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WALL STREET GAINS ON HOPES OF TRADE TRUCE, POWELL’S SPEECH IN FOCUS

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

DAILY MARKET REPORTS

  • U.S. stocks gained on Wednesday on hopes of a trade truce between the United States and China at the upcoming G20 Summit, while investors looked forward to Fed Chairman Jerome Powell’s speech for clues on the path of interest rate hikes.
  • Though President Donald Trump talked tough ahead of a high-stakes upcoming meeting with China’s President Xi Jinping, White House economic adviser Larry Kudlow held open the possibility that the two countries would reach a trade deal.
  • Meanwhile, Fed Chairman Powell is set to speak on “The Federal Reserve’s Framework for Monitoring Financial Stability” before the Economic Club of New York Signature Luncheon at 12:00 p.m. ET.
  • Salesforce jumped 4.9% and led the gains on the benchmark S&P 500 index after a robust quarterly sales report.
  • Tiffany’s plunged 9.6% after the high-end jeweler’s quarterly same-store sales missed estimates.

US FINANCIAL MARKET

Salesforce beats estimates on cloud demand

  • Salesforce.com easily beat analysts’ estimates for quarterly earnings and forecast 2020 revenue above expectations on Tuesday, as more companies turn to its cloud-based services.
  • Total revenue rose 26% to $3.39 billion, beating analysts’ average estimate of $3.37 billion.
  • Unearned revenue, which helps measure future business for subscription-based software vendors, rose about 25% to $5.38 billion, topping analyst estimates of $5.20 billion
  • Net income fell to $105 million in the third quarter, from $107 million a year earlier.
  • Salesforce said it expects full-year 2020 revenue between $15.90 billion and $16 billion. Analysts were expecting $15.83 billion.

Tiffany sales miss as Chinese tourists spend less than anticipated

  • Tiffany’s quarterly sales missed estimates as a slowing Chinese economy prompted Chinese tourists to spend less at the jeweler’s stores in the United States and Hong Kong, a shortfall that sent the company’s shares down as much 13%.
  • Total revenue rose 3.7% to $1.01 billion. Analysts on average expected revenue of $1.05 billion.
  • The company’s comparable-store sales, excluding currency changes, rose 3%, below an expected a rise of 5.3%.
  • The company’s net income fell to $94.9 million in the third quarter, from $100.2 million a year earlier.

Humana cuts 2019 membership forecast for prescription drug plans

  • Health insurer Humana said it expected a bigger drop in membership for its prescription drug plans in 2019, as it stuck to its pricing plans in an intensely competitive market.
  • The company now expects a fall of 750,000 to 800,000 members, compared with 500,000.
  • Humana, however, raised the net membership growth estimate for its individual Medicare Advantage products by 100,000 members to a range of 350,000 to 400,000 members for 2019.
  • The health insurer also reiterated its adjusted earnings forecast of about $14.40 per share for the year 2018. Analysts were expecting a forecast of $14.43 per share

Amazon Unveils Server Chip, Challenging Intel on Price

  • The largest cloud company unveiled its own server processors and said the Graviton chips will support new versions of its main EC2 cloud-computing service.
  • Until now, Amazon — and other big cloud operators — had almost exclusively used Intel Xeon chips.
  • It’s the second time this month that Amazon has taken a swing at Intel’s server chip business.
  • The cloud provider said on Nov. 6 that it’s offering services based on computers that use Advanced Micro Devices processors.

TransCanada asks Montana court to allow preliminary work on Keystone XL

  • TransCanada has asked a Montana court to allow it to resume pre-construction activities on its Keystone XL oil pipeline after a U.S. judge blocked construction on the $8 billion project earlier this month.
  • A U.S. judge in Montana issued an injunction on Nov. 8 blocking construction of the heavy crude pipeline from Canada to the United States, drawing praise from environmental groups and a rebuke from President Donald Trump.
  • TransCanada has filed an amendment with the Montana District Court to narrow the scope of the injunction to allow it to continue pre-construction work like meetings with stakeholders, the movement of pipe and equipment, and early right-of-way work.

Oil Declines Before U.S. Inventory Data and Saudi-Russia Talks

  • Oil fell, reversing earlier gains, as traders awaited weekly U.S. inventory data and any signs of whether Saudi Arabia and Russia will take steps to prevent a global surplus.
  • Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman will meet at the G-20 summit in Argentina and may discuss oil markets before OPEC and its allies review output policy next week in Vienna.
  • U.S. crude inventories increased by 3.45 million barrels last week, according to the American Petroleum Institute. That would be a 10th successive rise if confirmed by government data later today.

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US ECONOMY & POLITICS

 

US third-quarter GDP growth unrevised at 3.5%

  • Gross domestic product increased at an unchanged 3.5% annualized rate, the Commerce Department said in its second estimate of third-quarter GDP growth.
  • Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 3.6% rate in the third quarter, down from the 4.0% rate estimated in October.
  • Inventory investment added 2.27 percentage points to GDP growth. That was more than the 2.07 percentage points reported last month and was the biggest contribution since the fourth quarter of 2011.
  • Business spending on equipment increased at a 3.5% rate, instead of the previously reported 0.4% rate. That was still the slowest pace in two years.
  • Imports increased faster in the third quarter than previously estimated while the drop in exports was sharper, which sliced off 1.91 percentage points from GDP growth in the third quarter, instead of the 1.78 percentage points reported last month.

US new home sales plunged 8.9% in October

  • Sales of new U.S. homes plummeted 8.9% in October, as the number of newly built, unsold homes sitting on the market climbed to its highest level since 2009.
  • The Commerce Department says that new homes sold at a seasonally adjusted annual rate of 544,000 last month. New-home sales have declined in four of the past five months.
  • The median sales price has tumbled 3.1% from a year ago, to $309,700.

Weekly mortgage applications rise 5.5% as homebuyers edge back in

  • Total mortgage application volume increased 5.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Overall volume was still 16% lower than a year ago.
  • Mortgage applications to purchase a home drove the volume, rising 9% for the week and 2% from a year ago.
  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 5.12% from 5.16%, with points decreasing to 0.46 from 0.48 (including the origination fee) for loans with a 20% down payment.

Trump open to deal with Xi at dinner but with conditions: Kudlow

  • U.S. President Donald Trump is open to reaching a deal on U.S.-China trade irritants over dinner on Saturday with Chinese leader Xi Jinping but is ready to hike tariffs if there is no breakthrough, White House economic adviser Larry Kudlow said.
  • Kudlow said Trump had told advisers that “in his view, there is a good possibility that a deal can be made, and that he is open to that.”
  • But he said “certain conditions have to be met,” listing intellectual property theft, forced technology transfer, ownership of American companies in China, high tariffs and non-tariff barriers on commodities, and commercial hacking as examples of issues that “must be solved.”

Republican wins racially charged Senate race in Mississippi

  • Republican Cindy Hyde-Smith won a U.S. Senate special election runoff in conservative Mississippi on Tuesday, defeating a black challenger after a campaign that recalled the history of racist violence in the deep South state.
  • Her victory means Republicans will hold a 53-47 majority in the new U.S. Senate that convenes in January.

As Trump renews border wall demands, U.S. government shutdown looms

  • President Donald Trump’s renewed demand for U.S. taxpayer funding of his proposed U.S.-Mexico border wall was threatening again on Tuesday to bring on a budget standoff and a partial government shutdown, leaving Congress just 11 days to act.
  • By Dec. 7, Congress must pass a spending bill to keep some government agencies funded, including the Department of Homeland Security, which polices the border and immigration.
  • The $5 billion House Republicans tout for Trump’s wall, compares with $1.6 billion Senate Republicans have sought for this fiscal year.
  • The Trump administration would like the entire $23 billion up front, fearing that a House run by Democrats next year would never fully fund the long-term costs.

Trump Raises Prospect of Import Car Tariff After GM Cutback Plan

  • President Donald Trump raised the prospect of slapping a 25% tariff on imported cars to boost domestic auto assembly, pointing to a longstanding U.S. tariff on imported pickup trucks that has helped U.S.-based automakers dominate that market.
  • “The reason that the small truck business in the U.S. is such a go to favorite is that, for many years, Tariffs of 25% have been put on small trucks coming into our country. It is called the ‘chicken tax.”’ Trump said on Twitter Wednesday.
  • More cars would be assembled in the U.S. if the same tariff were applied on imported cars, Trump said, adding in a second tweet that “G.M. would not be closing their plants in Ohio, Michigan & Maryland.”

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EUROPE & WORLD

China not seriously considering U.S. Treasuries as trade war weapon – envoy

  • China’s ambassador to the United States said he does not believe Beijing is seriously considering using its massive U.S. Treasury debt holdings as a weapon in the U.S.-China trade war, citing concerns that such a move would destabilize financial markets.
  • Trade and economic analysts have often said China could slow its purchases of U.S. Treasuries or sell off its holdings to pressure Washington into a deal.
  • China is the largest foreign holder of U.S. Treasury debt, with $1.15 trillion on Sept. 30, according to the latest Treasury data, compared with $1.19 trillion a year earlier – out of about $15.97 trillion of total public Treasury debt outstanding.

BMW chief says considering second U.S. manufacturing plant

  • BMW is considering a second U.S. manufacturing plant that could produce engines and transmissions, Chief Executive Harald Krueger said, shortly after a report that U.S. President Donald Trump would impose tariffs on imported cars from next week.
  • Krueger in an interview at the Los Angeles Auto Show also said he backed British Prime Minister Theresa May’s current Brexit plan to divorce the United Kingdom from the European Union.
  • BMW has a U.S. vehicle assembly plant, in South Carolina, is planning to open a Mexico factory next year, and is considering changes to its current scheme of importing engines and transmissions.

Theresa May Backs Down Over Brexit Votes in Parliament, Official Says

  • U.K. Prime Minister Theresa May has backed down in a key Brexit battle with Parliament, ditching moves to stop lawmakers trying to re-write her plans, according to an official.
  • That means lawmakers will be free to vote on a series of potential changes to May’s motion, which could include calls for another referendum, or for a different deal with the EU.
  • The fact that May is backtracking already ahead of the Dec. 11 vote suggests she knows she’s losing the battle with rebels in her own Conservative Party who want to tear up the agreement she’s reached with the EU.

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TODAY in HISTORY

  • Portuguese explorer Ferdinand Magellan passed through the strait which bears his name to the Pacific ocean. (1520)
  • Margaret Thatcher resigned as prime minister of Great Britain; John Major took over. (1990)

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