DAILY MARKET REPORTS
- U.S. stock indexes advanced on Friday as solid results from Microsoft lifted technology stocks and added to an upbeat mood following signs from New York Fed President John Williams that the central bank would lower interest rates this month.
- Traders raised bets for a larger, half-percentage point cut in rates at the July 30-31 policy meeting to 41%, from a 23% chance a week ago, according to CME Group’s FedWatch program.
- Microsoft, America’s most valuable company, gained 2.2% as strength in its cloud business helped it beat analysts’ estimates at the end of a week of mixed corporate results.
- Credit card issuer American Express’s beat profit estimates but shares slipped about 2.4% as expenses jumped.
- Second-quarter profits at S&P 500 companies are now estimated to rise 1%, according to Refinitiv IBES data, in a reversal from earlier expectations of a small drop.
US FINANCIAL MARKET
Microsoft’s Cloud Business Drives Record Sales
- Microsoft said strength in its cloud-computing business drove record revenue in the latest quarter, extending the strong performance under Chief Executive Satya Nadella that has made it the world’s most valuable public company.
- Total revenue rose 12% to $33.72 billion, above average analysts’ estimates of $32.77 billion.
- Revenue growth in Azure was 64% in the fiscal fourth quarter, compared with 89% a year earlier and 73% in the prior quarter.
- Microsoft does not provide an absolute revenue figure for Azure, blending it into its “intelligent cloud unit,” which had revenue of $11.4 billion compared with analyst expectations of $11.0 billion.
- Revenue in Microsoft’s productivity software unit jumped 14.3% to $11.05 billion, driven by double-digit revenue growth for LinkedIn and Office 365. Analysts on average had expected revenue of $10.71 billion.
- Microsoft’s net income rose to $13.19 billion in the fourth quarter, from $8.87 billion a year earlier.
- Microsoft also forecasted between $10.3 billion and $10.5 billion in intelligent cloud sales for the fiscal first quarter, with a midpoint above analyst estimates of $10.13 billion.
American Express Revenue, Profit Rise
- Revenue at American Express was lifted in the latest quarter by higher card-member spending, loans and card fees, though expenses from rewards programs also increased.
- Total revenue, net of interest expense, rose 8.4% to $10.84 billion for the quarter. Analysts expected revenue of $10.83 billion.
- Customer spending rose 7% in the United States, the company’s biggest market, and 5% globally in the second quarter.
- Card-member rewards expenses, including the points that AmEx pays when cardholders redeem for hotels, airfare and other rewards, rose 9% to $2.65 billion.
- AmEx reported second-quarter profit of $1.76 billion, up from $1.62 billion a year earlier.
Chewy Posts Strong Sales Growth in First Quarter Post-IPO
- Chewy said its sales grew 45% in the latest quarter as the online pet-products seller released its financial results for the first time as a newly public company.
- For the fiscal first quarter net sales rose to $1.11 billion, in line with the consensus forecast.
- The company had 11.3 million active customers in the quarter, up 45% year over year. Customer sales in its “autoship” subscription program were up 56% and made up about 67% of net sales.
- The company reported a first-quarter net loss of $29.6 million, an improvement from a loss of $59.8 million in the same period a year earlier.
- Chewy said it expects fiscal second-quarter revenue of $1.12 billion to $1.14 billion, up 39% to 42% year over year, within range of analysts’ expectations.
- For the full year, the company forecast revenue of $4.68 billion to $4.75 billion, above analysts’ estimates of $4.67 billion.
BlackRock’s Cash Engine Gets Boost, but Its Profit Falls
- BlackRock’s second-quarter profit fell about 7% as the money-management giant faced increased competition and price pressures.
- The firm earned $1 billion in the second quarter on revenue of $3.5 billion. BlackRock earnings and revenue fell from a year ago and missed analyst expectations.
- Net inflows rose more than sevenfold to more than $150 billion as the firm took a surge of money into bond strategies, and its iShares exchange-traded funds roughly doubled net inflows to over $36 billion.
State Street Reports 20% Earnings Drop
- State Street reported a nearly 20% drop in earnings in the second quarter as income from fees and net interest fell.
- Total revenue of $2.87 billion was in line with analysts expectations.
- Total assets under custody and/or administration fell 3.3% to $32.75 billion.
- Assets under management totaled $2.91 billion, up 7.2%.
- The custodian banking firm reported net income of $587 million in the latest quarter, compared with $733 million a year earlier.
Syngenta profits hit by U.S./China trade wars, bad weather
- Agricultural chemical maker Syngenta on Friday reported a 34% fall in first-half net income, showing the impact of U.S. trade disputes with China and Mexico as well as bad weather in some of its markets.
- Syngenta’s first-half sales fell 7% to $6.8 billion, while net income tumbled 34% to $798 million, in part due to the bad weather and global issues.
- Chief financial officer Mark Patrick, when asked whether Syngenta faced any legal action relating to week-killing agent glyphosate, said the company had not been named in litigation involving glyphosate.
Schlumberger profit jumps 14.4% on higher international activity
- Schlumberger reported a 14.4% increase in quarterly profit on Friday, as demand in international markets helped the world’s largest oilfield services provider counter weakness in North America.
- The Houston-based company’s revenue fell to $8.27 billion from $8.30 billion.
- The company’s net income rose to $492 million in the second quarter, from $430 million a year earlier.
Boeing Plans $5 Billion Charge to Compensate 737 MAX Customers
- Boeing will set aside about $5 billion to compensate airlines that have suffered because of the grounding of the 737 MAX plane.
- Boeing said the $4.9 billion after-tax charge in the June quarter was related to estimates for “potential concessions and other considerations to customers for disruptions.”
- It said the charge, which takes into account taxes, would result in a $5.6 billion reduction in revenue and earnings for the quarter.
- The company said its estimated future costs to manufacture the 737 would increase by an additional $1.7 billion due to a production slowdown that has lasted longer than expected.
- That $2.7 billion in costs will be set against an undelivered accounting block of 3,100 737 MAX jets, implying that Boeing expects only a minimal dent in margins on a program that is expected to drive profit for more than a decade.
Budweiser Brewer to Sell Australian Unit to Japan’s Asahi
- Anheuser-Busch agreed to sell its Australian unit to Japan’s Asahi Group for $11.3 billion, including debt, as it pushes forward with an effort to sell assets and pare debt after pulling an initial public offering of its Asia-Pacific businesses.
- The company said Friday that selling its Australian unit—Carlton and United Breweries—would allow it to reduce debt and strengthen its position for growth opportunities.
- AB InBev last week canceled the planned IPO of its Asia businesses, which it hoped would raise nearly $10 billion and have been the largest listing of the year so far.
Pepsi Expands in Africa With $1.7 Billion Deal
- PepsiCo has agreed to pay $1.7 billion to buy South Africa’s Pioneer Foods, as the beverage giant looks to expand and accelerate its growth in sub-Saharan Africa.
- Pioneer Foods is one of South Africa’s largest producers and distributors of branded food and beverage products, and Pepsi said it planned to use its presence in the country as a beachhead for expansion across the continent.
- As a result of the acquisition, Pepsi said it would expand its sustainable farming program in Africa and work with local farmers to help boost yields, improve livelihoods, and preserve natural resources.
US ECONOMY & POLITICS
St. Louis Fed’s James Bullard Sees No Need for Larger Rate Cut
- Federal Reserve Bank of St. Louis President James Bullard said he would support a quarter–percentage–point cut in the central bank’s benchmark short-term rate at its July 30-31 meeting and doesn’t think a larger cut at that meeting is needed.
- Because financial markets already expect a quarter-point cut, some analysts have said the Fed might consider a larger, half-point move to address concerns around slower global growth, trade uncertainty and muted inflation.
- He said an unexpected intensification of trade tensions in May and June, together with inflation continuing to run shy of the central bank’s 2% target, warrants a slightly lower short-term rate.
U.S.-China officials discuss trade; Mnuchin eyes possible in-person talks
- U.S. and Chinese officials spoke by telephone on Thursday as the world’s two largest economies seek to end a year-long trade war, with U.S. Treasury Secretary Steven Mnuchin suggesting in-person talks could follow.
- Mnuchin and U.S. Trade Representative Robert Lighthizer spoke with their Chinese counterparts over the phone, Lighthizer’s office said on Thursday, following earlier comments by the Treasury secretary in an interview on the sidelines of the G7 meeting in Chantilly, France.
- “Right now we’re having principal-level calls and to the extent that it makes sense for us to set up in-person meetings, I would anticipate that we would be doing that,” Mnuchin told Reuters.
Trump to Nominate Eugene Scalia to Serve as Labor Secretary
- President Trump intends to nominate Eugene Scalia as secretary of labor, seeking to install a well-known figure in labor policy atop a department that recently lost its leader.
- Mr. Scalia, a 55-year-old partner at the law firm Gibson, Dunn & Crutcher and a son of the late Justice Antonin Scalia, would succeed Alexander Acosta, who stepped down from the position last week amid scrutiny of his role as a federal prosecutor in negotiating a plea agreement with financier Jeffrey Epstein.
- Mr. Trump made the announcement on Twitter late Thursday, saying of Mr. Scalia, “Gene has led a life of great success in the legal and labor field and is highly respected not only as a lawyer, but as a lawyer with great experience.”
EUROPE & WORLD
Chinese Conglomerate’s Debt Crisis Deepens; Bonds Plunge
- A large Chinese conglomerate fell deeper into a debt crisis, after it said it won’t repay $500 million in U.S. dollar bonds coming due next month.
- Cash-strapped China Minsheng Investment Group said on Friday it will not be able to repay the principal amount or interest on the three-year bonds that mature on Aug. 2, marking one of the largest Chinese defaults on a U.S. dollar bond this year.
- The unrated bonds, which carry a 3.8% coupon, were issued by an offshore subsidiary called Boom Up Investments.
- On Friday, they lost nearly a third of their value to trade at 50 cents on the dollar, according to a Hong Kong-based trader, indicating a very high likelihood of default.
Chance of no-deal Brexit rises as Johnson leads Hunt: poll
- The chance that Britain will leave the European Union without a deal is the highest since October 2017, economists polled by Reuters say, as arch-Brexiteer Boris Johnson looks set to take over as prime minister next week.
- Johnson was the face of the 2016 campaign to quit the EU and has said he would be willing to leave on Oct. 31 without a deal.
- The median forecast of that happening was 30% in the July 15-18 poll, up from 25% last month and 15% in May.
- Lawmakers voted on Thursday to make it harder for the next prime minister to try to force a no-deal Brexit, giving some support to sterling, and a strong majority of economists polled still think the two sides will eventually settle on a free-trade deal, as they have since late 2016, when Reuters first started asking the question.
TODAY in HISTORY
- Winston Churchill was the first to use the two-finger “V is for Victory” sign. (1941)
- President Clinton announced the “Don’t ask, don’t tell” policy regarding gays in the military. (1993)
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