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WALL STREET EDGES HIGHER AS STRONG JOBS DATA OFFSETS TRADE WORRIES

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

DAILY MARKET REPORTS

  • U.S. stocks edged higher on Friday on stronger-than-expected job growth in June, offsetting concerns from a trade war between the United States and China.
  • Nonfarm payrolls increased by 213,000 jobs last month, the Labor Department said, topping expectations of 195,000, while the unemployment rate rose from an 18-year low to 4.0% and average hourly earnings rose 0.2%.
  • The strong jobs data follows the minutes of the Fed’s latest policy meeting which showed policymakers discussed if recession lurked around the corner and expressed concerns trade tensions could hit an economy that by most measures looked strong.
  • Earlier stock futures were set for a more cautious start after the United States and China imposed tariffs on each other’s goods worth $34 billion, with Beijing accusing Washington of starting the “largest-scale trade war.”
  • President Donald Trump warned the United States may ultimately target over $500 billion worth of Chinese goods, but global markets remained broadly sanguine, though concerns about the conflict escalating capped appetite for risk.
  • Biogen jumped 20% after the company and Japanese drugmaker Eisai said the final analysis of a mid-stage trial of their Alzheimer’s drug showed positive results.

US FINANCIAL MARKET

Biogen shares soar on successful Alzheimer’s drug trial

  • Shares of the biotech company were up 20% Friday morning, a day after Biogen and Tokyo-based Eisai announced positive results from a Phase II study with BAN2401, an anti-amyloid beta protofibril antibody, in 856 patients with early Alzheimer’s disease. The stock move added $12 billion in value to Biogen shares.
  • “These BAN2401 18-month data offer important insights in the investigation of potential treatment options for patients with Alzheimer’s disease and underscores that neurodegenerative diseases may not be as intractable as they once seemed,” Biogen’s chief medical officer, Alfred Sandrock, said in a release.

Tariffs on U.S.-made models to force BMW price hikes in China

  • German luxury automaker BMW said on Friday that it will be unable to “completely absorb” a new Chinese 25% tariff on imported U.S.-made models and will have to raise prices on the vehicles it makes in Spartanburg, South Carolina.
  • BMW exports high-margin X4, X5 and X6 SUV and crossover models to China. Last year, the automaker shipped more than 100,000 vehicles from the United States to China.
  • China, which just days ago cut tariffs on all imported automobiles, slapped an additional 25% levy on 545 American products, including U.S.-made cars, beginning on Friday.

California agency opens third probe into Tesla’s Fremont factory

  • A California agency for occupational safety said on Thursday it opened a third investigation at Tesla’s factory in Fremont, California, following a complaint.
  • The state’s Occupational Safety and Health Administration (Cal-OSHA) said it opened the latest case on June 21 but did not give details on the investigations beyond confirming that they are active and ongoing.
  • Cal-OSHA said the first investigation opened on April 12 following a serious injury to a millwright employed by Automatic Systems Inc.
  • The second investigation was launched on April 17, a day after news website Reveal said that Tesla’s omissions in legally mandated reports made its safety record appear better than it was.

Wireless speaker maker Sonos files for IPO

  • Wireless speaker company Sonos filed for an initial public offering on Friday, riding on the back of increasing popularity of streaming music on connected audio systems though smartphone apps.
  • The filing did not reveal how many shares Sonos planned to sell or their expected price. The company set a nominal amount of $100 million to indicate the size of the IPO.
  • The company’s products are distributed in over 50 countries and 55% of the total revenue in fiscal 2017 was from outside the United States.

Payments processor Square withdraws banking license application

  • San Francisco-based payments processor Square said it had withdrawn its regulatory application to open a deposit-taking bank, but that the company plans to refile its paperwork at a later date.
  • The fintech firm last year applied with the Federal Deposit Insurance Corp (FDIC) for a special “industrial loan company (ILC)” license that, if granted, allows nontraditional financial firms to collect government-insured deposits.
  • Fintech firms are closely watching to see if Jelena McWilliams, who took over the FDIC last month, will end the regulator’s informal moratorium on issuing ILC licenses – one of the few ways nonbank companies can move into deposit-taking.
  • The issuance of ILCs to the likes of car manufactures and supermarkets has long been a controversial issue. The powerful small bank lobby has strongly opposed ILCs, which they say allows nonbanks to circumvent tough bank rules.

Oil slips below $77, weighed down by Saudi output boost, trade tensions

  • Oil slipped below $77 a barrel, under pressure from higher Saudi production and trade tensions between the United States and China, despite support from oil supply disruptions.
  • Top exporter Saudi Arabia told OPEC it raised oil output by almost 500,000 barrels per day last month, OPEC sources said, a sign Riyadh wants to make up for shortages elsewhere and dampen prices.
  • A U.S. government report also weighed on prices this week, showing crude stockpiles rose by 1.3 million barrels, while analysts had forecast a decline.

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US ECONOMY & POLITIC

U.S. job growth strong; unemployment rate rises to 4%

  • U.S. job growth increased more than expected in June as manufacturers stepped up hiring, but steady wage gains pointed to moderate inflation pressures that should keep the Federal Reserve on a path of gradual interest rate increases.
  • Nonfarm payrolls rose by 213,000 jobs last month. Data for April and May was revised to show 37,000 more jobs created than reported. The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population.
  • The unemployment rate rose to 4.0% from an 18-year low of 3.8% in June as more people entered the labor force in a sign of confidence in the jobs market. That was the first increase in the jobless rate in 10 months.
  • Average hourly earnings gained five cents, or 0.2% in June after increasing 0.3% in May. That kept the annual increase in average hourly earnings at 2.7%.
  • The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, rose to 62.9% last month from 62.7% in May. It had declined for three straight months.

U.S. Trade Gap Narrowed 6.6% in May

  • The trade deficit in goods and services fell 6.6% from a month earlier to a seasonally adjusted $43.05 billion in May.
  • Overall exports increased 1.9 percent to $215.3 billion as soybean shipments overseas almost doubled to $4.1 billion.
  • Imports rose 0.4 percent to $258.4 billion, boosted by a record value of capital goods shipments from overseas.
  • Economists expected a $43.6 billion gap in May. The May trade gap was the narrowest since October 2016.

China blames U.S. for ‘largest-scale trade war’ as tariffs kick in

  • The United States and China slapped tit-for-tat duties on $34 billion worth of each other’s imports, with Beijing accusing Washington of triggering the “largest-scale trade war” as the world’s two biggest economies sharply escalated their conflict.
  • China’s commerce ministry, in a statement shortly after the U.S. deadline passed on Friday, said that it was forced to retaliate, meaning imported U.S. goods including cars, soybeans, and lobsters also faced 25% tariffs.
  • China’s commerce ministry called the U.S. actions “a violation of world trade rules” and said that it had “initiated the largest-scale trade war in economic history.” Trump has railed against Beijing for intellectual property theft and barriers to entry for U.S. businesses and a $375 billion U.S. trade deficit with China.

Trump says U.S. tariffs could be applied to Chinese goods worth $500 billion

  • President Donald Trump said the United States may ultimately impose tariffs on more than a half-trillion dollars’ worth of Chinese goods as the world’s two largest economies hurtled toward the start of a trade war.
  • Trump confirmed that the United States would begin collecting tariffs on $34 billion in Chinese goods at 12:01 a.m. Washington D.C. time on Friday and warned that subsequent rounds could see tariffs on more than $500 billion of goods, or roughly the total amount that the United States imported from China last year.

Fed on lookout for recession but still sees strong economy: minutes

  • U.S. central bankers discussed whether recession lurked around the corner and expressed concerns global trade tensions could hit an economy that by most measures looked strong, minutes of the Federal Reserve’s last policy meeting on June 12-13 showed.
  • The minutes overall gave the impression of a central bank impressed by the U.S. economy’s strength and confident in its plans to continue raising rates, but also concerned with what could push the economy off its upward course.
  • Many of the Fed’s contacts across the economy said they were worried that a recent increase in tariffs levied by the United States and its trading partners was weighing on investment, according to the minutes’ summary of policymaker discussions.
  • Fed policymakers also had a wide-ranging discussion on whether the recently slim spread between short- and long-term interest rates might be a sign of an impending recession. “A number of participants thought it would be important to continue to monitor the slope of the yield curve,” according to the minutes.

Under fire for ethics scandals, EPA chief Pruitt resigns

  • U.S. Environmental Protection Agency chief Scott Pruitt, who pleased President Donald Trump by rolling back environmental regulations but came under heavy fire in a series of ethics controversies, has resigned, Trump said on Thursday.
  • Trump announced on Twitter that he had accepted Pruitt’s resignation as EPA administrator, adding that EPA Deputy Administrator Andrew Wheeler will become the regulatory agency’s acting chief on Monday.
  • Pruitt was under scrutiny for months over first-class travel at taxpayer expense, security spending, connections with lobbyists and industry groups, accusations of using his office for favors, a $43,000 soundproof phone booth for his office and his rental of a high-end condo from an energy lobbyist’s wife.
  • From a policy perspective, Pruitt was one of Trump’s most effective Cabinet members. Trump has praised Pruitt for slashing regulations on the energy and manufacturing industries, including his move to repeal Democratic former President Barack Obama’s signature program to cut carbon emissions from power plants, known as the Clean Power Plan.

California senators reach agreement on net neutrality bill

  • Key California lawmakers said Thursday they’ve reached an agreement on legislation to enshrine net neutrality provisions in state law after the Federal Communications Commission dumped rules requiring an equal playing field on the internet.
  • California’s bill is one of the nation’s most aggressive efforts to continue net neutrality, and the deal comes after a bitter fight among Democrats over how far the state should go.
  • Internet companies say it’s not practical for them to comply with state-by-state internet regulations and warn that Senator Scott Wiener’s bill would discourage the rollout of new technology in California.

Trump Aims to Win Over Montana Supporters on Senate Race

  • President Donald Trump urged his supporters in Montana to back the Republican challenging Democratic Sen. Jon Tester this fall, telling voters in a state he carried by 20 points that Mr. Tester “doesn’t share your values.”
  • The rally in Great Falls, marked Mr. Trump’s latest effort to persuade supporters in states he won handily in 2016 to vote against vulnerable Democratic incumbents, in an effort to potentially expand the GOP’s majority in the Senate.
  • Mr. Tester, who is seeking his third term, has emphasized that he is a centrist willing to work with Mr. Trump. In a pre-emptive defense, Tester placed full-page advertisements in more than a dozen Montana newspapers that said Mr. Trump signed 16 of Mr. Tester’s bills into law.

Republicans hold 51 seats in the Senate, compared with 49 controlled by Democrats. The GOP is aiming to pick off a few of the Trump-state Democrats to offset any losses they experience in November so they can protect or expand their caucus.

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EUROPE & WORLD

Samsung Estimates Operating-Profit Growth at 5%, Short of Expectations

  • Samsung Electronics estimates its second-quarter operating profit was up 5% from a year earlier, missing analyst estimates and ending its streak of record quarters at four.
  • The world’s largest semiconductor maker said it expects an operating profit of 14.8 trillion won ($13.2 billion) for the quarter. That would be up 5% from the year-earlier 14.07 trillion won, but down from the previous quarter’s record 15.64 trillion won.
  • The company expects revenue will decline to 58 trillion won from the year-earlier 61 trillion won.
  • Analysts expected the company to post operating profit of 15.1 trillion won and revenue of 60.3 trillion won for the quarter. Samsung will report final results later this month.

Xiaomi Shares Slip Ahead of Official Debut

  • One of the largest initial public offerings by a technology company in years closed with little fanfare Friday, and the shares fell in “gray-market” trading—an ominous sign for the official trading debut next week.
  • Chinese smartphone maker Xiaomi said the portion of its $4.7 billion IPO available to retail investors drew orders representing 9.5 times the shares offered—far short of the oversubscription rates of some other Hong Kong tech IPOs over the past year.
  • In gray-market trading Friday at the over-the-counter venue operated by Phillip Securities, Xiaomi shares closed at 16.10 Hong Kong dollars (US$2.05), 5.3% below the HK$17 IPO price. On another platform they finished at HK$16.20. Gray-market trading has historically been a good indicator of shares’ performance on their first day of trading on the exchange.

Preparations for listing Aramco stalled: WSJ

  • Public listing preparations of state-run Saudi Aramco have stalled, the Wall Street Journal reported on Thursday.
  • The company’s public listing is a part of Saudi Arabia’s plan to open its economy but a senior Aramco executive told here the WSJ that “everyone is almost certain it (IPO) is not going to happen“.
  • Aramco, the world’s biggest oil producer, has been expanding its global footprint by signing downstream deals and boosting the capacity of its plants ahead of the eagerly awaited initial public offering.

Airbus left waiting for expanded AirAsia A330neo jet deal

  • Airbus has failed to break deadlock with AirAsia over the fate of a multi-billion-dollar order seen as key to the future of its A330neo passenger jet, people familiar with the matter said.
  • AirAsia co-founder Tony Fernandes visited the planemaker this week for talks aimed at shoring up and increasing the existing order for 66 jets, but left Toulouse without signing a deal after what one source described as challenging talks.
  • The future of the deal with the airline’s AirAsia X long-haul unit is crucial to the latest version of the A330, a key source of profits at the European group, after a string of market losses to Boeing’s competing 787 Dreamliner.

Airbus upbeat on prospect for A400M export contract this year

  • Airbus said it was optimistic it could sign a first export contract for its troubled multi-nation A400M military transport plane this year and expressed growing confidence about prospects for European defense cooperation.
  • Airbus says the A400M – built by Airbus for seven NATO buyers – Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey – is finally turning the corner after years of cost overruns, technical challenges and schedule delays.
  • The A400M was commissioned in 2003 to give Europe an independent airlift capacity to support military and humanitarian missions, rather than relying on the Lockheed Martin C-130 or the now out-of-production Boeing C-17.

Airbus says over the worst in A320neo delivery logjam

  • Airbus is over the worst on engine delays that have hampered deliveries of its A320neo passenger jet, with the number of semi-finished and undelivered planes beginning to come down, its planemaking chief said.
  • The European aerospace group has faced a backlog of up to 100 A320neo jets nicknamed ‘gliders’ – sitting on the ground outside factories without their engines – due to delays in deliveries mainly from U.S.-based Pratt & Whitney.
  • Airbus President Guillaume Faury said this number had now fallen to 86 at the end of June. He also said that Airbus expected to deliver more of the A320neo models, carrying the new type of engine, in the second half than the current A320 model.

Rolls-Royce to sell commercial marine business for $661 million

  • Rolls-Royce Holdings said it would sell its loss-making commercial marine business to Norway’s Kongsberg Gruppen ASA for 500 million pounds ($661 million), in the latest reshaping of the engineering company by CEO Warren East.
  • The company said in January it was considering selling its commercial marine business which has been most impacted by the weaker oil price as it supplies oil and gas companies with equipment. The disposal will leave Rolls focused on providing engines for civil aircraft, military planes and ships, and engines for ships, yachts, trains, trucks, mining, and nuclear power stations.
  • While Rolls’ structure is now to executives’ liking, the engineering company remains under pressure from airline customers due to ongoing issues with parts not lasting as long as expected on the Trent 1000 which powers the Boeing 787.

Mazda recalls 270,000 vehicles over Takata airbags

  • Mazda is recalling nearly 270,000 vehicles with Takata airbags that have the potential to explode.
  • The potentially deadly defect can be found in passenger-side airbags on certain 2003-2008 Mazda6, 2006-2007 Mazdaspeed6 and 2004 MPV vehicles nationwide. It also involves 2005-2006 MPV models in certain states.
  • Over the last several years, about 50 million air bag inflators have been recalled in the U.S., with 22 deaths and more than 180 injuries linked to the defect.

In Thai jungle above trapped boys, alternative rescue effort ramps up

  • Rescue teams thrashed through dense forest hundreds of meters above a cave complex on Friday, searching for an alternative way to extract 12 boys and their soccer coach trapped inside for nearly two weeks.
  • Their work above the Tham Luang cave near Thailand’s northern border with Myanmar took on added urgency as forecasts for rain threatened a plan to bring the boys back through cramped, water-logged passageways to the cave entrance.
  • The death of a former Thai Navy SEAL working in the flooded cave on Friday has shaken the rescue mission, and forecasts for more rain could undermine the draining of the cave, forcing officials to consider other options.
  • Billionaire entrepreneur Elon Musk tweeted on Friday that engineers from his firms—SpaceX and The Boring Company—were heading to Thailand to see if they could assist the rescue.

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TODAY in HISTORY

  • Sir Thomas More was beheaded after refusing to join Henry VIII’s Church of England. (1535)
  • Louis Pasteur successfully treated a patient with a rabies vaccine. (1885)
  • Anne Frank and her family sought refuge from the Nazis in Amsterdam. (1942)
  • The Mars rover Sojourner rolled onto the Martian surface. (1997)

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