July 2: Top News From The Market

U.S. job growth likely cooled a bit in June after reaching a five-month high, but still-healthy hiring could suggest the labor market is strong enough to support an earlier Fed rate hike. Economists estimate that non-farm payrolls rose 230,000 last month after May’s 280,000 jump, the largest gain since December. The unemployment rate is seen dropping one-tenth of a percentage point to 5.4%, not far from the 5.0%-5.2% range most Fed officials consider consistent with full employment.

 

Chinese stocks fell again today in another highly volatile session despite regulatory efforts to put a floor under the sliding market. Late on Wednesday, the China Securities Regulatory Commission relaxed rules on using borrowed money to speculate on stocks, letting brokerages set their own tolerance level on margin calls, and allowing the roll-over of margin lending contracts. In addition, China’s main exchanges said they would cut transaction fees effective Aug. 1. Shanghai closed down 3.5%, taking losses since mid-June to more than 20%.

 

Debt-riddled Puerto Rico paid all of its $1.9B in obligations due on Wednesday, avoiding a deeper financial crisis for the moment. “As a result, there were no claims on any of National’s insurance policies,” National Public Finance Guarantee Corporation, an indirect subsidiary of MBIA (NYSE:MBI), confirmed in a statement. Puerto Rico Governor Alejandro Garcia Padilla recently called the commonwealth’s roughly $73B in debt “not payable,” fueling concerns among investors and bond insurers.

 

Following a decision to reopen the American embassy in Havana on July 20, President Obama is now urging Congress to lift the U.S. trade embargo on Cuba. “We don’t have to be imprisoned by the past,” Obama said at the White House. “Americans and Cubans alike are looking to move forward. I believe it’s time for Congress to do the same.” After climbing 8.2% during the session yesterday, closed-end Caribbean Basin Fund CUBA rose another 4.3% in after-hours trade.

 

Sweden’s central bank unexpectedly lowered its main interest rate deeper into negative levels today and expanded its bond purchases to the end of the year, saying uncertainty abroad had increased and it was difficult to assess the consequences of the situation in Greece. The repo rate was cut to -0.35% from -0.25%, while the country expanded its bond purchasing program by 45B kronor ($5.3B) to the end of year, adding to the 80B-90B kronor that was already announced.

 

Taking an important step toward its breakup on Nov. 1, HP (NYSE:HPQ) has filed paperwork with the SEC that outlines the balance sheet – based on the past performance of its Enterprise Group – of a new corporate technology company called Hewlett Packard Enterprise. According to the document, the entity had revenue of about $55B and total assets of $65B in the fiscal year ended in October. The second company resulting from the split, HP Inc., isn’t obligated to file a similar disclosure document because it is considered the parent company.

 

PayPal is acquiring leading digital money transfer provider Xoom (NASDAQ:XOOM) for an enterprise value of $890M in cash. “Xoom’s presence in 37 countries in particular, Mexico, India, the Philippines, China and Brazil will help us accelerate our expansion in these important markets,” said PayPal (Pending:PYPL) President Dan Schulman. The price represents a 21% premium to Xoom’s Wednesday close and comes ahead of PayPal’s mid-July spinoff from eBay (NASDAQ:EBAY). XOOM +21.7% premarket.

 

Furthering its efforts to challenge YouTube (GOOG, GOOGL) as a video hub, Facebook (NASDAQ:FB) plans to roll out Suggested Videos, a feature that recommends new videos for a user to watch that are related to one just seen. Facebook plans to give content providers a 55% revenue cut (on par with YouTube’s) for ads run against Suggested Videos. “Facebook could now be very serious competition for YouTube,” said Jan Rezab, chief executive and co-founder of Socialbakers. “If I were Google, I would watch out.”

 

More cross-border shipments and the euro’s weakness are presenting more opportunities for delivery firms in Europe, and UPS (NYSE:UPS) and FedEx (NYSE:FDX) are jumping on them. FedEx recently submitted regulatory filings to the European Commission to move ahead with its $5B deal to acquire TNT Express (OTCPK:TNTEY), while UPS is building new distribution centers specifically designed for pharmaceuticals and medical products, along with other expansions. According to a study by Center for Retail Research, e-commerce sales across the EU’s eight main economies are expected to grow more than 40% over two years to $289.6B in 2016, while the U.S. is expected slow 30% over the same period to nearly $400B.

 

Electrolux shares are down 10% in Sweden after the DOJ filed a lawsuit aimed at stopping the company’s $3.3B deal to acquire GE’s (NYSE:GE) appliance business. In a conference call today, Electrolux (OTCPK:ELUXY) CEO Keith McLoughlin said buying parts of the unit would not make sense for either party, but a settlement still remains in the cards. “Everybody we talk to says the process could last between 2 and 6 months, and shouldn’t drag on for years,” he added.

 

The U.K. government continues to offload its stake in Lloyds (NYSE:LYG), reducing its holdings to 15.9% as part of a trickle-out process that allows shares to be sold on the open market as long as they can make a profit. The news comes just nine days after the U.K.’s stake fell to 16.9%, indicating the government had sold shares worth roughly £600M in just over a week.

 

ArcelorMittal is cutting 2,800 jobs at its Mexico unit as a result of a global price slump, while accusing Russia, China and Turkey of dumping steel on markets at levels below production costs. ArcelorMittal (NYSE:MT) also warned that if Mexico continues to import steel products at what it called dumping prices, the number of job cuts will rise.

 

It’s been a long week for presidential candidate Donald Trump. Several big-name partners, including Univision and Macy’s (NYSE:M), severed ties with the business mogul over his recent remarks about Mexicans – and more trouble is brewing. According to cybersecurity site Krebs, the Trump Hotel Collection has fallen victim to a sweeping credit-card hack. The breach appears to go back to at least February and could span several locations.

 

The Justice Department announced a probe yesterday whether airlines were colluding to grow at a slower pace as part of an effort to keep airfares high. Airline stocks sold off in response to the antitrust investigation: UAL , AAL, LUV, DAL, ALK, HA, JBLU, SAVE, SKYW, VA.

 

The chief executives at Fannie Mae and Freddie Mac will get multimillion-dollar paydays thanks to a big raise approved by the companies’ regulator despite objections from lawmakers and the White House. The salaries of Fannie’s (OTCQB:FNMA) Timothy Mayopoulos and Freddie’s (OTCQB:FMCC) Donald Layton, which had been capped at $600K over the past two years, will now have a total annual target compensation of $4M each.

 

Under a new rule proposed by the SEC, senior executives that publish faulty financial statements would have to give back some of their compensation as punishment for the accounting missteps. Presently, an executive may get to keep a bonus even if a company artificially inflated financial metrics and then corrected the missteps by issuing new statements. The new rule would enable a company to “claw back” incentive-based compensation (which has grown consistently larger in recent years) when financials have been restated.

 

Source: Seeking Alpha