DAILY MARKET REPORTS
- The Dow Jones Industrial Average rose, crossing 27000 for the first time, as shares of UnitedHealth helped the blue-chip index rally more than 200 points after the Trump administration dropped a plan that would have upended the health-care industry.
- The Trump administration said it is dropping a plan to curb billions of dollars in annual rebates that drugmakers give middlemen in Medicare, a move that had the potential to disrupt the U.S. pharmaceutical industry.
- Shares of health insurers including Cigna and UnitedHealth jumped 13.74% and 4.74.
- A Labor Department report showed U.S. underlying consumer prices increased by the most in nearly 1-1/2 years in June, but that was unlikely to change expectations the Fed would cut rates this month.
- Powell, who began his second day of testimony before the Congress, had said that the central bank stood ready to “act as appropriate” to support record U.S. economic growth.
US FINANCIAL MARKET
Delta Gains from MAX Grounding and High Demand
- Delta Air Lines raised its profit outlook for this year, as strong travel demand and the diminished capacity of competitors with grounded Boeing 737 MAX jets buoyed the third-biggest U.S. carrier.
- The airline said revenue rose 8.7% from a year ago to a record $12.5 billion.
- Unit revenue, a closely watched measure of how much airlines earn for each seat flown a mile, rose 3.8%.
- Net income rose to $1.44 billion in the quarter, compared with $1.04 billion a year earlier.
- Delta said it would increase its quarterly dividend by 15% to 40.25 cents a share.
- The airline raised its 2019 profit guidance to between $6.75 and $7.25 a share, up from $6 to $7 a share previously.
Cargill fourth-quarter profit dives 41% on trade tensions, U.S. floods
- Commodities trader Cargill reported a 41% slump in adjusted quarterly profit, citing supply disruptions stemming from the U.S.-China trade war and also flooding in the central United States that hit marketing and transportation of grains.
- The privately held company’s adjusted operating profit fell to $476 million in the fourth quarter from $809 million a year earlier.
- The Minnesota-based food commodities firm, the largest privately held U.S. company, said three of its four business units posted lower year-on-year results.
Trump Administration Drops Plan to Curb Drug Rebates
- The Trump administration is dropping a plan to curb billions of dollars in annual rebates that drugmakers give middlemen in Medicare, a proposal it had said would drive down the prices consumers pay for prescription drugs.
- The decision reflects months of tension between the White House and the Department of Health and Human Services over the proposal, which also spurred a backlash from pharmacy-benefit managers that administer prescription-drug programs.
- It was a centerpiece of President Trump’s blueprint to lower drug costs.
OPEC Maintains World Oil Demand Forecast as Supply Concerns Continue
- OPEC cut its 2019 oil production growth forecast for its non-cartel peers, a week after the bloc and its allies extended their continuing output cut for another nine months.
- In its closely-scrutinized monthly oil market report released Thursday, the Organization of the Petroleum Exporting Countries reduced its 2019 non-OPEC supply growth forecast to 2.05 million barrels a day.
- The figure marked a reduction of only 95,000 barrels a day, although the downgrade follows months of market anxieties over rising supply from non-OPEC nations—particularly the U.S.—coming against a backdrop of weakening economic indicators and attendant fears about oil demand growth.
- While the report saw a cut to the forecast supply growth of non-OPEC producers, U.S. crude output rose 246,000 barrels a day in April, the report said.
U.S. oil companies slash Gulf of Mexico production as storm bears down
- U.S. oil producers on Wednesday cut nearly a third of Gulf of Mexico crude output as what could be one of the first major storms of the Atlantic hurricane season threatened offshore oil production and began soaking Louisiana with heavy rains.
- Fifteen production platforms and four rigs were evacuated in the north central Gulf of Mexico, according to a U.S. regulator as oil firms moved workers to safety ahead of a storm expected to become a hurricane by Friday.
- A tropical depression is expected to form in the Gulf by Thursday, with the potential to strengthen to a hurricane by the weekend, according to the National Hurricane Center.
AB InBev’s Asian Unit Damps IPO Price Expectations
- Anheuser-Busch InBev’s Asian unit has guided investors to expect its US$8.3 billion-plus initial public offering would price in the lower half of a previously indicated range, people familiar with the matter said.
- Budweiser Brewing had earlier set an indicative range of 40 to 47 Hong Kong dollars a share (US$5.12 to US$6.01), implying a total deal size of $8.3 billion to $9.8 billion.
- Even at or near the bottom of the range, this would still be the world’s largest stock market debut this year, eclipsing Uber’s $8.1 billion share sale.
- The IPO is set to price later Thursday, and the exact terms have yet to be decided, the people said. Trading will begin July 19.
Amazon to Retrain a Third of Its U.S. Workforce
- Amazon.com plans to spend $700 million to retrain a third of its U.S. workforce, as technology threatens to upend the way many of its employees do their jobs.
- The company announced that it will retrain 100,000 workers by 2025 by expanding existing training programs and rolling out new ones meant to help its employees move into more advanced jobs inside the company or find new careers outside of it.
- The training is voluntary, and most of the programs are free to employees, the company said.
- For example, hourly workers in fulfillment centers can retrain for IT support roles, such as managing the machines that operate throughout the facilities.
- Meanwhile, nontechnical corporate workers can spend several years retraining as software engineers without going back to college.
IBM proposes changes to law shielding internet firms from user content liability
- International Business Machines proposed changes to a 1996 law that protects internet companies from liabilities related to what users post on their platforms.
- In a blog post, IBM called for a fresh look at Section 230 of the Communications Decency Act, which exempts developers of online services from lawsuits stemming from user-posted content such as restaurant reviews or social media photos.
- Silicon Valley has long opposed efforts to rewrite the decades-old Communications Decency Act, which has been credited with helping the rapid growth of internet companies over the past 20 years.
- “We simply believe companies should also be held legally responsible to use reasonable, common-sense care when it comes to moderating online content,” an IBM government and regulatory affairs technology policy executive said in the blog post.
US ECONOMY & POLITICS
U.S. Consumer Prices Increased in June
- The consumer-price index (CPI), which measures what Americans pay for household items such as ice cream and services such as eye care, increased 0.1% in June from the prior month, the Labor Department said Thursday.
- Excluding the volatile food and energy categories, so-called core prices rose a stronger-than-expected 0.3% from May, the largest monthly rise since January 2018.
- From a year earlier, consumer prices climbed 1.6% in June.
- Core prices were up 2.1% on the year when excluding food and energy.
U.S. Jobless Claims Fell to 3-Month Low During Holiday Week
- Initial jobless claims, a measure of how many workers were laid off across the U.S., decreased by 13,000 to a seasonally adjusted 209,000 in the week ended July 6, the Labor Department said Thursday.
- Economists had expected 224,000 new claims.
- The four-week moving average, which shows the trend over the past month, fell by 3,250 to 219,250 last week.
- The overall number of Americans on unemployment rolls, known as continuing claims, rose by 27,000 to 1,723,000 in the week ended June 29.
Fed Officials Saw Strengthening Case for Rate Cuts Last Month, Minutes Show
- Federal Reserve officials grew more concerned about the economic outlook last month and discussed reasons why lower interest rates might be warranted in the coming months, according to minutes of their June meeting released Wednesday.
- Fed officials voted to hold their short-term benchmark rate steady last month, but the minutes said many officials were ready to cut rates if an economic outlook clouded by slower global growth, weaker-than-expected inflation and uncertainty over trade tensions didn’t soon improve.
- Earlier on Wednesday, Federal Reserve Chairman Jerome Powell sent a strong signal the central bank could cut interest rates later this month by highlighting how the economic outlook hadn’t improved since last month’s meeting.
U.S. Launches Probe of French Digital Tax
- U.S. trade officials are launching a probe of France’s planned tax on digital services, kicking off a spat with Paris as well as a global fight over how to tax the growing internet economy.
- U.S. Trade Representative Robert Lighthizer said Wednesday his office would launch a probe of the digital services tax, or DST, under the same broad law the Trump administration relied on for its trade conflict with China.
- France’s Senate is expected to vote Thursday on the final text of the bill, marking the final step before the law is promulgated.
- Officials and business leaders in Washington have argued that the tax unfairly targets American companies and could lead to double taxation and multiple new overlapping tax regimes.
Marco Rubio Introduces a Bill to Boost the U.S. Rare-Earth Industry
- Legislation aimed at making the U.S. more competitive with China for processing critical rare-earth minerals is set to be introduced in Congress on Thursday.
- The bill by Sen. Rubio would allow investors to form a cooperative that is exempt from antitrust laws, in an attempt to shield it from government-backed competition from China and volatile markets that have made it virtually nonexistent in the U.S.
- The Secretary of Commerce would secure a charter for the business, though it would need to be privately funded and operated under the terms of the legislation.
- In a statement, Mr. Rubio said the Chinese government has subsidized its industry, causing “a market failure” that has hurt rare-earth development in the U.S. and elsewhere.
Biden to Outline Foreign-Policy Plan
- Democratic presidential candidate Joe Biden will lay out his foreign-policy vision in a Thursday speech in which he will vow to hold a summit of the world’s leading democracies during his first year in office.
- In his foreign-policy address the former vice president will assert that President Trump’s “America first” policies have isolated the U.S., and he will stress the need to restore U.S. leadership around the globe, a senior Biden campaign official said.
- Mr. Biden plans to say that, if elected, he would convene a summit of world leaders to “refocus on our common purpose, to strengthen our common resilience and to work more effectively together.”
- The campaign official said the summit would also invite leaders of the private sector, including tech and social-media companies, “to make their own commitments to make our democracy more resilient.”
EUROPE & WORLD
U.K. Navy Thwarts Iranian Attempt to Block BP Tanker
- A British warship trained its guns on three Iranian vessels that tried to block the passage of a U.K.-flagged oil tanker through the Persian Gulf, a confrontation that comes amid heightened tensions between Washington and Tehran.
- The three Iranian ships tried on Wednesday to impede the British Heritage, a tanker carrying oil for British oil giant BP PLC, but were turned away by the HMS Montrose, the British Defense Ministry said in a statement Thursday.
- Wednesday’s incident marks the first time since tensions flared earlier this year between the U.S. and Iran that a Western warship has come close to military engagement with Iranian naval forces.
Bleak China autos outlook triggers raft of profit warnings
- Auto suppliers Johnson Electric and Sensirion slashed their earnings forecasts on Thursday, blaming a slowdown in car sales and pessimism about the prospects of a Chinese car sector recovery.
- The news is the latest to signal weaker global industrial activity and ripples from a trade war that has already forced China’s Geely, Swiss engineering company ABB, Germany’s Aumann and chemicals giant BASF, to warn of turbulence ahead.
- Hong Kong-based Johnson Electric, which makes micro-motors and electric power steering systems, said it expects profit to be “substantially lower” because of a significant decline in light vehicle production and an “especially depressed” market in China.
- Sales of automotive products in Asia fell 15% and sales of industry products fell 19% in the quarter, the company said.
Strains Emerge in China’s $3 Trillion Financing Market
- Risky borrowers are running into trouble in China and that is putting pressure on trust companies, an important corner of the country’s shadow-banking system.
- As of March, there were 68 trust companies with 22.5 trillion yuan ($3.3 trillion) of assets, including loans equivalent to 2.9% of China’s total banking assets, according to data from the China Trustee Association and Moody’s Investors Service.
- Some indebted borrowers are running into trouble due to a cooling housing market and slowing economy.
- More than 280 billion yuan of trust assets faced “default and repayment risks” as of March, according to Moody’s.
- That is a relatively small 1.26% of the sector’s total assets. But it is up 90% from a year earlier and is the highest amount since such data became publicly available in 2014.
U.S. Investigating Deutsche Bank’s Dealings with Malaysian Fund 1MDB
- The sprawling, multibillion-dollar Malaysian development fraud scandal that has toppled a prime minister and stretched from Hollywood to Wall Street is threatening to implicate another major global financial institution: Deutsche Bank.
- The U.S. Justice Department is investigating whether the German lender violated foreign corruption or anti-money-laundering laws in its work for the 1Malaysia Development fund, which included helping the fund raise $1.2 billion in 2014 as concerns about the fund’s management and financials had begun to circulate, according to people familiar with the matter.
- The investigation into Deutsche Bank has been helped in part by a former Goldman Sachs executive, Tim Leissner, who is cooperating with authorities.
- Prosecutors have been investigating similar issues at Goldman, where Mr. Leissner, a former managing director, pleaded guilty last year and admitted to earlier helping siphon off billions of dollars from the fund.
U.S. Reaches $1.4 Billion Opioid-Drug Settlement with U.K.’s Reckitt
- Reckitt Benckiser will pay up to $1.4 billion to settle U.S. investigations into whether its former pharmaceuticals unit organized a multibillion-dollar fraud to drive up sales of an opioid-addiction treatment.
- The U.K. consumer-goods company on Thursday said it struck a deal with the U.S. Department of Justice and the Federal Trade Commission to resolve their long-running investigations into the sales and marketing of Suboxone Film.
- Suboxone Film, a prescription medicine that dissolves in the mouth, is made by Reckitt’s former pharmaceuticals business, Indivior, which became a stand-alone company in 2014.
- Suboxone, whose active ingredient is an opioid, is used to treat addiction to other drugs like heroin.
Air China plans to buy 20 A350-900 aircraft from Airbus
- Air China, China’s flagship carrier, will buy 20 A350-900 jets from Airbus worth $6.54 billion based on list prices.
- Air China, which has 10 of the widebody aircraft in its fleet already, said the deliveries were scheduled from 2020 to 2022.
- Air China said it has the right to swap 5 out of 20 jets for the larger A350-1000.
TODAY in HISTORY
- The Rev. Dr. Martin Luther King, Jr., was posthumously awarded the Presidential Medal of Freedom for his work to advance civil rights. (1977)
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