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The U.S. files criminal charges against Huawei. U.S. stocks slumped Monday as slowing demand from China dented earnings from Caterpillar to Nvidia. And the U.K.’s Theresa May supports a Brexit backtrack. Here are some of the things people in markets are talking about.
U.S. prosecutors filed criminal charges against Huawei Technologies Co., China’s largest smartphone maker, alleging it stole trade secrets from an American rival and committed bank fraud by violating sanctions against doing business with Iran. Huawei has been the target of a broad U.S. crackdown over allegations it has stolen trade secrets, violated sanctions against Iran and sold equipment that could be used by the China’s Communist Party for spying. The charges filed Monday also mark an escalation of tensions between the world’s two largest economies, which are mired in a trade war that has roiled markets. Separately, Huawei Chief Financial Officer Meng Wanzhou, 46, the daughter of the company’s founder, was arrested in Vancouver, Canada, Dec. 1 on allegations that she committed fraud to sidestep sanctions against Iran. She’s become a flash-point in trade tensions between the U.S. and China.
U.S. stocks fell after Caterpillar and Nvidia blamed slowing global growth for disappointing results, augmenting concern the trade war with China is hitting corporate profits. Oil slid more than 3 percent. The S&P 500 halted a three-day rally to start a week packed with events that could move markets, with the sector bellwethers dousing enthusiasm over the young earnings season. The Dow Jones Industrial Average dropped as much as 400 points. Caterpillar sank more than 10 percent at one point after pinning its biggest quarterly profit miss in a decade on weak demand from China. Nvidia plunged as much as 18 percent after slashing its revenue forecast. “When you see the big cyclical companies missing earnings or missing forecasts, it worries the market because it confirms what they’ve already been hearing from the macro side,” said Dave Lafferty, chief market strategist at Natixis Investment Managers.
India Media Giant Rocked
The media mogul behind India’s biggest television network is battling to restore confidence in his businesses after an online news site reported that Subhash Chandra’s Essel Group has links to a company that’s being probed by fraud investigators. It began Friday, when a report by the Wire sent all of Essel’s seven listed units plunging, including a record 27 percent tumble at Chandra’s flagship TV broadcaster, Zee Entertainment Enterprises Ltd. A barrage of denials and statements from the conglomerate since helped Zee and its two affiliates recover some of their losses on Monday, while the remaining Essel units continued to fall. Essel’s public-relations blitz also unearthed some potentially broader issues: The closely held group had been scrambling to sell assets, including a big stake in Zee, to pay debts. The group emerged as the latest example of the growing number of Indian businesses struggling to cope with tougher borrowing conditions after the government began taking steps to lower the world’s second-highest ratio of bad loans.
Iron Ore Surges
Iron ore surged, with futures in China finishing at the highest level in more than a year, after a deadly dam collapse at a mine run by top producer Vale SA spurred concern that global supplies will be interrupted, potentially tightening the market and aiding the company’s rivals. May futures rallied as much as 6.3 percent to 567.5 yuan a ton on the Dalian Commodity Exchange, the highest price for the most-active contract since September 2017. Iron ore is headed for a second monthly advance following a series of incidents that have hit the global supply chain, with the disaster in Brazil following a fire at a port facility owned by Rio Tinto Group earlier this month, and a train derailment that hit BHP Group’s operations in November. The raw material’s recent advance has also been underpinned by signs that winter curbs on mills in China have been less severe than expected, boosting demand.
Prime Minister Theresa May is backing a plan to ditch the most contentious part of her Brexit deal as she scrambles for a compromise all sides can support, with time running out before the U.K. leaves the European Union. In a dramatic meeting on Monday, May effectively abandoned the agreement she’s spent the past 18 months negotiating with the EU and threw the weight of her government behind a move to re-write the deal. May urged hundreds of Conservative politicians crammed into a meeting room inside Parliament to support the proposal, which would strip out the so-called backstop plan for the Irish border, wrecking a compromise she’s agreed to with the EU in the hope of securing one with her own party.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- How to get business class seats to Asia for the price of economy.
- Deutsche Telekom is said to warn that Huawei ban would hurt Europe 5G.
- Asia's billionaire grandpas give way to the next generation of women.
- The world’s best red and white wines for under $20.
- Takeda is planning Japan’s biggest bond sale ever.
- How low can China bond yields go?
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