• The U.S. budget deficit widened to US$738.6Bn in the first eight months of the fiscal year, a US$206Bn increase from a year earlier, despite a revenue boost from President Donald Trump’s tariffs on imported merchandise.
• The shortfall was 38.8% more than the same period a year ago, the Treasury Department said in its monthly budget review released on Wednesday. So far in the fiscal year that began Oct. 1, a revenue increase of 2.3% hasn’t kept pace with a 9.3% rise in spending.
• As Trump ratcheted up the trade war with China with higher levies on imports from the Asian nation, the U.S. recorded US$4.9Bn in customs duties in May, bringing the total to US$44.9Bn in the first eight months of the fiscal year – almost double the same period a year earlier. Trump has repeatedly boasted that the U.S. is taking in billions in dollars through the tariffs, though importers in America are actually paying the levies.
• The deficit is forecast to reach $897 billion this fiscal year, from US$779Bn last year, and rise to more than US$1Tn in fiscal 2022, according to the Congressional Budget Office. In May, the fiscal deficit increased to US$207.8Bn, up 41.5% from the same month last year. The forecast in a Bloomberg survey of economists was US$202.5Bn.

 (Source: Bloomberg)

• Suspected attacks on two tankers off the coast of Iran saw oil markets erupt out of their recent slump on Thursday and kept traders gobbling up ultra-safe government bonds, gold, and the Japanese yen.
• Brent surged as much 4% after reports of the attacks added to already heightened tensions between Iran and the United States. The area is near the Strait of Hormuz through which a fifth of global oil consumption passes from Middle East producers.
• The crude spike helped Europe’s oil producers pull European stock markets higher and lift Wall Street futures.
• There were also some stellar gains in the telecoms sector as Germany dished out new 5G mobile network licenses to some new entrants.  
• Given that oil was at five-month lows on Wednesday, people were taking precautions in case it might escalate into something more serious, CMC Markets senior analyst Michael Hewson said.

 (Source: Reuters)

• Consolidated Bakeries reported a decline in profits for the three-month period ended March 31, 2019. Net Profits ended the period at $13.58Mn (EPS: $0.06) which represents a 34.3% fall relative to the corresponding period of 2018.
• Contributing to this performance was a decline in interest and other income which fell 20.8% whilst administrative & other expenses and cost of sales experienced increases of 8.8% and of 2.1% respectively.
• The stock has risen 15.9% since the start of the calendar year. Consolidated Bakeries closed trading yesterday at $1.97 and currently trades at a P/E of 65.67x earnings which is above the Junior Market Manufacturing sector average of 25.91.

 (Source: Consolidated Bakeries Financials)

• The Barbados government said it presented holders of foreign debt with two scenarios last month and plans to launch a formal exchange offer after another round of negotiations with creditors.
• The first scenario included 14-year amortizing notes issued at 66.67% of face value. Two-year grace period with 3.5% coupon, followed by 7.5% coupon in years 3-14, semiannual payments and natural disaster clause.
• The second scenario included bond issued at par to face value maturing in 25 years, maturing in 25 years, the 15-year grace period on the principal and a natural disaster clause.
• Both scenarios “are at the limits of what is compatible with the debt sustainability framework that underpins” loan agreement with IMF. The government plans to discuss scenarios with creditors in coming weeks “with a view to adjusting the structure of the bonds to meet creditor preferences so long as they are compatible with the debt” targets agreed to with IMF.

(Source: Bloomberg)

• The government is preparing a National Industrial Policy that will seek to revive the manufacturing sector, according to Ronald Topping, the Minister of International Business and Industry. The first draft of the policy is expected to be ready by September and finalized before the end of the current financial year in March 2020.
• This is a response to the decline of the sector over the last decade based on the reduction in employment in the sector, the number of companies in the sector, the level of investment, and the contribution of the sector to GDP. The minister also noted that there are several challenges facing the sector, particularly as it relates to access to financing.
• He added that talks are ongoing between the government and local manufacturers, and there are plans for national consultation in the coming months to hear their concerns. The government is also aiming to create two new industries, particularly in ICT and pharmaceuticals.

 (Source: Barbados Today)

• Britain’s opposition Labour Party is not prepared to let Prime Minister Theresa May’s successor pursue a “disastrous” no-deal Brexit, the party’s spokesman said on Wednesday.
• The Labour Party is using a vote on Wednesday to try and seize control of the parliamentary agenda later this month to give lawmakers the chance to introduce legislation aimed at preventing the suspension of parliament or a no-deal exit.
• “Boris Johnson and a series of other Tory (Conservative) leadership candidates have made clear they are prepared to see a no-deal exit from the European Union which quite clearly, even under the government’s own assessments, would be disastrous for the British economy,” Labour’s spokesman said.

 (Source: Reuters)

• The core consumer price index, which removes energy and food costs, rose 2% from a year earlier, below forecasts, according to a Labour Department report Wednesday. The figure rose 0.1% from the prior month for a fourth-straight time and missed estimates. The broader CPI increased at an annual 1.8%, less than projected.
• U.S. stock futures briefly advanced and Treasury yields dipped as below-forecast inflation followed signs of slower economic growth that stands to bolster investor expectations for Fed rate cuts this year.
• The market-implied odds of a July cut increased after the report, with Fed funds futures now indicating almost a quarter-point of easing in the next two months.
• Lower gasoline prices played a role in keeping broader inflation tame. Energy prices fell 0.6% from the prior month and 0.5% from a year earlier as all major components in the category fell on an annual basis.

(Source: Bloomberg)

• For the three-month period ended March 31, 2019, K.L.E. Group reported a net profit of $198,000 (EPS: $0.003) which represents a significant improvement over the $1.8Mn loss reported in the corresponding period of 2018.
• Improvement in the bottom line was partly attributed to a reduction in the cost of goods sold (17.6%) as well as a decline in the administrative and other expenses (6.4%).
• The stock has fallen 39.7% since the start of the calendar year. K.L.E. Group closed trading yesterday at $1.90 and currently trades at a P/B of 1.88x earnings which is below the Junior Market sector average of 3.85x.

(Source: K.L.E. Group Financials)

• The U.S. Treasury Department on Thursday tightened its pressure on Venezuela’s state-owned oil company by making clear that exports of diluents by international shippers could be subject to U.S. sanctions.
• The change, announced on the Treasury Department’s website, is the latest U.S. measure aimed at pressuring Venezuelan President Nicolas Maduro by limiting access to oil export revenue from PDVSA.
• PDVSA had long relied on imports of diluents from the United States to add to its extra-heavy oil to make the crude exportable. But that trade was banned in January, forcing the company to look abroad for other suppliers.
• The changing of the language puts international companies on notice that any continued engagement or transactions they have with PDVSA selling diluents is at risk, or subject to future potential sanctions.

 (Source: Reuters)

• The local sugar industry reportedly raked in US$27.1Mn in 2018, a 44.1% reduction from what was reported in 2017.
• The out-turn was attributed to a 28.0% decline in the volume of sugar exported and a decline in the average export price.
• The average export price for sugar declined by 22.4% to US$348.4 per metric tonne, compared to the US$449.2 per metric tonne it was being sold at in 2017.

 (Source: Guyana Chronicle