DAILY MARKET REPORTS
- U.S. stocks fell in morning trading on Tuesday as weak economic data from China added to fears of a global recession and pushed investors out of riskier technology stocks.
- China’s factory-gate prices shrank 0.8% in August, the sharpest pace of decline in three years, as businesses slashed prices to cope with flagging demand amid a bruising trade war with the United States that has slowed growth in the world’s second largest economy.
- The U.S. Federal Reserve and the European Central Bank (ECB) are widely expected to cut interest rates over the next two weeks, but investors doubt the extent to which central banks’ measures will stem an economic slowdown.
- Unlike in the U.S., where investors seem fairly confident that an interest-rate cut is coming, European investors remain skeptical of how aggressive the ECB will be.
- In Tuesday’s action, Ford Motor shares fell 4% after Moody’s Investors cut the company’s bond rating to junk status.
US FINANCIAL MARKET
Top U.S. banks temper net interest income view, cite potential rate cuts
- U.S. bank executives struck a cautious tone on Monday as they updated investors on how lower interest rates and an inverted yield curve would affect the year’s profits.
- Speaking at an industry conference, top brass from Citigroup and Wells Fargo tempered their outlooks for net interest income, a measure of how much money a lender earns from charging interest, citing macroeconomic concerns.
- It was the banks’ first guidance since the U.S. Federal Reserve cut interest rates in July for the first time in over a decade.
- Wells Fargo Chief Financial Officer John Shrewsberry said the San Francisco-based lender now expects net interest income to fall 6% in 2019, lowering projections for the second time this year. Previously, the bank forecast a decline of up to 5%.
- Citi now expects net interest income to be up between 3% and 4% for the year, compared with prior guidance of 4% growth.
Moody’s Cuts Ford’s Bond Rating to Junk Status
- Moody’s Investors Service cut Ford’s bond rating to junk status, citing weak cash generation and a yearslong restructuring plan that the auto maker is undertaking just as the car market softens globally.
- The ratings company on Monday cut Ford’s rating one notch to Ba1 from Baa3.
- Moody’s said Ford’s cash flow and operating-profit margins have fallen below the its forecasts and noted the auto maker’s sharply weaker performance in China, where Ford’s sales have plummeted over the last two years, leading to sharp losses.
Apple Bets More Cameras Can Keep iPhone Humming
- On Tuesday, Apple plans to reveal a trio of new iPhones with additional rear cameras and enhanced capabilities for low-light photos, according to people familiar with the plans.
- Analysts expect the phones to also feature faster processors, new exterior colors such as green and purple, and wireless charging for other devices such as AirPods wireless earbuds.
- In terms of pricing, most analyst expect prices to remain unchanged from the last year’s models, between $749 and $1,099 depending on size and features.
- The company, in addition to unveiling new smartphones this week, is expected to reveal a fifth version of its smartwatch that analysts say will have new casing and improved battery life, and be further liberated from the iPhone with a full App Store.
- Apple also is on the cusp of releasing new subscription services for TV shows and videogames announced in March.
Uber, Lyft Poised to Lose Fight Against California Bill to Label Drivers Employees
- California Democrats are poised to pass landmark employment legislation over the objections of two of the companies that would be most affected: Silicon Valley ride-sharing giants Uber Technologies and Lyft.
- The bill already passed the State Assembly 59-15 and is expected to be voted on in the state Senate before the legislative session ends on Friday, possibly as soon as Monday night.
- Democratic Gov. Gavin Newsom has said he would sign the bill, which intends to force companies that rely on “gig workers” to reclassify them as employees, likely upending the business model of those companies.
- Lyft in particular has said that the bulk of its roughly 325,000 California drivers—most of whom are part time—would no longer be able to drive for the company if they were employees, because it would need to start scheduling shifts.
Chip Makers Still Await Clearance to Sell to Huawei
- More than two months after President Trump agreed to ease export restrictions on Huawei, the U.S. has yet to green-light any sales to the Chinese telecom giant—frustrating U.S. chip makers that stand to lose billions of dollars in revenue.
- The Huawei blacklist, which went into force May 16, cut U.S. chip makers off from a pipeline that enabled them to send $11 billion worth of components to Huawei last year.
- President Trump, meeting with Chinese President Xi Jinping on the sidelines of the Group of 20 summit in Osaka, Japan, on June 29, agreed to ease the blacklist for cases that didn’t involve national security.
- But the Commerce Department has yet to grant any licenses for restricted sales.
- A spokesman for the Commerce Department said it is reviewing applications from Huawei suppliers, which can require input from the Defense, State and Energy departments.
U.S. states launch antitrust probe of Google, advertising in focus
- Attorneys general from 48 U.S. states, the District of Columbia and Puerto Rico formally opened an antitrust probe on Monday into Alphabet’s Google, in a sign of growing government scrutiny of U.S. technology giants.
- Texas Attorney General Ken Paxton, who is leading the probe, said it will focus on Google’s “overarching control of online advertising markets and search traffic that may have led to anticompetitive behavior that harms consumers.”
- California and Alabama declined to be part of the probe.
Judge lets Facebook privacy class action proceed, calls company’s views ‘so wrong’
- A federal judge on Monday ordered Facebook to face most of a nationwide lawsuit seeking damages for letting third parties such as Cambridge Analytica access users’ private data, calling the social media company’s views on privacy “so wrong.”
- While dismissing some claims, U.S. District Judge Vince Chhabria in San Francisco said users could try to hold Facebook liable under various federal and state laws for letting app developers and business partners harvest their personal data without their consent on a “widespread” basis.
- He rejected Facebook’s arguments that users suffered no “tangible” harm and had no legitimate privacy interest in information they shared with friends on social media.
Amazon’s New Multistory Warehouse Aims to Cut Delivery Times
- Amazon.com has agreed to take space in a first-of-its-kind three-story warehouse, a new type of distribution center that could reduce delivery times in congested cities to hours rather than days.
- The warehouse is the first of its kind to open in the U.S. with multiple floors that large delivery trucks can access by ramps, property analysts say.
- Amazon is taking about 500,000 square feet, and the Home Depot has plans to take almost 100,000 square feet, according to a person familiar with the project.
US ECONOMY & POLITICS
US job openings decline for second straight month
- U.S. job openings fell for a second straight month in July amid decreases in wholesale trade and the federal government, which could bolster economists’ views that job growth has peaked.
- Job openings, a measure of labor demand, slipped by 31,000 to a seasonally adjusted 7.2 million in July, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS, on Tuesday.
- Job openings have been little changed this year since scaling an all-time high of 7.6 million in late 2018.
- The job openings rate fell to 4.5% from 4.6% in June.
U.S. median household income was $63,179 in 2018: Census
- The median U.S. household income was roughly the same in 2018 as the prior year, while the number of people living in poverty fell slightly to 11.8% of the population, federal government data showed on Tuesday.
- The Census Bureau said in its Income, Poverty and Health Insurance Coverage and Supplemental Poverty Measure report that median household income was $63,179 last year compared with $62,626 in 2017.
- It said about 27.5 million residents did not have health insurance in 2018, up from 25.6 million during the previous year.
- The poverty rate fell to 11.8% last year from 12.3% in 2017.
Inflation Expectations Ease in August, New York Fed Survey Says
- The Federal Reserve Bank of New York said that inflation expectations a year and three years from now fell in August.
- One year from now, households in its Survey of Consumer Expectations said they see a record-low increase for the survey of 2.4%, down from 2.6% the prior month.
- Three years from now inflation expectations ebbed to 2.5%, from 2.6% in July.
- The New York Fed also said expectations for changes in home prices, medical care costs and rent also hit lowest-ever readings in the survey’s history.
Congress Buys Itself Extra Time to Avoid Shutdown
- Senate Majority Leader Mitch McConnell (R., Ky.) said on Monday that the Senate would move to pass a temporary funding measure by the end of the month.
- House Democrats last week indicated that they would move to pass a stopgap spending bill, though Senate Republicans had not publicly endorsed the proposal until Monday.
- Funding for the federal government will run out on Oct. 1, and lawmakers were quickly approaching that deadline without even beginning many of the most contentious spending negotiations.
- Delayed by talks this summer to set overall spending levels and raise the debt ceiling, the Senate has yet to consider any spending legislation, while the House has passed the vast majority of its spending bills.
Trump Holds Rally Ahead of North Carolina Election Seen as 2020 Bellwether
- President Trump traveled to North Carolina on Monday to rally on behalf of a congressional candidate as he goes all-in on a special election both parties see as a referendum on the man in the White House and a bellwether for his 2020 chances.
- Tuesday’s do-over election was called in February after the state election board found evidence of absentee-ballot fraud on behalf of the then-GOP candidate, pastor Mark Harris.
- Democrat Dan McCready is taking another run at the seat, this time facing Republican Dan Bishop, a 55-year-old state senator who won a 10-way primary last spring after Mr. Harris decided not to participate in the redo.
- Polls show a dead heat between Mr. McCready and Mr. Bishop.
- Tuesday’s vote is a test of how voters, particularly suburbanites who make up much of the district, view Mr. Trump as the 2020 campaign kicks into gear, people from both political parties said in interviews.
- If Mr. Bishop loses it will be a sign that a winning Democratic strategy in a red or swing state is to run as a centrist and at a distance from the progressive wing of the national party.
U.S. House panel to review DOJ automaker antitrust probe
- The U.S. House Judiciary Committee plans to hold hearings and seek documents into the Justice Department’s decision to open an antitrust investigation into four major automakers’ voluntary agreement with California to adopt compromise vehicle emissions requirements.
- House Judiciary Chairman Jerrold Nadler and Representative David Cicilline, who chairs a subcommittee on antitrust issues, said in a joint statement late on Monday the probe of Ford, Honda, BMW, and Volkswagen “is only the latest in a profoundly troubling pattern of abuse of power that has flourished under the Trump presidency.”
- The antitrust division sent Aug. 28 letters to the four automakers saying the government was concerned the agreement “may violate federal antitrust laws” but adding it had “reached no conclusions,” according to documents seen by Reuters.
- In July, the four automakers said they had reached a deal to adopt standards that were lower than Obama-era rules but higher than the Trump administration’s 2018 proposal.
Trump Officials Head to Congress to Detail Plans for Fannie and Freddie
- Treasury Secretary Steven Mnuchin is scheduled to testify before the Senate Banking Committee on Tuesday, starting at 10 a.m. EDT, about his department’s efforts to overhaul mortgage-finance giants Fannie Mae and Freddie Mac.
- His testimony comes five days after the administration released a report calling for the privatization of the companies, 11 years after the government took them over through a process called conservatorship.
- Mnuchin will testify alongside Mark Calabria, the head of the Federal Housing Finance Agency, who will play a key role in any push to privatize the companies, and Ben Carson, the secretary of the Department of Housing and Urban Development.
EUROPE & WORLD
China August factory deflation deepens, prices fall most in three years; pork prices soar
- China’s factory-gate prices shrank at the sharpest pace in three years in August, falling deeper into deflationary territory and reinforcing the urgency for Beijing to step up economic stimulus as the trade war with the United States intensifies.
- China’s producer price index (PPI) dropped 0.8% from a year earlier in August, widening from a 0.3% decline seen in July and the worst year-on-year contraction since August 2016, National Bureau of Statistics (NBS) data showed on Tuesday.
- Analysts polled by Reuters had expected the index to have shrunk by 0.9%, the second straight month of outright declines.
Chinese Consumer Prices Fattened by Precious Pork
- China’s consumer inflation rate kept up an accelerated pace in August as the price of pork, a mainstay of the Chinese diet, rose at its fastest clip in eight years.
- China’s overall consumer-price index rose 2.8% from a year earlier—matching the July level, which was the fastest pace in 17 months—data from the National Bureau of Statistics showed Tuesday.
- Economists expected a 2.6% rise, factoring in an expected retreat in vegetable prices and a higher year-earlier base comparison.
- However, pork prices jumped nearly 47% as supplies were crimped by outbreaks of African swine fever, a highly infectious virus that is deadly for pigs but not harmful to humans.
- China’s core consumer-inflation rate, which strips out volatile food and energy prices, slipped to a three-year low of 1.5% in August, reflecting sluggish domestic demand.
Mario Draghi’s Plan for Final Jolt of Stimulus Runs into Opposition
- In the run-up to his departure on Oct. 31, European Central Bank President Mario Draghi has signaled plans for a large, final burst of monetary stimulus to prop up a eurozone economy that is tottering under the pressure of trade tensions.
- But critical voices are multiplying, including a growing number from the ECB’s own 25-member rate-setting committee.
- Mr. Draghi’s critics say the eurozone economy isn’t weak enough to warrant aggressive new measures just a year after the ECB began phasing out its €2.6-trillion ($2.686 trillion) bond-buying program.
- Borrowing costs for households, businesses and governments are so low, they argue, that easier money will have little effect.
- The bank’s key interest rate is already minus 0.4%.
- They also say the measures—further interest-rates cuts and a new bond-buying program—risk leaving the bank with virtually no ammunition if the economy sinks further, while also exacerbating the risk of asset bubbles and damage to the region’s banks.
Margrethe Vestager, EU Commissioner Who Targeted U.S. Tech Giants, Is Given Second Term
- Margrethe Vestager, the Danish politician who has been the public face of the European Union’s regulatory push against Silicon Valley, has been nominated for a second, five-year term as the bloc’s competition commissioner.
- Ms. Vestager was expected to hand over the competition role—a powerful post with hands-on responsibilities for investigating and enforcing anticompetition issues—as she ascended to a higher role in the commission.
- Ms. Vestager is slated to become one of incoming European Commission President Ursula von der Leyen’s three “executive” deputies, in a move that is expected to provide the new vice-president with extra clout in commission deliberations.
- Ms. Vestager’s confirmation by the European Parliament is widely expected.
TODAY in HISTORY
- Elias Howe of Massachusetts received a patent for his sewing machine. (1846)
- Canada declared war on Germany, entering WWII. (1939)
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