Here are some highlights of news items you might have missed today.
OPEC Is Happy and Has no Worries
Remember when this news item used to keep the entire investment community on tenterhooks: OPEC ministers are meeting in Vienna. These days, it barely causes a stir and gets little mention in the global media. So in case you missed it elsewhere, here’s what happened: The group kept its production target unchanged at 30 million barrels a day and seemed at ease with the current environment.
“We don’t need to worry about anything, this is the best time for the market,” Ali al-Naimi, Saudi Arabia‘s oil minister, told a briefing before the meeting, according to Bloomberg. “Everything is good, stable and everyone is happy.”
But it’s still worth keeping an eye on, as there are issues in the Middle East — Syria, Iraq, Libya, Egypt — that could surface again and make OPEC and oil production key market-movers.
Best Buy Happy, Too
Yesterday, we wrote about the troubles at RadioShack, with shareholders rejecting the executive remuneration report in a nonbinding vote and the company reporting a loss and falling revenue. But the news was better today from a rival: Best Buy Co., Inc raised its quarterly dividend 12 percent to 19 cents a share. The increase will be payable Oct. 2 to shareholders of record as of Sept. 11, 2014.
“Our decision to increase the amount of cash we are returning to shareholders is indicative of our improved cash position and our confidence in the cash-generating power of our multi-channel business model,” said Hubert Joly, president and CEO of Best Buy, which is holding its shareholder meeting today.
In May, Best Buy reported better-than-expected first-quarter profit of $461 million, but it said that sales had edged downward in an overall mixed report that left investors a bit confused. The company attributed the sales decline of about 1.9 percent to the overall drop in sales of consumer electronic products. But CEO Joly also noted that Best Buy had increased market share throughout the U.S.
Here Comes Alibaba
Alibaba, the China-based online retailer, has launched a U.S. shopping site in a direct challenge to Amazon and other leading e-commerce sites. The Wall Street Journal reports that the site, called 11 Main, is being developed by Alibaba’s two wholly owned U.S. units, Vendio and Auctiva. It will play host to merchants in clothing and fashion accessories, jewelry, interior goods and arts and crafts. It plans to add more as it grows.
The report says that 11 Main is unlikely to challenge the leading positions of sites such as Amazon and eBay, though Alibaba does see room for growth in the U.S.
“There are many small shop owners that are looking for broader platforms, but when they look at the broader platforms, those are not necessarily structured to support their brands or their identities,” said 11 Main President Mike Effle in an interview with the WSJ.
Meanwhile, Fox Business News, citing people familiar with the deal, reports that Alibaba is looking to float its shares sooner than originally thought. It says that underwriters are planning a road show for investors in late July, with an initial public offering pricing tentatively set for the first week in August. The people familiar with the deal said initial reports that Alibaba would price its IPO on Aug. 8 — because the number eight is considered fortuitous in Chinese culture — are wrong. They add that Aug. 8 is a Friday, which would be a bad day to set pricing with the markets then closed over the weekend.
“Moreover, under the plan envisioned by the company and its underwriters, the IPO pricing will likely occur before August 8 while many Wall Street firms and large investors have yet to take their summer vacations, which typically occur during that month,” the FBN report states. Alibaba declined to comment for the report.
World Bank Downgrades Outlook
The crisis in Ukraine and the rough winter in the U.S. have led the World Bank to downgrade its forecast for the world economy. It said the world economy would grow 2.8 percent this year, down from its forecast made in January, which predicted growth of 3.2 percent.
Low interest rates will help the world’s wealthiest countries grow 1.9 percent this year, up from 1.3 percent in 2013, it said. Developing countries will grow 4.8 percent, the same as the previous year.
“Bad weather in the U.S., the crisis in Ukraine, rebalancing in China, political strife in several middle-income economies, slow progress on structural reform, and capacity constraints are all contributing to a third straight year of sub 5 percent growth for the developing countries as a whole,” the World Bank said.
Growth rates in the developing world remain far too modest to create the kind of jobs we need to improve the lives of the poorest 40 percent,” it added. “Clearly, countries need to move faster and invest more in domestic structural reforms to get broad-based economic growth to levels needed to end extreme poverty in our generation.”
Many analysts attributed today’s early drop in stocks to the World Bank report.
[Editor’s note: To read more about today’s biggest news, check out Mike Larson’s regular after-market Money and Markets column.]
Lew Wants More for All
Treasury Secretary Jacob J. Lew said the U.S. needs to set in place measures that ensure that benefits of economic growth are shared more widely, and said that unemployment is “still too high” and wages are lagging, Bloomberg reports.
Lew said he expects “a much stronger second quarter and second half of this year. Nevertheless, we cannot escape the fact that millions of Americans continue to struggle.”
“While corporate profits and non-farm productivity have risen, hourly compensation only just started rising, and not by enough to make up for lost ground,” he said, speaking to the Economic Club of New York. “As our economy grows and our workers become more productive, this progress needs to reach the lives of more hardworking Americans.”
He pointed to infrastructure as a means to increasing jobs and the overall economy.
“Building our roads, railways, bridges, and ports has been one of the most historically bipartisan ways to create jobs today and lay a foundation for future economic expansion,” he said, while urging lawmakers to approve increased spending on infrastructure “to make investing in America even more appealing.”
“Building our roads, railways, bridges, and ports has been one of the most historically bipartisan ways to create jobs today and lay a foundation for future economic expansion,” he said.
Best wishes,
The Money and Markets Team
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