Economics And Business
The Economics and Business Section of IR Insider publishes breaking news reports and analysis regarding developments relating to the U.S. Economy. Topics covered in the Economics and Business Section may include the U.S. national debt, changes in policies affecting interest rates, inflation, and unemployment rates. Updates on U.S. foreign trade, international trade, transnational trade deals, and ratification of economic treaties and sanctions may be further addressed. Additionally, news and data on world financial markets and leading banking institutions will be discussed. Our section editor is Ritika Pathak.
General Motors Co.’s driverless-car division Cruise received on Tuesday an equity investment of $1.15 billion from institutional investors like mutual fund company T. Rowe Price Associates Inc. Last year, After acquiring Cruise in 2016, GM established the startup as its own legal entity to keep separate the new technology and GM’s own manufacturing operations. SoftBank and Honda invested $2.25 billion and $2.75 billion respectively in Cruise last year.
American International Group (AIG) held its quarterly earnings call on Monday, revealing that CEO, Brian Duperreault projects the insurance company to post an underwriting profit for the full year. In response to this positive outlook for the year, its stock jumped by more than 6 percent during after-hours trading.
Berkshire Hathaway, run by Warren Buffett, has agreed to invest $10 billion into Occidental Petroleum Corp.’s bid to acquire Anadarko Petroleum Corp. Occidental’s competitor for the bid is Chevron Corp., who agreed to pay $33 billion for Anadarko, only to be topped by Occidental at $38 billion last week. The main benefit in the deal comes from energy assets in the Permian Basin, the world’s most productive oil field, in West Texas and New Mexico.
Over the past few weeks, several of the biggest technology companies have held their quarterly earnings calls for the first quarter of 2019. Alphabet, the parent company of Google, announced its quarterly earnings on Monday, April 29, which was the tipping point on investor’s negative sentiment for the company that has been building over the course of the past year. The stock (GOOG) responded to the lacklustre earnings report by dropping about eight percent in value to $1,189.51 by the time the market opened the next day.
On Monday, Tesla CEO Elon Musk announced plans to turn the company’s vehicles into ride-sharing robot taxis. Any Tesla car with autonomous driving can become a robotaxi, and owners would have to add their car to the Tesla Network platform through the company’s app. Musk said that there would be “over 1 million robotaxis on the road” by next year.
As Apple and Qualcomm geared up for the beginning of a lengthy legal battle over patent disputes starting April 16, Apple released a surprise announcement regarding a settlement between the two technology giants. The announcement stated that Apple has agreed to pay an undisclosed settlement fee to Qualcomm in return for a global patent license agreement, a chipset supply agreement, and an end to all ongoing litigation.
Walmart is increasing its use of robot helpers in stores to perform menial tasks such as monitoring inventory, cleaning floors, and unloading trucks. As the retailer works to raise wages and implement new services such as online grocery delivery, its use of robots will help control labor costs.
Pinterest, the online image curation company founded in San Francisco by Ben Silbermann and Evan Sharp, is reaching the final stages of its projected $1.2 billion IPO. Pinterest’s platform has surpassed 250 million monthly active users, allowing the company to generate over $700 million in revenue last year. These figures situate the company near Snapchat’s 287 million monthly active users, a company that had its IPO in mid-2017.
On Monday, Saudi Arabia’s national oil company Saudi Aramco revealed its financial details to investors for the first time. Aramco earned $111 billion in net income in 2018, more than Apple ($59.5 billion) and Exxon Mobil ($20.8) combined. The company had earned $212 billion prior to expenses such as taxes, a number comparable to the military budgets of all 28 European Union member states combined. On average, Aramco produced 13.6 million barrels of oil per day in 2018.
Apple’s Mar. 25 event unveiled a wide array of new services, marking Apple’s shifting focus towards integrating services into their existing hardware and software. These new services include the long rumored Apple News+ and Apple TV+, as well as the less anticipated Apple Card. Despite Apple’s previous denouncement of credit cards, Apple is partnering with Goldman Sachs to offer the Apple Card to promote Apple Pay while integrating its other services.
On Monday, Uber settled a lawsuit with its drivers in California and Massachusetts who wanted the company to recognize them as employees. While Uber agreed to pay the drivers $20 million, it did not agree to change their status as independent contractors.
Nvidia’s recent acquisition of Mellanox, a networking chipset and technology provider, for $6.9 billion marks a new direction for the company in its biggest acquisition to date. The acquisition shows analysts and stakeholders that its vision of the future ranges outside of just producing graphics cards, instead prioritizing the future of artificial intelligence.
Contrary to President Trump’s initial promise to reduce the gap between US imports and exports, the US is currently experiencing one of the highest levels of trade deficit in history at a staggering difference of $891.3 billion. President Trump’s policies directed at boosting exports and setting tariffs to protect domestic producers did little to close the negative trade gap. Economists have suggested that the appreciation of the US dollar combined with President Trump’s trade war with China has contributed to the deficit.
Last week, Tesla said that it would be closing almost all of its physical showrooms to cut costs and decrease the price of its Model 3 sedan, despite having announced 11 new store locations across the United States less than three months ago. CEO Elon Musk believes that this change was consistent with the growing online market: “it’s 2019 - people just want to buy things online,” he said during the announcement last Thursday. Despite the lack of a test drive possibility, the change could target technology-loving customers who dislike the process of physically buying a car, including dealing with salespeople and price haggling.
On Monday, Amazon.com Inc. announced through an SEC filing that former CEO of PepsiCo Indra Nooyi would be joining its board of directors as well as its audit committee. Having led PepsiCo for 13 years, Ms. Nooyi stepped down as CEO in October 2018. Mrs. Nooyi’s appointment increases the number of board members to eleven and makes her the fifth woman to be elected to the current board. Amazon has granted her 549 restricted stock units, which will be vested in three installments.
As hope for a sound Brexit-deal diminishes, farmers have raised concerns regarding the reduction of tariffs on food and other common good which threaten the the purchase of domestically produced agricultural goods as imports become a cheaper alternative to British citizens.
Japanese automaker Honda confirmed on Tuesday that it would close its factory in Swindon, England, by 2021. The plant, Honda’s only one in the UK, currently employs 3,500 workers and produces around 150,000 cars a year. The site will close down once Honda’s current line of Civic cars has come to an end.
The recently concluded US government shutdown depressed the morales of many citizens who had to live for a substantial amount of time devoid of any work and necessary payment. Although the shutdown has, at least as of now, been terminated, the repercussions are still quite evident. Taxpayers’ woes have significantly increased as the Internal Revenue Service’s ( IRS) response rate and services drastically curtailed after the shutdown.
On Monday, Amazon.com Inc. disclosed its plans to acquire Eero, a company that offers many small customizable wireless routers around the house to prevent Wifi dead zones. Although the acquisition price has not been disclosed, in a private financing round in 2016 Eero was valued at $251 million by Sand Hill Econometrics, an economic consulting firm. The startup, based in San Francisco, raised nearly $100 million in venture capital from investors such as Index Ventures, Initialized Capital, and Menlo Ventures.
President Trump is expected to nominate David Malpass as the next President of the World Bank. Malpass, currently the undersecretary for international affairs at the Treasury, has long been an outspoken critic of the bank. He has argued that the bank has become too focused on its expansion rather than fulfilling its role in helping developing countries combat poverty.
The United States Securities and Exchange Commission has requested information from Japanese carmaker Nissan Motor amidst the scrutiny of its former chairman Carlos Ghosn’s financial misconduct accusations. The SEC is investigating the verity of Nissan’s executive pay disclosures. A spokesperson for Nissan said that the company “[has] received an inquiry … and [is] cooperating fully.”
On Thursday, Starbucks announced that it would begin offering delivery services at around 2,000 of its roughly 8,000 stores in the United States in early 2019. The coffee chain began testing its new program in Miami over the summer and will partner with Uber Eats to deliver drinks to customers’ doors.
On Thursday, Lyft Inc. announced that it had filed confidential paperwork for an initial public offering, keeping the company on track in its agenda to reach the public market by March or April of 2019, although the timing is “subject to market and other conditions.” The underwriters for the IPO are said to be JPMorgan Chase, Credit Suisse and Jefferies, while the number of shares and price range is still unknown.
Qatar citizens have the highest per capita income of any country thanks to its status as the world’s largest exporter of liquefied natural gas, but the country’s decision to end its nearly 60-year-old membership in the Organization of the Petroleum Exporting Countries (OPEC) caught many observers by surprise earlier this week.
On Friday, Marriott International Inc. disclosed a data breach in its Starwood reservation database that could expose the personal information of up to 500 million guests. Marriott was alerted to a potential breach on Sept. 8, and after investigating, the company found that the hack into the system has allowed unauthorized access since 2014. Marriott found that the hacker had copied and encrypted the information, but wasn’t able to identify the exact information accessed until Nov. 19.
Deutsche Bank is Germany’s leading bank founded in 1870, with a strong position in Europe and a significant presence in the Americas and the Asia Pacific. Although the Bank was once known for its aggressive efforts to compete with Wall Street institutions, it has shrunk after years of losses as a result of problems including a bloated investment bank and trading desk and costly legal settlements tied to the sale of toxic mortgage securities. As a matter of fact, despite the bank’s valued company value in integrity, discipline, and client-centricity, earlier this Thursday, its headquarter in Frankfurt and five more offices were searched by one hundred seventy officers under a money-laundering investigation involving hundreds of millions of euros.
The United Kingdom is potentially standing at the brink of recession. The warning couldn’t have been any clearer from the Bank of England. A no-deal Brexit can send the British pound on a long downward spiral, resulting in a recession that could potentially prove to be worse than the 2008 financial crisis. The devastating effects can potentially shrink the UK economy by eight percent.
On Wednesday, UK Prime Minister Theresa May said that her cabinet supported the Brexit deal with the European Union. The resignation of important UK government ministers such as Boris Johnson and David Davis, however, highlighted the difficulty of getting a divided parliament to approve the deal. If Parliament does not approve, there are greater chances of a no-deal Brexit, meaning that there would be no agreement on the exit.
A potential Southeast Asian-centered trade deal fell short of being finalized for 2018. This year, the annual summit of the Association of Southeast Asian Nations was held in Singapore, where Prime Minister, Lee Hsien Loong confirmed that the final verdict was to postpone any such plans of a free- trade initiative to the subsequent year.