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Nov 14, 2019

Politics: States' massive Google antitrust probe will expand into search and Android businesses

Lauren Hirsch, Lauren Feiner




GP: Sundar Pichai, Google 190507
Google CEO Sundar Pichai speaks during the Google I/O keynote session at Shoreline Amphitheatre in Mountain View, California on May 7, 2019.
Josh Edelson | AFP | Getty Images
WASHINGTON – The 50 attorneys general investigating Google are preparing to expand their antitrust probe beyond the company’s advertising business to dive more deeply into its search and Android businesses, people familiar with the matter tell CNBC.
The development comes as politicians on both sides of the aisle, including President Donald Trump, increasingly tee off on Silicon Valley. Meanwhile, Democratic presidential candidate Sen. Elizabeth Warren has called for Big Tech firms to be broken up.
The attorneys general – which represent 48 states, Puerto Rico and Washington, D.C. – will write up subpoenas known as civil investigative demands, or CIDs, to support the inquiries, the people said. One of the people cautioned that the subpoenas may not be served imminently.
So far, the investigation has explicitly focused on Google’s advertising business.
Texas Attorney General Ken Paxton, who is leading the probe conducted by 48 states, the District of Columbia and Puerto Rico, announced the investigation during a September press conference that emphasized Google’s dominance in the ad market and use of consumer data.
The state has already served Google with CIDs for more information relating to Google’s advertising business.
But at a recent meeting of several attorney generals participating in the probe, Paxton expressed his support for expanding the probe’s purview into Google’s search and Android businesses. Other states will carry out the investigations of search and Android separately, the people said. It wasn’t clear which states would look at those businesses, however.
A spokesman for the Texas attorney general, asked about the scope of the probe, referred CNBC to a comment that had been issued in early October: “At this point, the multistate investigation is focused solely on online advertising; however, as always, the facts we discover as the investigation progresses will determine where the investigation ultimately leads.”
Google declined to comment. Ahead of Paxton’s announcement of the probe in September, Google’s senior vice president of Global Affairs wrote a blog post that said the company will cooperate with government investigations.
The development in the states’ investigation highlights how broadly the states and their attorneys general intend to scrutinize the tech conglomerate, said the people familiar with the matter.
States can be more aggressive in antitrust investigations than federal regulators, because they are less constrained by the lobbying and political forces that consume Washington, D.C. States are also typically more strained for resources than the federal government, though the states have committed to sharing resources in the Google investigation.
Google’s parent, Alphabet, has a market capitalization of nearly $900 billion, making it one of the most valuable companies in the world. Because much of its offerings are free to the user, it can be difficult to prove antitrust violations, which are historically proven by a clear impact on pricing. The Justice Department’s antitrust chief, Makan Delrahim, has indicated in public speeches that quality, innovation and other factors could be considered.
The DOJ, which is conducting its own antitrust probes of Big Tech, has served its own CIDs relating to “prior antitrust investigations in the United States and elsewhere,” Google said in a securities filing this summer.
Prior federal investigations into Google have ended with a whimper. The FTC in 2013 completed a nearly two-year investigation into Google, culminating in an agreement where Google said it would remove restrictions on its ad platform to make it easier for advertisers to manage campaigns across rival platforms. In 2010, Google closed an investigation of its deal to acquire mobile advertising network company AdMob, concluding the deal was unlikely to harm competition in mobile advertising.
But more recently, politicians on both sides of the aisle have cast a new spotlight on Big Tech. Warren, who is one of the leading Democratic candidates for president, has vowed to break up the giants of Silicon Valley. Trump, a Republican, in August tweeted without evidence that Google “manipulated” votes in the 2016 election.
Search is the heart of Google’s business, through which Google collects both advertising revenue and data. It also, argues critics, uses the function to promote its own products and services. The internet giant has rolled out a number of features over the past few years, like reviews, maps and travel bookings that benefit from internet traffic. The EU slapped Google with $2.7 billion fine in 2017 for giving favored treatment to its “Google Shopping” service. Google is appealing the decision.
That fine, though, hasn’t slowed Google’s expansion into new offerings. The company is pushing further into health care with its proposed acquisition of Fitbit, and earlier this week announced it will begin to offer checking accounts next year.
Google’s Android mobile operating system, meanwhile, is its foothold in the mobile market. Google requires phone and tablet makers that use Android to also pre-install Google’s app store and other apps like Gmail, Google Maps and the Chrome web browser, putting competing services at a disadvantage. Roughly 80% of smart mobile devices run on Android, according to the European Commission.
After a record $5 billion fine from EU regulators over Android antitrust abuse, Google said it will let EU users select their default search engine when setting up their Android device and stop bundling its apps on Android phones.
With that track record, the attorneys general investigating Google likely already have a broad vision of the case they wish to pursue against Google. They will use its CID requests to seek materials like emails and strategy documents to support that view, while looking for evidence of clear anti-competitive behavior. The requests can be a means of filling in holes in evidence, or a tactic to build up pressure on a company in hopes of forcing a settlement.
Sometimes, investigations and requests can dig up incriminating material. The prior FTC investigation into Google’s search practices found evidence it skewed results to favor its own products, according to documents previously inadvertently given to The Wall Street Journal in 2015.
Google is already pushing back against the first CID request from Texas. The company filed an order against Texas requesting protections from disclosing certain confidential information requested. Google said it worries that outside consultants brought on to help with the investigation had ties to Microsoft and may use the confidential information to aid its rivals.
Lauren Feiner reported from CNBC’s headquarters in Englewood Cliffs, N.J.

Deals: Serbia Buys Nine Tons of Gold to Heed President’s Crisis Advice

Gordana Filipovic



     
Photographer: Carla Gottgens/Bloomberg
Serbia’s central bank bought nine tons of gold in October, raising its reserves of the precious metal on the advice of President Aleksandar Vucic.
The biggest former Yugoslav republic is following Hungary and Poland, where officials boosted gold reserves in 2018 to create a bulwark against crisis. Central Bank Governor Jorgovanka Tabakovic, a member of Vucic’s Progressive Party, said the October 9-11 purchases raised the bank’s gold holdings to 10% of total reserves and made good on a suggestion from the president in May.
“We have completed gold purchase transactions and Serbia is safer today with 30.4 tons of gold worth around 1.3 billion euros ($1.4 billion),” Tabakovic told reporters in Belgrade Thursday. “For now, we have no plans to buy more.”
Serbian President Aleksandar Vucic Pins Future On EU Membership
Aleksandar Vucic
Photographer: Oliver Bunic/Bloomberg
The acquisition is the latest in a series of moves by Serbia to shore up its financial stability by changing the structure of its foreign debt and increasing the share of dinars and euros, Tabakovic said. The central bank paid 395 million euros ($434.3 million) for the gold, $1,503 an ounce, the governor said.
Tabakovic spoke after the bank upgraded its 2019 economic growth forecast to 3.6% from 3.5%, citing higher domestic demand that’s counterbalancing a slowdown in most of the European Union.

Inflation Target

With some economists speculating that the central bank may alter the parameters of how it charts and controls the money supply, she said it won’t change its inflation target, which remains at 3% plus/minus 1.5 percentage point, through December 2021.
The central bank has both cut interest rates three times this year, but it has also relied on market interventions to smooth developments in the dinar’s exchange rate against the euro.
“There’s no question of a choice between inflation falling within target and exchange rate stability, which is the basis of stability of investments and the predictability of business environment,” Tabakovic said.
The inflation target does matter and the central bank expects the measure to return to the tolerance band by April or May next year, she said.
The consumer price index has fallen below the tolerance band five times in the last three years, with the latest bout of price weakness entirely resulting from cheaper fresh vegetables, according to the central bank’s head of economic research, Savo Jakovljevic.

Bonds | Treasury Yields Report: Treasury yields fall amid uncertainty over US-China trade deal

Yun Li, Silvia Amaro



Treasurys

TICKER COMPANY YIELD CHANGE %CHANGE
US 3-MOU.S. 3 Month Treasury1.5740.0020.00
US 1-YRU.S. 1 Year Treasury1.555-0.0110.00
US 2-YRU.S. 2 Year Treasury1.591-0.0370.00
US 5-YRU.S. 5 Year Treasury1.625-0.0510.00
US 10-YRU.S. 10 Year Treasury1.817-0.0520.00
US 30-YRU.S. 30 Year Treasury2.299-0.050.00
Market players are largely focused on U.S.-China trade talks, after reports suggested that there is an impasse over issues such as agricultural products and intellectual property. President Trump had announced last month that the U.S. had reached an agreement in principle with China and that they were close to signing a phase one trade deal.
Chinese Ministry of Commerce spokesman Gao Feng said overnight that China and the U.S. are holding “in-depth” discussions about a phase one deal, but added the rolling back of some tariffs is key to striking a deal.
China and the U.S. have imposed tariffs on billions of dollars’ worth of one another’s goods since the start of 2018, battering financial markets and souring business and consumer sentiment.
On the data front, weekly jobless claims reached 225,000 last week, the highest number since June. Meanwhile, U.S. producer prices had their biggest gain in six months in October.
“Underlying the drift lower in rates has been the recognition that not much has actually changed on the global macro front in the past week and a half,” said Ian Lyngen, head of U.S. rates at BMO Capital Markets. “The Fed’s not cutting in December, global growth is slowing (though perhaps not as sharply as feared), and a trade deal between the US and China is still in the works, and will be for some time.”
Federal Reserve Chairman Jerome Powell said in his testimony on Wednesday interest rates are unlikely to change as long as the economy keeps growing.
New York Fed President John Williams said in a speech Thursday that interest rates and the economy are in “a good place.”
The Treasury is due to auction $55 billion in 4-week bills and $40 billion in 8-week bills.

Energy | Oil | Oil Price Report: Oil falls on US crude stocks build, OPEC shale growth comments

3minutos - Source: CNBC




GP: Transocean, rigs oil 191114
The Sedco 714 oil platform, operated by Transocean, stands in the Port of Cromarty Firth in Cromarty, United Kingdom, on February 16, 2016.
Matthew Lloyd | Bloomberg | Getty Images
Oil reversed early gains to move lower on Thursday as a build in U.S. crude inventories weighed on prices, while comments from the Organization of the Petroleum Exporting Countries about lower-than-expected U.S. shale production in 2020 limited declines.
Prices were also capped by mixed signs for oil demand in China, the world’s biggest crude importer. Industrial output rose more slowly than expected in October, but oil refinery throughput hit the second-highest level on record.
Brent futures hovered around breakeven at $62.36 per barrel, while West Texas Intermediate crude futures lost 17 cents to trade at $56.95.
U.S. crude stockpiles grew last week by 2.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.649 million-barrel rise, the Energy Information Administration said.
The report was delayed a day for the U.S. Veterans Day holiday on Monday.
“U.S. production is still very robust. We might be over-producing a bit and leaving it sitting in the storage tanks,” said Ryan Kaup, a commodities broker at CHS Hedging. “The market is reacting a little bit negatively to the build as it’s not what it expected.”
OPEC Secretary General Mohammad Barkindo said on Wednesday that there would likely be downward revisions of supply going into 2020, especially from U.S. shale.
Barkindo said it was too early to say whether further output cuts would be needed.
OPEC on Thursday pointed to a smaller surplus in the oil market next year although it still expects demand for its crude to drop as rivals pump more.
The drop in demand could press the case for the exporter group and partners like Russia to maintain supply curbs at a meeting on Dec. 5-6.
“The countdown to the meeting of the OPEC countries has started, and the question of whether the group and its allies will further cut supplies is top of mind,” said Norbert Rucker, head of economics at Swiss bank Julius Baer.
“Current market conditions are testing the petro-nations patience and cohesion ... Any major change in policy would come as a surprise.”

Commodities | Gold | Gold Price Report: Gold rises on waning trade optimism, dip in equities

3minutos - Source: CNBC




GP: Gold and Silver Casting at the Perth Mint 190918
Gold bars sit in a vault at the Perth Mint Refinery in Perth, Australia, on August 9, 2018.
Carla Gottgens | Bloomberg | Getty Images
Gold rose on Thursday, moving further away from a three-month low hit earlier this week, helped by uncertainty in U.S.-China trade ties that dented demand for riskier assets.
Spot gold rose 0.5% to $1,470.68 per ounce, having climbed to a high of $1,471.45. U.S. gold futures also rose 0.6% to $1,471.50 per ounce.
“Gold is primarily reacting to technical trends and over the last week we have seen the price come down below the support level of $1,470 ... and now we’re trying to break above that,” said Jeffrey Christian, managing partner of CPM Group.
Gold prices fell to a more than 3-month low of $1,445.18 an ounce on Tuesday. However, prices have risen since then as stock markets dipped, improving demand for bullion. World stocks nudged down on Thursday as Chinese economic data slowed in October and Germany only narrowly avoided a recession in the third quarter, adding to worries about the global growth fallout from the U.S.-China trade war.
“Gold should be in greater demand at least in the short term because the negotiations of a partial agreement in the trade dispute between the U.S and China appear to have stalled,” Commerzbank analyst Daniel Briesemann said in a note.
A Reuters poll of economists showed the U.S.-China trade war was unlikely to reach a permanent truce over the coming year, and while concerns have eased over a U.S. recession, an economic rebound is also not expected any time soon.
Earlier in the week, U.S. President Donald Trump said a trade deal with China was “close” but offered no details and warned he would raise tariffs “substantially” on Chinese goods without such an accord.
Also supporting safe-haven gold were worries about spiralling violence in Hong Kong as anti-government protesters paralysed parts of the city for a fourth day.
“The bulls now need to reclaim a few former support levels such as $1,480, $1,495 and ideally $1,515 before the technical outlook improves markedly. But first thing is first: they need to hold today’s breakout above short-term resistance at $1,467ish,” said Fawad Razaqzada, market analyst with Forex.com.
Meanwhile, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust , eased slightly to 896.77 tonnes on Wednesday.
Among other precious metals, palladium gained 1.4% to $1,733.28 per ounce. Silver rose 0.5% to $17.03 per ounce, while platinum was up 0.4% at $877.42 per ounce.

Oil 2020: Opec sees smaller 2020 oil surplus ahead of policy meeting

3minutos - Source: CNBC




OPEC logo is seen at the Organisation of Petroleum Exporting...
VIENNA, AUSTRIA - 2018/06/20: OPEC logo is seen at the Organisation of Petroleum Exporting Countries (OPEC) building in Vienna. The 174th OPEC meeting will be held on the 22th June 2018 in Vienna. (Photo by Omar Marques/SOPA Images/LightRocket via Getty Images)
SOPA Images | LightRocket | Getty Images
OPEC on Thursday pointed to a smaller surplus in the oil market next year although it still expects demand for its crude to drop as rivals pump more, building a case to maintain supply curbs at a meeting next month.
In a monthly report, the producer group said demand for its crude will average 29.58 million barrels per day (bpd) next year, 1.12 million bpd less than in 2019. That points to a surplus of about 70,000 bpd next year, less than in previous reports.
The drop in demand could press the case for the Organization of the Petroleum Exporting Countries and its allies to maintain supply curbs at a meeting on Dec. 5-6. Still, the report kept its 2020 economic and oil demand growth forecasts steady and was more upbeat about the outlook.
“On a positive note, signs of improving trade relations between the U.S. and China, a potential agreement on Brexit after the UK’s general election, fiscal stimulus in Japan, and a stabilization of the downward slope in major emerging economies could stabilize growth at the current forecast level,” OPEC said in the report.
The report echoes comments from OPEC Secretary-General Mohammad Barkindo, who has been saying the outlook in 2020 could surprise to the upside, citing prospects for a resolution of the trade dispute and lower non-OPEC supply.
OPEC, Russia and other producers have since Jan. 1 implemented a deal to cut output by 1.2 million bpd. The alliance, known as OPEC+, in July renewed the pact until March 2020 and ministers meet to review policy on Dec. 5-6.
While the demand for OPEC crude will drop next year, OPEC trimmed its forecast for growth in 2020 non-OPEC supply to 2.17 million bpd, down 40,000 bpd from previous forecast.
OPEC said its oil output in October jumped by 943,000 bpd to 29.65 million bpd, according to figures the group collects from secondary sources as Saudi supply recovered from attacks on oil plants that cut supply.
The report suggests there will be a 2020 surplus of 70,000 bpd if OPEC keeps pumping at October’s rate and other factors remain equal, less than the 340,000 bpd surplus implied in September’s report before the Saudi attacks