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Stocks Edge Lower as Powell Says Outlook ‘Highly Uncertain’

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US FINANCIAL MARKET | US ECONOMY & POLITICS
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US FINANCIAL MARKET

Stocks Edge Lower as Powell Says Outlook ‘Highly Uncertain’

  • U.S. stocks opened lower Wednesday after Federal Reserve Chairman Jerome Powell said Congress and the White House will need to spend more money to make sure policy makers’ quick initial response to the coronavirus-induced economic contraction isn’t wasted.
  • Powell made it clear, however, the Fed won’t push interest rates below zero, as traders had been increasingly betting.
  • Top Fed officials on Tuesday warned that the U.S. economic recovery following the coronavirus pandemic is likely to be uneven, with some sectors such as services and hospitality struggling to rebound.
  • Tensions between the U.S. and China added to the nerves among investors, who worry new frictions between the two largest economies could exacerbate the global downturn.
  • Sen. Lindsey Graham on Tuesday proposed legislation that would allow President Trump to impose sanctions on China if it doesn’t investigate the origins of the pandemic.
  • Adding to the uncertainty in markets, top Trump administration health officials on Tuesday emphasized the need for caution and widespread testing while easing coronavirus lockdowns.
  • Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, warned in a Senate hearing that there could be a new wave of infections in some states if there is a premature reopening of schools and businesses.

Chinese, Iranian Hacking May Be Hampering Search for Coronavirus Vaccine, Officials Say

  • Chinese and Iranian hackers are aggressively targeting American universities, pharmaceutical and other health-care firms in a way that could be hampering their efforts to find a vaccine to counter the coronavirus pandemic, U.S. officials said.
  • The attacks have raised the prospect among some officials that the aggression could be viewed by the Trump administration as a direct attack on U.S. public health and tantamount to an act of war, they said, because the attacks may have hindered vaccine research in some cases.
  • Such an interpretation would represent an escalation of how the U.S. government views cyberattacks against the country.
  • U.S. officials said that even an errant keystroke by a hacker targeting such health-care facilities could “irreversibly harm” efforts to find a vaccine.

Coronavirus Projected to Keep Weighing on Oil Demand

  • Global oil demand is expected to drop 18% this quarter from a year earlier as coronavirus lockdowns continue to hammer the economy, the Organization of the Petroleum Exporting Countries said Wednesday.
  • In its monthly report, OPEC said the world’s demand for crude would likely fall to 81.3 million barrels a day in the second quarter, down from 98.6 million barrels a year earlier.
  • Global oil demand is projected to drop 9.1% to an average of 90.6 million barrels a day in 2020, OPEC said.
  • Organization for Economic Cooperation and Development nations’ oil stocks in March were 89 million barrels above their five-year average, the report said.
  • OPEC forecast that the eurozone economy would shrink 8% in 2020, with the U.S. economy contracting 5.2%.

Boeing sees zero orders again in April, MAX cancellations mount

  • Boeing recorded zero orders for the second time this year in April and customers canceled another 108 orders for its grounded 737 MAX plane compounding its worst start to a year since 1962.
  • The company said on Tuesday it delivered just six planes last month, bringing the total to 56 for the first four months of 2020, down 67% from a year earlier, as it battles the biggest crisis in its history.
  • Boeing said on Tuesday the 737 MAX cancellations in April were from customers including China Development Bank Financial Leasing and General Electric’s aircraft leasing unit GECAS.
  • This was in addition to the 150 737 MAX orders scrapped in March by customers such as Irish leasing company Avolon and Brazil’s GOL.
  • Boeing’s gross orders stood at 49 aircraft for the year as of April, with a negative order total of 255 planes after cancellations.
  • Airbus’ gross orders for the year as of April were 365 aircraft.
  • Following 66 cancellations, net order tally was 299 airplanes, up from 290 in March.

Hyatt to lay off 1,300 employees as pandemic cripples travel

  • Hyatt Hotels said late Monday it would lay off 1,300 people globally as it tries to cope with the coronavirus crisis, which has virtually halted global travel by keeping people indoors.
  • Hyatt said it had also cut pay for senior management, board members and all employees in corporate offices as part of a restructuring, adding that the staff who were being laid off would be eligible for severance pay.
  • The hotel industry is estimating a loss of $1.4 billion in revenue every week on account of the outbreak and a 30% drop in hotel occupancy over a year, according to statements from the American Hotel and Lodging Association and the U.S. Travel Association in March.

Musk, Texas governor talk about potential Tesla move to Lone Star state

  • Texas Governor Greg Abbott said on Tuesday that he spoke with Elon Musk, the chief executive of Tesla, in recent days about a potential move of the company’s electric vehicle assembly plant to the Lone Star state.
  • Abbott’s remarks came just came three days after Musk threatened to move Tesla’s headquarters and future operations to either Texas or Nevada, after officials in the California county where Tesla’s only U.S. vehicle factory is located said the plant could not reopen because coronavirus lockdown measures remained in place.
  • Abbott did not provide details of the conversation. John Wittman, the governor’s communications director, said there was not yet any discussion of incentives to entice Tesla away from California.

Uber Technologies Makes Takeover Approach to GrubHub

  • Uber Technologies is seeking to acquire GrubHub in a deal that would unite two of the biggest players in the cutthroat mealdelivery business at a time when the coronavirus pandemic has sparked a surge in demand for their services.
  • GrubHub recently proposed that Uber pay 2.15 of its shares for each GrubHub share, which Uber rebuffed as too high, and now the two sides are discussing a lower price, some of the people said.
  • A combined company would control an estimated 55% of the third-party food-delivery market, with DoorDash number two at roughly 35%, according to analysts at Wedbush Securities.

 

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US ECONOMY & POLITICS

U.S. producer prices post biggest drop since 2009

  • U.S. producer prices fell by the most since 2009 in April, leading to the largest annual decline in nearly 4-1/2 years, which could bolster some economists’ predictions for a brief period of deflation as the novel coronavirus depresses demand.
  • The Labor Department said on Wednesday its producer price index for final demand tumbled 1.3% last month, the biggest decline since the series was revamped in December 2009, after slipping 0.2% in March.
  • In the 12 months through April, the PPI decreased 1.2%.
  • Excluding the volatile food, energy and trade services components, producer prices plunged 0.9% in April, the biggest drop since the introduction of the series in September 2013.
  • The so-called core PPI fell 0.2% in March and has now declined for three straight months.
  • In the 12 months through April, the core PPI decreased 0.3%.

Powell Says Washington Will Need to Spend More to Battle Downturn

  • Federal Reserve Chairman Jerome Powell said Congress and the White House will need to spend more money to make sure policy makers’ quick initial response to the coronavirus-induced economic contraction isn’t wasted amid evidence that recovery will take longer than first thought.
  • He warned that the recovery could take more time to gather speed than what appeared possible a few weeks ago.
  • Mr. Powell said early data revealed the downturn was already falling on households least able to bear it.
  • A Fed survey to be released Thursday shows that among people who were working in February, nearly 40% of those households making less than $40,000 a year had lost a job in March.

U.S. Budget Deficit Widened to $1.935 Trillion in 12 Months Through April

  • The budget deficit soared to a record $1.935 trillion in the 12 months through April as the U.S. ramped up spending and cut taxes to counter the economic slowdown and revenue dropped, a Treasury Department report showed on Tuesday.
  • The annual deficit was almost double the $1.037 trillion budget gap for the year through March. Spending rose to $5.2 trillion, while revenues fell to $3.265 trillion.
  • Spending climbed to $979.71 billion in April, a monthly record, as government aid to businesses and households hit by the coronavirus pandemic started to kick in.
  • At the same time, revenue plunged to $241.86 billion, down 55% from April 2019.
  • That left a deficit of $737.85 billion for the month.

Trump ‘not interested’ in reopening U.S.-China trade deal after report of Beijing discontent

  • U.S. President Donald Trump said on Monday he opposed renegotiating the U.S.-China “Phase 1” trade deal after a Chinese state-run newspaper reported some government advisers in Beijing were urging fresh talks and possibly invalidating the agreement.
  • Trump, who himself has considered abandoning the pact signed in January, told a White House press briefing he wanted to see if Beijing lived up to the deal to massively increase purchases of U.S. goods.
  • “No, not at all. Not even a little bit,” Trump said when asked if he would entertain the idea of reworking Phase 1. “I’m not interested. We signed a deal. I had heard that too, they’d like to reopen the trade talk, to make it a better deal for them.”

House Democrats Release $3 Trillion Bill to Respond to Coronavirus

  • House Democrats released a roughly $3 trillion bill to battle the health and economic effects of the coronavirus pandemic, a sum that would about double what Congress has allocated so far, staking out a position ahead of talks with Senate Republicans who are wary of additional spending.
  • It includes more than $1 trillion for states and local governments, including funding for education and public safety.
  • The bill would also send another round of direct checks to Americans.
  • This time, it would deliver $1,200 for individuals, $2,400 for married couples and $1,200 for each dependent, up to a maximum of three.
  • The House bill would also extend the additional $600 a week in enhanced unemployment benefits, which are set to expire at the end of July, until January.
  • Democrats included some longstanding wish-list items in their legislation, such as a repeal to the $10,000 cap on the state and local tax deduction for 2020 and 2021. Republicans have called any change to the 2017 tax bill a non-starter.
  • The House is expected to return to Washington to vote on the bill Friday, but negotiations with Senate Republicans aren’t expected to start until later this month at the earliest.
  • Top Senate Republicans were quick to dismiss the legislation’s prospects in the chamber they control, denouncing the bill as an empty and unrealistic publicity stunt.

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EUROPE & WORLD

Sony braces for lowest profit in four years, hit broadly by coronavirus

  • Sony expects operating profit to drop at least 30% this financial year to its lowest in four years as the company anticipates a hit to demand for its TVs, cameras and smartphone image sensors from the coronavirus outbreak.
  • Quarterly revenue fell 18% to 1.749 trillion yen, falling short of FactSet’s estimate of Y1.922 trillion yen.
  • The electronics and entertainment company reported a 57% fall in operating profit for the January-March quarter to 35.45 billion yen ($331 million), missing a 73.77 billion yen average of analyst estimates polled by Refinitiv.
  • The company did not provide precise forecasts for the current year which started in April, but CFO Hiroki Totoki said current calculations showed that profit was likely to drop “at least about 30%” from 845.46 billion yen in the previous year.
  • The forecast profit of less than 600 billion yen would be the lowest since the year that ended in March 2017, when earthquakes knocked out factories in southern Japan that produce image sensors.

China’s Tencent reaps revenue of lockdown gaming boom

  • High demand for video games during COVID-19 lockdowns buoyed Tencent Holdings’ first-quarter revenue and profits, with blockbuster games PlayerUnknown’s Battlegrounds Mobile and Honor of Kings helping it beats forecasts.
  • Tencent’s overall revenue jumped 26% to 108.07 billion yuan ($15.24 billion), while net profit rose 6% to 28.90 billion yuan for the three months through March, with both ahead of the average analyst estimate.
  • The video games business, which generates more than a third of its revenue, saw growth of 31% to 37.30 billion yuan ($5.26 billion) as people idled away the time in front of screens and used online multiplayer games to virtually hang out with friends.
  • The company said its group online advertising revenue surged by 32%, with gaming and education-related ads on WeChat and its other apps helping it buck a broader advertising downturn as the global economy reels from the pandemic.
  • Social media advertising revenue grew 47%, highlighting a shift in behavior as many people were confined to their homes.
  • However, its revenue from media ads fell 10% due to lower revenues from its video and news platforms.

Maersk sees drop in global ship container demand this year

  • Shipping group A.P. Moller-Maersk warned of a sharp drop in global container volumes due to the coronavirus pandemic, with weaker retail sales and depressed car production dampening demand.
  • The world’s biggest container shipping company reported revenue of $9.57 billion versus the $9.59 billion forecast by 16 analysts in a poll compiled by Maersk.
  • Maersk reported earnings before interest, tax, depreciation and amortization (EBITDA) at $1.52 billion, slightly above company guidance provided in March.
  • Maersk now expects global container demand to contract this year, after previously forecasting growth of between 1% and 3%.
  • Maersk had idled almost 10% of its fleet capacity at the end of March. It plans to take more vessels out of service to match the slowdown in container trade and keep freight rates from falling.

Maruti fourth-quarter profit slumps on weak demand

  • Maruti Suzuki India’s March-quarter profit fell 28% as poor demand for cars during the period was exacerbated by a nationwide lockdown to halt the spread of the novel coronavirus, hurting sales at the country’s top-selling carmaker.
  • Revenue from operations fell 15% to 181.98 billion rupees, said the company, which is majority-owned by Japan’s Suzuki.
  • Domestic unit sales at the carmaker dropped 16% to 360,428 vehicles during the quarter.
  • Its net profit fell to 12.92 billion rupees ($171.53 million), compared with 17.96 billion rupees a year earlier.

India and Pakistan Ease Restrictions Despite Rising Coronavirus Infections

  • Despite rising numbers of Covid-19 cases, India and Pakistan are loosening their lockdowns, counting on deaths to remain low and their hospitals to be able to cope with the envisaged rise in serious cases, according to public-health specialists.
  • The South Asian nations, two of the most populous developing countries wrangling with the pandemic, are encouraged by their being among countries with the fewest number of confirmed cases per person. India, with a population of 1.3 billion, has recorded 74,281 cases; Pakistan, with 220 million people, has recorded 34,336.
  • Like many countries in the developing world, India and Pakistan are testing far fewer people than some developed nations—less than 1.5 tests per 1,000 people, compared with around 26 per 1,000 in the U.S., according to Our World in Data, a nonprofit scientific effort based at the University of Oxford.

Coronavirus Creeps Back in Hong Kong as Local Transmissions Are Reported

  • After 23 days without a locally transmitted coronavirus case and with much of the city returning to normal life, health officials here are investigating how a 66-year-old woman and her granddaughter tested positive.
  • The test results, announced Wednesday, illustrate the continuing challenges for authorities world-wide in eliminating the disease even in places that were successful with containment earlier on.
  • Seven close contacts of the woman have shown symptoms and have been sent to the hospital for testing, officials said Wednesday.
  • The woman has no recent history of travel and hasn’t had contact with known carriers of the disease, officials said.

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TODAY in HISTORY

  • Winston Churchill gave his first speech as prime minister: “I have nothing to offer but blood, toil, tears and sweat.” (1940)
  • Pope John Paul II was shot and wounded by Mehmet Ali Agca as he drove through a crowd in St. Peter’s Square, Rome. (1981)

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