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US FINANCIAL MARKET | US ECONOMY & POLITICS
 EUROPE & WORLD | TODAY IN HISTORY

DAILY MARKET REPORTS

  • U.S. stock indexes dived around 1% on Wednesday as worries over China and the impact of rising Treasury yields on global growth drove falls in luxury goods companies and chipmakers.
  • Technology stocks slid more than 2%, the most among the 11 major S&P sectors, with the Philadelphia Semiconductor index down 3% after Swiss vacuum valve maker VAT Group said demand from chip equipment makers was softening.
  • A Republican senator has asked the two companies for a staff briefing about a Bloomberg report that the Chinese government implanted malicious hardware into server motherboards provided by Super Micro Computer.
  • That all played into a market that is increasingly worried about global growth after warnings from the IMF this week and a rise in Treasury yields to a more than 7-year high above 3% that signals a tightening of available capital globally.
  • U.S. Treasury yields held near multi-year highs after producer prices climbed 0.2% in September, continuing pressure on the Federal Reserve to continue to raise rates even as the global economy struggles with headwinds from the trade war with China.
  • Sears plunged 32% after the Wall Street Journal said the debt-laden retailer was preparing for a possible bankruptcy.

US FINANCIAL MARKET

(Nick Zieminski)

  • Sears shares lost nearly a third of their value in early trading on Wednesday, after a report said that the beleaguered retailer had hired advisers to prepare for a bankruptcy filing ahead of a debt payment deadline.
  • The Wall Street Journal late on Tuesday said Sears had hired boutique advisory firm M-III Partners LLC to help it prepare a filing before a $134 million debt payment becomes due on Monday, citing people familiar with the matter.
  • The Hoffman Estates, Illinois-based retailer has posted seven straight years of losses, while its sales have not grown since the 2008 financial crisis.

Boeing surprises with jump in September plane deliveries

  • Boeing delivered 61 of its best-selling 737 single-aisle aircraft in September, unexpectedly surging past numbers for August and suggesting manufacturing problems at suppliers may be easing. Boeing delivered 57 planes in September last year.
  • The numbers brought overall aircraft deliveries for the first nine months of 2018 to 568, up from 554 at a year ago.
  • Boeing’s production has been hit by delays at suppliers such as fuselage maker Spirit AeroSystems and GE joint venture CFM International, which makes engines for the 737s, resulting in deliveries of just 29 planes in July.
  • Boeing, which aims to deliver between 810-815 planes in 2018, is in front of its main rival Airbus, which delivered 503 aircraft through September this year, up from 454 aircraft deliveries in the same period last year.

Justice Department expected to approve CVS deal for Aetna as soon as Wednesday

  • The U.S. Justice Department is expected to approve drug retailer CVS’s deal to buy health insurer Aetna as soon as Wednesday.
  • The approximately $69 billion CVS-Aetna deal would be the second large deal this year between insurers and pharmacy benefit managers, a consolidation the companies say will help rein in rising U.S. healthcare costs.
  • As part of what is widely expected to be a settlement, Aetna said it would sell all of its standalone prescription drug plans for the Medicare program to WellCare Health Plans, paving the way for the deal’s approval.
  • The companies have said they believe together they can improve customer health by offering more low-priced medical services in CVS’s nationwide network of pharmacies, including providing chronic disease screenings and preventative care.

U.S., European regulators investigating Google glitch

  • At least two U.S. states and two European Union member states are investigating a breach at Google that may have exposed private profile data of at least 500,000 users to hundreds of external developers.
  • The investigations follow Google’s announcement that it would shut down the consumer version of its social network Google+ and tighten its data-sharing policies after a “bug” potentially exposed user data.
  • The Wall Street Journal reported that Google opted not to disclose the security issue due to fears of regulatory scrutiny, citing unidentified sources and a memo prepared by Google’s legal and policy staff for senior executives.
  • Under the EU’s General Data Protection Regulation (GDPR), maximum fines run to 4% of a company’s annual global turnover, meaning that penalties against the biggest Silicon Valley players could in theory run into billions of dollars.

Google challenges record $5 billion EU antitrust fine

  • Alphabet unit Google on challenged a record 4.34-billion euro ($5 billion) fine imposed by European Union antitrust regulators three months ago for using its popular Android mobile operating system to thwart rivals.
  • The company referred to arguments put forward by Chief Executive Sundar Pichai on the day of the EU ruling in July, of which the main one is that Android has created more choice for consumers, not less.
  • EU competition enforcers had said Google’s illegal practices included forcing manufacturers to pre-install Google Search and its Chrome browser together with its Google Play app store on their Android devices.
  • The EU antitrust authorities said the company also paid manufacturers to pre-install only Google Search and blocked them from using rival Android systems.

Waymo hits 10 millionth mile, prepares for public ride hailing

  • Waymo, the Alphabet subsidiary developing self-driving vehicles and an autonomous ride-hailing service, has logged another milestone ahead of a critical launch later this year.
  • The company’s fleet of autonomous vehicles has now logged 10 million miles on public roads in real-world traffic.
  • Waymo is just weeks from making its self-driving minivans available for public use in the Phoenix area. This will be the first robotaxi service in the U.S. and will mark a major advance in the development of self-driving vehicles
  • While Waymo is starting its robotaxi service with a small fleet of autonomous vehicles, the company has ordered 62,000 modified Chrysler Pacifica Hybrid minivans and 20,000 Jaguar I-Pace electric SUVs to expand its fleet.

Self-driving cars may hit U.S. roads in pilot program: NHTSA

  • Fully self-driving cars may be on the fast lane to U.S. roads under a pilot program the Trump administration said on Tuesday it was considering, which would allow real-world road testing for a limited number of the vehicles.
  • Self-driving cars used in the program would potentially need to have technology disabling the vehicle if a sensor fails or barring vehicles from traveling above safe speeds, the National Highway Traffic Safety Administration (NHTSA) said in a document made public Tuesday.
  • NHTSA said the pilot project would seek to find “how best to foster the safe introduction of vehicles with high and full driving automation onto our nation’s roadways.”

Cryptocurrency theft hits nearly $1 billion in first nine months: report

  • Theft of cryptocurrencies through hacking of exchanges and trading platforms soared to $927 million in the first nine months of the year, up nearly 250% from the level seen in 2017, according to a report from U.S.-based cybersecurity firm CipherTrace.
  • The report, which looks at criminal activity and money laundering in the digital currency market, also showed a steadily growing number of smaller thefts in the $20-60 million range, totaling $173 million in the third quarter.
  • Bitcoin’s popularity and the emergence of more than 1,600 other digital coins or tokens have drawn more hackers into the cryptocurrency space, expanding opportunities for crime and fraud.
  • The data also showed that the world’s top cryptocurrency exchanges from countries with weak anti-money laundering regulations (AML) have been used to launder $2.5 billion worth of bitcoins since 2009.
  • At the same time, these exchanges have also been used to purchase 236,979 bitcoins worth of criminal services, equivalent to approximately $1.5 billion at current prices, the report showed.

Walmart Canada exploring possible sale of cannabis-based products

  • Walmart’s Canadian unit said it is exploring the possibility of selling cannabis-based products, but has no immediate plans to get into the business.
  • Walmart is the first major retailer to show an interest in being a part of Canada’s burgeoning industry, as other big U.S. companies, mainly in the alcohol and beverage industries, begin to consider entering the market for cannabis-infused products.
  • The news comes as Canada is on the verge of becoming the first major economy to legalize recreational marijuana on Oct. 17, and shares in cannabis producers have rallied in anticipation.

Travelers to sell smart home solutions on Amazon, offers insurance discounts after purchase

  • The company said the kits will help homeowners prevent losses.
  • It is the first digital insurance storefront of its kind on Amazon’s website, according to Travelers.
  • The kits are currently available for preorder on the storefront and will be released Thursday.
  • The smart home kits include Security cameras, water sensors, motion detectors with multisensor capabilities, a smart home hub that wirelessly connects a wide range of smart devices and enables them to work together, and an Amazon Echo Dot.
  • Eligible Travelers insurance customers will get a discount on their home insurance policies if they buy a smart home kit.

Snapchat announces new scripted shows to win over users

  • Snap announced new scripted shows for its photo messaging app Snapchat which will launch this fall and struck partnerships with Hollywood production companies and writers in hopes of reversing its decline in users.
  • The serialized shows will have new episodes daily, and include a documentary series called “Growing Up is a Drag,” about the coming-of-age of teenage drag stars, produced by the company behind “Keeping Up with the Kardashians.”
  • Snap said the episodes will be fast-paced for mobile viewing and as short as five minutes long, with each show having a profile page where viewers can easily find each episode.
  • The episodes, like Snapchat’s existing shows, will include six-seconds of advertising that are unskippable.

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US ECONOMY & POLITIC

(Howard Schneider)

  • U.S. producer prices increased 0.2% in September, reversing an unexpected decline in August and in line with expectations.
  • In the 12 months through September, the producer price index rose 2.6%, slightly less than expected.
  • Economists had forecast the PPI increasing 0.2% in September and advancing 2.8% year-on-year.

Weekly mortgage applications fall 1.7% as interest rates move above 5%

  • Mortgage application volume fell 1.7% for the week, according to the Mortgage Bankers Association’s seasonally adjusted report. Volume was 15% lower compared with a year ago.
  • Refinance volume fell 3% last week and was 32% lower than a year ago. The refinance share of total applications dropped to 39% – the refinance share of total mortgage applications was 62% two years ago.
  • Mortgage applications to purchase a home, while less rate-sensitive week to week, also fell, down 1% for the week but 2% higher than the same week one year ago.
  • The average contract rate for 30-year fixed-rate mortgages with conforming loan balances increased to its highest level since February 2011, 5.05%, with points increasing to 0.51 from 0.49 for loans with a 20% down payment.

Florida’s Panhandle faces ‘hurricane of a century’

  • Powerful Hurricane Michael closed in on Florida’s northwestern shore on Wednesday with the threat of catastrophic surges of sea water and roof-shredding winds, and the state’s governor said it would be the worst hurricane to hit the region in a century.
  • It was set to make landfall later on Wednesday on Florida’s Panhandle and could drive sea water levels as high as 14 feet (4.3 meters) above normal in some areas, the center said. The storm could strengthen further before coming ashore, it said.
  • Michael’s menace was compounded by its relatively quick development, growing from a tropical storm to Category 4 hurricane in about 40 hours.
  • President Donald Trump declared a state of emergency for the entire state of Florida, freeing up federal assistance to supplement state and local disaster responses.

Trump says China not ready to reach trade deal, repeats threat of more tariffs

  • President Donald Trump repeated his threat to slap tariffs on an additional $267 billion of Chinese imports if Beijing retaliates for the recent levies and other measures the United States has imposed in an escalating trade war between the economic giants.
  • Trump, speaking to reporters in the Oval Office, also said China is not ready to reach a deal on trade.
  • The United States wants to pressure China to make sweeping changes to its trade, technology transfer, and high-tech industrial subsidy practices.
  • Citing the growing trade war, the International Monetary Fund on Tuesday cut its global economic growth forecasts for 2018 and 2019.

China trumps Russia in counterterrorism threat to U.S.: FBI Director

  • China is waging an unprecedented campaign to influence American public opinion as November congressional elections approach and presents the greatest long-term counterintelligence threat to the United States, U.S. security officials said.
  • Senators on the Homeland Security Committee questioned Homeland Security Secretary Kirstjen Nielsen and FBI Director Christopher Wray about President Donald Trump’s assertion that China is interfering in U.S. elections and asked if Beijing poses a larger threat to the country than Moscow.
  • “China absolutely is on an unprecedented – or exerting unprecedented effort to influence American opinion,” Nielsen said. “We have not seen to date any Chinese attempts to compromise election infrastructure.”

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EUROPE & WORLD

(Heather SomervilleGreg Roumeliotis)

  • Japan’s SoftBank is in discussions to buy a majority stake in the U.S. shared office space provider WeWork, a source said, potentially doubling down on one of its biggest bets on a loss-making startup.
  • A deal would signal a shift for SoftBank, which runs the world’s biggest private equity fund and has concentrated its ownership of late-stage startups in minority stakes, as it seeks attractive targets for its huge pool of capital.
  • SoftBank shares fell 5.4% and suffered their biggest one-day drop in nearly two years on Wednesday partly on concerns about the prospects of eight-year-old WeWork whose outlook is tied closely to the ups and downs of the real estate market.
  • The Wall Street Journal reported earlier that SoftBank’s investment could be between $15 billion and $20 billion and would likely come from SoftBank’s Vision Fund.
  • A smaller SoftBank investment under discussion earlier in the year valued WeWork at up to $40 billion, reported in June.

EU nations agree to seek 35% CO2 cut on cars by 2030

  • European Union nations, voicing concern over a U.N. report on global warming, agreed on Tuesday to seek a 35% cut in car emissions by 2030, as Germany warned that overly challenging targets risked harming industry and jobs.
  • The final rules will now be hashed out in talks beginning on Wednesday with the EU’s two other lawmaking bodies: the European Parliament, which is seeking a more ambitious target, and the European Commission, which proposed a lower one.
  • Curbs on the transport sector, the only industry in which emissions are still rising, aims to help the bloc meet its goal of reducing greenhouse gases by at least 40% below 1990 levels by 2030.

Turkish newspaper names 15 Saudis in missing journalist case

  • Turkish pro-government newspaper Sabah said on Wednesday it had identified a 15-member intelligence team it said was involved in the disappearance of prominent Saudi journalist Jamal Khashoggi.
  • Khashoggi was last seen a week ago entering the consulate in Istanbul to get documents related to his forthcoming marriage. His fiancée, waiting outside, said he never emerged and Turkish sources said they believe the prominent critic of Saudi policies, was killed inside the mission.
  • Sabah newspaper published the names and years of birth of 15 Saudis it said arrived at Istanbul’s Ataturk airport on Oct. 2. Twelve of them arrived early on Tuesday, based on photos captured at passport control which it published. The 15 departed at four different times, Sabah reported.
  • The report also said that the Saudis stayed at the Wyndham and Movenpick hotels in Istanbul, in the same neighborhood as the Saudi consulate.
  • Turkish NTV broadcast videos of what it said were the men arriving at the airport and checking into one hotel, as well as videos of what it said was a large van arriving at the consul general’s residence two hours after Khashoggi had entered the consulate.

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TODAY in HISTORY

  • Vice President Spiro Agnew resigned after being charged with tax evasion. (1973)
  • California representative Nancy Pelosi became minority whip. (2001)
  • The US Congress gave President Bush authorization to use military force against Iraq. (2002)

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