DAILY MARKET REPORTS
- U.S. stocks rose on Monday as oil prices hit $70 per barrel for the first time since November 2014, while those in technology companies rose led by second day of gains for Apple.
- U.S. crude was boosted by Venezuela’s deepening economic crisis and a looming decision on whether the US will re-impose sanctions on Iran.
- Apple was up 1.2%, continuing to ride on news that Berkshire Hathaway’s Warren Buffett had boosted stake in the company.
- Tyson Foods fell 0.6% after the meat processor missed Wall Street estimates for quarterly profit as it was hit by higher freight costs and wages.
- Shares of AthenaHealth jumped 25.2% after hedge fund Elliott Management proposed an all-cash offer that would value the healthcare IT company at about $6.5 billion.
- Starbucks rose 0.3% after Swiss food giant Nestle said it would pay the world’s biggest coffee chain $7.15 billion for the rights to sell its products around the world.
US FINANCIAL MARKET
Oil Surges on Venezuela Woes and Iran Worries
- Oil prices rallied to a 3½ year high, with the U.S. benchmark breaking above $70 a barrel, as investors braced for the country’s expected exit from the Iran nuclear deal this week and fresh troubles for Venezuelan oil company PDVSA emerged.
- Oil prices have risen over 10% in the past month as U.S. President Donald Trump has indicated it is likely he will withdraw from a 2015 international agreement with Iran which eased sanctions in return for curbs to its nuclear program. A decision is due by May. 12.
- Previously, international sanctions have cut Iranian exports by around 1 million barrels a day, but MUFG expects the U.S. will “go it alone” if they impose sanctions, meaning the impact will be a loss of 250,000-350,000 barrels a day.
- U.S. oil major ConocoPhillips has moved to take key Caribbean assets of state-run PDVSA to enforce a $2 billion arbitration award, Reuters reported, potentially dealing a further blow to the Venezuelan company’s declining oil output and exports.
Cognizant Lowers Profit Forecast on Higher-Than-Expected Tax Rate
- IT services firm Cognizant Technology Solutions lowered its forecast for annual earnings due to a higher-than-expected tax rate, driving its shares down 4% on Monday.
- Revenue rose about 10% to $3.91 billion. Analysts had expected first-quarter revenue of $3.90 billion.
- First-quarter net income fell to $520 million from $557 million.
- Cognizant lowered its forecast for full-year profit to $4.47 per share from $4.53 and said it expects earnings for the current quarter of at least $1.09, below analysts’ expectations of $1.12 per share.
- Cognizant, however, raised the lower end of its expected range for full-year revenue. It now expects revenue of between $16.05 billion and $16.30 billion.
Tyson Foods Misses Profit Estimates as Freight Costs Rise
- Sales rose, helped by packaged foods, but rising labor and freight costs weighed on margins.
- Sales at the food company increased by 7.6% to $9.77 billion, falling short of analysts’ expectations of $9.89 billion.
- Sales of prepared foods rose 23% to $2.15 billion, benefiting from its purchase of AdvancePierre Foods.
- Tyson said it made a profit of $315 million in its second quarter, down from $340 million for the same period the year before.
- Tyson said last quarter that it expected its costs this year would increase by $200 million as a result of a lack of drivers and trucks. Chief Executive Tom Hayes said that “at some point” those costs would be passed onto consumers.
Nestlé Inks Deal to Sell Starbucks Products World-Wide
- Food giant Nestlé is taking over Starbucks’s retail marketing and sales business, agreeing to pay more than $7 billion for the rights to sell the chain’s coffee, tea and food products in grocery stores and other outlets globally.
- Nestlé said it would pay Starbucks $7.15 billion initially, as well as continuing royalties on all sales as part of a perpetual global license.
- As part of the Starbucks deal, it will add Starbucks Reserve, Seattle’s Best Coffee and Teavana to Nestlé’s existing coffee portfolio, which includes Nescafé and Nespresso brands.
Elliott Makes Offer to Buy Athenahealth
- Activist investor Elliott has offered to buy Athenahealth, a company in which it has an 8.9% stake, for $160 a share.
- Shares in Athenahealth rose 24% in Monday morning trading to $156.74 following the announcement.
- Elliott’s deal could be worth about $7 billion, including debt.
Blackstone to Buy Gramercy Property In $7.6 Billion Deal
- Blackstone Group said it would buy Gramercy Property Trust, which is an asset manager of commercial real estate, in a deal valued at $7.6 billion in cash.
- Blackstone’s $27.50-per-share offer represents a premium of 15.4% to Gramercy’s close on Friday at $23.82.
- The deal will add to Blackstone’s real estate business, which has emerged as a bigger contributor to earnings in recent years than its private equity division.
- The deal is expected to close in the second half of the year.
Three-quarters Facebook users as active or more since privacy scandal: Reuters/Ipsos poll
- Most of Facebook’s U.S. users have remained loyal to the social network despite revelations that a political consultancy collected information about millions of accounts without owners’ permission, a Reuters/Ipsos poll released on Sunday showed.
- The national online poll, conducted April 26-30, found that about half of Facebook’s American users said they had not recently changed the amount that they used the site, and another quarter said they were using it more.
- The remaining quarter said that they were using it less recently, had stopped using it or deleted their account.
- Among all adults, 64% said they use Facebook at least once a day, down slightly from 68% who said so in a similar poll in late March, shortly after news organizations reported Cambridge Analytica’s activity.
Bank of America’s loan to Remington tests its firearms pledge
- Bank of America is preparing to provide critical financing to Remington Outdoor, which makes assault-type rifles, just weeks after the U.S. bank said it would stop financing “military-style” firearms for civilians.
- The bank is contributing $43.2 million to a $193 million lending package funded by seven banks, according to court documents, which will help put Remington back on stable footing as it emerges from bankruptcy later this month into an uncertain environment for gun makers.
- Anne Finucane, Bank of America’s vice chair, said in April that the bank had decided on its pledge to help reduce mass shootings, saying in an interview with Bloomberg TV that “it is not our intent to underwrite or finance military-style firearms on a go-forward basis.”
- Bank of America’s plans to go ahead with the credit facility following its change of policy in April have not previously been reported.
US ECONOMY & POLITIC
U.S. Pushes Nafta Partners to Accept a Wage Floor in Auto Sector
- The Trump administration is seeking to complete its overhaul of the North American Free Trade Agreement with new rules that would penalize the Mexican auto industry unless it boosts wages—to roughly $16 an hour.
- By comparison, Mexican auto assembly workers made less than $8 an hour on average in 2017, with workers at parts plants making less than $4 an hour, according to the Center for Automotive Research.
- Any manufacturer turning out cars with too little content at the wage threshold would face tariffs at the border. For light trucks, a higher amount—45% of the vehicle–would have to come from such higher-wage labor, the officials said.
- White-collar work in North America could contribute up to 15% toward the car’s 40% labor threshold—which could potentially allow a car to qualify for duty-free treatment if just 25% of its physical content were made with high-wage labor.
- The administration is winning some support from U.S. auto makers for its Nafta proposals by including terms that would favor U.S. manufacturers over Asian and European rivals that produce cars in the U.S.
EUROPE & WORLD
Air France-KLM Shares Plunge After CEO Quits Amid Ongoing Labor Battle
- Air France-KLM shares plunged after its chief executive pledged to resign because he had failed to quell labor unrest, throwing the company’s strategy into question.
- Jean-Marc Janaillac on Friday said he would resign after 55% of nearly 47,000 employees on French contracts rejected a pay deal in an ongoing dispute for higher wages.
- Its stock was down more than 13% on Monday, and by half since its recent peak in January, before employees at its Air France unit began a series of strikes over wages, forcing the airline to cut back on its flights, and incurring what the company says is more than €300 million ($358 million) in costs.
- On Monday, Air France said on its website that it would operate 85% of its scheduled flights, with cancellations hitting medium- and short-haul flights.
From Best to Worst: Argentine Market Sours as Rates Soar to 40%
- Argentina’s currency is reeling and its interest rates have surged to 40%, pummeling investors who piled into a market that had been one of the world’s best performers.
- Argentina was an investor favorite in 2017, when the MSCI Argentina Index surged 77%. At a time of low and negative interest rates globally, many investors eagerly took on risk in exchange for higher yields.
- The government last year sold $2.75 billion of bonds with a 100-year maturity at a yield of 7.9%. It was the first junk-rated country ever to sell century bonds.
- The run against the Argentine peso began toward the end of last month, when the central bank sold $4.3 billion to support a sagging currency.
- The declines are the latest sign that rising U.S. interest rates and a strengthening dollar are prompting investors to pull money out of some of the world’s riskiest markets, especially those with the largest trade and budget deficits.
TODAY in HISTORY
- The British ocean liner Lusitania was sunk by a German submarine in World War I off the coast of Ireland. (1915)
- Germany unconditionally surrendered to the allies in Rheims, France. (1945)
- The 27th Amendment to the Constitution, prohibiting mid-term Congressional pay raises, was ratified. (1992)
- Vladimir Putin was inaugurated as Russia’s president. (2000)
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