DAILY MARKET REPORTS
- U.S. stocks fell after President Trump raised the possibility that a meeting with China on trade might be canceled, capping a tumultuous week driven by the trade war and emerging currency fight with Beijing.
- Shares of chipmakers and other tariff-sensitive technology companies came under pressure after a report that Washington was delaying a decision about allowing some trade between U.S. firms and China’s telecom equipment maker Huawei again.
- The yuan remained stable Friday, but the offshore rate to the dollar was weaker than a previous key level, with the currency trading at 7.08 to the dollar.
- In Europe, Italy’s ruling League party Deputy Prime Minister Matteo Salvini called for early elections; while Britain’s economy shrank for the first time since 2012, raising concerns as the country gears up to leave the European Union in October.
- China’s Shanghai Composite Index fell 0.7% after economic data on Friday showed that producer prices have fallen into deflation for the first time in three years, as worries over the trade war with the U.S. sapped demand.
- In the U.S., shares of Uber Technologies fell 6.4% after the ride-hailing company reported a bigger-than-expected quarterly loss after markets close on Thursday.
US FINANCIAL MARKET
Uber Posts Its Largest Quarterly Loss
- Uber Technologies recorded its largest-ever quarterly loss as it was weighed down by heavy competition in Latin America and elsewhere, as well as a big expense related to its initial public offering.
- Revenue at the ride-hailing company climbed 14% to $3.17 billion in the second quarter, its smallest quarterly increase on record and below analysts’ expectations of $3.3 billion.
- the company’s core business, ride-hailing, grew revenue only 2% to $2.3 billion.
- If not for a 72% rise in revenue from food delivery unit Uber Eats, revenue would have dropped.
- Uber completed 1.68 billion rides and delivery trips for the quarter, better than the 1.65 billion predicted, while its monthly active users rose to 99 million globally, from 93 million at the end of the first quarter and 76 million a year earlier.
- Gross bookings, a measure of total value of services before payments to drivers, restaurants and other expenses, rose 31% from a year earlier to $15.76 billion. Analysts on average were expecting $15.80 billion.
- The ride-hailing giant’s loss of $5.23 billion was due primarily to the inclusion of $3.9 billion of stock-based compensation costs related to its May initial public offering. The company lost $878 million in the same period a year earlier.
- Uber’s loss excluding charges was $656 million, better than the $977 million loss forecast.
- The company said it expects losses to start narrowing and gave an outlook for the year better than analysts expected, targeting a loss of $3 billion to $3.2 billion, when excluding charges like interest, taxes and depreciation.
Streaming Services Boost CBS Revenue
- CBS’s investment in content and streaming-services expansion helped deliver better-than-expected revenue growth.
- CBS reported revenue for the quarter rose 9.9% from a year earlier to $3.81 billion. Analysts expected $3.72 billion.
- The company said subscriptions from direct-to-consumer streaming services—anchored by CBS All Access and Showtime—helped drive a 13% increase in affiliate and subscription revenue in the quarter.
- Without disclosing actual subscription figures for those services, CBS said it remains on track to reach its goal of 25 million combined subscribers by the end of 2022.
- CBS said its net earnings rose to $440 million in the quarter, from $400 million a year earlier.
Activision Results Hurt by Lack of New Games
- Videogame maker Activision Blizzard’s current-quarter forecast for profit and revenue fell short of estimates on Thursday, overshadowing better-than-expected second-quarter results, sending shares down 3.7%.
- Total adjusted revenue of $1.21 billion beat estimates of $1.19 billion.
- Digital net bookings fell 16% to $1.01 billion, while monthly active users declined 5% to 327 million.
- Activision’s net income fell to $328 million in the quarter, from $402 million a year earlier.
- Activision forecast third-quarter adjusted revenue of $1.10 billion and profit of 20 cents per share, below estimates of $1.36 billion and 40 cents per share.
- Activision raised its full-year forecast for adjusted profit to $2.15 per share from $2.10 and reaffirmed revenue expectation of $6.30 billion. Analysts were expecting a profit of $2.15 per share and revenue of $6.36 billion.
Dropbox reports wider net loss, paying users up
- Dropbox on Thursday reported a wider second-quarter net loss and said the number of users paying for its file sharing services rose slightly from the previous quarter.
- Dropbox’s revenue rose 18% to $401.5 million, beating the average analyst estimate of $400.9 million.
- Dropbox said the number of paying users rose to 13.6 million from 13.2 million in the prior quarter and 11.9 million a year earlier. Analysts had expected 13.4 million paying users.
- Average revenue per user rose to $120.48, narrowly missing estimates of $120.8.
- Net loss widened to $ 21.4 million for the second quarter, from $4.1 million a year earlier.
News Corp Revenue Falls 8% in Quarter
- News Corp reported an 8% decline in revenue for the June quarter, reflecting lower sales at its book-publishing unit, lower advertising revenue at its news and information-services business and the negative impact of foreign-currency fluctuations.
- Revenue fell to $2.47 billion. Analysts expected revenue of $2.56 billion.
- The New York-based media company posted a net loss of $51 million in the quarter, compared with a loss of $372 million in the year-earlier period, when a write-off weighed on results.
- Analysts expected net income of $24 million.
Yelp’s Profit Increase Gets Positive Reviews from Investors
- Yelp beat profit forecasts for the second quarter, and shares of the online-review company rose more than 4% in post-market trading Thursday.
- Yelp said second-quarter revenue grew 5% from the same period a year earlier, to $247 million, an amount in line with forecasts from analysts.
- Yelp said that in the second quarter, it had 197,000 paid advertising accounts, a measure which shows how many businesses have paid for ads over a three-month period, up from 192,000 in the first quarter.
- The San Francisco-based company reported net income of $12 million, up from $11 million in the second quarter of 2018.
- Yelp reaffirmed its prior guidance that revenue would grow 8% to 10% this year compared with 2018.
Broadcom Makes $10.7 Billion Deal to Buy Symantec’s Corporate-Focused Security Business
- Broadcom struck a $10.7 billion deal to buy Symantec’s enterprise security business, as it steps up efforts to expand beyond chip making.
- Symantec said it would pay a special dividend of $12 a share and boosted a stock repurchase program by $1.1 billion to $1.6 billion.
- Symantec also announced plans to cut around 7% of its employees and close facilities as part of a new restructuring plan.
Malaysia Charges Goldman Directors Over 1MDB Scandal
- Malaysia filed criminal charges against 17 current and former Goldman Sachs directors over their handling of the sprawling, multibillion-dollar financial scandal at the country’s state fund 1Malaysia Development Bhd.
- Attorney-General Tommy Thomas said Friday that custodial sentences and fines would be sought for the directors, who worked for three Goldman Sachs subsidiaries—Goldman Sachs International, Goldman Sachs (Asia) LLC, and Goldman Sachs (Singapore) Pte—in relation to bond sales the U.S. bank arranged for 1MDB in 2012 and 2013.
- The accusations relate to the individuals’ participation in the deals as arrangers, structure agents, underwriters and sellers.
- Friday’s charges pertained to those filed by Malaysia in December against the same Goldman units, and some former employees, for attempting to defraud the government and purchasers of the three 1MDB bonds with a total face value of $6.5 billion.
U.S.-China Trade Battle Is Crimping Global Oil Demand
- Worries about the health of the economy and increasingly uncertain trade relations between the U.S. and China will put further pressure on global oil demand in 2019, the International Energy Agency said Friday.
- In its closely watched oil-market report, the IEA downgraded its forecast for global oil-demand growth for the third time in four months, lowering it to 1.1 million barrels a day from 1.2 million barrels a day.
- Demand for the January-to-May period was at its weakest since 2008.
- Worsening relations between the U.S. and China “could lead to reduced trade activity and less oil demand growth,” the report said.
Saudi Aramco Accelerates IPO Plans to List as Soon as Early 2020
- Saudi Arabia’s state oil company is revving up plans for an initial public offering and accelerating the timeline for what would be the world’s biggest listing to as soon as early next year, according to people familiar with the discussions.
- The IPO of state-owned Saudi Aramco, is being sped up as government officials hope to capitalize on the positive international reaction to the company’s debut bond sale in April, which raised $12 billion, people close to the talks said.
- Crown Prince Mohammed bin Salman previously announced he would list 5% of Aramco in 2018 at a valuation of roughly $2 trillion for the entire company.
- Even floating 5% of the company would constitute the world’s largest IPO at around $100 billion.
FBI Surveillance Proposal Sets Up Clash with Facebook
- An effort by the FBI to more aggressively monitor social media for threats sets up a clash with Facebook’s privacy policies and possibly its attempts to comply with a record $5 billion settlement with the U.S. government reached last month.
- The FBI is soliciting proposals from outside vendors for a contract to pull vast quantities of public data from Facebook, Twitter and other social media “to proactively identify and reactively monitor threats to the United States and its interests.”
- The request was posted last month, weeks before a series of mass murders shook the country and led President Trump to call for social-media platforms to do more to detect potential shooters before they act.
- As described in the solicitation, it appears that the service would violate Facebook’s ban against the use of its data for surveillance purposes, according to the company’s user agreements and people familiar with how it seeks to enforce them.
US ECONOMY & POLITICS
U.S. June wholesale inventories revised lower
- U.S. wholesale inventories were revised lower to show them unchanged in June, indicating a slowdown in the pace of inventory accumulation that could further weigh on economic growth.
- The unchanged reading in wholesale inventories reported by the Commerce Department on Thursday was a downward revision to a 0.2% gain estimated last month.
- The component of wholesale inventories that goes into the calculation of gross domestic product edged up 0.1% in June.
U.S. producer prices rise slightly; underlying inflation tame
- U.S. producer prices increased moderately in July, lifted by a rebound in the cost of energy products, while underlying producer inflation retreated, which could allow the Federal Reserve to cut interest rates again next month.
- The producer price index (PPI) for final demand rose 0.2% last month after nudging up 0.1% in June, the government said.
- In the 12 months through July the PPI increased 1.7% after advancing by the same margin in June.
- Excluding the volatile food, energy and trade services components, producer prices edged down 0.1% last month. That was the first decline since October 2015 and followed an unchanged reading in June.
- The core PPI increased 1.7% in the 12 months through July, the smallest gain since January 2017, after rising 2.1% in June.
- The benign inflation report from the Labor Department on Friday could boost expectations for a half-percentage-point cut at the Fed’s Sept. 17-18 policy meeting.
Fed’s Evans Says Trade Headwinds Could Justify Additional Rate Cuts
- Federal Reserve officials would need to consider more stimulus aimed at boosting the economy if growing trade tensions lead to a sharper pullback, a senior Fed bank president said Wednesday.
- Chicago Fed President Charles Evans already has said he thought the Fed would need to cut rates this year by at least one more quarter-percentage point, following last week’s quarter-point cut, to lift inflation back to the Fed’s 2% target.
- But on Wednesday, he suggested trade and other global developments “have perhaps created more headwinds against that, and it would be reasonable to do more than just that. I don’t know,” he said.
EPA Proposes Changes to Clean Water Act Rules
- The Environmental Protection Agency is proposing a change in Clean Water Act regulations aimed at streamlining the approval process for permits that are often a sticking point for pipelines and other major infrastructure projects.
- The proposed regulatory change is aimed at bolstering federal authority in granting these permits and at preventing states from overstepping their authority, EPA Administrator Andrew Wheeler said in an interview.
- Mr. Wheeler signed a copy of the proposal Thursday evening, setting in motion a 60-day public comment period, and plans to announce it at an event Friday.
EUROPE & WORLD
Italian Populist Moves to Bring Down Government
- Matteo Salvini, head of Italy’s far-right, sought to trigger snap elections by declaring an end to the government in which he serves, exploiting his strong lead in opinion polls in a bid to make himself the country’s next leader.
- Mr. Salvini said on Thursday that differences between his anti-immigration League party and its larger coalition partner, the antiestablishment 5 Star Movement, had become irreconcilable.
- The statement brought Italy’s populist government close to an end after only 15 months in power.
U.K. Economy Shrinks for First Time Since 2012 as Brexit Worries Take a Toll
- The British economy unexpectedly contracted in the second quarter as uncertainty over the country’s planned departure from the European Union on Oct. 31 took its toll on business confidence.
- The U.K.’s Office for National Statistics said Friday that gross domestic product (GDP) in the world’s fifth-largest economy was 0.2% smaller than in the first quarter.
- That was equivalent to an annualized fall of 0.8%, a sharp slowdown from the 2% increase seen in the first three months of the year.
- With Brexit postponed until the end of October at the earliest, businesses drew down their stocks in the second quarter rather than place new orders, leading to the largest fall in manufacturing output since the depths of the global financial crisis in early 2009, and to a sharp fall in imports.
Japan Posts Surprising Growth but Global Uncertainty and Tax Bump Loom
- The Japanese economy grew at a faster pace than expected in the April-June quarter led by solid domestic demand, but a tax increase and global uncertainty could dim the outlook.
- The world’s third-largest economy after the U.S. and China expanded at an annualized rate of 1.8% during the quarter, in data released Friday. Economists had expected 0.4% growth.
- Capital expenditures rose 1.5% in the second quarter compared with the previous quarter as companies continued to make labor-saving investments, while exports declined 0.1% amid slowdowns in China and other Asian countries.
China’s Factory-Gate Prices Slip into Deflation
- China’s producer prices fell into deflation for the first time in three years, as worries over the trade war with the U.S. sapped demand, adding another complication to Beijing’s efforts to shore up its slowing economy.
- While producer prices fell 0.3% from a year earlier in July—lower than economists’ median forecast for a 0.1% drop—consumer prices edged up to a 17-month high, squeezing households’ spending power.
- China’s big industrial companies fell 3.1% in June from a year earlier, reversing a 1.1% gain in May, official data showed.
- China’s consumer-price index, meanwhile, rose 2.8% in July from a year earlier, higher than June’s 2.7% growth and beating market expectations of a 2.7% increase.
Apple supplier Japan Display’s net worth negative after tenth quarterly loss
- Cash-strapped Japan Display reported a tenth consecutive quarterly loss and a negative net worth, hit by weak iPhone sales at Apple, increasing the urgency for the firm to close a proposed bailout with a Chinese group.
- The liquid crystal display (LCD) maker for smartphones, which gets more than half of its revenue from Apple, posted a net loss of 83.27 billion yen ($786.53 million) in the April-June quarter, far wider than the 1.77 billion loss a year earlier.
- The ballooning loss, including a 51.4 billion yen writedown on an LCD plant, made its net worth negative, with liabilities exceeding assets.
- Japan Display is tapping a consortium led by Chinese investment firm Harvest Group for an 80 billion yen bailout deal, which includes investments from Apple and Hong Kong-based activist investor Oasis Management.
Bayer soars on report of proposed $8 billion Roundup settlement
- Bayer shares soared as much as 11% on Friday on a report that the German company has proposed to pay up to $8 billion to settle more than 18,000 U.S. lawsuits related to its weedkiller Roundup.
- Bayer shares have lost more than a third, or roughly 30 billion euros ($34 billion), in market value since August last year, when a California jury in the first such lawsuit found that Monsanto should have warned of the alleged cancer risks from Roundup.
- The German drugs and pesticides company has engaged in negotiations with plaintiffs’ lawyers, a person familiar with the matter told Reuters.
- While Bayer has indicated it could pay $6-$8 billion, plaintiffs’ lawyers want more than $10 billion to drop their claims, Bloomberg reported.
Denmark’s Nord Stream 2 route request could cause eight-month delay, cost 660 million euros – operator
- A Russian-led gas pipeline project across the Baltic Sea to Europe could be delayed by up to eight months and cost an extra 660 million euros ($740 million) due to hurdles in securing the necessary permits from Denmark, the pipeline operator has said.
- The 1,230-km (765-mile) Nord Stream 2 pipeline, now under construction, has come under fire from the United States and several eastern European, Nordic and Baltic countries, which say the conduit will increase Europe’s reliance on Russian gas.
- According to the letter, obtained by Reuters, the request for a third route could result in a delay of up to eight months and further costs of 560 million euros. The initial budget was 9.5 billion euros.
Huawei Unveils Android Replacement Following U.S. Ban
- Huawei Technologies offered the first details about the operating system designed to replace Google’s Android on its smartphones, as the Chinese technology giant races to develop backups to American technology following its U.S. blacklisting.
- Huawei’s new operating system, called HarmonyOS, is intended to run on all of Huawei’s consumer gadgets, including its hugely popular smartphones, which run Android and have taken a sales hit overseas since its May blacklisting.
- Huawei prefers to continue using Android, the world’s most popular smartphone operating system, on the company’s smartphones, but Huawei could switch its handsets to HarmonyOS “in just one or two days” if it had to.
- Huawei faces numerous hurdles to getting its operating system off the ground if it loses access to Android, and the stakes are high as smartphones make up a large chunk of the consumer-products revenue that comprises more than half of Huawei’s sales.
TODAY in HISTORY
- Jesse Owens became the first American to win four gold medals in one Olympics. 1936
- The United States exploded a nuclear bomb over Nagasaki, Japan, killing an estimated 74,000 people. 1945
- Singapore proclaimed its independence from Malaysia. 1965
- Vice president Gerald Ford was sworn in as president following Nixon’s 1974
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