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Daily Market Report | June 07, 2021

Stocks Wobble at Start to the Week – Wall Street Journal, 6/7/2021

  • Major U.S. stock indexes slipped on Monday, in a subdued start to the week after closing near record levels last week.
  • U.S. stock indexes have been mostly muted in recent trading sessions, with investors assessing a range of factors including the economic outlook, supply-chain problems and high valuations for stocks.
  • While inflation expectations have eased in recent days, investors remain on edge for signs that Federal Reserve officials may consider pulling back on easy money policies that have supported the rally in equities.
  • Over the weekend, Treasury Secretary Janet Yellen told Bloomberg News that President Biden’s spending plan would be good for the U.S., even if it contributes to rising inflation and results in higher interest rates.
  • The yield on the 10-year Treasury note rose to 1.574% from 1.559% Friday. Yields rise when prices fall.
  • Overseas, the pan-continental Stoxx Europe 600 gained 0.4%.
  • In Asia, major benchmarks were mixed. The Shanghai Composite Index rose 0.2%. Japan’s Nikkei 225 added 0.3%, while Hong Kong’s Hang Seng Index declined almost 0.5%.

Blackstone to Buy Data-Center Operator QTS Realty Trust for $6.7 Billion – Wall Street Journal, 6/7/2021

  • Blackstone Group has struck a roughly $6.7 billion deal to buy QTS Realty Trust and take the data-center operator private.
  • The investment giant’s infrastructure unit, Blackstone Infrastructure Partners, together with its nontraded real-estate investment trust, known as BREIT, have agreed to pay $78 a share for QTS, the companies plan to announce Monday. The price represents a 21% premium to QTS’s closing share price Friday and a 24% premium to the volume-weighted average over the last 90 days.
  • Based in Overland Park, Kansas, QTS is a real-estate investment trust that owns more than 7 million square feet of data-center space in 28 locations across North America and Europe.
  • Its customers include big software and social-media companies as well as government entities that use the centers to securely store and process data.

Google Settles Antitrust Case Over Advertising Practices – Wall Street Journal, 6/7/2021

  • Alphabet’s Google agreed to pay French regulators a fine of nearly $270 million, settling one of the first antitrust cases globally that allege the tech company abused its leading role in the digital advertising sector.
  • France’s competition authority said it had also accepted a series of proposed commitments Google made to settle the case, including promises to make it easier for competitors to use its online-ad tools.
  • As part of the case, the French competition authority alleged that the company’s advertising server—historically known as DoubleClick for Publishers and used by most large online publishers to put ad space up for sale—gave Google’s online ad auction house, AdX, an advantage in advertising auctions, in part by providing information about rival bids.
  • While Google’s commitments are binding only in France, they will become a template for how the company could resolve similar complaints from publishers and advertising-technology rivals elsewhere—potentially changing how Google operates its system around the world.

Amazon Founder Jeff Bezos to Be on Blue Origin’s First Human Space Flight – Wall Street Journal, 6/7/2021

  • Jeff Bezos plans to travel to space next month as one of the first passengers carried by Blue Origin, the Amazon.com founder’s space-travel company.
  • Mr. Bezos said in an Instagram post on Monday that he will be one of the inaugural travelers on Blue Origin’s New Shepard spacecraft, during a flight scheduled for launch from West Texas on July 20. Mr. Bezos said that his brother, Mark Bezos, will also be part of the crew.
  • The passenger list for Blue Origin’s July flight is also set to include the winner of a charity auction that will conclude this month. The auction has had nearly 6,000 participants and the highest bid is at $2.8 million, Blue Origin said Monday.

Options Traders Bet on Return of $100 Oil – Wall Street Journal, 6/7/2021

  • Traders have alighted on what some believe to be a one-way bet in the world’s most important commodity market: oil prices going to $100 a barrel.
  • They have scooped up call options tied to Brent and West Texas Intermediate crude-oil prices reaching $100 by the end of next year. Oil prices haven’t topped that milestone since 2014, when a gush of U.S. crude depressed energy markets.
  • Owners of $100 options—now the most widely owned WTI call contracts on the New York Mercantile Exchange—are making a leveraged bet that oil prices will hurtle higher after already surging more than 40% this year.
  • The roaring rally, goosed by thawing coronavirus restrictions, has lifted WTI prices to their highest level since 2018 at almost $70 a barrel and average U.S. gasoline prices above $3 a gallon, according to GasBuddy.

Biden’s Agenda Takes On Steep GOP Resistance in Senate – Wall Street Journal, 6/7/2021

  • Many of President Biden’s priorities are in danger of stalling as the Senate returns on Monday, with measures on voting, infrastructure and other issues facing firm Republican resistance and opposition from a handful of centrist Democrats.
  • The difficulties Democrats face moving ahead in the evenly divided Senate became clearer Sunday when a pivotal centrist, Joe Manchin of West Virginia, said he wouldn’t support the key voting-rules bill that has already been opposed by Republicans.
  • Mr. Manchin said that without Republican support, the voting legislation would deepen partisanship in Congress and that instead he favors pursuing discussions on narrower changes to voting laws.
  • Mr. Manchin also reaffirmed his opposition to ending the longstanding filibuster rule, which requires 60 votes to advance most bills and which some progressive Democrats have called for eliminating.
  • But beyond the voting-rules bill, many other pieces of legislation central to Mr. Biden’s agenda now face opposition by most if not all Republicans and some Democrats, depriving the measures of majority support even if the filibuster weren’t a factor.
  • Democrats also want to pursue measures on infrastructure and jobs. After weeks of negotiations between the White House and a group of GOP lawmakers led by Sen. Shelley Moore Capito (R., W.Va.), the two sides remain far apart, prompting some Democrats to call for pressing ahead without Republicans using reconciliation.
  • Some Democrats have balked at that idea. Mrs. Capito and Mr. Biden plan to talk again Monday.

A G-7 Deal on a Global Minimum Tax for Companies Faces Hurdles – Wall Street Journal, 6/7/2021

  • An agreement by wealthy countries to impose minimum taxes on multinational companies faces a rocky path to implementation, with many governments likely to wait and see what others, especially a divided U.S. Congress, will do.
  • The deal would impose a minimum tax of at least 15% and give countries more authority to tax the profits of digital companies like Apple and Facebook that dominate global markets but pay relatively little tax in many countries where they operate.
  • New tests come in the months ahead, as details get hashed out and governments see which country goes first.
  • Those that move ahead before others could damage their revenue bases and companies, according to tax experts, and those lagging behind a global consensus could be hurt too.
  • At the center of attention, some tax specialists, lawyers and officials said, is the U.S. Congress.
  • In countries with parliamentary systems, governments can quickly deliver on pledges, turning them into local laws and regulations. In the U.S., however, a slim Democratic majority in the House, an evenly split Senate, antitax Republicans and procedural hurdles complicate passage.

Yellen Says Higher Interest Rates Would Be ‘Plus’ for U.S., Fed – Bloomberg, 6/7/2021

  • Treasury Secretary Janet Yellen said President Joe Biden should push forward with his $4 trillion spending plans even if they trigger inflation that persists into next year and higher interest rates.
  • “If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen said Sunday in an interview with Bloomberg News during her return from the Group of Seven finance ministers’ meeting in London.
  • Biden’s packages would add up to roughly $400 billion in spending per year, Yellen said, contending that’s not enough to cause an inflation over-run. Any “spurt” in prices resulting from the rescue package will fade away next year, she said.

Federal Student-Loan Loss Forecast Rises by $53 Billion – Wall Street Journal, 6/7/2021

  • The Biden administration has raised an estimate of losses on the federal government’s student loan portfolio by $53 billion, reflecting lower repayment rates and pandemic-relief efforts.
  • A year ago, the federal budget projected that taxpayers would ultimately lose $15 billion on all outstanding student debt, which currently comes to $1.6 trillion.
  • The administration’s proposed $6 trillion budget now projects long-term losses will reach $68 billion.
  • Those estimates are still far smaller than losses projected in an internal analysis led by officials appointed by Betsy DeVos, who was education secretary under President Donald Trump, which showed that taxpayers ultimately would be on the hook for roughly two-thirds of the $1.6 trillion student debt portfolio.
  • The federal loan program has for years been racked by problems. Millions of borrowers defaulted on loans during and after the 2007-2009 recession, many of whom dropped out of college and struggled to find decent-paying jobs.
  • Others borrowed heavily to cover steep tuition increases and then enrolled in federal programs that tie their payments to their incomes. The lower payments typically aren’t enough to cover interest, and borrowers’ balances are rising.

Supreme Court Rejects Bid to Weaken Public-Sector Labor Unions – Bloomberg, 6/7/2021

  • The U.S. Supreme Court turned away a bid to weaken the power of public-sector unions, refusing to reconsider a 1984 ruling that lets them serve as the exclusive bargaining agent for workers.
  • The justices without comment rejected an appeal by Jade Thompson, an Ohio high school teacher who said she has a First Amendment right not to be represented by a union. The appeal was one of the first to test the court’s appetite for labor issues since Justice Amy Coney Barrett’s confirmation in October created a 6-3 conservative majority.
  • In rebuffing Thompson, the court’s conservative wing passed on a chance to extend a 2018 ruling that said government employees can opt out of paying fees to a union to cover the cost of collective bargaining.

Tennessee Scientist Is First to Go on Trial on Charges He Hid Work in China – Wall Street Journal, 6/7/2021

  • Until last year at the University of Tennessee, Anming Hu studied, among other things, how to join certain metals together using materials that are more than 1,000 times smaller than the width of a human hair.
  • He also ran a group developing similar nanoscale technologies at an institute in Beijing.
  • Mr. Hu’s research has a range of potential applications including fixing turbines and printing sophisticated electronic sensors.
  • On Monday, prosecutors are set to present their case that Mr. Hu hid his China collaborations from the U.S. government while also receiving National Aeronautics and Space Administration grants for his work in Tennessee.
  • The trial in Knoxville is the first after a slew of arrests of researchers and years of rising concerns among U.S. authorities that American taxpayers are unwittingly funding Chinese scientific development and boosting China’s drive for global pre-eminence.
  • The Senate this week is expected to approve legislation that would provide for $190 billion for research in advanced technologies and other programs to try to better compete with China. In its current form, the bill toughens restrictions on recipients of government research funds from also accepting money from government programs from China, Russia, North Korea and Iran.

EUROPE & WORLD

China’s imports grow at fastest pace in decade as materials prices surge – Reuters, 6/7/2021

  • China’s imports grew at their fastest pace in 10 years in May, fuelled by surging demand for raw materials, although export growth slowed more than expected amid disruptions caused by COVID-19 cases at the country’s major southern ports.
  • China’s exports in dollar terms in May grew 27.9% from a year earlier, slower than the 32.3% growth reported in April and missing analysts’ forecast of 32.1%.
  • Imports increased 51.1% on year last month in dollar terms, the fastest growth since January 2011 but slower than the 51.5% rise tipped by the Reuters poll.
  • China posted a $45.53 billion trade surplus for the month, wider than the $42.86 billion surplus in April but less than the $50.5 billion expected.
  • Two-year average growth for exports dropped to 23.4% in May from 36.3% in April, pointing to weaker export momentum as the reopening of developed economies reduce demand for personal protective equipment (PPE) and work-from-home (WFH) products, analysts at Nomura said in a note.

Supply disruptions cause dip in German industrial orders in April – Reuters, 6/7/2021

  • German industrial orders dropped unexpectedly in April on falling domestic demand, data showed on Monday, as supply chain disruptions held back manufacturers in Europe’s largest economy.
  • The Federal Statistics Offices said orders for industrial goods fell by 0.2% in seasonally adjusted terms, the first drop this year after three successive increases.
  • A breakdown of the data showed that domestic demand fell by 4.3% while foreign demand rose by 2.7%.
  • Both consumer and capital goods posted an increase while intermediate goods contracted by 1%, the data showed.

Europe City Traffic Hits 2019 Level for First Time in 15 Months – Bloomberg, 6/7/2021

  • Traffic in 15 European cities was as busy as in 2019 for the first time since the coronavirus pandemic began, according to data from TomTom NV.
  • The figures, which showed congestion was on average equal to levels from the year prior to the pandemic last week, were the strongest since March 2020.
  • It compares with a drop of 15% a month ago and a decline of as much as 34% in the most recent wave of virus infections in the region.

China’s Tech Clampdown Is Spreading Like Wildfire – Wall Street Journal, 6/7/2021

  • What started out as a government crackdown on anticompetitive practices among Chinese internet giants has grown into a broader effort to clean up how the country’s fast-growing—and, until recently, freewheeling—tech sector operates.
  • In May, China’s cyber regulator accused 105 apps, including short-video and job-recruitment apps, of illegally collecting and using personal data. It ordered the companies to fix their problems within three weeks or risk legal action.
  • The directives came days after another 117 apps were told to fix user-data problems. Regulators have also met with ride-hailing services for potential mistreatment of drivers, while internet firms have been ordered to reform their data and lending practices.

Chinese Internet Regulators Investigate Startup After Tiananmen Square Anniversary Post – Wall Street Journal, 6/7/2021

  • A buzzy Chinese Instagram-like startup backed by the country’s two biggest technology giants had its domestic social-media account shut down amid an investigation by Beijing’s cyber watchdog into a post it shared on the anniversary of the 1989 Tiananmen Square crackdown, according to people familiar with the situation.
  • Shanghai-based Xiaohongshu—which means “Little Red Book” in Chinese and is backed by Alibaba Group and Tencent Holdings —wrote in a post on China’s Twitter -like Weibo platform on June 4, “Tell me loudly, what is the date today?”
  • The Friday post, which was shared on the 32nd anniversary of the day that Chinese troops crushed peaceful student protests in Tiananmen Square, was quickly deleted.
  • By midnight Friday in China, Xiaohongshu’s entire Weibo account—which had 14 million followers—had disappeared, replaced by a message that said the account was unavailable for suspected violations of laws and regulations.

‘Do We Need to Be in Hong Kong?’ Global Companies Are Eying the Exits – Wall Street Journal, 6/7/2021

  • Apprehensive about Hong Kong’s future as the best place to do business in China and beyond, multinational firms are pulling up stakes, adding to uncertainty about the outlook for one of the world’s premier commercial cities.
  • In a survey of members of the American Chamber of Commerce in Hong Kong released last month, 42% of the 325 respondents said they were considering or planning to leave the city, citing uneasiness over China’s new security law and a pessimistic outlook of Hong Kong’s future.
  • Dozens of international companies have moved regional headquarters or offices from the city since 2019, government data show.
  • That has contributed to the highest rate of commercial real estate vacancies in 15 years, with more than 80% of the vacant space surrendered by international companies, data compiled by Cushman & Wakefield show.

Toshiba to buy back 6% of shares, pay special dividend – Reuters, 6/7/2021

  • Toshiba said on Monday it will buy back up to 6% of its outstanding shares worth around 100 billion yen ($913 million), in line with its plans to boost shareholder returns.
  • The Japanese industrial conglomerate will also allocate about 50 billion yen to pay a special dividend as “some shareholders, mainly retail shareholders, prefer dividends”, it said in a statement.
  • Toshiba, which has been under pressure from activist shareholders, last month promised to return to shareholders a surplus of 150 billion yen against the appropriate shareholder equity level.

Factmonster – TODAY in HISTORY

  • Spain and Portugal signed the Treaty of Tordesillas, which divided the New World between the two countries. (1494)
  • Louis XIV was crowned king of France. (1654)
  • Richard Henry Lee of Virginia introduced a resolution in the Continental Congress proposing a Declaration of Independence. (1776)
  • Homer Plessy was arrested for his refusal to move from a whites-only seat on a train. This led to the Plessy v. Ferguson Supreme Court decision. (1892)

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