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Pre-Market: Toyota Recalls 6.5 Million Vehicles; Alibaba Launches First US E-Commerce Website


The World Bank lowered its global growth forecast for 2014.

Stock futures pointed toward a lower open on Wednesday. Before the opening bell, Dow Jones (INDEXDJX:.DJI) futures fell 0.38% to 16,877. Nasdaq (INDEXNASDAQ:.IXIC) futures moved lower, falling 0.39% to 3,785.50.  Futures on the S&P 500 (INDEXSP:.INX) were down 0.44% to 1,942.50.


Toyota (NYSE:TM) is recalling 6.5 million cars in Japan because of potentially faulty airbags installed by Japanese airbag maker Takata Corp (OTCMKTS:TKTDY), the world's second-largest airbag manufacturer. Takata Corp discovered record-keeping errors at a plant in Mexico where potentially faulty airbag inflators were produced from 2001 to 2002, and the company warned more vehicles may need to be recalled. In other auto-recall news, General Motors (NYSE:GM) CEO Mary Barra has said her company will release an estimate of the cost GM has incurred because of ignition-switch-related recalls early next month. Toyota fell 0.50% in pre-market trading. GM was down 0.27%.

Chinese e-commerce giant Alibaba is launching its first direct-to-consumer online store today called 11 Main. The site will operate similarly to Alibaba's China-based TMall, which acts as a virtual storefront for sellers, who set their own prices. Alibaba has been expanding in the US ahead of its initial public offering later this summer, which is expected to be one of the largest ever with Alibaba's own estimate of its valuation between $96.6 billion and $121 billion.  Meanwhile, Alibaba has just completed what it reports as the biggest merger in the history of China's Internet, acquiring the remaining third of mobile Web browser maker UCWeb that it doesn't already own.

Airbus (OTCMKTS:EADSY) is facing an unexpected lost after Dubai's Emirates airlines canceled an order for 70 A350 jets. The deal, which was struck in 2007, was worth $16 billion according to list prices at the time. Airbus's sales chief John Leahy has downplayed the impact the canceled order will have, and noted that competitor Boeing (NYSE:BA) received more cancelations for its Dreamliner aircraft. Rolls-Royce (OTCMKTS:RYCEY), the sole engine maker for the A350 jet, said the canceled order would cuts $4.4 billion from its books.

The world's largest clothing retailer, Inditex SA (BME:ITX), beat analyst estimates with its first-quarter earnings, as net income fell less than expected and the Arteixo, Spain-based retailer kept expansion costs down. The company, which owns brands including Zara, Stradivarius, and Bershka, said e-commerce helped boost its margins. Meanwhile, Sweden's Hennes & Mauritz AB (OTCMKTS:HNNMY), owner of the H&M retail chain, reported 19% growth in sales in the month of May, its fastest growth in half a year.


Today's economic calendar kicked off with MBA mortgage applications, which surged 10.3% in the past week after a soft May. At 10:00 a.m., the Census Bureau will release its quarterly services survey, which measures total operating revenue and percentage of revenue by class of customer in the information and technology-related services industry. The EIA petroleum inventories are reported at 10:30 a.m. The results of the $21 billion 10-year bond auction will be delivered at 1:00 p.m. The US Treasury will release its monthly budget figures at 2:00 p.m., which analysts expect will show a monthly deficit of $131 billion versus a $106.9 billion surplus in April.

Global Markets

The World Bank reeled back its global growth forecast for 2014 after poor weather in the US, turbulent financial markets, and the conflict in Ukraine got the global economy off to a "bumpy" start. Asian stocks beat off early losses and ended in positive territory overnight, with Asia's benchmark MSCI Asia Pacific Index hitting its highest level since 2008. Japan's Topix Index rallied 0.8% after a 0.5% sell-off yesterday. Vietnam says China has sent six warships to guard an oil rig in the disputed South China Sea.

European stocks fell from a six-year high following the World Bank's forecast and profit-forecast cuts from Lufthansa (OTCMKTS:DLAKY) and Vallourec (OTCMKTS:VLOUF). In the United Kingdom, unemployment fell more than forecast, and payrolls rose to a record high. EU regulators are planning to launch a formal investigation into corporate-tax codes in Ireland, Luxembourg, and the Netherlands, which may be allowing companies like Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG), and Amazon (NASDAQ:AMZN) cheaper tax deals than allowed by EU law.

Twitter: @brokawbrokaw
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