US FINANCIAL MARKET
WALL STREET EDGES LOWER AFTER CONFLICTING SIGNALS ON TRADE
- The three major U.S. indexes fell on Thursday after conflicting headlines on U.S-China trade relations and a row between the world’s top two economies over the Hong Kong protest led to uncertainty over the timing of a deal to end the dispute.
- China’s chief trade negotiator late last week invited his American counterparts for a new round of face-to-face talks.
- Chinese officials hope the negotiations can take place before Thanksgiving, but the U.S. side hasn’t committed to a date.
- That report came less than a day after President Trump criticized China’s efforts to reach a trade agreement, escalating concerns that the world’s two biggest economies won’t reach a deal this year.
- Adding to strains between the two nations, Beijing on Wednesday summoned the highest-ranking U.S. diplomat in the capital to object to Washington’s support for Hong Kong protesters after the House of Representatives passed legislation Wednesday requiring the U.S. to re-examine its relationship with Hong Kong.
- That put formal American support for the pro-democracy protests in the hands of Mr. Trump, but Congress would be able to override any veto given the broad bipartisan support.
- New data Thursday showed the number of Americans applying for first-time unemployment benefits held steady at a near five-month high last week, above the level expected by economists surveyed by The Wall Street Journal.
Macy’s cuts forecast ahead of holiday season after gloomy quarter
- Macy’s cut its annual profit forecast for the second time this year on Thursday, as the department store operator blamed weak international tourism and sluggish mall traffic for the first drop in same-store sales in two years.
- Net sales were $5.17 billion, down more than 4% from the comparable quarter a year ago. Analysts were expecting $5.32 billion.
- Comparable sales at Macy’s owned and licensed stores fell 3.5% in the third quarter, also due to prolonged warm weather that hit demand for winter goods. Analysts had expected a 1% decrease.
- Adjusted net income fell to $21 million in the quarter, from $83 million a year earlier.
- Macy’s now expects 2019 adjusted profit of between $2.57 per share and $2.77 per share, compared with its previous forecast of between $2.85 and $3.05.
- It also projected full-year total comparable sales to fall between 1% and 1.5%, compared to a previous forecast of up to a 1% rise.
Shares of Victoria’s Secret parent L Brands jump on fourth-quarter forecast, in-line profits
- L Brands posted mixed third-quarter results as declining sales at Victoria’s Secret continued to weigh on its performance.
- Sales fell to $2.68 billion from $2.78 billion a year ago, and were slightly lower than the $2.69 billion analysts expected.
- Same-store sales at L Brands’ total business fell 2% in the third quarter, a bigger drop than the 1% decline analysts forecast.
- The company’s net losses widened to $252 million from a loss of $42.75 million in the same quarter a year ago.
- The company said it expects 2019 fourth-quarter earnings per share to be about $2.00, which would result in full-year adjusted earnings per share of about $2.40. L Brands previously expected fiscal 2019 earnings to range between $2.30 and $2.60 per share.
Amgen raises 2019 profit, sales view after buying Celgene psoriasis drug
- Amgen on Thursday raised its full-year profit and revenue forecasts after completing its $13.4 billion acquisition of Celgene’s psoriasis therapy Otezla.
- Full-year revenue is now expected between $23.1 billion and $23.3 billion, compared with the previous range of $22.8 billion to $23.0 billion.
- Amgen now expects 2019 adjusted earnings per share between $14.50 and $14.70, up from its prior range of $14.20 to $14.45.
PayPal to Buy Honey Science for $4 Billion
- PayPal has reached a roughly $4 billion deal to buy shopping and rewards platform Honey Science, as it pushes to gain a bigger role in consumers’ shopping habits.
- Honey, which is profitable and generated more than $100 million in revenue in 2018, helps people find discount codes online, working with the likes of AliExpress; Walmart; Adidas; and LVMH’s Sephora.
- PayPal executives say that Honey, which will be embedded into its apps, would help drive deeper engagement with its 300 million customers while helping merchants target new customer segments.
- Honey’s roughly 17 million active monthly users, they said, skew young and overlap to some extent with PayPal’s digital money-transfer service, Venmo.
Charles Schwab in talks to buy smaller rival TD Ameritrade
- Charles Schwab, the largest discount broker in the U.S. financial world, is in talks to buy rival TD Ameritrade, CNBC reported, as profits in the industry come under pressure from a shift to zero commission.
- CNBC did not provide any financial detail on the deal, but Fox Business pegged the value at $26 billion, citing sources.
- A deal between Charles Schwab and TD Ameritrade could be seen as a response to recent disruption in the industry, where nimbler startups such as Menlo Park, California-based Robinhood are rapidly gaining market share by eliminating commissions on stock trades.
Tesla Targets U.S. Auto Makers’ Profit Engine with Electric Pickup
- Tesla Chief Executive Elon Musk has talked for years about building an electric pickup truck that would threaten the heart of the Detroit automakers’ profits, and on Thursday he will finally take the wraps off the so-called cyberpunk truck.
- Analysts expect the Tesla pickup, which Musk has said would combine the performance of a Porsche 911 with the functionality of Ford’s industry-leading F-150 full-size truck, to debut in late 2021 or early 2022 with a starting price of under $50,000.
- As Musk pushes to take a bite of Detroit’s profits, Ford and larger rival General Motors are gearing up to challenge Tesla more directly with new offerings like the Ford Mustang Mach E electric SUV as well as electric pickups.
Google to Restrict Political Ad Targeting on Its Platforms
- Google said Wednesday it plans to stop allowing highly targeted political ads on its platform, further fragmenting the rules being set by Silicon Valley tech giants for guarding against misinformation.
- Google will roll out the ban within a week in the U.K., in advance of a Dec. 12 general election.
- The ban will take effect in the European Union by the end of the year and in the rest of the world on Jan. 6.
- Under the new policy, political ads can only be targeted based on users’ age, gender, and location at the postal-code level.
- Advertisers would no longer be able to target political ads based on users’ interests inferred from browsing or search history.
US ECONOMY & POLITICS
U.S. Existing-Home Sales Increased 1.9% in October
- Sales of previously owned homes rose in October after a decline in the previous month, with gains concentrated in mid- and high-priced homes, a sign limited inventory is posing challenges for sales of homes priced at the low end.
- Existing-home sales rose 1.9% in October from the previous month to a seasonally adjusted annual rate of 5.46 million.
- Economists forecast sales increased 1.5% last month.
- Sales in October increased 4.6% from the same month the previous year, marking the fourth straight month of year-over-year gains.
- September sales were revised down to 5.36 million, compared with an earlier estimate of a 5.38 million pace.
US weekly jobless claims unchanged at five-month high
- The number of Americans filing applications for unemployment benefits was unexpectedly unchanged at a five-month high last week, suggesting some softening in the labor market.
- Initial claims for state unemployment benefits were flat at a seasonally adjusted 227,000 for the week ended Nov. 16, the highest level since June 22, the Labor Department said.
- Data for the prior week was revised to show 2,000 more claims received than previously reported.
- Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid rose 3,000 to 1.70 million for the week ended Nov. 9.
Fed Officials Cut Rates Last Month Amid Worries on Trade, Global Growth
- Federal Reserve officials said little about what would prompt them to resume interest-rate cuts when they signaled a pause following last month’s rate reduction.
- In cutting rates for the third time since July, Fed policy makers at the October meeting worried that weakness in manufacturing, trade and business investment could threaten the economic expansion by triggering cutbacks in hiring and consumer spending, according to minutes of the policy meeting, released Wednesday.
- They showed last month’s decision to cut rates had less support than earlier moves and that most officials thought that they should shift to a wait-and-see stance in the weeks or months ahead.
- Investors expect the Fed to hold rates steady at its next meeting on Dec. 10-11, and futures markets see a roughly 50% probability of one more rate cut by the middle of next year, according to CME Group.
House Passes Bill Supporting Hong Kong Protesters
- The House passed legislation Wednesday requiring the U.S. to re-examine its relationship with Hong Kong, putting formal American support for pro-democracy protests in Hong Kong in the hands of President Trump and adding to strains between the U.S. and China.
- The House bill is the same legislation that passed in the Senate on Tuesday, requiring the secretary of state to certify annually that Hong Kong is independent enough from Beijing to retain favored trading status, an underpinning of its economy.
- White House officials said they expect Mr. Trump to sign the bill, but cautioned that he hasn’t yet made a final decision.
- Signing the bill could further aggravate Beijing, while vetoing it likely would be widely seen as a betrayal of pro-democracy protesters. The White House declined to comment.
Trump Blames Beijing for Lagging Trade Talks
- President Trump criticized China’s efforts to reach a trade agreement during a visit to a Texas plant where Apple is assembling its new desktop computer.
- Mr. Trump toured the Austin facility with Apple Chief Executive Tim Cook on Wednesday as the White House sought to promote job creation and economic growth against the backdrop of a continuing trade war with Beijing.
- Asked if he would secure a pact by the end of the year, Mr. Trump said, “China would much rather make a trade deal than I would” and added, “I haven’t wanted to do it yet. Because I don’t think they’re stepping up to the level that I want.”
- The president also said he was “looking at” exempting Apple from a coming round of China tariffs. “We have to treat Apple on a somewhat similar basis as we treat Samsung, ” he said.
A U.S.-China ‘phase one’ trade deal may not be inked this year
- Completion of a “phase one” U.S.-China trade deal could slide into next year, people close to the White House said, as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with heightened demands of its own.
- Asked Wednesday about the status of the China deal, Trump told reporters in Texas “I don’t think they’re stepping up to the level that I want.”
- Trump and U.S. Trade Representative Robert Lighthizer recognize that rolling back tariffs for a deal that fails to address core intellectual property and technology transfer issues will not be seen as a good deal for the United States.
China Invited U.S. Trade Negotiators for More Talks
- China’s chief trade negotiator has invited his American counterparts for a new round of face-to-face talks, according to people briefed on the matter, as both sides are struggling to strike a limited deal to help de-escalate tensions between the world’s two largest economies.
- During a phone call late last week, Liu He, President Xi Jinping’s point person on trade negotiations with Washington, extended the invitation to U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to hold the meeting in Beijing, the people said.
- U.S. negotiators have indicated they would be willing to meet in person, but that they would be reluctant unless China makes it clear that it would make commitments on intellectual-property, forced technology transfers and agricultural purchases.
Threat of Auto Import Tariffs Remains Despite Lapsed Deadline
- President Trump’s decision to let a deadline to impose tariffs on foreign auto imports lapse without taking action has left the auto industry puzzled over the White House’s next move—which could include restarting the clock with a new levy action.
- Experts on trade law say Mr. Trump might still seek to impose the tariffs despite the missed deadline, but such an action would be vulnerable to a strong legal challenge for not complying with Section 232 of the Trade Expansion Act of 1962.
- Alternatively, Mr. Trump could decide to abandon the Section 232 action and pursue tariffs under Section 301 of the Trade Act of 1974, which is the same mechanism the president used to impose tariffs on Chinese imports.
- Under Section 301, the U.S. would first have to determine that a foreign country pursued unfair trade practices.
- If that finding is made, Mr. Trump would have a wide berth to impose tariffs if he determines negotiations with the offending party are unsuccessful.
EUROPE & WORLD
China food delivery firm Meituan continues strong run since listing
- Chinese food delivery giant Meituan Dianping beat market expectations with a 44% jump in third-quarter revenue and a second straight quarterly profit, as it increased its dominance in the business.
- Revenue for Meituan came in at 27.49 billion yuan ($3.5 billion) for the quarter, up from 19.1 billion yuan in the same period a year earlier. That compares with a market consensus estimate of 25.92 billion yuan.
- Meituan’s food delivery division – its core business – reported revenue of 15.58 billion yuan in the quarter, a 39.4% increase from a year earlier.
- Meituan said gross transaction volumes for the quarter rose 33.6% to 194.6 billion yuan, while the annual number of transacting users climbed 14% to 435.8 million.
- It booked a profit of 1.33 billion yuan, its second consecutive quarter of profit since listing last September.
- According to research firm Trustdata, Meituan has steadily increased its share of China’s food delivery market to 65.8% as of end-September, compared with 60.1% a year earlier.
Hong Kong Takes Cues from Beijing in Boosting Force Against Protesters
- Chinese President Xi Jinping’s demands for an unflinching crackdown on antigovernment protests in Hong Kong have locked the city’s government into escalating a battle of attrition with increasingly militant demonstrators.
- After Xi said in Brazil last week that Hong Kong’s priority is to end violence and restore order, police in the city employed increasingly forceful tactics against protesters: besieging a university campus to conduct mass arrests; deploying snipers and officers armed with assault rifles and submachine guns for the first time; and warning that lethal firepower may be used.
- Now that he has publicly drawn a line in the sand, Hong Kong’s leaders—effectively appointed by and beholden to Beijing—have little choice but to continue forcefully suppressing the protests, China politics watchers say.
- While amping up the use of force, Hong Kong’s leaders also signaled little appetite for a mediated resolution, saying public dialogue can’t take place while violent clashes continue.
TODAY in HISTORY
- Georgia’s Rebecca Felton was sworn into the U.S. Senate, becoming the first woman U.S. Senator. (1922)
- The 18 1/2 min gap in the Richard Nixon Watergate tapes was revealed. (1973)
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