Five Things You Need to Know to Start Your Day

(Bloomberg) --

U.S. stocks took a breather from all the recent trade angst on Tuesday. But emerging-market woes persisted, with equity gauges worth $8 trillion now in bear territory. Here are some of the things people in markets are talking about.

Trump Veering From Hard-Line Approach to Tech?

President Donald Trump signaled Tuesday he may take a less confrontational path toward curbing Chinese investments in sensitive American technologies, potentially relying on a U.S. committee that scrutinizes foreign acquisitions for national security risks. Trump made remarks Tuesday at the White House that appeared to align with Treasury Secretary  Steven Mnuchin’s approach, in an internal administration debate over how to protect U.S. intellectual property from China. Trump directed the Treasury Department in March to weigh options for restricting Chinese investment in American companies. In May, he said the U.S. “will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology.”

U.S. Stocks Rebound...

U.S. stocks rebounded from the worst selloff since early April as a rally in American crude overshadowed lingering concerns about the impact of heightened trade tensions. The S&P 500 Index rose back above its 50-day moving average, while technology shares hit hardest Monday bounced back to give the Nasdaq indexes advances. Energy producers led gains after oil popped above $70 a barrel following reports the U.S. is pressing allies to halt imports of Iranian crude. The dollar jumped versus major peers, while Treasuries were confined to a narrow trading range. 

Yet China Markets Are Still on Edge...

A deepening sense of unease is rippling through China’s financial markets. The benchmark Shanghai stock index has tumbled 20 percent in just five months. The yuan is heading for its longest losing streak in four years in Hong Kong. Corporate defaults are mounting. There are homegrown reasons for the concern: the nation’s deleveraging campaign is reducing the amount of liquidity available and threatening growth. Then throw in an unpredictable trade war with the U.S., and investors are facing a long list of reasons to sell. Official efforts to calm nerves have had little effect so far. "Fundamentals in China are very bad," said Hao Hong, chief strategist at Bocom International Holdings Co. "Selling pressure in the market is still very big." Analysts warn the rout may have no end in sight.

And Emerging-Market Woes Continue

With the addition of China, the slump in emerging-market stocks has now pushed equity gauges worth a combined $8 trillion into bear markets. Developing-nation currencies are also in retreat, heading toward their worst month since November 2016, while the risk premium on emerging-market government bonds over U.S. Treasuries also continues to widen. Bear markets are a key signal for trend reversals as investors use them to verify whether the previous bull market has ended or the sell-off is just a correction in a rally.

GE Unveils Overhaul

General Electric Co. CEO John Flannery took the boldest steps yet to revamp the sinking corporate titan, unveiling plans to pull GE out of the health-care and oil markets. By slimming it down and reorienting around power, renewable energy and aviation, he hopes to breathe new life into the 126-year-old company. “We are making fundamental changes to position our businesses for the future and redefine GE,’’ Flannery said Tuesday on a conference call with investors and analysts. The overhaul will profoundly reshape an icon of American business –- albeit one that has fallen sharply from its Jack Welch-era heyday at the turn of the century. GE shares surged TK%.

What we’ve been reading

This is what caught our eye over the last 24 hours.

• Many quant hedge funds are struggling to make money this year.
• Trump’s travel ban was upheld by the U.S. Supreme Court.
• Crypto influencers are using tweets to pump up the market.
• Philippine President Rodrigo Duterte has sparked an uproar in Asia’s biggest Catholic nation after calling God “stupid.”
• Here’s how to fly the world’s best business class for less than coach.
• Everything you need to know about the BOJ’s quest to spur 2% inflation.
• The pros and cons of stealing art.

To contact the editor responsible for this story: Boris Korby at bkorby1@bloomberg.net

©2018 Bloomberg L.P.