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Britain asks EU to postpone Brexit for third time after UK lawmakers delay vote on withdrawal deal

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Britain’s Prime Minister Boris Johnson leaves Downing Street to head for the House of Commons as parliament discusses Brexit, sitting on a Saturday for the first time since the 1982 Falklands War, in London, Britain, October 19, 2019.

Tom Nicholson | Reuters

Britain has requested an extension of the Oct. 31 deadline to leave the European Union after U.K. lawmakers delayed a vote Saturday on the withdrawal agreement negotiated by Prime Minister Boris Johnson.

EU Council President Donald Tusk said he received the extension letter and that he would begin consulting with EU leaders on how to respond to Britain’s request. It is the third time that Britain has asked the EU to delay the deadline for Brexit.

Johnson, however, did not personally sign the letter officially requesting an extension. The prime minister, in a separate letter to Tusk, made clear that he personally opposes such an extension.

“I have made clear since becoming Prime Minister, and made clear to Parliament again today, my view, and the Government’s position, that a further extension would damage the interests of the UK and our EU partners, and the relationship between us,” Johnson wrote.

Though Johnson personally opposes an extension, the British government was forced to ask for one after U.K. lawmakers delayed approval of Johnson’s withdrawal agreement and voted to activate a law that required Downing Street to ask Brussels to push back the deadline for Brexit.

That amendment triggering the law, known as the “Benn Act,” was backed by 322 votes to 306.

Johnson wrote that it is up to the EU to decide whether to grant the request for an extension. He said that the British government would press ahead with ratification of the withdrawal agreement and that he hopes the process can be completed before the current deadline for Brexit lapses on Oct. 31.

Speaking after the setback in parliament Saturday, Johnson said he would “not negotiate a delay with the EU and neither does the law compel me to do so.” However by law, according to the Benn Act, Johnson had until 11:00 p.m. London time Saturday to send a letter to the EU requesting an extension.

Johnson also added: “I will tell our friends and colleagues in the EU exactly what I’ve told everyone in the last 88 days that I’ve served as prime minister: that further delay would be bad for this country, bad for the European Union and bad for democracy.”

Johnson has also previously stated he would rather be “dead in a ditch” than ask for more time from the EU.

His withdrawal agreement bill will now be introduced in the House of Commons early next week which would potentially mean a vote on Tuesday evening on what is termed the “second reading,” the initial stage of a passage of bill through the House of Commons.

Should it pass, this would be the first time the House has passed any bill relating to Brexit withdrawal deals.

—CNBC’s Elliot Smith contributed to this article.

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In a Strong Economy, Why Are So Many Workers on Strike?

At first glance, it may seem like a paradox: Even as the economy rides a 10-year winning streak, tens of thousands of workers across the country, from General Motors employees to teachers in Chicago, are striking to win better wages and benefits.

But, according to those on strike, the strong growth is precisely the point. Autoworkers, teachers and other workers accepted austerity when the economy was in a free fall, expecting to share in the gains once the recovery took hold.

Increasingly, however, many of those workers believe that they fell for a sucker’s bet, having watched their employers grow flush while their own incomes barely budged. Corporate profits are near a record high, up nearly 30 percent since the pre-recession peak in 2006. During the same time, the income of the typical household has increased by less than 4 percent. Some workers are responding with measures like strikes partly as a result.

“That was the understanding — that if we gave up the concessions back in 2007 and 2009, that once G.M. got back on their feet, we would slowly get those things back,” said Tammy Daggy, who worked at the now-idled G.M. plant in Lordstown, Ohio, for nearly 25 years. But on many issues, “we never did.”

To an extent, the pattern of strikes reflects a recurring feature of the labor market: Workers typically become bolder the longer an expansion continues, using the leverage they have when jobs are harder to fill to demand greater compensation. This was particularly true during the three decades after World War II, according to a survey of research by Jake Rosenfeld, a sociologist at Washington University in St. Louis.

Overall strike activity has fallen sharply since the 1970s, as the ranks of unions have been depleted, dropping to about 10 percent of the work force from over 25 percent. Employers have also responded more aggressively — for example, by permanently replacing striking employees.

Now, though, workers appear increasingly willing to walk off the job. Last year, the number of workers who participated in significant strikes soared to nearly 500,000, its highest point since the mid-1980s, while the total duration of such strikes reached a 15-year high.

The backdrop for this trend is a rising gap between the money employers are making and the portion they’re sharing with workers. The share of the national income that workers receive fell in the early 2000s to its lowest level since World War II according to some measures, then collapsed further in 2009. It has yet to recover.

That may be partly because the labor market is weaker than the picture painted by the official unemployment rate of 3.5 percent. That rate measures only the number of out-of-work Americans who say they are looking for jobs. It excludes Americans in their prime working years who are not actively looking for work but, given the opportunity, might choose to re-enter the work force.

According to Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, the group who could quickly re-enter the work force is potentially large, and may help employers avoid bidding up wages to lure those who are currently employed. “We still don’t know how much shadow labor is out there,” Mr. Kashkari said in an interview on Thursday.

But regardless of the strength of the labor market, in recent decades employers have amassed more power to hold wages down.

“In the late 1990s, it seemed like maybe a hot economy was sufficient” to substantially raise workers’ incomes and narrow inequality, said Jason Furman, who led the White House Council of Economic Advisers during President Barack Obama’s second term. But a series of reports that Mr. Furman’s council released in 2016 documented changes that have allowed employers to pocket more of the gains from growth. Those changes include noncompete clauses in employment contracts and even outright collusion, in which companies explicitly agree not to hire workers away from one another or to offer identical wages.

Employers argue that they need additional flexibility with their work force as they contend with global competition and technological changes.

Scholars say there was an element of economic opportunism behind the strikes of the 1950s and ’60s, as unions exploited their bargaining power in tight labor markets.

But workers say today’s strikes are fueled by a deeper sense of unfairness and economic anxiety. This past week, for example, unions representing about 2,000 workers at copper mines and smelters in Arizona and Texas went on strike, saying their members had not received raises for a decade.

“It’s about: ‘O.K., the government is not going to take care of us. Business is not going to take care of us. We’ve got to take care of ourselves,’” said D. Taylor, president of the hospitality workers union, UNITE HERE, which has had thousands of members strike in the past two years, including at Marriott International. “It’s been bubbling up for some time. Now it’s come up to the surface.”

In the airline industry, workers who made numerous concessions amid a wave of post-9/11 corporate restructurings complain that they continue to struggle under austerity even as the airlines post outsize profits.

“They got all these employees to agree to terms within the shadow of bankruptcy court, then they created these megamergers and are making billions,” said Sara Nelson, president of the Association of Flight Attendants.

While airline workers, unlike most private-sector workers, must receive permission from the government before they can strike, they have repeatedly demonstrated their anger. Thousands of airline catering workers, many of whom make under $12 per hour, voted to strike this year, pending the assent of a federal mediation board. Airline mechanics, including at Southwest Airlines, have won raises after effectively gumming up the operations of their employers: The mechanics significantly increased the number of low-grade maintenance problems they identified, leading to widespread flight delays and cancellations. (The mechanics denied that this was their intention.)

Teachers have expressed frustration that their districts were slow to reverse the spending cuts that followed the economic crisis a decade ago, even as state and local budgets have recovered.

“When the recession hit, teachers kind of buckled down. We said: ‘We get it. Everybody has got to pull their weight,’” said Noah Karvelis, who helped organize last year’s teacher walkouts in Arizona that forced lawmakers to raise teacher salaries and partially restore education funding. “But 10 years later, the state’s economy is back, we’re doing really well, and still the cuts are there. It was a huge, huge thing for us.”

In Chicago, teachers who went on strike on Thursday are demanding that local officials devote more of a recent billion-dollar cash infusion from the state to raises. They point out that teaching assistants’ pay starts at around $30,000 a year but they are required by law to live in the high-cost city. And veteran teachers often leave the district because their salaries plateau for several years. The teachers also want the district to hire more school nurses and librarians, who are in short supply across Chicago.

“In Chicago, the citizenry during the austerity talks believed it,” said Michelle Gunderson, a first-grade teacher on the union’s bargaining committee, referring to the lean contract negotiated in 2016. “At that time, we had a Republican governor who wasn’t funding our schools. But now an infusion of money has come in that has not made it to the classroom.”

The school district has said that $700 million of that money went directly to teacher pensions, and that the rest kept the district solvent. The district has proposed raising salaries 16 percent over five years and substantially increasing the number of nurses.

For its part, while G.M. has made $35 billion in profits in North America over the past three years, sales appear to be slowing in the United States and China. Domestic automakers also say they are under pressure from foreign rivals, which have lower labor costs in nonunion factories in the South, and to invest in developing electric vehicles.

That is one reason G.M. sought to preserve a so-called two-tiered wage scale introduced amid the company’s struggles over a decade ago, in which workers hired after 2007 make up to 45 percent less than the $31 an hour that veteran workers currently earn. The company also relies on a cadre of temporary workers who earn even less.

As part of the tentative deal the company reached with the United Automobile Workers, G.M. appears to have agreed to a path for temps to become permanent workers, and to alter its tiered wage scale. Workers will vote on the agreement over the next several days, and a result is expected on Friday.

Some workers are skeptical that the union made sufficient progress on these questions, and on the extent to which G.M. can continue to shift production to Mexico, which has imperiled jobs in the United States.

Selina Estrada, 32, who assembles doors at the G.M. plant in Spring Hill, Tenn., said she feared the company would prevent temporary workers from attaining permanent status by laying off those workers before they had achieved the required three years of “continuous service.”

“They’ll keep turning them around and laying them off right before their three years,” she said. “It’s never going to happen.”

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UK lawmakers delay Brexit vote and force Boris Johnson to ask for deadline extension

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U.K. lawmakers have voted to amend a crucial Brexit vote which now forces the government to seek an extension to the deadline and delays full approval.

The amendment, introduced by former Conservative lawmaker Oliver Letwin, withholds approval of Prime Minister Boris Johnson’s withdrawal agreement with the European Union until legislation is in place, and was passed 322 to 306.

The move automatically triggers the “Benn Act” which forces the prime minister to request a further extension to the October 31 deadline until January 31.

Speaking after the setback, Johnson said the government will not table the meaningful vote on Saturday. 

The opportunity to have a meaningful vote has effectively been passed up,” Johnson said. 

“Next week, the Government will introduce the legislation needed for us to leave the EU with our new deal on Oct 31 and I hope that our European colleagues and friends will not be attracted, as the opposite benches are, or should I say the front bench opposite, by delay,” Johnson further added. 

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It’s the bulls’ game to lose as the stock market heads for its final act of 2019

Wall Street’s final act of 2019 will hinge on whether investors should believe the messages being sent by corporate credit, crowd consensus and the calendar characteristics.

The broad market has been a sloppy stalemate between supportive and antagonistic forces for many months: The S&P 500 is hovering around the 3000 level it first reached in July – and is only up 4 percent from its January 2018 peak.

The global economic slowdown and flattening of corporate profits have held equities in check — leading to bouts of intense recession anticipation — while profoundly low global bond yields and a still-sturdy U.S. consumer have bolstered stock valuations.

Now — with the S&P up nearly 20% year to date but with the near-20% drop of a year ago fresh in mind — most investors, Cassandras and Polyannas alike, agree on a few things. Stocks are not cheap at close to 17-times forecast earnings, but also not terribly expensive, especially compared to bond yields. The Federal Reserve has cut rates twice and is quite likely to offer a third, even without severe weakness striking the U.S. economy. And while the economic expansion is looking mature, there aren’t bright flashing lights indicating an imminent recession.

This leads to those three crucial factors under debate as the key to whether the market is preparing to break higher after a long bull-market intermission or not.

Credit where due

If a recession were ominously approaching, it would come as something of a surprise to the corporate-debt markets, which have a reputation for expressing worry about the economy and risks to company cash flows before stocks register them.

For now, the credit backdrop remains pretty benign, helped by an easier Fed and a global hunger for predictable cash yield.

The risk spread demanded by investors in the vast market for BBB-rated corporate debt has been steady, as seen here. Certainly this gap has widened from very tight readings back in 2018 but are not signaling stress or alarm about the availability of money for lower-rated issuers in the investment-grade universe.

Source: FRED

Citigroup strategists also point to the Fed’s bank survey showing that lending standards for commercial and industrial loans have not become particularly restrictive, which in their view hints that industrial production should reverse some of its recent drop.

Source: Citigroup

There are plenty of clear excuses to worry about the durability of the economy, including a still-unpredictable trade fight dampening corporate investment and CEO sentiment. And the more speculative fringes of the debt markets — such as bottom-rated CCC-rated junk bonds and bank loans to highly leveraged borrowers — are showing some outright vulnerability to higher default rates.

But, on the whole, credit is holding together and is not a reason to doubt stocks’ ability to make further progress from here.

Reading the crowd

The choppy August pullback in stocks, accompanied by a rush toward record lows in Treasury yields and sharp drop in global growth, took a toll on investor attitudes.

A mosaic of sentiment and investor-positioning gauges say the market mood is subdued, especially given the S&P 500 is within a small upward wiggle of a record high.

Ned Davis Research tracks a composite of trader-sentiment indicators, which this month fell to the “extreme pessimism” zone where stocks’ risk-reward prospects tend to improve.

Source: Ned Davis Research

Retail investors for years have consistently harvested cash from the equity market and have been net buyers of bonds as yields have pressed lower. There is certainly a demographic tide involved, as an older population makes safety and retirement income higher priorities over capital appreciation.

But if nothing else, this pattern shows the lack of any kind of enthusiasm toward equities that would raise concerns about reckless greed inflating stocks.

Bank of America Merrill Lynch tallies the net flows across asset classes on a weekly basis, which shows the risk-averse move away from stocks and into bonds and cash.

Source: Bank of America Merrill Lynch

As noted, this has been the general trend for much of this bull market, which of course has seen numerous nasty corrections and scares.

But that doesn’t change the fact that investors seem not to be expecting or playing for another leg higher in stocks – which is itself a net positive.

‘Tis the season

In 2018, as the market suffered a relentless liquidation culminating in a 20% three-month loss by Christmas Eve, every seasonal rule of thumb failed. Not simply the tendency of stocks to do well in November and December, but more detailed patterns. When the S&P 500 was up at least 10% through September the market “almost always” carried higher through December, etc.

This doesn’t change the fact that the broad sweep of history has shown a general bias toward strength at year end. And, yes, pre-election years have a more pronounced upside tilt (even granting that there just have not been enough presidential elections to make such analyses statistically rigorous).

Last year’s experience might prompt even more skepticism about seasonal market indicators than usual, and understandably. But it’s worth asking: What are the chances that these guides will fail spectacularly two years in a row?

In all, the bullish case is starting to line up: Stocks have been resilient through a growth scare, trade-war flare-ups, an earnings-growth lull, yield-curve inversion and repo-market stress episode. Low bond yields and strength in defensive sectors and big growth stocks have carried the market, but early signs now show traction in cyclical, financial and global stocks – hinting at a more offensive tone.

Global leading growth indicators might have bottomed, the Fed appears on track to offer a third “insurance” rate cut, sentiment is cautious and credit still flowing. The next rally could prove a final flourish to the upside before a larger reckoning, but rarely do bull markets end by going sideways for 20 months and then falling apart.

The setup has improved, suggesting it’s now becoming the bulls’ game to lose.

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Boeing pilot warned of 737 Max software tied to crashes, told regulators to delete it from manuals

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A Boeing pilot warned about problems with the flight-control program on the 737 Max that was implicated in two fatal crashes, said he “unknowingly” lied to regulators, and told the Federal Aviation Administration not to include the system in pilot manuals before regulators deemed the plane safe for the public in 2017, according to messages released Friday.

The messages deepened the manufacturer’s crisis over the bestselling jets, which have been grounded worldwide since March in the wake of the crashes, sending the stock to an eight-week low.

The Boeing lead pilot complained in one of the messages that a flight-control system, known as MCAS, was difficult to control, according to the messages, which were obtained by NBC News.

That system and pilots’ ability to recover from its failure in flight are at the heart of investigations into the crashes. Investigators have implicated the system in both crashes — a Lion Air 737 Max that went down in Indonesia in October 2018 and an Ethiopian Airlines plane of the same model that crashed in March.

MCAS malfunctioned on both flights, repeatedly pushing the planes’ noses down until their final, fatal dives. All 346 people on both flights were killed.

“Oh shocker alerT! MCAS is now active down to M .2. It’s running rampant in the sim on me,” Mark Forkner, Boeing’s former chief technical pilot for the 737, said in 2016 to a colleague, Patrik Gustavsson, referring to the simulator, according to the transcript. “Granted, I suck at flying, but even this was egregious.”

His colleague replied that they would have to update the description of the system.

“So I basically lied to regulators (unknowingly),” read Forkner’s reply. Gustavsson responded: “It wasn’t a lie, no one told us that was the case.”

Forkner’s attorney, David Gerger, said in a statement, “If you read the whole chat, it is obvious that there was no ‘lie.'”

“The simulator was not reading right and had to be fixed to fly like the real plane,” he said. “Mark’s career — at Air Force, at FAA, and at Boeing — was about safety. He would never put anyone in an unsafe plane.”

‘Jedi mind-tricking regulators’

Forkner in January 2017 instructed an FAA employee to remove MCAS from pilot manuals and training, according to an email between the two that was obtained by NBC News.

“Delete MCAS, recall we decided we weren’t going to cover it in the FCOM or the CBT, since it’s way outside the normal operating envelope,” Forkner wrote.

He said in an earlier email to an FAA official that he was “jedi mind-tricking regulators into accepting training the training that I got accepted by FAA etc.”

The FAA on Friday said Boeing withheld these “concerning” messages for months from regulators.

The agency, which first certified the planes in 2017, said it is “disappointed that Boeing did not bring this document to our attention immediately upon its discovery,” adding it is “reviewing this information to determine what action is appropriate.”

Pilots at airlines, including American, complained after the crashes that they did not know about the MCAS system until after the first crash.

Boeing shares fell sharply Friday after the news broke, shedding nearly 7% and shaving about 170 points off the Dow Jones Industrial Average. The stock ended at $344, the lowest close since Aug. 21.

CEO under fire

The messages add to pressure already piling up on Boeing and CEO Dennis Muilenburg. The company and the FAA are facing several investigations into the plane’s design and software.

The company’s board removed Muilenburg as chairman last week, saying the division of the two roles will help him focus on bringing the plane back to service. Muilenburg is set to testify at two congressional hearings for the first time since the crashes: a Senate Commerce Committee hearing on Oct. 29 and a House Transportation Committee panel scheduled for Oct. 30.

Rep. Peter DeFazio, D-Ore., chair of the House Committee on Transportation and Infrastructure, called the instant messages “shocking, but disturbingly consistent with what we’ve seen so far in our ongoing investigation of the 737 MAX, especially with regard to production pressures and a lack of candor with regulators and customers.”

He said the incident “is not about one employee; this is about a failure of a safety culture at Boeing in which undue pressure is placed on employees to meet deadlines and ensure profitability at the expense of safety. Boeing will have to answer for this and other questions at our hearing on October 30th.”

The FAA turned over the instant messages to U.S. lawmakers and the Department of Transportation’s Office of Inspector General, the agency said.

“Over the past several months, Boeing has been voluntarily cooperating with the House Transportation and Infrastructure Committee’s investigation into the 737 MAX. As part of that cooperation, today we brought to the Committee’s attention a document containing statements by a former Boeing employee,” Boeing said in a statement.

Boeing has developed a fix for the software that misfired on the crashes but regulators haven’t yet signed off.

Airlines have missed out on hundreds of millions of dollars in revenue because of the grounding, which forced them to cancel flights and reduce their growth plans. Carriers repeatedly pulled the planes out of ischedules with no end in sight to the grounding. Southwest this week canceled 737 Max flights through Feb. 8, later than any U.S. carrier.

“We want to know more details and we stand with [FAA] administrator [Steve] Dickson in his demand for more information and an explanation on why this information were withheld,” said Dennis Tajer, spokesman for American Airlines pilots’ union.

Pilots at Southwest, the largest Max customer in the U.S., earlier this month sued Boeing for allegedly rushing the plane to market and said the grounding has meant its pilots have lost out on about $100 million in pay.

“The FAA’s announcement echoes the very serious concerns at the center of SWAPA’s lawsuit, and this is more evidence that Boeing misled pilots, government regulators and other aviation experts about the safety of the 737 MAX,” Southwest pilots’ union said in a statement. “It is clear that the company’s negligence and fraud put the flying public at risk.”

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Stocks will likely hit new records in the week ahead if earnings keep topping expectations

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Stocks will try in the week ahead to break the all-time highs set earlier in the year as a slew of S&P 500 companies get set to report.

The S&P 500 and Dow Jones Industrial Average are both around 1% below their all-time highs while the Nasdaq Composite is about 2% away from its record. The indexes got a lift this after a big chunk of this week’s reporters posted better-than-expected results. They were also boosted by improving sentiment around Brexit and U.S.-China trade negotiations.

The all-time highs could be tested as about 120 S&P 500 companies, or around 24%, are scheduled to release their quarterly results in the week ahead. Some of those companies include Caterpillar and Boeing, both of which are expected to report Wednesday before the bell. Amazon, Intel, McDonald’s and Chipotle Mexican Grill are also on deck for the week.

“You’ve got the potential for a combination of things that drive us to new highs,” said Art Hogan, chief market strategist at National Securities. “At the same time you’re getting better micro data in the earnings, you’re getting better news on the macro hurdles facing us.”

Traders work the floor at the NYSE .

Brendan McDermid | Reuters

More than 14% of S&P 500 companies have reported through Friday, FactSet data shows. Of those companies, 81% posted earnings that beat analyst expectations.

J.P. Morgan Chase’s report on Tuesday sent the stock to an all-time high while Citigroup and Bank of America also got a boost from their earnings releases. Netflix, meanwhile, briefly rallied around 7% Thursday before ending the session up 2.5%. Morgan Stanley advanced 1.5% on earnings. Coca-Cola climbed more than 1% on Friday after releasing its quarterly numbers.

To be sure, the companies are being rated on a very low bar this earnings season. Analysts polled by FactSet expected third-quarter earnings to have fallen by 4.6%.

“Earnings can be a positive catalyst to the extent that expectations are pretty low,” said Dan Russo, chief market strategist at Chaikin Analytics. “The bar has been lowered to the point where companies can jump over it.”

But investors might have a harder time digesting the week’s reports.

Companies such as Caterpillar are heavily affected by the U.S.-China trade war given their exposure to overseas markets. Boeing and Intel also have overseas exposure. Meanwhile, reports from companies such as Amazon, McDonald’s and Chipotle will be heavily scrutinized as investors look for clues on how the consumer is doing.

“Trade frictions and the global economic slowdown have clearly affected 2019 earnings growth thus far,” Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said in a note. “The third-quarter earnings reporting season will likely confirm that those negatives continued to pour over into last quarter’s results.”

The good news for investors is recent trade talks appear to have yielded some progress. President Donald Trump announced Oct. 11 the U.S. and China had reached a “very substantial phase one” deal. Multiple reports this week said China wants additional talks before signing off on the first phase, but National Economic Council Director Larry Kudlow said Thursday there is “a lot of momentum” to finalize the deal.

John Augustine, chief investment officer at Huntington Private Bank, said the “narrative” around trade had gotten “so one-sided to the negative side, there may be a better chance than not that a phase-one deal is signed.”

Meanwhile, preliminary figures on consumer sentiment showed a slight increase in October from September. The final consumer sentiment numbers for the month are scheduled for release on Friday.

“If corporate earnings show signs of resilience, especially by the U.S. consumer, then a run to new highs is by no means out of the question,” Tom Essaye, founder of The Sevens Report, said in a note.

Week ahead calendar (times in ET)

Monday

Earnings before the bell: Halliburton, SAP, Lenox Intl., PetMed Express

Earnings after the bell: Cadence Designs, Celanese, TD Ameritrade, Zions Bancorp (530p cc)

Tuesday

8:30 a.m. Philadelphia Fed nonmanufacturing (Oct)

10 a.m. Existing Home sales (Sept)

Earnings before the bell: Biogen, Lockheed Martin, McDonald’s, NextEra Energy, Novartis, Procter & Gamble, Travelers, UBS, United Tech., UPS

Earnings after the bell: Texas Instruments, Canadian Natl. Railway, Chipotle Mexican Grill, CoStar, Discover Fincl., Equity Residential, Snap, Whirlpool

Wednesday

7 a.m. Weekly mortgage applications

10:30 a.m. EIA weekly inventories report

Earnings before the bell: Boeing, Boston Scientific, Caterpillar, Daimler, Eli Lilly, Alexion Pharmaceuticals, Blackstone, Freeport-McMoRan, General Dynamics, Hilton, Invesco, LG Display, Nasdaq OMX, Norfolk Southern

Earnings after the bell: eBay, Ford Motor, Microsoft, PayPal, Tesla

Thursday

8:30 a.m. Weekly jobless claims

8:30 a.m. Durable goods orders (Sept)

9:45 a.m. Manufacturing PMI (Oct flash)

9:45 a.m. Services PMI (Oct flash)

10 a.m. New Home sales (Sept)

Earnings before the bell: 3M, AstraZeneca, Comcast, Danaher, Dow, Equinor, Raytheon

Earnings after the bell: Amazon.com, Gilead Sciences, Intel, Vale, Visa

Friday

10 a.m. Consumer sentiment (Oct final)

Earnings before the bell: A-B InBev, Ambev, Barclays, Charter Comm., Eni, Verizon

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Boris Johnson set for Brexit showdown in historic day for UK politics

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Prime Minister of the United Kingdom (UK) Boris Johnson gives a press conference at European Parliament on October 17, 2019 in Brussels, Belgium.

Jean Catuffe | Getty Images News | Getty Images

LONDON — After Theresa May’s three failed attempts to win over lawmakers, current U.K. leader Boris Johnson will put his own Brexit deal to the test during a historic Saturday sitting of the British Parliament.

The House of Commons will sit from 9.30 a.m. London time “until any hour,” according to the latest agenda paper. The House is sitting on a Saturday for the first time since 1982, when the U.K. was at war with Argentina.

Aside from key changes in how Northern Ireland is treated, there appears to be little difference from May’s failed deal, but Johnson will be banking that lawmakers, tired of the Brexit deadlock, will switch to support his withdrawal deal.

Some reports suggest Johnson has persuaded hardline Brexiteers that by voting for his deal, the government can keep the threat of a no-deal on the table when trade negotiations begin during the Brexit transition period.

Johnson will make a statement at 9.30 a.m. local time, before taking at least 90 minutes of questions about his talks that led to the agreement between the U.K. and 27 other EU leaders.

In the afternoon, the government motion is expected to ask lawmakers to approve the deal. The vote is expected to be tight with more “hard Brexit” supporters in his Conservative Party now ready to back Johnson after rejecting May.

If MPs (Members of Parliament) do approve the deal unamended on Saturday, the government is expected to table the Withdrawal Agreement Bill as soon as Monday, freeing the U.K. to leave the European Union on October 31.

The U.K. then enters into a transition period until the end of 2020. During this time, the EU and U.K. would attempt to resolve future trading terms.

Should Johnson lose the vote, U.K. legislation means he has until 11 p.m. London time to send Brussels a letter requesting an extension to the Brexit deadline.

Amendments to the vote have been made possible by a Commons victory on Thursday which saw remain MPs and opponents to a no-deal Brexit vote in unison. If any amendment is selected by the Speaker of the House John Bercow and approved by lawmakers, it could mean the outcome of Saturday’s vote is altered significantly.

One possibility is a stiffening of existing legislation that prevents no deal at all, while another possible vote is on whether a second public referendum is needed to confirm Johnson’s Brexit deal.

What Johnson needs

The prime minister needs roughly 318 votes to pass the motion, but there are only 288 Conservative Party MPs.

On these calculations, which assumes all Conservatives vote for the deal, Johnson is 30 votes short.

His former reliance on 10 votes from the Democratic Unionist Party (DUP) has now evaporated with the Northern Irish party, angry at the deal struck with Europe, now vowing to oppose the government.

Further opposition can be expected from the Scottish National Party (SNP), Plaid Cymru (Welsh national party), Liberal Democrats, one Green Party MP and of course, the main rump of the opposition Labour Party.

But all is not lost for Johnson and there are three sources he can plunder for support:

  • Conservative rebels who the prime minister previously sacked, but haven’t yet defected to another party.
  • Labour lawmakers whose constituencies voted heavily to leave in the 2016 referendum.
  • A small number of MPs sitting as independents.

Some pro-deal Labour MPs have already confirmed they will defy their party to vote with Johnson while, conversely, some rebel Conservative lawmakers are set to reject Johnson’s proposal.

Now watch: Scottish lawmaker says Johnson should be “taken out of office”

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The US and China made ‘substantial progress’ at trade talks, Chinese vice premier says

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President Donald Trump, right, shakes hands with Liu He, China’s vice premier, during a meeting in the Oval Office of the White House in Washington, D.C., on Friday, Oct. 11, 2019.

Andrew Harrer | Bloomberg | Getty Images

Chinese Vice Premier Liu He said on Saturday that will work with the to address each other’s core concerns on the basis of equality and mutual respect, and that stopping the trade war would be good for both sides and the world.

“The two sides have made substantial progress in many fields, laying an important foundation for the signing of a phased agreement,” Liu, also the chief negotiator in the trade talks, told a virtual reality conference in Nanchang, the capital of southeastern Jiangxi province.

“Stopping the escalation of the trade war benefits China, the U.S and the whole world. It’s what producers and consumers alike are hoping for,” Liu said in a rare public speech about the trade war.

China and the United States reached a limited deal last week toward ending the trade war that has roiled global markets and hammered world growth. Both sides are working toward a written agreement.

China’s third-quarter economic growth slowed to an annual 6.0%, its weakest pace in almost three decades as the bruising trade war hit factory production and investment sentiment.

Liu said on Saturday that China will step up investment in core technologies to accelerate economic restructuring, adding economic prospects remain “very bright.”

“We’re not worried about short-term economic volatility. We have every confidence in our ability to meet macroeconomic targets for the year,” he said.

Liu said improved relations between China and the United States benefited the world.

“Growth in Sino-U.S. economic and trade cooperation is connected to peace, stability and prosperity of the whole world,” he said.

“China and the U.S. can meet each other half way, based on equality and mutual respect, addressing each other’s core concerns, striving to create a good environment and achieving both sides’ common goals.”

The International Monetary Fund estimated that a tentative trade deal reached by Washington and Beijing last week could reduce the harm done by tit-for-tat tariffs imposed by both countries over the past 15 months.

Instead of dragging global growth down by 0.8%, the impact might be limited to 0.6%, Managing Director Kristalina Georgieva said on Thursday.

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G.M. Workers Begin to Size Up the Deal Their Union Is Selling

The tentative contract hammered out by the United Automobile Workers and General Motors won’t please all of the union’s members, but it is sure to get strong support at the Detroit-Hamtramck assembly plant.

The factory, which employs 700 U.A.W. members, is scheduled to close in January. But under the contract, G.M. has promised to spend $3 billion to retool Hamtramck to make battery modules and electric trucks, most likely increasing its work force and ensuring its operation for at least several more years.

“I think it’s a good contract,” Wiley Turnage, chairman of Local 22, which represents Hamtramck workers, said Friday. “I’m happy.” He said he planned to vote in favor of the contract and to recommend that his members do the same.

If ratified by the U.A.W.’s rank and file, the contract will end a strike that has idled 34 factories in seven states for more than a month and has cost G.M. an estimated $2 billion in operating profit. The walkout’s effects have rippled through the North American auto industry, affecting production and idling workers at parts suppliers and G.M.’s operations in Canada and Mexico.

Voting on the contract will take place next week, with a result due on Friday. A simple majority is required for ratification, but it must include a majority of skilled-trades workers — the electricians and other technical specialists who maintain machinery. If it does not, the union will have to bargain with the company to address their concerns — as occurred in 2015, the last time G.M. negotiated a contract.

The agreement includes provisions for higher wages and a process that allows temporary workers to become full-fledged employees. It also enables full-time hourly workers to rise to the top wage of $32 an hour within four years, ending a two-tier wage system that fostered tensions between workers. Each worker would also be paid a bonus of $11,000.

RBC Capital Markets estimated that the contract would raise G.M.’s labor costs by $100 million a year.

For its part, G.M. secured the union’s acceptance that three plants already idled, including a factory in Lordstown, Ohio, will close permanently. That will help G.M. guard against excess manufacturing capacity at a time when auto sales are slowing, and put G.M. in a more stable position if the economy goes into a recession. The union went into the talks hoping to prod G.M. into reactivating the Lordstown plant.

A rejection of the contract would be a major setback for the U.A.W. president, Doug Jones, and the union’s other senior officials at a delicate moment. Before the strike, union leaders had come under heavy criticism from the rank and file over a federal corruption investigation in which several high-ranking officers have been charged with using union funds for lavish travel and personal purchases.

Many union locals have started planning informational meetings to explain the terms of the contract to members. Darlene Maddox, who was laid off when the Lordstown factory closed this year and accepted a transfer to Lansing, Mich., said she was very disappointed that her old plant wouldn’t be saved but wanted to know more before deciding how to vote.

“My first instinct is to vote no,” she said. “But the major highlights appear to be good.”

Others said they were encouraged that temporary workers would be able to become permanent employees with full benefits after three years of service.

Under current rules, temporary workers earn about $15 an hour, can be laid off at any time and have no dental or vision insurance.

Linda Castro, a temporary worker at a plant making sport utility vehicles in Spring Hill, Tenn., joined G.M. in January 2017, was laid off after a few months and more than a year later was recalled. She said she was worried that G.M. would lay off temporary workers before they could become full employees.

“No one is going to make it to three years,” she said. “So it’s useless.”

Others said the end of the two-tier wage system was a big victory. Under current conditions, some G.M. workers earning less than $20 an hour work alongside veterans making $31 an hour, the current top wage. The proposed contract would move workers to the top wage in four years, half the time it takes now.

“For me, what matters is making sure everyone makes the same wage, and to be able to do that in a time frame that’s not eight years,” said Ashly Luna, an assembler at a truck plant in Flint, Mich., who has been at G.M. for 12 years.

The proposed contract also would leave the workers’ share of health care costs unchanged at about 3 percent, well below the level paid by other manufacturing workers and G.M.’s salaried staff.

D. J. Calma, another line worker in Flint, said autoworkers deserved generous health care terms because of the physical toll of assembly work.

“In the short amount of time I’ve been here, 12 years, I never thought my body would feel this way,” he said. “It’s the repetitious squeezing. You’re putting your body to the test, truck to truck.”

Todd Campanella, an officer in a U.A.W. branch that represents more than 800 G.M. employees in Rochester, N.Y., said the leadership of his local would meet with senior union officials over the weekend to discuss the contract before presenting it to members for a vote.

Mr. Campanella attended the meeting on Thursday in Detroit at which leaders of G.M. union locals gathered to debate the proposed contract. He said representatives from idled plants had voiced concerns about the agreement before the group voted to recommend it to workers.

“We’re all in this together, and when some of us are hurting, we’re all hurting,” Mr. Campanella said. “That’s really where the discontent would come from. Other than that, a lot of the contract was very positive for a lot of the plants.”

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Johnson & Johnson Recalls Baby Powder Over Asbestos Worry

Johnson & Johnson, which has spent years insisting that its baby powder is safe, recalled 33,000 bottles of the product on Friday after the Food and Drug Administration discovered evidence of asbestos, a known carcinogen, in one of the bottles.

The recall, the first time Johnson & Johnson has pulled baby powder from store shelves over asbestos concerns, could undercut its defense against a swarm of allegations that its talc-based products caused cancer. It comes as the company, which reaches into the lives of millions of people through brands such as Tylenol, Band-Aid and Rogaine and reported nearly $82 billion in sales last year, is entangled in numerous legal battles over the safety of its products.

The company has settled some claims — and is still fighting others — involving its role in the nationwide opioid crisis. On Thursday, Johnson & Johnson agreed to pay $117 million in a settlement over the deceptive marketing of transvaginal pelvic mesh implants, and a jury this month ordered it to pay $8 billion to a Maryland man who accused the company of playing down the risks associated with the antipsychotic drug Risperdal. In total, the company faces more than 100,000 lawsuits over its products.

More than 15,000 of those are from people who say baby powder and other talc-based products caused them to develop cancer. Some have mesothelioma, an aggressive cancer that is considered the signature disease of asbestos exposure, while others have ovarian cancer.

The decision to pull the baby powder, sourced from China and distributed last year, is a “whopper” for a company as dependent on consumer trust as Johnson & Johnson, said David Noll, a law professor at Rutgers University.

“I can’t imagine an attorney for Johnson & Johnson standing up in front of a jury now and saying with a straight face that the product is safe,” Mr. Noll said. He added that “if people come to associate the company’s signature product with deadly diseases, there will be huge spillover effects for its ability to market other products.”

The recall was prompted by the FD.A.’s discovery of trace levels of chrysotile asbestos in samples from a bottle of baby powder bought from an online retailer. The company said it was informed of the results on Thursday and recalled bottles from lot number 22318RB out of an “abundance of caution,” though the F.D.A. advised consumers with baby powder from the affected lot to “stop using it immediately.”

But Johnson & Johnson also repeated its longstanding defense against cancer claims, saying that “thousands of tests over the past 40 years repeatedly confirm that our consumer talc products do not contain asbestos.” The company appeared to question the testing process, saying in a statement that it is working with the F.D.A. to “determine the integrity of the tested sample and the validity of the test results.”

Dr. Susan Nicholson, Johnson & Johnson’s vice president of women’s health, said during a short conference call with investors on Friday that the F.D.A.’s report showed “an extremely unusual finding” that was “inconsistent with our testing to date.”

In response, an agency spokeswoman, Gloria Sánchez-Contreras, said, “The F.D.A. stands by the quality of its testing and results.”

Analysts estimate the baby powder lawsuits could cost Johnson & Johnson $5 billion to $10 billion. The recall could lead to the company’s having to pay more in damages or to settle cases, said Erik Gordon, a University of Michigan business professor who studies corporate governance. Shares of the company closed down more than 6 percent on Friday.

Plaintiffs in the talc cases have accused Johnson & Johnson of failing to warn customers of the risks of asbestos contamination, despite being aware of concerns for decades. A New York Times investigation last year found internal memos and reports made public during litigation that document executives’ concerns about potential contamination that date back 50 years.

[Read our investigation into claims about asbestos in baby powder.]

Johnson & Johnson disclosed this year that it was being investigated by the Justice Department and the Securities and Exchange Commission over concerns about possible asbestos contamination of its talc-based products.

Johnson & Johnson is awaiting a major decision that could tilt the talc litigation in its favor. As part of pretrial proceedings for thousands of talc lawsuits consolidated in New Jersey, a federal judge is mulling whether to block testimony from expert witnesses hired by plaintiffs, a move that could cause many talc cases to be dismissed or dropped.

[Thousands of people who trusted Johnson & Johnson’s baby powder for decades are suing the company after developing cancer. “The Weekly,” our new TV show, investigates their allegations.]

Baby powder represents a tiny fraction of Johnson & Johnson sales but an outsize threat to its reputation.

Johnson & Johnson’s name is “so synonymous with their line of baby products,” said Alla Valente, an analyst with Forrester. But recently, she said, the company has started a “damage control campaign” that casts it as bigger than its baby powder, focusing on its slate of other products.

“It’s about trust: If a mother could trust a Johnson & Johnson product for their children, then that product must be safe,” Ms. Valente said. “But now, the dam is finally breaking, where consumers are saying that enough is enough.”

Talc is a natural mineral, formed in underground deposits under the same geological conditions as asbestos. In mines, veins of asbestos can intermingle with talc, geologists say.

Johnson & Johnson officials emphasized on Friday that the level of asbestos detected was very low, just a fraction of 1 percent of the sample. United States health agencies, however, say there is no known safe level of exposure to asbestos.

While health risks increase with heavier and longer exposure to asbestos, the overall evidence suggests no level of asbestos exposure is safe, and disease has been found in people with only brief exposures, according to the National Cancer Institute.

Several earlier F.D.A. tests, including one in the past year and another about a decade ago, did not detect any asbestos in samples of baby powder.

The F.D.A. does not require safety testing for personal-care products and cosmetics before they are marketed, and tests products only occasionally, usually after complaints by consumers or advocacy groups.

The agency considered — and soon abandoned — a plan to monitor talcum products for asbestos in the 1970s, when concern about asbestos in household products captured the public’s attention. The F.D.A. commissioned tests of Johnson & Johnson powders back then, and the company successfully challenged their validity.

This year, after consumer tests found asbestos in makeup kits for children sold at Claire’s, the F.D.A. followed up with its own tests. It detected the carcinogen in half of 20 products, including Claire’s eye shadow and compact powder, JoJo Siwa makeup sold at Claire’s, and bronzers, blush and other makeup made by Beauty Plus Global City Color Cosmetics and sold in retail outlets. The products were eventually recalled.

The agency plans to test 30 more products containing talcum powder, including those popular on social media and others marketed to children, Ms. Sánchez-Contreras said. The products are a tiny percentage of the thousands of personal-care products available for sale.

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