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.
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.
Tuesday’s midterm election results have shown that Democrats will take control of the House of Representatives for the first time since 2010, while the Senate will maintain a Republican majority. What could this combination of a Republican President and a split Congress mean for the economy? Main areas of reconsideration include infrastructure, healthcare, the minimum wage, and tax cuts.
President Trump signed the "Tax Cuts and Jobs Act" into law on Dec. 22., 2017, bringing sweeping changes to the tax code. Generous incentives in the Trump tax are meant to persuade people to work through business challenges, but financial advisers now have a new way to deliver impact investing to wealthy clients — one that comes with substantial tax benefits — according to the fledgling federal tax law.
On Friday, chain store retailer Five Below Inc. opened its newest location in Manhattan. Its first outpost in New York City spans 11,000 square feet and is located on Fifth Avenue, between 44th and 45th Streets. Five Below has opened 67 new stores in 2018 so far and plans to reach 750 by the end of the year, almost quadrupling the number of stores since its initial public offering in 2012.
Goldman Sachs forecasts the yuan reaching 7.1 against the dollar in the next six months, breaching the psychologically important barrier of 7. MK Tang, a senior China economist at Goldman in Hong Kong, said that "we see good economic reasons arguing for a weaker yuan, especially in the coming months," Tang said. "It’s only a matter of time for the yuan to hit 7."
On Tuesday, Italy’s 2019 fiscal budget was rejected by the European Union Commission. The European Union Commission’s vice president, Valdis Dombrovskis, stated that rejecting the budget plan was the only viable option they had. The budget goes against the requirements of the Stability and Growth Pact, which is essentially a set of rules and regulations established to ensure countries part of the European Union are making financially safe decisions and are properly coordinating their respective fiscal policies.
Automotive company Tesla Inc. reported its surprising third-quarter earnings of $311.5 million, its first profit in two years and its third quarterly profit ever. The automaker earned $22 million in the third quarter of 2016 and $11.2 million in the first quarter of 2013 and has yet to report an annual profit.
The European Union has sent the Italian budget back to Rome with a failing grade, the first time such a request will have been made of an EU member state. The Commission is worried about the impact of higher spending on already high levels of debt in Italy, the eurozone's third-biggest economy and Italy will have to back down or face fines.
Despite the uproar which followed the demise of journalist Jamal Khashoggi, the investment conference (named the Future Investment Initiative) at Saudi Arabia still took place and was attended by international leaders. Prime Minister Imran Khan, chairman of Pakistan’s Tehreek-e-Insaf, was one of the invited speakers. Khan did not shy away from delineating grave economic crises which the country has encountered.
Walmart Inc. has reached an agreement with Hollywood studio Metro-Goldwyn-Mayer in which MGM will create original video shorts to stream on Vudu, an on-demand streaming service that Walmart bought in 2010. This deal is an attempt by Walmart to push its way into the online entertainment industry and to compete with rivals such as Amazon Prime Video, Netflix, and Hulu.
Last Thursday, the Dow Jones and S&P 500 — two barometers for how well the US stock market is doing — dropped by more than 2 percent. The US share market, indeed, has begun its worryingly decline that the Dow dropped more than 800 points in one of the worst sell-offs since Feb. as investors worried that sharply rising interest rates would constrain the nation’s historic economic expansion.