DAILY MARKET REPORTS
- Major U.S. stock indexes recouped some of their losses Tuesday after China’s central bank signaled it wouldn’t let the yuan fall much further, steadying a stock market that had been reeling from escalating trade tensions.
- U.S. equity markets saw their worst trading day of 2019 on Monday.
- The Dow dropped 2.9% while the S&P 500 slid nearly 3%. The Nasdaq plunged more than 3% on Monday.
- China’s central bank avoided escalating tensions with the U.S. further, opting to set a key currency level higher than expected after the U.S. Treasury Department labeled the country a currency manipulator.
- China’s central bank set the yuan’s official reference point at stronger than the key 7 yuan-to-the-dollar point on Tuesday.
- That reinforced stocks around the world and encouraged investors to take advantage of depressed stock prices following the market’s harshest bout of selling of the year a day earlier.
- The trade tensions between the U.S. and China may prompt the Federal Reserve to step up interest-rate cuts to bolster economic growth in the world’s largest economy, some investors and analysts said.
- A speech by the Fed’s James Bullard later Tuesday is likely to be scrutinized closely for any further signals on likely actions by the central bank.
US FINANCIAL MARKET
U.S. Designates China as Currency Manipulator
- The U.S. Treasury labeled China a currency manipulator after the Chinese central bank let the yuan depreciate, capping a day of trade-war escalations that sparked a global fall in financial markets and fears the clash could stall the U.S.’s economic expansion.
- The uncertainty could pressure the Federal Reserve to consider more interest-rate cuts, following its decision last week to lower rates for the first time in more than a decade.
- The decision to label China as a currency manipulator for the first time since 1994 comes just four months after the U.S. Treasury passed on an opportunity to make such a formal designation as part of its semiannual currency report.
- Monday’s action by the Treasury is mostly symbolic, requiring the U.S. administration to consult with the International Monetary Fund to try to eliminate the unfair advantage the currency measures have given a country.
China Puts Soothing Spin on Currency Move
- Chinese media played down Beijing’s abandonment of a former red-line in currency policy as they sought to reassure the country’s millions of small investors.
- On Monday, China let the yuan weaken beyond 7 yuan per dollar for the first time since 2008, drawing an official U.S. rebuke and rattling global markets.
- Several outlets depicted the move as a demonstration of market maturity for the yuan, which is also known as the renminbi, or people’s currency.
- Crossing seven “shouldn’t be viewed as a ‘forbidden zone,’ but a ‘shackle’ meant to be broken and abandoned sooner or later,” the news agency Xinhua said in an editorial on Monday.
‘NBA 2K’, ‘Grand Theft Auto V’ help Take-Two surge past estimates
- Videogame publisher Take-Two Interactive Software raised its full-year revenue forecast on Monday, boosted by the success of its games “NBA 2K”, “Grand Theft Auto V” and “Red Dead Redemption 2”, sending its shares up 7% in extended trading.
- On an adjusted basis, the game publisher’s revenue in the first quarter stood at $422.2 million, soaring above the average analyst estimate of $356.8 million.
- Take-Two’s net income fell to $46.3 million, or 41 cents per share, from $71.7 million, or 62 cents per share, a year earlier.
- Take-Two forecast second-quarter revenue of $860 million to $910 million, above analysts’ estimates of $852.5 million.
- Take-Two raised its annual forecast to $2.60 billion and $2.70 billion in adjusted revenue, up from its prior forecast $2.50 billion to $2.60 billion. Analysts had expected $2.65 billion in revenue.
Marriott cuts full-year forecast for key revenue measure, shares fall
- Marriott International cut its full-year outlook for a key revenue measure that indicates pricing power as the world’s largest hotel chain faces the impact of weakening business travel due to slowing global economic growth.
- Revenue fell to $5.31 billion from $5.41 billion a year earlier.
- Net income fell to $232 million in the second quarter, from $667 million a year earlier.
- Marriott recorded a $126 million non-tax accrual in the quarter for the fine proposed by the U.K. Information Commissioner’s Office in relation to the data breach in its Starwoods hotels reservation system.
- Shares of the company fell 3% in extended trading after the hotel chain said it now expected revenue per available room (RevPAR) to grow in the range of 1% to 2% in 2019 compared with the prior estimate of 1% to 3%.
Chesapeake forecasts strong oil output for 2020, shares rise 6%
- Chesapeake Energy on Tuesday forecast double-digit growth for oil production in 2020 after reporting better-than-expected quarterly output, as it shifts focus to crude amid weak natural gas prices.
- Revenue rose 4.2% to $2.39 billion.
- The company’s second-quarter production fell 6.4% to average 496,000 barrels of oil equivalent per day (boepd), but beat analysts’ average estimate of 494,640 boepd.
- Adjusted net loss widened to $158 million in the quarter from $118 million a year earlier.
- Chesapeake raised the bottom end of its full-year oil production range by 250,000 barrels to between 43 million barrels of oil to 44.5 million barrels of oil, and natural gas production guidance by 15 billion cubic feet (bcf) to between 725 bcf and 750 bcf.
Continental Resources profit falls 20% on weak crude prices
- U.S. oil producer Continental Resources reported a 19.7% fall in quarterly adjusted profit on Monday as weaker crude and natural gas prices more than offset a rise in overall production.
- The company’s average net sales price, excluding hedging, fell to $36.03 per barrel of oil equivalent from $42.16 in the year-ago period.
- However, total production rose to 331,414 barrels of oil equivalent per day (boepd) from 284,059 boepd a year earlier.
- Adjusted net income fell to $219.1 million in the second quarter, from $272.9 million a year earlier.
- For the full year, the company raised the lower end of its oil production outlook by 5,000 barrels per day to 195,000 barrels per day, while keeping the higher end of the outlook unchanged at 200,000 barrels per day.
Blue Apron Narrows Loss but Continues to Lose Customers
- Blue Apron Holdings narrowed quarterly losses, but its customer base for its meal kits continued to decline.
- Total sales were $119.2 million, a 34% decline from a year earlier, missing analysts’ estimates of $138.1 million.
- Revenue per customer during the quarter was $265, up from $250 in the previous year’s period.
- Blue Apron’s customer count shrank again, to 449,000, down from 550,000 in the first quarter.
- Blue Apron said its second-quarter loss narrowed to $7.7 million, an improvement from its year-earlier loss of $32.8 million.
Mastercard to buy part of payments company Nets for $3.19 billion
- Payments processor Mastercard said on Tuesday it would buy a majority of the corporate services businesses of Scandinavian payments group Nets for about 2.85 billion euros ($3.19 billion) furthering its push into the Nordic markets.
- The acquisition comprises of the clearing and instant payment services, and e-billing solutions of Nets’ corporate services business.
- The deal, expected to close in the first half of 2020, will be dilutive for up to 24 months after the deal closes, Mastercard said.
Amazon Music cuts monthly price to 99 cents for students with Prime subscription
- Amazon.com lowered the price of its paid music service to 99 cents per month from $4.99 for students with a Prime subscription.
- New and current student members can now subscribe to Amazon Music Unlimited, its premium subscription tier, providing them access to more than 50 million songs, the e-commerce giant said in a statement.
- Similar plans from Apple’s music streaming service and rival Spotify offer student subscriptions at $4.99 per month, 50% lower than their regular prices.
Apple, Goldman Sachs start issuing Apple Cards to consumers
- Apple and Goldman Sachs rolled out a virtual credit card on Tuesday, which will help the iPhone maker diversify from device sales and also build out the Wall Street bank’s new consumer business.
- With the card, Apple aims to draw in iPhone owners with 2% cash back on purchases with the Apple Pay service, no fees and an app to manage related finances.
- For Goldman, the card will enhance the bank’s focus on its Marcus consumer banking brand, which it started in 2015 to even out volatile results from businesses such as trading and investment banking.
US ECONOMY & POLITICS
Job Openings in the U.S. Remained Elevated in June
- There were 7.35 million positions waiting to be filled in June.
- The quits rate held at 2.3%, the highest level in more than a decade and a sign workers remain confident about their ability to find a job in a robust environment for employment. The quits rate has been unchanged since June 2018.
- Openings for state and local government rose to a record 613,000 while federal listings were little changed at 105,000.
- Listings grew for professional and business services and trade and transportation, while openings in the construction and leisure industries declined.
China Braces for Protracted Trade Dispute with the U.S.
- China is preparing itself for a protracted struggle with the U.S., fighting a trade war volley for volley while leaving room to negotiate, as Beijing tries to manage increasingly divisive relations with the world’s superpower.
- These difficulties are landing just when Mr. Xi is ordering a smooth and celebratory run-up to the 70th anniversary of the People’s Republic in October.
- That event, according to Communist Party watchers and media, is supposed to showcase him as a strong leader of a powerful nation.
- As a result, these analysts said, Mr. Xi can ill afford to make concessions, even as he wants to avoid deteriorating relations with President Trump and the U.S., still a main trading partner and investor.
China Deals ‘Body Blow’ to Struggling U.S. Farm Belt
- The U.S. Farm Belt braced for deeper pain from the escalating trade battle between the world’s two biggest economies after China said it would suspend all imports of U.S. agricultural goods.
- China was one of the biggest export destinations for U.S. agricultural commodities from 2009 to 2010 alongside Canada and Mexico, according to the U.S. Department of Agriculture. In 2017, Chinese buyers imported $19.5 billion in farm goods.
- That dropped to $9.1 billion last year as China’s tariffs on U.S. soybeans, pork, milk and other products made them more expensive for importers there, prompting some to seek alternatives and scale back imports from the U.S.
- Over the first six months of this year, China’s agricultural imports from the U.S. were down 20% from the same period last year.
- Research firm Trade Partnership Worldwide LLC in February projected that tariffs on U.S. exports could cost the country’s agricultural sector 59,000 to 71,000 jobs over the next two years.
Former Fed Leaders Plea for Central Bank’s Political Independence
- The former heads of the Federal Reserve made their case Monday for the central bank to remain independent and free from short-term political pressures, an implicit rebuttal to President Trump’s repeated criticism of the institution.
- All four former still-living Fed chairs—Paul Volcker, Alan Greenspan, Ben Bernanke and Janet Yellen—cosigned an op-ed in The Wall Street Journal on Monday underlining their belief that the central bank and its leader should be allowed to serve without political pressures or “the threat of removal or demotion… for political reasons.”
- The piece follows more than a year of regular attacks by Mr. Trump on the central bank, which he accuses of undermining his economic agenda by keeping interest rates higher than he would like.
Trump praises U.S. economy amid China spat, vows to back farmers
- U.S. President Donald Trump on Tuesday dismissed concerns over a protracted trade war with China, saying the United States was “in a very strong position,” a day after his administration ratcheted up tensions by labeling Beijing a currency manipulator.
- Trump, who said last week he would slap tariffs on a further $300 billion in Chinese imports starting Sept. 1, also sought to appease U.S. farmers after China shut the door to American agricultural purchases and raised the specter of additional tariffs on U.S. farm products.
- The Republican president also said he would continue to back American farmers, who have seen his administration already offer a $16 billion aid package to recoup losses from the ongoing trade war.
- “Our great American Farmers know that China will not be able to hurt them in that their President has stood with them and done what no other president would do – And I’ll do it again next year if necessary!” Trump wrote on Tuesday.
EUROPE & WORLD
China says U.S. currency manipulator labeling could cause chaos in financial markets
- China’s central bank said on Tuesday that Washington’s decision to label Beijing as a currency manipulator would “severely damage international financial order and cause chaos in financial markets”.
- Washington’s decision to ratchet up currency tensions on Monday would also “prevent a global economic and trade recovery,” the People’s Bank of China (PBOC) said in the country’s first official response to the latest U.S. salvo in the two sides’ rapidly escalating trade war.
- China “has not used and will not use the exchange rate as a tool to deal with trade disputes,” the PBOC said in a statement on its website.
Deutsche Post raises 2019 forecast after price hikes
- Deutsche Post DHL said on Tuesday it expects restructuring measures and increases in German postage and parcel prices to lift earnings in the second half of 2019, despite rising global trade tensions.
- The company reported a 3% rise in second-quarter sales to 15.5 billion euros ($17.37 billion), while operating profit rose by 2.9% to 769 million euros, topping the 727 million average forecast from analysts.
- DHL said full-year operating profit should rise to between 4.0 billion and 4.3 billion euros, up from a previous estimate of between 3.9 billion and 4.3 billion euros, due to higher expectations for its German Post & Parcel (P&P) division.
Tencent in Talks for Stake in Ariana Grande, Queen’s Record Label
- Tencent is negotiating to buy 10% of Universal Music Group, the world’s largest record label, from Vivendi SA for about €3 billion ($3.36 billion)—a deal that would strengthen the Chinese internet giant’s growing clout in the global music industry.
- The investment, if consummated, also gives Tencent an option to double its stake. A deal would give it a seat at one of the world’s music giants.
- It would also tighten Tencent’s dominance of the music industry in China, where consumers have quickly adopted streaming platforms and shown increasing willingness to pay for music.
China Vows to Punish Hong Kong Protesters Who Break the Law
- China’s top office for Hong Kong affairs warned protesters in the city not to underestimate the strength of the central government and urged the local police to crack down on those who break the law.
- A Hong Kong police spokesman said 148 people were arrested on Monday. As has been the case in recent weeks, by Tuesday morning Hong Kong had returned to normal. Trains and planes were back on track.
- The unrest in Hong Kong has escalated into a second crisis for Beijing, as it grapples with a spiraling trade conflict with the U.S. that has roiled global markets.
- The two issues have begun to bleed into one another, with some American lawmakers expressing concern over whether Hong Kong is autonomous enough to merit special trade status with the U.S.
China’s Huawei seeks compensation from Flex over withheld goods
- Huawei Technologies said it was seeking compensation from its contract manufacturer Flex for illegally withholding some 400 million yuan ($57 million) worth of its goods in the wake of a U.S. trade ban on the Chinese firm.
- Huawei spokesman Guo Fulin did not comment on the amount, but a person with direct knowledge of the matter said the company had sent a lawyer’s letter to Flex on Monday demanding “hundreds of millions of yuan” in damages for lost income, wasted materials, equipment replacements and other costs.
- Headquartered in California, Flex is among the world’s largest electronic manufacturers and competes against Taiwan’s Foxconn Technology in providing contract services for Huawei products such as smartphones and 5G base stations.
TODAY in HISTORY
- The first atomic bomb used in warfare was dropped on Hiroshima, Japan. (1945)
- President Johnson signed the Voting Rights Act of 1965, which outlawed the poll taxes and literacy tests that had restricted black voter registration in the South. (1965)
- Arnold Schwarzenegger announced his candidacy to replace Gray Davis as governor of California to Jay Leno on the Tonight Show. (2003)
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