Category Archives: Business

Google Loses Most of Appeal of EU Android Decision

BRUSSELS—

Alphabet Inc.’s

GOOG 0.57%

Google suffered legal blows on two continents this week, a significant setback in the company’s efforts to fight allegations that it is abusing its dominance in digital advertising and on mobile phones.

The EU’s General Court in Luxembourg on Wednesday largely upheld a 2018 decision by the EU competition regulator that fined Google $4.33 billion for allegedly abusing the market dominance of its Android operating system for mobile phones to promote and entrench its Google search engine and Chrome browser on mobile devices.

The decision came shortly after a federal judge in the United States District Court for the Southern District of New York on Tuesday denied the bulk of Google’s motion to dismiss the claims brought by a coalition of states led by Texas alleging Google abused its dominance in digital advertising tools, allowing the case to proceed to the discovery stage and ultimately toward trial.

The EU ruling means Google will very likely continue applying some of the changes it has made since to comply with the 2018 decision, including offering users in the EU a choice screen of different search engines. The Android case was the biggest of three antitrust fines totaling more than $8 billion that the EU has levied against Google since 2017—and it focused on mobile phones, one of the company’s fastest growth areas.

The ruling is also a vote of confidence for the European Commission, the bloc’s antitrust enforcer, which has been aggressive in targeting big U.S. tech companies and other firms over concerns about anticompetitive behavior. Last week, the Commission blocked

Illumina Inc.’s

$7.1 billion merger with cancer-test developer Grail Inc., two U.S. companies.

In the U.S., Judge P. Kevin Castel’s decision was closely watched because the Justice Department has been preparing a similar antitrust case against Google over its position in the advertising technology industry.

In both cases, Google did score some partial victories.

In the EU, the court annulled one element of the decision that alleged Google had broken competition laws by making revenue-sharing payments to manufacturers to exclusively pre-install only Google Search, not competing search engines. As a result, the court reduced the overall fine by about 5% to €4.13 billion, about the same in dollars.

“We are disappointed that the court did not annul the decision in full,” a Google spokesman said, adding that Android has created more competition in the mobile phone industry. The company has previously said it should be able to recoup the money it spends developing Android by encouraging manufacturers to install Google Search.

The court’s decision can still be appealed to the EU’s top court, the Court of Justice. Google said it would review the decision before deciding whether to appeal.

In the U.S., the judge tossed out claims pertaining to Google’s “Jedi Blue” ad agreement with rival Facebook—now known as Meta Platforms Inc. The plaintiffs alleged the deal was part of a plan to “kill” an alternative ad technology called header bidding that Google executives feared would harm its business. He also knocked down the plaintiffs’ claim that Google’s Accelerated Mobile Pages, or AMP, technology was part of an anticompetitive plot to curtail header bidding, among several other claims from the plaintiffs.

In a blog post Tuesday in response to the U.S. decision, Google called the Jedi Blue allegations the “centerpiece” of Texas’s case, and cited the various allegations that were tossed out as evidence that the case was “deeply flawed.”

In a statement on Wednesday, Texas Attorney General

Ken Paxton

applauded the judge’s decision, calling it “a major step in the right direction to make our free market truly free.”

The 2018 EU Android case has been significant because it focused on Google’s efforts to increase its mobile business, but also because it underscored Google detractors’ arguments that antitrust enforcement takes too long. By the time the commission had issued its decision, those detractors said Android had already helped make Google Search as dominant on mobile devices as it had been on desktops.

Shortening the time it takes to force companies to make changes in the market was a major reason that the EU pursued new digital-competition legislation called the Digital Markets Act, passed earlier this year. The new law will eventually make it illegal for Google and other very large tech companies to engage in a range of practices that the bloc considers to be anticompetitive, including some of the practices the commission has previously issued fines for.

The 2018 decision focused in large part on how Google bundled together the licensing of its apps for Android devices. In that decision, the EU ordered Google to stop requiring smartphone manufacturers to pre-install the company’s search app and Chrome web browser as a condition for licensing Google’s popular Play app store. It also said the company would have to allow manufacturers to install Google apps on systems that run alternative versions of the Android operating system.

The EU argued Google’s practices had made it harder for potential competitors to emerge and were part of a strategy that was meant to ensure that Google’s search engine would remain dominant as consumers began using search engines on their smartphones.

Google quickly appealed the 2018 decision but also had to comply with it while its appeal was under way. Google changed its licensing deals for manufacturers and implemented what it called a Choice Screen on Android devices, allowing users of new phones in the EU to select alternate default search engines. So far that choice screen doesn’t appear to have had an appreciable impact on the market share for Google Search in Europe.

Google’s appeal of the case centered in part on whether its Android operating system is dominant, arguing that the Commission was wrong to consider Android devices as their own market without seeing them as competitors to

Apple’s

iPhone and iPad devices. The company also argued that requirements to bundle Google Search with its app store weren’t anticompetitive, and that restrictions on use of other versions of Android were needed to ensure Android phones would be compatible with the company’s apps. The court dismissed Google’s arguments on all those points on Wednesday.

Google also argued that the revenue-sharing agreements that required phone makers not to pre-install other search engines covered less than 5% of the market and didn’t have an impact on competitors. The court on Wednesday sided with Google, ruling that the Commission didn’t prove its case on that point.

It is the European Commission’s second court victory against Google in as many years. Last year, Google lost its appeal of a separate, $2.42 billion antitrust fine over allegedly directing users of its search engine to Google’s own comparison-shopping ads at the expense of other services. A second appeal to the EU’s top court is pending.

Google was also fined $1.49 billion in 2019 for limiting how some websites could show ads that were sold by the company’s rivals. Its appeal of that case is still under way.

Google continues to attract scrutiny from antitrust regulators in the EU. Last year, the commission opened a formal antitrust investigation into allegations that Google abuses its dominant position in advertising technology. Google said its ad-tech tools are competitive and that it would work with the commission to resolve its questions.

The Wall Street Journal reported earlier this year that Google had offered concessions to try to ward off a potential antitrust lawsuit in the U.S. targeting the company’s ad-tech business.

The Wall Street Journal reported earlier this year that Google had offered concessions to try to ward off the Justice Department’s antitrust lawsuit targeting the company’s ad-tech business, but people familiar with the matter say the offer wasn’t likely to satisfy regulators.

Write to Sam Schechner at sam.schechner@wsj.com and Kim Mackrael at kim.mackrael@wsj.com

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Stocks Waver After Suffering Worst Day Since June 2020

U.S. stocks wobbled between small gains and losses Wednesday, coming off a wild day of trading spurred by a stronger-than-expected inflation report.

The S&P 500 dropped 0.1%, a day after the benchmark index plummeted 4.3% in its worst selloff since June 2020. The Dow Jones Industrial Average fell 0.3%, while the tech-focused Nasdaq Composite gained 0.1%.

The release of U.S. inflation data for August on Tuesday spurred volatile moves across asset classes. The consumer-price reading showed the core inflation index, which excludes volatile energy and food figures, increased last month from a year earlier—indicating that broad price pressures strengthened.

The hot inflation report curbed investors’ hopes the Federal Reserve might slow its aggressive pace of interest-rate increases. That led traders on Tuesday to dump stocks across all sectors, sell bonds and cryptocurrencies, and push the U.S. dollar higher.

On Wednesday, markets seemed to take data measuring U.S. suppliers’ prices in stride. The producer-price index, which measures what suppliers are charging businesses and other customers, declined 0.1% from the month before, in line with economist expectations.

“We witnessed violent moves in the market yesterday as we reprice Fed and economic risk expectations,” said

Megan Horneman,

chief investment officer at Verdence Capital Advisors. “Today we’re absorbing such a destructive day.”

The latest U.S. inflation data curbed investors’ hopes the Federal Reserve might slow its aggressive pace of interest-rate increases.



Photo:

Julia Nikhinson/Associated Press

Some of Tuesday’s sharp market moves started to unwind Wednesday. The WSJ Dollar Index lost 0.4%, after notching its largest one-day jump since March 2020. Brent crude, which fell the day before, rose 1.3% to $94.32 a barrel.

Energy stocks rose broadly as Brent crude rebounded. The sector was the top gaining segment of the S&P 500 on Wednesday.

Among the top individual gainers in the S&P 500,

Starbucks

rose 5.8% after the coffee chain raised its longer-term financial outlook. The company now sees adjusted earnings-per-share growth over the next three years of 15% to 20%, up from its previous forecast of 10% to 12%.

Also making the index leaderboard,

Moderna

shares climbed 5.1% after its CEO told Reuters the company is open to supplying Covid vaccines to China.

Shares of railroad operators declined as a possible freight labor strike looms. The White House is assessing how other transportation providers could fill potential gaps in the nation’s freight network as labor unions and railroads continue contract talks.

Union Pacific

lost 4.9%, and

CSX

fell 3.1%.

Few market watchers were willing to suggest that volatile market moves may be in the rear-view mirror—especially until the Fed’s next meeting.

The Fed will make its next interest-rate policy decision next week. Federal-funds futures, used by traders to bet on interest-rate moves, showed a 68% chance that the central bank will lift rates by 0.75-percentage point. The data also show traders are assigning a 32% probability that the Fed will increase interest rates by 1 percentage point, according to CME Group data.

U.S. Treasury yields continued their upward climb, in another signal that investors are expecting higher interest rates.

The yield on the 10-year U.S. Treasury note rose to 3.427%, from 3.422% Tuesday. The yield on the two-year note, which is more sensitive to near-term rate expectations, climbed to 3.789%, from 3.754%. Yields and bond prices move in opposite directions. 

Some investors and strategists said the market may have overreacted Tuesday, especially after Fed Chairman

Jerome Powell

already said last month in Jackson Hole that the central bank must continue raising interest rates until it is confident inflation is under control.

“You’ve got this tension with dip buyers versus those who are selling the rally,” said Viraj Patel, global macro strategist at Vanda Research. “I think you can paint a very nice bullish picture and find plenty of evidence to buy equities, and you can paint a very nice bearish picture and find plenty of evidence to sell. That naturally means we are going to bounce around for a bit.”

Overseas, global indexes fell, following the U.S. stock market’s performance Tuesday. In Europe, the pan-continental Stoxx Europe 600 lost 1%. London’s FTSE 100 fell 1.2%, after U.K. inflation data showed that core consumer prices ticked up to 6.3% in August, from 6.2% in July, even as inflation eased slightly overall

In Asia, Hong Kong’s Hang Seng Index lost 2.5%, and the CSI 300 index of the largest stocks listed in Shanghai and Shenzhen was down 1.1%. Japan’s Nikkei 225 tumbled 2.8%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Dave Sebastian at dave.sebastian@wsj.com

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SoftBank Considers Launching a Third Vision Fund

Global tech investor

SoftBank Group Corp.

is considering the launch of a new giant startup fund after ill-timed bets and massive losses weighed down two earlier attempts to dominate startup investing, according to people familiar with discussions at the company.

The Tokyo-based tech conglomerate, by far the world’s largest startup investor in recent years, would likely use its own cash for what would be the third SoftBank Vision Fund if it moves ahead with the plan, some of the people said.

The company is also considering putting additional money into Vision Fund 2, its main investment fund for the past few years, instead of starting a new fund, one of the people said. Vision Fund 2 is currently worth less than the investment that went into it. Those losses significantly reduce the pay for SoftBank staff working on the fund—a factor in its decision making. The company expects to make a decision in the coming months, the people said. 

SoftBank, led by Chief Executive Officer

Masayoshi Son,

has been hit particularly hard by the rout in tech valuations that began last fall, posting a record $23 billion loss in the three months ended in June. 

Much of that red ink is a product of its first two Vision Funds, the startup investment unit that Mr. Son formed in 2017 in a bid to dominate the venture sector. The $100 billion initial Vision Fund, which raised $60 billion from Saudi and Emirati wealth funds, was beset by giant soured bets on companies including WeWork Inc. and

Didi Global Inc.,

leading to meager gains over five years. 

The successor Vision Fund 2, funded by SoftBank and intended to be more cautious, is now worth 19% less than the $49 billion it invested, after accelerating its spending just as valuations peaked on companies including fintech Klarna Holdings AB. 

Chief Executive Officer Masayoshi Son has been hit particularly hard by the rout in tech valuations.



Photo:

Neil Hall/REUTERS

Mr. Son told investors in August he was “quite embarrassed and remorseful” after having gotten caught up in the frenzy, and he has substantially cut back spending on startups. Still, he has said he is committed to the startup and tech sector long term and eventually plans to increase spending again.

Mr. Son and SoftBank have tried to chart a new path forward after the market turned against unprofitable tech investments. He has also faced a string of departures of top staff. In July, the company said

Rajeev Misra,

who led the Vision Fund since it was created in 2017, would step back from his role overseeing new investments as he starts his own fund. 

Despite the misses, SoftBank expects to have more cash coming in over the next year, from a public listing of its chip maker Arm. Its Japanese telecom holdings also generate cash. 

Still, analysts and investors say the company’s options are more limited than in the past. Mr. Son has been selling down SoftBank’s stake in Alibaba Group Holding Ltd. and its telecom holdings, and funding a large stock-buyback program. The result has been an increasingly concentrated bet on startups, where results have been disappointing. 

Among those pushing for a new fund are some employees of the Vision Fund. A new fund would be a way to reset their compensation, which is partly based on profits at the fund and its investments, one of the people familiar with discussions said. The current fund would require making back large losses before employees could get those bonuses. A new fund would put profits closer in reach. The company is also considering restructuring staff incentives for Vision Fund 2. 

The size of the new fund couldn’t be determined. 

Mr. Son personally takes a hit with Vision Fund 2 in the red because of a $2.6 billion personal commitment he made. Based on the terms of the investment, Mr. Son didn’t put up the money himself but owes SoftBank if the fund ends up performing poorly.

The unusual investment has been criticized by some investors and analysts who say it could skew Mr. Son’s motivations given a structure that could make him more focused on Vision Fund 2 than on other investments. Mr. Son, who owns over one-fourth of SoftBank, has said the structure better aligns him with the investment fund.

SoftBank structured its arrangement in a way that allows the company to get repaid on most of its investment before Mr. Son. About $33 billion of its commitment to Vision Fund 2 is in preferred equity.

While that structure would have led to outsize profits for Mr. Son if Vision Fund 2 did well, today it means particularly large losses because the fund is underwater. Mr. Son currently owes $2.1 billion on the investment, SoftBank disclosures show. He is charged a 3% annual interest rate on his unpaid balance to SoftBank.

From the Archives: SoftBank’s longtime strategy of dumping mountains of cash on promising young companies to create big winners failed dramatically at WeWork and is inviting scrutiny into the fund’s other investments. Here’s a look at Vision Fund’s structure, and how its fast-paced investment strategy could make it risky.

Write to Eliot Brown at Eliot.Brown@wsj.com and Julie Steinberg at julie.steinberg@wsj.com

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Premarket stocks: The Fed could crash the housing market

One area of growing concern: housing. Interest rate hikes can lead to higher mortgage rates, which could cause people to think twice about buying a home.

So far, sales are slipping, while prices are holding steady. But some economists warn continued historic rate hikes by the Fed could risk crashing the housing market, underscoring the difficult task ahead for the central bank.

What’s happening: According to Tuesday’s Consumer Price Index report, housing costs rose 0.7% in August and are up 6.2% year-over-year, the largest increase since 1991. 

That increase was largely responsible for August’s higher-than-expected pace of inflation. Combined with a tight labor market, those high prices give the Fed reason to continue to go hard at its policy meeting next week and beyond, Marvin Loh, senior strategist at State Street, told me. 

The Fed needs to see housing costs ease by about half a percentage point to reach its ultimate inflation goal, Loh added. 

The job won’t be easy. Housing prices can remain stubbornly high, even as the Fed works to counteract them. 

Housing prices are “the type of sticky inflation that will not ease anytime soon,” Joseph Brusuelas, chief economist at RSM US, told me. “It’s why the Fed will need to demonstrate a show of resolve by increasing the policy rate by 75 basis points at its September meeting despite the encouraging declines in transportation and energy.”

The risks: Some economists are noting weakness in the housing market starting to peek through. Home sales declined in July for the sixth month in a row. Housing starts, a measure of new home construction, also plunged that month as the cost of building supplies remained high and prospective buyers were priced out of the market. 

So should the Fed keep up its historic hikes? The central bank must walk a careful line — a housing slowdown has preceded nine out of the past 12 recessions, and investors haven’t forgotten America’s catastrophic housing crisis in 2008.

Keep in mind: Although there are some reasons to suggest the CPI report on housing lags what’s actually going on in the market, and that housing prices could already be on their way down, we’re nowhere near a market collapse. 

Still, Federal Reserve officials will face a tough decision in the coming months. Do they use the housing market’s resilience as a mandate to push forward with aggressive rate hikes and risk a crash?

Americans should prepare for a heating bill shock this winter

Gas prices are easing in the US. But winter is coming and the CEO of Chevron, one of the world’s largest energy companies, is warning that relief at the pump could soon be offset by sweat-inducing heating bills.

Chevron Chairman and CEO Mike Wirth said in an interview with CNN’s Poppy Harlow “there’s certainly a risk that costs will go up” for American consumers.

Wirth is not predicting a rise of the magnitude seen in Europe, where natural gas prices have skyrocketed as Russia has limited exports, reports my colleague Paul R. La Monica.

But in an interview that aired Tuesday, Wirth warned that US prices could be “significantly higher” this winter.

Oil prices are still up more than 15% so far this year. That has helped boost sales, earnings and the stock prices of companies like Chevron. Shares of the oil producer are up 36% year-to-date, while the broader S&P 500 is 17.5% lower.

Wirth acknowledged that his company is making large profits while Americans struggle.

“I recognize that high energy prices are difficult for consumers. That’s why we’ve talked about increasing production, trying to increase supply to markets in a commodity business,” he said. “You go through these cycles. Two years ago, we were losing billions of dollars a quarter. Now we’re making strong profits.”

Bearish investors flock to cash

In more doom and gloom on Wall Street, pessimistic fund managers are selling stocks and piling into cash, according to a Bank of America survey published Tuesday.

“Investors’ perception of the outlook for the global economy remains bleak in September,” Michael Hartnett, Bank of America’s chief investment strategist, wrote in the report, which surveyed 212 fund managers with more than half a trillion dollars of assets under management in September.

About 72% of respondents expected a weaker economy in the next 12 months, up 5 percentage points from August. The share of investors saying recession is likely also increased in September to 68%, the highest since May 2020.

Unsurprisingly, Wall Street is bracing for corporate profits to soften and equities to continue to crash, the survey showed. The cash levels investors are holding jumped from 5.7% last month to 6.1%, their highest level since the September 11 attacks in 2001.

Up next

The August Producer Price Index, another key measure of US inflation, is released at 8:30 a.m. ET. 

Join CITIZEN by CNN at 2 p.m. ET for a panel on inflation, jobs, and the economy featuring reporters Paul LaMonica, Phil Mattingly, Christine Romans and Vanessa Yurkevich. RSVP here.

Coming tomorrow: Attention will turn to a meeting between Russia’s Vladimir Putin and China’s Xi Jinping.

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Google loses challenge against EU antitrust decision, other probes loom

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LUXEMBOURG, Sept 14 (Reuters) – Google suffered one of its biggest setbacks on Wednesday when a top European court upheld a ruling that it broke competition rules and fined it a record 4.1 billion euros, in a move that may encourage other regulators to ratchet up pressure on the U.S. giant.

The unit of U.S. tech giant Alphabet (GOOGL.O) had challenged an EU antitrust ruling, but the decision was broadly upheld by Europe’s General Court, with the fine trimmed modestly to 4.125 billion euros ($4.13 billion) from 4.34 billion euros.

Even with the reduction, it was still a record fine for an antitrust violation. The EU antitrust enforcer has fined the world’s most popular internet search engine a total of 8.25 billion euros in three investigations stretching back more than a decade.

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The judgment is set to boost landmark rules aimed at curbing the power of U.S. tech giants that will go into effect next year. read more

“The judgment strengthens the hand of the Commission. It confirms the Commission can use antitrust proceedings as a backstop threat to enforce rapid compliance with digital regulation also known as the DMA,” said Nicolas Petit, professor at European University Institute.

EU antitrust chief Margrethe Vestager did not mince her words.

“This, of course, is really good. Now, we have the second Google judgment and for us, it is really important as it backs our enforcement efforts,” she said.

This is the second court defeat for Google which lost its challenge to a 2.42 billion euro ($2.42 billion) fine last year, the first of a trio of cases.

“The General Court largely confirms the Commission’s decision that Google imposed unlawful restrictions on manufacturers of Android mobile devices and mobile network operators in order to consolidate the dominant position of its search engine,” the court said.

“In order better to reflect the gravity and duration of the infringement, the General Court considers it appropriate however to impose a fine of 4.125 billion euros on Google, its reasoning differing in certain respects from that of the Commission,” judges said.

Google, which can appeal on matters of law to the EU Court of Justice, Europe’s highest, voiced its disappointment.

“We are disappointed that the Court did not annul the decision in full. Android has created more choice for everyone, not less, and supports thousands of successful businesses in Europe and around the world,” a spokesperson said.

ANTITRUST BOOST

The ruling is a boost for Vestager after the General Court overturned her decisions against Intel (INTC.O) and Qualcomm (QCOM.O) earlier this year.

Vestager has made her crackdown against Big Tech a hallmark of her job, a move which has encouraged regulators in the United States and elsewhere to follow suit.

She is currently investigating Google’s digital advertising business, its Jedi Blue ad deal with Meta (META.O), Apple’s (AAPL.O) App Store rules, Meta’s marketplace and data use and Amazon’s (AMZN.O) online selling and market practices.

The Court agreed with the Commission’s assessment that iPhone maker Apple (AAPL.O) was not in the same market and therefore could not be a competitive constraint against Android.

The court backing could reinforce the EU antitrust watchdog in its investigations into Apple’s business practices in the music streaming market, which the regulator says Apple dominates.

FairSearch, whose 2013 complaint triggered the EU case, said the judgment may lead to more competition in the smartphone market.

“This shows the European Commission got it right. Google can no longer impose its will on phone makers. Now they may open their devices to competition in search and other services, allowing consumers to benefit from increased choice,” its lawyer Thomas Vinje said.

The Commission in its 2018 decision said Google used Android to cement its dominance in general internet search via payments to large manufacturers and mobile network operators and restrictions.

Google said it acted like countless other businesses and that such payments and agreements help keep Android a free operating system, criticising the EU decision as out of step with the economic reality of mobile software platforms.

The case is T-604/18 Google vs European Commission.

($1 = 1.0002 euros)

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Reporting by Foo Yun Chee
Editing by David Evans and Bernadette Baum

Our Standards: The Thomson Reuters Trust Principles.

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Fred Franzia, creator of ‘Two Buck Chuck,’ has died

Bronco Wine Company, the 49-year-old company he helped create with his brother and cousin, announced his death on Facebook, writing that it’s “truly saddened by the passing of its founder and CEO, Fred Franzia.” He passed away early Tuesday morning with his family by his side at his home in Denair, California, the company said.

Franzia championed affordable wine for the masses and frequently criticized his higher-priced competitors. “Who says we’re lower priced? We’re the best price. The others, I think, are overpriced,” Franzia told the San Francisco Chronicle in 2009.

Perhaps his most notable contribution to American culture is Charles Shaw, a.k.a. “Two Buck Chuck.” The wine, sold exclusively at Trader Joe’s since 2002, earned that nickname for its affordable price that undercuts its higher-priced competitors. “Take that and shove it, Napa,” he once said in an interview.

“Core to his vision was a belief that wine should be enjoyed and consumed on every American table,” Bronco’s statement said. “When asked how Bronco Wine Company can sell wine less expensive than a bottle of water, Fred T. Franzia famously countered, ‘They’re overcharging for the water — don’t you get it?'”

Bronco Wine is one of Ameria’s biggest wine companies, with a portfolio of more than 100 brands spanning from wine, spirits and ready-to-drink cocktails. Wine Spectator estimates that it’s the 13th largest wine marketer in the US, moving more than 3.4 million cases last year.

Notably, he never owned the boxed-wine brand that bares his family’s name. His parents sold the label in 1973 to Coca-Cola prompting him to start Bronco Wine. “My dad, he was not a fighter,” Franzia told the New Yorker in 2009. “He just folded. And he and I went through a period of no communication, I think for five years. I just was pissed.” (Franzia boxed wine is currently owned by the Wine Group.)

He’s survived by his five children, fourteen grandchildren and two sisters. In the statement, Bronco said that his “entrepreneurial spirit, tireless dedication, and his commitment to both his family and to the Bronco family will forever be remembered. His legacy will endure for generations to come.”

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Mortgage demand declines 29% from last year as rates eclipse 6%

Mortgage demand appears to have nowhere to go but down, as interest rates go up.

Application volume dropped 1.2% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The week’s results include an adjustment for the observance of Labor Day. Since last year, homebuyers’ demand for mortgages has fallen by nearly a third.

Mortgage rates, which had been easing slightly through July and August, pushed higher yet again, after Federal Reserve Chairman Jerome Powell made it clear to investors that the central bank would stay tough on inflation, even if it caused consumers some pain.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.01% from 5.94%, with points decreasing to 0.76 from 0.79 (including the origination fee) for loans with a 20% down payment.

“The 30-year fixed mortgage rate hit the 6% mark for the first time since 2008 – rising to 6.01% – which is essentially double what it was a year ago,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Refinance demand fell another 4% for the week and was 83% lower than the same week one year ago. With rates above 6%, only about 452,000 borrowers could benefit from a refinance, according to Black Knight, a mortgage technology and data provider. That is the lowest number on record. These few remaining candidates could only save about $315 per month per borrower.

Mortgage applications to purchase a home squeezed out a gain of 0.2% from the previous week, but were 29% lower than the same week one year ago. There was a bump up in demand for Veterans Affairs and USDA loans, which are favored by first-time buyers because they can offer low or no down payments.

“The spread between the conforming 30-year fixed mortgage rate and both ARM and jumbo loans remained wide last week, at 118 and 45 basis points, respectively. The wide spread underscores the volatility in capital markets due to uncertainty about the Fed’s next policy moves,” Kan added.

Mortgage rates jumped significantly higher this week, after the monthly inflation number came in higher than expected. That had investors worried that the Federal Reserve would hike rates more than expected at its next meeting.

“It was one of the last shoes to drop before the Fed announcement on September 21st, and it arrived at a time where the market had fully priced in a 75bp hike, but was willing to consider something even higher if the data was convincing,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “This was arguably convincing enough for the Fed to at least open the conversation.”

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EU court backs antitrust ruling against Google but reduces fine

The European Union flag is seen with Google’s logo.

Jaap Arriens | NurPhoto | Getty Images

The European Union’s General Court on Wednesday upheld an antitrust ruling against Google’s parent company Alphabet but reduced its fine to 4.125 billion euros ($4.12 billion) from 4.34 billion euros.

The dispute between Google and the EU courts is over whether it uses the Android operating system to quash competition, and was initiated against the company in 2015.

The court said it “largely confirms the European Commission’s decision that Google imposed unlawful restrictions on manufacturers of Android mobile devices and mobile network operators to consolidate the dominant position of its search engine.”

In a statement provided to Reuters, Google said, “We are disappointed that the Court did not annul the decision in full. Android has created more choice for everyone, not less, and supports thousands of successful businesses in Europe and around the world.”

The initial fine was issued by the European Commission in 2018 and was the largest ever received by Google. It said that around 80% of Europeans used Android and that Google gave an unfair advantage to its apps, such as Chrome and Search, by forcing smartphone markets to pre-install them in a bundle with its app store, Play.

Google contends that Android phones compete with iOS phones, Apple’s operating system, and that consumers using Android still allows consumers a choice of phone maker, mobile network operator and the opportunity to remove Google apps and install others.

In Wednesday’s judgment, the General Court said the new fine was “appropriate in view of the significance of the infringement.”

It highlighted that Google’s business model “is based first and foremost on increasing the numbers of users of its online search services so that it can sell its online advertising services,” whereas Apple focuses on the sale of higher-end smart mobile devices.

Google argues that this allows it to keep the majority of its services free.

The company can still appeal the ruling in the EU’s highest court.

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Stock futures inch higher after major averages suffer worst day since June 2020

Stock futures inched slightly higher on Wednesday morning after another hot inflation reading sent the major averages tumbling to their worst day since June 2020 and dampened investors’ expectations of a less hawkish Federal Reserve.

Futures tied to the Dow Industrial Average last added 63 points, or 0.2%, while S&P 500 futures ticked 0.18% higher and Nasdaq 100 futures gained 0.15%.

During Tuesday’s regular trading session the Dow sank 1,276.37 points, or 3.94%, to close at 31,104.97, while the S&P 500 slid 4.32% to 3,932.69. The Nasdaq Composite toppled 5.16% to 11,633.57. All the major averages broke a four-day winning streak.

The market moves came after August’s consumer price index report showed headline inflation rose 0.1% on a monthly basis despite a drop in gas prices.

The hot inflation report left questions over whether stocks could go back to their June lows or fall even further. It also spurred some fears that the Federal Reserve could potentially hike even higher than the 75 basis points markets are pricing in.

“It caught the market off guard,” said LPL Financial’s Quincy Krosby. “The market had been expecting at least that we had leveled off — perhaps not moving downward but certainly not climbing higher. It was the wrong direction and the concern, of course, is always translated into what does this mean for the Fed.”

All 30 Dow stocks and S&P 500 sectors finished the session lower, led to the downside by communications services. The sector fell 5.6% and finished its worst day since February, dragged down by shares of big technology names like Netflix and Meta Platforms, which tumbled about 7.8% and 9.4%, respectively.

A reading of the producer price index is due out Wednesday morning and could offer further clues into the state of inflation before the Fed’s rate-hike meeting next week.

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Asian shares extend global rout, yen perks up on intervention hints

An electronic stock quotation board is displayed inside a conference hall in Tokyo, Japan November 1, 2021. REUTERS/Issei Kato

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  • https://tmsnrt.rs/2zpUAr4
  • Nikkei tumbles 2.3%, S&P 500 futures stabilise
  • Dollar falls 0.6% on yen on news of rate check from BoJ
  • 2-yr U.S. yields scale new 15-yr high of 3.8040%
  • U.S. yield curve remains deeply inverted

SYDNEY, Sept 14 (Reuters) – Asian stocks tumbled on Wednesday as U.S. data dashed hopes for an immediate peak in inflation, although the dollar paused its relentless run against the yen as Japan gave its strongest signal yet it was unhappy with the currency’s sharp declines.

Data on Tuesday showed the headline U.S. consumer price index gained 0.1% on a monthly basis versus expectations for a 0.1% decline. In particular, core inflation, stripping out volatile food and energy prices, doubled to 0.6%. read more

Wall Street saw its steepest fall in two years, the safe-haven dollar posted its biggest jump since early 2020, and two-year Treasury yields, which rise with traders’ expectations of higher Fed fund rates, jumped to the highest level in 15 years.

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The stock rout is set to hit European markets, with the pan-region Euro Stoxx 50 futures , German DAX futures and FTSE futures off more than 0.7%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 2.2% on Wednesday, dragged lower by a 2.4% plunge in resources-heavy Australia (.AXJO), a 2.5% drop in Hong Kong’s Hang Seng index (.HSI) and a 1.5% fall in Chinese bluechips (.CSI300).

Japan’s Nikkei (.N225) tumbled 2.6%.

After a heavy equity selloff overnight, both the S&P 500 futures and Nasdaq futures rose 0.2%.

“Markets have reacted violently to what I would consider to be a modest miss in U.S. CPI,” said Scott Rundell, chief investment officer at Mutual Limited.

“Futures have stabilised, so we might see a dead-cat bounce tonight.”

Financial markets now have fully priced in an interest rate hike of at least 75 basis points at the conclusion of the Fed’s policy meeting next week, with a 38% probability of a super-sized, full-percentage-point increase to the Fed funds target rate, according to CME’s FedWatch tool.

A day earlier, the probability of a 100 bps hike was zero.

“USD rates are now pricing in a Fed funds rate of 4.25% by end-2022 (75bps, 75bps, 25bps for the remaining three meetings). Decent odds of a 4.5% peak early 2023 is also reflected,” said Eugene Leow, senior rates strategist at Deutsche Bank.

“While resilient growth and slowing inflation can make for a better risk taking environment, the U.S. economy now looks too hot still. With no clear signs of the labour market slowing and inflation still problematic, a downshift from the Fed looks set to be delayed again.”

The strength of the U.S. dollar had pressured the rate sensitive Japanese yen close to its 24-year low at 149.96 yen before giving up some of the gains on news that the Bank of Japan has conducted a rate check in apparent preparation for currency intervention. read more

Yen-buying intervention is rare. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a yen sell-off and rapid capital outflows.

Earlier in the day, Japanese Finance Minister Shunichi Suzuki said that currency intervention was among options the government would consider. read more

The dollar now hovered at 143.7 yen , down 0.6% for the day.

Many traders remained doubtful that intervention was imminent, but the jump in the yen pointed to rising nerves. The timing of the BOJ’s move also suggests that 145 per dollar will be an important level for markets and the authorities.

The two-year U.S. Treasury yield scaled a new 15-year high of 3.8040% on Friday before retreating to 3.7629%, and its curve gap with the benchmark 10-year yields widened to around 34 basis points, compared with just 16 basis points a week ago.

The yield curve inversion is usually treated as a warning of recession.

The 10-year Treasury note yield held steady at 3.4178%.

Oil prices edged lower on Friday. U.S. crude settled down 0.6% at $86.82 per barrel and Brent eased by a similar margin at $92.65.

Gold was slightly higher. Spot gold was traded at $1703.02 per ounce.

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Reporting by Stella Qiu; Editing by Stephen Coates, Ana Nicolaci da Costa and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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