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Aug 1, 2019

Bonds | Treasury Yields on Thursday 1, August 2019 | 10-year Treasury yield dives to lowest level since 2016 after Trump announces new China tariffs

Thomas Franck



The yield on the benchmark 10-year Treasury note fell to its lowest level since 2016 on Thursday after President Donald Trump announced new tariffs on Chinese goods.
The president said on Twitter that 10% duties will be imposed on $300 billion worth of Chinese goods, effective Sept. 1. Trump’s tweets came after a U.S. delegation met with Chinese trade officials earlier this week.
At around 2:30 p.m. ET, the yield on the benchmark 10-year Treasury note had fallen approximately 15 basis points to 1.878%, its lowest level since November 2016. The yield on the 30-year Treasury bond, which clinched its lowest level since October 2016 on Thursday, last traded at 2.428%. It hit a low of 2.422% earlier in the session.
“The tweet is bringing back the ‘trade war’ risk that markets have dealt with at various times over the past year. My guess is it is a negotiating tactic, but markets are concerned as the stakes are high and there is a chance it backfires,“said Arthur Bass, managing director of fixed income financing, futures, and rates at Wedbush Securities.
“Fed fund futures are now fully pricing two additional 25bp moves this year, although that could easily reverse if the risk-off move abates,” Bass added. “With today’s move, fixed income investors will no doubt be positioned a bit long going into tomorrow’s employment release,” when the government will announce July’s jobs data.
Yields were also under pressure Thursday after the Federal Reserve in the prior session cut interest rates for the first time since 2008.
In approving the cut, the FOMC pointed to “implications of global developments for the economic outlook as well as muted inflation pressures.” It also characterized economic growth as “moderate” and the labor market “strong,” but eased policy regardless.
The 2-year Treasury note yield, more representative of changes to Fed policy, fell 16 basis points to 1.72%, off an earlier low of 1.694%, its lowest since November 2017.
The policymaking committee made explicit reference to inflation, a threat to bonds as rising prices chip away at the real value of their fixed payments.
“Overall inflation and inflation for items other than food and energy are running below 2 percent,” the FOMC added. “Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.”
Fed Chairman Jerome Powell also confused investors with comments that the central bank’s decision in July did not guarantee additional cuts before the end of 2019.
“We’re thinking of it essentially as a midcycle adjustment to policy,” Powell said following the release of the Fed’s decision. “What I said was it’s not the beginning of a long series of rate cuts. I didn’t say it’s just one or anything like that.”
“When you think about rate-cutting cycles, they go on for a long time and the committee’s not seeing that,” he added.
Powell’s “press conference was not as smooth as I know they can be,” said Gary Pollack, head of fixed-income trading at Deutsche Bank Private Wealth Management. “He clarified that this wasn’t the beginning of a long easing cycle and that threw some reality into the market.”
Going forward, “I think they’re also going to be cognizant of global trade tensions, which was sort of the ignition of market’s expectations of rate cuts,” Pollack added. ”[Trade policy’s] certainly out of their hands, but the think the Fed allowed the market to push them into these easing expectations.”
The federal funds rate target range is now 2%–2.25%.
The number of Americans filing applications for unemployment benefits increased last week, but the trend in claims remained consistent with tightening labor market conditions.
Claims for state unemployment benefits rose 8,000 to a seasonally adjusted 215,000 during the week ended July 27, the Labor Department said on Thursday.
— CNBC’s Jeff Cox contributed reporting.

U.S. Markets Overview: Treasurys chart

TICKER COMPANY YIELD CHANGE %CHANGE
US 3-MOU.S. 3 Month Treasury2.0850.000.00
US 1-YRU.S. 1 Year Treasury1.907-0.0990.00
US 2-YRU.S. 2 Year Treasury1.754-0.1340.00
US 5-YRU.S. 5 Year Treasury1.698-0.1470.00
US 10-YRU.S. 10 Year Treasury1.906-0.1150.00
US 30-YRU.S. 30 Year Treasury2.458-0.0680.00
Source: CNBC

Fx on Thursday 1, August 2019 | Dollar falls after Trump imposes more tariffs on China

2 minutes




Reusable currencies 140128
Frank van den Bergh | E+ | Getty Images
The dollar fell on Thursday after President Donald Trump said the U.S. would put additional tariffs on China.
The president said additional tariffs of 10% on the remaining $300 billion in Chinese goods would be added in September.
The dollar index fell 0.18% to 98.34.

Earlier, the dollar was stronger after the Federal Reserve sounded cautious on more rate cuts sent the euro to a 26-month low on Thursday, as investors decided a lengthy U.S. easing cycle was unlikely.
In a widely expected move, the U.S. central bank cut rates on Wednesday for the first time since the financial crisis, in response to the growing risk of higher import tariffs and a slowdown in the world’s major economies. But it also signalled that the quarter point cut may not be the start of a lengthy campaign to shore up the economy.
“It’s not the beginning of a long series of rate cuts,” Fed Chairman Jerome Powell said after the Fed’s decision, although he added, “I didn’t say it’s just one rate cut.”
The Fed’s less dovish than expected message triggered a rebound in the dollar, sending the dollar index to a 26-month high of 98.93 on Thursday.

Source: CNBC

Energy | Oil Price Closing Report on Thursday 1 August 2019 | Oil plunges the most in 4 years after Trump's new China tariffs raise fears of a global slowdown

Maggie Fitzgerald



Crude oil plunged on concerns the global economy would weaken further after President Donald Trump ended a tariff ceasefire with China. The president said additional tariffs of 10% on the remaining $300 billion in Chinese goods would be added in September.
Futures for WTI crude dropped 7.9% to $53.95. WTI broke a 5-day winning streak with its worst daily performance in more than 4 years.
“The oil market has been the highest hit asset around from the trade war and this only exacerbates the situation,” said John Kilduff Founding Partner of Again Capital.
“It was a rough day for oil even before the tweet came out,” said Kilduff. “The oil markets didn’t get help from the stance the Federal Reserve took yesterday and then got hurt by the president’s announcement.”

Brent crude, the international benchmark, also fell more than 6% to $60.67 following Trump’s tweets. Brent had its worst day since February 2016.
“Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country...We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!” Trump said in a tweet on Thursday.
Although the trade war with China has been going on for over a year, in May, President Trump hiked tariffs to 25% from 10% on $250 billion in Chinese goods. China immediately retaliated with tariffs on U.S. goods.
Trade talks resumed this week in Shanghai and although the White House called the talks “constructive” Trump said “sadly, China decided to re-negotiate the deal prior to signing” which caused him to impose new tariffs.
Earlier on Thursday, oil was down because the Federal Reserve dampened hopes for a string of interest rate cuts. The Fed lowered interest rates 25 basis points on Wednesday but did not signal it was entering a deep easing cycle.

Source: CNBC

Dow | Wall Street Closing Report | Dow drops 280 points, giving up big earlier gain after Trump says US adding more tariffs on China


Fred Imbert




Stocks slashed gains on Thursday after President Donald Trump said the U.S. would impose an additional 10% tariff on Chinese imports to the U.S.
The Dow Jones Industrial Average traded 300 points lower after rallying as much as 311 points earlier in the day. The S&P 500 was down 1.1%. The Nasdaq Composite traded down 1.1% after jumping more than 1.6%.
“Trade has always been an issue hanging over the market and whether or not we see an escalation, said Quincy Krosby, chief market strategist at Prudential Financial. “The fact is we’ll surely get a reaction from Beijing.”
“There were concerns that after the [Federal Reserve] meeting and as earnings season began to wind down, the market would be more susceptible to volatility,” Krosby said.
Trump said in a series of tweets the tariff will be imposed on $300 billion worth of Chinese goods. The levy will take effect Sept. 1.
Trump’s tweets came after a U.S. delegation met with Chinese trade officials earlier this week. Those were the first in-person trade talks between China and the U.S. since both countries reached a truce on the situation.

Shares of Caterpillar and Deere, two bellwethers of global trade, dropped to trade more than 2% lower.  Boeing traded 0.9% lower. FedEx shares also fell 4%.
Apple, which has managed to avoid large hits from U.S.-China trade tariffs, fell 2.7%. The tech giant told U.S. Trade Representative Robert Lighthizer on June 17 that tariffs on the remaining $300 billion in Chinese imports would cover “all of Apple’s major products.”
Retail stocks like Nike dropped 3.1%. Yeti Holdings dropped 10.8% while PVH slid 7.5%. The SPDR S&P Retail ETF (XRT) plummeted by 3.3%.
Treasury yields fell sharply on the news. The benchmark 10-year yield slid to 1.89%, hitting its lowest level since November 2016. The 2-year rate dell to trade at 1.726%.
Gold prices spiked as investors looked for safety, trading 0.3% higher and erasing earlier losses. The Cboe Volatility Index (VIX), considered the best fear gauge in the market, traded 15.3% higher at 18.66 and hit its highest level since early June.
“People are trading very nervously,” said Ilya Feygin, senior strategist at WallachBeth Capital. “They are overreacting to every little piece of news.”
“Things are going to keep swinging back and forth instead of this slow upward grind we’ve seen recently. There’s going to be a lot of headlines,” Feygin said.
Stocks had rallied earlier in the day, as investors were betting the Federal Reserve would cut interest rates again in September. 
Traders work on the floor at the New York Stock Exchange.
Brendan McDermid | Reuters
The Fed cut interest rates by 25 basis points on Wednesday — its first cut in more than a decade — citing “global developments” along with “muted inflation” as reasons for easing monetary conditions.
But Chairman Jerome Powell told reporters in a news conference following the Federal Open Market Committee’s rate decision that the central bank’s rate cut was a “midcycle adjustment,” hinting that further rate cuts later this year were not a sure thing.
That comment led to a 333-point drop on the Dow, its biggest one-day drop since May 31. The S&P 500 and Nasdaq dropped 1.1% and 1.2%, respectively, to end July.
“Yesterday was the perfect example of expectations being misaligned with reality,” said Art Hogan, chief market strategist at National Securities. “The Fed did exactly what it should have done. An insurance cut is exactly that.”
“The Fed delivered a message saying the market may have been ahead of itself pricing in so many rate cuts,” he said.
Thursday marked the first trading day of August, a month that has not been kind to Wall Street. Since 1950, August has been the second-worst month for the S&P 500, according to the Stock Traders’ Almanac. Over that time, the S&P 500 has averaged a loss of 0.1% in August.
—CNBC’s Sam Meredith contributed to this report.

Source: CNBC

Gold | Gold Price Closing Report on Thursday 1, August 2019 | Gold surges after Trump says US will impose new tariffs on Chinese imports

3 minutes




Reusable: gold liquid mold
Gold rose nearly 2% on Thursday after U.S. President Donald Trump said he would impose additional tariffs on Chinese imports, renewing trade tensions between the two countries, dragging the dollar down from two-year highs and sending bond yields lower.
Separately, palladium prices slumped more than 6% on technical selling.
Trump said on Thursday he would impose an additional 10% tariff on $300 billion worth of Chinese imports starting Sept. 1, as talks aimed at easting tensions between the world’s two largest economies continue.
Spot gold rose 1.9% to $1,440.02 per ounce, while U.S. gold futures rose nearly 1% to $1,450.90.
“Trump just came out and said he is announcing a 10% tariff on China that sunk the dollar index and brought some safe-haven demand for gold,” said Jim Wyckoff, senior analyst with Kitco Metals.
Earlier this session, bullion fell to its lowest since July 17 at $1,400.31 as the dollar surged after the U.S. Federal Reserve doused expectations of further monetary policy easing.
Gold held above the key $1,400 level and bargain hunters stepped in to buy the dips, Wyckoff added.
Though the U.S. central bank slashed its benchmark interest rate on Wednesday for the first time in a decade, gold prices fell as much as 1.2% after Fed Chair Jerome Powell signaled further sharp cuts were not imminent.
The U.S. dollar fell 0.2%, while the U.S treasury yields across maturities dropped after Trump’s tariff tweets, hitting session lows. The dollar index had earlier risen to its highest against other major currencies since May 2017.
“Some people positioned for a more robust expression of dovishness from Fed and they didn’t get it. Gold responded to the fact that there is a lot of ambiguity now on how the Fed will tackle the monetary policy going forward,” said Bart Melek, head of commodity strategies at TD Securities in Toronto.
Lower interest rates and resurgent investor and central bank buying are expected to help gold prices cement recent gains and hold above $1,400 an ounce next year, a Reuters poll showed on Thursday.
Market participants are now awaiting the release of U.S. non-farm payrolls data on Friday.
In other precious metals, spot palladium fell to a seven-week low of $1,410 per ounce earlier this session. The metal was last down 6.3% at $1,420.53.
An analyst in New York cited investors liquidating positions in the metal after prices breached a key technical level of $1,490, adding, weak auto sales in China further pressured the market.
Platinum was down 1% at $851.09 an ounce, while Silver was down 0.1% at $16.24 per ounce.

Source: CNBC

Europe | Europe Markets Closing Report on Thursday 1, August 2019 | European stocks close higher on strong earnings; Bank of England holds rates

Elliot Smith



European stocks traded higher Thursday after strong earnings reversed early losses resulting from a more hawkish tone from the U.S. Federal Reserve.

European Markets: FTSE, GDAXI, FCHI, IBEX

TICKER COMPANY NAME PRICE CHANGE %CHANGE VOLUME
FTSEFTSE 100FTSE7577.51-9.27-0.12590145856
DAXDAXDAX12230.3441.300.3468349936
CACCACCAC5545.4226.520.4856938865
The pan-European Stoxx 600 closed provisionally 0.41% higher, led by a 2.2% gain for financial services stocks. Basic resources plummeted 3.2% on the back of a steep loss for Tenaris after the Luxembourg-based steel company missed second-quarter earnings expectations.
In the U.K., the Bank of England’s Monetary Policy Committee voted unanimously to hold interest rates steady at 0.75% and cut its growth forecast in the face of increased Brexit worries and a slowing global economy.
The BOE gave no indication that it was considering lowering interest rates. Its forecasts assume Britain avoids a sudden Brexit shock, but the central bank lowered its growth forecast to 1.3% for 2019 and 2020, down from 1.5% and 1.6% respectively.
The pound slipped a further 0.5% against the dollar, continuing its steep decline to hover just above the $1.21 mark, having dropped below it earlier in the session. The currency held steady following the BOE announcement.
The FTSE 100 was the only major European index to lose value, slipping 0.07%.
Markets earlier reacted to the Fed’s first cut to its main interest rate since 2008 on Wednesday, after Chairman Jerome Powell cited signs of a global slowdown, simmering U.S. trade tensions and persistent low inflation in the central bank’s decision to lower borrowing costs by 25 basis points.
However, Powell suggested the cut was a “mid-cycle adjustment to policy” rather than the start of an aggressive monetary easing cycle.
On the data front, U.K. PMI (Purchasing Managers’ Index) data showed British manufacturers’ output in July fell by the most in seven years as Brexit worries and weaker global demand weighed on factories.

Earnings in focº us

Societe Generale on Thursday reported a second-quarter net income of 1.05 billion euros ($1.16 billion), surpassing analyst expectations according to Reuters’ estimates. The French bank posted a net income of 1.2 billion euros for the same quarter last year. Societe Generale stock gained 5.7% by afternoon trade.
British bank Barclays beat analyst expectations by reporting a second-quarter net profit of £1.03 billion ($1.25 billion), compared to £1.2 billion in the same period a year earlier. Barclays stock traded 1.3% higher.
ING Groep, the Netherlands’ largest bank, cautioned on Thursday that rock-bottom interest rates will pressure future earnings as it announced a higher-than-expected profit of 1.4 billion euros in the second quarter of the year. The bank’s shares slipped 2.3% during trade.
Royal Dutch Shell’s second quarter profits slumped to a 30-month low due to lower oil and natural gas prices and refining margins, falling far short of forecasts and leading the company’s shares 4.9% lower.
British medical device company Convatec saw its shares soar 17.9% after reporting its first-half results, while British public and private services provider Capita jumped 17.3% to the top of the Stoxx 600 after the company’s results showed it is on track to meet its 2020 turnaround target.
Shares of Zalando jumped 13.3% after the German online retailer raised its profit guidance.
At the other end of the European blue chip index, chipmaker AMS saw its share price shed 6.1% after hitting its highest since September on Wednesday.

Source: CNBC

News | Stealth Indicator Signals Bad News As Fed Cuts Rates

By Mark Kolakowski



Leading U.S. machinery manufacturers have missed analysts' estimates for revenues and earnings due to the strong dollar, weakening global economies and trade disputes, a troubling sign for the broader U.S. economy, Barron's reports. These companies include Eaton Corp. PLC (ETN), a conglomerate officially domiciled in Ireland which makes truck parts and electrical products, AGCO Corp. (AGCO), a tractor company, Cummins (CMI), a leading maker of engines, Terex Corp. (TEX), a crane manufacturer, and Caterpillar Inc. (CAT), a leading maker of heavy construction equipment.
As a group, these 5 companies missed 2Q 2019 consensus estimates by 1.3% for sales and by 4.1% for earnings, per Barron's. Adding to the gloom, Cummins, Terex, and Caterpillar also reduced their corporate guidance for the rest of 2019. AGCO raised its guidance, while Eaton held its steady, Barron's adds.

Significance for Investors

The strong U.S. dollar has hurt all five companies, by raising the price of exports in local currencies and by translating overseas earnings into fewer dollars. For example, the strong dollar reduced 2Q revenue for AGCO by 5.7%, Barron's indicates.
All else equal, lower interest rates in the U.S. should weaken the dollar. The announcement by the Federal Reserve on July 31 that it would cut the federal funds rate by 25 basis points (bp) thus should be a modest positive for these stocks going forward.
However, global growth in manufacturing has been decelerating since Dec. 2017, Barron's notes, creating a more serious headwind for these stocks. Eaton's 2Q sales of hydraulic equipment or lifting and towing heavy objects have slowed. Terex faces lower demand for the aerial work platforms used for building and maintaining tall structures. Cummins and Caterpillar have been hit by weak demand from the oil and gas industry. AGCO saw net sales drop by 4.5% year-over-year, per its earnings release.
For Caterpillar, 2Q revenues were up by 3% and EPS by 1 cent on a year-over-year (YOY) basis, per The Wall Street Journal. However, they missed the consensus estimates by 2.8% and 9.3%, respectively. Sales in Asia were down by 8% due to competitive pricing pressures and a Chinese holiday, but sales in the U.S. and Canada were up by 11%, as strong demand from mining companies and from state and local governments for infrastructure projects more than offset weak demand from energy exploration companies in the Permian Basin and from home builders.
U.S. tariffs on imported steel and aluminum cost Caterpillar $70 million in both 1Q and 2Q 2019, and the company projects a full year cost between $250 million and $300 million, versus $110 million in 2018, per the Journal. However, Caterpillar has raised prices, which added $427 million to operating profit in the quarter. Nonetheless, Caterpillar now expects EPS for full year 2019 to be near the low end of its previously-indicated range of $12.06 to $13.06, the Journal notes.

Looking Ahead

Mike Wilson, chief U.S. equity strategist and chief investment officer (CIO) at Morgan Stanley, warns that future consensus earnings estimates are too high by about 5% to 10% and expects a 10% market correction in the next three months, with the S&P 500 eventually ending 2019 at 2,750, or 7.7% below the close on July 31, per Barron's.
Wilson finds that negative corporate guidance about future earnings is at a three-year high, Business Insider reports. He also observes that cautious investors have made defensive stocks market leaders, and sees weak market breadth as indicative of deteriorating prospects for most stocks.

Source: Investopedia

Politics | Joe Biden stands his ground and resists rivals' attacks in testy second debate

Sabrina Siddiqui



Joe Biden was the central target as 10 Democratic presidential candidates took the stage for the second debate in Detroit on Wednesday, with rivals attempting to knock the former vice-president from his frontrunner status.
Unlike last month’s debate in Miami, however, where Biden visibly struggled to defend his decades-old record, this time Biden was ready for the fight.
Biden, 76, was flanked by a crop of younger and more diverse candidates intent on casting him as a relic in their fight to be the party’s nominee to take on Donald Trump in the 2020 election.
They included California senator Kamala Harris, who in the last debate skilfully attacked Biden’s past positions on ordered busing and segregation; New Jersey senator Cory Booker, with whom Biden has sparred over criminal justice; and other contenders who have so far failed to make a splash in the race, such as New York senator Kirsten Gillibrand, Colorado senator Michael Bennet, former San Antonio mayor Julian Castro, and Hawaii representative Tulsi Gabbard.
The debate opened with what appeared to be a redux of last month’s searing confrontation between Biden and Harris, this time over healthcare. As Harris sought to defend a Medicare-for-All plan she unveiled this week, which would maintain a role for private insurance and be implemented over 10 years, Biden sensed an opportunity.
“Anytime someone tells you you’re going to get something good in 10 years, you should wonder why it’s going to take 10 years,” he said.
“To be very blunt, and to be very straightforward, you can’t beat President Trump with double-talk on this plan.
“You’re just simply inaccurate in what you’re describing,” Harris shot back.
Countering that Biden’s own healthcare plan would leave out roughly 10 million Americans, Harris added: “In 2019 in America, for a Democrat to be running for president with a plan that does not cover everyone, I think is without excuse.”
But Harris, whose breakout moment in last month’s debate prompted a brief surge in the polls, was forced to weather other criticisms of her healthcare proposal.
What followed was an unruly and often deeply personal debate over issues that included immigration, climate change and race relations.
At nearly every turn, Biden and his past were brought squarely into focus.
On immigration, it was Castro’s turn to land a punch when the topic turned whether or not illegal border crossings should be decriminalized. The issue, which has been elevated amid Trump’s policy of separating parents and children at the US-Mexico border, has divided Democrats.
“Open borders is a right-wing talking point,” Castro, who served as Barack Obama’s housing secretary, said. “And, frankly, I’m disappointed that some folks, including some folks on this stage, have taken [the] bait.”
Biden dismissed the critique, pointing out he had never heard Castro level such criticisms of immigration policy while serving in the Obama administration.
“It looks like one of us has learned the lessons of the past, and one of us hasn’t,” Castro retorted.
The tenor was not unlike Tuesday’s debate, which exposed the sharp dividing lines between the progressive and moderate wings of the party.
But whereas the previous night saw progressive stars Bernie Sanders and Elizabeth Warren defending the Democratic Party’s leftward turn, Wednesday was dominated by a clash of personalities and tactics. At times, it devolved into allegations of cynicism and whose framing was most disingenuous.
When Gillibrand resurrected a 1981 op-ed in which Biden argued against expanding a child tax credit for high-income earners – suggesting his views had undercut women in the workplace – Biden asked why she had previously praised his work on gender equality.
“I don’t know what happened except you’re now running for president,” Biden said.
A similarly personal back-and-forth transpired when Booker accused Biden of constantly linking himself to Obama, only to dodge scrutiny over the more controversial aspects of the former president’s tenure.
“You can’t do it when it’s convenient and then dodge it when it’s not,” said Booker, who also went after Biden’s role in authoring a tough-on-crime bill in 1994 now seen as the cause of mass incarceration.
“There are people right now in prison for life for drug offenses because you stood up and used that tough on crime phony rhetoric that got a lot of people elected but destroyed communities like mine,” Booker said.
Despite the onslaught, Biden largely managed to stand his ground.
In many ways, the evening was a testament to the Democratic Party’s most pressing debate: whether to campaign on sweeping, progressive reforms or frame the election around the urgency of limiting Trump’s presidency to a single term.
Biden has built his candidacy on the latter, telling voters the choice before America was to determine whether Trump would forever reshape the nation’s identity or simply go down as “an aberration”.
But Warren, who has yet to share the debate stage with Biden, warned Democrats on Tuesday that the White House would not be reclaimed through “small ideas and spinelessness”.
For many candidates, the Detroit debates may have been their last chance to leave a national impression. The threshold to qualify for the third round of debates in September is expected to grow tighter, requiring candidates to achieve 2% support from at least four polls and contributions from 130,000 donors.
Trump dismissed his potential opponents on Wednesday.
“The people on the stage tonight, and last, were not those that will either Make America Great Again or Keep America Great!” the president tweeted.
In an impassioned plea to his colleagues, Booker warned Democrats that picking one another apart only worked to Trump’s benefit.
“This pitting against progressives against moderates, saying one is unrealistic and the other doesn’t care enough – that to me is dividing our party and demoralizing us in the face of the real enemy here,” he said.
“The person who is enjoying this debate the most right now is Donald Trump.”

Source: The Guardian

Stocks making the biggest moves premarket: Verizon, Cigna, Clorox, Dunkin', Yum, Wayfair & more

Peter Schacknow



Check out the companies making headlines before the bell:
Verizon – Verizon reported adjusted quarterly profit of $1.23 per share, 3 cents a share above estimates. Revenue came in below Wall Street forecasts, however. Verizon added a net 245,000 phone subscribers during the quarter, above the 163,000 that analysts surveyed by FactSet had been forecasting.
Cigna – The insurer earned an adjusted $4.30 per share for the second quarter, beating the consensus estimate of $3.74 a share. Revenue also exceeded forecasts, with overall results getting a boost from strength in Cigna’s health-services unit.
Clorox – The household products maker beat estimates by 5 cents a share, with quarterly profit of $1.88 per share. Revenue missed forecasts, however, and Clorox gave a weaker-than-expected fiscal 2020 forecast on weakness in its household segment as well as unfavorable exchange rates in certain markets.
Dunkin’ Brands – The restaurant chain came in 4 cents a share above estimates, with second-quarter profit of 86 cents per share. Revenue was short of forecasts, however. Comparable sales at U.S. Dunkin’ locations rose 1.7%, better than expected, but comparable sales at U.S. Baskin-Robbins locations were short of forecasts.
DuPont – DuPont, one of the companies that emerged from the breakup of DowDupont, reported adjusted quarterly profit of 97 cents per share, 13 cents a share above estimates. The specialty materials maker saw revenue fall short of forecasts, however, and said it expects organic sales to fall slightly this year.
Wayfair – The luxury home goods retailer lost $1.35 per share for its latest quarter, matching Street forecasts. Revenue beat estimates, but the bottom line was impacted by a more than 50% increase in operating expenses.
Yum Brands – The restaurant chain beat consensus by 6 cents a share, with adjusted quarterly profit of 93 cents per share. Revenue beat estimates as well. Comparable-restaurant sales rose 5%, beating the forecast of 3.1% by analysts surveyed by Refinitv.
Qualcomm – Qualcomm reported adjusted quarterly profit of 80 cents per share, 5 cents a share above Street forecasts. The chipmaker’s revenue came in below estimates and the company gave a current-quarter earnings forecast that falls largely below consensus, as it strips out business from China’s Huawei Technologies.
Fitbit – Fitbit lost 14 cents per share for its latest quarter, 4 cents a share less than Wall Street had projected. The fitness-device maker saw revenue beat estimates, however Fitbit cut its full-year sales forecast on disappointing sales of its new Versa Lite smartwatch.
Thomson Reuters – Thomson Reuters raised its sales and profit outlook for 2019 and 2020 after reporting a 4% increase in organic revenue for the second quarter, its biggest rise since 2008. Separately, Thomson Reuters and co-owner Blackstone finalized a deal to sell their Refinitiv data business to London Stock Exchange for $27 billion in stock.
Las Vegas Sands, Wynn Resorts – The casino operators are on watch after new numbers showed gaming revenue in Macau dropped 3.5% from a year earlier, slightly below analysts’ forecasts.
Amazon.com – Amazon is in early-stage talks to buy a 26% stake in India’s Reliance Industries, according to the Economic Times. Reliance is India’s largest brick and mortar retailer.
Beyond Meat – Beyond Meat priced a secondary offering of 3.25 million new shares at $160 per share, 18.6% below Wednesday’s closing price for the plant-based burger maker’s stock.
BlackRock – The asset management firm is no longer in talks to buy private-equity firm Pamplona’s stake in cybersecurity firm Cofense, according to The Wall Street Journal. BlackRock already holds a stake in Cofense, and the potential deal was designed to address national security concerns expressed by government officials about Pamplona and its links with wealthy Russians, according to the paper.

Source: CNBC

Politics I Argentina Can’t Escape Its Economic Curse

 by Patrick Gillespie



When it was commissioned in the 1870s, the Renaissance-style building chosen to house a water treatment plant in Buenos Aires was meant to project Argentina’s emergence on the world stage.
By the time it finally opened two decades later, the Palace of Running Water was a symbol of spent ambition. With its imported European terracotta tiles and stained glass windows, the waterworks illustrated the excesses that had wrecked the Argentine economy and almost brought down the global financial system.
The story of what came to be known as the Barings Crisis of 1890 is studied by economic historians as the biggest sovereign debt meltdown of the century. But for Argentines, the fallout reverberates outside the pages of textbooks; for the same elements of boom and egregious bust lie at the root of the country’s economic and political upheaval to the present day.
Argentina has spent 33% of the time since 1950 in recession, according to a World Bank report released in May. In global terms, that is second only to the Democratic Republic of Congo, which endured two major wars, three military coups and numerous regional conflicts over the same period. By comparison, Argentina’s larger neighbor Brazil has seen recession for 12% of that time.

Bust and Boom

Argentina has spent more time in recession than almost every other nation
Source: The Conference Board; World Bank
Argentina’s perennial volatility is once more front and center as President Mauricio Macri bids for re-election in the wake of a currency rout and a massive $56 billion bailout from the International Monetary Fund. With presidential primaries due on Aug. 11, the vote is shaping up to be a dramatic contest over the country’s economic future.
While polls suggest the race is too close to call, investors clearly favor Macri to enact the reforms they see as needed to steer the economy out of recession. They have concerns that Macri’s main opponent, Alberto Fernandez, wouldn’t be the moderate president he contends, fears magnified by his choice of running mate, the populist former president, Cristina Fernandez de Kirchner. For his part, Fernandez, 60, lambasts Macri’s economic stewardship and says he’s happy to not be “Wall Street’s candidate.”
relates to Argentina Can’t Escape Its Economic Curse
Julian Diaz at his restaurant Los Galgos in Buenos Aires.
Photographer: Sarah Pabst/Bloomberg
Fernandez has Julian Diaz’s vote. Diaz, 37, the owner of three restaurants in Buenos Aires, says he’s backing “Fernandez-Fernandez,” not so much out of political conviction as what he sees as economic and social necessity.
Custom is down and Diaz says inflation means his prices have risen “exponentially”: a cafe con leche costs 80 pesos ($1.80); a year ago it was 55 pesos. He’s reduced the number of staff on the payroll through attrition and put on hold plans to expand, waiting for the election outcome.
“We can’t think about developing the country with poverty rising, violence rising, where the social gap is widening, where there’s no consumer spending,” Diaz said at his Los Galgos restaurant three blocks from the palace. Argentina’s crisis is cyclical, making it “unbearable,” he said. “There’s always another crisis coming.”
The turbulence can be traced back to the last decade of the 19th century. At the time, Argentina was cashing in on farming of its abundant plains, the Pampas, and a wave of European migrants relayed home the opportunities to be had. Opulent mansions, Parisian boulevards and Utopian plazas were sprouting up in the capital. As work was about to begin on the Palace of Running Water, plans were drawn up for the Teatro Colon, still one of the world’s best opera houses.
English bank Baring Brothers and Co. was only too happy to join the rush, and bet big on Argentina. But something had to give, and as the economy slowed in 1889, Argentines sniffed a crisis and rapidly exchanged their pesos for gold, causing the currency to tumble. Drought, a failed coup, rising inflation and strikes drove foreign investors away, and by early 1890 government leaders couldn’t stop the tailspin.
Buenos Aires Tango Star Wins Fight to Bring Back Cobblestones
The Plaza de Mayo district of Buenos Aires.
Photographer: Sarah Pabst/Bloomberg
The tipping point came when Barings failed to float a bond in the London market for the Buenos Aires Water Supply and Drainage Company—contracted to build the Palace of Running Water. Soon after, Barings notified the Bank of England that it was on the verge of collapse due to its exposure in Argentina, and it had to be bailed out. The following year, 1891, Argentina’s economy shrank 11%.
Barings “simply lent too much money, they went too far,” said Eugene White, a professor at Rutgers University and author on the crisis. “The party got too raucous—they didn’t take the punch bowl away.”
Many of the elements of the Barings Crisis—mounting debt, a currency rout, bailout and even drought—have echoes in Argentina’s current recession. Its economic woes follow a well-worn path: It spends more than it earns, relying on dollars from grain sales and forcing the government to rack up debts to cover the purchase of imports, and once investors sour on fronting more money, a vicious domino effect ends in misery. Little wonder it’s had 61 central bank chiefs in the 84 years of the institution’s existence.
relates to Argentina Can’t Escape Its Economic Curse
Natalia Perrotta stands in front of the Water Palace.
Photographer: Sarah Pabst/Bloomberg
Yet that cyclical nature of Argentine life means some voters are willing to give Macri more time. Natalia Perrotta, 32, a doctor at a public hospital, has cut back on spending and vacations, but she doesn’t blame the president for her belt-tightening. “In Argentina we’ve always had ups and downs in the economy,” she said. “And because of that I don’t consider what’s happening now as new.”
The warning signs are again flashing red: The IMF sees a 1.3% contraction for 2019, with inflation ending the year at some 40%, and “significant downside risks” to its outlook, notably political uncertainty.
The upshot is that many Argentines have little faith in politics, policy or the peso. The proof? They have some $350 billion in savings stashed abroad, more than at home, according to Miguel Kiguel, head of consulting firm EconViews and author of a book on Argentina’s economic crises.
“The lack of confidence comes from the fact that every few years there’s a major devaluation or high inflation, and the way to protect yourself is to go into dollars,” said Kiguel, a former chief of advisers in the Economy Ministry in the 1990s.

Flight to Safety

Whether it’s the 1880s or 2010s, Argentines don’t save in pesos before a crisis
Source: BCRA; della Paolera, Alan Taylor
When governments change, the policy whiplash is often dramatic. Argentina went from seven presidencies in the early 1970s to a bloody, right-wing military dictatorship that ruled for almost eight years until 1983 and sent the country into a war with the U.K. Then came a pro-business government in the 1990s, populist administrations from 2003 to 2015, and finally Macri’s market-friendly presidency.
Macri, 60, a former civil engineer, put Argentina’s global comeback at the heart of his program after his predecessor Kirchner presided over currency and capital controls, tampered with official statistics and refused to pay back debt holders. But lately Macri’s been fighting populism with populism, freezing prices on food items, mobile phone bills, electricity, gas and public transport. Fernandez, an adherent of the populist Peronist movement founded in 1946 by then-President Juan Peron and his wife, Eva, accuses Macri of mismanagement, and advocates for generous welfare spending. The first round vote is on Oct. 27, with a runoff planned for the end of November if necessary.
Argentina's Hot Summer Of Packed Subways, More Theft And Floods
The Plaza Miserere subway station in Buenos Aires.
Photographer: Erica Canepa/Bloomberg
Gerardo della Paolera, 60, an economic historian who co-wrote a book about the Barings Crisis, believes more turmoil is inevitable regardless of who wins: Argentina will need to restructure its debt once the IMF cash dries up in 2021, he says. Like many Argentines, he’s trying to prepare his family, knowing how this story ends. His adult children love Argentina and don’t want to leave, but he doesn’t see a future for them in their own country. “I push them to go abroad,” he said.
Diaz, the restaurant owner, is left to lament his country’s lost opportunity.
“Always when I pass the Palace or Teatro Colon, it symbolizes to me what Argentina could have been,” he said, sipping a coffee. Argentina has “so many wonderful things, but at the same time it has instability and a lack of predictability,” he said. “Here, we don’t even know what’s going to happen tomorrow.”

Source: Bloomberg

Analysis | The Cybersecurity 202: Cisco settlement over hackable technology a warning to government contractors

By Joseph Marks



PowerPost Analysis
Analysis Interpretation of the news based on evidence, including data, as well as anticipating how events might unfold based on past events


An exterior view of Cisco Systems Inc. headquarters in Santa Clara, Calif. (AP Photo/Paul Sakuma, File)
THE KEY
The $8.6 million settlement Cisco will pay to settle claims it sold states and federal agencies hackable surveillance software marks a sea change in how seriously the government is now taking cybersecurity bugs. 
The Cisco bug, which a whistleblower first alerted the company about in 2008, was in surveillance software that ended up in schools, hospitals, airports and prisons as well as federal agencies and at least 15 state governments, as I reported yesterday.
It could have allowed hackers to spy on surveillance video footage, turn cameras on and off and delete footage. It could even have allowed those hackers to compromise other connected physical security systems such as alarms or locks. Yet the company didn’t fix the bug until 2012 – one year after the whistleblower, James Glenn, filed a lawsuit against the company.
The settlement marks the first time a company has been forced to pay out for inadequate cybersecurity protections under a federal whistleblower law that normally targets fraud and graft in federal contracts. And it’s sure to prompt other government suppliers to take a closer look at the security of the products they sell to the U.S. government. 
The federal government is reviewing its multibillion-dollar contracting enterprise, which supplies everything from military hardware to border surveillance tools but which officials have said was not designed to make cybersecurity a major consideration.
Those officials worry that federal agencies are inadvertently greenlighting a slew of hackable products for purchase by federal agencies — many of which are then also bought by states and government grant recipients such as schools and hospitals. The flawed Cisco software could be a prime example: Glenn's lawyers say it was purchased by the U.S. Secret Service, the Federal Emergency Management Agency and military services as well as prisons and police departments, including the New York Police Department.
Even Cisco says the settlement underscores how government is taking cybersecurity in the products it buys far more seriously than it used to. In a blog post yesterday, Cisco’s Chief Legal Officer Mark Chandler described the settlement as an example of “changing standards” and noted that “what seemed reasonable at one point no longer meets the needs of our stakeholders today.”
“We intend to stay ahead of what the world is willing to accept,” Chandler added.
Glenn was working for a Cisco subcontractor called NetDesign in Denmark when he first spotted the cybersecurity bug and he sent the company numerous “detailed reports” throughout 2008 “revealing that anyone with a moderate grasp of network security could exploit this software,” his lawyers told me. But Glenn never got a response, his attorneys said.
“I was very concerned about the possibility that someone might endanger public safety by hacking into government systems,” Glenn said in a statement.
Glenn filed his lawsuit under the False Claims Act, which effectively allows individuals to sue on behalf of the government if they believe a government contractor is committing fraud. The government can join the suit later and collect most of the proceeds.
In this case, the federal government and state governments that joined the suit will collect 80 percent of the $8.6 million award while Glenn and his attorneys will take 20 percent, his lawyers said.
States that joined the settlement with the Justice Department include New York, California, Illinois, Florida, Massachusetts and Virginia.
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PINGED, PATCHED, PWNED

FILE - In this July 16, 2019, file photo, a man walks across the street from a Capital One location in San Francisco. (AP Photo/Jeff Chiu, File)
PINGED: The hacker behind the Capital One breach likely also compromised the data of several other companies, multiple researchers report. Unicredit, Italy's largest bank, confirmed to Reuters it was investigating a potential breach by the same hacker and working with relevant authorities.
Vodafone, Ford, and Michigan State University also may have been impacted, according to research from CyberInt, an Israeli security firm, according to Zack Whittaker at TechCrunch. The Ohio Department of Transportation also confirmed to TechCrunch that it was hacked, but said only publicly available information was compromised. Cybersecurity blogger Brian Krebs reported potential hacks on the same entities and posted an image of files allegedly accessed by the hacker.
The Justice Department has not confirmed any additional breaches, but told Forbes' Thomas Brewster that the hacker, Paige Thompson, could be arrested for additional charges. Thompson bragged about additional hacks in a Slack channel where she admitted to hacking Capital One. Amazon, which stored the Capital One data on its cloud service, told Matt Day and Nico Grant at Bloomberg that it contacted other clients named in Thompson's online postings but found no evidence their data was accessed. (Amazon founder Jeff Bezos owns the Washington Post).

Rep. Alexandria Ocasio-Cortez, D-N.Y., attends a House Oversight Committee. (AP Photo/J. Scott Applewhite)
PATCHED: Rep. Alexandria Ocasio-Cortez (D-N.Y.) clapped back yesterday at claims from Senate Majority Leader Mitch McConnell (R-Ky.) that efforts by Democrats to pass election security legislation that he’s been blocking amounted to “modern-day McCarthyism.” 
Ocasio-Cortez described how former Sen. Joseph McCarthy (R-Wis.) lobbed baseless accusations of communist sympathy at political opponents in the 1950s in order to gin up fear and said McConnell's situation was far different:
McCarthyism is the practice of baselessly accusing political opponents of being communists as unjust grounds for targeting & harassment.
You are blocking action to protect US elections despite official DoJ pleas. That doesn’t make you a communist. It just makes you a bad leader. https://t.co/qLqR2vtOfI
— Alexandria Ocasio-Cortez (@AOC) July 30, 2019
McConnell has earned the ire of Democrats in both chambers for repeatedly blocking attempts to pass election security legislation — even after testimony from former special counsel Robert S. Mueller III. and Federal Bureau of Investigations Director Christopher A. Wray warning that foreign countries including Russia are likely to interfere in the 2020 election. 

Signage at the corporate headquarters of Equifax Inc. in Atlanta. (AP Photo/Mike Stewart, File)
PWNED: Breached consumers are likely to get a lot less than the “up to $125" first advertised from the Equifax settlement due to an “overwhelming response” from consumers, the Federal Trade Commission warned yesterday. Because the pool for cash claims was only $31 million, large demand for cash has made the size of each payout smaller
Instead, the agency is encouraging consumers to opt for the alternative settlement offer: 10 years of free credit monitoring with $1 million in fraud protection. “Frankly, the free credit monitoring is worth a lot more,” Robert Schoshinski, assistant director at the FTC's division of privacy and identity protection, wrote in a blog post.

Before The Bell on Thursday 1, August 2019 I Stocks ready to bounce back after sell-off sparked by Fed's Powell comments,

Fred Imbert, Sam Meredith



U.S. stock index futures rose on Thursday, pointing to a rebound on Wall Street after  tanking a day earlier when the Federal Reserve dampened hopes of a lengthy easing cycle following a 25-basis-point rate cut.
Around 7 a.m. ET, Dow Jones Industrial Average futures indicated a gain of more than 70 points at the open. Futures on the S&P 500 and Nasdaq 100 also rose.
The U.S. central bank cut interest rates for the first time in more than a decade on Wednesday, citing "global developments" along with "muted inflation" as reasons for easing monetary conditions.
However, Chairman Jerome Powell told reporters in a news conference following the Federal Open Market Committee's rate decision that the central bank's rate cut was a "midcycle adjustment," hinting that further rate cuts later this year were not a sure thing.
In a series of posts on Twitter, President Donald Trump said Powell had "let us down " by not clearly signalling more rate cuts.
The Fed operates independently of the White House. During a press conference, Powell said the central bank would never move rates because of political factors or to prove its independence.
Meanwhile, the U.S. and China ended a brief round of trade talks, without achieving much progress in ending their protracted dispute.
The world's two largest economies have been engaged in a trade war since last year. In that time, they've slapped tariffs on billions of dollars' worth of each other's goods.
On the data front, the latest weekly jobless claims will be released at around 8:30 a.m. ET.
The closely watched ISM manufacturing index for July, manufacturing Purchasing Managers' Index (PMI) data for July, construction spending figures for June, and the latest reading of light vehicle sales will follow later in the session.

SOURCE: CNBC

Asia Markets Closing Report on Thursday August 1, July 2019 I Asia markets decline as data shows July manufacturing activity in China contracted

Eustance Huang



Asia Pacific markets declined Thursday as a private survey showed Chinese factory activity contracted in July while official data revealed South Korea’s exports fell.
Mainland Chinese stocks slipped on the day: The Shanghai composite fell 0.81% to about 2,908.77 and the Shenzhen component declined 0.63% to 9,268.05. The Shenzhen composite shed 0.524% to approximately 1,563.06.
Hong Kong’s Hang Seng index shed 0.76% to close at 27,565.70. Hong Kong-listed shares of Standard Chartered jumped 2.93% after the lender announced a larger-than-expected first half profit.
The benchmark Kospi in South Korea ended its trading day down 0.36% at 2,017.34. Shares of major chipmaker SK Hynix were up 1.04% while Samsung Electronics declined 0.33%.
Trade numbers for July showed South Korean exports fell 11% on-year, which was slightly better than the 11.3% drop analysts had predicted. In particular, semiconductor exports dropped 28.1%, Reuters reported. Imports declined 2.7% compared to the 8.1% drop expected.

South Korea-Japan dispute

The trade numbers came amid an ongoing dispute between Seoul and Tokyo. Last month, Japan placed restrictions on exports of important high-tech materials to South Korea that are used by tech companies.
The situation could escalate further if Japan removes South Korea from a list of trusted trade partners that enjoy preferential treatment. Prime Minister Shinzo Abe’s cabinet plans to endorse Seoul’s removal from the so-called “white list,” which is expected to go into effect late August, the Nikkei business daily reported.
On Thursday, South Korea said its security cooperation with Japan may be hurt if Tokyo removes the country from the list after ministerial talks in Thailand failed to yield any results, Reuters reported.
Elsewhere, Japan’s Nikkei 225 closed fractionally higher at 21,540.99 while the Topix index added 0.14% to at 1,567.35.
Australia’s S&P/ASX 200 shed 0.35% to close at 6,788.90, as most sectors slipped.
Shares of Australian miner Lynas dropped 3.07% as the future of an operating license renewal in Malaysia remains in question for the world’s only major rare earths producer outside China.
Malaysian Prime Minister Mahathir Mohamad said Thursday that the country is waiting for the company’s plan for radioactive waste management ahead of a renewal deadline of Sept. 2.
The MSCI Asia ex-Japan index declined 0.82%.

Chinese factory activity shrinks in July

A private survey showed Chinese factory activity contracted in July. The Caixin/Markit factory Purchasing Managers’ Index came in at 49.9 — slightly better than the 49.6 reading analysts had expected. PMI readings above 50 indicate expansion, while those below that signal contraction.
That number came after official data released Wednesday showed Chinese factory activity contracting for the third straight month in July.
Beijing’s ongoing trade war with Washington was “part of the story” in China’s economic slowdown, according to Fraser Howie, an independent analyst. “I think certainly from a sentiment perspective, the trade war is very significant,” he told CNBC’s “Street Signs ” on Thursday.
But it wasn’t the “main driver” of China’s economic story.
“The stories are domestic,” he said. “There are a lot of problems there, China’s not on the brink of collapse. I wouldn’t say it’s nicely humming along, I would say it’s more muddling through.”
The United States and China wrapped up a round of trade talks on Wednesday and will resume negotiations in Washington in early September.
The two sides conducted “frank, efficient and constructive in-depth exchanges” on major economic and trade issues, according to Chinese state-run media Xinhua. The White House said Wednesday that both sides discussed topics such as forced technology transfer, intellectual property rights, services, non-tariff barriers and agriculture.
U.S. President Donald Trump and Chinese President Xi Jinping reached a truce in June at the G-20 summit in Japan after trade talks collapsed in May that prompted a steep U.S. tariff hike on $200 billion of Chinese goods.

Asia-Pacific Market Indexes Chart

Fed rate cut

Overnight, the Fed cut rates by 25 basis points in a widely expected move, citing “global developments” and “muted inflation” as reasons. But Fed Chairman Jerome Powell dampened hopes of further rate cuts later this year. He told reporters that Wednesday’s rate cut was “not the beginning of a long series of rate cuts.”
“Powell suggested the Fed isn’t in a long cutting cycle and that the cut was aimed at insuring against downside global risks, he also added that the cut was not necessarily a one-off,” Felicity Emmett, from ANZ Research, wrote in a morning note.
“This suggests the future policy path will depend on whether global data is feeding negatively back into the US. So far, the manufacturing sector has shown weakness in line with the global slump, but the much larger services sector is holding up,” Emmett added.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 98.854 after soaring from levels below 98.1 yesterday.
The Japanese yen traded at 109.08 against the dollar, weakening from the 108.5 handle in the previous session. Meanwhile, the Australian dollar changed hands at $0.6848 after dropping from highs around $0.690 yesterday.
Oil prices fell Thursday afternoon during Asian trading hours, with the international benchmark Brent crude futures contract declining 1.21% to $64.26 per barrel. U.S. crude futures slipped 1.4% to $57.76 per barrel.
— Reuters contributed to this report.

Source: CNBC