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The Morning Ledger: Rate Rise Signals Higher Financing Costs for Companies |
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The Marriner S. Eccles Federal Reserve Board Building in Washington, D.C., U.S., June 19, 2015. PHOTO: ANDREW HARNIK/ASSOCIATED PRESS
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Good morning. Companies could come under more pressure to raise funds in the coming months after the U.S. Federal Reserve on Wednesday signaled it could lift benchmark interest rates up to four times this year, reports the WSJ’s Nick Timiaros. That will gradually lead to higher financing costs for companies with outstanding debt or plans to issue new debt.
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The Fed's latest quarter-percentage point increase, the second this year, will bring the benchmark federal-funds rate to a range between 1.75% and 2%.
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“Most people who want to find jobs are finding them, and unemployment and inflation are low.”
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Fed officials again raised their forecast for economic growth and lowered their projections for unemployment. They now see the jobless rate falling to a 50-year low of 3.5% by the end of next year, and a full percentage point below their estimate of where unemployment should be in the long run. This overshoot could spark inflation and prompt the central bank to run tighter monetary policy, writes the WSJ's Greg Ip.
There are other signs that Fed officials could take tighter hold of the purse strings. The Fed's statement excluded language that rates were likely to remain lower than the levels expected to prevail in the longer run. And Fed Chairman Powell said the bank would hold a press conference after each policy meeting starting next year, rather than after every other meeting, reports the WSJ's Justin Lahart.
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The European Central Bank could Thursday signal the winding down of its €2.5 trillion ($2.9 trillion) bond-buying program. The move would draw a line under a controversial crisis-era stimulus tool and start the clock on interest-rate hikes, following the path of the Federal Reserve.
Adobe Systems Inc. and Jabil Inc. are among the companies slated to report earnings today.
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General Motors Co., the Detroit auto maker, said its Chief Financial Officer Chuck Stevens plans to retire after more than 40 years with the company, effective March 1, 2019. He will be replaced by Dhivya Suryadevara, effective Sept. 1, 2018.
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Ms. Suryadevara, 39, has been vice president, corporate finance since July 2017. Compensation details were not immediately available.
Automatic Data Processing Inc., the Roseland, N.J. payroll-processing company, said CFO Jan Siegmund plans to resign from his post. Mr. Siegmund will remain in the role while ADP looks for a replacement. He joined ADP in 1999 and was tapped as CFO in November 2012.
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Brian Roberts, Chairman and CEO of Comcast, in San Francisco, Calif., U.S., Nov. 3, 2015. PHOTO: ELIJAH NOUVELAGE/REUTERS
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Comcast Corp. on Wednesday offered to buy a big chunk of 21st Century Fox Inc.’s entertainment and international assets for $65 billion, kicking off a potential bidding war with Walt Disney Co. as the two media titans vie for supremacy in a business dealing with tumultuous change.
AT&T Inc.’s $85 billion purchase of Time Warner Inc. is on track to go down as one of the largest acquisitions in history, but the deal will be dwarfed by an even bigger figure: the combined company’s approximately $181 billion debt load.
SoftBank Group Corp. is discussing making another multibillion-dollar investment in WeWork Cos., with a deal that would value the shared-office company at $35 billion to $40 billion, according to people familiar with the matter.
Apple Inc. is trying to enforce new privacy policies across its vast network of iPhone and iPad apps -- and in the process is exposing longstanding gaps that left users’ data vulnerable to abuse.
Microsoft Corp. is working on technology that would eliminate cashiers and checkout lines from stores, in a nascent challenge to Amazon.com Inc.'s automated grocery shop, six people familiar with the matter told Reuters.
British aircraft-engine maker Rolls-Royce Holdings PLC, facing investor pressure to boost competitiveness, said it would cut 4,600 jobs.
H&R Block Inc. plans to close about 400 U.S. offices as the new tax law reduces the complexity of filing annual returns for millions of Americans and customer behavior shifts toward digital tools.
Fledgling biotechs and medical-technology startups in the U.S. and Europe have found a new source of cash to fund costly research: China.
Escalating trade tensions have made times even harder for shares of companies that sell everyday goods. Beverage makers like Molson Coors Brewing Co., which are down 19% so far this year, and PepsiCo Inc., off 12%, told analysts that they are already seeing inflationary pressures, including rising aluminum costs and increases in freight and fueling expenses.
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Indian IT and services company HCL Technologies Ltd. has to make changes to its billing process because of the U.S. corporate tax reform, said Chief Financial Officer Anil Chanana on Tuesday.
A provision in the tax law requires companies to bill their clients in the location where the economic value is created, resulting in HCL having to sometimes split bills to reflect that, he said, speaking on the sidelines of the WSJ's CFO Network annual meeting in Washington, D.C.
"Part of the sum we charge a client would be charged through the U.S. entity, whereas another part would be charged through the Indian entity," said Mr. Chanana. The provision, called base erosion and anti-abuse tax -- or BEAT -- is an administrative burden and means more work for the billing department, Mr. Chanana said. "There is a cost factor associated to it but it is not significant," he said.
The company is in the process of automating tasks in its finance function, said Mr. Chanana. "We are doing a lot of process automation," he said. HCL now has around 30 to 40 robots working for the finance function. Reducing the headcount -- the company currently has around 1,000 people in the finance department -- is not one of the objectives of the move, Mr. Chanana said. "I would like to grow the company without having to hire more people in finance," he said.
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Indian services company Wipro Ltd. is planning to do bolt-on acquisitions to buy businesses in the artificial intelligence space, said Chief Financial Officer Jatin Dalal. "We work with a list every day," Mr. Dalal said Tuesday alongside the WSJ's CFO Network conference in Washington. He said Wipro doesn't have a fixed timeline for these acquisitions.
The company is in the process of hiring more workers in the U.S., instead of bringing them from India. Roughly half of Wipro's 15,000 employees in the U.S. work on visas, he said. The move to hire more local staff is independent of the Trump administration's stance on immigration, Mr. Dalal said. The company has invested around $1.5 billion in the U.S. in the past decade, he added.
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U.S. President Donald Trump, Secretary of State Mike Pompeo and White House Chief of Staff John Kelly in Singapore, June 11, 2018. PHOTO: JONATHAN ERNST/REUTERS
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The White House moved to protect its deal with Beijing to rescue ZTE Corp., taking steps to head off a bipartisan effort to use a must-pass defense bill to reinstate a ban on sales of U.S. components to the Chinese telecommunication company. ZTE has proposed a $10.7 billion financing plan and nominated eight board members, reports Reuters.
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A top U.S. bank regulator gave an upbeat assessment of the industry’s lending and sales practices in his inaugural congressional testimony Wednesday, but clashed with Democrats when he said he has “never observed” discrimination.
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German prosecutors Wednesday imposed a €1 billion ($1.1 billion) fine on Volkswagen AG in connection with its emissions-cheating scandal, describing the penalty as one of the highest ever levied on a German company.
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The remnant of Lehman Brothers Holdings Inc. has settled a $1.2 billion derivatives lawsuit with Credit Suisse Group AG, wrapping up one of the last remaining big legal battles involving the failed investment bank nearly a decade after its collapse.
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Most of the world’s airlines have bowed to Chinese demands to refer to Taiwan as part of China, but the three main U.S. international carriers have refused.
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Pedestrians cross a road next to cyclists and other vehicles in the central business district in Beijing, China, June 1, 2018. PHOTO: GIULIA MARCHI/BLOOMBERG NEWS
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The Trump administration, deepening its global trade offensive, is preparing to levy tariffs on tens of billions of dollars of Chinese goods in the coming week, perhaps as early as Friday -- a move that is likely to spark heavy retaliation from Beijing. Mr. Trump will be discussing the tariffs with his advisors on Thursday, reports Reuters.
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China’s economy is starting to feel the impact from Beijing’s monthslong effort to curb debt, with business activity slowing and the central bank deciding to not follow the U.S. Federal Reserve in adjusting interest rates.
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The Trump administration is moving to bring back to life the U.S. Export-Import Bank, an agency that smooths export deals between U.S. manufacturers and overseas buyers, potentially ending a three-year freeze that has held up more than $40 billion of export deals.
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Saudi Arabia’s oil minister is flying to Russia this week to discuss ways to manage an output boost both producers say they want to propose at an OPEC summit next week, officials at the group said Wednesday.
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Industrial production in the eurozone fell 0.9% in April, resuming its 2018 decline after a March bounce.
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