How Emerging Markets Could Still Go Horribly Wrong
Today’s Agenda
- Don’t sleep on the risk of emerging-market contagion.
- Hurricane Florence is historically massive – but you can’t easily blame global warming.
- Apple may be about to deliver bad news to wireless carriers.
- Europe needs to be careful trying to contain Viktor Orban.
- China says it won’t bend in the trade war.
The Risk of Emerging-Market Contagion
(Bloomberg Opinion) -- This is a week of anniversaries of terrible events. Today, obviously, marks 17 years since the 2001 terror attacks. Later this week will be the tenth anniversary of the Lehman Brothers bankruptcy, which intensified the worst financial crisis since the Great Depression. It’s hard to imagine a repeat of either of these disasters, but important to watch for the next one.
Wall Street doubts the recent troubles of emerging markets will become such a catastrophe. It’s a reasonable assumption; it’s unlikely the Turkish lira, say, will crush U.S. banks. But there is a chain of potential contagion that could give markets more of a scare than they’ve felt so far, warns Satyajit Das. The global economy isn’t exactly in the best shape; and as we discovered a decade ago, markets are linked in ways that can surprise investors: “If EM stresses persist, then advanced economies face additional credit tightening, exacerbating the reductions in liquidity underway and potentially transmitting price shocks.” Read the whole thing.
One accelerant to those EM stresses is the strengthening U.S. dollar, writes Marcus Ashworth. Robust U.S. economic numbers, rising interest rates and global agita are driving investors to the relative safety of the greenback. That means they’re shunning EM assets, which makes EM stresses worse, which leads to still more dollar strength. Pretty soon all of the money is on fire. “The contagion in emerging markets is set to take a worrying turn,” Marcus warns. Read the whole thing.
Hurricane Blame Is in the Wind
Hurricane Florence spent the day gathering destructive strength and grinding toward the Carolinas. It could be the most devastating hurricane ever to hit the U.S. East Coast north of Florida. Is this the fault of climate change? Yee-e-e-nnn-oo? It’s complicated, writes Faye Flam. Because, yes, absolutely, global warming seems to make bigger, stronger storms more likely. But no, you can’t blame global warming directly for Hurricane Florence, which may be no more destructive than, say Hurricane Hazel, which hit North Carolina in 1954.
There are a lot of people in the hurricane’s path who should be heading for safety now. There are also some investors at less-urgent risk: people who bought catastrophe bonds, which suffer when natural disasters hit. But Brian Chappatta writes cat-bond investors have reason not to worry too much about any one hurricane.
Why AT&T and Verizon Are Sweating Apple
On a happier note, tomorrow is a high holy day for American consumers: It’s the day Apple Inc. unveils its new phones and other gewgaws, on which we will spend all of our money because, hey, it would probably just catch on fire anyway. One fun thing Apple may announce is a thing called an eSIM – essentially, an easy way to switch cell-phone carriers without having to be locked down by their annoying sim cards. Even if Apple doesn’t roll this out tomorrow, the spread of eSIMs is inevitable, Alex Webb writes. And that will push carriers such as AT&T Inc. and Verizon Communications Inc. “further down the path to becoming little more than utilities.” And interchangeable utilities may have a harder time socking you with enormous bills. Which would be just terrible. Read the whole thing.
Tread Lightly With Hungary
How do you solve a problem like Viktor Orban? How do you hold a moonbeam in your hand? Hungary’s prime minister is an antidemocratic, authoritarian nationalist who runs a country that just happens to be in the European Union, which does not care for such behavior. The EU has lots of extreme tools to punish Orban, but it should proceed with caution, warn Bloomberg’s editors – Orban’s going to hunker down either way, and the key is to starve him of influence rather than making a martyr out of him. Read the whole thing.
How China Sees America
China and the U.S. are at risk of being pulled into an increasingly destructive trade war. President Donald Trump and many in his orbit consider China America’s biggest geopolitical and trade rival. Tensions are rising. Fu Ying, vice chairperson of the Foreign Affairs Committee of China's National People's Congress, writes China “will stand firm against U.S. bullying over trade.” But she also says Beijing wants to keep talking. Read the whole thing.
Bonus China reading: China needs to give its companies a tax cut. – Shuli Ren
Table Talk
Oh, look, Amazon.com Inc. is taking over yet another industry, writes Brooke Sutherland: business-to-business distribution.
At first blush, you might think Ford Motor Co. regrets getting rid of its luxury brands around the time of the financial crisis. But it had no choice, and the luxury brands may not be as strong as they seem, writes Chris Bryant.
Quick Hits
Bremain? Brexit? Bre-do-over? Polls show British Brexit attitudes are all over the map. – Matt Singh
Theresa May would probably like it if Brexit negotiations dragged on to the last bitter minute. – Therese Raphael
It’s too early to judge Trump’s effect on the economy. It's probably not large, and it could also cut both ways. – Michael Strain
Obamacare could get a boost in the midterms, in the form of a big gain in the number of states expanding Medicaid. – Max Nisen.
There are better ways to help the working poor than Bernie Sanders’s “Stop BEZOS” stunt. – Noah Smith
Trump and John Bolton have thrown away any chance of Mideast peace. – Hussein Ibish
ICYMI
A “super typhoon” is aiming at Hong Kong. Trump may finally have some leverage over Kim Jong Un in peace talks. One of Tesla’s biggest fans has thrown in the towel.
Kickers
It’s a good day to read Tom Junod’s classic 9/11 piece “The Falling Man.”
Are our gadgets making us smarter, or stupider and more violent?
Get ready for the four-day workweek.
Why do “entomologists, geneticists, synthetic biologists, mathematical biologists, microbial ecologists, roboticists, computer scientists, and physicists” all study the lowly termite?
All the EGOT (Emmy, Grammy, Oscar, Tony) winners, ranked.
Note: What were you doing #WhenLehmanCollapsed? Bloomberg Opinion would like you to share your story on Twitter. By using this hashtag, you’ll give an up-close and personal picture of what happened 10 years ago at the beginning of the financial crisis. The campaign will run from 9/12 – 9/15, and a selection of tweets will be featured by Bloomberg's social media accounts.
Also, please send EGOTs, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.
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To contact the editor responsible for this story: Timothy L. O'Brien at tobrien46@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mark Gongloff is an editor with Bloomberg Opinion. He previously was a managing editor of Fortune.com, ran the Huffington Post's business and technology coverage, and was a columnist, reporter and editor for the Wall Street Journal.
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