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HOUSTON (Reuters) – The board of Citgo Petroleum [PDVSAC.UL] appointed by Venezuela’s congress chief was properly seated, a U.S. court ruled, dealing a blow to contested Venezuelan President Nicolas Maduro’s efforts to retake control of the Texas-based refiner.

Venezuelan congress chief Juan Guaido’s recognition by the Trump administration as the South American country’s legitimate leader makes his Citgo appointments valid, Delaware Chancery Court Vice Chancellor Kathaleen McCormick ruled on Friday.

The ruling provides U.S. court backing for Guaido as the country’s official leader with power to name directors of Citgo and its parent, Petroleos de Venezuela [PDVSA.UL] (PDVSA). However, she delayed the ruling for 10 days to give Maduro’s lawyers time to challenge the process used to confirm the appointments.

“We are grateful that the court has rejected the Maduro regime’s efforts to use the U.S. judiciary to advance their anti-democratic objectives,” Citgo said in a statement.

Quinn Smith, an attorney who represented the Maduro appointed board in the court case, did not respond to requests for comment outside normal working hours. Neither PDVSA nor the Venezuelan oil ministry immediately responded to requests for comment.

Citgo, Venezuela’s most important foreign asset, has been caught in a tug-of-war as President Donald Trump’s government has tried to use the firm as leverage to topple Maduro. Sanctions have barred Citgo from buying Venezuelan crude or paying it dividends.

Judge McCormick said the court “accepts as binding the U.S. President’s recognition of the Guaidó government and assumes the validity of the Guaidó government’s appointments to the PDVSA board.”

Her ruling set a high hurdle for Maduro’s lawyers to challenge the directors. McCormick wrote the court generally accepts director seatings, and noted the Maduro board’s lawyers “do not appear to contest the authority” of the officials who authorized the appointments.

In February, the Guaido-led congress appointed an ad-hoc PDVSA board with rights to nominate directors for U.S. units PDV Holding, Citgo Holding and Citgo Petroleum. However, Maduro retains the support of the Venezuelan military and still controls PDVSA and most state functions.

The Trump administration in January imposed sanctions on Venezuela and PDVSA designed to curb its oil revenue to pressure Maduro to step aside. Since then, its shipments have declined about 40{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}.

By Andrea Shalal, Alexandra Alper and Huizhong Wu

BEIJING/WASHINGTON (Reuters) – China on Friday said it would not be blackmailed and warned of retaliation after U.S. President Donald Trump vowed to slap a 10{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} tariff on $300 billion of Chinese imports from next month, sharply escalating a trade row between the world’s biggest economies.

Trump stunned financial markets on Thursday by saying he plans to levy the additional duties from Sept. 1, marking an abrupt end to a truce in a year-long trade war that has slowed global growth and disrupted supply chains.

Beijing would not give an inch under pressure from Washington, Chinese Foreign Ministry spokeswoman Hua Chunying said.

“If America does pass these tariffs then China will have to take the necessary countermeasures to protect the country’s core and fundamental interests,” Hua told a news briefing in Beijing.

“We won’t accept any maximum pressure, intimidation or blackmail. On the major issues of principle we won’t give an inch,” she said, adding that China hoped the United States would “give up its illusions” and return to negotiations based on mutual respect and equality.

Trump also threatened to further raise tariffs if Chinese President Xi Jinping fails to move more quickly to strike a trade deal.

The newly threatened duties, which Trump announced in a series of tweets after his top trade negotiators briefed him on a lack of progress in talks in Shanghai this week, would extend tariffs to nearly all Chinese goods that the United States imports.

The president later said if trade discussions failed to progress he could raise tariffs further – even beyond the 25 percent levy he has already imposed on $250 billion of imports from China.

Senior Chinese diplomat Wang Yi told reporters on the sidelines of an Association of Southeast Nations event in Thailand that additional tariffs were “definitely not a constructive way to resolve economic and trade frictions”.

U.S. Secretary of State Mike Pompeo, who was also in Bangkok, decried “decades of bad behavior” by China on trade and said Trump had the determination to fix it.

The news hit financial markets hard. On Friday, Asian and European stocks took a battering and safe-haven assets such as the yen, gold and government bonds jumped as investors rushed for cover.

Retail associations in the United States predicted a spike in consumer prices, hitting consumer stocks on Thursday on Wall Street, where Target Corp tumbled 4.2{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}, Macy’s Inc fell 6{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} and Nordstrom Inc was down 6.2{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}.

Asked about the impact on financial markets, Trump told reporters: “I’m not concerned about that at all.”

Moody’s said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the euro zone.

The tariffs may also force the Federal Reserve to again cut interest rates to protect the U.S. economy from trade-policy risks, experts said.

CHINESE RETALIATION?

One Chinese official told Reuters it was not the first time Trump had “flip-flopped”, and that though the time between the talks being declared constructive and Trump’s threat of new tariffs was short, officials in Beijing were already prepared.

“Discussion followed by a fight has become the normal pattern,” the official said.

Possible retaliatory measures by China could include tariffs, a ban on the export of rare earths that are used in everything from military equipment to consumer electronics, and penalties against U.S. companies in China, analysts say.

So far, Beijing has refrained from slapping tariffs on U.S. crude oil and big aircraft, after cumulatively imposing additional retaliatory tariffs of up to 25{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} on about $110 billion of U.S. goods since the trade war broke out last year.

China is also drafting a list of “unreliable entities” – foreign firms that have harmed Chinese interests. U.S. delivery giant FedEx is under investigation by China.

“China will deliver each retaliation methodically, and deliberately, one by one,” ING economist Iris Pang wrote in a note.

“We believe China’s strategy in this trade war escalation will be to slow down the pace of negotiation and tit-for-tat retaliation. This could lengthen the process of retaliation until the upcoming U.S. presidential election,” Pang said.

FRUSTRATED

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin briefed Trump earlier this week on their first face-to-face meeting with Chinese officials since Trump met Xi at the G20 summit at the end of June and agreed to a ceasefire in the trade war.

“When my people came home, they said, ‘We’re talking. We have another meeting in early September.’ I said, ‘That’s fine, but until such time as there’s a deal, we’ll be taxing them,” Trump told reporters.

A source familiar with the matter said Trump grew frustrated and composed the tweets shortly after Lighthizer and Mnuchin told him China made no significant movement on its position.

Previous negotiations collapsed in May, when U.S. officials accused China of backing away from earlier commitments.

American business groups in China expressed disquiet over the latest round of U.S. tariffs. The U.S.-China Business Council said on Friday it was concerned the action “will drive the Chinese from the negotiating table, reducing hope raised by a second round of talks that ended this week in Shanghai”.

“We are particularly concerned about increased regulatory scrutiny, delays in licenses and approvals, and discrimination against U.S. companies in government procurement tenders,” said the U.S.-China Business Council’s President Craig Allen in an e-mail.

Ker Gibbs, the president of the American Chamber of Commerce in Shanghai, said that as market access in China “remains unnecessarily restricted”, the United States should continue its dialogue with Beijing, and “also work with like-minded countries to persuade China that fair and reciprocal trade and investment benefits all.”

CROPS AND DRUGS

Trump said Beijing had failed to fulfil promises to stop sales of the synthetic opioid fentanyl to the United States, which U.S. officials say was to blame for most of more than 28,000 synthetic opioid-related overdose deaths in the United States in 2017.

He also said Beijing had not followed through on a goodwill pledge to buy more U.S. agricultural products.

The U.S. Department of Agriculture on Thursday confirmed a small private sale to China of 68,000 tonnes of soybeans in the week ended July 25.

The United States also has yet to ease restrictions on U.S. companies’ sales to Chinese telecommunications giant Huawei, which Trump had pledged as a goodwill gesture to Xi after meeting at the G20 in Osaka.

MILAN (Reuters) – UniCredit (CRDI.MI) has found no evidence so far of any customer data having been accessed or compromised in relation to a major data breach at Capital One Financial Corp (COF.N), the bank said in a memo to staff on Thursday.

U.S. authorities are looking at whether a suspect charged with stealing data on more than 100 million Capital One customers from an Amazon.com Inc. cloud service successfully hit other targets.

On Wednesday, UniCredit said it had launched its own investigation into the matter after the bank’s name was mentioned in a blog post by a cybersecurity researcher as a possible additional target of the Capital One breach.

Earlier on Thursday the New York State Department of Financial Services said it had been notified by Italy’s biggest bank of the possible loss of consumer data related to the Capital One case.

A source close to the matter said UniCredit does not store any customer data on Amazon servers.

MUNICH (Reuters) – German prosecutors said on Wednesday they had filed charges against former Audi Chief Executive Rupert Stadler, who is being investigated over his role in Volkswagen’s (VOWG_p.DE) emissions test cheating scandal.

Volkswagen admitted in September 2015 to having used illegal engine control software to cheat pollution tests, triggering a global backlash against diesel. The affair has so far cost the German carmaker 30 billion euros ($33.5 billion).

The public prosecutor’s office in Munich said Stadler and three other defendants are being charged with fraud, false certification and criminal advertising practices. Stadler has denied any wrongdoing, his lawyer said.

Premium brand Audi only admitted in November 2015 that its 3.0 litre V6 diesel engines were fitted with an auxiliary control device which was deemed illegal in the United States.

Volkswagen and its former managers have faced numerous law suits, and in April prosecutors in the German city of Braunschweig charged former Volkswagen boss Martin Winterkorn with fraud over his role.

The Munich prosecutor said that three of the defendants are accused of having developed engines for Audi, Volkswagen and Porsche cars that used emissions cheat devices.

“Defendant Stadler is accused of having been aware of the manipulations since the end of September 2015 at the latest, but he did not prevent the sale of affected Audi and VW vehicles thereafter,” the prosecutor said in a statement.

Stadler was arrested in June 2018 as part of a broader probe into emissions cheating at Audi, which is part of Volkswagen Group, and spent several months in prison.

Volkswagen later terminated Stadler’s contract against the backdrop of a criminal investigation into whether he was involved in emissions tests cheating.

The prosecutors said that his indictment relates to roughly 250,000 Audi branded cars, 112,000 Porsches and 72,000 Volkswagen cars that were sold in the U.S. and Europe.

‘PRESUMPTION OF INNOCENCE’

The defendants charged by the Munich prosecutor include former Audi and Porsche manager Wolfgang Hatz as well as two engineers, several people familiar with the proceedings said.

Hatz, former research and development chief at Porsche and former head of powertrain development at Audi and parent Volkswagen, spent several months in custody in 2017 and 2018 over his alleged role in the emissions cheating scandal.

A lawyer for Hatz separately said his client denied any wrongdoing.

The Munich prosecutors on Wednesday declined to identify the defendants, except for Stadler.

Investigations against 23 further suspects continue, the prosecutor’s office said.

The Braunschweig prosecutors had said that Volkswagen’s emissions cheating took place between November 2006 and September 2015, and that Winterkorn failed in his duty to inform European and U.S. authorities after it became clear in May 2014 that diesel engines had been manipulated.

Winterkorn had also neglected to inform customers of, and did not prevent, the continued installation of fraudulent software, the prosecutors have said.

Winterkorn’s lawyer has said he cannot comment on the charges because he had been denied access to important case files.

Audi said in a statement on Wednesday that it was in the interest of the company, its shareholders and employees to clarify the issues that led to the diesel crisis.

“Until this has happened, the presumption of innocence must prevail,” the spokesman said.

(Reuters) – Eli Lilly and Co (LLY.N) reported a second-quarter profit that topped Wall Street estimates and raised its 2019 earnings forecast on Tuesday, as higher demand for newer drugs offset increased discounts for the U.S. Medicare program and sales declines of medicines that lost patent protection.

The drugmaker has been working to retain its position as a leader in diabetes care with newer drugs like Trulicity, Jardiance and Basaglar, as its top-selling insulin product Humalog faces increased competition and political pressure over the soaring cost of life-sustaining insulin.

Lilly is counting on new drugs in other therapeutic areas to drive growth, such as Taltz for psoriasis and migraine treatment Emgality, which won U.S. approval last year.

Emgality, which competes with similar new drugs from Amgen (AMGN.O) and Teva (TEVA.TA), had sales of $34.3 million in the quarter, short of analysts’ estimate of $42.3 million, as many new patients get the drug at little or no cost.

Emgality is expected to meaningfully contribute to sales in the second half of the year, Chief Financial Officer Joshua Smiley told analysts on a conference call.

Revenue rose 0.9{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $5.64 billion, above Wall Street estimates of $5.59 billion. However, U.S. revenue was nearly flat at $3.25 billion, as net prices fell for Trulicity, Humalog and other drugs due to changes in Medicare Part D, the part of the government program for older Americans related to self-administered prescription drugs.

Still, Trulicity sales rose 32{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $1.03 billion in the quarter.

The Trump administration and other lawmakers have introduced several proposals aimed at lowering healthcare costs for U.S. consumers, some of which have already been scrapped.

While it is unclear what impact any of these will actually have on drugmakers, Lilly Chief Executive David Ricks said the industry will continue “shaping the debate.”

Humalog sales fell 12{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $677.6 million amid increased competition and as Lilly, bowing to political pressure, offered a half-priced version called Insulin Lispro.

Sales of erectile dysfunction drug Cialis plunged 63{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $200.2 million due to market entry of cheaper generic versions.

Lilly raised both ends of its 2019 adjusted earnings forecast range by 7 cents and now expects $5.67 to $5.77 per share.

Excluding items, Lilly earned $1.50 per share, beating analysts’ estimates by 5 cents, according to IBES data from Refinitiv.

The company said Verzenio in a late-stage combination trial helped women with certain types of advanced breast cancer live longer. Verzenio had sales $133.9 million.

Eli Lilly shares were up 0.3{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} at $109.04.

NEW YORK (Reuters) – The British pound on Monday touched its lowest against the dollar since early 2017 after Prime Minister Boris Johnson’s government said it now assumed there would be a hard divorce from the EU, while stocks dipped globally after last week touching their highest in five months.

The dollar index edged up and touched its highest since May 31 as markets counted down to a likely cut in U.S. interest rates this week, with much riding on whether the Federal Reserve signals more cuts will follow.

Sterling fell to a 28-month low of $1.2213 as Johnson’s cabinet prepared the ground for a “no-deal” British exit from the European Union, which many investors say would tip Britain into a recession and inject unwanted uncertainty into financial markets. [GBP/]

The pound was last trading at $1.2216, down 1.32{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} on the day.

“Political risk is finally getting priced. There is a realization the market had not fully priced the increased chances of a no-deal Brexit,” said Claire Dissaux, head of global economics and strategy at Millenium Global Investments.

The dollar index rose 0.16{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}, with the euro up 0.03{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $1.1128.

The Japanese yen weakened 0.20{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} versus the greenback at 108.91 per dollar.

A stronger-than-expected U.S. gross domestic product report on Friday lead some investors to doubt whether the Fed will continue easing this year after its Wednesday meeting.

Interest rate futures are fully priced for a quarter-point rate cut from the Fed, with a 1-in-4 chance of a half-point move.

On Wall Street, tech stocks weighed the most on the S&P 500 in the run-up to the sector’s earnings reports, while the Fed remained as the main market catalyst.

“The key question facing investors now is whether the Fed can get away with a small number of insurance cuts or whether it will be pushed toward a more fundamental loosening of policy,” Neil Shearing, group chief economist at Capital Economics, said in a note.

The Dow Jones Industrial Average rose 71.48 points, or 0.26{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}, to 27,263.93, the S&P 500 lost 5.43 points, or 0.18{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}, to 3,020.43 and the Nasdaq Composite dropped 59.53 points, or 0.71{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}, to 8,270.68.

The pan-European STOXX 600 index rose 0.14{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} and MSCI’s gauge of stocks across the globe shed 0.19{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}.

Emerging market stocks lost 0.43{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.57{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} lower, while Japan’s Nikkei lost 0.19{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}.

Investors were also keeping an eye on U.S.-China trade talks. U.S. and Chinese negotiators meet in Shanghai this week for their first in-person talks since a G20 truce last month, but expectations for a breakthrough are low.

Oil futures zigzagged in and out of positive territory, whipsawed by Fed expectations and the reaction to talks between Iran and some signatories of its nuclear agreement over the weekend.

U.S. crude rose 0.27{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $56.35 per barrel and Brent was last at $63.39, up 0.03{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} on the day.

U.S. Treasury yields were lower across the board in line with most major sovereign debt markets amid global economic uncertainty, with investors focused on the widely expected interest rate cut by the Fed later this week.

People say the Fed could go 50 basis points, but I think that’s not going to happen,” said Stan Shipley, fixed income strategist at Evercore ISI in New York. “The question is what they are going to say about future cuts.”

Benchmark 10-year notes last rose 5/32 in price to yield 2.065{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}, from 2.081{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} late on Friday.

The 30-year bond last rose 5/32 in price to yield 2.5943{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}, from 2.601{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} late on Friday.

Spot gold added 0.1{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $1,418.99 an ounce. U.S. gold futures fell 0.04{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $1,418.70 an ounce.

Copper rose 0.80{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} to $6,011.00 a tonne.

(Reuters) – Pfizer Inc (PFE.N) is in talks to merge its off-patent drugs business with Mylan NV (MYL.O) in a stock deal, the Wall Street Journal reported on Saturday, citing people familiar with the matter.

Mylan shareholders would receive a little more than 40{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} of the newly formed entity, with Pfizer shareholders receiving the remainder, the Journal said, adding Pfizer would also get about $12 billion in proceeds from a new sale of debt.

Pfizer and Mylan did not immediately respond to requests for comment.

WASHINGTON (Reuters) – U.S. economic growth slowed less than expected in the second quarter as a surge in consumer spending blunted some of the drag from declining exports and a smaller inventory build, which could further allay concerns about the economy’s health.

The fairly upbeat report from the Commerce Department will probably not deter the Federal Reserve from cutting interest rates next Wednesday for the first time in a decade, given rising risks to the economy’s outlook, especially from a trade war between the United States and China.

Despite the better-than-expected GDP reading, business investment contracted for the first time since early 2016 and housing contracted for a sixth straight quarter. Fed Chairman Jerome Powell early this month flagged business investment and housing as areas of weakness in the economy.

But the signs of robust consumer spending, together with a strong labor market, further diminish expectations of a 50 basis point rate cut and could raise doubts about further monetary policy easing this year.

Gross domestic product increased at a 2.1{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} annualized rate in the second quarter, the government said. The economy grew at an unrevised 3.1{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} pace in the January-March quarter.

Economists polled by Reuters had forecast GDP increasing at a 1.8{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} rate in the second quarter.

The economy is slowing largely as the stimulus from the White House’s $1.5 trillion tax cut package fades. The tax cuts together with more government spending and deregulation were part of measures adopted by the Trump administration to boost annual economic growth to 3.0{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} on a sustained basis.

The economy grew 2.9{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} in 2018 and growth this year is expected to be around 2.5{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}. Economists estimate the speed at which the economy can grow over a long period without igniting inflation at between 1.7{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} and 2.0{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48}.

The GDP report showed a pickup in inflation last quarter. A gauge of inflation tracked by the Fed increased at a 1.8{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} rate last quarter, just below the U.S. central bank’s 2{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} target.

The government also published revisions to GDP data from 2014 through 2018. The updated data showed growth in the second and third quarters of last year was not as robust as previously estimated, and the economy grew much more slowly in the fourth quarter than had been reported in March. Revised price data showed moderate inflation last year.

STRONG CONSUMER SPENDING

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged at 4.3{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} rate in the second quarter, the fastest since the fourth quarter of 2017. Consumer spending grew at a 1.1{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} rate in the first quarter.

Some of the slowdown in consumer spending early in the year was blamed on a 35-day partial shutdown of the government. Spending is being supported by the lowest unemployment rate in nearly 50 years, which is lifting wages.

The jump in consumer spending helped to offset some of the weakness from exports, which fell at a 5.2{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} rate last quarter, in a reversal of the strong growth experienced in the first quarter.

The plunge in exports caused a deterioration of the trade deficit. As result, trade subtracted 0.65 percentage point from GDP growth last quarter after contributing 0.73 percentage point in the January-March period.

The acceleration in consumer spending also helped businesses to whittle down an inventory overhang, leading to a smaller inventory build.

Inventory investment increased at a $71.7 billion rate, slowing from the first quarter’s $116.0 billion pace of increase. While inventories cut 0.86 percentage point from GDP growth in the second quarter, the smaller pace of stock accumulation is a potential boost to manufacturing.

Businesses have been placing fewer orders with factories while working through stockpiles of unsold goods, which contributed to undercutting manufacturing production. Inventories added 0.53 percentage point to GDP growth in the first quarter.

Business investment fell at 0.6{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} rate in the second quarter, the first contraction since the first quarter of 2016. It was pulled down by a 10.6{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} pace of decline in spending on structures, which includes oil and gas well drilling.

Spending on intellectual products, including research and development, increased. Business spending on equipment rebounded at a 0.7{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} rate in the second quarter. It is seen constrained by design problems at aerospace giant Boeing BA.N.

Boeing reported its biggest-ever quarterly loss on Wednesday due to the spiraling cost of resolving issues with its 737 MAX airplane and warned it might have to shut production of the grounded jet completely if it runs into new hurdles with global regulators to getting its best-selling aircraft back in the air.

The plane was grounded worldwide in March after two fatal crashes in Ethiopia and Indonesia. Production of the aircraft has been reduced and deliveries suspended.

Growth in government investment accelerated, but spending on homebuilding contracted for a sixth straight quarter.

(Reuters) – Shares of Tesla Inc (TSLA.O) fell 11 percent on Thursday and were set to knock off more than $5 billion in the electric carmaker’s market value, a day after it disappointed Wall Street by pushing its profit timeline once again.

Analysts also focused on the impact of shrinking margins, a key challenge for the company in delivering a profit consistently.

“For Tesla to be more than niche, one of the core challenges will be for Tesla to improve its gross margin profile,” a Credit Suisse analyst wrote in a research note.

Wedbush Securities cut its price target on the stock from $230 to $220, citing the softer margin profile.

The stock was down 11.34{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} at $234.84 before the opening bell, still 3{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} above the median price target of $227.5.

The delayed timeline on profitability also weighed on its $1.8 billion junk bond US166858275=, which debuted just shy of two years ago. In European trading, the bond dropped more than 2 full points in price, and its yield, which moves in the opposite direction, surged back above 8{5048a9ac22a95e6c0a00d427d71a0d7ff263f9d98391fe7073acb5a0aa0a3f48} for the first time since July 1.