DAILY MARKET REPORTS
- The S&P 500 and the Dow Jones Industrials Average rose on Wednesday, as bank stocks gained on rising Treasury yields, while a drop in Microsoft pressured the Nasdaq.
- The benchmark 10-year U.S. Treasury yield moved back above the symbolic 3% mark on Tuesday and hit its highest in four months early on Wednesday, while two-year rates reached 2.8%, the highest in over a decade.
- Investors are increasingly expecting the Federal Reserve to raise interest rates at its meeting next week and again in December, CME Group data show, and some analysts will also be eyeing the central bank’s projected path for 2019.
- Investors were also monitoring talks between the U.S. and Canada, with Canadian Foreign Minister Chrystia Freeland set to meet U.S. Trade Representative Robert Lighthizer Wednesday.
- Data showed U.S. homebuilding increased more than expected in August, a positive sign for a housing market which has underperformed the broader economy amid rising interest rates for loans.
US FINANCIAL MARKET
- Tesla said the Justice Department has opened an investigation into the company following Chief Executive Elon Musk’s surprise tweet in August that he had secured funding to possibly take the electric-car maker private.
- The company said that last month it received a “voluntary request for documents” from the Justice Department, generally the first step in a federal investigation of this kind, but said it hasn’t received a subpoena.
- The Securities and Exchange Commission is also investigating Mr. Musk’s funding claim and subpoenaed Tesla seeking information from each of its directors.
Amazon Forecast to Be No. 3 Digital Advertising Player in 2018
- Amazon is expected to move up the rankings of the top U.S. digital ad sellers in 2018 to take the No. 3 slot, thanks to an acceleration in ad revenue growth and accounting changes by the company, according to research firm eMarketer.
- The tech giant is expected to generate $4.6 billion in U.S. ad revenue, surpassing Verizon’s Oath and Microsoft in eMarketer’s ranking, while still significantly trailing the industry heavyweights, Google and Facebook.
- EMarketer estimated Amazon will have a market share of 4.15%, up from its earlier estimate in March that the company’s share would be 2.7%.
Amazon’s use of merchant data under EU microscope
- EU regulators are quizzing merchants and others on U.S. online retailer Amazon’s use of their data to discover whether there is a need for action, Europe’s antitrust chief said on Wednesday.
- The comments by European Competition Commissioner Margrethe Vestager came as the world’s largest online retailer faces calls for more regulatory intervention and even its potential break-up because of its sheer size.
- Vestager said the issue was about a company hosting merchants on its site and at the same time competing with these same retailers by using their data for its own sales.
China LNG tariff casts shadow over new U.S. export terminals
- China set a 10% tariff on U.S. liquefied natural gas (LNG) imports, extending a trade dispute into energy and casting a shadow over U.S. export terminals that would propel the United States into the world’s second-largest LNG seller.
- The tariffs undermine Trump’s drive to use U.S. shale oil and natural gas to turn the United States into a global energy leader.
- But China, which purchased about 15% of all U.S. LNG shipped in 2017, is now on track to buy less than 100 billion cubic feet of U.S. LNG in 2018, less than last year, according to Thomson Reuters vessel tracking and U.S. Department of Energy data.
- Proposed U.S. export terminals, many expected to supply Chinese customers, were expected to account for 60% of all new LNG production coming to market by 2023, according to industry data.
US ECONOMY & POLITIC
- The U.S. current-account deficit, a measure of the nation’s trade and financial flows with other countries, narrowed to $101.46 billion in the second quarter from $121.71 billion in the first quarter.
- Economists had expected a $103.2 billion deficit.
- The deficit fell to 2% of current-dollar gross domestic product in 2018’s second quarter from 2.4% in the first three months of this year.
U.S. Housing Starts Rose in August
- Housing starts increased 9.2% in August from the prior month to a seasonally adjusted annual rate of 1.282 million, the Commerce Department said Wednesday.
- Building permits, more stable measure that can signal how much construction is in the pipeline, fell 5.7% from July to an annual pace of 1.229 million last month, the lowest level in more than a year.
- Economists had expected a 5.3% increase for starts and a 0.8% decline for permits in August.
- Starts grew a robust 29.3% for buildings with two or more units, while they edged up 1.9% in August from the prior month for single-family construction.
Weekly mortgage applications rise 1.6% as interest rates hit a 7-year high
- Interest rates for home loans appear to be climbing again, and that may, in fact, be what’s getting borrowers back to their brokers — fear that rates could move significantly higher in the coming months.
- Total mortgage application volume increased 1.6% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted report.
- Refinance volume led the charge, rising 4% for the week, although it was 39% lower compared with the same week one year ago.
- The average interest rate for 30-year fixed mortgages with conforming loans ($453,100 or less) rose to its highest level in more than seven years, 4.88%, from 4.84%, with points decreasing to 0.44 from 0.46 with a 20% down payment.
Senate Passes Broad Spending Bill
- The Senate passed its second appropriations bill in five days, boosting spending for the Defense Department, medical research and the opioid crisis, and funding other departments through Dec. 7 to avoid a shutdown before the midterm elections.
- The bill gives $674.4 billion to the Defense Department, up $19.8 billion from this fiscal year, and awards U.S. service members a 2.6% pay raise.
- To combat the opioid epidemic, the bill appropriates $3.8 billion, an increase of $2.7 billion over 2017.
Kavanaugh Accuser Wants ‘Full Investigation’ Before Any Senate Hearing
- Attorneys for the woman who accused Brett Kavanaugh of sexual assault said she wants a full investigation of the allegations before she testifies, throwing into doubt a planned Monday hearing that would have pitted her word against that of the nominee.
- An investigation would ensure the Judiciary committee “is fully informed before conducting any hearing or making any decisions,” attorneys for Dr. Ford said in the letter.
- Republicans have trained much of their fire on Judiciary Committee Democrats, saying they should have brought up the allegations earlier, as they have been aware since July, and that Kavanaugh had already been thoroughly vetted by the FBI.
- Democrats are suggesting Republicans aren’t committed to getting to the bottom of the assault allegation by not delaying the process for a further FBI investigation.
Tightening Texas race boosts Democrats’ hopes of taking Senate
- The Democratic congressman aiming to unseat Republican U.S. Senator Ted Cruz in Texas has pulled even in the race, a Reuters poll found, a spark of hope for a party seeking a Senate majority to curb President Donald Trump’s agenda.
- The Reuters/Ipsos/UVA Center for Politics Poll released on Wednesday of several competitive U.S. Senate races offered a mixed picture of Democrats’ chances in November of winning the two seats they would need to take control of that chamber.
- It showed tight races in Arizona, where Democrats are hoping to win a seat held by a retiring Republican, and in Florida, where Republicans aim to unseat a Democratic incumbent.
- Among the bright spots for Democrats: Beto O’Rourke of Texas had a 2-percentage-point lead over Cruz among likely voters and Kyrsten Sinema of Arizona had a 3-point lead over Congresswoman Martha McSally to succeed U.S. Senator Jeff Flake.
EUROPE & WORLD
- The scope of an already massive Russia-linked money laundering case swelled Wednesday when Denmark’s largest bank said more than $230 billion in transactions flowed through its tiny Estonian branch, a larger amount than previously reported.
- Chief Executive Thomas Borgen resigned as the bank published results of a year-long investigation into how its operation in the Baltic former Soviet Republic turned into a hub for illicit flows out of Russia and other ex-Soviet states into the West.
- The enlarged number disclosed in the report—€200 billion ($233 billion)—included more than 6,200 client accounts “deemed suspicious,” indicates that the problems facing the bank are more serious than previously thought.
- The sum of €200 billion, while not all having been identified as illicit, is a significant amount of money, equal to nearly half of all Russian central government spending in 2015, the year most of the accounts were shut.
North Korea’s Kim agrees to inspections in bid to salvage nuclear talks
- North Korea said on Wednesday it would permanently abolish its key missile facilities in the presence of foreign experts, the latest gesture by leader Kim Jong Un to revive faltering talks with Washington over his country’s nuclear program.
- Speaking at a joint news conference in Pyongyang, Kim and South Korean President Moon Jae-in said they agreed to turn the Korean peninsula into a “land of peace without nuclear weapons and nuclear threats”.
- Kim’s latest promises come days before Moon meets Trump in New York at the U.N. General Assembly next week.
- Seoul officials hope Moon will be able to convince Trump to restart nuclear talks with Pyongyang, after he canceled a trip by his secretary of state to Pyongyang last month, citing lack of progress.
China’s Tencent Music seeks $2 billion in U.S. IPO
- Tencent Music, China’s biggest music-streaming company, is seeking to raise about $2 billion in a U.S. listing, according to three people close to the deal, down from the up to $4 billion that had been touted earlier.
- The subsidiary of Chinese tech giant Tencent filed confidentially with the U.S. Securities and Exchange Commission (SEC) two weeks ago, in what will be one of the biggest listings in New York by a Chinese company this year.
- Tencent Music runs the music service providers QQ Music, KuGou and Kuwo, controlling three-quarters of China’s booming music streaming market.
Toshiba Memory chief shrugs off price concerns, sticks with IPO plans
- The chief executive of Toshiba Memory, the world’s No. 2 producer of NAND flash memory chips, on Wednesday brushed aside concerns about falling memory chip prices and reaffirmed the company’s plan to go public in two to three years.
- Oversupply has weighed on NAND flash memory contract prices, resulting in an average drop of 15 to 20% in the April-June quarter, according to market research firm TrendForce.
- Nevertheless, Toshiba Memory and Western Digital started mass production this month at the new line, their fifth, in Yokkaichi in central Japan.
- Toshiba and Western Digital held a combined 33.8% NAND market share in terms of revenue in the April-June quarter, trailing Samsung’s 36.4.
TODAY in HISTORY
- President James Garfield died of a gunshot wound inflicted by a disappointed office seeker the previous July 2. (1881)
- Bruno Hauptmann was arrested for the Lindbergh baby kidnap-murder. (1934)
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