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WALL STREET BOUNCES BACK AS TECH SHARES RECOVER

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US FINANCIAL MARKET | US ECONOMY & POLITICS
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DAILY MARKET REPORTS

  • U.S. stocks recovered from a brutal two-day selloff on Wednesday as gains in technology stocks lifted investor sentiment ahead of the Thanksgiving holiday.
  • The pressure on technology stocks appeared to have eased on Wednesday, with the other members of the FAANG group – Amazon.com, Netflix, Alphabet and Facebook – gaining between 1.3% and 2.3%.
  • Apple shares have lost more than 20% since their record closing high on Oct. 3 due to concerns over waning iPhone demand.
  • Worries about slowing global growth and peaking corporate earnings have sapped risk appetite in recent months, throwing into doubt the longevity of the decade-old bull run for stocks.
  • Latest economic data showed new orders for key U.S.-made capital goods were unexpectedly unchanged in October and shipments rebounded modestly, which could temper expectations of an acceleration in business spending on equipment early in the fourth quarter.

US FINANCIAL MARKET

Deere outlook for 2019 disappoints amid trade war, slowing demand

  • Deere gave an underwhelming earnings forecast for fiscal 2019 after missing quarterly profit estimates amid a U.S. trade battle with China that has depressed U.S. farm commodity prices and hurt farm equipment demand.
  • Group sales rose 17% to $9.4 billion, topping the consensus forecast, but the world’s largest tractor maker said that a stronger U.S. dollar and slower global demand would mean net sales will rise only 7% for its 2019 fiscal year.
  • After adjusting for items, net income increased 42% to $3.1 billion, missing expectations on a per share basis.
  • The Moline, Illinois-based tractor maker expects net income of about $3.6 billion in 2019. That would translate into earnings of $11.10 per share, compared with the average analyst estimate of $11.47

Gap’s comparable sales miss as namesake brand struggles

  • Gap reported quarterly same-store sales below estimates, dragged down by another weak performance in its namesake brand, indicating that the apparel retailer needs to double down on efforts to reduce excess inventory and to revive sales.
  • Net sales rose 6.5% to $4.09 billion, slightly above the average estimate of $4 billion.
  • Same-store sales at the Gap brand fell 7% in the third quarter, much bigger than the 4% drop analysts had expected.
  • Net income increased to $266 million compared to $229 million a year earlier, beating consensus.
  • The company cut the top end of its full-year profit forecast to $2.60 per share from $2.70, retaining the lower end at $2.55.

U.S. banking sector reports $62 billion profit in third quarter: FDIC

  • The U.S. banking sector reported $62 billion in profits in the third quarter, up 29.3% from the same period a year ago, according to quarterly data from the Federal Deposit Insurance Corporation.
  • The regulator said in a statement that profits were boosted by a lower effective tax rate and higher operating revenues.
  • Only 3.5% of banks reported net losses, down from 4% a year ago. The number of problem banks also fell from 81 in the second quarter to 71 in the third quarter, the lowest number since the third quarter of 2007.
  • The FDIC’s chair said that while profitability was strong, the industry had seen heightened exposure to credit and interest-rate risk as lenders searched for higher-yield loans.

America’s Online Spending Surge Portends Blowout Black Friday

  • In the first 20 days of November, shoppers spent $31.9 billion online, a jump of almost 17% from a year earlier, according to a report from Adobe Analytics.
  • With online sales already up so sharply this month, Adobe has reaffirmed its full-season forecast of $124.1 billion spent online during the final two months of the year.Mobile phones are the most popular way to shop digitally, accounting for 48% of visits to retail websites, the study said.

U.S. chipmaker Nvidia to provide AI platform for Chinese EV start-ups

  • U.S. chipmaker Nvidia has signed separate deals with Chinese electric vehicle startups XPeng Motors, Singulato Motors and SF Motors to develop autonomous driving technology, Chief Executive Jensen Huang said on Wednesday.
  • Huang said XPeng and Singulato will use Nvidia’s artificial intelligence (AI) driving chip Xavier and its computing platform to develop hardware for autonomous driving, a strategic technology area in which China’s leaders want to compete globally.
  • The companies separately said they will work on a series of projects from data collection to machine learning.

Oil prices pare gains as US crude stockpiles rise by 4.9 million barrels

  • Oil prices slightly pared gains on Wednesday after government data showed a jump in U.S. crude stockpiles, after crude futures earlier clawed back some of the previous day’s plunge.
  • U.S. commercial crude inventories rose by 4.9 million barrels in the week through Nov. 16, the U.S. Energy Information Administration reported.
  • The American Petroleum Institute had said on Tuesday that U.S. crude inventories fell by 1.5 million barrels.

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US ECONOMY & POLITICS

US durable goods orders fall 4.4% in October

  • Orders to U.S. factories for big-ticket manufactured goods fell by the largest amount in 15 months with a key category that tracks business investment showing weakness for a third straight month.
  • The Commerce Department said Wednesday that orders for durable goods dropped 4.4% last month.
  • Shipments of core capital goods – non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans – rose 0.3% in October after a downwardly revised 0.2% drop in the prior month.
  • Economists had forecast core capital goods orders rising 0.2% last month. Core capital goods orders increased 6.4% on a year-on-year basis.

US weekly jobless claims rise to a more than 4-month high

  • Initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 224,000 for the week ended Nov. 17, the highest level since the end of June, the Labor Department said on Wednesday.
  • Economists had forecast claims slipping to 215,000 in the latest week.
  • The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,000 to 218,500 last week.
  • The total number of people claiming benefits in all programs for the week ending November 3 was 1,462,361, an increase of 44,958 from the previous week.

U.S. Existing-Home Sales Rise for First Time in Seven Months

  • Sales of previously owned U.S. homes rose in October for the first time in seven months, suggesting demand is stabilizing at a lower level as available properties become less scarce.
  • Contract closings increased from the prior month to an annual rate of 5.22 million, the National Association of Realtors said Wednesday. That compared with economists’ projections for sales of 5.2 million.
  • The median sales price rose 3.8% from a year earlier, while the inventory of available homes expanded 2.8%, the third straight increase.

U.S. Consumer Sentiment Sours More Than Forecast in November

  • The sentiment index dropped to 97.5, the lowest level since August, from the prior month’s 98.6, according to a University of Michigan report Wednesday.
  • The median estimate of economists was 98.3, which was also the preliminary reading released earlier this month.
  • The gauge of current conditions decreased to 112.3, while the expectations index slipped to 88.1 — also three-month lows.

USTR says China has failed to alter ‘unfair, unreasonable’ trade practices

  • The Trump administration said that China has failed to alter its “unfair” practices at the heart of the U.S.-China trade conflict, adding to tensions ahead of a high-stakes meeting later this month between U.S. President Donald Trump and Chinese President Xi Jinping.
  • The findings were issued in an update of the U.S. Trade Representative’s “Section 301” investigation into China’s intellectual property and technology transfer policies, which sparked U.S. tariffs on $50 billion worth of Chinese goods that later ballooned to $250 billion.
  • USTR said that China was continuing its policy and practice of conducting and supporting cyber-enabled theft of U.S. intellectual property and was continuing discriminatory technology licensing restrictions.

U.S. home refinancing requests fall near 18-year low: mortgage group

  • U.S. borrowers filed the fewest applications for home refinancing in almost 18 years last week even as mortgage rates drifted lower in step with U.S. bond yields, the Mortgage Bankers Association said on Wednesday.
  • The Washington-based industry group said its seasonally adjusted index on refinancing activity fell 5.0% to 783.7 in the week ended Nov. 16. This was the weakest reading since December 2000.
  • On the other hand, MBA’s seasonally adjusted measure on loan applications to buy a home rose to 227.7, up 3.1% for its biggest weekly gain since the July 5 week.

Harvesting in a trade war: U.S. crops rot as storage costs soar

  • U.S. farmers finishing their harvests are facing a big problem – where to put the mountain of grain they cannot sell to Chinese buyers.
  • Across the United States, grain farmers are plowing under crops, leaving them to rot or piling them on the ground, in hopes of better prices next year, according to interviews with more than two dozen farmers, academic researchers and farm lenders.
  • U.S. farmers planted 89.1 million acres of soybeans this year, the second most ever, expecting China’s rising demand to give them better returns than other bulk crops.
  • But Beijing slapped a 25% tariff on U.S. soybeans in retaliation for duties imposed by Washington on Chinese exports, effectively shutting down U.S. soybean exports to China, worth around $12 billion last year and 60% of total exports.

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EUROPE & WORLD

Apple supplier Foxconn seeks to cut costs in 2019: Bloomberg

  • Apple’s biggest iPhone assembler Foxconn aims to cut 20 billion yuan ($2.88 billion) from expenses in 2019 as the company faces “a very difficult and competitive year”, Bloomberg reported, citing an internal memo.
  • The Taiwan-based producer said in a statement it was conducting a regular annual review to budget effectively for 2019, but it was also the latest to point to concerns over demand for Apple’s flagship devices.
  • Foxconn’s iPhone business will need to reduce expenses by 6 billion yuan next year and the company plans to eliminate about 10% of non-technical staff, the Bloomberg report said.

Crunch time for Tencent Music’s 2018 $2 billion IPO hopes

  • Tencent Music Entertainment – China’s answer to Spotify – is facing crunch time on its hotly anticipated U.S. $2 billion mega IPO this year.
  • The streaming giant, which has more than 800 million monthly users, had initially pencilled an October launch for a U.S. initial public offering (IPO) of up to $2 billion, but decided last month to delay until November in the hope that markets would settle.
  • Now, the last mega U.S. IPO of the year faces a still-weak mood towards tech stocks and ongoing market jitters ahead of next week’s G20 meeting in Buenos Aires.

G20 draft communique avoids explicit anti-protectionist pledge: FT

  • The Group of 20 industrialized nations is drafting a communique that will exclude an explicit pledge to fight protectionism, which could help avoid a repetition of friction between U.S. President Donald Trump and world leaders at last year’s summit, the Financial Times reported on Wednesday.
  • The draft communique obtained by the FT calls for countries to keep markets open, preserve multilateral trade, and ensure a level playing field, the newspaper reported.
  • However, there is no explicit commitment to fight protectionism, the FT reported. Anti-protectionist terminology has been part of G20 pledges since the forum was created in 2008.

WTO to set up panels to rule on U.S. tariff disputes

  • The United States and opponents of President Donald Trump’s steel and aluminum tariffs both confirmed their wish to litigate on Wednesday, triggering the procedure for World Trade Organization dispute hearings, a Geneva trade official said.
  • China, the European Union, Canada, Mexico, Norway, and Russia all confirmed they would escalate their disputes by starting adjudication proceedings, while the United States confirmed its wish for dispute panels against Canada, China and the EU.
  • Washington says the metals tariffs, imposed by Trump in March, are a national security measure, and therefore exempt from WTO rules.

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TODAY in HISTORY

  • The 18 1/2 min gap in the Richard Nixon Watergate tapes was revealed. (1973)

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