tighten controls.
- Germany’s DAX slipped 0.4% as Deutsche Bank fell 4.7% following the launch of yet another restructuring plan, which will see the German lender cut nearly 20,000 jobs, slash its balance sheet and significantly shrink its investment bank.
- Boeing shares slipped 1.1% after Saudi Arabian budget airline said it would not proceed with a provisional $5.9 billion order for the planemaker’s grounded 737 MAX aircraft, instead opting for a fleet of Airbus A320 jets.
US FINANCIAL MARKET
Axe falls on 18,000 Deutsche Bank jobs in $8.3 billion reinvention
- Deutsche Bank laid off staff from Sydney to London on Monday as it began 18,000 job cuts in a 7.4 billion euro ($8.3 billion) “reinvention” which Germany’s largest lender said would mean yet another annual loss, knocking its shares.
- In a retreat from a decades-long ambition to make its struggling investment bank, which employs 38,000 people, a force on Wall Street, Deutsche Bank said on Sunday it would scrap its global equities operations and cut some in fixed income.
- As part of the overhaul, Deutsche Bank will set up a so-called bad bank to wind-down unwanted assets, with 74 billion euros of risk-weighted assets, and Sewing will represent the investment bank on the board in a sign of its waning influence.
Boeing Loses MAX Deal to Airbus
- Boeing Sunday lost a deal for 737 MAX jetliners in one of the first tangible signs the crisis around the plane could shift business to European rival Airbus.
- Saudi Arabia’s Flyadeal Sunday said it would buy up to 50 Airbus A320neo planes, the direct rival to Boeing’s MAX that has been idled globally in the wake of two crashes within less than five months.
- The deal between the discount arm of flag carrier Saudi Arabian Airlines, or Saudia, has a value of more than $5.5 billion, based on Airbus list prices that don’t include industry-standard discounts.
- The Saudi commitment for up to 50 MAX jets had a value of $5.9 billion before industry-standard discounts, Boeing said at the time, but it was never formally concluded.
Roche, Spark push back takeover deadline in $4.3 billion deal
- Swiss drugmaker Roche has agreed to extend the takeover deadline in its $4.3 billion bid for U.S. gene therapy specialist Spark Therapeutics, adding it remains “fully committed” to the transaction and expects it to close this year.
- The new deadline for both companies to extend the merger agreement now runs to April 30, 2020, rather than Jan. 31, 2020, Roche said in a U.S. regulatory filing on Monday, saying the change provides “additional time to clear the transaction”.
WeWork looking to raise up to $4 billion in debt ahead of IPO: source
- Shared office space manager WeWork is looking to raise $3 billion to $4 billion in debt before it goes public, a person familiar with the matter said on Sunday, a move aimed to fuel investor confidence in the company.
- Money-losing WeWork has faced questions about the sustainability of its business model, which is based on short-term revenue agreements and long-term loan liabilities.
- The money raised via the debt offering could grow as big as $10 billion over the next few years, the source said, cautioning that there is still no certainty the offering will ultimately materialize.
US ECONOMY & POLITICS
Pentagon’s Cloud Project Under Fire as Award Nears
- The Pentagon plans to award a long-awaited cloud-computing contract next month, but the huge program—expected to cost up to $10 billion—faces mounting complications from congressional scrutiny and a court challenge.
- Amazon and Microsoft were designated in April as finalists for the contract, drawing complaints from rival companies including Oracle and IBM, which say the contract-award process was skewed from the start to favor Amazon—an allegation both the Pentagon and Amazon dispute.
- Defense Department emails could give the contract’s opponents more ammunition, providing a new window into Amazon’s interactions with Pentagon officials in the months leading up to the announcement of the massive cloud deal, known as Joint Enterprise Defense Infrastructure, or JEDI.
- Oracle has challenged the procurement process in the U.S. Court of Federal Claims, charging that a former Amazon employee working at the Pentagon helped shape the deal to favor Amazon, and then returned to work for Amazon.
- Oracle’s suit is scheduled for a court hearing this week.
California Tallies Damage from Quakes
- As Californians braced for aftershocks from a pair of powerful earthquakes that hit late last week, officials began the arduous work of assessing the damage to roads, buildings and pipelines spread over a massive and sparsely populated area between Las Vegas and Los Angeles.
- The USGS said in a statement Saturday that millions of people in the region felt the shaking from the latest quake.
- It gave a preliminary estimate of the financial toll of at least $1 billion, based on the quake’s magnitude and the affected area.
- Later Saturday, Gov. Newsom said the cost to repair damage likely will exceed $100 million. His estimate was based on actual surveys that state and local officials did.
Iran’s Breach of Nuclear Pact Tests European Resolve
- Iran confirmed it was enriching uranium at levels that breach the 2015 nuclear agreement, leaving France, Britain and Germany with delicate decisions in the coming days over how to respond.
- A spokesman for Iran’s atomic energy agency said Monday that the country had started enriching uranium at 4.5% on Monday morning, according to state media, above the 3.67% purity allowed under the deal.
- On Monday, European officials said they are in discussions with Russia and China and indicated no action was likely at least until July 15, when European Union foreign ministers meet in Brussels to talk about Iran and other issues.
- Iran’s move inches the country along a path that could allow it to produce enough fissile material for a nuclear weapon over the next year.
- It increases the pressure on the European members of the pact to trigger a dispute procedure in the accord that could end with international sanctions being reimposed on Tehran.
Trump Hopes to Stem Tide of Legal Setbacks on Health Care
- President Trump’s efforts to roll back provisions of the Affordable Care Act are being repeatedly thwarted by the courts, leaving many of his key health policy initiatives in limbo before the 2020 presidential election.
- The White House is hoping its record of losses on health-care issues starts to turn around Tuesday, as a federal appeals court in Louisiana hears arguments in a lawsuit to topple the health law.
- The administration has sided with Republican-led states that say the ACA is invalid without its penalty on people who go without coverage.
- A ruling could come later in the year and the losing side could seek Supreme Court review, which would potentially set the stage for a final decision in the middle of the campaign season.
EUROPE & WORLD
German exports, industrial production up slightly in May
- German exports and industrial production picked up slightly in May, staging a very modest recovery after the previous month’s disappointing data.
- Official statistics released Monday showed that exports were up 1.1% on the month after dropping 3.4% in April.
- Industrial production rose 0.3% after a 2% fall in April. Both figures were roughly in line with economists’ forecasts.
- They followed data on Friday showing that factory orders in Europe’s biggest economy dropped 2.2% in May.
Supply-chain pain: South Korea chipmakers and their suppliers seek to bypass Tokyo curbs
- South Korean chipmakers and Japanese chemical suppliers caught in the midst of a sudden escalation of a bilateral diplomatic dispute are scrambling to circumvent tightened export controls imposed by Tokyo, industry executives said.
- The curbs apply to three materials where Japan is dominant: photoresists, used to transfer circuit patterns onto semiconductor wafers; hydrogen fluoride, used as an etching gas in the chipmaking process and fluorinated polyimides, used in displays.
- Japan said last week it would stop preferential treatment for shipments of the three materials to South Korea, requiring exporters to gain permission each time they want to ship, which takes around 90 days.
- Though it remains unclear exactly how far Tokyo could slow the export approval process or if it will shift towards a ban, South Korean chipmakers are worried the situation could develop into a full-blown crisis.
Turkish Lira Falls After Erdogan Ousts Central Bank Chief
- The Turkish lira dropped sharply on Monday as President Recep Tayyip Erdogan’s decision to fire the governor of the central bank left investors worried about economic mismanagement in a country dealing with high inflation and sluggish growth.
- Mr. Erdogan released a presidential decree on Saturday dismissing central bank chief Murat Cetinkaya without explanation.
- Over the weekend, Mr. Erdogan told lawmakers from his party that he had sacked Mr. Cetinkaya because the governor had failed to implement instructions to cut rates, according to Turkish daily newspaper Hurriyet.
Huawei outlines investment plans in Poland depending on 5G role
- Huawei aims to spend 3 billion zlotys ($793 million) in Poland in the next five years, although whether the Chinese firm has a role in the 5G rollout may affect the scale of investment, an official at the group’s Polish unit said.
- Polish officials said in January the government was prepared to exclude Huawei from 5G networks after the arrest of a Chinese Huawei employee and a former Polish security official on spying allegations.
- “In the next five years, we plan to spend almost 3 billion zlotys in Poland through purchases,” Ryszard Hordynski told Reuters, adding the firm was waiting to see what role the company had in Poland’s 5G plans.
British Airways faces record $230 million fine over data theft
- British Airways-owner IAG is facing a record $230 million fine for the theft of data from 500,000 customers from its website last year under tough new data-protection rules policed by the UK’s Information Commissioner’s Office (ICO).
- The ICO proposed a penalty of 183.4 million pounds, or 1.5% of British Airways’ 2017 worldwide turnover, for the hack, which it said exposed poor security arrangements at the airline.
- The attack involved traffic to the British Airways website being diverted to a fraudulent site, where customer details such as log in, payment card and travel booking details as well as names and addresses were harvested, the ICO said.
Huawei staff share deep links with Chinese military, new study claims
- A new analysis of CVs of Huawei staff appeared to reveal deeper links between the technology giant and China’s military and intelligence bodies than had been previously acknowledged by the firm.
- The paper, which looks at employment records of Huawei employees, concluded that “key mid-level technical personnel employed by Huawei have strong backgrounds in work closely associated with intelligence gathering and military activities.”
- Some employees can be linked “to specific instances of hacking or industrial espionage conducted against Western firms,” it claimed.
- The study, conducted by Christopher Balding, an associate professor at Fulbright University Vietnam, and think tank Henry Jackson Society, looked through CVs of Huawei employees leaked online from unsecured databases and websites.
- Huawei said it was unable to verify the Huawei employee CVs cited by Balding and therefore “cannot confirm the veracity of all of the information published online.”
TODAY in HISTORY
- The Wall Street Journal began publication. (1889)
- General Douglas MacArthur was named commander-in-chief of the United Nations forces in Korea. (1950)
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