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Update on the latest business

February 7, 2019

FINANCIAL-MARKETS

Stocks tumble

NEW YORK (AP) — Stocks are tumbling in midday trading on Wall Street, following European markets lower, as investors became more pessimistic about the global economic outlook. The latest blow to confidence came Thursday as European officials slashed their forecast for economic growth in the eurozone this year.

U.S. indexes fell broadly, with the worst drops going to internet and technology companies. Facebook fell 2.4 percent. Twitter plunged 10.4 percent after reporting weak user numbers.

Traders are seeking safety in U.S. government bonds, sending yields lower. The yield on the 10-year Treasury fell to 2.66 percent.

MORTGAGE RATES

US mortgage rates fall to 10-month low; 30-year 4.41 pct.

WASHINGTON (AP) — U.S. long-term mortgage rates fell this week to a 10-month low, spurring on potential homebuyers for the upcoming season.

Mortgage buyer Freddie Mac says the average rate on the benchmark 30-year, fixed-rate mortgage eased to 4.41 percent from 4.46 percent last week. Despite the declines in recent weeks, home borrowing rates are above last year’s levels. The key 30-year rate averaged 4.32 percent a year ago.

The average rate this week for 15-year, fixed-rate loans declined to 3.84 percent from 3.89 percent.

UNEMPLOYMENT BENEFITS

Applications for US jobless aid fell to low level of 234,000

WASHINGTON (AP) — The number of Americans seeking unemployment benefits dropped sharply last week, a sign that layoffs are rare and the job market is strong.

The Labor Department says weekly applications for jobless aid fell 19,000 to 234,000, a low level that indicates businesses are holding onto their employees. Applications are a proxy for layoffs. The four-week average, a less volatile figure, rose to 224,750.

Businesses are hiring at a healthy pace that has surprised economists, who expected job gains would slow as the number of unemployed dwindled. The jobless rate stood at just 4 percent last month, when employers added 304,000 jobs, the most in nearly a year. With labor scarce, many companies are reluctant to let workers go, likely because they fear it will be hard to replace them.

FORD-CHICAGO PLANT

Ford to invest $1 billion, hire 500 at Chicago factories

CHICAGO (AP) — Ford Motor Co. plans to invest $1 billion and add 500 jobs at its plants in Chicago as the automaker launches three new SUVs.

Ford announced at the Chicago Auto Show on Thursday that they will expand capacity to produce a new Ford Explorer, new Police Interceptor Utility and new Lincoln Aviator. Work will be finished this spring. The new jobs at the two Chicago facilities will bring employment at both to about 5,800.

The Chicago plant will stop making the one-time top-selling Taurus sedan as it meets rising demand for SUVs. The Chicago factory is Ford’s longest continually operating vehicle assembly plant. It started producing the Model T in 1924.

The Aviator is due in showrooms this summer and the Interceptor is the top-selling police vehicle in the country.

IBM-NEW YORK

IBM: $2B expansion in NY to focus on artificial intelligence

ALBANY, N.Y. (AP) — IBM is announcing plans for a $2 billion expansion in New York state focusing on artificial intelligence hardware.

The Westchester County-based company says that as part of the investment, it will create a center for AI computer chip research and development at the SUNY Polytechnic Institute’s campus in Albany.

To support the expansion, New York has agreed to contribute $300 million for the purchase and installation of equipment for the work. In addition, IBM and the state will together invest $55 million to fund artificial intelligence research across the State University of New York system.

The deal was announced Thursday by company executives and Gov. Andrew Cuomo. The Democrat says the expansion would put New York on the cutting edge of artificial intelligence research.

DELTA-SMALL PLANE

After trade fight, Delta’s new small jetliner takes flight

UNDATED (AP) — Delta Air Lines’ newest plane is taking off, part of a trend of airlines giving high-paying passengers more room and comfort on smaller jets.

Delta’s first flight with the 109-seat Airbus A220 took off Thursday from New York’s LaGuardia Airport and landed in Boston.

The plane was developed by Canada’s Bombardier, which later joined forces with Airbus to make and sell the jet, which is smaller than Boeing 737s.

Delta is putting 12 first-class seats and 15 other premium seats on the plane.

A day earlier, United Airlines said it will fly a retooled Bombardier jet with 50 seats, 30 of them at premium prices.

Boeing fought unsuccessfully to block Bombardier from selling the new plane to Delta, claiming that Bombardier got illegal subsidies from the Canadian government.

BB&T-SUNTRUST

BB&T, SunTrust combining in $66 billion all-stock deal

ATLANTA (AP) — Southern regional banks BB&T and SunTrust are combining in an all-stock deal valued at about $66 billion.

The banks said Thursday that the combined company will be the sixth-largest U.S. bank based on assets and deposits. It will have approximately $442 billion in assets, $301 billion in loans and $324 billion in deposits serving more than 10 million households.

The combined company will be based in Charlotte, North Carolina, its board and management evenly split between BB&T Corp. and SunTrust Banks Inc. A new name will be chosen before the deal closes in the fourth quarter.

SunTrust shareholders will receive 1.295 shares of BB&T for each share they own. BB&T shareholders will own about 57 percent and SunTrust shareholders will own about 43 percent of the business.

TWITTER-RESULTS

Twitter posts bigger 4Q profit, monthly user base slips

NEW YORK (AP) — Twitter’s revenue and profit and its daily user base all grew in the final three months of 2018, capping its first profitable year.

But its monthly user count slipped and guidance for the current quarter was below expectations, sending shares down 10 percent at the opening bell Thursday.

The San Francisco company disclosed its daily user base count for the first time, putting the figure at 126 million, up 9 percent from a year earlier. These are users who see ads on the platform and log in at least once a day. Its monthly user base fell to 321 million, from 326 million.

Twitter posted earnings of $255 million, or 33 cents per share, in the October-December quarter. That is up from $91 million, or 12 cents per share, a year earlier. Revenue grew 24 percent to $909 million.

Analysts polled by FactSet were expecting earnings of 25 cents per share and revenue of $867 million.

GERMANY-FACEBOOK

German antitrust authorities restrict Facebook data use

BERLIN (AP) — German antitrust authorities have issued a ruling prohibiting Facebook from combining user data from different sources.

The Bundeskartellamt says Facebook users have only been able to use the social network on the condition that it can collect user data “outside of the Facebook website in the internet or on smartphone apps and assign these data to the user’s Facebook account.” This includes assigning data from Facebook-owned services like WhatsApp and Instagram, as well as third-party websites, to a Facebook user account.

Bundeskartellamt president Andreas Mundt said Thursday that the ruling means “Facebook will no longer be allowed to force its users to agree to the practically unrestricted collection and assigning of non-Facebook data to their Facebook user accounts.”

Facebook said it rejects the decision, and will appeal.

BREXIT

EU parl’t chief warns of Brexit ‘catastrophe’

BRUSSELS (AP) — The president of the European Parliament is warning that the EU and Britain are on the verge of an “economic and human catastrophe” if they fail to finalize the Brexit agreement.

After talks with British Prime Minister Theresa May, Antonio Tajani said Thursday: “We are very concerned. ... This is the reality of a no-deal Brexit.”

Tajani, whose European Parliament, like the U.K. Parliament, must endorse any deal by March 29, says that lawmakers do not want to renegotiate the legally binding divorce agreement. But he says that they “are open to be more ambitious on our future relations, including looking at the Irish situation again if the U.K.’s red lines change.”

Top EU Brexit lawmaker Guy Verhofstadt is proposing to make a separate Brexit political declaration on future EU-U.K. ties “more binding, more precise.”

EUROPE-ECONOMY

EU slashes its forecasts for eurozone economic growth

BRUSSELS (AP) — European Union officials have slashed their growth forecast for the 19 countries that use the euro, saying even the reduced estimate was vulnerable to “large uncertainty” from slowing growth in China and weakening global trade.

The EU’s executive Commission cut the forecast for this year to 1.3 percent from 1.9 percent in their earlier forecast last autumn.

The eurozone probably grew 1.9 percent last year, slowing from a 10-year high of 2.4 percent in 2017. A raft of risks is stalking the European and global economies, including China’s slowdown, a trade dispute between the U.S. and China that has created new import taxes, and the chance that Britain could leave the European Union in March in a chaotic fashion without approving a transition agreement.

ITALY-EARNS-FIAT CHRYSLER

Fiat Chrysler profits soar on North American results

MILAN (AP) — Italian American automaker Fiat Chrysler says fourth-quarter net profits rose by 61 percent, powered by North American sales of the all-new Ram 1500 and Jeep Wrangler.

Fiat Chrysler Automobiles on Thursday reported quarterly net profits of 1.29 billion euros ($1.46 million), compared with 804 million euros in 2017. Revenues rose 6 percent to 30.6 billion euros.

North America profits grew by 19 percent to 6.2 billion euros, accounting for the lion’s share of the automaker’s global profits. The carmaker continued to have trouble in Asia, which swung to a loss due to market weakness in China and more competition in Fiat Chrysler’s core SUV market.

Europe also lost ground, with profits dipping 44 percent on lower shipments and weaker pricing, while Latin America more than doubled.

ITALY-GUCCI-BLACKFACE

Gucci follows Prada, pulls blackface items after complaints

ROME (AP) — Gucci has apologized for a wool sweater that resembled a “blackface” and said the item had been pulled from its online and physical stores.

In a statement Wednesday, Gucci said it was committed to diversity and considered it a “fundamental value to be fully upheld, respected and at the forefront of every decision we make.”

The turtleneck black wool balaclava sweater covers the nose and includes a red cut-out for the mouth. It was ridiculed on social media as insensitive and racist, at a time when the U.S. is grappling with cases of old photos of politicians with their faces blackened.

In December, Prada said it was no longer selling a line of accessories that featured a character with brown skin and exaggerated red lips after complaints they resembled blackface.

DUBAI-SIX FLAGS

Struggling Dubai amusement park abandons Six Flags expansion

DUBAI, United Arab Emirates (AP) — A massive amusement park in Dubai says it is abandoning plans to build a $454-million Six Flags.

DXB Entertainments, which runs Dubai Parks & Resorts, said in a statement filed on Thursday on the local stock market that a planned financial instrument was “no longer available and the Six Flags Dubai project cannot proceed at this time.”

Plans for a Six Flags park long have circulated in Dubai.

In 2016, Dubai officials say they planned to add the park chain, owned by the Grand Prairie, Texas-based Six Flags Entertainment Corp.

CONGRESS-GREEN NEW DEAL

Democrats seek Green New Deal to address climate change

WASHINGTON (AP) — Democrats including Rep. Alexandria Ocasio-Cortez of New York are calling for a Green New Deal intended to transform the U.S. economy to combat climate change and create thousands of jobs in renewable energy.

The freshman lawmaker and veteran Sen. Ed Markey of Massachusetts are teaming up on the plan. A joint resolution they drafted sets a goal of meeting all power demand in the U.S. through clean, renewable and zero-emission energy sources by 2030. Use of wind and solar power would be dramatically increased.

House Speaker Nancy Pelosi says she welcomes “the enthusiasm” of backers of a Green New Deal, but she stopped short of supporting it.

TRUMP’S TAXES

Dems turn focus to tax returns - and Trump’s loom largest

WASHINGTON (AP) — The new Democratic-controlled House is looking at proposals to compel presidents and presidential candidates to make public years of their tax returns. But the burning question is what Democrats might do more immediately to get such files from President Donald Trump.

That goal has been high on their list of priorities since they won control of the House, but asking for Trump’s returns is likely to set off a huge legal battle with his administration.

The issue will come to the fore in an oversight hearing Thursday. Democratic Reps. Anna Eshoo of California and Bill Pascrell of New Jersey say Trump has left Americans in the dark “about the extent of his financial entanglements and potential conflicts of interest.”

Trump broke with tradition by refusing to release his income tax filings during his 2016 campaign.

EARNS-YUM BRANDS

Yum’s quarterly profits slip despite strong same-store sales

LOUISVILLE, Ky. (AP) — Yum Brands missed Wall Street’s profit and revenue forecasts in the fourth quarter despite strong same-store sales growth at Taco Bell and KFC restaurants.

Net earnings fell 17 percent to $1.04 per share.

Without one-time items, including a big gain from refranchising 331 company-owned restaurants, Yum earned 40 cents per share in the October-December period, down 58 percent from a year ago. That was well short of the 95 cents analysts had forecast, according to FactSet.

Yum says its earnings took a 41-cent hit because of a change in the fair value of the $200 million investment it made in Grubhub last February.

Fourth-quarter revenue fell 1 percent to $1.56 billion, short of analysts’ forecast of $1.59 billion.

RESTAURANTS-DELIVERY

Some restaurants sit out the third-party food delivery boom

UNDATED (AP) — Food delivery services like Uber Eats and Grubhub are taking off like a rocket. But some restaurants aren’t on board.

Jimmy John’s sandwich chain is launching a national ad campaign this week promising never to use third-party delivery. It says its own drivers can best ensure fast, quality service.

Jimmy John’s is swimming against the tide. Starbucks recently announced it’s expanding delivery to more U.S. stores through Uber Eats. McDonald’s also partners with that service. And Taco Bell is launching delivery nationwide through Grubhub.

But others besides Jimmy John’s have also rejected third-party delivery, including Domino’s, Panera Bread and Olive Garden.

They say they have expertise in delivery, and they don’t like paying commissions or sharing data with third parties, even though third parties can help them bring in more business.

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