US FINANCIAL MARKET
U.S. STOCKS HIT NEW HIGHS ON OPTIMISM OVER TRADE, EARNINGS
- The Dow Jones Industrial Average jumped 140 points at the open Monday to claim its first all-time high since July.
- The S&P 500 and Nasdaq indexes also hit new highs.
- In company news, McDonald’s fell after firing its chief executive and Under Armour sank after disclosing an accounting probe.
- Carmakers led the Stoxx Europe 600 Index toward a four-year high after the U.S. commerce secretary said tariffs on importing vehicles into the American market might be unnecessary.
- Earnings continue to roll in around the world, with Uber and Marriott still due Monday.
- In China, trade data at the end of this week will give details for October against a backdrop of easing tensions on negotiations with U.S. counterparts.
McDonald’s Fires CEO Steve Easterbrook Over Relationship with Employee
- McDonald’s said it has fired Chief Executive Steve Easterbrook because of his consensual relationship with an employee.
- The burger giant said Sunday that its board voted Friday to terminate Mr. Easterbrook after investigating his relationship with the unnamed employee. Mr. Easterbrook resigned from McDonald’s board as well. He wrote in an email to McDonald’s employees on Sunday that he had violated company policy on personal conduct.
- “This was a mistake,” Mr. Easterbrook wrote in the email. “Given the values of the company, I agree with the board that it is time for me to move on.”
- The board was alerted to the relationship, conducted a thorough investigation and acted swiftly, according to McDonald’s.
- McDonald’s said Mr. Easterbrook would be succeeded immediately by USA President Chris Kempczinski, 51 years old.
- Mr. Easterbrook, 52, has been chief executive since March 2015. During his tenure, the company’s shares nearly doubled in value.
Under Armour Shares Fall on Probe News, Revenue Cut
- Under Armour shares fell as much as 16.5% Monday as federal authorities investigate the sportswear maker’s accounting practices and whether it shifted sales from quarter to quarter to appear healthier, according to people familiar with the matter.
- Under Armour said sales were flat in the third quarter and it lowered its revenue forecast for the rest of the year, as the company battles to return to the growth levels it once enjoyed.
- The company has been struggling with weak sales since 2017. Until then, it had been among the fastest-growing clothing brands, riding 26 straight quarters of at least 20% year-over-year revenue growth.
- For the third quarter, the company reported a profit of $102 million compared with a profit of $75.3 million during last year’s third quarter.
- Total revenue fell 1% to $1.43 billion. Analysts expected total sales of $1.41 billion.
- World-wide, Under Armour’s apparel revenue increased 1%, while footwear sales declined 12%.
- The Wall Street Journal reported Sunday that the Justice Department and the Securities and Exchange Commission are examining the sportswear maker’s revenue-recognition practices and whether it shifted sales from quarter to quarter to make them appear stronger.
- Under Armour had three chief financial officers (CFOc) from 2016 to 2017. Brad Dickerson, who had served as CFO since 2008, left the company in February 2016. Chip Molloy, a former PetSmart Inc. executive, took over but stayed a year on the job. Under Armour at the time cited unspecified personal reasons for his departure.
Sprint Swings to Loss, Reports Drop in Phone Subscribers
- Sprint has lost subscribers as its merger with T-Mobile US moved through the regulatory approval process more slowly than expected.
- Sprint lost 91,000 of its most lucrative phone connections in the latest quarter, as the No. 4 U.S. carrier struggled to retain subscribers and compete with its larger rivals for new customers.
- Those net losses were better than some on Wall Street expected, however.
- T-Mobile added 754,000 net new postpaid phone customers in the September quarter while Verizon added 444,000 such connections and AT&T added 101,000.
- Sprint reported a net loss of $274 million for the September quarter.
- During the same quarter last year, it reported a net income of $196 million.
- Revenue fell to $7.8 billion in the period from $8.4 billion a year earlier.
General Dynamics Gets a Multibillion-Dollar Navy Submarine Deal
- The U.S. Navy has reached an agreement with General Dynamics on a multibillion-dollar deal to buy the next batch of Virginia–class attack submarines, according to the service.
- After protracted negotiations, the deal was cut from 11 submarines to 9 because funding was running more than $1 billion short, with an option to buy a 10th vessel in 2023, according to service documents and congressional correspondence.
- The value of the resulting agreement wasn’t immediately disclosed.
- General Dynamics’ Electric Boat unit makes the Virginia class sub with Huntington Ingalls Industries.
Microsoft rolls out new cloud tool for analyzing business data
- The Azure Synapse system, to be unveiled at an event in Florida, is part of the company’s fast-growing cloud computing unit, which has driven the company’s shares up over the past five years.
- The tool is meant to help companies build out systems that analyze large amounts of data to make better business decisions, such as whether a digital marketing campaign is driving more traffic to stores and websites.
Large Bitcoin Player Manipulated Price Sharply Higher, Study Says
- A single large player manipulated the price of bitcoin as it ran up to a peak of nearly $20,000 two years ago, a new study concludes.
- The study—written by John M. Griffin, a finance professor at the University of Texas with a background in forensics, and Ohio State University finance professor Amin Shams reviewed the period between March 2017 and March 2018, when the price of bitcoin soared and its total market value rose to $326 billion.
- About half of that increase was due to the influence of a manipulation scheme, according to the study’s authors.
- They said the unknown manipulator operated from a single account at Bitfinex, the largest cryptocurrency exchange at the time.
- The manipulator used another cryptocurrency, called tether, to boost demand for bitcoin, leading to the price surge.
- It isn’t clear by how much or if the manipulator profited.
- Tether is similar to bitcoin, but with key differences: Bitcoin trades freely, while tether’s value is pegged to the dollar via an asset reserve. For every tether in circulation, there purportedly is $1 in the reserve. This kind of digital currency is called a stablecoin.
- In April, the company revealed in a court filing that tether was only 74% backed by reserves.
- If new tethers were being created in response to orders, then the price of bitcoin would reflect natural demand.
Citigroup to launch digital savings account for American Airlines cardholders
- The savings account, Citi Miles Ahead savings account, will offer up to 50,000 miles as a sign-on bonus and a 25% boost on miles earned through the card, the bank said in a statement.
- The digital service will only be available in areas where the bank does not have physical branches.
US ECONOMY & POLITICS
China Reviews Xi’s Options to Visit U.S. to Ink Trump Trade Deal
- China is reviewing locations in the U.S. where President Xi Jinping would be willing to meet with Donald Trump to sign the first phase of a trade deal between the world’s two largest economies, people familiar with the plans said.
- Officials in Beijing had hoped that if Xi traveled to the U.S. to sign stage one of the agreement it would be as part of a state visit, but they’re open to having him go even if it isn’t, people familiar with the matter said.
- No final decision has been made, said a Chinese official, who asked not to be named discussing the private negotiations.
U.S. May Not Need to Put Tariffs on European Cars, Ross Says
- In May, the White House agreed to delay new tariffs on imported vehicles and parts for six months as Washington engaged in negotiations with the European Union and Japan.
- While the U.S. struck a deal with Japan last month that averted the tariffs, the EU has yet to reach an agreement with the Trump administration as the deadline nears.
- “Our hope is that the negotiations we’ve been having with individual companies about their capital investment plans will bear enough fruit that it may not be necessary to put the 232 fully into effect, may not even be necessary to put it partly in effect,” Ross told Bloomberg Television on Sunday, referring to the investigation under Section 232 of a 1962 trade law.
U.S. factory orders fall in September; core capital goods revised down
- New orders for U.S.-made goods fell more than expected in September and business spending on equipment was slightly weaker than initially thought, suggesting that manufacturing remains soft amid the ongoing U.S.-China trade war.
- Factory goods orders declined 0.6% after dipping by an unrevised 0.1% in August.
- Shipments of manufactured goods declined 0.2% in September after decreasing 0.3% in the prior month.
- Transportation equipment orders dropped 2.8% in September.
- Orders for civilian aircraft and parts dropped 11.8% after declining 17.2% in the prior month.
- Orders for computers and electronic products fell 1.2% but orders for electrical equipment, appliances and components rose 0.7%.
- Machinery orders edged up 0.2% in September after decreasing 0.3% in August.
- Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, declined 0.7% in September, the same as previously reported. Business investment declined at its steepest pace in more than 3-1/2 years in the third quarter.
- Manufacturing has been hobbled by a 16-month trade war between the United States and China, which has also caused a drop in business investment.
EUROPE & WORLD
Aramco Starts IPO With Prince’s Economic Vision at Stake
- Crown Prince Mohammed bin Salman finally decided to offer shares in the world’s largest oil producer.
- Saudi Arabia is aiming for a valuation of between $1.6 trillion and $1.8 trillion, below the $2 trillion valuation Prince Mohammed has long advocated, according to people familiar with the matter.
- Goldman Sachs told investors Aramco is worth between $1.6 trillion and $2.3 trillion.
- Bank of America, another top bank on the deal, had the bottom of its range at just $1.2 trillion.
- BNP Paribas gave an estimate of $1.42 trillion.
- Most of the banks valuations are based on oil prices staying above $60 a barrel and assume Aramco will be able to raise oil production by 2021.
- The company said it posted a net income of $68 billion during the nine-month period ending on September 30.
- The company’s revenues and other income related to sales for the same period amounted to $244 billion, it said.
- It expects capital expenditure of $35 billion to $40 billion next year, rising to $40 billion to $45 billion in 2021.
- Aramco’s net income last year of $111 billion made it the most profitable of any corporation — more than Apple, Google’s parent Alphabet and Exxon Mobil combined — but the company has pledged to pay a minimum of $75 billion in dividends, leaving it vulnerable to a downturn in oil prices.
- Almost every bank assumes Aramco will need to take debt this year and next year to cover spending and dividend payments.
- To boost investor appetite, Aramco said it will pay an income tax rate of 20% on its domestic downstream business starting next year, compared with current levies of between 50% to 80%.
Microsoft Japan Says Four-Day Work Week Boosted Productivity 40%
- After spending August experimenting with a four-day work week in a country notorious for overwork, Microsoft Japan said sales per employee rose 40% compared with the same month last year.
- The “Work-Life Choice Challenge Summer 2019” saw full-time employees take off five consecutive Fridays in August with pay, as well as shortening meetings to a maximum of 30 minutes and encouraging online chats over face-to-face ones.
- Among workers responding to a survey about the program, 92% said they were pleased with the four-day week, the software maker’s Japan affiliate said in a report on its website on Oct. 31.
Germany to hike electric car subsidies as VW launches car
- Grants for plug-in hybrids will rise from 3,000 to 4,500 euros.
- For vehicles priced over 40,000 euros the grants will rise to 5,000 euros.
- The government wants to have 10 million electric vehicles on the roads by 2030.
TODAY in HISTORY
- Abraham Lincoln married Mary Todd in Springfield, Ill. 1842
- James and John Ritty of Dayton, Ohio, patented the first cash register. 1880
- Howard Carter discovered the tomb of Tutankhamen in Egypt. 1922
- Nellie T. Ross of Wyoming was elected the nation’s first woman governor, to serve out the term of her husband who died in office. 1924
- The American embassy in Tehran, Iran, was seized by militants and 90 Americans were taken hostage. 1979
- Israeli Prime Minister, and Nobel Laureate, Yitzhak Rabin, was assassinated by a right-wing Israeli. 1995
- Democratic senator Barack Obama wins the presidential election against Sen. John McCain, taking 338 electoral votes to McCain’s 161. Obama makes history as the first African American U.S. president. 2008
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