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The Morning Ledger: Rising Wages Are Starting To Bite Corporate Profits |
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Employees at a factory in Lafayette, Ind., U.S., work on a semi-trailer wall. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS
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Good morning. U.S. companies from hotel operators to fast-food chains have warned in recent months that higher labor costs are dragging on their profits -- a potential headwind for the nine-year stock-market rally, writes the WSJ's Danielle Chemtob.
Higher wages are bad for stocks: Economists at Goldman Sachs Group Inc. predict that every percentage-point increase in labor-cost inflation will weigh down earnings of companies in the S&P 500 by 0.8%. In total, the bank estimates labor costs equate to 13% of revenue for companies in the S&P 500.
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Wages are steadily inching higher: Average hourly earnings increased 2.7% in June from a year earlier, according to the Labor Department’s monthly jobs report released Friday. Wages have risen at least 2.5% for 16 of the past 17 months, a faster pace than recorded earlier in the economic expansion.
Some sectors are hit harder than others: Labor costs equal 21% of revenue for companies in the industrials sector, 20% for the technology sector and 15% for utilities.
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Levi Strauss & Co. and WD-40 Co. are among the companies reporting earnings today.
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BMW’s plant in South Carolina, U.S., is a manufacturing hub for the company’s SUVs. PHOTO: LUKE SHARRETT/BLOOMBERG NEWS
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BMW AG and Daimler AG stand to suffer from China's move to raise to 40% its tariff on auto imports from the U.S. Both car makers have invested billions in recent years to expand U.S. factory production with the goal of exporting a significant number of vehicles to China and other markets worldwide.
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Tesla Inc.’s Chinese customers will be among the first consumers to feel the pinch from the U.S.-China trade dispute after the electric car company raised its price listings by nearly 20% on its Chinese website.
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Germany and China signed a raft of commercial accords worth some €20 billion ($23.5 billion) on Monday, with their leaders reiterating commitments to a multilateral global trade order despite a looming trade war with the U.S., reports Reuters.
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Trade tariffs between the U.S., China and Europe add to the problems confronting the global shipping industry, which was already struggling this year with weak demand and high fuel prices.
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Robert Smith, Founder, Chairman and CEO, Vista Equity Partners, speaks in Beverly Hills, Calif., U.S., May 1, 2018. PHOTO: REUTERS/Lucy Nicholson
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Billionaire Robert Smith’s private-equity firm, Vista Equity Partners, revamps software companies by following detailed protocols and gauging employees’ personalities and cognitive abilities. “Their process is like a factory,” says one investor.
Uber Technologies Inc. has tapped Scott Schools, a former top official at the U.S. Justice Department, to be its first chief compliance officer, as the ride-hailing giant seeks to move past a series of regulatory problems and other controversies ahead of a highly anticipated initial public offering next year.
Pfizer Inc.'s stock fell after President Donald Trump on Monday tweeted criticism of the drug company’s recent price increases, his latest salvo on a popular issue that his administration has so far failed to make much headway reversing.
Deutsche Bank AG has hired one of its top shareholders, New York private-equity firm Cerberus Capital Management LP, as a paid adviser to help the troubled lender tackle runaway costs and boost lagging profits.
Big companies including Starbucks Corp. and Hyatt Hotels Corp. said they would phase out single-serve plastic straws as more corporations respond to advocacy groups and customers who are concerned about environmental damage, particularly to the world’s oceans.
Chevron Corp.’s recently retired chief executive John Watson topped the list of the highest-paid energy bosses in the S&P 500, taking home $24.8 million in 2017, compared with $17.5 million that first-year Exxon Mobil Corp. Chief Executive Darren Woods was paid last year.
J.M. Smucker Co. is selling its U.S. baking business, which includes Pillsbury baking mixes and Hungry Jack pancakes, to a private-equity firm for $375 million including debt, mirroring moves by other food companies to divest decades-old brands whose sales are in decline because of changing consumer tastes.
Martin Sorrell’s new marketing venture has agreed to acquire a Netherlands-based digital production agency, topping a rival bid from WPP PLC, the advertising giant he spent decades building.
Southeast Asian ride-hailing company Grab Inc. expects revenue to exceed $1 billion this year and is talking to strategic partners about fundraising after the latest round valued the startup at $10 billion, reports Bloomberg.
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A customer inspects an iPhone X at an Apple store in November 2017. PHOTO: JUSTIN SULLIVAN/GETTY IMAGES
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U.S. House lawmakers sent letters Monday to the chief executives of Alphabet Inc. and Apple Inc. seeking answers about how they handle users’ personal information, including spoken words, email content and location data collected by smartphones, as privacy concerns in Washington spread beyond Facebook Inc.
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A group of U.S. state attorneys general is investigating whether Five Guys, Panera, Burger King and other big fast food chains are using “no-poach” rules in franchise agreements to hold down wages and limit employee advancement, reports Reuters.
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A former Goldman Sachs Group Inc. banker is in talks with U.S. prosecutors to potentially plead guilty to criminal charges stemming from an alleged scheme to steal billions of dollars from a Malaysian state investment fund, people familiar with the matter said.
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Takeda Pharmaceutical Co., the Japanese drug maker, said Tuesday it has received clearance from the U.S. Federal Trade Commission for its proposed $2 billion acquisition of Shire PLC, reports MarketWatch.
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A tax-law goof which requires companies to depreciate building-renovation costs over 39 years is prompting some U.S. restaurant chains to postpone renovations.
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The Big Four accounting firms secured contracts worth millions of euros from the European Commission over the past five years to advise on tax policy, fuelling concerns about conflicts of interest, reports the Financial Times.
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Preliminary second-quarter data from the Federal Reserve indicate the year-over-year growth rate of business loans rose to 5.5% in late June. PHOTO: KIM HONG-JI/REUTERS
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Business borrowing is picking up, with preliminary second-quarter data from the U.S. Federal Reserve indicating the year-over-year growth rate of business loans rose to 5.5% in late June from less than 1% near the end of 2017.
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U.S. consumer debt rose $24.6 billion in May by the most in six months on an increase in credit-card debt outstanding and non-revolving loans, reports Bloomberg.
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European Central Bank President Mario Draghi urged eurozone governments on Monday to take further steps to pool responsibility for the bloc’s financial system to guard against future crises, days after European leaders kicked back plans to strengthen the architecture of the currency union.
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Eurozone house prices rose at the fastest pace in 11 years during the first three months of 2018, a development that is likely to reinforce the European Central Bank’s determination to end a key stimulus program in December.
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MetLife Inc., the New York insurer, appointed Ed Spehar as executive vice president and treasurer, effective Aug. 16, 2018. Mr. Spehar currently serves as senior vice president and CFO for MetLife's Europe, Middle East and Africa business.
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Prior to that, he worked as senior vice president and head of investor relations at MetLife. Mr. Spehar succeeds John McCallion who was recently named executive vice president and chief financial officer. Compensation details were not immediately available.
Stobart Group Ltd., a U.K.-infrastructure and support services business, said it is searching for an interim chief financial officer following the resignation of its CFO Richard Laycock on July 5, 2018.
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