DAILY MARKET REPORTS
- The S&P 500 edged higher on Monday, helped by gains in bank shares and utility Sempra Energy, as investors looked past a chaotic G7 meeting over the weekend and focused on a historic U.S.-North Korea summit.
- President Donald Trump threw the G7’s efforts to show a united front into disarray after taking aim at Canadian Prime Minister Justin Trudeau and announcing that he was backing out of the joint communique.
- The markets appeared to be calm even as Trudeau spoke of retaliatory measures that Canada would take next month in response to Trump’s decision to slap tariffs on steel and aluminum imports from Canada, Mexico and the European Union.
- Trump, who is in Singapore for the historic summit with North Korean leader Kim Jong Un, said the Tuesday summit could “work out very nicely” as officials from both countries met to narrow differences on how to end a nuclear stand-off on the Korean peninsula.
- Envision Healthcare rose 2.7 percent after private equity firm KKR said it would take the physician services provider private in a deal valued at $5.57 billion.
US FINANCIAL MARKET
KKR to take Envision private for $5.57 billion in healthcare push
- KKR said on it will take U.S. physician services provider Envision Healthcare private in a deal valued at $5.57 billion, its latest acquisition in the healthcare sector.
- The private equity firm saw off competition from peers Carlyle, TPG Global and others as it sealed the deal for $46 per share – a premium of 5.4 percent to Envision’s last close on Friday.
- KKR already owns Envision’s AMR, the largest U.S. provider of ambulance services, which it bought for $2.4 billion last year and merged with its helicopter ambulance service. The firm also took WebMD Health private for about $2.8 billion.
- Envision said the deal marks an end to its efforts to find strategic alternatives, which the company launched after posting disappointing third-quarter results last year. The company has been struggling with lower patient admissions at hospitals.
Workday to Buy Adaptive Insights for $1.55 Billion
- Workday has agreed to acquire business-intelligence software company Adaptive Insights for about $1.55 billion, in an effort to strengthen its financial planning products.
- Under the deal, Pleasanton, Calif.-based Workday would acquire all shares outstanding of Adaptive Insights, including the assumption of about $150 million in unvested equity issued to Adaptive Insights employees.
- The transaction is expected to close in the third quarter of Workday’s fiscal year 2019, ending Oct. 31.
- Workday, a provider of cloud-based software for human-resources management and finance, intends to combine the Adaptive Insights Business Planning Cloud with its suite of applications under one system.
Electronic Arts Embraces Subscriptions for New PC Games
- Electronic Arts for the first time will let people subscribe to play its newest PC games, embracing a model analysts believe could eventually alter how people access and select which games to play.
- Electronic Arts will offer a subscription that gives early and full access to its latest PC games, such as “Battlefield V” and “FIFA 19,” which typically cost about $60 each.
- The company plans to charge $15 a month, or $100 annually, for access to more than 100 of its games as well some titles from other publishers. The service is slated to launch this summer.
- Streaming games is technologically challenging, and so far it mostly has been tried with older, less demanding content.
- If streaming new games becomes widespread, it will raise questions about whether gamers need to plunk down hundreds of dollars for pricey hardware in the future.
Amazon is expanding its discounts for Prime members at Whole Foods stores to 10 new states
- Amazon is expanding its Whole Foods Market discounts for Prime customers to 10 new states including Arizona, Georgia and North Carolina, the company said Monday.
- The expansion means the discounts, which include an additional 10 percent off various sale items, will be available to nearly half the country.
- The benefits roll out for the first time June 13 in: Alabama, Arizona, Georgia, Hawaii, Mississippi, North Carolina, Oregon, South Carolina, Tennessee and Washington. Amazon is also expanding benefits to parts of California and Nevada.
Global Investment in Wind and Solar Energy Is Outshining Fossil Fuels
- Global spending on renewable energy is outpacing investment in electricity from coal, natural gas and nuclear power plants, driven by falling costs of producing wind and solar power.
- In 2016, the latest year for which data is available, about $297 billion was spent on renewables—more than twice the $143 billion spent on new nuclear, coal, gas and fuel-oil power plants, according to the IEA.
- The Paris-based organization projects renewables will make up 56% of net generating capacity added through 2025.
- In the U.S., more than two decades of government tax credits, have propelled renewables. About 17% of the country’s electricity last year came from renewable sources, including wind, solar and hydroelectric dams, according to federal data.
Electric-Vehicle Frenzy Sweeps Up Once-Unloved Metal: Nickel
- The speculative fever for electric-car metals is pushing to nearly four-year highs prices for nickel—a key ingredient in stainless steel.
- Nickel is the top industrial metal and among the best-performing assets of 2018, with futures contracts on the London Metal Exchange up 21%, as battery manufacturers and investors across the world hoard the metal in anticipation of a shortage.
- Helping fuel nickel’s latest leg up, more companies have come to favor batteries that use more nickel than cobalt, as prices for the latter have spiked amid struggles extracting it from Congo, the world’s largest supplier.
- Currently, batteries only account for a tiny slice of total nickel demand, about 3%, according to analysts. But some in the metals industry expect that figure to ramp up as more consumers switch to electric cars. Analysts at Citigroup estimate battery usage could hit as much as 40% in the next 15 years.
Probe finds PG&E power lines sparked deadly 2017 California wildfires
- A dozen of the wind-driven blazes that swept northern California’s wine country last fall, killing 46 people in the deadliest firestorm in state history, were sparked by PG&E-owned power lines, state officials said.
- The California Department of Forestry and Fire Protection, or CalFire, also said its investigators had found “evidence of alleged violations of state law” by Pacific Gas & Electric Company and referred those cases to county prosecutors for further review.
- PG&E issued a statement in response saying the company looked forward to reviewing the CalFire reports, adding, “We continue to believe our overall programs met our state’s high standards.
US ECONOMY & POLITIC
Down to the Wire: U.S., North Korea Huddle in Singapore Ahead of Leaders’ Summit
- Senior U.S. and North Korean officials huddled for last-minute negotiations Monday, trying to iron out differences ahead of a summit meeting between the two countries’ leaders, while America’s top diplomat said Washington’s position was “clear and unchanged.”
- At the end of a day during which envoys from the two sides spent hours talking in a conference room at the Ritz-Carlton hotel, U.S. Secretary of State Mike Pompeo said talks were “moving quite rapidly” as President Donald Trump prepared to meet Kim Jong Un.
- The two men are expected to meet publicly on Tuesday at 9 a.m., shake hands and go behind closed doors for a one-on-one meeting. The White House has set aside two hours for their meeting, but U.S. officials said there is no set time for the talks to finish.
- Mr. Pompeo, who has led several rounds of talks with North Korea in recent months, said Washington wouldn’t agree to ease economic sanctions against Pyongyang unless “we get the outcome we are demanding”—complete, verifiable and irreversible denuclearization.
U.S.-Canada Trade Feud Escalates After Fraught G-7 Summit
- U.S. administration officials escalated President Donald Trump’s criticisms of Canadian Prime Minister Justin Trudeau and the global trading system on Sunday, heightening tensions with major allies as Washington enters an important stretch of negotiations on several fronts, from China to the North American Free Trade Agreement.
- After the Group of Seven industrialized nations summit ended Saturday in Canada with a joint communiqué stressing the importance of a rules-based international trading system, a spat erupted between Messrs. Trudeau and Trump.
- Mr. Trudeau asserted Canada’s strength and independence and criticized U.S. tariffs on Canadian metals. Mr. Trump later withdrew his support for the communiqué, an unprecedented move that left the allies divided in a way they hadn’t been for decades.
- German Chancellor Angela Merkel said in a TV interview late Sunday that it was “sobering and somewhat depressing” to learn Mr. Trump wouldn’t endorse the final communiqué.
- The end of the G-7 meeting—coupled with Mr. Trump’s news conference Saturday, in which he said major U.S. trading partners had treated the U.S. “like the piggy bank that everybody is robbing”—left frayed U.S. ties with countries that represent the postwar Western-led economic system.
Banks Pull Back on Municipal Debt for First Time in Nine Years
- Banks reduced their quarterly municipal-bond holdings for the first time in nine years, a sign of how much new U.S. tax rules damped demand for debt from state and local governments.
- Municipal securities held by U.S.-chartered depository institutions fell in the first quarter by nearly $16 billion to $554 billion, according to Federal Reserve data published Thursday.
- Banks emerged over the past decade as one of the biggest buyers of tax-exempt municipal debt because the investments were viewed as stable and safe. They currently hold 14% of outstanding municipal bonds.
- But new legislation passed late last year by Congress dropped tax rates paid by banks to 21% from 35%, making tax-exempt bonds less appealing.
EUROPE & WORLD
China’s Xiaomi books $1 billion quarterly loss ahead of blockbuster IPO
- Chinese smartphone maker Xiaomi booked a first-quarter net loss of 7 billion yuan ($1.09 billion) ahead of its blockbuster initial public offering.
- That compares with a net loss of 43.89 billion yuan for the whole of 2017, according to its draft prospectus.
- When one-off items are excluded, Xiaomi said it made a net profit of 1.04 billion yuan in the first quarter, compared with 3.9 billion yuan for the whole of 2017.
- Its smartphone shipments jumped 88 percent thanks to strong growth overseas, helping Xiaomi’s revenue rise to 34 billion yuan ($5.3 billion) for the period. That compares with 114.6 billion yuan for all of last year.
Daimler shares drop on report up to one million cars contain defeat device
- Daimler shares fell following a report that up to a million Daimler cars contained illegal defeat devices as Chief Executive Dieter Zetsche prepared to meet the transport minister on Monday.
- German Transport Minister Andreas Scheuer summoned Zetsche after the country’s KBA Motor Vehicle Authority discovered “inadmissible defeat devices” in Mercedes-Benz engines, even as Daimler disputes they were illegal.
- Carmakers use software to manage exhaust emissions filtering and engine performance. A device can be classified as illegal if exhaust filtering systems are deactivated too early or without good reason.
- The emissions scandal has hung over the German car industry since September 2015, when Volkswagen admitted to using software that could tell when a diesel vehicle was being tested and temporarily lower its toxic emissions to pass U.S. regulations.
Takeda shareholder group aims to block $62 billion Shire deal
- A group of Takeda Pharmaceutical shareholders is trying to build support to block the $62 billion acquisition of London-listed Shire at an extraordinary general meeting, a leading member of the group told Reuters.
- Takeda will hold the shareholder meeting later this year or early next year to approve an issue of new stock to help fund the Shire deal, making it a de facto vote on the deal itself.
- The 130 member group formed by ex-Takeda employees holds one percent of the drugmaker’s shares, and needs to secure a third of shareholder votes.
Rolls-Royce, preparing to cut thousands of jobs, says engine problem has spread
- Britain’s best-known engineering company has been hit by a problem with a compressor in the Trent 1000 package C engine that is not lasting as long as expected, grounding planes, forcing inspections and angering airline clients.
- On Monday, it said it had now found the same issue on a “small number of high life Package B engines”, requiring a one-off inspection of the B fleet and sending its shares down 1 percent.
- The existing package C issue had led to about 30 of the affected aircraft being grounded at any one time for checks. They were flown by airlines including British Airways, Virgin Atlantic and Air New Zealand.
- Airlines that use the package C engine tend to also take the package B engine. According to Rolls some 380 package C engines are in service while there are 166 package B engines in service.
Bombardier JV wins $4.9 billion Los Angeles Airport contract
- Bombardier and its partners have been awarded a $4.9 billion contract to build and operate a passenger transit system at the Los Angeles International Airport, the company said on Monday.
- The Canadian plane and train maker has a 10 percent stake in the venture, which also includes Balfour Beatty, ACS Infrastructure and Fluor Enterprises.
- In the overall contract, Bombardier was awarded a $219 million order to design and build the system, including the supply of 44 of its INNOVIA automated vehicle systems.
- Bombardier will also be involved in operating and maintaining the system for which a joint venture has been set up. The Canadian company owns a 55 percent share in this venture.
HSBC to invest $15-17 billion by 2020 in push for growth
- HSBC will invest $15-17 billion in the next three years in areas including technology and China as it swings from a strategy of cost-cutting to growth, new CEO John Flint said on Monday, while keeping profitability and dividend targets little changed.
- In a first public outline of his strategy at the helm of Europe’s biggest bank by market capitalization, Flint set out ambitions to grow its return on tangible equity to 11 percent, in line with previous targets, from 6.8 percent in 2017.
- The update marks a shift in HSBC’s post-2008 crisis attitude from cost-cutting and restructuring to investment and growth, but analysts said the focus on China and technology were familiar themes.
Foxconn says investigating labor conditions at China factory used for Amazon
- Contract manufacturer Foxconn said it is investigating a plant in China that makes devices for Amazon, after a U.S. watchdog group criticized what it described as harsh working conditions at the factory.
- A 94-page report by China Labor Watch that followed a nine-month investigation cited excessive hours, low wages, inadequate training and an overreliance on “dispatch” or temporary workers in violation of Chinese law at the plant, which makes Echo Dot smart speakers and Kindle e-readers.
- China Labor Watch said its investigation found that about 40 percent of workers at the plant were dispatch workers, far exceeding the 10 percent limit under Chinese law. Dispatch workers were paid at the same rate for regular and overtime hours, rather than time and a half as required
- Dispatch workers earned 14.5 yuan ($2.26) per hour, the report said. Workers also put in more than 100 overtime hours per month during peak season, far more than the 36 hours allowed by law, and some worked for 14 consecutive days.
Iraqi ballot box storage site catches fire in Baghdad
- A storage site housing half of Baghdad’s ballot boxes from Iraq’s parliamentary election in May caught fire on Sunday, just days after parliament demanded a nationwide recount of votes, drawing calls for the election to be re-run.
- The timing of the fire undermined the results of an election whose validity was already in doubt. Fewer than 45 percent of voters cast a ballot, a record low, and allegations of fraud began almost immediately after the vote.
- A recount could undermine nationalist cleric Moqtada al-Sadr, a long-time adversary of the United States whose bloc won the largest number of seats in the election. One of Sadr’s top aides expressed concern that some parties were trying to sabotage the cleric’s victory.
TODAY in HISTORY
- King Henry VIII married his first wife, Katharine of Aragon. (1509)
- Capt. James Cook discovered the Great Barrier Reef off Australia. (1770)
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