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S&P DROPS AS STRONG JOBS DATA RAISE RATE HIKE FEARS, TECHS BUOY NASDAQ

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

DAILY MARKET REPORTS

  • The S&P 500 and Dow Industrials dropped on Friday after strong August jobs data raised concerns about the possibility of faster interest rate hikes, but a rebound in chip stocks helped the Nasdaq trade higher.
  • U.S. job growth accelerated in August and wages recorded their largest annual increase in nine years, the Labor Department said, strengthening views the economy was so far weathering an escalating trade war with China.
  • After the data, traders of U.S. short-term interest-rate futures kept their bets of two more rate hikes this year, with a further hike expected in June 2019.
  • The probability of a second 2019 rate hike increased but was still below 50%.
  • Investors also prepared for a fresh salvo of Sino-U.S. tariffs as a public comment period for proposed U.S. tariffs on an additional $200 billion worth of Chinese imports passed at midnight ET.
  • The tariffs could now go into effect at any moment, although there was no clear timetable, and Beijing has said it would retaliate.
  • Broadcom was up the most on the S&P after its current-quarter revenue forecast largely beat estimates on strong data center demand and expectations of a boost from a new Apple iPhone.
  • Tesla slid after the electric carmaker said its chief accounting officer resigned and Bloomberg reported Chief People Officer Gaby Toledano was also to leave.

US FINANCIAL MARKET

(Maria Armental)

  • Broadcom posted a sixth straight quarter of profit, more than doubling from the prior year as stronger demand for products used in data centers continues to drive sales growth
  • Revenue rose 13% to $5.07 billion from $4.46 billion a year earlier. Analysts expected Broadcom to post $5.07 billion in revenue.
  • Revenue from the enterprise storage unit, which primarily serves data center end markets, rose 70% to $1.25 billion.
  • Gross margin improved to 51.7% from 48.2% a year earlier.
  • Overall, Broadcom’s third-quarter profit surged to $1.2 billion from $481 million a year earlier.
  • Broadcom forecast current-quarter revenue of $5.40 billion, plus or minus $75 million compared to expectations of $5.35 billion

GameStop misses profit estimate, shares fall

  • GameStop, the world’s largest video game and gaming console retailer, reported a lower-than-expected quarterly profit on Thursday due to lower sales of video game software at its outlets.
  • Total sales during the quarter fell 2.4% to $1.65 billion, ahead of analyst estimates of $1.62 billion.
  • Net sales from the video game software business fell 18.5% to $300.9 million.
  • GameStop said its comparable store sales fell 0.5% in the quarter compared to an expected a 3.5% drop in same-store sales.
  • The company reported a net loss of $24.9 million in the second quarter, compared with a profit of $22.2 million a year earlier.

Tesla rocked by executive departures, Musk web show

  • Tesla shares fell nearly 9% in early trading on Friday as the resignation of its chief accounting officer after just a month at work spooked investors amid another social media storm around billionaire chief executive Elon Musk.
  • The company, hurt in the past month by Musk’s high-profile U-turn on a deal to take it private, said Chief Accounting Officer Dave Morton had resigned, citing discomfort with the level of public attention and pace of work.
  • That followed a twitter storm overnight about Musk smoking marijuana and drinking whiskey in a 2-1/2-hour live web show with comedian Joe Rogan.
  • The forty-seven-year-old billionaire spent two and a half hours on a podcast late Thursday discussing everything from artificial intelligence and its impact on humankind to flamethrowers and social media.
  • Tesla shares, down just 1% after Musk’s appearance on the Rogan podcast, fell another 7% in the half hour after Morton’s resignation.

EU Clears Apple to Acquire Song-Recognition App Shazam

  • Apple received the European Union’s approval to acquire Shazam, allowing the technology giant to close one of its most prominent deals in years—and helping its music business to battle Spotify for streaming-music subscribers.
  • Regulators were concerned that by acquiring Shazam—that helps users identify songs playing around them—Apple could gain access to data about its competitors’ customers, allowing Apple to encourage them to switch to its own streaming service.
  • The decision follows a string of setbacks for Silicon Valley firms in the EU, which has developed a reputation in recent years for being one of the world’s toughest enforcers of the antitrust law.

Twitter Permanently Bans Alex Jones After New Violations

  • Twitter said it permanently banned Alex Jones and his website Infowars, effectively taking away one of the last few online microphones available to the right-wing provocateur.
  • While other tech companies including Apple, Facebook, and YouTube previously suspended various accounts associated to Mr. Jones, Twitter had allowed him to remain on its platform.
  • Twitter said its decision was based on reports of tweets and videos Mr. Jones posted in the past 24 hours “that violate our abusive-behavior policy, in addition to the accounts’ past violations.”
  • Mr. Jones frequently touts discredited conspiracy theories, most notably labeling as a hoax the 2012 shooting at Sandy Hook Elementary School that killed 20 children.

Third Point Aims to Replace Campbell Soup’s Entire Board

  • Daniel Loeb’s Third Point has launched a proxy fight to replace Campbell Soup’s entire board after the fund was underwhelmed by the company’s plan to sell two business units.
  • If it were to succeed, the activist hedge fund believes all potential options for the company could be back on the table.
  • Third Point is seeking every seat and thinks Campbell’s current board, which includes three descendants of the inventor of Campbell soup, isn’t acting fast enough to turn around the struggling food conglomerate and undo some of the strategic missteps it oversaw.

J&J to work with India on compensation for recalled hip implants

  • Johnson & Johnson said it would work with the Indian government to compensate patients who had suffered from hip implants that were recalled by the U.S. healthcare firm eight years ago after data showed high failure rates.
  • This follows last week’s recommendation from a government panel that J&J pay at least 2 million rupees ($27,812) to each patient for the faulty ASR hip implant.
  • About 93,000 people worldwide received ASR implants which were recalled in 2010, 4,700 of those people were in India.
  • In 2013, J&J agreed to pay nearly $2.5 billion to settle thousands of lawsuits from patients in the United States who said they were injured by the implants.

Mattel, After Years Toying With Big Screen, Creates Film Division

  • Mattel is launching a film division to develop movies based on Barbie, Hot Wheels and other popular brands it owns, the struggling toy maker’s latest attempt to crack into Hollywood as its rivals have done.
  • The company said that it hired Robbie Brenner, producer of films like the Oscar-nominated “Dallas Buyers Club,” as executive producer to lead the newly formed Mattel Films.
  • Mattel has lagged behind toy rivals Lego and Hasbro, which have developed blockbuster films based on their brands, including “The Lego Movie” and the “Transformers” franchise.

Verizon’s media and advertising head Tim Armstrong to leave

  • Verizon’s head of media and advertising business Tim Armstrong is in talks to leave the U.S. wireless carrier
  • Armstrong, who came to Verizon in 2015 from AOL after the company bought the online service provider for $4.4 billion, served as the chief executive officer of AOL.
  • Armstrong has been working on building AOL’s expertise in placing text and video ads on mobile phones.

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US ECONOMY & POLITIC

(Harriet TorrySarah Chaney)

  • The pace of hiring picked up in August, American workers’ paychecks grew strongly and the unemployment rate held steady, showing ongoing strength in the labor market.
  • The unemployment rate was 3.9% last month, as Nonfarm payrolls rose a seasonally adjusted 201,000 in August, a pickup from the prior month.
  • Economists expected 192,000 new jobs and a 3.8% unemployment rate.
  • Revised figures show employers added 147,000 jobs in July and 208,000 in June, a net downward revision.
  • Average hourly earnings increased 0.4%, or 10 cents in August after rising 0.3% in July.
  • That raised the annual increase in wages to 2.9% in August, the largest gain since June 2009, from 2.7% in July.
  • The share of Americans participating in the labor force fell by 0.2 percentage point to 62.7% in August.
  • A broad measure of unemployment and underemployment that includes Americans stuck in part-time jobs or too discouraged to look for work fell to 7.4% from 7.5% the prior month.

Chances Fade for U.S.-China Trade Deal

  • The prospect of resolving the U.S. trade battle with China is fading as the White House draws closer to a deal to revise the North American Free Trade Agreement. The outcomes are related, U.S. officials say.
  • Relaxing trade tensions with Mexico and Canada, plus a preliminary trade agreement with the EU, have made it easier to forge a multilateral front to oppose Chinese trade practices. The U.S., EU, and Japan have already held meetings on such a strategy.
  • A trade detente also blunts criticism from Congress and U.S. industry that the administration has erred by picking fights with friendly countries at the same time as it battles with China.
  • Additionally, officials say, it helps recruit allies to stop Chinese exporters from skirting U.S. tariffs by shipping goods to third countries, which then send the goods to the U.S., say officials.
  • The tougher White House stance makes it harder to try to reach a deal at two summits in November, which had been the game plan of Beijing and some in the administration.

Kavanaugh Weathers Raucous Hearing

  • Supreme Court nominee Brett Kavanaugh wrapped up what is likely to be the toughest part of his confirmation process Thursday, completing two days of public questioning in which senators often spent their time sparring with one another.
  • Much of Thursday morning was taken up by a continuing partisan battle over access to Judge Kavanaugh’s records from the George W. Bush White House.
  • While hundreds of thousands of pages of material have been made public, Democrats complained that many other records have been designated “committee confidential” by the panel, limited only to senators and their staffs, without good reason.
  • Senators battled each other over confidential documents, with Democrats threatening civil disobedience and Republicans warning of severe consequences, and Judge Kavanaugh for a time becoming a spectator at his own confirmation.
  • Senators debated a March 2003 email sent by Judge Kavanaugh during his years in the Bush White House in which he took issue with the notion that the landmark Roe v. Wade ruling that found a constitutional right to abortion was “settled law.”

House Republicans Push to Lock In Tax Cuts Past 2025

  • Even though the legislation dubbed “Tax Reform 2.0” isn’t likely to become law this year or have a significant practical effect on individual tax returns until today’s sixth-graders are in college, Republicans see advantages in voting now.
  • Most immediately, the planned September vote will give GOP members a talking point ahead of the midterm elections.
  • For them, it’s a way to highlight partisan contrasts and continued economic growth since last year’s tax law, which passed without a single Democratic vote.
  • The expiration dates were included in last year’s tax law because of the way that Republicans enacted it.
  • They used expedited procedures known as reconciliation, which allowed them to push it through the Senate without needing Democratic votes but with the restriction that the law couldn’t increase budget deficits beyond 2027.

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EUROPE & WORLD

(Carlo Martuscelli)

  • British Airways’ owner said the airline has been hit by a cyber hack, with the personal data of customers who booked flights on the carrier’s website stolen, the latest in a string of corporate data breaches.
  • International Consolidated Airlines Group said Thursday that the breach affected customers who booked flights with British Airways between Aug. 21 and Sept. 5 and that it was investigating the incident.
  • British Airways said about 380,000 card payments were compromised but didn’t include travel or passport details.

VW faces about $10.7 billion investor suit over dieselgate scandal

  • Volkswagen faces a trial next week as investors seek 9.2 billion euros ($10.7 billion) in compensation arguing that the carmaker should have informed shareholders about a diesel pollution scandal before regulators did in September 2015.
  • The lawsuit bundles 1,670 claims brought mainly by VW’s institutional shareholders who have accused the carmaker of failing to inform investors about the scope of a scandal which has cost the company 27.4 billion euros in penalties and fines.
  • Had VW warned investors about the size of the scandal before the U.S. Environmental Protection Agency (EPA) issued a “notice of violation” on Sept. 18, 2015, then institutional investors may have avoided losses on their shareholdings, plaintiffs said.
  • Volkswagen has admitted systematic emissions cheating but denies wrongdoing in matters of regulatory disclosure.

Tencent Bets $1 Billion on China Housing Boom With Stake in Property Brokerage

  • One of China’s largest real-estate brokerages is planning to raise about $2 billion from investors including Tencent and private-equity firm Warburg Pincus.
  • Lianjia was founded in 2001 and has scores of brick-and-mortar branches in Beijing, Shanghai and other Chinese cities.
  • The company also has a website and mobile app that lets Chinese home buyers and renters search listings of new and secondhand properties.
  • The private fundraising round is likely to value the Beijing-based company known as Lianjia at about $13 billion.
  • Residential property sales in China totaled 6.6 trillion yuan ($964.26 billion) in the first seven months of the year, up 16% from the same period in 2017, according to China’s National Bureau of Statistics.

HNA, Under Pressure From Beijing, to Sell Its Overseas Empire

  • One of China’s largest conglomerates intends to unload its entire stake in Deutsche Bank and sell off the vast majority of overseas investments it made in recent years, a significant comedown for a once-highflying company.
  • HNA, which amassed more than $40 billion worth of businesses in an aggressive global acquisition spree from 2015 to 2017, is dismantling its overseas empire to shrink its balance sheet under renewed pressure from Chinese regulators and creditors.
  • The conglomerate is in talks to sell California-based technology distributor Ingram Micro—which it bought for $6 billion in 2016—and Zurich cargo handler Swissport International.
  • HNA’s fresh efforts to unload assets shows the group remains under pressure to repay debt, which totaled 657.4 billion yuan ($96.12 billion) at the end of June, down 10.7% from six months earlier.

Aramco Weighs $1 Billion Venture Capital Fund For Tech

  • Saudi Arabia’s national oil company is considering a $1 billion venture-capital fund to invest in international technology firms as the kingdom deepens efforts to diversify its economy.
  • Aramco already invests in startups and high-growth firms in the energy space via its $500 million Saudi Aramco Energy Ventures fund and the Aramco Entrepreneurship Center, which has roughly $200 million to deploy early-stage capital in local Saudi companies.
  • Aramco wants to locate tech firms in Saudi Arabia to create jobs, although that goal isn’t the primary reason for establishing the fund.

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TODAY in HISTORY

  • Brazil declared its independence from Portugal. (1822)
  • Nazi Germany began its initial blitz on London during World War II. (1940)
  • The Entertainment and Sports Programming Network (ESPN) made its debut on cable TV. (1979)

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