DAILY MARKET REPORTS
- Losses in shares of technology and industrial companies dragged Wall Street lower on the first trading day of the second half of this year, as a risk of an escalating tariff war between Washington and its trading partners continued to weigh on sentiment.
- Shanghai’s blue-chip index slid nearly 3%, days before the U.S. tariff on $34 billion worth of Chinese goods comes into effect on July 6, posing threats of a similar response from Beijing.
- Canada on Friday struck back at the Trump administration over U.S. steel and aluminum tariffs, vowing to impose punitive measures on $12.63 billion worth of American goods.
- Trade war worries were also being compounded by a threat from the European Union to hit the United States with almost $300 billion in retaliatory tariffs.
- Global stocks were also facing the impact of a threat to Chancellor Angela Merkel’s German ruling coalition, while the Mexican peso whipsawed after Andres Manuel Lopez Obrador’s election victory set the stage for a left-wing government at a time of tense relations with the United States.
US FINANCIAL MARKET
Tesla hits Model 3 manufacturing milestone, hours after deadline – factory sources
- Tesla nearly produced 5,000 Model 3 electric sedans in the last week of its second quarter, with the final car rolling off the assembly line on Sunday morning, several hours after the midnight goal set by Chief Executive Elon Musk.
- Musk said the company hit its target of 5,000 Model 3s in a week, according to an email sent to employees on Sunday. Tesla also expects to produce 6,000 Model 3 sedans a week “next month.”
- The 5,000th car finished final quality checks at the Fremont, California factory around 5 a.m. PDT. It was not clear if Tesla could maintain that level of production for a longer period.
Dell Technologies Confirms Deal That Would Mark Return to Public Markets
- Dell is nearing a deal to buy out the holders of shares that track the performance of VMWare using a mix of cash and equity in Dell, people familiar with the matter said on Sunday.
- The move will mark the culmination of a review that Dell has been conducting for several months as it has sought to consolidate its complicated ownership structure without overburdening its balance sheet, which bears around $50 billion in debt.
- Dell will not make any immediate moves to buy out the shareholders of the publicly traded VMWare stock, who will continue to own just under 20% of the company.
ADM to buy France’s Neovia as it expands into fast-growing feeds
- Archer Daniels Midland is in exclusive talks to take over French animal feed business Neovia for 1.5 billion euros ($1.75 billion) as part of the U.S. farm giant’s strategy to expand in the fast-growing animal nutrition sector.
- The acquisition would be ADM’s second largest to date after it purchases natural food ingredients company Wild Flavors in 2014. The Wild Flavors deal was worth $3 billion.
- Neovia had sales of 1.7 billion euros ($2 billion) in 2017, of which 75% from outside Europe. ADM would divert all its feed activities into Neovia’s to create a new unit, called ADM-Neovia, with combined sales approaching $3.5 billion.
GM says a new wave of tariffs could force US job cuts
- General Motors warned Friday that another wave of tariffs being considered by the Trump administration could force the company to scale back its business and cost American jobs.
- In comments submitted to the Commerce Department, the automaker said that the tariffs, if approved, could drive individual vehicle prices up thousands of dollars, stifling demand. Such costs would need to be borne either by consumers or the company.
BMW says U.S. tariffs on EU cars may hit investment there
- U.S. tariffs on imported cars could lead BMW to reduce investment and cut jobs in the United States due to the large number of cars it exports from its South Carolina plant, the German carmaker has warned. The BMW plant in South Carolina is its largest globally and ships more than 70% of its annual production to other export markets.
- Chinese tariffs on U.S. passenger cars have already hiked up the cost of exporting to China, BMW said. Any U.S. tariffs would likely lead to further retaliatory measures from China and the European Union.
US ECONOMY & POLITIC
Largest U.S. business group attacks Trump on tariffs
- The U.S. Chamber of Commerce, the nation’s largest business group and customarily a close ally of President Donald Trump’s Republican Party, is launching a campaign on Monday to oppose Trump’s trade tariff policies.
- The new campaign is an aggressive effort by the business lobbying giant. Using a state-by-state analysis, it argues that Trump is risking a global trade war that will hit the wallets of U.S. consumers. For example, the Chamber said Texas could see $3.9 billion worth of exports targeted by retaliatory tariffs; Tennessee, $1.4 billion; and South Carolina, $3 billion.
- On Friday, Canada struck back at U.S. steel and aluminum tariffs, vowing to impose punitive measures on $12.6 billion worth of American goods until Washington relents.
- China is expected to impose a new 25-percent tax on soybeans in July. Mexico is adding duties to pork imports. The EU has targeted $3.2 billion in American goods exported to the 28-member bloc, including bourbon and Harley Davidson motorcycles.
Report on Trump bill rejecting WTO seen by trade experts as hot air
- U.S. President Donald Trump has ordered the drafting of legislation that would mean abandoning key disciplines agreed at the World Trade Organization, Axios news website reported late on Sunday, to a skeptical response from trade experts.
- The website followed up on Sunday by publishing what it said was a draft bill, the “United States Fair and Reciprocal Tariff Act”, immediately drawing ridicule for legislation that would be known by its acronym, the FART Act.
- The act would allow Trump to ignore the WTO’s “most favored nation” principle, which stops countries trading on different terms with different trading partners unless they have a formal trade agreement.
- Axios quoted a source as saying the bill was “insane” and Congress would never consent to it. Trump was briefed on the draft in late May and most officials thought it was unrealistic or unworkable, apart from Trump’s trade adviser Peter Navarro.
Kennedy’s departure from high court could benefit business interests
- In a hotly contested case before the U.S. Supreme Court three years ago, Justice Anthony Kennedy cast the deciding vote to uphold the broad scope of race discrimination claims that can be brought under the Fair Housing Act.
- While Kennedy’s legal decisions were often friendly to corporate interests, his rulings – as in the Fair Housing case – sometimes went against them, especially in cases involving civil rights and environmental regulation.
- Kennedy will be replaced with a justice selected by President Donald Trump, who has said he will make his choice from a shortlist of conservative judges. One area in which that could lead to more business-friendly decisions is in “disparate impact” litigation, a concept at the core of the Fair Housing Act fight.
Trump, Trudeau discuss trade, economic issues over a phone call
- U.S. President Donald Trump spoke with Canadian Prime Minister Justin Trudeau late on Friday to discuss trade and other economic issues, White House Press Secretary Sarah Sanders said on Saturday.
- The phone call between the two leaders was the first to be publicly disclosed since Trump blasted Trudeau as “very dishonest and weak” at the end of the Group of Seven leaders meeting in Canada earlier this month.
- During the call, Trudeau told Trump that Canada had no choice but to announce reciprocal countermeasures to the steel and aluminum tariffs, according to a separate statement issued by Canada late on Friday.
New Jersey averts a government shutdown with last-minute budget
- New Jersey Governor Phil Murphy struck a last-minute budget deal on Saturday, ending threats of a government shutdown that had raged for weeks as he struggled to reach an accord with members of his own party.
- It was the state’s first budget deal in eight years with a Democrat at the helm, instead of Republican firebrand and one-time presidential hopeful Chris Christie.
- In the new budget for fiscal 2019, which began on July 1, taxes on millionaires will rise to 10.75% from 8.97% to help raise revenue for education, transportation and public pensions.
- Under Saturday’s agreement, there will be no change to the state’s sales tax, which was lowered in 2016 to 6.625% from 7% in exchange for higher gasoline taxes to help pay for infrastructure repairs.
EUROPE & WORLD
Airbus shares fall on report of missing A320neo delivery goal
- Airbus shares fell on Monday after Bloomberg reported that the European planemaker would miss its delivery target for Pratt & Whitney-powered A320neo narrow-body jets this year.
- Airbus expects to deliver 30 to 40 fewer of the aircraft than previously anticipated, citing a source who declined to be identified due to confidentiality agreements.
- Asked to comment on the report, an Airbus spokesman replied that Airbus was sticking to its overall forecast for deliveries of around 800 planes in general for 2018.
Mexican Lopez Obrador wins historic election landslide for left
- Andres Manuel Lopez Obrador won Mexico’s presidency in a landslide victory on Sunday, setting the stage for the most left–wing government in the country’s democratic history at a time of tense relations with the Trump administration.
- The 64-year-old former Mexico City mayor won with the widest margin in a presidential election since the 1980s, according to an official quick count that showed him taking more than half the vote — some 30 points ahead of his nearest rival.
- In a posting on Twitter, Trump congratulated the leftist on his victory. “I look very much forward to working with him. There is much to be done that will benefit both the United States and Mexico!” Trump tweeted.
- The first high-level contact between Lopez Obrador and the White House is likely to be a phone call on Monday. Earlier on Sunday, Trump raised the prospect of taxing cars imported from Mexico if there are tensions with the new government.
EU warns U.S. of boomerang effect if Trump imposes car levies
- The European Union has warned the United States that imposing import tariffs on cars and car parts would harm its own automotive industry and likely lead to counter-measures by its trading partners on $294 billion of U.S. exports.
- In a 10-page submission to the United States Commerce Department, they said tariffs on cars and car parts were unjustifiable and did not make economic sense. In its submission, the EU said EU companies make close to 2.9 million cars in the United States, supporting 120,000 jobs – or 420,000 if cars dealerships and car parts retailers are included.
- The submission said that tariffs on cars and car parts could undermine U.S. auto production by imposing higher costs on U.S. manufacturers. The EU had calculated that a 25% tariff would have an initial $13-14 billion negative impact on U.S. gross domestic product with no improvement to its current account balance.
China further eases foreign investment curbs in free trade zones
- Publishing a revised ‘negative list’ for investment, the National Development and Reform Commission (NDRC), China’s top economic planner, said curbs in oil and gas exploration, nuclear fuel production and telecommunications would be eased.
- Foreign investors will no longer have to conduct oil and natural gas exploration and development through joint ventures, and a ban on foreign investment in the production of nuclear fuel and radioactive minerals will be lifted, the NDRC said in a statement.
- Foreign investment limits on breeding of new crop varieties and seed production for wheat and corn will be relaxed and opening of value-added telecommunications will be expanded from Shanghai’s free trade zone to other zones, it added.
Saudi king said will boost oil output if needed: White House
- The leader of Saudi Arabia promised President Donald Trump that he can raise oil production if needed and the country has 2 million barrels per day of spare capacity, the White House said, rowing back on an earlier Trump tweet that appeared to suggest the Saudis had agreed to boost output by that amount.
- The White House statement undercut a tweet by Trump earlier in the day when he wrote that Saudi Arabia had definitely agreed to produce more oil. In the tweet, Trump said the extra Saudi oil would help offset a decline in supply from Iran after the United States pulled out of the Iran nuclear deal in May and moved to reimpose oil sanctions.
- The Trump administration is pushing countries to cut all imports of Iranian oil in November when the United States re-imposes sanctions against Tehran.
Iran eyes private oil exports to help beat U.S. sanctions
- Iran will allow private companies to export crude oil, part of a strategy to counter U.S. sanctions, and is urging fellow OPEC members, including regional rival Saudi Arabia, not to break output agreements, state media and officials said on Sunday.
- Meanwhile, Iranian Oil Minister Bijan Zanganeh sent a letter to OPEC asking its members to adhere to the group’s agreement reached last month to collectively raise output and “refrain from any unilateral measures” that could undermine the unity of the producer group.
- Referring to reports that Saudi Arabia may increase its oil exports to replace Iranian oil in world markets, Jahangiri said: “Anyone trying to take away Iran’s oil market (share) would be committing great treachery against Iran and will one day pay for it.”
Libyan Oil Output Choked Off as Two More Ports Are Out of Action
- Libya’s National Oil declared force majeure on another two oil ports, removing thousands of more barrels from the market just as global supply concerns put pressure on OPEC to ramp up production.
- Oil loadings at the Zueitina and Hariga export terminals in eastern Libya have stopped, the Tripoli-based NOC said Monday.
- The latest port halts, combined with the shutdown of Es Sider and Ras Lanuf, will cut the country’s oil output by 850,000 barrels a day at a cost of about $67.4 million a day, according to the NOC.
Panasonic to consider more investment in Tesla’s Gigafactory if asked
- Panasonic would consider further investment in Tesla’s so-called Gigafactory if requested by the U.S. electric vehicle maker, an executive at the Japanese conglomerate said. The investment would come on top of the $1.6 billion Panasonic is contributing to the automotive battery plant, which it jointly operates with Tesla in the U.S. state of Nevada.
- Panasonic’s initial investment in the Gigafactory is almost complete, and the Japanese electronics maker has not made any decisions on whether to pledge further funds, Ito said.
- Panasonic is the exclusive battery cell supplier for Tesla’s current production models, making them in Japan as well as at the $5 billion Gigafactory.
China June manufacturing sector growth ebbs as export orders shrink
- Growth in China’s manufacturing sector cooled slightly in June as firms faced rising input costs and a decline in export orders amid an escalating trade dispute with the United States, a private survey showed on Monday.
- The Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) declined to 51.0 in June from May’s 51.1, matching forecasts. It remained above the 50-point mark that separates growth from contraction for the 13th consecutive month.
- The survey showed new export orders contracted for the third straight month and the most in two years, though there was no significant slide from the previous two months.
Volkswagen components business to become an independent entity
- Volkswagen said its components development and manufacturing business would become an independent entity within the group from January 2019, alongside the VW Passenger Cars business and Volkswagen Commercial Vehicles.
- It said the goal of its reorganization was to prepare the components business for the challenges of electric mobility.
TODAY in HISTORY
- Congress passed the Sherman Antitrust Act. (1890)
- Amelia Earhart and her co-pilot Fred Noonan disappeared over the Pacific Ocean while attempting to fly around the world. (1937)
- President Johnson signed the Civil Rights Act of 1964 into law. (1964)
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