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TURKEY TURMOIL SPILLS OVER TO WALL ST., SHAVES 200 POINTS OFF DOW

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

DAILY MARKET REPORTS

  • The Dow Jones Industrial Average fell more than 200 points on Friday amid a widespread selloff in global stocks as the Turkish lira tumbled due to concerns over the country’s economy and a deepening rift with the United States.
  • President Donald Trump doubled tariffs on aluminum and steel imports from Turkey, deepening the currency’s losses and raising concerns that the crisis could weigh on other economies.
  • Investors fled to safe-haven assets, with the dollar rising to a 13-month high and U.S. bond yields slipping to a three-week low.
  • Ten of the 11 major S&P sectors were lower, with bank stocks taking the biggest hit. JPMorgan, Wells Fargo and Bank of America fell more than 1%, weighing the most on the benchmark S&P 500.
  • Data on Friday showed U.S. consumer prices rose in July and the underlying trend continued to strengthen, pointing to a steady increase in inflation pressures.

US FINANCIAL MARKET

  • Dropbox’s forecast for the current-quarter and results for the second quarter beat Wall Street estimates on Thursday, with the online storage firm earning more from a higher number of paying subscribers.
  • Shares, however, came under pressure and slipped nearly 10% in extended trading after the company decided to advance its lock-up expiration date by several trading days. The lock-up period will unlock an additional 356.4 million shares for trading.
  • Revenue jumped 27% to $339.2 million, above Wall Street expectations of $330.9 million.
  • The company’s ARPU rose to $116.66 in the quarter and beat expectations of $113.95.
  • Dropbox’s paying subscribers rose 20% to 11.9 million and outpaced the average analyst estimate of 11.73 million.
  • The company, which is yet to turn profitable, reported a smaller loss of $4.1 million in the second quarter of 2018 compared with $26.8 million a year earlier.

News Corp tops estimates as Foxtel, books unit drive gains

  • News Corp topped profit targets, as it benefited from gains at its newly acquired TV network and recorded double-digit growth in its real estate listings and book publishing businesses.
  • Total revenue surged about 30% to $2.69 billion, above estimates of $2.65 billion.
  • Revenue at News Corp’s online real-estate listings unit rose 19% while its book publishing division saw a 20% jump in revenue.
  • The company’s news business, which houses the Wall Street Journal and the New York Post, made $1.29 billion in revenue, rising 1% from a year earlier and accounting for almost half of overall revenue as the number of digital subscribers grew.
  • News Corp said net loss narrowed to $372 million in the fourth quarter from $430 million a year earlier.

Endologix Shares Drop on Weak Outlook

  • Endologix reported a loss of $23.9 million in its second quarter.
  • The medical device company posted revenue of $44.7 million in the period.
  • Endologix sees FY2018 revenue of $145-155 million, versus prior of $170-$180 million and the consensus of $175.6 million.

WeWork Raises $1 Billion in Debt From SoftBank as Revenue Doubles

  • WeWork disclosed it raised another $1 billion in funding from SoftBank, as the shared-office company continues its rapid growth by doubling revenue but piling up losses, according to newly released financial information.
  • Revenue for the first half of this year more than doubled to $763.8 million.
  • The company said its loss in the first half of the year more than tripled to $723 million from the year-ago period as it accelerates opening new spaces and spends more to market them.
  • WeWork prefers to point to a new metric it calls “community adjusted EBITDA,” which it says is a better measure of its profitability because it backs out the costs of running the buildings, such as utilities, technology expenses, and personnel maintaining the occupancy rate.
  • Those earnings more than doubled to $202 million in the first half of this year.

U.S. Car Makers Left in the Dust as China’s Tariff Cut Boosts Europe, Japan

  • Automakers exported a record $7.4 billion worth of vehicles to China last month, as European and Japanese companies took advantage of a tariff cut that excludes their U.S. counterparts.
  • The July 1 tariff reduction to 15% from 25% allows lower retail prices, which encouraged foreign manufacturers to ship 165,000 cars into China last month, breaking the previous record of 134,000 set in July 2014, according to customs data.
  • U.S. automakers are blocked from the bonanza, however, with China adding a punitive 25% tariff on U.S.-built vehicles last month—for a total of 40%. An agent at a Shanghai-based trading company said that has effectively priced American imports out of reach of all but the most affluent customers.
  • China’s auto market slowed in July despite the import surge, with sales down 4% from a year earlier to 1.89 million vehicles, the government-backed China Association of Automobile Manufacturers said Friday.

ISS recommends shareholders vote for Cigna’s acquisition of Express Scripts as Carl Icahn rails against deal

  • Proxy advisor Institutional Shareholder Services recommends shareholders approve Cigna’s acquisition of Express Scripts, days after famed activist investor Carl Icahn called the deal a “folly.”
  • ISS acknowledged potential regulatory and competitive risks to Express Scripts but said the potential benefits of the $54 billion deal outweigh them.
  • The proxy advisor called the combination financially compelling, and one that would give the combined company immediate scale with strong cash flow generation.

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US ECONOMY & POLITIC

  • The consumer-price index (CPI)—a broad measure of Americans’ living expenses, from groceries to dental care—rose 0.2% from a month earlier. Excluding food and energy components, so-called core prices rose 0.2% as well. The increases fell in line with economists’ expectations.
  • A rise in so-called shelter costs—reflecting rent and mortgage costs—accounted for 60% of last month’s gain in the overall index.
  • Overall prices have climbed 2.9% over the past year, near the biggest gains of the expansion.
  • Core prices increased 2.4%, the biggest 12-month gain since September 2008.
  • the higher prices also mean Americans’ are losing purchasing power. A separate report released Friday showed average hourly earnings were flat in July, and average weekly earnings fell 0.2%.

  • President Trump said Friday he would double steel and aluminum tariffs on Turkey, more than a week after he imposed sanctions against two top Turkish officials over the country’s refusal to free an American pastor held for nearly two years.
  • The Treasury Department last week moved to prevent Americans from doing business with Turkey’s ministers of justice and interior, both of whom the U.S. accused of “serious human rights abuses” for their roles in detaining Pastor Andrew Brunson, a 50-year-old North Carolina native who was arrested three months after a failed July 2016 military coup.
  • Mr. Trump in a tweet said the U.S. would impose aluminum tariffs of 20% and steel tariffs of 50% on Turkey.
  • The Turkish lira fell nearly 14% against the dollar on Friday, amid concerns about Turkey’s foreign debts.
  • Turkey’s external debt to gross domestic product is above 50%, one of the highest among developing economies.

Parts Shortages Crimp U.S. Factories

  • Suppliers of everything from engines to electronic components aren’t keeping up with a boom in U.S. manufacturing, which has lifted demand in markets such as energy, mining, and construction. As a result, some manufacturers are idling production lines and digesting higher costs.
  • Many industrial companies have reported strong sales and profits in recent weeks, and the pace of factory hiring has more than doubled this year compared with the first seven months of 2017.
  • However, deliveries from suppliers have slowed for 22 consecutive months through July, according to the latest survey of U.S. manufacturers by the ISM. More than 25% of respondents said it took longer for materials to arrive in July than June. Machinery was the hardest-hit sector.
  • A shortage of specialized workers including welders and truck drivers is exacerbating the crunch. The number of job openings in manufacturing climbed to 482,000 in June, the Federal Reserve Bank of St. Louis said Tuesday, the highest level in 17 years.

Growth Seen Hitting 3% in 2018, but Risks to Outlook Mount After This Year

  • Economists are raising 2018 growth projections after a strong second quarter, but disputes with U.S. trading partners, a fading boost from fiscal stimulus and rising short-term interest rates lead many to believe the boom won’t last much beyond that.
  • The average estimate for economic growth this year increased to 3%, up from projections of 2.9% last month and 2.4% a year ago, according to The Wall Street Journal’s monthly survey of private economists.
  • They also see the unemployment rate falling to 3.6% by June, which would be the lowest unemployment rate in nearly 50 years. The jobless rate in July was 3.9%.
  • The differences might look small, but they have huge impacts on budgets and well-being.
  • Maintaining 3% growth or higher could help the economy grow out of looming trillion-dollar budget deficits.
  • Moreover, if the administration’s growth forecast is maintained, the economy would double in size over the next 24 years.
  • At the 1.8% rate forecast by economists for the year 2020, it would take 39 years.

Kansas Secretary of State Kris Kobach to Recuse Himself in Razor-Thin Election

  • Kansas Secretary of State Kris Kobach is preparing to recuse himself from the ballot counting process in the razor-thin election for the Republican nomination for Kansas governor, in which he leads incumbent Gov. Jeff Colyer by 121 votes.
  • As secretary of state, Mr. Kobach, a conservative Republican and ally of President Trump, oversees the state’s election apparatus, though ballot counting is done by county election officials.
  • Mr. Trump endorsed Mr. Kobach, who served on a now-disbanded White House voter-fraud commission, on Monday morning, the day before the primary election.

Aggressive wildfire threatens thousands of homes in southern California city

  • Hundreds of firefighters were building barriers and constructing containment lines early on Friday to slow an approaching wildfire threatening to torch thousands of homes in a lakeside community southeast of Los Angeles.
  • More than 21,000 people have been evacuated in and around Lake Elsinore where furious flames and billowing smoke rose into the sky at the edge of the city of 60,000 as the blaze, dubbed the Holy Fire, burned nearby in the Santa Ana Mountains.
  • Governor Jerry Brown declared a state of emergency for the area on Thursday, freeing up additional resources to battle the blaze. Forrest Clark, 51, was charged with setting the fire, the Orange County District Attorney Office said.
  • The Holy Fire was one of several fires burning in California that have displaced tens of thousands of people. Wildfires across the state and region could be further stoked by strong gusts, low humidity, and hot weather on Friday and Saturday, forecasters warned.

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EUROPE & WORLD

Perrigo to Separate Its Prescription Pharmaceutical Business

  • Perrigo plans to shed its prescription pharmaceutical unit, which accounts for about one-fifth of total revenue, following a strategic review of its portfolio.
  • Revenue fell 4.2% to $1.19 billion. Analysts had expected $1.23 billion in revenue.
  • Sales of Ireland-based Perrigo’s prescription business, which makes generic topical medicines, have fallen in each quarter since the March 2016 period. In the latest quarter, sales fell 13% to $208.6 million.
  • Perrigo’s net income rose to $36 million in the second quarter, compared with a net loss of $69.6 million a year ago. The year-ago period had a more than $135 million loss tied to the early retirement of debt.

Japan’s Economy Revs Up Again After Stalling

  • Japan returned to solid growth in the April-June quarter, a trend economist said was likely to continue on the back of higher wages and consumer spending unless trade conflicts with the U.S. worsen.
  • The world’s third-largest economy expanded at an annualized pace of 1.9% in the second quarter of 2018 after a revised 0.9% contraction in the first quarter, which ended the longest stretch of growth in 28 years.
  • Private consumption, which accounts for nearly 60% of GDP, increased 0.7% in the second quarter as temporary pressures that weighed on spending earlier this year, including higher fresh-food prices and heavy snow, faded.
  • Nominal compensation of employees hit a record in the second quarter, rising 4.3% from a year earlier, and capital spending rose 1.3%. Companies have been investing more actively in labor-saving technologies as they cope with the tightest job market in decades.

Russia tells Washington curbs on its banks would be act of economic war

  • Russia warned the United States on Friday it would regard any U.S. move to curb the activities of its banks as a declaration of economic war which it would retaliate against, stepping up a war of words with Washington over spiraling sanctions.
  • The warning, from Prime Minister Dmitry Medvedev, reflects Russian fears over the impact of new restrictions on its economy and assets, including the rouble which has lost nearly 6% of its value this week on sanctions jitters.
  • Economists expect the economy to grow by 1.8% this year. But if new sanctions proposed by Congress and the State Department are implemented in full, something that remains uncertain, some economists fear growth would be almost cut to zero in future.
  • In a sign of how seriously Russia is taking the threat, President Vladimir Putin discussed what the Kremlin called “possible new unfriendly steps by Washington” with his Security Council on Friday.

Samsung eyes young buyers with gaming, music-friendly Galaxy Note 9

  • Samsung Electronics unveiled the Galaxy Note 9 “phablet” in New York on Thursday in a key product launch that it hopes will attract younger customers with stepped-up features and services for gamers and music-lovers.
  • Samsung also announced partnerships with global hit game Fortnite and music-streaming service Spotify in a stepped-up challenge to Apple in the premium-phone race.
  • But the hefty price tag – at $999.99 for the base 128-gigabyte model – has raised questions as to whether features such as a longer battery life and quick cooling would be enough to attract customers.
  • The Note 9 will support up to 1 terabyte of memory – a 512GB version that can take another 512GB through a memory card – making Samsung the first major smartphone maker to sell a 1TB phone.

Ericsson to add 300 U.S. jobs as 5G demand picks up

  • Mobile telecom equipment maker Ericsson said on Friday it would add around 300 jobs in the United States to meet rising demand for next-generation 5G equipment.
  • Many investors expect the Swedish company to benefit from a new cycle of network upgrades as demand for 5G gear kicks in later this year or early in 2019, starting in the United States.
  • After a broad restructuring and clear out of top management, Ericsson is tackling falling spending on networks by telecoms operators, but it has added recruits in research and development in order to be ready to meet the eventual demand for 5G networks.

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TODAY in HISTORY

  • Missouri became the 24th state in the United States. (1821)
  • Franklin D. Roosevelt was stricken with polio at his summer home on Campobello Island. (1921)
  • S. forces seized Guam from Japan. (1944)
  • President Reagan signed a bill that awarded $20,000 to each survivor of the Japanese-American internment. (1988)

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