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Update on the latest in business:

May 23, 2019

^FINANCIAL MARKETS

Asian shares slip as US-China spat takes center stage

SINGAPORE (AP) — Asian markets were broadly lower on Thursday as traders focused on tensions between the U.S. and China and braced for the impact of their tariff hikes.

Earlier this month, the U.S. and China concluded their 11th round of trade talks with no agreement. Further talks have not been arranged.

The U.S. has imposed 25% tariffs on $250 billion in Chinese imports and is planning to target another $300 billion.

On Wall Street, trade worries and mixed corporate earnings pulled stocks lower.

The S&P 500 index was down 0.3% at 2,856.27 and the Dow Jones Industrial Average retreated 0.4% to 25,776.61. The Nasdaq composite shed 0.5% to 7,750.84. The Russell 2000 index of small company stocks was 0.9% lower at 1,531.63.

Benchmark U.S. crude oil fell to just above $61 per barrel.

The dollar weakened against the yen and the euro.

^COAL-CLIMATE CHANGE

US says Trump coal moves hasten but don’t increase emissions

BILLINGS, Mont. (AP) — The Trump administration’s decision to lift a moratorium on coal sales from public lands could hasten the release of more than 5 billion tons of greenhouse gases, but officials concluded Wednesday it would make little difference in overall U.S. climate emissions.

That conclusion from the Bureau of Land Management comes after a judge ruled last month the administration had failed to consider the environmental effects of resuming coal sales from public lands.

Sales were largely halted in 2016 under President Barack Obama over worries about climate change. But the moratorium was rescinded by then-Interior Secretary Ryan Zinke soon after President Donald Trump took office, fulfilling a campaign pledge from the Republican.

Critics said the Trump administration’s contention that resuming sales would have negligible effects on the environment was absurd given the scope of the federal coal program.

^QUALCOMM-ANTITRUST

Judge rules Qualcomm violated antitrust law in chip market

NEW YORK (AP) — A federal judge has ruled that Qualcomm unlawfully squeezed out cellphone chip rivals and charged excessive royalties to manufacturers such as Apple in a decision that undercuts a key part of its business.

The decision vindicates the U.S. Federal Trade Commission two years after it filed its antitrust lawsuit against the San Diego chipmaker. It’s a potentially costly setback for Qualcomm, as the decision could slash its ability to extract big royalties from phone makers.

Qualcomm said Wednesday that it would appeal, suggesting the case could still take a few years to resolve.

The outcome seems likely to reduce the licensing fees paid to Qualcomm, but it’s unclear if device makers will pass on any of their savings and lower their prices. The royalties represent a relatively small portion of smartphone prices that now top $1,000 for some premium models.

U.S. District Judge Lucy Koh in San Jose, California, ruled Tuesday that Qualcomm Inc. must renegotiate licensing deals with customers. It must license its patents to rival chipmakers at fair prices and can’t sign exclusive agreements that block competitors from also selling chips to smartphone makers like Apple. Qualcomm must submit to FTC monitoring for seven years.

The case has geopolitical ramifications. If Qualcomm suffered a big hit to its profitability, that could mean less spending on research and development — a knock to an American tech icon as the U.S. embarks on a politically sensitive race with China to update to 5G, a new wireless technology.

^US-CHINA TRADE-BEIJING’S OPTIONS

China has more weapons in US tariff war _ but do they work?

BEIJING (AP) — China has an array of options for retaliating for Washington’s latest tariff hike in the two countries’ escalating trade battle.

Beijing could limit exports of rare earths or disrupt operations of American companies in China. But those steps all carry economic and political costs. And there is no guarantee they would work.

President Xi Jinping and his economy czar visited a Chinese factory that processes rare earths — exotic minerals used in electric cars, mobile phones and other technology.

The message was clear: China’s role as the main global supplier of rare earths used in smartphones, lightweight magnets, batteries and other components is leverage over Washington. And China’s sway could extend much further into the U.S. technology sector, particularly to Apple and other companies that rely on Chinese manufacturing.

Until now, Beijing has tried to look restrained in its fight with President Donald Trump over technology and trade. It has responded to U.S. tariff hikes by imposing penalties, but usually on a smaller number of American imports.

As the two sides dig in for what may be a long fight, Xi’s visit suggested his government is looking for new ways to pressure Washington to settle.

^TRADE WARS-RETAILERS

Retailers, shoppers could feel more pain if tariffs spread

NEW YORK (AP) — An escalating trade war between the U.S. and China could mean higher prices on a broad array of products from toys to clothing. But some retailers will be less equipped to handle the pain than others, leaving consumers to carry the load.

Analysts say big box giants like Target and Walmart who marked their latest quarter with strong performance are best positioned to absorb the higher costs because of their clout with suppliers. They’re also taking a judicious approach to price increases to lessen the impact.

The losers will be the ones that have been struggling all along — the mall-based clothing stores and others that sell commoditized products like basic sweaters or that don’t have the financial wherewithal to absorb extra costs.

Consumers, as well as most retailers, had been left largely unscathed by the first several rounds of tariffs that the U.S. imposed on China because they mostly focused on industrial and agricultural products. But that began to change when items like furniture saw an increase in tariffs to 25% two weeks ago.

Retailers will absorb the extra costs when those products arrive in U.S. ports in June. But now the Trump administration is preparing to extend the 25% tariffs to practically all Chinese imports not already hit with levies, including toys, shirts, household goods and sneakers.

Cowen & Co. estimates shoppers could see as much as 10% to 15% in price increases across all goods imported from China, which would mean an incremental cost of $100 billion or more.

ECONOMY-THE DAY AHEAD

Business events and economic reports scheduled for Thursday:

WASHINGTON (AP) _ The Commerce Department releases its report on April’s new home sales today.

Also, Freddie Mac, the mortgage company, releases weekly mortgage rates.

FAA-AVIATION REGULATORS

FAA chief says flying public will regain faith in Boeing jet

FORT WORTH, Texas (AP) — The chief of the Federal Aviation Administration says “maybe” public confidence in Boeing’s 737 Max jet is shaken after two deadly crashes, but he thinks that will eventually change.

Representatives from 33 other global aviation regulators will meet in Fort Worth, Texas, Thursday to hear FAA officials describe the steps they have taken — and what remains to be done — before the plane flies again.

The list of foreign regulators includes delegates from Indonesia and Ethiopia, where the two crashes occurred before the plane was grounded worldwide in March. In all, 346 people died.

Acting FAA Administrator Daniel Elwell says he isn’t concerned about the future of public confidence in the plane because he’s not worried about the future of aviation safety.

BOEING PLANE-UNITED

United CEO vows to be aboard 737 Max when its cleared to fly

CHICAGO (AP) — CEO Oscar Munoz says he will be aboard United Airlines’ first flight of a Boeing 737 Max once regulators agree to let the aircraft fly again.

Munoz made the promise after Chicago-based United’s annual meeting with shareholders Wednesday.

In crashes in Indonesia in October and Ethiopia in March, an automated system called MCAS mistakenly turned the noses of the planes down in response to faulty readings from a single sensor. Pilots were unable to recover; 346 people died. As a result, regulators grounded the planes.

Chicago-based Boeing says it has finished with its updates to the flight-control software implicated in the crashes.

Munoz says even after regulatory agencies clear the 737 Max to fly again, it will take more to get passengers comfortable getting on board. He says United is developing a case for the 737 Max, including educating customers and employees about why United feels it’s safe to resume flights.

LNG-US-SAUDI ARABIA

Saudi Aramco to buy liquid natural gas from US company

NEW YORK (AP) _Saudi Aramco will begin buying liquid natural gas from a U.S. company under a 20 year agreement.

Saudi Arabia’s state owned oil company said Wednesday it would buy 5 million tons of liquid natural gas per year from Sempra Energy, based in San Diego.

Aramco will make a 25% equity investment in an LNG export facility under development in Port Arthur, Texas, as part of the deal.

Sempra CEO Jeff Martin said that the company is pleased to partner with Saudi Aramco, the largest oil and gas company in the world, to help develop the natural gas liquefication facility in Texas.

Aramco CEO Amin Nasser says the agreement is a major step forward in the company’s long-term strategy to become a global LNG player.

CALIFORNIA WILDFIRES-UTILITY

Judge approves $105M fund for California wildfire survivors

SAN FRANCISCO (AP) — Pacific Gas & Electric Corp. received approval on Wednesday to establish a $105 million fund to help survivors of recent California wildfires started by the utility’s equipment.

A federal judge overseeing PG&E’s bankruptcy case approved the utility’s wildfire assistance program to provide relief for people who lost property during the huge fires in 2017 and 2018.

Lawyers for wildfire victims argued PG&E could pay up to $250 million to adequately help their clients and pointed out that the utility sought last month to pay $235 million in bonuses for its employees.

U.S. Bankruptcy Judge Dennis Montali said he couldn’t under the law impose a larger amount, and said the fund, created voluntarily by PG&E, was an “appropriate remedy.” He said he wanted to see the fund up and running as quickly as possible and wanted both sides to name an independent third party to administer the program in five days.

BRAZIL-NATURA-AVON

Brazil’s Natura announces purchase of Avon Products

RIO DE JANEIRO (AP) — The Brazilian cosmetics maker Natura has announced that it is buying Avon Products in an all-stock deal.

Natura said Wednesday the deal would create the world’s fourth-largest group of beauty products and aims to give the Brazilian brand a global reach.

Natura said in a statement that the estimated value of the deal is $3.7 billion. Shareholders of both companies still have to approve the deal.

The Brazilian company says a holding company will be created, with 76% of the shares going to current Natura stockholders and 24% to Avon’s. It expects to conclude the deal in the beginning of 2020.

The Brazilian company started with a door-to-door model similar to Avon’s, but recently bought retail stores like The Body Shop.

COUNTERFEIT IPHONE SCAM

Chinese man guilty of defrauding Apple out of 1,500 iPhones

SALEM, Ore. (AP) — Over the span of two years, a Chinese national in Oregon sent devices that looked like iPhones to Apple, saying they wouldn’t turn on and should be replaced under warranty. He didn’t just submit a couple of the devices -- he delivered in person or shipped to Apple around 3,000 of them.

Apple responded by sending almost 1,500 replacement iPhones, each with an approximate resale value of $600.

But the devices that Quan Jiang sent Apple were fake.

Jiang, who is 30, a former engineering student at a community college in Albany, Oregon, pleaded guilty in federal court Wednesday to trafficking in counterfeit goods. That’s according to the U.S. Attorney’s office in Portland.

The presence of fake iPhones and other high-tech gadgets has become an issue in global resale markets.

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