DAILY MARKET REPORTS
- The S&P 500 and Dow indexes hit a record high at the open on Friday, after Federal Reserve Chairman Jerome Powell’s dovish remarks this week boosted bets of an interest rate cut this month.
- Minutes from the ECB’s recent meeting released on Thursday signaled fresh stimulus was under consideration.
- Earlier in the week, Fed Chairman Powell said the economic outlook hadn’t improved, hinting at a coming interest-rate cut.
- Data released Friday morning showed that Eurozone industrial production rose sharply in May, raising hopes that the long slowdown in the region’s manufacturing sector could be leveling off.
- German car maker Daimler fell 1.1% after it issued a profit warning, it’s second in a month.
- Shares of Illumina, the maker of gene-sequencing machines, plummeted 15% after the San Diego company lowered expectations for second-quarter revenue.
US FINANCIAL MARKET
Daimler Issues Another Profit Warning as Legal Woes, Recalls Hit
- Daimler cut its earnings outlook for the second time in a month, as the legal fallout from the continuing diesel-emissions scandal continues to hamper the luxury auto firm.
- The Mercedes-Benz maker on Friday blamed the warning on higher-than-expected costs related to an extended recall of rupture-prone Takata air bags and ongoing proceedings related to its diesel vehicles.
- Those issues, with a combined impact of €3.1 billion ($3.5 billion), weighed heavily on second-quarter earnings.
- Quarterly earnings before interest and taxes swung to a loss of €1.6 billion, compared with a €2.6 billion profit a year ago.
- It now expects group EBIT for the full year to be “significantly below” that of last year, which came in at €11.1 billion.
Illumina Stock Declines as Company Lowers Revenue Outlook
- Illumina, the maker of gene-sequencing machines, lowered its second-quarter revenue expectations over problems with its direct-to-consumer business and reduced sales of its sequencing systems.
- The San Diego company said it expects a roughly $50 million revenue hit from problems with its population genomics initiatives, weakness in the direct-to-consumer market and lower sales associated with its non-high-throughput sequencing systems.
- The company said it plans to report revenue for the quarter of about $835 million, compared with $830 million a year earlier.
- Analysts were expecting revenue of $888 million.
- Illumina lowered its outlook for the year, expecting revenue growth of 6%, compared with its previous guidance of 13% to 14%.
T-Mobile-Sprint Talks Slow Over Dish Ownership
- Negotiations to complete the merger of T-Mobile and Sprint are dragging on as the parties haggle over ownership restrictions and other conditions for Dish once it gets assets from the wireless companies, according to people familiar with the matter.
- Discussions are continuing, and all sides remain optimistic they can find common ground on the ownership question and other issues to complete the more than $26 billion merger, the people said.
- T-Mobile and Sprint are planning to extend their merger agreement past its July 29 deadline, one of the people said.
- It would be the second such extension to close a deal that was announced more than a year ago and has run into resistance from federal and state antitrust officials.
Google Contractors Listen to Recordings of People Using Virtual Assistant
- Google said contractors are listening to customer audio recorded by the company’s virtual assistant, a disclosure prompted by a media report that adds to privacy concerns associated with the technology.
- In a blog post Thursday, Google confirmed it employs people world-wide to listen to a small sample of recordings.
- In its blog post, Google said language experts listen to 0.2% of “audio snippets” taken from the Google Assistant to better understand different languages, accents and dialects.
- “This is a critical part of the process of building speech technology, and is necessary to creating products like the Google Assistant,” it said.
Volkswagen to Invest in Ford’s Self-Driving Car Unit
- Volkswagen agreed to invest around $2.6 billion in Ford’s autonomous-vehicle partner, Argo AI, in a deal that values the startup at $7 billion.
- Ford has been the majority shareholder of Argo since early 2017, when it agreed to invest $1 billion.
- Under the agreement with Volkswagen, Argo would develop autonomous-driving technology for VW and eventually supply systems for commercial use, while continuing its development work with Ford.
- The $2.6 billion investment in Argo includes $1 billion in capital funding as well as the value of VW’s 200-person autonomous-driving division in Munich, which the companies placed at $1.6 billion.
Head of Boeing’s 737 MAX Program Retires
- Boeing said the head of its 737 MAX production facility will retire after less than a year at a division engulfed in crisis following two fatal crashes of the aircraft.
- Eric Lindblad will be replaced by Mark Jenks as vice president of the huge Boeing plant outside Seattle in Renton, Wash., that produces the 737, Boeing said.
- Boeing said the departure of Mr. Lindblad, a 34-year company veteran, wasn’t a consequence of the fatal crashes of 737 MAX planes operated by Indonesia’s Lion Air and Ethiopian Airlines that together killed all 346 people on board.
PC Shipments Rise After Several Quarters of Decline
- Personal-computer shipments rose in the second quarter for the first time since last year, two research companies said Thursday, as businesses sought upgrades to technology with new Windows 10 software and a shortage in processors eased.
- World-wide shipments totaled 63 million units for the quarter ended in June, up 1.5% from a year earlier, according to Gartner.
- Meanwhile, International Data Corp. said the global PC market rose 4.7% to 64.9 million units.
- Lenovo, HP and Dell accounted for 64.1% of PC shipments in the quarter, according to Gartner, and roughly 67% estimated by IDC data.
Fed’s Powell Says Facebook’s Libra Raises ‘Serious Concerns’
- Federal Reserve Chairman Jerome Powell and legislators in both parties expressed broad concern about Facebook’s plan to create a cryptocurrency-based payment network, underscoring the legislative and regulatory scrutiny the project could face.
- Mr. Powell, speaking to the Senate Banking Committee on Thursday, expressed doubt about the feasibility of launching the digital coin, dubbed Libra, on the timeline Facebook has targeted.
- “I think we agree that Libra raises a lot of serious concerns, and those would include around privacy, money laundering, consumer protection, financial stability,” he said.
- “Those are going to need to be thoroughly and publicly assessed and evaluated before this proceeds.”
Walmart told U.S. government India e-commerce rules regressive, warned of trade impact
- Walmart told the U.S. government privately in January that India’s new investment rules for e-commerce were regressive and had the potential to hurt trade ties, a company document seen by Reuters showed.
- The lobbying effort yielded no result at the time – India implemented the new rules from Feb. 1 – but the document underlines the level of concern at Walmart about the rules.
- Just months earlier, Walmart had invested $16 billion in Indian e-commerce giant Flipkart, its biggest ever acquisition globally.
- Differences over e-commerce regulations have become one of the biggest issues in frayed trade ties between New Delhi and Washington.
US ECONOMY & POLITICS
U.S. Producer Prices Rose Slowly in June
- The producer-price index (PPI), a measure of the prices businesses receive for their goods and services, rose a seasonally adjusted 0.1% in June from a month earlier, the Labor Department said Friday.
- Economists had expected prices to be flat from May.
- Excluding food, energy and trade services, core prices were flat from May.
- Economists had expected core producer prices to rise 0.2% in June after posting a 0.4% gain in both April and May.
- Compared with June 2018, the overall producer-price index was up 1.7% last month.
- Excluding food and energy, the index was up 2.3%.
U.S. Budget Gap Widened 23% in First Nine Months of Fiscal Year
- Government tax receipts rose again in June but not enough to offset higher federal spending, which pushed the U.S. budget gap to $747 billion for the first nine months of the fiscal year.
- The government collected $2.6 trillion in receipts, a 3% increase, reflecting a substantial increase last month in corporate tax revenue, which had been running below Congressional Budget Office projections so far this year.
- Higher spending on the military and interest on the debt drove federal outlays up 7%, to $3.3 trillion since the start of the fiscal year, the Treasury said.
- In the 12 months that ended in June, the deficit totaled $919 billion, a 22.6% increase from the same period a year earlier.
- As a share of gross domestic product, the year-over-year deficit totaled 4.4%, much higher than the previous 12 months.
Labor Secretary Acosta Resigns Amid Pressure Over Epstein Prosecution
- Alexander Acosta said he was resigning as labor secretary, amid criticism of a nonprosecution deal he struck with financier Jeffrey Epstein more than a decade ago as a federal prosecutor.
- Appearing Friday morning with President Trump on the South Lawn of the White House, Mr. Acosta told reporters he was stepping down. President Trump said the secretary had called him that morning, and that it was Mr. Acosta’s choice.
Tropical Storm Barry Brews, Forcing Evacuations
- Louisiana officials ordered some residents to evacuate and others to prepare for a tropical storm that would soon bring intense rainfall, strong winds and life-threatening storm surges.
- Forecasters upgraded the weather system brewing in the Gulf of Mexico on Thursday to Tropical Storm Barry, which was sustaining winds of up to 40 miles an hour.
- They anticipate it could strengthen further to become a hurricane before making landfall as soon as late Friday along the Louisiana coast.
Biden Has Poll Lead After First Democratic Debates
- The crowded Democratic presidential field has sorted into a top tier of five candidates after the first debates, with former Vice President Joe Biden in the lead and Sen. Elizabeth Warren narrowly behind him, a new WSJ/NBC News poll finds.
- The poll found that 26% of surveyed Democratic primary voters supported Mr. Biden as their first choice for the party’s nomination, and 19% supported Ms. Warren, of Massachusetts.
- Sen. Kamala Harris of California and Sen. Bernie Sanders of Vermont were tied in third place, with 13% each, while South Bend, Ind., Mayor Pete Buttigieg drew 7% support.
- Months into the primary campaign, none of the 17 other candidates tested in the survey garnered more than 2% support.
- Only 12% of respondents said their mind was definitely made up on who they would support, and pollsters said that Mr. Biden’s lead shouldn’t be considered substantial.
EUROPE & WORLD
ECB Follows Fed in Signaling Fresh Stimulus
- European Central Bank officials signaled at their June policy meeting that they will consider injecting fresh stimulus into the eurozone economy through interest-rate cuts or the relaunch of a €2.6 trillion ($2.9 trillion) bond-buying program, amid deep concerns over slowing global growth and trade disputes.
- ECB officials were in “broad agreement” at their June meeting that the bank should “be ready and prepared to ease the monetary policy stance further by adjusting all of its instruments,” according to the minutes.
- While the exact timing of any ECB action remains unclear, analysts said the bank could cut its key interest rate, currently set at minus 0.4%, as soon as its next policy meeting on July 25.
- More likely, the ECB could clearly signal a rate cut at its July meeting, and follow through on Sept. 12, when policy makers will have fresh economic forecasts for growth and inflation.
Turkey Receives Russian Missile System, Risking U.S. Sanctions
- The Turkish government said it had begun receiving a sophisticated new air-defense missile system from Russia, potentially exposing President Recep Tayyip Erdogan’s country to U.S. sanctions and testing its position in NATO.
- Mr. Erdogan has described the $2.5 billion shipment of the S-400 system as a sovereign decision that cannot be questioned by Washington or Turkey’s other military allies in the West.
- But the U.S. government has warned that Turkey could face sanctions if it deployed the Russian defense system on its soil, and could lose access to America’s F-35 stealth jet fighter.
- The events in the coming weeks could determine how U.S.-Turkish relations unfold, and raise questions about Turkey’s long-term role in the North Atlantic Treaty Organization as Russia attempts to build on its own growing influence in the country.
China Trade Data Points to Sagging Economy
- Chinese exports fell 1.3% in June from a year earlier, after rising 1.1% the previous month, the General Administration of Customs said Friday. Imports fell 7.3% in June versus an 8.5% drop in May.
- Economists had expected continued weakness in foreign trade due to the volley of tariffs between the U.S. and China, sluggish demand and weaker commodities prices, but imports dropped more than expected.
- China’s exports to the U.S. fell 7.8% in June from a year earlier, extending a 4.2% decline in May, customs data show.
- Imports from the U.S. tumbled 31% from a year earlier.
- The bilateral trade surplus widened to $29.92 billion—the highest in seven months—from May’s $26.9 billion.
- Bucking the trend, exports to Southeast Asian countries surged nearly 13% in June, extending May’s 3.5% growth, possibly a sign of transshipping to circumvent the tariffs.
China to Sanction U.S. Companies for Arms Sales to Taiwan
- China will sanction U.S. firms that participate in arms sales to Taiwan, after Washington approved sales of $2.2 billion in tanks, missiles and related military hardware, Beijing said.
- China’s Foreign Ministry said Friday that the arms sales “harmed China’s sovereignty and national security” and that the sanctions were necessary to safeguard its national interests.
- The Defense Security Cooperation Agency, part of the United States Defense Department, notified Congress on Monday of proposed arms sales including 108 M1A2T Abrams tanks, Hercules armored vehicles, heavy equipment transporters and Stinger anti-aircraft missiles.
Europe Set to Delay Iran Dispute Decision, Despite U.S. Pressure
- European powers are likely to put off a decision on triggering a dispute procedure in the nuclear deal with Iran that could lead to international sanctions being reimposed, a delay that might further inflame tensions with the U.S. on how to deal with Tehran.
- The U.S. triggered a board meeting of the United Nations’ atomic agency this week to focus on the Iranian violations.
- However, European officials say that none of the steps Tehran has taken so far significantly reduce Iran’s breakout time—the amount of time it would take Iran to amass enough fissile material for a nuclear weapon.
- They also acknowledge Iran’s claims that the steps it has taken to expand and further enrich its stockpile of uranium can be easily reversed, and say this isn’t the time to escalate tensions between Europe and Iran but to pursue diplomacy.
India aims to raise $47 billion from stake sales in state firms over 5 years – sources
- The Indian government has plans to raise as much as 3.25 trillion rupees ($47.4 billion) in the next five years by reducing its stakes in some large state-owned firms to 40% in the nation’s biggest privatization push in more than two decades.
- Last week, finance minister Nirmala Sitharaman in her budget announced that the government will look to reduce direct controlling stakes in some state-run firms on a case-by-case basis.
- The plan will open up a steady stream of state companies to greater private investment, and target the kind of annual divestment revenue that will be crucial to meet fiscal deficit targets.
- Narendra Modi’s administration already sold government stakes in a host of companies to raise a record $40.92 billion in his first term, nearly three times the divestment proceeds of $14.52 billion achieved by the Congress party government in 2009-2014.
TODAY in HISTORY
- Congress authorized the Medal of Honor. (1862)
- The first Etch-A-Sketch went on sale. (1960)
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