DAILY MARKET REPORTS
- U.S. stocks slipped on Monday, dragged down by financial shares, as investors fled riskier assets on fears that a drawn-out trade war between the United States and China could force the global economy into recession.
- President Donald Trump said on Friday he was not ready to make a deal with China, pouring cold water on any hopes that the dispute would end soon.
- Trump’s pledge to tax the remaining $300 billion worth of Chinese imports goes into effect on Sept 1.
- Over the weekend, Goldman Sachs said fears of the U.S.-China trade war leading to a recession were growing and that it no longer expected a trade deal before the 2020 U.S. presidential election.
- Hong Kong’s Hang Seng Index fell 0.4% after protests at the city’s airport prompted authorities to cancel more than 100 flights.
- Chinese authorities said the violent weekend demonstrations marked the emergence of “the first signs of terrorism” in the semiautonomous city, and vowed a merciless crackdown.
- The Shanghai Composite closed higher, though, notching a 1.5% gain after China’s central bank continued to weaken the yuan, though at a slower pace than traders had expected.
- That helped ease concerns of a sharp devaluation after President Trump last week accused China of manipulating its currency.
US FINANCIAL MARKET
CBS, Viacom in Final Stages of Deal Talks
- CBS and Viacom are in the final stages of negotiating a deal that would reunite mogul Sumner Redstone’s media empire in the hopes of creating a more formidable competitor to the entertainment industry’s giants.
- The two sides are still working out details including the exchange ratio for the transaction but have narrowed it down to a range of between 0.59 and 0.60, which would represent a small premium for CBS shareholders.
- The all-stock deal, if completed, would bring under one roof recognizable American media properties including Viacom cable channels like MTV and Nickelodeon, the Paramount film and TV studio and the CBS broadcast network.
BlackRock becomes Authentic Brands’ largest shareholder with $875 million stake
- BlackRock’s new private equity fund Long Term Private Capital has completed its maiden investment, taking up an $875 million stake in Authentic Brands, making it the largest investor in the U.S.-based entertainment company, the fund said on Sunday.
- In April, BlackRock said it was set to start investing its long-term private capital vehicle, which had $2.75 billion in capital committed from cornerstone investors at the time.
- “The fund itself put $625 million and we have another $250 million that is coming from related entities and co-investors,” André Bourbonnais, head of BlackRock’s Long Term Private Capital, told Reuters.
Aramco, Setting Stage for IPO, Bulks Up on Refining With $15 Billion Deal
- Saudi Aramco is buying a 20% stake—worth some $15 billion including debt—in India’s Reliance Industries ’ oil and chemicals business, a move that would help match its enormous crude production with refining capacity, as it gears back up for a planned initial public offering.
- The move would represent one of Aramco’s biggest forays overseas, and comes as it is trying to win over potential global investors for a possible listing that is now back on the front burner among Aramco executives and Saudi government officials.
- Saudi Aramco, meanwhile said net earnings for the first half of 2019 were $46.9 billion, down just over 11% from $53 billion in the year-earlier period, on lower oil prices.
EU Nears Decisions in Facebook Privacy Cases
- The European Union could begin to hit Facebook with decisions under the bloc’s new privacy law by the end of the year, raising the specter of billions of euros in fines and orders to change business practices.
- Ireland’s Data Protection Commission says it is nearing the end of its investigations in some of the 11 cases it has opened into the tech giant under the EU’s General Data Protection Regulation, or GDPR.
- Ireland aims to send at least some draft decisions, along with any proposed fines and sanctions, to the EU’s 27 other national privacy regulators by the end of September.
U.S. still evaluating requests from firms to sell to China’s Huawei: officials
- The U.S. Commerce Department is continuing to evaluate requests by U.S. companies to sell certain equipment to Chinese telecoms company Huawei, a White House official and Commerce Department spokesman said Friday.
- President Donald Trump earlier said the United States would not do business with Huawei for the time being, but the White House official said that comment referred only to a ban on U.S. government purchases of Huawei equipment.
- The Commerce Department process was continuing, said the White House official and the Commerce spokesman.
- Commerce in May had put Huawei on a national security blacklist, effectively banning sales of U.S. technology, software and services to the firm.
California Fostered America’s Tech Industry. It Is Becoming a Great Adversary.
- California, the birthplace of the American tech industry, is emerging as a great foe.
- On Monday, the state legislature resumes and will consider a bill that, if passed, could classify drivers for ride-hailing companies like Uber and Lyft as employees, entitled to better wages and benefits.
- The state is set to debut a law next year that will give privacy rights to consumers unprecedented in the U.S.
- Passed last year, the California Consumer Privacy Act broadens the definition of what constitutes as personal information and will give California residents the right to prohibit the sale of personal data to third parties and opt out of sharing it altogether.
- The tech sector accounted for about 19% of California’s economy last year, according to CompTIA.
US ECONOMY & POLITICS
Fed Considers New Tool for a Downturn
- Federal Reserve officials are weighing whether to use a tool that could reduce the risk of a credit crunch in a downturn.
- The tool is known as the countercyclical capital buffer.
- It allows the Fed to require banks to hold more loss-absorbing capital should the economy show signs of overheating, or to keep less of it during bad economic times.
- The Fed’s board of governors so far hasn’t used the tool, approved in 2016. Its rule on the buffer says it should turn it up when economic risks are “meaningfully above normal” and reduced when they “abate or lessen.”
- Now, some Fed officials are debating whether it is time to use the tool, which could provide banks with additional lending firepower in a subsequent downturn. It isn’t clear when they might make a decision.
U.S. adviser Bolton courts Brexit Britain with a trade deal talk
- U.S. President Donald Trump wants to see a successful British exit from the European Union that Washington will support with a U.S.-UK free trade agreement, national security adviser John Bolton told British officials on Monday.
- As the United Kingdom prepares to leave the European Union on Oct. 31, its biggest geopolitical shift since World War Two, many diplomats expect London to become increasingly reliant on the United States.
- Bolton, in London for two days of talks with British officials, is seeking an improved U.S.-British relationship with Prime Minister Boris Johnson after sometimes tense ties between Trump and Johnson’s predecessor, Theresa May.
- A central message Bolton was making is that the United States will help cushion Britain’s exit from the EU with a free trade agreement that is being negotiated by U.S. Trade Representative Robert Lighthizer and his British counterpart, Liz Truss.
IMF stands by yuan view; says China could need stimulus if trade war worsens
- The International Monetary Fund on Friday stood by its assessment that the value of China’s yuan was largely in line with economic fundamentals, but an IMF official said the fund was encouraging China to pursue a more flexible exchange rate with less intervention.
- James Daniel, director of the IMF’s China department, said that an assessment of China’s economic policies found the yuan exchange rate in 2018 to be “not significantly over-valued or under-valued.”
- U.S. Treasury Secretary Steven Mnuchin is seeking to engage the IMF to help “correct” an unfair trade advantage from Beijing’s currency actions, but Daniel declined to say how the IMF was responding to the request.
- The IMF said in the report that a worsening of trade tensions with the United States could put China’s economic and financial stability at risk, making new fiscal stimulus measures from the government warranted.
Lack of G7, IMF support seen dimming impact of U.S. move on China’s yuan
- China is unlikely to face serious consequences from the Trump administration’s decision to label it a currency manipulator given the apparent lack of G7 and IMF support for the move, former and current U.S. and G7 officials said.
- An accord agreed by the Group of Seven of the world’s most advanced economies in 2013 says that members should consult each other before taking major currency actions.
- But former and current officials said the Treasury failed to make those consultations, contradicting White House economic adviser Larry Kudlow’s claim that G7 members were on board.
EUROPE & WORLD
Hong Kong Airport Shutdown Sparks Global Disruption
- International airlines scrambled to reschedule flights for throngs of passengers caught in the political turmoil engulfing Hong Kong after authorities shut down the city’s airport, one of the world’s busiest hubs.
- Hong Kong’s airport authority canceled more than 130 outbound flights after thousands of people descended on the arrival and departure halls to protest the police’s handling of long-running demonstrations in the city.
- Hong Kong’s airport is one of the world’s busiest.
- Last year, it handled more than 400,000 flights and 75 million passengers, as well as 5 million tons of cargo.
China Says Hong Kong Protests Show ‘First Signs of Terrorism’
- Chinese authorities condemned violent weekend demonstrations in Hong Kong as “deranged” acts that marked the emergence of “the first signs of terrorism” in the semiautonomous city, vowing a merciless crackdown on the perpetrators.
- The spokesman, Yang Guang, expressed “intense condemnation” for such “deranged and severe criminal activities committed without regard for the consequences.” Such violence must be severely punished, “without leniency, without mercy,” he said.
- Mr. Yang didn’t indicate that Beijing has any imminent plans to intervene in the unrest.
- Instead, he reiterated the central government’s firm support for Hong Kong’s police and judiciary in their efforts to “decisively enforce the law” and punish wrongdoers as soon as possible.
- Chinese state media, however, appeared to signal that mainland forces are ready to step in, if necessary.
Chinese Financial Institutions’ Lending Dives
- Lending by Chinese financial institutions slumped in July on weakening demand, signaling further economic headwinds from trade tensions with the U.S. and potentially paving the way for more stimulus efforts by Beijing’s policy makers.
- Chinese banks issued 1.06 trillion yuan ($150.2 billion) of new yuan loans in July, down from 1.66 trillion yuan in June, the People’s Bank of China said on Monday—lower than the median forecast of 1.25 trillion yuan by economists polled by The Wall Street Journal.
- Total social financing, a measure of credit in the economy, stood at 1.01 trillion yuan in July, as some nonbank financial institutions withdrew credit they issued earlier.
- In June, total social financing was at 2.26 trillion yuan.
TODAY in HISTORY
- The last American combat troops left Vietnam. (1972)
- Notorious Boston gangster James (Whitey) Bulger was found guilty of 31 of the 32 charges he faced, including murder, extortion, money laundering, drug dealing and possession of weapons. (2013)
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