DAILY MARKET REPORTS
- U.S. stocks were little changed on Friday, kept in check by Treasury yields at seven-year highs after the September jobs report did little to alter the view that the Federal Reserve would continue to gradually raise interest rates.
- U.S. job growth slowed sharply in September, missing economists’ forecasts, likely as Hurricane Florence depressed restaurant and retail payrolls, a Labor Department report showed. Jobs numbers for July and August were revised higher.
- But the unemployment rate fell to near a 49-year low, suggesting the labor market has tightened further, while wages rose steadily, pointing to moderate inflation pressures.
- Among stocks, financials rose 0.42% as longer-dated U.S. Treasury yields rose after the jobs data. Banks were up 0.29%.
- Costco Wholesale shares dropped 3.1% after the company’s quarterly sales barely beat analysts’ estimates, while gross margins fell on rising costs and higher investments.
- Tesla shares fell 4.5% after Chief Executive Officer Elon Musk stirred nerves about the settlement of his securities fraud lawsuit by mocking the U.S. Securities and Exchange Commission on Twitter.
US FINANCIAL MARKET
(Soundarya J, Jaslein Mahil)
- Costco Wholesale’s quarterly sales barely beat analysts’ estimates on Thursday as growth in online business decelerated to its slowest in the year amid intense competition, while gross margins fell on rising costs and higher investments.
- Net sales rose 5% to $44.41 billion. Analysts on average expected revenue of $44.27 billion.
- Adjusted same-store sales rose 7.2%, beating estimates of a 6.4% rise.
- The company’s gross margin fell 35 basis points to 10.92% in the fourth quarter on higher gas prices and investments.
- Net income rose to $1.04 billion in the fourth quarter.
Tesla shares fall after Musk mocks SEC on Twitter
- Shares of Tesla fell as much as 4% on Friday after Chief Executive Elon Musk stirred nerves about the settlement of his securities fraud lawsuit by mocking the U.S. Securities and Exchange Commission on Twitter.
- The tweet calling the SEC the “Shortseller Enrichment Commission” came just hours after a federal judge ordered Musk and the SEC to write a letter justifying a settlement which allows him to remain in charge at Tesla.
- In the settlement that was announced over the weekend, Tesla and Musk instead agreed to pay $20 million each to the regulator while the billionaire – also a large Tesla shareholder – would step down as chairman but continue as CEO.
Steinhoff’s Mattress Firm files for Chapter 11 bankruptcy
- Steinhoff’s United States unit, Mattress Firm, has filed for voluntary Chapter 11 bankruptcy protection to strengthen its balance sheet and support its parent company’s debt restructuring, the South African company said on Friday.
- The restructuring of the largest U.S. mattress retailer comes as its parent fights for survival after revealing multi-billion-euro holes in its balance sheet that wiped more than 90% off its market value and forced it to sell assets to fund working capital.
- Mattress Firm, which has 3,000 brick-and-mortar locations, will implement a restructuring plan that will initially close around 200 stores and reject up to 700 leases, with the possibility of further closures, it said.
- The retailer has received $650 million to fund ongoing operations and repay debt and costs associated with the restructuring.
Snap to bet on older users, revamped marketing for profitability in 2019
- Snap’s Chief Executive Evan Spiegel has set a goal to achieve full-year profitability in 2019 and outlined a new set of strategic goals, online news service Cheddar reported on Thursday, citing a memo.
- In the memo, Spiegel admitted that Snapchat had “rushed redesign, solving one problem but creating many others”.
- Spiegel said the company would aim to reach the profit goal by attracting older users through revamped marketing, increase active advertisers and better serve emerging markets users with the forthcoming redesign of its Android app.
E-cigarette maker Juul files complaints against ‘copycat products’
- Juul Labs, the e-cigarette maker at the heart of a U.S. crackdown on youth vaping, has filed patent infringement complaints in the United States and Europe against what it said were copycat rivals.
- Juul, which controls nearly three-quarters of the U.S. e-cigarette market, filed a complaint on Wednesday with the U.S. International Trade Commission (ITC) naming 18 entities, most of them based in the United States or China, accusing them of developing and selling products based on its patented technology.
- The complaints follow the seizure this week by U.S. health regulators of more than 1,000 pages of documents from Juul Labs about its sales and marketing practices, as they investigate growing e-cigarette use among young people that threatens to create a new generation of nicotine addicts.
US ECONOMY & POLITIC
- U.S. job growth slowed sharply in September likely as Hurricane Florence depressed restaurant and retail payrolls, but the unemployment rate fell to near a 49-year low of 3.7%, pointing to a further tightening in labor market conditions.
- Nonfarm payrolls increased by 134,000 jobs last month, the fewest in a year, as retail, leisure, and hospitality shed employment.
- Economists had forecast payrolls increasing by 185,000 jobs in September and the unemployment rate falling to 3.8%.
- Data for July and August were revised to show 87,000 more jobs added than previously reported.
- Average hourly earnings increased 0.3% in September after a similar rise in August, meaning the annual rise in wages fell to 2.8% from 2.9% in August, which was the biggest advance in more than nine years.
US trade deficit widens to $53 billion as soybean exports plummet amid China trade battle
- The imbalance increased $3.2 billion in August to $53.2 billion, a 6.4% increase and part of an ongoing trend in 2018, according to the figures released Friday by the Bureau of Labor Statistics and the U.S. Census.
- For the calendar year, the trade deficit is up $31 billion or 8.6% from a year ago.
- One particular contributor to the August imbalance was soybeans, a hotly contested point of the trade war. Soybean exports fell $1 billion for the month.
- Overall, industrial supplies and materials exports fell $2.4 billion, food, feeds, and beverages declined $1.2 billion, while consumer goods rose $1.6 billion.
- On the import side, auto vehicles, parts, and engines rose $1 billion while consumer goods increased $900 million.
Manufacturers on pace for most bullish year ever amid lower taxes and deregulation
- A combination of lower corporate taxes and slashing of regulations by the Trump administration have manufacturers on pace for their most optimistic year on record, according to the latest National Association of Manufacturers survey.
- More than 92% of manufacturers surveyed said they had a positive outlook for their businesses in the third quarter.
- At that rate, putting 2018 would be the most optimistic year for manufacturers in the survey’s history.
Tariff deal with U.S. not yet even in ‘pre-work’ stage: EU trade chief
- The European Union has yet to begin even “pre-work” towards a transatlantic trade agreement on industrial goods aimed at averting a tariff war with U.S. President Donald Trump, Trade Commissioner Cecilia Malmstrom said on Friday.
- Addressing a meeting of EU trade ministers, Malmstrom said there was progress in ongoing efforts to improve trade ties with the United States by cooperating on regulations, but she suggested a deal on reducing import duties was a long way off.
- The EU ministers met to debate what to offer the United States to ease tensions and avert a return to a tit-for-tat tariff conflict.
Brett Kavanaugh’s Supreme Court nomination advances to final vote in confirmation showdown
- Senate Republicans won a key vote Friday to advance embattled Supreme Court nominee Brett Kavanaugh to his final confirmation vote.
- The majority-republican Senate voted 51-49 to end debate on Kavanaugh, setting him up for his final hurdle on his path to the high court.
- Of the swing votes: Flake, Collins, and Manchin all voted for him, while Murkowski, Heitkamp, and Donnelly voted against.
- Heitkamp and Donnelly have seats at risk in deep red states and are key to the Democrats regaining the Senate.
Pentagon sees China as ‘growing risk’ to U.S. defense industry
- China represents a “significant and growing risk” to the supply of materials vital to the U.S. military, according to a new Pentagon-led report that seeks to mend weaknesses in core U.S. industries vital to national security.
- The nearly 150-page report, seen by Reuters on Thursday ahead of its formal release on Friday, concluded there are nearly 300 vulnerabilities that could affect critical materials and components essential to the U.S. military.
- China was given heavy emphasis in the report. It was singled out for dominating the global supply of rare earth minerals critical in U.S. military applications.
- The report noted China’s global profile in the supply of certain kinds of electronics as well as chemicals used in U.S. munitions.
- The report also examined U.S. shortcomings that contribute to weakness in the domestic industry, including roller-coaster U.S. defense budgets that make it difficult for U.S. companies to predict government demand.
Pence accuses China of ‘malign’ campaign to undermine Trump
- U.S. Vice President Mike Pence intensified Washington’s pressure against Beijing on Thursday by accusing China of “malign” efforts to undermine ahead of next month’s congressional elections and reckless military actions in the South China Sea.
- In what was billed as a major policy address, Pence sought to build on Trump’s speech at the United Nations last week in which he accused China of trying to interfere in the vote that will determine if his Republican Party keeps control of Congress.
- Neither Trump nor Pence provided hard evidence of meddling by China, which last week rejected the president’s allegation.
EUROPE & WORLD
- Samsung Electronics estimated third-quarter operating profit jumped by a fifth to a record high, with its semiconductor unit bolstered by robust demand from data centers and gains in production yields.
- Preliminary operating profit climbed 20.4% to 17.5 trillion won ($15.5 billion) on a 4.8% gain in revenue, in line with expectations.
- The firm did not elaborate on its performance and will disclose detailed earnings in late October.
- Chips account for nearly 80% of Samsung’s operating profit and Samsung has benefited from a surge in data centers for cloud computing that has spurred spikes in prices for DRAM chips.
South Korea’s LG Electronics quarter-three profit likely rose 44% year-on-year
- South Korea’s LG Electronics said its third-quarter operating profit likely rose 44.4% from a year earlier, slightly below estimates.
- Revenue likely rose to 15.4 trillion won from 15.2 trillion won from a year earlier, compared with a 15.9 trillion won forecast.
- LG estimated July-September profit at 746 billion won ($659.76 million), compared with an average 776 billion won forecast.
- LG did not elaborate on its performance and will disclose detailed earnings in late October.
Canada records first trade surplus since Dec 2016, exports down
- Canada recorded its first trade surplus for more than 18 months in August as unusually timed shutdowns at auto plants helped cut imports at a greater rate than exports, Statistics Canada said on Friday.
- The surplus of C$526 million ($408 million) was the first since December 2016.
- Exports fell by 1.1% partly due to lower shipments of motor vehicles, and imports dropped by 2.5% for the same reason.
Canada adds 63,300 jobs in September, many more than expected
- The Canadian economy added 63,300 jobs in September, more than twice as many as forecast, and the jobless rate edged down to 5.9%, Statistics Canada data indicated on Friday.
- Analysts had called for a gain of 25,000 jobs from August when 51,600 positions were lost.
- The gain resulted entirely from an 80,200 increase in part-time positions. Full-time employment dropped by 16,900 jobs.
TODAY in HISTORY
- The Beatles released their first hit, “Love Me Do,” in Britain. (1962)
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