DAILY MARKET REPORTS
- U.S. stocks paused Monday as investors looked ahead to a key Federal Reserve meeting that many anticipate will result in the first rate cut since 2008.
- While Refinitiv data shows 76% of the 222 S&P 500 companies that have reported earnings so far have topped profit estimates, data on the U.S. economy went in the opposite direction, supporting action by the Fed on Wednesday.
- Stocks have flirted with records for much of the summer as investors have bet on the Fed lowering interest rates by as much as 50 basis points at the end of its July 30-31 meeting.
- Bets on a rate cut have helped buoy stocks, even as data have shown the domestic and global economy slowing.
- Investors will get a fresh look Tuesday at the Fed’s preferred inflation gauge, the price index for personal–consumption expenditures, as well as the Labor Department’s monthly employment report Friday.
- Hong Kong’s benchmark Hang Seng Index was down 1% as protests in the city have grown increasingly violent, triggering concerns about the impact tensions with Beijing could have on the local economy.
- Among stocks, Mylan jumped 13.87% after it confirmed reports over the weekend that it was combining with Pfizer’s off-patent branded and generic established medicines business to form a new global player.
US FINANCIAL MARKET
Pfizer posts 30% rise in quarterly profit
- The company’s profit rose 30% to $5.05 billion on revenue that slipped 1.5% to $13.26 billion.
- Pfizer agreed to merge its off-patent drugs business with generic drugmaker Mylan, creating a global seller of lower-price medicines in an increasingly competitive business.
- Shareholders of Pfizer will own 57% of the new business and the rest of it will be owned by shareholders of Mylan. The new company is expected to have between $19 billion and $20 billion revenue on a pro forma basis.
- The new company intends a dividend of approximately 25% of free cash flow beginning the first full quarter after close.
LSE says it is in talks to buy Refinitiv for enterprise value of $27 billion
- The London Stock Exchange Group said on Saturday it was in talks to buy data analytics platform Refinitiv for a total enterprise value of about $27 billion by issuing new LSE Group shares.
- The talks are with a consortium including some investment funds affiliated with Blackstone Group and Thomson Reuters, LSE said in a statement. Blackstone and Thomson Reuters, the parent of Reuters News, together own Refinitiv
- The deal would result in Refinitiv shareholders holding a roughly 37% stake in the combined company and less than 30% of the total voting rights of LSE Group, LSE said.
Exact Sciences in advanced talks to buy Genomic Health for $2.8 billion
- Cancer diagnostics company Exact Sciences is in advanced negotiations to buy healthcare company Genomic Health for about $2.8 billion to strengthen its cancer testing, Bloomberg reported on Saturday.
- A deal could be announced as early as next week but the talks could still be delayed or fall apart altogether, according to the report, which cited people familiar with the matter.
- Exact Sciences and Genomic Health did not respond immediately to a Reuters request for comment on Saturday.
Dish Network has tough road to become competitive mobile carrier
- Dish Network’s bid to become a fourth U.S. mobile carrier may cost billions more than it expected and pits it against corporate giants, but the satellite TV provider has an advantage in starting fresh with no legacy technology to maintain and deep-pocketed potential partners.
- T-Mobile and Sprint received regulatory approval for their $26.5 billion merger on condition they sell Sprint’s prepaid wireless business and some cell sites to Dish, paving the way for the satellite provider, which owns $20 billion worth of spectrum, to enter the wireless phone market as the No. 4 company.
- Under Friday’s agreement, Dish will pay $1.4 billion for Sprint’s prepaid business and $3.6 billion three years later to buy spectrum licenses.
- Dish will be starting off with 9.3 million users from Sprint’s prepaid business, compared with U.S. Cellular, currently the fifth largest carrier in the United States, which has about 5 million users.
- It has promised to be able to serve 70 percent of U.S. population by 2023.
U.S. to deny tariff relief for Apple Mac Pro parts from China: Trump
- U.S. President Donald Trump on Friday said his administration would not grant Apple any relief for tariffs on parts made in China for its Mac Pro computer and later added he thought the firm would build a plant in Texas.
- On July 18, Apple asked the U.S. Trade Representative’s office to waive 25% tariffs on 15 parts, including ones for the Mac Pro desktop computer. The public comment period for those requests closes on Aug. 1.
- Trump later told reporters he thought Apple would build a plant in Texas, without elaborating on exactly what he was referring to or how he knew.
Tarantino Scores Career-Best Opening Weekend With ‘Hollywood’
- Quentin Tarantino never stood a chance of usurping the family-friendly “The Lion King” from atop the box office, but with his latest film, “Once Upon a Time…in Hollywood,” the director won his best opening weekend on record.
- Sony Pictures Entertainment’s “Once Upon a Time…in Hollywood” pulled in a satisfactory $40.4 million in U.S. and Canada, according to preliminary studio estimates.
- It was no surprise to see Disney’s photorealistic reimagining of its 1994 animated classic “The Lion King,” repeat its reign at the box office for a second week in a row with $75.5 million.
- That brings the film’s two-week domestic total to a staggering $350.8 million and $962.7 million world-wide.
US ECONOMY & POLITICS
U.S.-China Trade Talks Set to Resume With Modest Expectations
- Negotiators for the U.S. and China will face off in Shanghai this week in another attempt to piece together a trade accord amid much lowered expectations for the kind of sweeping deal that appeared within reach this spring.
- People close to the talks said a major breakthrough is unlikely on points that led to negotiations breaking down in early May, but that modest wins might be obtainable.
- Among the possible smaller achievements that might be obtainable, close observers said, would be a commitment by China to purchase more agricultural products and action by the U.S. to relax its ban on U.S. companies selling to telecommunications equipment giant Huawei, which Mr. Trump has already agreed to do in general terms.
- Progress toward a small agreement on Huawei and agricultural purchases could set the stage for negotiators to tackle bigger issues in a follow-up meeting in Washington, the people following the talks said.
- U.S. national security officials have identified Huawei gear as a potential pipeline for Chinese espionage, and China hawks in Congress and elsewhere stand ready to denounce Mr. Trump for any effort toward Huawei that could be seen as appeasement.
Former Fed Chief Yellen Endorses Quarter-Point Rate Cut This Week
- Former Federal Reserve Chairwoman Janet Yellen said she endorses a quarter-percentage-point cut in the central bank’s benchmark interest rate this week because of worries over global growth and low inflation.
- Ms. Yellen said while the U.S. economy was doing well and the labor market remains strong, inflation, which has been running below the central bank’s 2% target all year, is too low.
- She also said the global economy was weakening because of trade conflicts that have created uncertainty for business investment and also Fed interest rate increases that had contributed to slower growth abroad.
Trump urges Fed to do more than a ‘small rate cut’
- U.S. President Donald Trump on Monday urged the Federal Reserve to go beyond making a “small rate cut” this week, raising pressure on the central bank to lower borrowing costs by more than Wall Street expects.
- In a series of tweets ahead of the Fed’s meeting scheduled for Tuesday and Wednesday, Trump reiterated his criticism of independent U.S. monetary policymakers, accusing them of acting too cautiously in comparison to China and Europe.
- The Republican president, who is seeking re-election in 2020 and had tied his efforts in part to the strength of the U.S. economy, is seeking a financial jolt from a cut in short-term borrowing rates to counter a global economic slowdown.
Dan Coats to Step Down as Director of National Intelligence Next Month
- President Trump said Sunday that Director of National Intelligence Dan Coats, who has tangled with the president over how to deal with the threat posed by Russia, is leaving his post.
- Mr. Trump said he would nominate Rep. John Ratcliffe, a three-term Texas Republican, to succeed him.
- Mr. Ratcliffe, who as a lawmaker has focused on counterterrorism and cybersecurity issues, has been praised by Mr. Trump’s allies for his strident questioning of former special counsel Robert Mueller for declaring Mr. Trump wasn’t exonerated on the question of obstruction of justice in his report on Russia’s interference in the 2016 election.
Kamala Harris Unveils Plan to Transform Health Care to a Federal System
- Democratic presidential candidate Sen. Kamala Harris (D., Calif.) released a plan Monday to reshape the U.S. health-care system by transforming it over 10 years to a federal one that would still allow a limited role for private insurers.
- Ms. Harris, who has been criticized by some of her party for her lack of clarity on her support for Medicare for All, released the plan a day before the start of the second round of Democratic debates, where health care is expected to be a key topic.
- Her version of Medicare for All would upend the current system for a government-run health-care program that would cover a robust set of benefits, from long-term care to mental health and hospitalization.
- But private health plans such as those from Cigna and Aetna could offer Medicare Advantage—in essence, plans with enhanced benefits.
String of Wins Lift Trump
- A budget deal headed to final passage, while a Supreme Court ruling paved the way for a border wall and Robert Mueller’s congressional testimony landed few new blows to President Trump last week.
- As the president accelerates his 2020 re-election effort, that run of news aids his campaign, people from both parties agreed.
- Overall, Mr. Trump remains in an uncertain position, according to the latest Wall Street Journal/NBC News poll taken July 7-9.
- It showed that three of the top Democratic presidential candidates—former Vice President Joe Biden, Sen. Elizabeth Warren and Sen. Bernie Sanders—lead Mr. Trump among voters nationally in test matchups, while Sen. Kamala Harris, is essentially tied.
- Less than 50% of registered voters said they approved of his performance in office.
EUROPE & WORLD
China’s industrial profits fell 3.1% y/y in June
- Profits earned by China’s industrial firms fell 3.1% in June from a year earlier, reversing gains in May, the National Bureau of Statistics said on Saturday.
- The June figure compared with profit growth of 1.1% in May.
- For the first half of 2019, profits dropped 2.4% from the same period last year to 2.98 trillion yuan, compared with a 2.3% fall in the first five months.
- Industrial firms’ liabilities rose 5.6% from a year earlier to 65.1 trillion yuan by end-June, up from a 5.3% rise as of end-May.
- Producer price inflation, one gauge of industrial profitability, eased to zero in June from a year earlier, rekindling worries about deflation, which could prompt authorities to launch more aggressive stimulus measures.
Temporary factors weigh on LatAm economic growth: IMF
- A sharp decline in International Monetary Fund estimates for Latin American economic growth in 2019 largely resulted from “temporary factors” including adverse weather, while policy uncertainty in the largest economies also weighed.
- Alejandro Werner, director of the IMF’s Western Hemisphere department, wrote on Monday that output suffered as weather reduced mining output in Chile and agricultural output in Paraguay, while mining activity in Brazil slowed after a dam disaster.
- Last week, the IMF slashed its 2019 economic growth expectation for Latin America by more than half to 0.6%, from its 1.4% increase estimate just three months earlier.
- Brazil, now expected to grow only 0.8% from 2.1% three months ago, is seen accelerating to 2.4% in 2020, “assuming a robust pension reform is approved, confidence returns, investment recovers, and monetary policy remains accommodative”.
- Mexico, seen now growing 0.9% this year from 1.6% percent in the previous estimate, is expected to accelerate to 1.9% in 2020 “as conditions normalize.”
Britain warns EU: change your ‘stubborn’ position or face no-deal Brexit
- Britain warned the European Union on Monday that it needed to change its ‘stubborn’ position on Brexit if a no-deal exit was to be avoided.
- Foreign Secretary Dominic Raab said he wanted a deal but that the EU had to change its position.
Britain rejects idea of tanker swap with Iran
- Britain on Monday rejected the idea that it could release a Iranian tanker in exchange for a British-flagged vessel seized by the Islamic Republic in the Gulf.
- Tensions have spiked between Iran and Britain since after Iranian commandos seized a British-flagged tanker earlier this month.
- That came after British forces captured an Iranian oil tanker near Gibraltar, accused of violating sanctions on Syria.
Struggling Chinese Bank Gets a Lifeline From State-Backed Investors
- Three of China’s state-backed financial institutions are to take stakes in a struggling commercial bank, indicating a different approach by regulators toward the country’s small troubled lenders.
- The Industrial and Commercial Bank of China, the country’s largest bank by assets, said one of its units would pay up to 3 billion yuan ($435.6 million) for a 10.82% stake in Bank of Jinzhou, which lends mostly to small and medium-size companies in a northeastern region of the country.
- Two of China’s largest asset managers that specialize in handling distressed debt will also take minority stakes, Bank of Jinzhou said.
- China Cinda Asset Management ’s stake would represent about 6.49% of its shares. China Great Wall Asset Management’s stake wasn’t disclosed.
Beijing Presses Hong Kong Government to Quell Unrest
- China’s top office for Hong Kong affairs used a rare news conference to endorse the territory’s leader and the police’s handling of increasingly violent clashes with protesters, signaling that Beijing is unlikely to yield concessions as it pressures the semiautonomous city to quell the unrest.
- The Hong Kong protests have become an international embarrassment for China as it wrestles with the trade conflict with the U.S. and grapples with a slowing economy.
- Beijing sought Monday again to portray the Hong Kong unrest, now in its eighth straight weekend, as the product of meddling by “external forces.”
- The statements came a day after Hong Kong police and protesters clashed Sunday, this time near the city’s financial district.
- Officers used tear gas, riot shields and nonlethal projectiles to contain thousands of protesters, many wearing black clothes and yellow hard hats.
Grab commits $2 billion to Indonesia with SoftBank’s backing
- Southeast Asian ride-hailing firm Grab on Monday said it will invest $2 billion into Indonesia over five years using capital from Japan’s SoftBank Group, marking its biggest commitment in the region’s most populous market.
- The investment will go toward creating a next-generation transportation network and transforming how critical services, like healthcare, are delivered, Grab said in a statement.
- In its statement, Grab said it has invested over $1 billion in Indonesia since 2017. The firm has been on a fundraising drive since buying last year the southeast Asian operations of U.S. ride-hailing peer Uber.
TODAY in HISTORY
- Artist Vincent van Gogh died of a self-inflicted gunshot wound in Auvers, France. (1890)
- President Eisenhower signed the congressional act that created the National Aeronautics and Space Administration (NASA) was authorized by Congress. (1958)
This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S&P 500, are unmanaged and may not be invested into directly. Sources: Reuters, Bloomberg, the Wall Street Journal.
Content posted by third parties on this site is screened in order to protect clients’ privacy and comply with regulatory requirements. Content containing sensitive personal information, inappropriate language, information about specific investments, misleading information, information about other companies or websites, or information related to litigation will be removed. Content posted by third-parties on this site remains the responsibility of the party posting the content and is not adopted or endorsed by Pence Wealth Management or LPL Financial. Any opinions or statements posted by third parties are their own and may not be representative of the experience of others and are not indicative of future performance or success. Third party content on this site does not reflect the views of LPL Financial and have not been reviewed by LPL Financial as to accuracy or completeness.