US FINANCIAL MARKET
U.S. Stocks Decline from Records amid Rate Speculation
- Investors weighed valuations and speculated the Federal Reserve may raise interest rates sooner than expected.
- Policy makers have kept their target for overnight lending between banks in a range of zero to 0.25 percent since December 2008.
- Traders see about a 72 percent chance officials will raise the key rate from near zero by September 2015. That’s up from 56 percent at the end of May.
- Both the S&P 500 and the Dow average advanced 1.3 percent last week, with the 30-stock gauge closing above 17,000 for the first time, as monthly payroll addition exceeded 200,000 for a fifth month in June.
- The equities benchmark is trading at 16.7 times the projected earnings of its members, higher than the five-year average multiple of 14.3.
- Alcoa will unofficially open the second-quarter earnings-reporting season tomorrow.
With U.S. stocks hitting record highs on the back of strong jobs growth, the ECB holding out the prospect of printing money and British house prices soaring there is a lot to ponder in the week to come
- The Bank of England is highly unlikely to lift interest rates from a record low 0.5 percent after its monthly policy meeting on Thursday. The British economy is growing fast and its housing market is threatening to burst out of control – prices in London have shot up nearly 26 percent from a year ago.
- The U.S. Federal Reserve is winding up its money-printing program but seems comfortable leaving rates low until well into next year.
- Draghi speaks in London on Wednesday – the venue for his game-changing 2012 declaration that he would do whatever it takes to preserve the euro.
- In Japan, the focus is on Thursday’s machinery orders, which act as a leading indicator of capital spending and are expected to have resumed growing in May.
Gold Extends Drop From 3-Month High as Iraq Concerns Ease
- Gold extended a decline from a three-month high as concerns that the insurgency in Iraq eased while Ukrainian forces began to turn the tide against pro-Russian rebels.
- Gold for August delivery dropped 0.3 percent to $1,316 an ounce by 8:49 a.m. on the Comex in New York.
Double-digit profit growth may return in second half
- Many factors point to second-quarter earnings poised to surprise substantially to the upside.
- Analysts polled by Reuters are calling for earnings growth for the second quarter of 6.2 percent, and a return to double digits in the third and fourth quarters: 10.9 percent and 11.9 percent, respectively.
Dish Network shares may rise 20 percent after spectrum auction: Barron’s
- The third-largest pay-TV provider in the U.S., Dish Network owns undeveloped wireless spectrum that bullish analysts think could be worth $25 billion, Barron’s wrote.
IBM signs up to help fight China’s war on smog
- IBM has signed an agreement with the city of Beijing to use advanced weather forecasting and cloud computing technologies to help tackle the Chinese capital’s persistent smog.
- After a series of pollution scares and scandals, China’s central government has promised to reverse some of the damage done to the nation’s sky, rivers and soil by more than three decades of growth.
China approves Lenovo, IBM $2.3 billion server deal
- The Chinese Ministry of Commerce’s anti-monopoly bureau has approved Lenovo’s proposed $2.3 billion deal to buy IBM’s low-end server business.
Boeing 737 fuselages damaged in train derailment
- A train derailment in Montana this week damaged a shipment of jetliner fuselages and other large parts on its way to Boeing factories in Washington State.
- Boeing said a BNSF Railway train loaded with six 737 narrowbody fuselages and assemblies for its 777 and 747 widebody jets derailed in Montana while en route from Wichita on Thursday.
- A total of 19 cars in the 90-car train derailed in the incident about 18 miles (30 km) east of Superior, Montana. The cause of the derailment was not yet known.
- Of the derailed cars, three cars carrying 737 plane fuselages went down.
Apple poaches another luxury executive as iWatch nears
- Apple has poached a senior executive from Swiss luxury watch brand Tag Heuer, which could be to help it with the launch of its iWatch expected this autumn.
- Tag Heuer, part of luxury goods group LVMH, said on Friday its vice president for sales, Patrick Pruniaux, who had been with the brand for seven years, was leaving on Monday to join Apple.
- Apple has plucked several executives from the luxury sector in recent months. Burberry ex-CEO Angela Ahrendts started as its new head of retail and online sales in May, and former head of French fashion brand Yves Saint Laurent Paul Deneve was hired last year to work on special projects.
US ECONOMY & POLITICS
Central banks ending era of clear promises, return to ‘artful’ policy
- The world’s major central banks are returning to a more opaque and artful approach to policymaking, ending a crisis-era experiment with explicit promises that they found risked their credibility and did not substitute for action.
- From Washington to London to Tokyo, the global shift from transparency to flexibility underscores the challenges central bankers face as they test the limits of what monetary policy can achieve.
- Both the Fed and BoE had promised to hold interest rates near zero until their jobless rates had fallen to a particular level. However, unemployment in the United States and Britain fell much more quickly than economists expected and both central banks scrambled to replace their suddenly outdated “forward guidance”.
EUROPE & WORLD
Draghi’s $1.4 Trillion Shot
- The ECB president says a program to hand as much as 1 trillion euros ($1.4 trillion) to banks.
- Draghi has identified weak lending as an obstacle to the euro area’s recovery and is committed to reversing a slump that has eroded more than 600 billion euros in loans to companies and households since 2009.
German Industrial Output Falls in Sign of Slower Growth
- Production fell 1.8 percent from April.
- The economy ministry said the decline in output was primarily due to the timing of the May 1 holiday and should only be temporary.
- While Germany remains the driving force for the euro-area’s yet-lackluster recovery, recent data suggest that tensions between Russia and Ukraine are weighing on confidence and business prospects.
China Auto Sales Rise 14% as Foreign Brands Target Small Cities
- Retail deliveries of cars, multipurpose and SUVs climbed 14 percent to 1.47 million units in June.
Daimler expects sales to surpass Audi, BMW in China this year
- Mercedes-Benz’s previously strong momentum in China stalled in 2012, with sales volume falling far behind BMW and Audi.
- It plans to launch around 20 new or upgraded car models in China over two years as it seeks to boost sales by a third to more than 300,000 cars a year by 2015.
BMW’s $1 billion plant surfs Mexican investment wave
- BMW revealed a $1 billion Mexican plant investment on Thursday, becoming the latest major automaker to take advantage of the country’s growing industrial base and tariff-free access to the U.S. market.
- BMW outlined plans to build a factory in the central Mexican city of San Luis Potosi.
- The plant will begin assembling models in 2019 with an initial workforce of 1,500 and annual production capacity of 150,000 vehicles, the company said.
IMF’s Lagarde hints at world growth forecast cut
- Global economic activity should strengthen in the second half of the year and accelerate in 2015, although momentum could be weaker than expected, IMF chief Christine Lagarde said on Sunday.
- In April, the IMF had forecast that global output would grow by 3.6 percent in 2014 and 3.9 percent in 2015.
TODAY in HISTORY
- Twenty-five years after her execution, Pope Calixtus III annulled the heresy charges brought against Joan of Arc (1456)
- Commodore John D. Sloat occupied Monterey and declared California annexed to the United States (1846)
- The United States annexed Hawaii (1898)
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