Trade looks set to dominate this week’s agenda once again as tariff concerns dent stocks. Here are some of the things people in markets are talking about.
Trade Concerns Drag on Equities
Trade war fears sparked another selloff in U.S. equities. Shares fell the most since April, led lower by technology shares after China and the EU released a joint warning on the consequences of a trade war. Harley-Davidson said it would move production from the U.S. to avoid tariffs. The Dow Jones Industrial Average fell for the ninth day in 10, with Intel, Boeing and Caterpillar among the biggest losers. The Nasdaq indexes tumbled more than 2%. The declines could have been worse, if not for White House trade adviser Peter Navarro, who indicated that a Treasury Department report later this week on American restrictions on Chinese investments won’t be as damaging to growth as markets are anticipating.
Will the U.S. Curb China Tech Investment?
Navarro’s comments helped ease investor concern after they reached a fever pitch amid reports the Treasury Department is planning to heighten scrutiny of Chinese investments in sensitive U.S. industries under an emergency law. Under the plan, the White House would use one of the most significant legal measures available to declare China’s investment in U.S. companies involved in technologies such as new-energy vehicles, robotics and aerospace a threat to economic and national security, according to eight people familiar with the plans. Reports that the U.S. is considering such extreme unilateral measures may be viewed by China as a shift away from any chance of diplomacy. Treasury Secretary Steven Mnuchin, who has pressed within the administration for a negotiated settlement to trade disputes with China, denied in a tweet Monday morning that the measures would be aimed at China, calling reports on the measure published by Bloomberg News and the Wall Street Journal “false, fake news.” He described the restrictions to be announced later this week as “not specific to China, but to all countries that are trying to steal our technology.”
China, EU Warn Against Trade War
China and the European Union vowed to oppose trade protectionism in an apparent rebuke to the U.S., saying unilateral actions risked pushing the world into a recession. Vice Premier Liu He – President Xi Jinping’s top economic adviser— said China and the EU had agreed to defend the multilateral trading system, following talks Monday in Beijing. The comments, made at a press briefing with European Commission Vice President Jyrki Katainen, come as both sides prepare to face off against President Donald Trump’s tariff threats. “Unilateralism is on the rise and trade tensions have appeared in major economies,” Liu said. “China and the EU firmly oppose trade unilateralism and protectionism and think these actions may bring recession and turbulence to the global economy.”
Banks Sound Emerging-Market Alarm
The prospect of an escalating trade war, combined with the fallout from Turkey’s elections, are resurfacing concerns over emerging markets. MSCI’s index of developing-nation currencies fell 0.4 percent Monday. Goldman Sachs said it’s reducing an overweight position in developing-nation currencies, preferring a more “defensive” stance amid the mounting tensions. Citigroup Inc. warned that investment flows into emerging assets will struggle, while Russia’s BCS called the trade rhetoric a “spoiler” for the ruble that could offset support from a mild OPEC output increase. Outflows from U.S.-listed emerging market ETFs that invest across developing nations, as well as those targeting specific countries, hit $3.38 billion last week, the most in more than a year.
Xerox CEO Blasts Fujifilm
Xerox Corp.’s Chief Executive Officer John Visentin blasted his Fujifilm Holdings Corp. counterpart’s efforts to revive merger talks and warned he doesn’t plan to renew the companies’ Asia joint venture in 2021. Visentin, elevated to CEO after shareholders Carl Icahn and Darwin Deason won a court order blocking the companies’ $6.1 billion merger deal, said in a letter to Fujifilm chairman Shigetaka Komori on Monday that a lawsuit by Fujifilm was “nothing more than a desperate, misguided negotiating ploy to save a takeover” that has already been blocked by a judge because of the “surreptitious actions of your team.” Visentin said Fujifilm’s own accounting problems had made its deal with Xerox impossible to complete.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Jack Ma is embracing blockchain – while warning of a bitcoin bubble.
- Instagram may be worth more than $100 billion.
- These are all the steps China’s taking to stem losses in financial markets.
- HBO’s website is blocked in China after John Oliver criticized Xi Jinping.
- Apple is planning to pump up the volume on its audio devices.
- Wall Street’s hottest lunch commodity is a $185 Waygu steak sandwich.
©2018 Bloomberg L.P.