DAILY MARKET REPORTS
- U.S. stocks rose on Thursday on hopes of a de-escalation in trade tensions after Washington and Beijing agreed to hold high–level talks next month, while data showing strong job addition in the private sector allayed some slowdown concerns.
- The U.S. and China said deputy-level officials would work together in mid-September to lay the groundwork for the meeting after the two economies had moved to impose tariffs on each other.
- Beijing said it hopes for “substantive progress” during talks next month.
- U.S. private employers’ payrolls grew at the fastest pace in four months in August led by big gains in service-sector jobs.
- The ADP National Employment Report, considered a precursor to the Labor Department’s more comprehensive jobs report, showed the private sector added 195,000 jobs in August, above economists’ expectations of an increase of 149,000 jobs.
- The 10-year German bund yield crept higher despite weaker-than-expected manufacturing orders data released for July.
- The data is likely to reinforce expectations for stimulus measures to be announced by the European Central Bank next week.
US FINANCIAL MARKET
Slack Shares Plunge Despite Raising Full-Year Outlook
- Slack Technologies forecast slowing revenue growth in the second half and a bigger-than-expected third-quarter loss in its first report as a public company on Wednesday, as it faces intense competition from Microsoft and others.
- In the July quarter Slack said revenue rose 58% from a year earlier to $145 million, beating analysts’ consensus estimate and the company’s internal guidance.
- It said it had over 100,000 paid customers at the end of the quarter.
- In the latest quarter, Slack’s net loss ballooned to $359.6 million from $31.9 million a year ago, largely from stock-based compensation in connection with its direct listing.
- The company forecast a third-quarter loss of 8 to 9 cents a share. Analysts on average were expecting a loss of 7 cents per share.
- It also forecast revenue in the range of $154 million to $156 million, representing growth of 46% to 48%, which is slower than the 58% this quarter and the 67% increase in the first quarter.
WeWork Weighs Slashing Valuation by More Than Half Amid IPO Skepticism
- WeWork’s parent company is weighing a dramatic reduction in its valuation as it aims to go public while facing widespread skepticism over its business model and corporate governance, according to people familiar with the matter.
- We is considering putting a price tag on its IPO that would value it somewhere in the $20 billion range, potentially at the low end, these people said, less than half of the $47 billion mark where it last raised private capital.
- Adam Neumann, We’s co-founder and chief executive, flew to Tokyo last week to meet one of the company’s biggest investors, SoftBank Group Chief Executive Masayoshi Son, and members of his team, the people said.
- There, they discussed the possibility of an additional infusion of capital, multiple people briefed on the meeting said.
Apple Leads Corporate Bond Bonanza
- Apple on Wednesday joined U.S. companies including Deere and Walt Disney in a recent sprint to issue new bonds, taking advantage of the steep decline in benchmark interest rates and a surge in investor demand.
- Apple launched its first bond deal since 2017, selling $7 billion of debt.
- All three companies issued 30-year bonds with yields below 3%, a first for the corporate debt market.
- The new batch of bonds is primarily being used to refinance near-term debt, helping companies lower their interest expenses by replacing existing debt with lower yielding bonds.
Goldman Sachs’s Partnership Is Shrinking
- Goldman Sachs’s partnership is shrinking under a new chief executive who wants to restore its exclusivity.
- At least a dozen Goldman partners are negotiating their exits from the firm that are likely to be announced in coming weeks, executives said.
- They would add to a spike in departures already this year among Goldman’s partners, whose title has inspired envy across Wall Street for decades but lost some of its luster in recent years.
- In all, up to 15% of Goldman’s partners may leave this year, far higher than typical turnover.
Judge Approves Settlement Allowing CVS-Aetna Merger
- A federal judge on Wednesday approved a Justice Department settlement that allowed CVS Health’s nearly $70 billion acquisition of health insurer Aetna, removing a cloud of uncertainty for the merged company.
- U.S. District Judge Richard Leon had spent months questioning whether the settlement did enough to protect competition and consumers in health-care markets, raising the possibility that he might not approve it.
- The judge, in a first for a court review of a government merger settlement, convened hearings to consider live witness testimony from the deal’s critics who said the Justice Department’s deal with the companies was inadequate.
U.S. safety agency cites Tesla Autopilot design as factor in 2018 California crash
- The National Transportation Safety Board (NTSB) on Wednesday cited driver errors and Tesla’s Autopilot design as the probable cause of a January 2018 crash of a Model S into a parked fire truck on a highway in California.
- The safety board, which previously criticized Tesla’s driver assistance system Autopilot after a 2016 fatal crash in Florida, said that the system’s design “permitted the driver to disengage from the driving task” in the Culver City, California, crash.
- The NTSB said on Tuesday that Autopilot allowed the driver to keep his hands off the wheel for the vast majority of the nearly 14 minutes of the trip.
US ECONOMY & POLITICS
China and the U.S. Will Hold High-Level Trade Talks in Early October
- Chinese and American officials plan to hold trade talks in Washington in early October, a new attempt to tame a trade war that is rippling through the global economy and hurting business investment and confidence.
- Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke by phone on Thursday morning Beijing time and agreed to meet next month for high-level trade talks, state-run China Central Television said.
- The U.S. side confirmed the phone call and said a high-level meeting would take place in Washington in the coming weeks.
- Both sides said deputy-level officials would work together in mid-September to lay the groundwork.
Private Sector Adds 195,000 Jobs, Beating Economists’ Estimates
- The private sector added 195,000 jobs last month, according to the ADP National Employment Report.
- Economists were expecting 140,000 jobs.
U.S. weekly jobless claims rise
- Labor market resilience was underscored by other data on Thursday showing a slight increase last week in the number of Americans filing applications for unemployment benefits.
- the Labor Department said initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 217,000 for the week ended Aug. 31.
- Economists polled by Reuters had forecast claims would be unchanged at 215,000 in the latest week.
- Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid dropped 39,000 to 1.66 million for the week ended Aug. 24.
U.S. Unit Labor Costs Revised Higher in Second Quarter
- A key measure of compensation for U.S. workers rose more quickly in the first half of the year than previously thought, the latest sign corporate profits are being squeezed.
- Unit labor costs rose at a 2.6% annual rate in the second quarter, the Labor Department said Thursday.
- That was up from an initially reported increase of 2.4%.
- Such costs rose at a 5.7% rate in the first quarter, higher than the previously reported 5.5% increase.
- The agency left unchanged its estimates, released last month, that productivity rose at a rate of 2.3% in the second quarter and 3.5% in the first quarter.
Fed Lines Up Another Quarter-Point Rate Cut
- Federal Reserve officials are gearing up to reduce interest rates at their next policy meeting in two weeks, most likely by a quarter-percentage point, as the trade war between the U.S. and China darkens the global economic outlook.
- Investors place a 90% probability on a quarter-percentage-point rate cut and a 10% probability on a larger, half-point cut.
EUROPE & WORLD
Safran raises profit forecasts after strong first half results
- France’s Safran raised full-year forecasts as it reported stronger than expected first-half profits, sending shares in the world’s second-largest aerospace supplier sharply higher on Thursday.
- The maker of aircraft engines and components such as landing gear said first-half recurring operating income rose 36% to 1.883 billion euros on revenues up 27% to 12.102 billion, reflecting higher margins across three reorganized divisions.
- Safran, which co-produces engines for Boeing’s 737 grounded MAX jetliner, said it now expects revenue to grow around 15% in 2019 compared with a previous forecast of 7-9%.
U.K. Lawmakers Foil Johnson With Votes to Delay Brexit and Bar Snap Election
- British lawmakers imposed twin defeats on Prime Minister Boris Johnson, frustrating his signature effort to take Britain out of the European Union at the end of October and thwarting his push for a quick election.
- Lawmakers voted 327 to 299 in favor of a proposal requiring the government to seek a three-month extension to the Brexit deadline if it can’t agree with the EU, by Oct. 19, on new terms for separation that meet Parliament’s approval.
- The House of Commons also rejected Johnson’s push for an Oct. 15 snap general election, though the standoff likely still leaves the U.K. on course for its third nationwide poll in four years, albeit later in the fall.
- The back-to-back blows Wednesday for Mr. Johnson’s minority government significantly reduce the chances that the U.K. will leave the bloc abruptly on Oct. 31 without a deal to minimize expected economic disruption.
- But they also augur a further spell of political and economic uncertainty for Europe’s second-largest economy.
Recession risks rise for Germany as industrial orders plunge
- Weaker demand from abroad drove a bigger-than-expected drop in German industrial orders in July, suggesting that struggling manufacturers could tip Europe’s biggest economy into a recession in the third quarter.
- Contracts for ‘Made in Germany’ goods fell 2.7% from the previous month in July, data showed on Thursday, driven by a big drop in bookings from non-euro zone countries, the economy ministry said.
- That undershot a Reuters consensus forecast for a 1.5% drop.
- Orders from non-euro zone countries plunged nearly 7% on the month while demand from other euro zone countries and domestic bookings rose slightly, the data showed.
- The overall reading for June was revised up to an increase of 2.7 from a previously reported 2.5% increase.
‘Half an Olive Branch’ Fails to Pacify Hong Kong Protesters
- On Thursday, explaining why she withdrew an extradition bill that kick-started a summer of dissent in the city, Chief Executive Carrie Lam said “society” would like “peaceful demonstrators not to provide a legitimate basis for the really violent protesters.”
- Her refusal to authorize an independent inquiry into how police have handled the protests, the opposition camp says, means neither of the opposition forces will be placated.
- The extradition bill—which would have allowed people to be sent to China for trial—was initiated, introduced and now withdrawn by her government, she said. She added that Beijing has backed her administration throughout the process.
TODAY in HISTORY
- Humanitarian Mother Teresa, who won a Nobel Peace Prize for her work with the poor, died in Calcutta, India, at age 87. (1997)
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