FT : Why the US squeeze on Iran only strengthens the Revolutionary Guard The Tru

Why the US squeeze on Iran only strengthens the Revolutionary Guard
The Trump administration is bolstering the reputation of commander Qasem Soleimani as a hero

I should know better than to make a prediction about the Middle East. But here I am, making a prediction. The next president of Iran will be Qasem Soleimani, commander of the overseas arm of the hardline Revolutionary Guard and master of Tehran’s influence across the region. And here’s more: if he’s not president in two years, he will be more powerful still — as the kingmaker deciding on the next supreme leader, the highest position in the Islamic republic.

If I’m wrong, I’ll blame the IMF for this bet. It was while reading about the fund’s latest forecasts that I realised the Islamic republic was heading for more militarism. The main beneficiary will be Major General Soleimani, the charismatic 62-year-old soldier already basking in (Iranian-style) glory.

Of course, most of the world, which once looked forward to rehabilitating Iran and ridding it of nuclear weapons, will blame the US administration of Donald Trump — and they would be right. Iran is a troublemaker, no doubt. But it is US radicalism that is now feeding more Iranian extremism.

Before I get to Maj Gen Soleimani, a fascinating if scary character, here’s the backdrop: last week, the US said it would eliminate waivers on Iran’s oil exports, which means that some of the largest buyers, such as China and India, would face sanctions if they continued their purchases. Since the US withdrew from the 2015 nuclear agreement, Iran’s oil exports have halved, to 1.3m barrels a day. The US administration aims for them to fall all the way to “zero”. That’s why the IMF projects that Iran’s economy will contract by 6 per cent this year and that inflation will close in on 40 per cent. The forecasts could worsen, depending on how little oil Iran can still sell.

The denial of waivers followed another unprecedented step: designation of the Revolutionary Guard as a terrorist organisation, the first time the US has branded a part of any government as terrorist. In the sustained campaign waged by the White House, US policy towards the region has also shifted towards blind support for Iran’s rivals, most notably Saudi Arabia and Israel. Despite American denials, the objective is clear: to spark domestic unrest in the hope of toppling the Islamic republic’s leadership. Unless, that is, the US is considering the yet more foolish option of a military attack.

Much of the stress is aimed at breaking Maj Gen Soleimani. Instead, it is bolstering his image as a national hero. The general runs the Quds force, responsible for the regional meddling the US and its allies seek to curb. That includes support for the murderous regime of Bashar al-Assad in Syria and funnelling weapons and military expertise to other non-state actors in Lebanon and Yemen. Israel’s military is so obsessed with Maj Gen Soleimani that on his birthday in March, the Israel Defense Forces tweeted a video of a layered cake with moving images of birthday wishes from all of Iran’s proxies. As the video concludes, the cake explodes.

Many Iranians bemoan the behaviour of the Quds force and oppose the political and financial cost to the state. Yet they also credit Maj Gen Soleimani with keeping the Sunni extremists of Isis at bay and expect him to be the first line of defence against any US attack. In a poll conducted last year by the University of Maryland’s Center for International and Security Studies, two in three Iranians surveyed held a very favourable opinion of him.

Cleverly, the general has never shown political ambition. But he has cultivated ties with both reformist and hardline political camps. Although the Revolutionary Guard is heavily involved in business — and thoroughly corrupt — Maj Gen Soleimani has no known business interests. On social matters, too, he comes across as less of a hardliner, speaking out, for example, against the harassment of women who refuse to wear the hijab.

True, there are constraints to a military man being elevated to office in a country ruled by clerics. But the Revolutionary Guard has massively expanded its power in recent years. If Iran sees itself at war — which is, for now, a fierce economic fight but could transform into a military confrontation — it will turn to the nationalist military figure who can protect it. The tighter the squeeze on Iran, the more Maj Gen Soleimani rises to the top.

WSJ : What to Watch at This Week’s Fed Meeting The discussions could help to def

What to Watch at This Week’s Fed Meeting
The discussions could help to define how officials react to surprises on growth, inflation and hiring in the months ahead

Federal Reserve officials are poised to leave interest rates unchanged at their two-day meeting ending Wednesday, and the debate could center on what it would take for them to move off the sidelines.

The central bank’s two earlier policy meetings this year offered more concrete shifts on its interest rate outlook and plans for its $3.9 trillion asset-portfolio runoff.

This time, the discussions around the boardroom table could help to define how officials would react to positive or negative surprises on growth, inflation and hiring in the months ahead.

The Fed releases a policy statement at 2 p.m. EDT but no new economic projections. This leaves Chairman Jerome Powell’s press conference at 2:30 p.m. as the main venue for additional color on any new thinking about the economic and policy outlook. Here are five things to watch:

Growth Story

Look for officials to make only slight changes to their policy statement to reflect stronger-than-expected first-quarter economic growth, which clocked in at a 3.2% annual rate. Firmer economic data has made it easier for officials to maintain their pledge to be “patient” in evaluating where to set rates.

That refrain might grow stale later this year, but for now it appears to have succeeded in signaling an end to the once-a-quarter rate rises the Fed maintained for more than a year. Despite better economic data and buoyant stock markets, it is likely too soon for the Fed to signal any bias toward raising rates. “The stand-pat stance on rates should still dominate,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets.

Inflation Puzzle

While fears of a sharper growth slowdown have receded, Fed officials face—again—the predicament of weakening in inflation. The Fed’s preferred inflation gauge, excluding volatile food and energy categories, rose 1.6% in March from a year earlier, down from 1.8% in January and 2% in December.

There’s no single explanation for the weakness, though the deceleration has been concentrated in service-sector prices that aren’t tightly linked to the business cycle, such as health care. Other market-based measures of inflation expectations, on the other hand, are little changed or slightly better than they were when officials met in March.

Inflation is slipping below the Fed’s 2% target at a time when Mr. Powell and other officials have placed greater emphasis on achieving inflation at or even above the target. The Fed says its target is symmetric, meaning that officials are comfortable with inflation rising mildly above or below 2%. In the current expansion, however, inflation has almost always hovered below the target since it was adopted in 2012.

Mr. Powell’s read of the inflation dynamics could offer important cues about what might lead the Fed to maintain or abandon its current “patient” posture.

The Bar to Cut

Officials have signaled this year that the bar to raise rates remains higher than in recent years because of soft inflation. But there has been less clarity about where the bar is for the Fed to cut rates.

Typically, the Fed has cut rates when growth falters and worries about a recession grow. But Fed Vice Chairman Richard Clarida has pointed recently to two instances in the 1990s in which the Fed cut rates as a precaution, or insurance, against the possibility of such a deterioration in the outlook.

Markets will be highly attuned for signals from Mr. Powell about whether he sees any prospect for the Fed to lower rates if, for example, the weak inflation persists. Roberto Perli, an analyst at Cornerstone Macro, says inconclusive U.S. data, stronger global data, recent stock market gains and political pressure from President Trump to cut rates are obstacles that should prevent Mr. Powell from providing such a clear signal right now.

Technical Tweak

Recent movements in short-term money markets have again caused the benchmark federal-funds rate to drift closer to the top of its target range between 2.25% and 2.5%. In the past when this has occurred, the Fed has lowered the rate it pays banks on deposits, or reserves, held at the central bank relative to the top of the target range.

The rate of interest on excess reserves is currently set at 2.4%, and market liquidity managers are curious to see if the Fed is prepared to lower the rate, relative to the top of the range, by 0.05 percentage point, as it did twice last year, to keep the fed-funds rate closer to the middle of its target range. Cutting the rate could be tricky for the Fed to explain, however, which is one reason officials would leave this alone for now.

Alternately, officials could debate whether to approve an intermeeting cut in the rate or to devise a new market facility to reduce volatility in reserve demand.

Asset Markets

Market volatility, including a big decline in the stock market late last year, encouraged Fed officials to signal they were done lifting interest rates earlier this year. Because markets have since rallied, one question for the Fed is how it regards the potential for easier monetary policy to boost asset prices.

Last year, Mr. Powell repeatedly observed how recent expansions ended with credit bubbles rather than unwanted inflation. In March, he played down concerns that changes in the Fed’s policy stance might ignite a market melt-up like one that followed Fed rate cuts in 1998. Still, with stock markets testing new records, the Fed’s pulse on financial stability concerns looms again.

WSJ : Apple’s iPhone Revenue Drops 17% Overall revenue and profit decline, thoug

Apple’s iPhone Revenue Drops 17%
Overall revenue and profit decline, though results exceed expectations; shares climb in after-hours trading

Apple Inc. AAPL -1.93% posted its first back-to-back drop in quarterly sales and profit in more than two years, but the tech titan reported strength beyond its struggling iPhone business and said a sharp downturn in China showed signs of easing.

Profit dropped 16% to $11.56 billion for the three months through March 30, while revenue slid 5% to $58.02 billion, Apple said Tuesday.

Sales of the iPhone, long the biggest driver of its business, fell 17% to about $31 billion—an accelerated decline for a product that has been hobbled by smartphone owners holding on to devices longer and by competition from rivals in China offering lower-price, feature-rich handsets.

The company’s results exceeded analysts’ expectations, which had ebbed following a surprising slump in the previous quarter. Chief Executive Tim Cook highlighted glimmers of hope in problem areas including China, where he said customers have reacted positively to Apple’s move to lower iPhone prices and offer financing programs.

“Looking back at the past five months, November and December were the most challenging, so this is an encouraging trend,” Mr. Cook said. “We like the direction we’re headed with the iPhone, and our goal now is to pick up the pace.”

Apple said it expects revenue in the current quarter of between $52.5 billion and $54.5 billion, above consensus expectations.

Apple also blunted the damage from its iPhone business by extending the robust growth of services like app sales and streaming-music subscriptions, which collectively jumped 16%. It also said it would add $75 billion to its continuing share-buyback program.

Shares of Apple surged about 5% after-hours, after falling in regular trading. Through Tuesday’s close, Apple’s stock was up about 27% this year, recouping most of the losses it racked up in the final two months of last year. Its market value is on course to once again top $1 trillion.

Tuesday’s report followed a mixed bag of quarterly results from tech giants, including a major stumble by Google’s parent company Alphabet Inc. that caused its stock to plunge nearly 8% on Tuesday, its worst decline in more than six years.

Both the digital-advertising giant and e-commerce giant Amazon.com Inc. over the past week reported their slowest revenue growth in four years as their core businesses showed signs of maturity. Microsoft Corp. , meanwhile, topped $1 trillion in market value at Tuesday’s close for the first time after reporting strong earnings last week.

The iPhone’s woes have threatened to define one of the weakest years in Mr. Cook’s tenure. In January, Apple reported its first decline in revenue and profit for the holiday quarter. It last experienced consecutive quarterly declines in 2016 amid weak demand for the iPhone 6s, which offered limited improvements over preceding models—much like this year’s iPhone XS and XR.

Mr. Cook has combated the adversity with a new strategy: expanding Apple’s services business and increasing the price of its gadgets. In March, it announced new subscription services for original TV shows, videogames and magazines, as well as a credit card. It raised prices late last year on iPads, helping it increase sales 22% in the latest quarter even as analysts estimate shipments remained flat.


Mr. Cook also highlighted success—especially in China—of trade-in programs added to revive iPhone sales. The company is offering customers with older iPhone models above-average prices for those devices if they exchange them for new iPhones, he said.

Investors have largely shrugged off the iPhone troubles and focused on Apple’s potential to generate billions of dollars in revenue by selling subscriptions across the more than 900 million iPhones world-wide. They also were encouraged that the company struck a multiyear agreement in April with Qualcomm Inc. for smartphone modem chips that should allow Apple to deliver an iPhone in 2020 with speedier, 5G wireless technology.

“They have reset expectations,” said Mike Bailey, research director at FBB Capital Partners LLC, which has $1.1 billion under management and counts Apple among its top-10 holdings. “The next catalyst Apple needs to get sales growing are features like 5G. That factor went from negative to positive in the quarter because of the resolution with Qualcomm.”

Apple’s share-repurchase plan is down slightly from last year’s $100 billion commitment, which was the largest ever announced by a U.S. company, according to data from research firm Birinyi Associates. Apple has bought back $71.6 billion since announcing that prior commitment, bringing total repurchases since 2012 to nearly $275 billion. Apple didn’t give a timetable for when it will fulfill the new commitment.

The company’s board also approved a 5% increase in its quarterly dividend to 77 cents a share, building on last year’s 16% increase.

Apple continues to struggle with broader economic challenges in China, where slower growth has hurt companies including 3M Co. and Intel Corp. The iPhone maker’s sales from Greater China, which includes Hong Kong and Taiwan, fell 22% in the just-ended fiscal second quarter, an improvement from the prior quarter.

Apple recently reduced iPhone prices in China to be more competitive with lower-price handsets from rivals like Huawei Technologies Co. and Xiaomi Corp. That bolstered sales in China during the quarter, analysts said, but iPhone shipments still fell 30% to an estimated 6.5 million units, according to Canalys, a market research firm.

Mr. Cook said Apple has been helped by the Chinese government’s move to stimulate the economy by reducing value-added taxes, and by a boost to consumer confidence from signs of progress in U.S.-China trade talks.

Apple also delivered 30% sales growth from its wearables division that includes its smartwatch, AirPods wireless headphones and HomePod smart speaker. Analysts project that will be a $21.76 billion business this fiscal year.

The combination of wearables and services accounted for 29% of total revenue in the fiscal second quarter, while the iPhone fell to 54% of sales from its typical level of two-thirds.

“Thank goodness for the services side of the business because if they didn’t have that Apple would be a super-cyclical hardware-only company,” said David Rolfe, chief investment officer of Wedgwood Partners Inc., a St. Louis-based firm with $3.1 billion that counts Apple as its third largest holding. “It’s grown its ecosystem and given people more reasons to stick around.”

Dow Jones & Co., publisher of The Wall Street Journal, has a commercial agreement to supply news through Apple services.

>>> April ADP Employment Change 275K vs 170K Briefing.com consensus By Sector G

April ADP Employment Change 275K vs 170K Briefing.com consensus
By Sector
Goods-producing: 52,000
  • Natural resources/mining -2,000
  • Construction 49,000
  • Manufacturing 5,000
Service-providing: 223,000
  • Trade/transportation/utilities 37,000
  • Information -1,000
  • Financial activities 6,000
  • Professional/business services 59,000
    • Professional/technical services 28,000
    • Management of companies/enterprises 7,000
    • Administrative/support services 25,000
  • Education/health services 54,000
    • Health care/social assistance 46,000
    • Education 9,000 Leisure/hospitality 53,000
  • "April posted an uptick in growth after the first quarter appeared to signal a moderation following a strong 2018," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "The bulk of the overall growth is with service providers, adding the strongest gain in more than two years."
  • Mark Zandi, chief economist of Moody's Analytics, said, "The job market is holding firm, as businesses work hard to fill open positions. The economic soft patch at the start of the year has not materially impacted hiring. April's job gains overstate the economy's strength, but they make the case that expansion continues on.

>>> Johnson Controls beats by $0.29, reports revs in-line (37.50) Reports Q2

Johnson Controls beats by $0.29, reports revs in-line (37.50)
  • Reports Q2 (Mar) earnings of $0.59 per share, excluding non-recurring items, $0.29 better than the S&P Capital IQ Consensus of $0.30; revenues rose 2.6% year/year to $5.78 bln vs the $5.79 bln S&P Capital IQ Consensus.
  • On April 30, 2019, co closed the previously announced sale of the Power Solutions business to Brookfield Business Partners for net cash proceeds of approximately $11.6 bln.
  • Co announced plans to launch a "modified Dutch auction" tender offer in the coming days for up to $4.0 bln of its ordinary shares with a price range between $36.00 and $40.00 per share.
  • Co announced that it has commenced a cash tender offer to purchase up to $1.5 billion in aggregate principal amount of certain of its outstanding notes

>>> Estee Lauder beats by $0.25, beats on revs; guides FY19 EPS above consensu

Estee Lauder beats by $0.25, beats on revs; guides FY19 EPS above consensus, revs above consensus (171.81)
  • Reports Q3 (Mar) earnings of $1.55 per share, excluding non-recurring items, $0.25 better than the S&P Capital IQ Consensus of $1.30; revenues rose 11.1% year/year to $3.74 bln vs the $3.56 bln S&P Capital IQ Consensus.
  • Co issues upside guidance for FY19, sees EPS of $5.15-5.19, excluding non-recurring items, vs. $5.06 S&P Capital IQ Consensus; sees FY19 revs increase of 7-8% (implying $14.65-14.79 bln) vs. $14.55 bln S&P Capital IQ Consensus.
  • "Company is mindful of risks related to social and political issues, including geopolitical tensions, regulatory matters, global security issues, currency volatility and economic challenges that could affect consumer spending in certain countries and travel corridors. Given this environment, the Company has reflected the following risks in its outlook:
    • Continued softness of brick & mortar retail in the United States and United Kingdom is impacting overall prestige beauty growth, especially in the makeup category. The
    • Company plans to invest further in the U.S. in the fourth quarter of fiscal 2019 to improve growth.
    • Some costs associated with the anticipated Brexit in the United Kingdom.
    • Continuation of tariffs in China and the gradual moderation of net sales growth in China and Travel Retail from recent levels. The Company has not experienced this moderation to date and continues to be optimistic about the strength of long-term growth in those areas.

>>> Garmin beats by $0.02, beats on revs; reaffirms FY19 EPS guidance, revs guid

Garmin beats by $0.02, beats on revs; reaffirms FY19 EPS guidance, revs guidance (85.74)
  • Reports Q1 (Mar) earnings of $0.73 per share, excluding non-recurring items, $0.02 better than the S&P Capital IQ Consensus of $0.71; revenues rose 7.7% year/year to $766 mln vs the $733.26 mln S&P Capital IQ Consensus, with marine, aviation, fitness and outdoor collectively increasing 12% over the prior year quarter Gross margin of 59.0% compared to 60.0% in the prior year quarter
  • Co reaffirms guidance for FY19, sees EPS of $3.70, excluding non-recurring items, vs. $3.75 S&P Capital IQ Consensus; sees FY19 revs of $3.5 bln vs. $3.53 bln S&P Capital IQ Consensus

>>> trivago beats by €0.01, misses on revs; affirms FY19 Adjusted EBITDA guidanc

trivago beats by €0.01, misses on revs; affirms FY19 Adjusted EBITDA guidance (4.79)
  • Reports Q1 (Mar) GAAP earnings of €0.02 per share, €0.01 better than the S&P Capital IQ GAAP Consensus of €0.01; revenues fell 19.5% year/year to €208.76 mln vs the €239.6 mln S&P Capital IQ Consensus.
  • Adjusted EBITDA was €20.9 mln in the first quarter of 2019, compared to an Adjusted EBITDA loss of €21.9 mln in the first quarter of 2018, up €42.8 mln. Reflecting the performance in the first quarter of 2019, the co continues to expect Adjusted EBITDA for 2019 to be between €50 mln and €75 mln.
  • The number of Qualified Referrals decreased to 129.3 mln in the first quarter of 2019, or by 32%, compared to 189.5 mln in the first quarter of 2018.
  • Update on legal proceedings -- "On August 23, 2018, the Australian Competition and Consumer Commission, or ACCC, instituted proceedings in the Australian Federal Court against us. The ACCC alleged breaches of Australian consumer law relating to our advertisements in Australia concerning the hotel prices available on our Australian site and our strike-through pricing practice, which is the display adjacent to the price quote in the top position in our search results of a higher price that is crossed out. In March 2019, we completed the production of certain documents to the ACCC pursuant to the court's discovery order. The court has set trial date for September 9, 2019. Management has established a provision in respect of this matter.

>>> Royal Caribbean beats by $0.20, beats on revs; guides Q2 EPS in-line; guid

Royal Caribbean beats by $0.20, beats on revs; guides Q2 EPS in-line; guides FY19 EPS below consensus (121.05)
  • Reports Q1 (Mar) earnings of $1.31 per share, excluding non-recurring items, $0.20 better than the S&P Capital IQ Consensus of $1.11; revenues rose 20.3% year/year to $2.44 bln vs the $2.38 bln S&P Capital IQ Consensus.
  • Co issues in-line guidance for Q2, sees EPS of $2.45-2.50, excluding non-recurring items, vs. $2.48 S&P Capital IQ Consensus.
  • Co issues downside guidance for FY19, sees EPS of $9.65-9.85, excluding non-recurring items, vs. $9.94 S&P Capital IQ Consensus. Note: This range includes the negative impact of $0.25/sh from the shipyard incident for Oasis of the Seas (two construction cranes collapsed on the stern of the ship causing extensive damage) and also includes the negative impact of approximately $0.25 per share from currency and fuel since the January guidance. Better Q1 results and an improved revenue outlook are offsetting the vast majority of these two negative impacts. Excluding these impacts, Adjusted EPS would have been in the range of $10.15 to $10.35 per share

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • HCSG -19.5%, EXTR -15.5%, FTR -14.4%, CAMP -11%, MGPI -9.5%, SSNC -7.8%, HVT -7.6%, CYH -7%, WATT -6.1%, CAI -5.6%, LXRX -4.5%, FEYE -3.4%, OLN -3.3%, CHRW -3.2%, ENLC -3.1%, ASH -3.1%, CLX -3%, TENB -2.5%, CSTE -2.5%, YUM -2.3%, ZEN -2.2%, EXAS -2%, AX -1.8%, VNOM -1.7%, APY -1.7%, TAP -1.6%, NBR -1.4%, AMRN -1.1%, VRTX -0.9%, ENBL -0.9%, SO -0.9%, AMGN -0.8%, AME -0.8%

Other news:

  • NBRV -23.7% (receives Complete Response Letter from FDA on NDA for Intravenous CONTEPO)
  • TBIO -7.3% (entered into a securities purchase agreement with several institutional accredited investors for the private placement of 5,582,940 shares of common stock at $8.50/share)
  • NBEV -3.1% (entered into $100 mln at the market offering agreement)
  • KRP -1.9% (attributed to block trade pricing)
  • RGEN -1.7% (prices underwritten public offering of 2,734,375 shares of common stock at $64.00 per share)
  • DSSI -1.1% (files 11.68 mln share common share offering by selling shareholders)
  • WAB -1% (announces secondary public offering of 12.5 mln shares of common stock by selling stockholder; also files for 47,833,671 share common stock shelf offering by holders - includes ~28 mln shares issuable upon conversion of Series A non-voting convertible preferred stock)

Analyst comments:

  • N/A.