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U.S. STOCKS SLIDE ON G-7 TENSIONS

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US FINANCIAL MARKET | US ECONOMY & POLITICS
 EUROPE & WORLD | TODAY IN HISTORY

DAILY MARKET REPORTS

  • U.S. stocks slipped Friday as trade tensions between the U.S. and its allies ratcheted up ahead of a major summit.
  • On Thursday, French President Emmanuel Macron said the U.S.’s newly announced steel and aluminum tariffs against the European Union and Canada were pushing the six other G-7 nations to become a force of their own. Canadian Prime Minister Justin Trudeau said he would stay true to the interests of Canadian citizens, even if that means tensions between neighbors.
  • While many investors say the trade tensions won’t be a significant drag on global growth, they expect such headlines to add to the rocky environment for stocks that has marked most of 2018.
  • Investors are eyeing next week’s U.S. Federal Reserve meeting on interest rates and an unprecedented U.S.-North Korea summit scheduled for June 12 in Singapore.
  • Apple was down 1.6% after a newspaper report said the company had asked its supply chain to manufacture about 20% fewer components for iPhones in the latter half of 2018.

US FINANCIAL MARKET

Broadcom profit beats; expects wireless to remain weak

  • Broadcom’s quarterly profit beat Wall Street estimates as demand for its networking chips and storage solutions from data centers more than made up for weakness in its wireless business.
  • Net revenue jumped 19.7% to $5.01 billion, above the average analyst estimate of $5.00 billion.
  • Revenue from the company’s wired infrastructure business, which sells data center switching chips to customers such as Amazon.com and switching ICs to the likes of Cisco Systems, jumped 46% to $2.30 billion.
  • The company’s net income jumped nine-fold to $3.72 billion, in the second quarter.

Apple plans to make 20% fewer new model iPhones this year: Nikkei

  • Apple expects to ship 80 million new model iPhones this year, down 20% from what it had planned at the same time last year, the Nikkei reported, citing industry sources.
  • The California-based firm has asked its parts suppliers to make about 20% fewer components for the three new iPhones it plans to launch in the second half of 2018, compared to last year’s plans for its iPhone X and iPhone 8 models.
  • The report adds to concerns of weakening smartphone sales after years of scorching growth as sales stagnate in key growth markets such as China and users upgrade their phones less often.
  • Top Apple analyst Ming-Chi Kuo said earlier this week that Apple might cut prices of new iPhones to debut later this year by as much as $300, according to several media reports.

GE Surprises Wall Street by Keeping Imperiled Dividend Intact

  • The board declared a 12-cent dividend, holding the payout steady for another quarter despite growing concerns that it would get cut. The dividend is payable July 25 to owners of record at the close of business June 18.

Verizon CEO to Retire, Succeeded by a Newcomer

  • Verizon Communications named Hans Vestberg as its next chief executive, appointing a relative newcomer to run the wireless giant at a time when its industry is being reshaped by megadeals.
  • Mr. Vestberg, who joined the company about a year ago and is its chief technology officer, will succeed longtime CEO Lowell McAdam on Aug. 1. Mr. McAdam will remain executive chairman until the end of the year and then become nonexecutive chairman.
  • The 52-year-old Swede was previously the chief executive of Ericsson. Mr. Vestberg was ousted in July 2016 by the network equipment maker’s board when he was unable to halt slumping sales and profits.
  • Shares of Verizon have gained about 35% during Mr. McAdam’s seven-year tenure, outpacing rival AT&T Inc. but lagging behind the broader market, which rallied roughly 125% in the same period.

Money Markets See Biggest Inflows Since 2013 in Run for Cash

  • Investors poured the most cash since October 2013 into global money markets on the heels of trade tensions and turmoil in developing economies.
  • At $45 billion, U.S. funds were the biggest beneficiaries of the $55 billion inflow in the week through June 6 — the second-highest on record — according to EPFR Global.

Phony bank accounts not a ‘systemic’ issue: U.S. regulator

  • A U.S. bank regulator said on Thursday that an industry-wide review prompted by Wells Fargo’s sales practices scandal had uncovered some instances of phony accounts at other lenders but little evidence of a “systemic” problem.
  • The Office of the Comptroller of the Currency reviewed more than 40 large and midsize banks after Wells Fargo’s phony accounts scandal first erupted in 2016, wrapping up the process at the end of 2017. The full findings have not been made public.

Most Forecasters See Modest Growth Boost from Bank-Regulation Rollback

  • Most economists think the U.S. will experience stronger growth in the coming years due to recent legislation that relaxed postcrisis rules on some banks, though a sizable minority said the measure could at least modestly weaken financial stability.
  • Among dozens of forecasters surveyed in recent days by The Wall Street Journal, 61% said they expected U.S. growth in the medium term would be modestly stronger thanks to the bill signed last month by President Donald Trump.
  • There could be a tradeoff: 40% said the law would at least modestly weaken the stability of the financial system. Just over half said the law would have no effect and the rest said it would leave the system stronger than before.

Goal! Investors line up World Cup winners off the pitch

  • The soccer World Cup is a massive money-spinner and stock market players are busy picking brewers, betting firms, pub chains and sportswear brands that will benefit from the associated global spending surge.
  • This year’s tournament will add $2.4 billion to the global advertising market, according to marketing agency Zenith. The tournament is expected to have a broadcast audience of 3.5 billion across the globe.
  • Volumes of beer typically get a 2-3% boost in host countries during a World Cup year, Morgan Stanley analysts found looking at the four previous hosts.
  • The world’s biggest sportswear brands are also vying for dominance on the field with Nike supplying shirts for 10 countries, and Adidas supplying 12.

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US ECONOMY & POLITIC

April wholesale inventories revised up slightly

  •  U.S. wholesale inventories were a bit higher than initially estimated in April amid increases in the stocks of motor vehicles and a range of other goods.
  • The Commerce Department said wholesale inventories edged up 0.1% instead of being unchanged as it reported last month.
  • The component of wholesale inventories that goes into the calculation of gross domestic product — wholesale stocks excluding autos — nudged up 0.1% in April.

Trump says Russia should be at G7 meeting

  • U.S. President Donald Trump said on Friday Russia should also be attending a Group of Seven nations summit, as he prepared to fly into a chilly reception at the meeting in Canada, where other G7 leaders are set to clash with him over trade.
  • Russia was expelled from what was then called the G8 in 2014 because of its annexation of Crimea from Ukraine. Trump said it should be readmitted.
  • Trump was scheduled to leave the G7 meeting early on Saturday, to prepare for a summit with North Korean leader Kim Jong Un on Tuesday. The group consists of the United States, Canada, France, Germany, Italy, Japan and Britain.

U.S. can sell pork to Mexico through import quota, despite tariffs

  • U.S. producers can sell pork legs and shoulders to Mexico via an import quota despite retaliatory measures taken this week after U.S. President Donald Trump imposed tariffs on steel and aluminum, the Mexican government said on Thursday.
  • Mexico published a long list on Tuesday of U.S. products it would subject to tariffs, including the pork cuts. The measures were a response to U.S. tariffs on steel and aluminum imports from Mexico, Canada and the European Union.
  • But due to the country’s high consumption of pork legs and shoulders, Mexico created a quota for 350,000 tons that could be imported without tariffs. It was not previously clear that the quota would apply to imports from the United States.

Trump says EPA chief Scott Pruitt is not blameless: ‘We’ll see what happens’

  • President Donald Trump on Friday suggested that Environmental Protection Agency Administrator Scott Pruitt shoulders some of the blame for the controversies engulfing his agency.
  • Trump’s statement was perhaps his most equivocal since it was revealed more than two months ago that Pruitt had leased a Capitol Hill condominium linked to a prominent energy lobbyist for just $50 a night.
  • Since then, a steady trickle of reports has led the EPA inspector general, as well as federal and congressional investigators, to open probes into Pruitt’s EPA. Pruitt and his agency now face about a dozen investigations.
  • Just one day earlier, internal EPA emails revealed that Pruitt had an aide reach out to Chick-fil-A to inquire about securing a franchise location for Pruitt’s wife. That report only fueled demands from Democrats that investigators probe a string of personal tasks Pruitt had staffers perform for him.

Trump considering 3,000 pardons, including boxer Muhammad Ali

  • U.S. President Donald Trump said on Friday he is considering pardoning some 3,000 people “who may have been treated unfairly,” including late heavyweight boxing champion Muhammad Ali.
  • Trump said he was considering a pardon for Ali, who died in 2016. The boxer refused to be inducted into the U.S. Army in 1967, claiming conscientious objector status, and was sentenced to five years in prison. He never went to prison while his case was under appeal and in 1971 the U.S. Supreme Court overturned the conviction.
  • “We have 3,000 names. We’re looking at them. Of the 3,000 names, many of those names have been treated unfairly,” Trump told reporters on the White House lawn before he departed for a Group of Seven summit in Canada. In some cases, their sentences are “far too long,” he said.

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EUROPE & WORLD

Jack Ma’s Ant Financial Valued Around $150 Billion After Funding Round

  • China’s Ant Small and Micro Financial Services Group said it raised around $14 billion from domestic and global investors in one of the largest private-capital raises on record.
  • The funding round valued Ant at around $150 billion, according to people familiar with the matter. It also marks the first time foreign investors could buy stakes in the Hangzhou-based company.
  • The lowest investment amount was about $200 million, while the highest was more than $500 million.
  • Ant’s previous funding round in the summer of 2016 valued the company at $60 billion. Last year Ant reported $2 billion in pretax profits but posted a first-quarter loss early this year because of heavy spending on marketing and customer-acquisition costs.

Foxconn unit’s shares skyrocket in Shanghai trading debut

  • Foxconn Industrial Internet, a unit of the world’s largest contract manufacturer, became China’s biggest domestically listed tech company by market cap on Friday as its shares soared a maximum 44% on debut.
  • The company raised more than $4 billion in China’s biggest IPO since 2015, highlighting Beijing’s resolve to lure major tech listings away from Hong Kong and New York and use capital markets to fortify the domestic tech sector.

Airbus clinches final deal to rescue Bombardier CSeries

  • European planemaker Airbus has finalized a rescue deal for Bombardier’s CSeries jet and is expected to flex its marketing and cost-cutting muscle to revive the loss-making Canadian venture.
  • Bombardier agreed in October to sell Airbus a 50.01% stake in its flagship commercial jet for a symbolic Canadian dollar, after sluggish sales and low production rates prevented it from keeping a lid on costs.
  • Airbus, by contrast, will be able to offer airlines deals by packaging the CSeries with its own jets in a challenge to Boeing and is expected to use its industrial power to slash the price of parts, along with improving efficiencies internally.

China’s Trade Surplus Narrows—but Not With the U.S.

  • China reported a trade surplus of $24.92 billion last month, according to customs data released Friday, narrower than April’s $28.78 billion and the $32.6 billion forecast in a poll of economists.
  • Imports were up 26% from a year earlier—driven by rising oil prices and bigger purchases of factory inputs, some economists said—accelerating from April’s 21.5% and beating forecasts.
  • Overall, China’s exports in May were up 12.6% from a year earlier, about matching April’s 12.9% pace, the customs bureau said.

IMF, Argentina Agree on $50 Billion Bailout Deal

  • The International Monetary Fund and Argentina reached an agreement for a $50 billion credit line to stem a drop in the value of the Argentine peso and shore up the government of President Mauricio Macri, as he accelerates plans to reduce fiscal deficits.
  • Mr. Macri sought the IMF’s help four weeks ago, after the peso’s slide threatened Argentina’s ability to pay its debt, much of which was denominated in U.S. dollars. The peso is down more than 25% this year against the dollar.
  • The deal represents a forceful response from the IMF. The size of the program is at the upper end of the $30 billion to $50 billion range that analysts had expected, and the deal also came together quickly.
  • About $15 billion from the credit line would be immediately available to Argentina after the package is approved by the IMF’s board, which is expected on June 20. The rest would be dispersed as needed as Argentina meets its targets

Iran slams U.S. for seeking Saudi oil output hike, says OPEC won’t comply

  • Iran said on Friday a U.S. request for Saudi Arabia to pump more oil so that it could cover a drop in Iranian exports was “crazy and astonishing” and said OPEC would not heed the appeal, setting the stage for a tough OPEC meeting this month.
  • The U.S. government had unofficially asked Saudi Arabia and some other OPEC producers to raise output a day before Washington slapped new sanctions on Tehran.
  • Iran has called on OPEC to discuss what it called “illegal” sanctions at the next meeting on June 22, which is due to debate production policies.
  • OPEC is likely to reject a request by Iran to discuss U.S. sanctions against Tehran at this month’s meeting of the oil producer group, a source familiar with the matter told Reuters.

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TODAY in HISTORY

  • Tennessee became the 11th and last state to secede from the Union. (1861)
  • James Earl Ray, Martin Luther King, Jr.’s, assassin, was arrested. (1968)
  • President Reagan became the first American president to address a joint session of Britain’s Parliament. (1982)

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