DAILY MARKET REPORTS
- U.S. stock indexes were lower on Wednesday, weighed down by Facebook, energy stocks and concerns over the possibility of President Donald Trump going through with plans to slap new tariffs on Chinese goods as early as this week.
- Facebook dipped 0.6%, while Twitter dropped 2.4% as their top executives appeared in front of the Congress over what lawmakers see as a failure to combat continuing foreign efforts to influence U.S. politics.
- The U.S. trade deficit rose to a five-month high in July due to weak exports of soybeans and civilian aircraft, Commerce Department data showed, suggesting the Trump administration’s protectionist policy was so far not having an impact.
- The data comes as consultations on a U.S. proposal to impose tariffs on $200 billion more in Chinese imports ends on Sept. 6, with Trump ready to impose these tariffs after that.
- The United States and Canada will also resume talks to settle differences on revamping the North American Free Trade Agreement (NAFTA), despite Trump’s threats to continue trade deals with just Mexico in a bilateral agreement.
- Oil fell below $78 a barrel as a U.S. Gulf tropical storm weakened and moved away from oil-producing areas and concern about weakening global demand added downward pressure.
- Halliburton dropped the most on the S&P after the oilfield services provider said it expects moderating oil and gas activity in North America and a slower-than-expected ramp-up of new contracts in the Middle East to hurt third-quarter results.
US FINANCIAL MARKET
- Bayer cut its earnings forecast due to delays to its $63 billion takeover of Monsanto and said sales of its consumer care products fell, hitting its shares, already reeling from a legal battle over the weed killer Roundup.
- Bayer said the number of plaintiffs seeking damages over Monsanto’s Roundup and Ranger Pro herbicides had risen to 8,700 from 8,000 from last month, and said that it expected more to sue.
- Last month, shortly after Bayer closed the acquisition, Monsanto was ordered to pay $289.2 million by a California state jury.
- It found that Monsanto’s Roundup and Ranger Pro products presented a “substantial danger” to consumers, and that Monsanto knew or should have known of potential risks and failed to warn users.
- Sales rose 8.8% to €9.48 billion from a restated figure of €8.71 billion, boosted by the integration of Monsanto, which offset weakness in the pharmaceuticals and consumer-health segments.
- Bayer reported a fall in second-quarter net profit to €799 million from $1.22 billion a year earlier after Bayer further reduced its stake in plastics company Covestro.
- Bayer said it now expects full-year core earnings per share of between €5.7 ($6.6) and €5.9, lower than consensus expectations and below 2017’s €6.64 a share, a restated figure to account for the integration of Monsanto.
Facebook, Twitter face U.S. Congress over foreign bids to tilt politics
- Top executives from Facebook and Twitter will defend their companies in the U.S. Congress on Wednesday over what lawmakers see as a failure to combat continuing foreign efforts to influence U.S. politics.
- Facebook COO Sheryl Sandberg, who will testify alongside Twitter Chief Executive Jack Dorsey, will acknowledge that the company was too slow to respond to Russian efforts to interfere in the 2016 U.S. election, but insist it is doing better.
- Facebook, Twitter, and other technology firms have been on the defensive for many months over political influence activity on their sites as well as concerns over user privacy.
- “We’ve removed hundreds of pages and accounts involved in coordinated inauthentic behavior – meaning they misled others about who they were and what they were doing,” Sandberg said in written testimony released on Tuesday.
- Dorsey will tell the House Energy and Commerce Committee that Twitter “does not use political ideology to make any decisions,” according to written testimony also made public on Tuesday.
Halliburton shares fall after CEO warns about third-quarter profit
- Shares of oilfield services provider Halliburton fell after its chief executive officer warned that third-quarter earnings could be hurt from moderating activity in the Permian Basin and a slower-than-expected ramp-up of new Middle East contracts.
- Pipeline bottlenecks, a tight labor market, and inflation are slowing activity in the largest U.S. shale basin, CEO Jeff Miller said at a Barclays conference in New York.
- The slowdown threatens to undermine a recovery in the oilfield services sector, which was hit hard by the 2014 downturn in oil prices.
- Halliburton also is experiencing a slower-than-anticipated ramp-up of new contracts in the Middle East, which will affect its third-quarter earnings, Miller said.
Amazon touches $1 trillion, on pace to overtake Apple
- Amazon.com on Tuesday briefly joined Apple to become the second $1 trillion publicly listed U.S. company after its stock price more than doubled in a year as it grew rapidly in retail and cloud computing.
- Shares traded as high as $2,050.50 before easing to end at $2,039.51, up 1.3% and just short of the milestone of $2,050.2677.
- If the online retailer’s shares keep up their recent pace, it would be a matter of when, not if, Amazon’s stock market valuation eclipses that of iPhone maker Apple, which reached $1 trillion on Aug. 2.
- Apple took almost 38 years as a public company to achieve the trillion-dollar milestone, while Amazon got there in 21 years.
CDC reports 30 more cases of illnesses linked to Kellogg’s tainted cereal
- Thirty more people have reported sick after eating Kellogg’s Honey Smacks cereal contaminated with Salmonella, the Centers for Disease Control and Prevention (CDC) said, bringing the total to 130 cases in 36 states.
- So far 34 people have been hospitalized, but no deaths have been reported, CDC said on Tuesday, adding that three more states – Delaware, Maine, and Minnesota – have reported cases of illnesses.
- Kellogg had in June decided to recall an estimated 1.3 million cases of its Honey Smacks cereal from more than 30 U.S. states due to the potential for Salmonella contamination.
- However, the contaminated cereal is still being sold in some locations, CDC said, citing the U.S. Food and Drug Administration.
Boeing’s KC-46 program completes FAA certification
- Boeing said on Wednesday its KC-46 mid-air refueling tanker program completed the U.S. Federal Aviation Administration certification, nearly three years after the planemaker commenced testing for the certification.
- The KC-46 is a multirole tanker to refuel U.S., allied and coalition military aircraft using its boom and hose and drogue systems.
- Earlier in July when Boeing reported quarterly results, the company said it would spend an additional $426 million before taxes on the program as it worked through test delays and production changes to eight aircraft in various stages of production.
- Boeing is currently on contract for the first 34 of an expected 179 tankers for the U.S. Air Force.
Goldman drops bitcoin trading plans for now
- Goldman Sachs is ditching plans to open a desk for trading cryptocurrencies as the regulatory framework remains unclear.
- In recent weeks, Goldman executives have concluded that many steps still need to be taken, most of them outside the bank’s control, before a regulated bank would be allowed to trade cryptocurrencies.
- The Wall Street bank was planning to clear bitcoin futures for some clients as the new contracts were going live on exchanges when the cryptocurrency rocketed to a record high of $16,000 in December.
Blood-Testing Firm Theranos to Dissolve
- In the wake of a high-profile scandal, the company will formally dissolve, according to an email to shareholders.
- Theranos will seek to pay unsecured creditors its remaining cash in coming months, the email said.
- The move comes after criminal charges against Theranos founder Elizabeth Holmes and the blood-testing company’s former No. 2 executive, alleging that they defrauded investors of hundreds of millions of dollars and defrauded doctors and patients.
US ECONOMY & POLITIC
- The U.S. trade deficit posted its biggest monthly increase in almost three and a half years in July, as tax cuts and higher federal spending goosed up domestic demand while a cooling economy overseas hampered exports.
- The trade shortfall in goods and services widened by 9.5% from June to a seasonally adjusted $50.08 billion in July.
- Economists had expected the deficit to hit $50.3 billion.
- U.S. exports sank 1% from June, while imports rose 0.9% on the month.
- Through the first seven months of 2018, the trade deficit expanded 7% from a year earlier to $337.88 billion.
- Imports rose 8.3% in the first seven months of this year, while exports climbed 8.6% over the same period.
U.S. factory activity hits 14-year high; supply constraints rising
- U.S. manufacturing activity accelerated to more than a 14-year high in August, boosted by a surge in new orders, but increasing bottlenecks in the supply chain because of a robust economy and import tariffs could restrain further growth.
- The ISM said its index of national factory activity jumped to 61.3 last month, the best reading since May 2004, from 58.1 in July.
- reading above 50 indicates growth in manufacturing, which accounts for about 12% of the U.S. economy.
Weekly mortgage applications are stuck in a rut as rates rise
- Mortgage interest rates are stuck near recent highs and are beginning to rise again, further weakening home affordability.
- Those factors left mortgage application volume basically unchanged last week, falling 0.1% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
- Volume was 18% lower compared with the same week one year ago.
- Applications to refinance a home loan fell 1% for the week and were 37% lower than a year ago.
- Mortgage applications to purchase a home increased 1% for the week and were 2% higher than a year ago.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to 4.80% from 4.78%, with points decreasing to 0.42 from 0.46 for loans with 20% down payments.
U.S., Canada Face Tough Issues as They Resume Nafta Talks
- Canadian Foreign Minister Chrystia Freeland is set to meet U.S. Trade Representative Robert Lighthizer in Washington after the U.S. and Mexico last week agreed to terms on their portion of the trilateral accord.
- The focus this week will be on Ottawa and Washington bridging differences to keep all three countries signatories to an update of the quarter-century-old treaty.
- As talks with Canada resume, the biggest sticking point is Canada’s insistence on retaining a dispute-resolution system that allows member states to challenge trade penalties imposed by the others.
- Mr. Lighthizer has proposed eliminating the system, contained in Nafta’s Chapter 19, and Mexico has agreed to that. But Canada remains unwilling to scrap the mechanism.
- Other issues where the U.S. and Canada are at odds include greater U.S. access to the Canadian dairy market; intellectual property; and duty-free treatment of small amounts of goods purchased in the U.S.
EU, U.S. trade chiefs to mend ties after Trump tariff detente
- U.S. and EU trade chiefs will hold the first meeting in Brussels on Monday to pursue closer transatlantic ties after U.S. President Donald Trump agreed to drop his threat of tariffs on EU cars.
- European Trade Commissioner Cecilia Malmstrom will host United States Trade Representative Robert Lighthizer at the first political level meeting of a new working group, the Commission said on Wednesday.
- The group, set up after a detente in July, is charged with finding ways to cut tariffs, boost U.S. liquefied natural gas exports and to reform the World Trade Organization.
- Trump agreed with Commission President Jean-Claude Juncker in July to refrain from imposing tariffs on EU cars while the two sides launched discussions to remove tariffs on non-auto industrial products.
Brett Kavanaugh’s Supreme Court Hearing Has Testy Start
- Supreme Court nominee Brett Kavanaugh’s weeklong confirmation hearings began raucously Tuesday, as Democrats sought to bring the proceedings to a halt and protesters shouting from the rear were removed by police, leading to 70 arrests.
- Republicans, holding a one-vote majority on the Senate Judiciary Committee, brushed aside complaints about access to his records as an aide to former President Bush and insinuations that his appointment could abet President Trump’s grip on power.
- To Democrats, the nomination comes anchored to a Trump presidency they consider illegitimate if not criminal, and they attacked Republicans for moving toward confirmation without the release of millions of pages of emails and other records related to the nominee’s service in George W. Bush’s White House.
- Republicans said the Democrats’ behavior, including frequent interruptions and demands for adjournment, were inappropriate whatever their views of the nominee.
- Judge Kavanaugh touted his judicial impartiality at a session in which Democrats painted him as a servant of social conservatives and business interests.
EUROPE & WORLD
- One of Japan’s largest airports, Kansai International, was closed indefinitely by damage from the nation’s most powerful typhoon in 25 years.
- The bridge that links the island airport with the mainland was hit by a storm-driven tanker ship Tuesday, shearing off one chunk and dislodging a section of roadway from the rest of the bridge.
- Nationwide, NHK said, at least seven people were killed and more than 300 injured as the typhoon knocked down trees, flooded coastal areas, and damaged buildings.
- Japan Airlines and All Nippon Airways, the nation’s two biggest carriers, both canceled hundreds of flights, most of them domestic, while the bullet train linking Tokyo and Osaka was temporarily shut down.
Toyota Recalls More Than 1 Million Vehicles Over Fire Risk
- Toyota is recalling over one million Prius and C-HR crossover sport-utility vehicles globally to repair a portion of the electrical system that could cause a fire.
- The recall affects certain 2016-2018 model-year Prius vehicles, Prius Prime plug-in hybrids and hybrid gas-electric versions of the C-HRs.
- In the U.S., the recall covers about 192,000 Prius vehicles, but Toyota doesn’t sell a hybrid version of the C-HR in the U.S.
- Wires leading to the hybrid power-control unit could be subject to wear, “exposing the core wire, potentially causing an electrical short to occur between the damaged wires,” a company spokesman said.
Bank of Canada Seen as On Hold Until October
- The Bank of Canada is expected to keep its benchmark interest rate on hold at a policy announcement on Wednesday, in part to allow more time to see how last-ditch efforts to include Canada in a new North American Free Trade Agreement unfold.
- Economists from nine of 11 primary dealers of Canadian government securities expect the Bank of Canada to keep the target for the overnight rate unchanged this week at 1.50%.
- The Bank of Canada last raised the key rate in July, by a quarter-percentage point, marking its fourth increase since mid-2017.
- Nafta is crucial for Canada, which sends about three-quarters of its exports to the U.S., accounting for roughly one-fifth of the country’s gross domestic product.
UK charges two Russians for attempted murder of Skripals, blames Moscow
- Britain charged two Russians in absentia on Wednesday with the attempted murder of a former Russian spy and his daughter, saying the suspects were military intelligence officers almost certainly acting on orders from high up in the Russian state.
- Prime Minister Theresa May said the government had concluded they were officers in Russia’s intelligence service GRU.
- The Russians are charged with conspiracy to murder Sergei Skripal and with the attempted murder of Skripal, his daughter and police officer Nick Bailey. They are also charged with illegal use and possession of a chemical weapon.
Shells hit Syria’s Idlib as rebels brace for assault
- The Syrian military shelled the last stronghold of active rebellion against President Bashar al-Assad on Wednesday as a war monitor said insurgents blew up another bridge in anticipation of a government offensive.
- Damascus, backed by allies Russia and Iran, has been preparing an assault to recover Idlib and adjacent areas of the northwest and resumed air strikes along with Russia on Tuesday after weeks of lull.
- Idlib’s fate now appears likely to rest on the results of Friday’s Tehran summit between the leaders of Russia, Turkey and Iran – a meeting that Russian deputy foreign minister Sergei Ryabkov on Wednesday said would make the situation “clearer”.
- The prospect of an offensive in Idlib has alarmed humanitarian agencies. The United Nations has said displaced people already make up about half of the 3 million people living in rebel-held areas of the northwest.
TODAY in HISTORY
- Russia’s Peter the Great levied a tax on bearded men. (1698)
- Humanitarian Mother Teresa, who won a Nobel Peace Prize for her work with the poor, died at the age of 87. (1997)
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