DAILY MARKET REPORTS
- The three main indexes were rising for the second consecutive session after Friday’s data showed jobs and wage growth for May beat expectations, with unemployment rate falling to an 18-year low.
- Concerns that bullish economic numbers will lead to faster rises in interest rates and relatively lower future growth have sent U.S. stocks on a tailspin on several occasions this year. But investors said they did not find Friday’s data concerning.
- Trade tensions continued to hang in the backdrop. Over the weekend, the Trump administration showed no sign of backing down from restrictive tariffs in the face of pushback from allies and China.
- Finance officials from the Group of Seven leading nations issued a public rebuke of Washington’s new steel and aluminum tariffs on Saturday expressing “unanimous concern and disappointment.”
- Beijing separately said it wouldn’t abide by any agreement to buy more U.S. products without assurances that the U.S. wouldn’t go ahead with plans to hit it with tariffs on Chinese imports.
- Boeing rose 1.5% after it said it would partner with French aerospace firm Safran to make and service aircraft parts.
- Microsoft announced a $7.5 billion deal to acquire GitHub, the largest online code host.
- Among other stocks, Merck gained about 2.5% after latest data showed the company’s cancer drug Keytruda improved survival as a stand-alone treatment for a type of lung cancer.
- Facebook dipped 0.9% on a New York Times report that claimed the company had allowed Apple and other major device makers “deep” access to users’ personal data.
US FINANCIAL MARKET
Microsoft to buy coding site GitHub for $7.5 billion
- Microsoft said it would buy privately held coding website GitHub for $7.5 billion in an all-stock deal to expand its clout among software developers.
- GitHub supplies coding tools for developers and calls itself the world’s largest code host with more than 28 million developers using its platform.
- Microsoft’s Nat Friedman will take over as the Chief Executive of San Francisco-headquartered GitHub, whose current CEO Chris Wanstrath will become a Microsoft technical fellow.
- On an adjusted basis, Microsoft expects the deal to add to its operating income in fiscal 2020 and reduce earnings per share by less than 1% in 2019 and 2020.
Boeing takes on Honeywell, UTX with new joint venture
- Planemaker Boeing will partner with French aerospace firm Safran to make and service aircraft auxiliary power units as it uses some its profit from record jet sales to push into other lucrative aerospace segments.
- Safran already makes APUs, which are used to start aircraft engines and run other systems and competes with Honeywell and United Technologies – the two leading manufacturers of such power units.
- The alliance with Safran comes about a month after the world’s biggest planemaker said it would buy aerospace parts company KLX to expand its aircraft services business.
- Boeing and rival Airbus are branching into more profitable services, in a bid to emulate the wider margins of third party suppliers who traditionally control the market for repairs and services.
Walmart Sells Majority Stake in Brazil Operation
- Walmart has reached a deal to sell a majority of its Brazil operations to private-equity firm Advent International, as the global retail giant scales operations in markets where it has struggled.
- Advent will acquire an 80% stake in Walmart Brazil, which has 438 stores and employs 55,000 workers.
- Financial terms weren’t immediately disclosed.
- In 2017, the company reported total sales of more than $25 billion Brazilian real ($6.68 billion).
Merck’s Keytruda is shown to extend lung cancer survival in 2 trials
- New trial results show that Merck’s Keytruda improves survival as a stand-alone treatment for newly diagnosed lung cancer.
- It also improves survival in combination with chemotherapy for hard-to-treat squamous cell lung cancer.
- Keytruda is designed to unleash the body’s immune system to attack cancer cells.
- Keytruda, along with drugs like Roche’s Tecentriq and Bristol-Myers Squibb’s Opdivo, is designed to unleash the body’s immune system to attack cancer cells.
Mixed results for Bristol/Nektar combination in cancer trial
- Mixed results over the weekend from closely watched studies combining Bristol-Myers Squibb Co’s cancer immunotherapy with Nektar Therapeutics experimental drug NKTR-214, led at least one Wall Street analyst to reassess expectations.
- Bristol agreed in February to pay Nektar $1.85 billion for a global development and profit-sharing deal aimed at increasing the effectiveness of Opdivo by combining it with immune response booster NKTR-214 for 20 cancer indications across nine different tumor types, including melanoma, kidney and lung cancers.
- Updated early stage results showed that 11 out of 13, or 85%, of melanoma patients treated with Opdivo and NKTR-214 had tumor shrinkage, but the response rate fell to 50 percent after 14 additional patients were enrolled in the trial.
Mastercard is looking to integrate its payment tech into Google and Amazon voice assistants
- Mastercard is looking at ways to integrate its payments system into voice assistants made by Google and Amazon, according to Vice Chairman Ann Cairns.
- It would allow people to pay for items using their voice.
- Recently, the company launched a way for people to pay with Masterpass for products within Facebook Messenger.
McDonald’s to add self-order kiosks to 1,000 stores each quarter
- McDonald’s will upgrade 1,000 stores with kiosk and mobile order technology every quarter for the next eight to nine quarters.
- International markets like Canada, Australia and the U.K. are already fully integrated with kiosk service and mobile ordering.
- McDonald’s has also been exploring delivery in the U.S. in an attempt to meet customer demand and changes in how consumers want to get their food.
Big Tesla investors look like firewall for Elon Musk
- Tesla Chief Executive Elon Musk faces votes at Tuesday’s shareholder meeting that will challenge his grip on the electric carmaker, but he may be able to count on some powerful friends: big fund managers likely to be fans.
- These stockpickers would have weighed Musk’s forceful public persona in their decisions to buy and hold Tesla shares in the first place, and likely are ready to back him at the meeting to be held in Mountain View, California.
- They expect shareholders to elect three Tesla directors and vote to let Musk keep his chairman’s title despite investor challenges and broader concerns with Tesla’s production.
Bain says will help Toshiba Memory pursue big acquisitions
- Bain Capital, which led the $18 billion acquisition of Toshiba Memory said it plans to support the business in pursuing M&A in the chip industry, including potentially large deals.
- The world’s No. 2 maker of NAND chips will have significant funding and spending needs – partly due to the high capital cost nature of the semiconductor industry but also because it has to please the many members of the winning Bain consortium.
Apple Looks to Expand Advertising Business with New Network for Apps
- Now the iPhone maker is looking to expand its digital-advertising business, people familiar with the matter said, as it shifts its growth strategy beyond selling devices toward pushing services on them.
- Over the past year, Apple has met with Snap, Pinterest and other companies about participating in an Apple network that would distribute ads across their collective apps, the people said.
- The move would expand on Apple’s current small-but-growing business selling promotional ads for search terms in its App Store, which delivered nearly $1 billion in revenue last year.
- The digital ad effort, if it proceeds, would push Apple into territory dominated by Google, which claims 35% of the mobile ad market, and Facebook, which has 25%, according to research firm eMarketer.
Global airlines slash profit outlook as fuel costs jump
- Global airlines slashed their forecast for industry profits in 2018 on a spike in fuel costs, while warning higher interest rates and a host of geopolitical tensions would add to operating risks.
- The International Air Transport Association (IATA), which represents about 280 carriers, said the industry is expected to post a $33.8 billion profit this year, 12% below a previous forecast of $38.4 billion.
- The less upbeat earnings outlook is a drop from a record $38 billion in 2017, but comparisons to that figure are distorted by special accounting items such as one-off tax credits that boosted annual profits, the industry group said.
- IATA expects an average oil price of $70 a barrel this year, up from $54.90 last year and its previous prediction of $60.
Elon Musk’s SpaceX Delays Plans for First Space Tourists to Circle Moon
- SpaceX has indicated it won’t launch a pair of space tourists to loop around the moon this year as previously announced, the latest sign that technical and production challenges are disrupting founder Elon Musk’s plans for human exploration of the solar system.
- The delay comes amid SpaceX’s own projections of a nearly 40% drop in launches next year from as many as 28 anticipated for 2018. The decline primarily reflects a global slump in manufacturing orders and launch contracts for large commercial satellites.
- A new timetable for the flight—now postponed until at least mid-2019 and likely longer—hasn’t been released by SpaceX.
US ECONOMY & POLITIC
Supreme Court rules narrowly for Colorado baker who wouldn’t make same-sex wedding cake
- The Supreme Court on Monday handed a narrow victory to a Christian baker from Colorado who refused for religious reasons to make a wedding cake for a gay couple.
- The justices, in a 7-2 decision, faulted the Colorado Civil Rights Commission’s handling of the claims brought against Jack Phillips, saying it had showed a hostility to religion. In doing so, the commission violated his religious rights under the First Amendment of the U.S. Constitution.
U.S., China End Latest Trade Talks Without Settlement
- The U.S. and China moved closer to imposing tariffs on one another as negotiators made little progress in talks and Beijing threatened that it won’t abide by a deal on farm and other products if the U.S. goes ahead with sanctions.
- U.S. Commerce Secretary Wilbur Ross and Liu He, China’s economic czar, led the weekend negotiations in Beijing, after several days of talks by lower level officials.
- A statement released Sunday by China’s official Xinhua News Agency said both sides achieved “concrete progress” in areas including agriculture and energy but details are yet to be hammered out.
- “If the U.S. introduces trade sanctions including tariffs,” the statement added, any results from the negotiations “won’t go into effect.”
- That means China would not only back out of any purchasing agreements with the U.S. but also retaliate for any U.S. sanctions, Chinese officials said.
Trade Tensions Intensify as Allies Rebuke U.S., Testing Trump Ahead of G-7
- The Trump administration showed no sign of backing down from restrictive tariffs in the face of pushback from allies and China over the weekend, isolating the U.S. and complicating the president’s meeting later this week with leaders of Washington’s staunchest partners.
- Top finance officials from the Group of Seven leading nations met in Canada, where the non-U.S. members issued a public rebuke of Washington’s new steel and aluminum tariffs.
- But even with retaliatory moves under way in China as well as in Europe and North America, there was no sign over the weekend that the administration was wary of inching closer to a trade war.
- “When you’re almost 800 Billion Dollars a year down on Trade, you can’t lose a Trade War!” President Donald Trump said in a Twitter message Saturday. “The U.S. has been ripped off by other countries for years on Trade, time to get smart!”
White House expected to announce compromise on biofuels
- The Trump administration is expected on Monday to announce changes in biofuels policies, including a plan to count ethanol exports toward federal biofuels usage quotas and allowing year-round sale of fuels with a higher blend of ethanol.
- The changes are aimed at easing tensions between the oil and corn industries, which have been clashing for months over the future of the U.S. Renewable Fuel Standard – a law that requires refiners to add increasing amounts of biofuels into the nation’s gasoline and diesel.
- While the RFS has helped farmers by creating a 15 billion-gallon-a-year market for corn-based ethanol, oil refiners have complained that complying with the law incurs steep costs and threatens the blue-collar jobs Trump has promised to protect.
- The Trump administration is expected to propose lifting restrictions on selling a certain kind of higher-ethanol blend gasoline in the summer, called E15. Sales of E15 are currently banned in the summer over worries it could increase smog.
A Republican Holdout in California Is Under Siege—and Key to U.S. House
- For California’s primary election Tuesday, the Orange County looks more like a Wild West battleground for control of the House of Representatives.
- Seven Republican-held congressional districts in California are competitive, and four of them are in Orange County, more than any single county in the U.S. Democrats need a net gain of 23 seats for a House majority.
- With the stakes high, both national parties opened their California campaign headquarters in Orange County, about 5 miles apart.
- The California Republican Party holds only 14 of the state’s 53-member House delegation, its smallest share in six decades. Half those seats are considered vulnerable in the November midterm election.
U.S. weighs more South China Sea patrols to confront ‘new reality’ of China
- The United States is considering intensified naval patrols in the South China Sea in a bid to challenge China’s growing militarization of the waterway, actions that could further raise the stakes in one of the world’s most volatile areas.
- U.S. Defense Secretary Jim Mattis warned in Singapore on Saturday that China’s militarization of the South China Sea was now a “reality” but that Beijing would face unspecified consequences.
- The Pentagon is weighing a more assertive program of so-called freedom-of-navigation operations close to Chinese installations on disputed reefs, two U.S. officials and Western and Asian diplomats close to discussions said.
- Such moves could involve longer patrols, ones involving larger numbers of ships or operations involving closer surveillance of Chinese facilities in the area, which now include electronic jamming equipment and advanced military radars.
EUROPE & WORLD
China’s Xiaomi plans $3 billion CDRs in blockbuster July IPO
- Chinese smartphone and connected device maker Xiaomi plans to raise up to 30% of its blockbuster $10 billion IPO by selling shares in mainland China while offering the remainder in Hong Kong, said people with knowledge of the matter.
- The Beijing-based, Cayman-domiciled company was previously expected to raise as much as $10 billion from an initial public offering (IPO) of shares in Hong Kong only.
- A dual listing could set a template for future CDR offerings and help boost Xiaomi’s chances of meeting a $70 billion plus valuation target that some analysts and investors see as aggressive.
- Xiaomi is looking to sell about 15% of its enlarged capital in the combined share sale, implying a fundraising size of about $10 billion, said the people.
China Launches Probe of Foreign Chip Makers
- Chinese regulators are investigating memory-chip makers Micron, Samsung, and SK Hynix, all three of which said State Administration for Market Regulation officials have visited their China offices recently.
- The three companies—the dominant suppliers of so-called DRAM chips—said they are cooperating with the investigation, but didn’t say what it is about.
- Bernstein analyst Mark Newman said it may concern the rising cost of DRAM chips that Chinese smartphone makers are facing as demand continues to outpace supply.
- DRAM, is a type of chip used in processing, while NAND flash memory is for storage. China consumes a fifth of the world’s DRAM memory chips and a quarter of the NAND flash chips, according to research firm TrendForce.
Honda’s China sales slump for 4th month amid quality issues
- Honda sales in China slumped for a fourth consecutive month in May, due to the lingering impact from a quality issue associated with the automaker’s popular CR-V sport-utility vehicle.
- The Japanese automaker’s sales in China fell 15.3% in May from a year earlier to 99,263 vehicles.
- That brings Honda’s sales in the world’s biggest auto market for the first five months of the year to 501,116 vehicles, down 6.5% from the same period a year earlier.
- Last year, Honda’s sales rose 15.5% to 1.44 million vehicles. The automaker’s China sales were up 24% in 2016 and 32.5% in 2015.
Merkel Responds to Macron’s Plan to Overhaul EU with One of Her Own
- German Chancellor Angela Merkel outlined proposals for overhauling and strengthening the architecture of the European Union, including combining nations’ defense capabilities and building a common investment fund for the eurozone.
- While the suggestions broadly matched known German positions about the bloc’s future, they marked Ms. Merkel’s most direct and detailed reaction to proposals for overhauling the EU that French President Emmanuel Macron laid out in September.
- The 40-year-old French leader has called for a deeper overhaul that would see eurozone countries share more resources and liabilities in a budget as large as several percentage points of eurozone economic output.
- That would potentially place the largest burdens on Germany and France, respectively the two largest eurozone economies.
- The proposals, including beefing up an existing backstop for cash-strapped members of the eurozone and creating a joint budget for the currency union, came after capital markets briefly sank after the formation of a populist Italian government last week, evoking memories of the 2010 eurozone crisis.
Bayer to close Monsanto takeover, to retire target’s name
- Germany’s Bayer will wrap up the $62.5 billion takeover of Monsanto on Thursday this week and also retire the name of the U.S. seeds maker.
- The German drugmaker had received all required approvals from regulatory authorities, it said in a statement.
- Bayer launched a 6 billion euro ($7 billion) rights issue on Sunday, a cornerstone of the financing package for the deal.
Airbus sales chief defiant on A330neo demand as Boeing seals new win
- The head of airplane sales at Airbus dismissed concerns about a sharp drop in orders for the A330neo jet and predicted European wide-body demand would start to recover this year as rival Boeing extended a series of wins in the lucrative segment.
- Airbus has lost a series of U.S contests for sales of the 250-300-seat A330neo, followed by a decision set to be approved this week by the owners of India’s Vistara to order six Boeing 787s instead of A330neos.
- Demand for wide-body jets has weakened recently because of oversupply, but Boeing has extended a traditional lead in that part of the market thanks to a spate of orders for its 787 and a rebound in 777 demand, assisted by a recovery in freight demand.
Analysts say a U.S. decision to revoke export licenses for jets sold to Iran, after pulling out of an international nuclear sanctions deal, could deepen Airbus’s wide-body woes since IranAir’s order for 100 jets had included 28 A330neos.
TODAY in HISTORY
- Henry Ford took his first car out for a test drive. (1896)
- The U.S. Fifth Army entered Rome, leading to the liberation of the city during World War II. (1944)
- People’s Army of China opened fire on crowds of prodemocracy demonstrators in Tiananmen Square, killing thousands. (1989)
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