Global News April 27, 2018

  1. BBC
  2. Global News April 27, 2018

“U.S. Growth Cools to 2.3% While Compensation Costs Accelerate.”

U.S. economic growth cooled last quarter as consumers pulled back following outsize spending in the prior period, though solid business investment cushioned some of the weakness and employee-compensation costs accelerated amid a tight job market.
Gross domestic product, the value of all goods and services produced in the nation, rose at a 2.3 percent annualized rate after climbing 2.9 percent in the prior quarter, the Commerce Department reported Friday. The median forecast of economists surveyed by Bloomberg called for a 2 percent gain. A separate Labor Department report showed that employment costs rose more than expected in the first quarter and a measure of private wages had the biggest annual gain since 2008.
While GDP growth was the best for any January-March period since 2015, it’s a step down from three quarters of GDP growth above or near 3 percent, and a reminder that the first quarter remains plagued by data quirks. Analysts expect a rebound as tax cuts take hold amid a strong job market, though tailwinds such as low inflation and borrowing costs are starting to dissipate, and trade tensions represent a headwind.
The 2.3 percent pace of GDP growth is still faster than what the Federal Reserve sees as the economy’s long-term potential rate, and officials have previously said they view the first-quarter slowdown as transitory, with the economy poised to reach a milestone in May — the second-longest expansion on record. Investors expect the central bank to raise interest rates in June for the second time this year.
Even so, the results underline the difficulty of achieving President Donald Trump’s goal of 3 percent sustained growth, despite corporate and individual tax cuts that went into effect in January. Other figures on Friday cast a shadow over the strong, synchronized global upswing: Europe’s economy lost momentum in the first quarter as expansions slowed from the U.K. to France, partly because winter storms ripped through the region.


“Prime hike gives Amazon warchest for fight over postal costs.” Inc’s 20 percent hike in the cost of Prime membership should deliver more than $1 billion in extra revenue this year and cover any “rational” hike in United States Postal Service delivery fees, Wall Street analysts said on Friday.
Several said that Thursday’s move by the company to raise Prime fees to $119 a year from $99 starting June 16 would not faze many of Prime’s estimated 60-65 million U.S. members.
“The incremental $20 membership fee could result in an incremental $1.2 billion to $1.3 billion of revenue which should more than offset any rational USPS price increase,” Deutsche Bank analyst Lloyd Walmsley said.
Shares of the company were up 7.4 percent to a record high of $1630 in premarket trading on Friday as investors lauded another blockbuster quarter that delivered profits of $1.6 billion and revenue of $51 billion. The 20 percent hike was the second time Amazon had increased its Prime subscription fee since the launch of the service in 2005.
The service, crucial in driving purchases of both goods and digital media on Amazon, gives members free delivery, access to movies and original series through Prime Video, on-demand music streaming and free books on Prime Reading. That appears to put it on a collision course with Netflix and Apple in the streaming market – but analysts say Bezos is more interested in how the appeal of the service props up his retail empire.


BBC News
“Koreas make nuclear pledge after historic summit.”

The leaders of North and South Korea have agreed to work to rid the peninsula of nuclear weapons after holding a historic summit. The announcement was made by the North’s Kim Jong-un and Moon Jae-in of South Korea after talks at the border.
The two also agreed to push towards turning the armistice that ended the Korean War in 1953 into a peace treaty this year. The summit came just months after warlike rhetoric from North Korea. Details of how denuclearization would be achieved were not made clear and many analysts remain skeptical about the North’s apparent enthusiasm for engagement.
An issue for the North is the security guarantee extended by the US, a nuclear power, to South Korea and Japan and its military presence in both countries. Previous inter-Korean agreements have included similar pledges but were later abandoned after the North resorted to nuclear and missile tests and the South elected more conservative presidents.
Following Friday’s summit, Mr Kim said the two leaders had agreed to work to prevent a repeat of the region’s «unfortunate history» in which progress had «fizzled out». «There may be backlash, hardship and frustration,» he said, adding: «A victory cannot be achieved without pain.»
Other points the leaders agreed on in a joint statement were:
• An end to «hostile activities» between the two nations
• Changing the demilitarised zone (DMZ) that divides the country into a «peace zone» by ceasing propaganda broadcasts
• An arms reduction in the region pending the easing of military tension
• To push for four-way talks involving the US and China
• Organising a reunion of families left divided by the war
• Connecting and modernising railways and roads across the border
• Further joint participation in sporting events, including this year’s Asian Games
The commitment to denuclearisation does not explicitly refer to North Korea halting its nuclear activities but rather the aim of «a nuclear-free Korean peninsula». The two countries have also «agreed to actively seek the support and co-operation of the international community» to reach this goal, the joint statement says. China later praised the political determination and courage of both leaders. A statement from its foreign ministry said it hoped the momentum could be maintained.


“Stocks Open Higher; Pound Weakens on Growth: Markets Wrap.”

Most U.S. stocks opened higher as the American economy cooled less-than-expected in the first quarter, while disappointing growth in Europe weighed on the pound and euro.
Yields on benchmark Treasuries fell and the dollar fluctuated near recent highs. The U.K. posted the worst quarterly GDP figures since 2012 and lackluster numbers also came out of France and Spain. Renewed optimism over tech earnings and progress toward peace on the Korean peninsula helped spur Asian equities.
The slew of first quarter growth figures are the latest clues on the health of the global economy, which is preoccupying investors amid growing signs of a peak in the cycle and against a backdrop of rising rates. The murky outlook is threatening to outweigh the impact of both a solid earnings season and easing geopolitical tension.
Elsewhere, the yen was little changed after the Bank of Japan maintained its stimulus, as expected. The South Korean won climbed as North Korean leader Kim Jong Un and South Korean President Moon Jae-in agreed to end a seven-decade war this year. Commodities retreated, led by oil.