DAILY MARKET REPORTS
- Stronger-than-expected bank earnings and signs that a trade spat among the world’s top economies were easing helped lift investors’ appetites for risk.
- Stocks have shaken off recent losses this week, with technology shares rebounding following a rocky stretch in March, and energy shares rallying as crude oil prices hit fresh multiyear highs.
- Shares of JPMorgan and Citigroup rose after first-quarter earnings for the lenders came in stronger than analysts were expecting, thanks in part to a stronger economy, higher interest rates and savings from the new tax bill.
- Tax cuts are expected to help corporate America post its biggest quarterly profit growth in seven years. Earnings at the S&P 500 companies are estimated to grow by 18.4 percent from a year earlier.
US FINANCIAL MARKET
JPMorgan Reports Record Earnings, Boosted by Tax Law
- JPMorgan Chase said Friday that its quarterly profit surged 35% to an all-time high, as a strong economy and nearly a quarter-billion dollars in tax savings boosted results.
- The stronger-than-expected first-quarter results were punctuated by big gains in profitability and trading, both for desks that specialize in stocks and bonds. The bank’s total revenue rose 12% to 27.91 billion.
- JPMorgan’s trading revenue increased 13% to $6.57 billion from $5.82 billion a year earlier. Fixed-income trading revenue rose 8.0% to $4.55 billion, while stock-trading revenue grew 26% to $2.02 billion.
- The New York firm, the largest U.S. bank by assets, reported a profit of $8.71 billion, up from $6.45 billion a year earlier.
- JPMorgan paid an effective income-tax rate of 18.3% in the first quarter, compared with 48.7% in the fourth quarter of 2017 and 22.7% in last year’s first quarter.
Wells Fargo Reports Higher Earnings
- Wells Fargo said its first-quarter profit rose as one of the nation’s largest banks continues to seek growth while trying to move past its spate of regulatory problems.
- Revenues fell to $21.9 billion from $22.3 billion in the year-earlier period.
- Wells Fargo has been offered a penalty of $1 billion by regulators to resolve outstanding investigations related to auto insurance and mortgage lending abuses, the third-largest U.S. bank by assets said on Friday.
- The bank said it may need to restate its results, though, given ongoing discussions and a possible looming settlement with two regulators—the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency.
- Despite its ongoing woes, the bank reported a 6 percent jump in profit, saying net income rose to $5.53 billion in the quarter, from $5.23 billion.
- Profits at Wells Fargo’s community banking division, which includes the unit responsible for the questionable sales tactics over the past several years were $2.71 billion, a 3.9% decrease from the $2.82 billion it earned in the first quarter of 2017.
Citigroup profit beats on strength in consumer banking, equity trading
- Citigroup reported a higher-than-expected quarterly profit on Friday, driven by strength in its consumer banking business and a surge in equities trading.
- Total revenue rose about 3 percent to $18.87 billion, while operating expenses rose 2 percent to $10.92 billion.
- Global consumer banking revenue increased 7 percent on gains in North America, Mexico and Asia. Equity markets revenue jumped 38 percent, gaining from increased volatility in the quarter.
- The rise in equity markets revenue offset a 7 percent drop in Citi’s bigger fixed income trading business. Combined, the two were up 1 percent.
- Citi’s net income rose 13 percent to $4.62 billion in the first quarter ended March 31.
Commercial Lending Fuels PNC Profits
- PNC Financial Services said that fourth-quarter earnings rose 16%, fueled by higher interest rates and commercial lending.
- Revenue was up 6% from a year ago to $4.11 billion.
- Profit at the Pittsburgh-based bank rose to $1.23 billion, from $1.06 billion a year ago.
- Average total loans grew 4% from a year ago to about $221 billion, fueled by 8% growth in commercial loans, and Chief Executive William Demchak said that loan demand is strengthening.
Broadcom to buy back up to $12 billion of shares
- Chipmaker Broadcom said on Thursday it would buy back up to $12 billion of its common stock, sending its shares up 4.5 percent to $250 in extended trading.
- The company, which last month ended its efforts to acquire rival Qualcomm, said the repurchase program is effective immediately until the end of Broadcom’s fiscal year 2019.
- The San Jose, California based company has about 411 million outstanding shares and a market value of about $98.71 billion as of Thursday’s close.
Ford’s March China vehicle sales down 11% from a year ago
- Ford Motor’s sales in China fell 11 percent in March from a year earlier to 83,666 vehicles, as its business in the world’s biggest auto market remains hampered by a dearth of fresh products.
- The company, whose sales fell a sharp 30 percent in February, said on Friday its sales in the first three months of this year totaled 207,139 vehicles, down 19 percent from a year earlier.
- The big decline in February volume was due in part to fewer working days in the month because of a late Chinese lunar New Year holiday, but Ford’s first-quarter numbers reveal the continued difficulty facing the Michigan-based automaker.
SpaceX looks to raise $507 million in a new funding round
- Elon Musk-led SpaceX Corp is raising $507 million in a new round of funding, valuing the company at around $26 billion, according to a filing seen by Reuters.
- New articles of incorporation filed by the company last week and sent to Reuters by private analytics firm Lagniappe Labs showed the addition of 3 million ‘Series I’ shares from a previous version filed in November.
- The filing also gave the initial value of the Series I shares as $169, 25 percent higher than a value given in its previous fundraising round late last year.
Comcast to Bundle Rival Netflix in Plans
- Netflix and Comcast, once bitter rivals, are more closely binding their fortunes together after a couple of years of detente.
- The companies said Friday that Comcast will begin bundling Netflix with plans for cable TV, phone and internet starting this month. The integration effectively allows customers to pay for both Netflix and Comcast services on one bill, through Comcast.
- The deal marks Netflix’s first billing integration with a U.S. cable operator, a move that will make it easier for Comcast customers to sign up and pay for the streaming service as Netflix’s U.S. market matures.
- The pact also marks a milestone in a gradual shift in strategy for Comcast, the nation’s largest cable company, which for years viewed Netflix as a competitor.
Musk says Tesla will be profitable in third-quarter, fourth-quarter
- Tesla will be profitable in the third and fourth quarters of this year and will not have to raise any money from investors, billionaire Chief Executive Elon Musk said on Friday.
- Musk went slightly further in a tweeted response to a story in The Economist which cited estimates Tesla would need $2.5 billion to $3 billion this year in additional funding.
- “The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obviously no need to raise money,” Musk wrote.
US ECONOMY & POLITIC
U.S., France and Britain Craft Broad Plans for Strike on Syria
- Britain, France and the U.S. united Thursday around broad plans for a military strike against Syria as they worked to bridge differences over the scope and purpose of a coordinated response to a suspected chemical weapons attack, U.S. officials said.
- While officials in all three countries said there now is definitive proof that Syria used chemical weapons last weekend to kill dozens of civilians, they had yet to finalize plans for a strike as the Pentagon warned about the risks of miscalculation.
Consumer sentiment slips more than expected in April after hitting 14-year high
- U.S. consumer sentiment slipped in April, after recording its highest level since 2004 in March.
- The University of Michigan’s mid-month report on consumer attitudes about the economy inched down to 97.8 in mid-April, compared with 100.5 expected by a survey of Reuters economists.
- The index reached 101.4 at the end of March.
Job Openings (JOLTS) in U.S. Declined in February to 6.05 Million
- U.S. job openings pulled back in February and January’s figure was revised lower, Labor Department data showed Friday.
- Vacancies fell by 176,000 to 6.05 million from 6.23 million in January, according to the Job Openings and Labor Turnover Survey, or JOLTS.
- That compared with the median estimate of economists for 6.02 million openings. January’s figure was previously reported as 6.31 million.
White House Plans to Escalate Trade Pressure on China
- The Trump White House, confident that its hard-line strategy is succeeding, is planning to ratchet up the pressure on China by focusing on new tariffs and threatening to block Chinese technology investment in the U.S.
- Administration officials familiar with the U.S. strategy say that the U.S. trade representative, as early as next week, will detail which products are on the list of $100 billion in Chinese goods subject to 25% import tariffs.
- The initial hit list of $50 billion in Chinese imports didn’t include some consumer staples such as clothing, mobile phones or shoes, to minimize consumer impact and limit domestic criticism..
Trump Asks Advisers to Study Rejoining Pacific Trade Pact (TPP) Talks
- A little over a year after withdrawing the U.S. from the Trans-Pacific Partnership, President Donald Trump has asked his top economic advisers to study the possibility of re-entering the trade pact negotiations.
- Mr. Trump has deputized Robert Lighthizer, and Larry Kudlow, to study the possibility of re-entering the TPP if the terms were favorable, the president told a group of lawmakers on Thursday.
Trump orders review of U.S. Postal Service following criticism of Amazon
- U.S. President Donald Trump on Thursday ordered the creation of a task force to study the U.S. Postal Service and its financial difficulties, after recently claiming without evidence that deliveries for Amazon.com were costing the service money.
- The task force will look into the post office’s business model, similar to a commission set up by U.S. President George Bush in 2002.
- “The USPS is on an unsustainable financial path and must be restructured to prevent a taxpayer-funded bailout,” said the order, signed by Trump.
- It said the Postal Service had lost $65 billion since the 2007-2009 recession.
- The order did not mention Amazon, which Trump has regularly criticized in recent weeks.
U.S. to export pork to Argentina under new rules after 26 years
- U.S. pork will be imported into Argentina for the first time since 1992 under newly finalized technical and safety rules, the U.S. Department of Agriculture (USDA) and U.S. Trade Representative’s (USTR) office said on Friday.
- Argentina had blocked imports of U.S. pork for about 26 years, citing animal health concerns. The deal is expected to open up a potential $10-million-per-year market for U.S. pork producers, the U.S. agencies said.
- The United States, the world’s leading pork exporter with global sales of $6.5 billion, exports about 27 percent of its pork production, making it highly dependent on foreign markets at a time when hog supplies are growing seasonally.
EUROPE & WORLD
China’s Trade Surplus with U.S. Soars
- China’s trade imbalance with the U.S. worsened sharply in the first three months of the year, potentially adding fuel to the countries’ already heated trade dispute.
- China’s trade surplus with the U.S. reached $58.25 billion in the first quarter, up 19.4% compared with the same period a year ago, official data released Friday showed.
China’s March aluminum exports rise to highest since June as tariff impact limited
- China’s aluminum exports in March rose to their highest since June as favorable pricing led the world’s biggest producer to sell more abroad even as the nation faces scrutiny over its trade practices amid a spat with the United States.
- Unwrought aluminum and aluminum product exports rose 10.2 percent from a year ago to 452,000 tons last month, the General Administration of Customs said on Friday, the fourth-highest amount on record.
- Steel exports last month fell 25.3 percent from a year earlier to 5.65 million tons.
Rolls-Royce and airlines grapple with further Dreamliner engine issues
- Rolls-Royce requires more money and more inspections to fix problems with Trent 1000 engines on Boeing 787 Dreamliner planes, leading to further disruption for airlines and testing relations between Rolls and its customers.
- Problems with engine turbine blades wearing out sooner than expected have hampered a restructuring program prompted by the engineering company’s declining older engine program and plunging demand for oil equipment.
- It said on Friday that more regular inspections are required and would lead “to higher than previously guided cash costs being incurred during 2018”.
- Rolls said it would reprioritize spending to mitigate the costs and kept its 2018 free cash flow guidance unchanged at about 450 million pounds ($643 million), give or take 100 million pounds.
Mylan seeks deal for German Merck’s consumer products unit
- Generic drug maker Mylan is in advanced discussions to acquire Merck KGaA’s consumer health business after other bidders failed to meet the German company’s price expectations, people familiar with the matter said.
- Merck said last year it was looking to sell its consumer healthcare business, which has annual sales of about $1 billion, to help to fund its research into prescription drugs.
- The precise value of Mylan’s offer could not be established but the sources said the companies were negotiating a price between 3.5 billion and 4 billion euros ($4.3-$4.9 billion).
Aramco is world’s most profitable oil company: Bloomberg
- Saudi Aramco is the world’s most profitable oil company, Bloomberg reported on Friday, but its huge earnings and cash flows may still fail to justify its desired $2 trillion valuation.
- Financial performance at Aramco has long been one of the best kept secrets in the oil industry but as the company prepares for a long-awaited initial public offering this year or next it needs to tell investors what it earns and how it operates.
- Bloomberg news agency cited company accounts as saying Aramco had net income of $33.8 billion in the first six months of 2017 and cash flows of $52.1 billion.
- The accounts, prepared to the IFRS standard, showed the firm made $7.2 billion in net income in the first of half of 2016, when crude averaged $41 a barrel, Bloomberg said.
- Aramco responded: “This is inaccurate, Saudi Aramco does not comment on speculation regarding its financial performance and fiscal regime.”
Jaguar Land Rover to cut output and jobs due to Brexit, diesel slump
- Jaguar Land Rover will cut around 1,000 jobs and production at two of its English factories.
- Jaguar sales are down 26 percent so far this year whilst Land Rover demand dropped 20 percent in its home market as buyers shun diesel, concerned over planned tax rises and possible bans and restrictions in several countries.
TODAY in HISTORY
- Sidney Poitier became the first African American to win the Academy Award for best actor. (1964)
- Apollo 13 announced “Houston, we’ve got a problem,” when an oxygen tank burst on the way to the Moon. (1970)
- Tiger Woods became the youngest person to win the Masters Tournament and the first of African descent to win a major golf title. (1997)
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