US FINANCIAL MARKET
WALL STREET SLIPS AT OPEN ON ESCALATING U.S.-CHINA TENSIONS
- Global stocks retreated Wednesday as trade talks between the U.S. and China appeared to near an impasse, with President Trump threatening to raise tariffs further.
- Major indexes in Europe and Asia also logged declines in early trading as investors grew concerned that relations between the world’s two biggest economies may be further strained after the U.S. Senate passed a bill in support of Hong Kong’s antigovernment protesters.
- China’s Foreign Ministry said the act was a violation of international law, while Hong Kong officials said foreign legislatures shouldn’t interfere with its internal affairs.
- Investors are also growing jittery that fresh tariffs on Chinese products including smartphones and toys may be put into effect Dec. 15, directly hitting American consumers.
- Mr. Trump said in a Tuesday cabinet meeting that China needs to make a deal he likes to avoid levies going even higher.
- Shares in Target climbed about 11% after the retail chain posted another quarter of rising sales.
- Lowe’s jumped 5.9% after the home-improvement retailer raised its profit forecast and disclosed plans to shut some Canadian stores.
- Later today, the Federal Reserve will issue its October policy meeting’s minutes, which may offer further clues about the direction of future policy.
Target lifts profit goal on expected holiday boost, shares surge
- Target raised its full-year earnings forecast on Wednesday, signaling a strong holiday season as the retailer benefits from its investments in same-day delivery services and store revamps, sending its shares up.
- Revenue rose 4.7% in the quarter to $18.7 billion, up from $17.8 billion during the same period last year and ahead of estimates.
- Overall same-store sales rose 4.5%, beating expectations of a 3.6% increase.
- Target’s investments in its same-day delivery services accounted for 80% of its digital comparable sales growth, which surged 31% in the third quarter. Its store traffic was up 3.1%.
- Net income rose 14.5% to $706 million during the quarter, up from $616 million during the same period last year.
- Target said it now expects full-year adjusted profit of $6.25 to $6.45 per share, up from its prior range of $5.90 to $6.20 per share.
- For the holiday quarter, Target expects comparable sales growth of 3% to 4%, in line with expectations.
Lowe’s calms nerves with profit forecast raise after Home Depot sales warning
- Lowe’s raised its annual profit forecast on Wednesday, helping ease concerns over the health of the U.S. consumer after larger rival Home Depot cut its full-year sales estimates ahead of the all-important holiday season.
- Sales grew $17.39 billion, just shy of analyst estimates of $17.68 billion.
- Lowe’s same-store sales rose 2.2% and missed analysts’ estimate of a 3.1% increase, dragged down by weaker performance in Canada.
- In the third quarter, Lowe’s said net income grew to $1.05 billion, from $629 million a year earlier.
- Lowe’s raised its 2019 adjusted earnings forecast to $5.63 to $5.70 per share, from $5.45 to $5.65 earlier.
Boeing Loses Crucial Orders for New 777X Jet from Emirates
- Emirates Airline is reducing its order for Boeing’s embattled 777X jet, electing to buy the smaller 787 Dreamliner instead, in the latest setback for the for the U.S. manufacturer’s newest plane.
- Emirates is still by far the biggest customer for the upgraded 777, with orders remaining for 126 planes.
- But the airline has been frustrated by delays to the aircraft, including those related to its new GE engine.
- Against that backdrop, the airline said Wednesday it would swap orders for 30 of the 777X for 30 of Boeing’s 787s.
- The Dreamliner deal is worth $8.8 billion before customary discounts, at least $3.5 billion less than the value of the 777Xs that have been canceled.
U.S. begins issuing some licenses for companies to supply goods to Huawei
- The U.S. Commerce Department confirmed Wednesday it has begun issuing licenses for some U.S companies to supply non-sensitive goods to China’s Huawei.
- In May, the Trump administration put Huawei on an economic blacklist, citing national security concerns, but on Monday agreed to again extend a temporary general license to assist some U.S. rural network operators.
- U.S. Commerce Secretary Wilbur Ross told Fox Business Network late Tuesday that the department has “had 290-something requests for specific licenses. We now have been starting to send out the 20-day intent to deny letters and some approvals.”
Microsoft Teams surpasses 20 million daily active users; rival Slack shares slip
- Microsoft said its workplace messaging app, Teams, has more than 20 million daily active users, up from 13 million in July.
- The software maker offers the app as part of some Office365 business packages, as well as a free version.
- Slack reported more than 10 million daily active users in the second quarter.
Apple starts construction of new $1 billion campus in Texas
- Apple said on Wednesday it had started construction of a new campus in Austin, Texas, beside its existing facility where it makes the new MacBook Pro laptops.
- Tim Cook is set to give a tour of the Texas factory to U.S. President Donald Trump later on Wednesday.
- The new $1 billion, 3-million-square-foot campus will initially house 5,000 employees, with the capacity to grow to 15,000, and is expected to open in 2022, Apple said.
- Apple said it is also preparing to ship the new Mac Pro desktop computers to customers, at a production facility just a short distance away from Austin, starting in December.
U.S. Fed approves merger between BB&T, SunTrust Banks
- The U.S. Federal Reserve said on Tuesday it approved a merger between BB&T and SunTrust Banks, sealing the biggest tie-up of banks since the 2007-2009 global financial crisis.
- The Fed said its approval was conditioned on several actions, including that BB&T must divest 30 branches and more than $2.4 billion in deposits to mitigate the competitive effects of the merger.
- SunTrust must also satisfy the terms of a newly-issued consent order after the Fed found it had misled certain business customers regarding the operation and billing for some products.
US ECONOMY & POLITICS
Fed Minutes to Shed Light on Internal Debate Over Rates
- The Federal Reserve releases the minutes of its Oct. 29-30 meeting on Wednesday at 2 p.m. EST, shedding light on its decision to cut interest rates and signal a wait-and-see policy stance.
- Officials reduced their benchmark rate by a quarter percentage point for the third time since late July but raised the bar for another cut at their next meeting on Dec. 10-11.
- The meeting last month followed an unscheduled one via videoconference on Oct. 4 when officials discussed and subsequently agreed on a plan to rebuild bank deposits held at the Fed, known as reserves.
- An account of that videoconference call will likely be included in Wednesday’s minutes.
Stalled U.S.-China Trade Talks Raise Threat of Another Impasse
- Trade talks between the U.S. and China are in danger of hitting an impasse, threatening to derail the Trump administration’s plan for a limited “phase-one” pact this year, according to former administration officials and others following the talks.
- Mr. Trump is facing pressure from people within and close to the administration who blame the lack of progress on what they describe as Beijing’s refusal to follow through on commitments at the bargaining table.
- China, for its part, is reluctant to commit to buying a specific amount of American agricultural products, The Wall Street Journal reported last week.
- “China is going to have to make a deal that I like,” President Trump said Tuesday at a cabinet meeting. “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”
- Looming now are plans by the Trump administration to impose 15% tariffs on smartphones, toys and other products from China on Dec. 15. The levies are expected to directly hit consumers as Mr. Trump gears up for his 2020 re-election campaign.
Senate Unanimously Approves Measure Backing Hong Kong Protesters
- The Senate unanimously passed legislation that would re-examine U.S. support for the Hong Kong government as clashes between police and protesters seeking to counter Beijing’s control over the largely self-governing territory grow more violent.
- The Senate bill, approved through a unanimous consent vote, would require the U.S. secretary of state to certify annually that Hong Kong remained sufficiently independent from Beijing to warrant the special status that has helped the city grow into a global financial hub.
- It would also task the president with placing sanctions on individuals who have suppressed human rights in Hong Kong.
- In a statement, the Hong Kong government expressed “deep regret” over the legislation’s passage and said foreign legislatures shouldn’t interfere with its internal affairs.
Beijing Summons U.S. Diplomat to Protest U.S. Support for Protesters
- China’s Foreign Ministry summoned the highest-ranking U.S. diplomat in the capital to object to Washington’s support for Hong Kong protesters, a day after Beijing asserted its authority to rule on Hong Kong’s constitutional issues.
- With the U.S. ambassador currently not in Beijing, the Foreign Ministry said it summoned the U.S. Embassy’s acting chief, William Klein, on Wednesday.
- In Wednesday’s meeting, China Vice Foreign Minister Ma Zhaoxu told Mr. Klein that any effort by the U.S. government to intervene in the Hong Kong issue would only be “lifting up stones to smash your own feet,” according to the Chinese readout.
- On Wednesday, Foreign Ministry spokesman Geng Shuang delivered a diatribe against the U.S. over the Senate’s Hong Kong bill, while referring all trade-war questions to the Commerce Ministry.
House Passes Measure Funding Government Through Dec. 20
- The House passed a short-term spending resolution to keep the government funded through Dec. 20, moving to buy lawmakers more time to reach an agreement on border-security funding in full-year spending legislation.
- Government funding runs out after Nov. 21, leaving Congress and the White House just days to prevent a shutdown at the end of the week.
- Senate Majority Leader Mitch McConnell (R., Ky.) has said the Senate will pass a stopgap measure, and the Trump administration has indicated it supports the continuing resolution.
- The resolution also extends several health-care programs, provides for a 3.1% pay raise for military personnel, and sets funding for conducting the decennial census.
EUROPE & WORLD
China’s Pinduoduo posts bigger loss as costs surge; shares tumble
- China’s Pinduoduo reported a bigger-than-expected quarterly loss on Wednesday due to higher operating expenses, sending the e-commerce company’s shares down 13% before the opening bell.
- Revenue rose 123% to 7.51 billion yuan. Analysts had expected 7.49 billion yuan.
- Annual spending per active buyer by September was 1,566.7 yuan, up 75% from 894.4 yuan of the same period last year.
- Meanwhile, annual active buyers by the end of September reached 536.3 million, up 39% from a year ago.
- Alibaba’s latest earnings report put its active users at 693 million.
- Net loss widened to 2.34 billion yuan in the quarter, from 1.1 billion yuan a year earlier
Former U.K. Consulate Employee Says Chinese Secret Police Tortured Him
- A former employee of Britain’s Hong Kong consulate claimed Chinese secret police beat him, deprived him of sleep and chained him spread-eagled as they pressed him for information about activists leading the pro-democracy protests that have swept the city since June.
- In a series of interviews, Simon Cheng, a Hong Kong citizen who worked for the U.K. mission’s business-development team when he was detained, told The Wall Street Journal he also was questioned repeatedly about the role his interrogators presumed Britain was playing in fomenting the unrest.
- U.K. Foreign Secretary Dominic Raab condemned China’s treatment of Mr. Cheng, which he said “amounts to torture.” The case threatens to strain relations between London and Beijing.
Lucky Eights Power Alibaba’s Blockbuster Share Sale
- Chinese e-commerce giant Alibaba has pulled off a blockbuster Hong Kong stock sale even as protests rage in the city, in a deal packed with auspicious numbers.
- The company said it had raised 88 billion Hong Kong dollars (US$11.2 billion), by selling stock at HK$176 (US$22.49) a share.
- The overall sum raised could rise to nearly US$13 billion if the underwriting banks exercise an option to sell 15% more shares in the days after the stock starts trading on Nov. 26.
Mainland Chinese Investors Pile into Hong Kong Despite Unrest
- Investors from mainland China have plowed nearly $20 billion into Hong Kong’s stock market in less than six months, focusing on cheap valuations despite long-running unrest.
- Cumulative net purchases through the Stock Connect program total HK$150 billion (US$19.17 billion) since the start of June, the month when protests began, according to Wind, a Chinese data provider.
- Year-to-date, net buying has more than doubled compared with last year, at HK$194.8 billion, but remains far behind 2017’s record HK$340 billion.
TODAY in HISTORY
- The war crimes trials of 24 German World War II leaders began in Nuremberg, Germany. (1945)
- President John F. Kennedy agreed to lift the American blockade of Cuba, ending the Cuban missile crisis. (1962)
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