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U.S. STOCKS RISE AFTER CHINA’S XI EASES TRADE FEARS

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

DAILY MARKET REPORTS

  • U.S. stocks climbed Tuesday after remarks from Chinese President Xi Jinping soothed concerns about a trade war that have roiled markets in recent weeks.
  • In his first public comments since the trade dispute with the Trump administration started, Jinping vowed to open the country’s economy and said China would raise the foreign ownership limit in automobile, shipbuilding and aircraft sectors “as soon as possible”.
  • Shares of major U.S. automakers were up between 2 percent and 3 percent following Xi’s comments.
  • The fresh trade news allowed investors to shrug off a late U.S. selloff on Monday, spurred by the news that federal investigators had searched the office and home of Michael Cohen, Mr. Trump’s longtime lawyer.
  • Authorities seized records including those related to a payment to a former adult-film actress. Mr. Trump described the raid as a “disgrace.”
  • U.S. stocks will face a major test in coming weeks as first-quarter earnings pour in.
  • Analysts expect quarterly profits for S&P 500 companies to rise 18.5 percent from a year ago, which would be the biggest gain in seven years.
  • Facebook shares erased premarket gains and were marginally down ahead of CEO Mark Zuckerberg’s testimony before U.S. lawmakers on Tuesday and Wednesday.

US FINANCIAL MARKET

Walmart partners with Postmates to expand online grocery delivery

  • Walmart said on Tuesday it has partnered with delivery service Postmates in Charlotte, North Carolina, as part of the retailer’s plan to expand its grocery home delivery services to 100 metro areas.
  • Last month, Walmart said it would expand the service to reach more than 40 percent of U.S. households in its attempt to step up fight against rival Amazon.com.
  • Walmart’s online grocery delivery service, which provides customers fresh produce, meat, seafood and bakery items to their doorstep, has a fee of $9.95 and a $30 minimum order.

Kroger to hire 11,000 employees to its supermarkets

  • Kroger said on Tuesday it would hire 11,000 employees in its supermarket divisions, including Fred Meyer stores and Mariano’s Fresh Market, with nearly 2,000 of them for management roles.
  • The hiring would not include jobs created as a result of capital investment, such as temporary construction jobs or increases due to the company’s mergers, Kroger said.
  • The company’s hiring plan follows local media reports that Kroger workers, led by civil rights activist Reverend Jesse Jackson Sr., plan to protest at its Cincinnati headquarters against the alleged closure of several stores that serve minority communities.

Ford to launch five new, redesigned car models in China in 2018

  • Ford, struggling to revive sales in China, on Tuesday unveiled five new models for the world’s biggest auto market, part of a business revitalization effort centered around a plan to launch over 50 new or redesigned vehicles by 2025.
  • The five new models are sedan and hatchback versions of the redesigned Focus car, sedan and hatchback versions of the sporty Focus ST-Line model, as well as the redesigned Escort car.

U.S. watchdog seeks record fine against Wells Fargo for abuses – sources

  • The top U.S. watchdog for consumer finance is seeking a record fine against Wells Fargo & Co that could exceed several hundred million dollars for auto insurance and mortgage lending abuses.

Indonesia’s Lion Air confirms $6.2 billion deal for Boeing 737s, flags 787 jet order

  • Indonesia’s Lion Air Group announced on Tuesday a firm order to buy 50 Boeing 737 MAX 10 narrowbody jets worth $6.24 billion and said it plans to place a provisional order for Boeing 787 widebody jets in the next few weeks.
  • Lion Air, which already has offshoots in Malaysia and Thailand, also plans to establish a new airline in a Southeast Asian country this year.

Verifone to be taken private for $2.6 billion in cash

  • Payments technology company Verifone Systems on Monday agreed to be taken private by an investor group led by Francisco Partners for $2.58 billion in cash.
  • Shares of the company, which makes point-of-sale payment devices, surged 52 percent in extended trading, just shy of the offer price of $23.04 per share.
  • Verifone said the deal was valued at $3.4 billion, including debt.

Travel industry eyes blockchain potential for fees, delays, lost bags

  • Blockchain technology has the potential to shake up the travel industry by giving airlines and hotels a way to bypass controlling intermediaries like Expedia or Amadeus and gain better access to customer data.
  • Major players are partnering with startups and talking to large corporate clients about whether they can do group bookings via blockchain instead of using middlemen, who charge up to 25 percent of ticket or room prices in fees.
  • Because transaction data is openly available and not controlled by any one party, blockchain offers an opportunity to build new platforms that can connect travel providers and customers more directly and replace decades-old technology.

Exxon, Qatar in talks for potential U.S. shale deal

  • Exxon Mobil is in talks with Qatar over a possible deal that could see the country investing in the company’s U.S. gas resources.
  • The deal could take the shape of a joint venture in which Qatar, through state-owned Qatar Petroleum, could partner or invest in future wells with Exxon’s unit XTO Energy.
  • For Qatar, which is locked in a dispute with Saudi Arabia, along with the United Arab Emirates, Bahrain and Egypt, the move could help broaden its investment outside Middle East.
  • Qatar Petroleum’s investment will be crucial for Exxon, which needs it to go ahead with a $10 billion natural gas-export project in East Texas.

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US ECONOMY & POLITIC

U.S. Producer Prices Rose 0.3% in March

  • The producer-price index, a measure of the prices businesses receive for their goods and services, rose a seasonally adjusted 0.3% in March from a month earlier
  • When excluding the often-volatile food and energy categories, prices were up 0.3% in March from the prior month.
  • Prices excluding food, energy and a volatile gauge of margins called trade services climbed 0.4% last month.
  • From a year earlier, overall prices rose 3.0% in March, while prices excluding food and energy increased 2.7% and prices excluding food, energy and trade services were up 2.9%.

U.S. wholesale inventories increase solidly in February

  • U.S. wholesale inventories increased a bit less than initially estimated in February, but still suggested that inventory investment would contribute to economic growth in the first quarter after being a drag on output in the prior period.
  • The Commerce Department said that wholesale inventories rose 1%.
  • At February’s sales pace it would take wholesalers 1.26 months to clear shelves, unchanged from January.

CBO: Fiscal Stimulus Will Widen Budget Deficits, Boost Growth in Coming Years

  • The Congressional Budget Office said the federal budget deficit would total $804 billion this year, 43% higher than it had projected last summer, and exceed $1 trillion a year starting in 2020.
  • Economic growth will jump above 3% this year thanks to fiscal stimulus, the CBO said, but the agency predicted the acceleration will prove largely fleeting.
  • Larger deficits will add to the national debt: Debt held by the public will hit $28.7 trillion at the end of fiscal 2028, or 96.2% of GDP, up from 78% of GDP in 2018.
  •  If Congress extend the tax cuts, as many Republicans want to do, the CBO predicted higher deficits and publicly held debt of about 105% of GDP by the end of 2028—a level exceeded only once in U.S. history, in the immediate aftermath of World War II.

Trump’s top homeland security advisor Tom Bossert resigns

  • President Trump’s top homeland security advisor, Tom Bossert, resigned.
  • The White House didn’t give a reason for the resignation.
  • A report said that the move was pushed by new national security advisor John Bolton, who just started at the White House on Monday.

Trump cancels South America trip to ‘oversee the American response to Syria’

  • President Trump will not travel to South America this week, the White House says.
  • Vice President Mike Pence will make the trip in Trump’s stead.
  • The White House says Trump will stay in the U.S. in order to “oversee the American response to Syria and to monitor developments around the world.”

Rising Home Prices Push Borrowers Deeper Into Debt

  • Roughly one in five conventional mortgage loans made this winter went to borrowers spending more than 45% of their monthly incomes on their mortgage payment and other debts, the highest proportion since the housing crisis.
  • That was almost triple the proportion of such loans made in 2016 and the first half of 2017, CoreLogic said.
  • The amount of these loans packaged and sold by Fannie and Freddie increased 73% in the second half of 2017, compared with the first half of the year, according to Inside Mortgage Finance.
  • In that same period, overall new mortgages rose 15%.

Big Banks Find a Back Door to Finance Subprime Loans

  • Bank loans to Exeter and other nonbank financial firms have increased six-fold between 2010 and 2017 to a record high of nearly $345 billion, according to a Wall Street Journal analysis of regulatory filings.
  • Banks say their new approach of lending to the nonbank lenders is safer than dealing directly with consumers with bad credit and companies with shaky balance sheets. Yet the relationships mean that banks are still deeply intertwined with the riskier loans they say they swore off after the financial crisis.
  • The money still ends up with people with poor credit. The typical Exeter customer, for example, has a FICO score of around 570 on a range of 300 to 850. (Anything below 600 is usually considered subprime.)
  • Exeter, which is majority owned by private-equity firm Blackstone Group, charged off about 9% of its loans as of September 2017, according to S&P Global, compared with 1% for Wells Fargo’s auto loans.
  • The nonbanks turn a profit by charging borrowers a higher rate—say, 15% on a subprime auto loan—than what they pay to the bank, which might be 3%. The bank makes money on that 3% loan because it is funded by deposits, on which it pays almost nothing.

Trump Says He Will Decide Soon on Response to Syria Chemical Attack

  • President Donald Trump and his national security team began laying the groundwork Monday for a possible military strike against Syrian President Bashar al-Assad in response to a suspected chemical-weapons attack that killed dozens of civilians.
  • The Pentagon prepared a series of military options for Mr. Trump, who said Russian President Vladimir Putin and Iran shouldn’t evade responsibility if they helped Mr. Assad carry out the strike.

Agents Raid Office of Trump Lawyer Michael Cohen in Connection With Stormy Daniels Payments

  • FBI agents searched the office, home and hotel room of President Donald Trump’s longtime lawyer, Michael Cohen, on Monday, seizing records including those related to a payment to a former adult-film actress.
  • The searches were executed by the Federal Bureau of Investigation as part of a probe by the U.S. attorney’s office in Manhattan, which has opened an investigation that is being coordinated with the office of special counsel Robert Mueller.
  • The president criticized Mr. Mueller’s team, calling it “the most conflicted group of people” and said Attorney General Jeff Sessions made a “terrible mistake” by recusing himself from the Justice Department’s investigation.
  • The multiple raids, all in Manhattan, mark a significant escalation in prosecutors’ interest in Mr. Cohen, who has served as the president’s personal attorney for decades and has described himself as Mr. Trump’s “fix-it guy.”

Chinese Investment into the U.S. Fell Sharply in 2017

  • After climbing for much of the past two decades, Chinese investment into the U.S. dropped by 36% last year as relations between the world’s two largest economies cooled.
  • Long before this year’s trade restrictions were announced and the tension between the two nations became clear, Chinese investors had hit the brakes on new U.S. acquisitions, sending the level of investment down to $29.4 billion last year from a record $46.2 billion a year earlier.
  • Overall, China ranked 11th in cumulative foreign direct investment into the U.S. in 2016, according to the Organization for International Investment.

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EUROPE & WORLD

Xi Vows Greater Access to China, Warns Against ‘Cold War Mentality’

  • Chinese President Xi Jinping promised foreign companies greater access to China’s financial and manufacturing sectors, pledging Beijing’s commitment to further economic liberalization amid rising trade tensions with the U.S.
  • Mr. Xi said Tuesday that plans are under way to accelerate access to the insurance sector, expand the permitted business scope for foreign financial institutions and reduce tariffs on imported automobiles and ownership limits for foreign car companies.
  • In apparent, if unacknowledged, answer to some of the U.S.’s criticisms, President Xi said China would increase imports, improve the protection of intellectual property and provide a more transparent, rule-based environment for foreign investment.

Bayer shares jump on report of U.S. antitrust deal on Monsanto

  • Bayer shares jumped on Tuesday following a media report that the U.S. Justice Department will allow the German drugs and pesticides group to acquire Monsanto in a $62.5 billion deal.
  • Under the deal, Bayer agreed to sell additional seed and treatment assets to BASF and agreed to make concessions related to digital agriculture.
  • European Union antitrust regulators approved the deal in March after the companies agreed to sell a swathe of assets to BASF.
  • China, Brazil and Australia have also approved the proposed merger.

Jack Ma’s Ant Financial to Raise $9 Billion, Become World’s Biggest Unicorn

  • Ant Financial Services Group, carved out of his e-commerce giant Alibaba seven years ago, is preparing to raise $9 billion in a private funding round, according to people familiar with the matter.
  • The latest funding round could value Ant at close to $150 billion, according to the people, making it by far the world’s largest unicorn—a term used to describe private companies valued at over $1 billion.
  • If Ant goes public at a valuation of more than $100 billion, it could be worth more than large U.S. financial firms including Goldman Sachs, PayPal and BlackRock.
  • Ant, which owns popular mobile payments network Alipay and is one of China’s largest non-bank lenders, is currently in talks with potential investors and demand for its shares has so far been strong.

Airbus suspends A320 revamp study amid output problems

  • Airbus has shelved advanced studies aimed at improving its A320neo jet family, designed in part to fend off a mid-market plane that Boeing hopes to build, two people familiar with the matter said.
  • The surprise decision to back away from the proposed “A320neo-plus” and “A321neo-plus,” which would lengthen and modernize both models, comes as Airbus continues to face problems in increasing output for the current versions.
  • The 30-year-old A320 family is Airbus’s most-sold model and competes with Boeing’s 737 for the bulk of airline business.
  • The decision to back off the A320neo-plus raises a second question mark over Airbus’s response to a potential new Boeing jet after it lost key sales contests for the A330neo, which sits at the top end of the middle-market between 200 and 270 seats.

Volkswagen Expected to Replace CEO Matthias Müller This Week

  • Volkswagen’s supervisory board is expected to vote on Friday to replace Chief Executive Matthias Müller with Herbert Diess, a former BMW executive who now runs the Volkswagen brand, the German car maker’s biggest business.
  • Mr. Müller, who formerly ran Volkswagen’s sports-car marque, Porsche, became CEO of the company in September 2015 in the wake of the disclosure in the U.S. that Volkswagen had rigged millions of diesel-powered cars to cheat emissions tests.
  • Such a change would mark a surprising turn of events for Mr. Müller, who was elevated to the top job with a mandate to clean up after the company’s damaging diesel-emissions scandal.
  • Earlier Tuesday, Volkswagen said in a short statement it was considering changes to its senior-management structure, including possible changes to Mr. Müller’s position and responsibilities.

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TODAY in HISTORY

  • The U.S. patent system was formed. (1790)
  • The safety pin was patented by Walter Hunt, in New York. (1849)
  • Titanic set sail on its fateful voyage. (1912)
  • Paul McCartney announced the official split of the Beatles. (1970)
  • The Northern Ireland “Good Friday Accord” was reached. (1998)

This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S&P 500, are unmanaged and may not be invested into directly. Sources: Reuters, Bloomberg, Wall Street Journal.

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