Transcripts For KQED Nightly Business Report 20160805 : vima

Employers have been creating jobs at a healthy clip for years, but today, just one day before the july employment report is set to be released, there were two setbacks for american workers. Firsttime applications for Unemployment Benefits rose by 3,000 last week to a seasonally adjusted 269,000. We also learned today that there was a rise in layoffs last month and tomorrow we may get answers to some pressing economic questions. Hampton pearson has more. Reporter sagging Energy Prices drove layoffs higher in july, a 19 increase over june. Out placement first challenger, gray and christmas says the cuts came from large employers. The big oil companies, conoco phillips, made a big cut this month as well as the Equipment Companies like halliburton continue to cut jobs as they react to the real amount of business that they have got to handle. Reporte despite the setbacks, leading economists still see a labor market healthy enough to support Economic Growth for the rest of the year without the volatility of the last two months. There was junes blockbuster growth of 287,000 jobs, following a near wipeout in may when employers added just 11,000 workers to payroll. The Consensus Forecast called for payrolls to increase by 179,000 jobs with the Unemployment Rate falling to 4. 8 . This would be a second strong jobs report following the weak reading in may, and we think it would give the Federal Reserve comfort about the state of labor markets and its outlook on the u. S. Economy. Reporter monetary policymakers will have tomorrows july report plus another one for august before their next policy meeting in midseptember. That data will help determine if the fed raises rates or changes course. For nightly business report, im half. On pea im Hampton Pearson in washington. The fed use counterpart in england made an historic move, cutting its main Interest Rate to its lowest level ever, and the bank of england didnt stop there. Geoff cutmore reports now from london. Reporter there were a couple of firsts in this report from the bank of england today, the first time weve seen Interest Rates cut in seven years but also the first time weve seen such a dramatic reduction in growth expectations. They are now talking about 0. 8 gdp growth for full year 2017, and thats a very radical departure from the previous forecasts of 2. 4 . That goes some way to explaining why we had more than just an Interest Rate cut at this meeting. 70 billion pound sterling of stimulus introduced in the form of a corporate and guild bondbuying program. That will go some way perhaps in calming jitters around what the postbrexit uk economy is going to look like. It was asked several times in the press conference whether they thought helicopter money might be a good idea or whether uk rates may indeed have to go negative and it was said hes no fan of negative rates, but the bank has signalled that rates are likely to go lower again before the end of the year. This is Geoff Cutmore at the bank of england for nightly business repor britains vote to leave the European Union is not only prompting the bank of england to make big moves, but if might also deter british tourists from taking that vacation here in the u. S. , and as adidi roy reports, american businesses are playing close attention. Reporter its travel season in the u. S. , and that means the british are coming. The uk sends more overseas visitors to the u. S. Than any other country. Last year the Commerce Department says brits spent more than 4. 5 billion in the u. S. Now with brexit looming and the sterling weakening against the dollar, some are worried that the u. S. May be too pricey for uk tourists, but in the travel industry opinions seem to be mixed. In its Earnings Call today trip adviser is saying brexit is partly responsible for softness in june and into july. But Intercontinental Hotels says it expects currency fluctuations to have only a small impact on its results and last week American Airlines told analysts on itsl that while they havent seen any shortterm impact of brexit on the companys revenue they expect currency changes to have a negative effect on the airlines, adding that down the road its the Business Traveler that they will be watching more closely. Looking forward the travel transindex which gathers data from airlines, hotels and travel sites says International Travel will be slightly lower in the next six months. The u. S. Travel Association Says that historically the growth in tourism from the uk has been tied to currency changes between the two countries and that could have some in the travel industry watching the Exchange Rate closely. For nightly business report, im adidi roy. Reporter so what will all of this, brexits impact on tourism in the u. S. To the rate cut by the bank of england and tomorrows much anticipated jobs report mean for your investment portfolio . Kevin corran is a Portfolio Manager in washington and joins us now. Good to see you again, kevin. Welcome back. Good to see you, sue. Lets start first of all with what the bank of england did. One, were you surprised, and do you think they will have to do more . No. I think this was delivered pretty much on script. The bank of england needed to do two things. They needed to assure markets that they were there to support what might be a weak economy, and by the way, we havent had a lot of data to judge the path of the economy. Yes, exactly. And then they also couldnt do more than the market expected because the the countrys also somewhat concerned about a weak sterling, so the market got today i think exactly what it was looking for. You know, how long do you think it will be before we get some concrete data about the brexit vote effect on either consumers or the economy. It could be some time, i would think. Yeah, i think its going to take some time, and there are a couple of different parts of this. You will get some data on gdp within the next couple of months, and in the near term were going to be looking at some various surveys, et cetera, to get a gauge of things, but you have to also understand that nothing really has happened yet economically. There may be a shock to psyche. Theres some planning that has to be made in terms of what the future looks like, but in the last few weeks not too much has actually changed as a result of the as a result of the vote. Here at home where does this put the fed, because if indeed they do decide to raise rates maybe in september, they are going in the opposite direction of most Central Banks around the world. Yeah, and thats a bit of a trick because what the fortunate thing that we have here is that weve got an economy thats doing much better than other placed. Weve got an Unemployment Rate thats coming down. Well be looking at the jobs number tomorrow. You mentioned it earlier in your segment. Were also going to be looking at the inflation rate and the fed will be looking at the inflation rate which appears to be stabilizing. If you look at where we are, annualized the last few months in core inflation youre above 2 so inflation, employment, they look pretty good. Not much slack in the economy. That would suggest the feds should be raising Interest Rates, but thats not where the rest of the world is. You look at europe, just about every major economy there has negative shortterm Interest Rates, and thats creating some potential for volatility in currencies. So are you changing your portfolio mix at all, and for those at home where would you put money to work given the backdrop we just set up . Yeah. Well, not much has changed because weve been advocates of staying with the dollar, staying with the u. S. Economy because we think were the best game in town. We think the growth here is the best, as i mentioned and having a strong dollar to boot isnt so bad so were staying with that posture in terms of sectors. We do like health care. Theres been a little bit of underperformance as a result perhaps of the election coming up. We think theres some good Balance Sheets and values to be had there. Industrials the same thing and i would even say that gold is something that we put back as a small position in portfolios earlier this year, basically as a hedge and we think the valuation has gotten somewhat better. Thanks for the advice, kevin, appreciate it. As always, thanks. Stocks wey quiet following the bank of englands rate cut and ahead of julys job report which some hope will provide the market with more clarity. When all was said and down the Dow Jones Industrial three points to 18,52. The nasdaq added six and the s p 500 up fractionally and domestic crude rose more than 2. 5 . Still ahead, why a troubling trend may be brewing in the restaurant industr it was a lackluster quarter for viacom. Profits tumbled at the media company, but results were better than what analysts had been expecting, and that helped send shares higher. But its Quarterly Results are being overshadowed by a vicious and very public fight between viacom ceo and the companys Controlling Shareholder. Julia boorstin reports. This is one of the most unusual board room battles weve seen in years. Viacoms founder and Controlling Shareholder Sumner Redstone is trying to fire his protege and longtime friend viacom ceo felipe domond while arguing redstone is incompetent to fire him. This morning viacom reporting modestly better than expected earnings, defending captain saying they were undervalued by the teenage mutant ninja turtle. And domond is under fire for his management of viacom. Theres still enormous heat on domond. They preannounced a bad quarter a few quarter so they marginally beat the lowered expectations. Compare what they did this quarter compared to a year ago period its obvious that this company is still in difficult position. These mixed results come on the heels of reports that talks to settle redstone and domonds legal issues fell apart. Now the question of who controls viacoms future, domond or redstone, will be decided by judges in three states in october. A massachusetts judge will hear the suit over redstones mental competence. A delaware judge will hear lead independent director fred slarnos suit to direct the dismissal from viacoms board and in california a judge will hear redstones decision to replace viacom directors. Viacoms Earnings Call acknowledged that the legal battles have been an overhang at the stock and pushed to sell a stake in paramount hand now he says hes optimistic. Last week courts in massachusetts and delaware rejected motions to dispolice, alled loud discovery to proceed and scheduled trials to take place in october. We view these Favorable Court rules as positive steps that move us ahead to a resolution. Redstones National Amusement issuing a statement saying, quote, domond is the third highest paid ceo in the united the worst as measured by pay for performance, including his prenegotiated golden parachute, he stands to receive almost half a billion dollars for a tenure that has seen the market decline of one of the nations greatest media companies. As the barbs continue to sly its clear the battle for viacom is far from over. For nightly business report, m Julia Boorstin in los angeles. The owner of pittsburgh king and tim hortons reported an unexpected fall in revenue. Restaurant Brands International says unfavorable Exchange Rates along with slowing sales at existing locations weighed on its Quarterly Results, but those lower sales were offset by cost cuts, and that helped send shares of the Parent Company Restaurant Brands higher on the session, but its been a tough Second Quarter for other restaurants and fast food chains as well. Consumers have been going out to eat less in part because of cheaper grocery prices, and as susan lee reports, some say this is the new normal for that sector. Reporter whether its burgers, burritos or friday chicken, americans are not eating out like they used to. Lower prices at the pump, aggressive value deals and even new menu items are not enough to get more people into restaurants. This is whats being called the new normal in the meals business. The npd group has been tracking sales receipts for the industry for decades, and they say the foot traffic stalled in march this year, just before u. S. Consumer confidence started to wane. The sector is now growing slower than historical trends. Npd forecasts industry traffic will only grn anemic half a percent each year for the next never been able to find a strong correlation between movement in gas prices and samestore sales of traffic. A lot of other factors so im not convinced that the gasoline prices really played much of a factor as much as Wage Inflation and growth in jobs. I think those are the two factors that investors should look at. Living costs are going up faster than wages which is hurting consumer confidence. Also high college debt being paid for by both students and parents and the millenials lack of disposable income all contributing to a slowdown in Restaurant Visits and another factor keeping average folks from dining out according to mcdonalds ceo. There is a widening gap between food away from home and food at home where the commodity decreases have been passed by the grocer and the food at home is is theres value to be had for families there whereas with others there is a Price Inflation environment. Mcdonalds, burger king and chipotle have all seen a slowdown in sales growth and this years Second Quarter, but things may be turning around. They have seen the sales slowdown for sure. Its been, you know, kind of clear from the First Quarter into the Second Quarter so its there, but, again, you know, it made it may reverse itself. There is some evidence that weve had an improvement in the month of july, you know. Maybe even it might be slight but weve seen an improvement in the month of july so who knows if this is going to continue. The npd group paints a more pessimistic picture with sales set to grow even below the years since the Global Financial crisis. For nightly business report, im susan lee. A shore drop in attendance hurts seaworlds results, and thats whe tonights market focus. The theme park operator said fewer tourists from latin america and an overall downturn in the orlando market, which is home to its biggest park, contributed to a nearly 8 drop in visitors. Revenue for the quarter also fell missing estimates while profit rose and was in line with targets. Seaworld also cut its yearly profit guidance. The shares plunged 13 to 12888. Kelloggs revenues fell below expectations as the maker of eggo waffles and frosted flakes saw continued weakness in its cereal brands, but the food giant did post a jump in profit thanks to costcutting. Kellogg also raised its yearly earnings outlook. Shares were higher by more than a percent to 82. 42. Metlife will cut 1 billion in costs by the end of 2019, and job losses will be part of that plan. The news follows a disappointing Earnings Report from the nations largest life insurer in which quarterly profit fell 949 . Metlife shares fell nearly 9 to 39. 54. Linkedin reported higher than expected revenue thanks to an increase in premium subscriptions and sponsored content. The professional networking website also beat analyst profit estimates earlier this month. The Software Giant microsoft announced that it would buy linkedin for about 26 million in a deal that is expected to close this year. Shares were flat, following the earnings and closed the regular se5 cents to 192. 01. Nike, the worlds biggest sportswearmaker is getting out of the golf business. The company says it will stop making clubs, golf balls and golf bags so it can focus on its shoe and apparel business, but is this move by nike another blow to the game of golf where the hits just seem to keep on coming . Will gray is associate editor at thegolfchannel. Come and joins you now. Good to see you, will and welcome. Thank you. Good to be with you. What impact do you think this will have on the space with nike exiting . Yeah, certainly interesting timing given the golf season is right at basically its peak time, but i think that its going to create an opportunity for the other equipment manufacturers in golf in terms of the longterm health of the game. I dont think that nike getting out of the equipment space is necessarily going to have a huge impact. Remember, they are still going to be very involved into golf, going on to the soft goods side and youll see plenty of swooshes on golfers, both on the men and womens side. We saw calloway golf and its stock move sharply higher today. Yeah. Calloway certainly had a big first day of trading after the nike announcement, but a company that i have my eye on is pxg, run by bob parsons. Making golf clubs for the last year or two but they are really in a position to make a big splash. They have had a couple of big names the pga tour they have signed this year. When youre looking at where nikes athletes and golfers could sign in the