Five Things You Need to Know to Start Your Day

(Bloomberg) --

U.S. stocks drop the most in a month, while evidence mounts that the trade war with China is taking its toll on the American economy. Here are some of the things people in markets are talking about.

Trade War Hits American Economy

President Donald Trump regularly declares that he’s winning his trade wars. Yet evidence is growing that the U.S. economy is a net loser so far. In two separate papers published over the weekend, some of the world’s leading trade economists declared Trump’s tariffs to be the most consequential trade experiment seen since the 1930 Smoot-Hawley tariffs blamed for worsening the Great Depression. They also found the initial cost of Trump’s duties to the U.S. economy was in the billions and being borne largely by American consumers. The world’s two largest economies are nearing the finish line on a deal, but that doesn’t mean the U.S.-China trade war ends. More work remains on ensuring that Beijing will follow through on its commitments, U.S. Trade Representative Robert Lighthizer told Congress last week. And while China wants Trump to remove tariffs that he imposed last year on $200 billion of Chinese goods, it’s not yet clear if the president will roll back some or all of the duties.

Asia Stocks to Follow U.S. Slide

Asian stocks are set to track U.S. shares lower as investors look for trade-deal details. The dollar strengthened and Treasury yields slipped. Futures pointed to equities opening weaker across the region after the S&P 500 Index declined the most in a month, though the benchmark did pare the worst of its losses late in the session. Chinese assets will be in the spotlight after a report China is planning to cut the value-added tax rate that covers the manufacturing sector to support growth. The yuan held gains on reports of an imminent trade deal.

The Battle Underlying Japan’s Stock Market

The rally that’s pushed Japanese equities to a three-month high hides a different story when it comes to the cash market. While foreigners have bought 1.48 trillion yen ($13.2 billion) of futures linked to the Topix index and the Nikkei 225 Stock Average since January, propelling the gauges higher, they’ve also offloaded 785 billion yen of cash equities, according to data from the Japan Exchange Group through Feb. 22. They were net sellers of both the contracts and stocks last year. “What we’re seeing is a bit of an extreme scenario at play, with foreigners only buying up futures,” said Norihiro Fujito, the chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo.

More Huawei Drama

Huawei Technologies Co. Chief Financial Officer Meng Wanzhou is going on the offensive, suing the Canadian government for allegedly trampling her constitutional rights during her arrest in an effort to discredit the extradition case she’s facing. In a civil suit filed Friday, Meng claims officers failed to immediately arrest her on Dec. 1 in Vancouver on a U.S. extradition request and instead first detained her under the guise of a routine custom check to “unlawfully compel her to provide evidence and information.” The suit, filed in the Supreme Court of British Columbia, is against the Canadian Border Services Agency, a Royal Canadian Mounted Police officer and the Canadian government. Separately, China is now linking the cases of two Canadians seized after Meng’s arrest, sparking a bitter diplomatic feud.

Australia’s Climate Quagmire

Australia’s government is catching flak for how it’s using official data on carbon emissions, as climate change shapes up to be a key issue in elections due by May. Prime Minister Scott Morrison and Environment Minister Angus Taylor are boasting of a quarterly decline reported in government data last week, ignoring figures from the same publication that show an overall rise in recent years.  Climate change is a key dividing line and an emotive topic in Australia — which is blessed with natural wonders such as the Great Barrier Reef yet remains reliant on mining and exporting fossil fuels to keep its economy ticking.

What we’ve been reading:

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

• Hong Kong is releasing less land for new private homes.
• Tesla’s new Model Y crossover is already prompting investor concerns.
• Face mask craze creates Korean billionaire with Goldman backing.
• JPMorgan snags a lucrative role in Lyft’s IPO.
• Coinbase faces a backlash after buying a firm with spyware ties.
• These AI cameras can spot shoplifters before they steal.
• A glimpse inside the most powerful Italian supercar ever made.

To contact the editor responsible for this story: Alyssa McDonald at amcdonald61@bloomberg.net

©2019 Bloomberg L.P.