DAILY MARKET REPORTS
- Strong gains in tech heavyweights lifted the Nasdaq to a record intra-day high on Tuesday, while declines in financial and energy stocks weighed on the S&P 500 and Dow.
- A relentless rally in stocks last year came to a halt in late January on issues ranging from rising interest rates, trade concerns to geopolitical issues.
- However, strength in the U.S. economy, as shown by the latest jobs report, helped investors shift their focus back to fundamentals.
- The jobs report played into market expectations that the Federal Reserve would increase interest rates at its meeting next week. Data from CME Group showed investors betting on a 93.9% probability of a rate rise.
- Investors were still wary about trade discussions and equity index futures pared gains earlier after White House economic adviser Larry Kudlow said President Donald Trump may seek separate talks with Canada and Mexico in a bid to get individual trade deals with the two countries.
US FINANCIAL MARKET
U.K. Indicates It Will Allow Fox to Buy Sky Subject to News Spinoff
- The U.K. government said it preferred not to block a long-delayed deal by Rupert Murdoch’s 21st Century Fox to consolidate ownership of British pay-TV giant Sky, but would only give the green light after hashing out the details of a planned divestment of Sky’s news operations.
- The decision by Britain’s culture secretary pushes back any final sign-off on Mr. Murdoch’s bid for all of Sky, and it complicates a much bigger corporate standoff playing out in the U.S. Cable giant Comcast is also bidding for Sky.
- U.K. Culture Secretary Matt Hancock said Tuesday the government found no objection for that deal going through. Technically giving Comcast a slight advantage in their competing bids for Sky.
Apple’s New Features Take Aim at Facebook
- As it touted its newest operating software for the mobile devices on Monday, Apple unveiled forthcoming features that collectively bear the hallmarks of a social-media business.
- There are tools to make it easier to share photos with friends, a group video-chat service for up to 32 people and the capability to play augmented-reality games among friends.
- At the same time, Apple introduced new privacy tools in its Safari browser that will limit the personal data that apps like Facebook can collect.
- A new tool in Apple’s Photo app will automatically suggest which photos and who to share them with, say, after a dinner with friends. The friends will then be encouraged to share the photos back with iPhone users.
- The process, which relies on machine learning, is “private” because it uses end-to-end encryption.
Amazon is reportedly upping its investment in India by $2 billion
- Amazon is set to up its investment in India by $2 billion, CNBC reported, citing sources.
- The e-retailer had previously committed $5 billion to the emerging market. Any extra capital would help stave off a threat from Walmart, which last month took a majority stake in Indian e-commerce giant Flipkart.
- Amazon was also reportedly eyeing a bid for Flipkart to bolster its already sizable India business. Amazon did not immediately respond to a request for comment.
- Citi Research last month estimated Amazon’s India market to be worth $16 billion.
Howard Schultz to Step Down as Starbucks Chairman
- Howard Schultz is stepping down as chairman of Starbucks, the international behemoth he built that transformed the way Americans drink coffee.
- The move is likely to fuel speculation that the liberal-leaning Mr. Schultz is preparing to run for political office.
- Mr. Schultz, who will take the honorary title of chairman emeritus, will be succeeded by lead independent director Myron Ullman, former chairman and chief executive at J.C. Penney.
- Mr. Schultz’s last day with the company is June 26, Starbucks said.
Twitter to Join S&P 500
- Twitter is slated to join the S&P 500 before trading opens on Thursday, according to S&P Dow Jones Indices, as the social-media platform replaces Monsanto on the widely watched index.
- Twitter is supplanting Monsanto as the agricultural company is due to be acquired by German pharmaceutical and chemical conglomerate Bayer in a deal expected to be completed soon.
- The move also means mutual and exchange-traded funds that track the S&P 500 will have to add Twitter to their holdings.
- S&P said Netflix will replace Monsanto on the S&P 100. Netflix, founded in 1997, closed Monday trading with a market capitalization of $157.28 billion.
- It is unusual that S&P included Twitter because companies are supposed to have four straight quarters of positive as-reported profits. In April, the social-media company reported its second consecutive profitable quarter after 16 straight quarters of losses.
Wells Fargo to Sell 52 Branches to Flagstar
- Wells Fargo said it agreed to sell 52 retail bank branches in the Midwest to Flagstar Bancorp as part of Wells’s plan to trim its branch network.
- The sale includes all Wells Fargo branches in Indiana, Michigan and Ohio, along with four branches in Wisconsin.
- Wells Fargo said the roughly 490 branch employees will receive job offers from Troy, Mich.-based Flagstar.
- Wells Fargo previously said it plans to reduce its retail bank network to about 5,000 branches by the end of 2020, through consolidations and divestitures.
- The San Francisco bank, which is struggling to move past a spate of investigations across its businesses, had 5,861 branches at the end of 2017.
- The transaction, which includes about $2.3 billion in deposits and $130 million in loans, is expected to close in the fourth quarter.
US ECONOMY & POLITIC
Conference Board’s Employment Trends Index Declined in May
- The index for May was 107.69, down from April’s downward-revised reading of 108. The May reading was up 3.9% compared to a year earlier.
- In total, six of the eight components that make up the index had negative contributions in May.
- The other five that added negative contributions were the percentage of respondents who say finding a job is hard, job openings, the number of temp employees hired, initial claims for unemployment insurance and the ratio of involuntarily part-time to all part-timers.
- Real manufacturing and trade sales and industrial production made positive contributions.
ISM non-manufacturing index grows in May, expanding for the 100th month
- Growth in U.S. non-manufacturing increased in May, reaching a 100-month streak of overall expansion.
- The Institute of Supply Management’s measure of the non-manufacturing sector grew to 58.6 from 56.8 in April, beating a forecast of 57.6 by a survey of Thomson Reuters analysts.
- According to the institute’s metric, the index of the 17 U.S. non-manufacturing industries tracked by the index had saw 100 straight months of expansion.
California Nonpartisan Primaries Could Shut Parties Out of Key November Midterms
- Eight states hold primaries Tuesday. The most important contests are in California, where the top two vote-getters—regardless of their party—will advance to the general election.
- In deep-blue California, Republicans are watching anxiously to see if they will have any GOP candidate at the top of the ticket.
- Polls show Democrat Gavin Newsom, the lieutenant governor, with a solid lead for the top spot. Republicans have feared that the second spot would go to another Democrat, former Los Angeles Mayor Antonio Villaraigosa.
- Mr. Trump and top California Republicans have thrown their weight behind John Cox, a San Diego businessman, in an effort to consolidate GOP support and lift him above other Republican candidates.
Trump may seek separate trade deals with Canada, Mexico: U.S. adviser
- U.S. President Donald Trump may seek separate talks with Canada and Mexico in a bid to get individual trade deals with the two countries, White House economic adviser Larry Kudlow said.
- “He is very seriously contemplating kind of a shift in the NAFTA negotiations. His preference now, and he asked me to convey this, is to actually negotiate with Mexico and Canada separately,” Kudlow said in an interview with Fox News.
- “He prefers bilateral negotiations and he’s looking at two much different countries,” he said. “Canada’s a different country than Mexico. They have different problems.
- The United States, Canada and Mexico have been in months of negotiations to rework the North American Free Trade Agreement, which Trump has long criticized as having harmed the United States economically.
Deep in the Pentagon, a secret AI program to find hidden nuclear missiles
- The U.S. military is increasing spending on a secret research effort to use artificial intelligence to help anticipate the launch of a nuclear-capable missile, as well as track and target mobile launchers in North Korea and elsewhere.
- The effort has gone largely unreported, and the few publicly available details about it are buried under a layer of near impenetrable jargon in the latest Pentagon budget.
- But U.S. officials familiar with the research told Reuters there are multiple classified programs now under way to explore how to develop AI-driven systems to better protect the United States against a potential nuclear missile strike.
- The Trump administration has proposed more than tripling funding in next year’s budget to $83 million for just one of the AI-driven missile programs, according to several U.S. officials and budget documents
- If the research is successful, such computer systems would be able to think for themselves, scouring huge amounts of data, including satellite imagery, with a speed and accuracy beyond the capability of humans, to look for signs of preparations for a missile launch, according to more than half a dozen sources.
Mueller’s Office Accuses Manafort of Trying to Tamper with Potential Witnesses
- Special counsel Robert Mueller’s office accused former Trump campaign chairman Paul Manafort of trying to tamper with potential witnesses in the criminal lobbying case he faces in Washington.
- In a court filing late Monday, Mr. Mueller’s office sought to revoke Mr. Manafort’s release before his trial, saying he had tried to communicate with two contacts who had worked with him on a project at issue in the case.
- The specific allegations involve Mr. Manafort’s dealings with “former senior European politicians” who allegedly worked with Mr. Manafort to secretly act as paid lobbyists for Ukraine.
- Mr. Manafort has been accused of not registering his lobbying work for Ukrainian politicians, which he was required to do if he or those he was directing were contacting American officials about the project.
EUROPE & WORLD
China Offers to Buy Nearly $70 billion of U.S. Farm and Energy Products
- China offered to purchase nearly $70 billion of U.S. farm and energy products if the Trump administration abandons threatened tariffs, according to people briefed on the latest negotiations with American trade officials.
- In weekend talks in Beijing, Chinese negotiators led by Liu He, President Xi Jinping’s economic envoy, presented a U.S. team a package that includes Chinese companies buying more U.S. soybeans, corn, natural gas, crude oil and coal, among other agricultural and energy products.
Mexico hits back on U.S. steel, slaps tariffs on pork, bourbon
- Mexico responded in kind to U.S. President Donald Trump’s metals tariffs by imposing its own duties on American steel on Tuesday, while also targeting politically sensitive agricultural products from pork to bourbon.
- As of Tuesday, Mexico will impose tariffs of 15% to 25% on U.S. steel products, the Mexican economy ministry said in a list published in the government’s official gazette.
- The list also included a 20% tariff on U.S. pork legs and shoulders, apples and potatoes and 20 to 25% duties on types of cheeses and bourbon. Separately, Mexico opened a tariff-free quota for pork imports from other countries.
OPEC Faces New Concern Over Global Oil Stocks: China
- China’s state-and-commercial-owned oil stores will help the Organization of the Petroleum Exporting Countries and other major producers determine whether to continue their supply cuts or open the taps wider again, say some officials from the cartel.
- Excess Chinese oil could feed into any resurgent glut and push prices down, they worry. The most recent data suggests that U.S. production may be on the rise again.
- China’s inventories, including the country’s strategic reserve and commercial stocks, have risen by 130 million to 930 million barrels in the past year, according to oil-data company Ursa Space Systems.
- That increase would erase more than a third of the 340 million barrels of surplus oil stock that OPEC cuts took out of inventories in OECD countries.
Toshiba to Close the Book on Its Laptop Unit
- Toshiba, which was the first in the world to commercialize laptop computers in 1985, is selling the business to Sharp, a symbolic step marking Toshiba’s withdrawal from most consumer businesses.
- Sharp is paying just ¥4 billion ($36 million) for an 80.1% stake in a business that once was at the forefront of the global move toward mobile computing.
- Toshiba’s laptop PCs, sold under the Dynabook name, helped make the conglomerate famous among consumers outside Japan, but the business has lost money for the past five years and was at the center of a profit-padding scandal that the company disclosed in 2015.
- Osaka-based Sharp, controlled by Taiwan-based iPhone assembler Foxconn Technology Group, has been expanding its consumer goods lineup because Foxconn wants to establish itself in branded electronic products.
Dutch fintech Adyen valued at up to $8.3 billion as investors seek shares
- The listing of Adyen, the Dutch firm whose payments processing technology is used by Facebook and Netflix, got off to a strong start on Tuesday when investor demand for its shares covered those on offer within an hour.
- Existing shareholders in Adyen, whose customers also include Uber and eBay, are selling a stake of up to 14.2% in the financial technology company which indicated in its prospectus its total equity would be valued at 6.5 billion-7.1 billion euros ($7.3 billion-$8.3 billion) when it lists on June 13.
China launches DRAM chip price probe into Samsung Elec, SK Hynix and Micron
- China has launched a probe into Samsung Electronics, SK Hynix and Micron Technology, the three semiconductor makers who control the market for DRAM memory chips.
- Beijing is investigating price-fixing allegations as DRAM prices have risen sharply, the first such probe by China, said a source with knowledge of the matter.
- Prices for DRAM chips, which help devices perform multiple tasks, have more than doubled in two years as servers, gaming PCs and cryptocurrency mining devices demand more firepower to process large amounts of streaming data.
- All three firms said officials from China’s State Administration for Market Regulation had visited their offices recently.
Toyota’s May China vehicle sales up 8.6% year on year
- Toyota Motor’s vehicle sales in China rose 8.6% in May from a year earlier to 122,400 vehicles, the company said on Tuesday.
- Over the first five months of the year, Toyota sold 562,200 vehicles in China, up 8.7% from a year ago.
China shows faster pace of economic restructuring, but still relying on credit: Moody’s
- China’s economic restructuring is picking up pace, with its manufacturing sector showing signs of a shift to higher value-added areas – a credit positive, analysts at Moody’s Investors Service said.
- China has been cutting excess capacity in heavy industry in recent years to revive profitability in the sector and reduce high debt levels, while encouraging factories to shift to higher-value production such as robotics and aerospace under its Made in China 2025 initiative.
- Moody’s downgraded China’s sovereign credit rating by one notch to A1 in May last year on concerns debt would continue to rise as potential economic growth slows, and the firm’s outlook on China remains broadly similar to its view from a year ago.
TODAY in HISTORY
- George Marshall proposed a plan (Marshall Plan) to help Europe recover financially from the effects of World War II. (1947)
- Robert F. Kennedy was shot by an assassin and died the next day. (1968)
- The Centers for Disease Control published the first report about the disease that would later become known as AIDS. (1981)
- Former president Ronald Reagan died. (2004)
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