World Markets Roiled By Rising Fears Of US-China Trade War

Fears of a trade war roiled financial markets and sent the dollar wobbling Friday after Beijing retaliated against the Trump administration’s tariff hikes by threatening import duties on U.S. goods.

Stocks plunged on Wall Street after U.S. President Donald Trump imposed sanctions Thursday on goods and investment from China. The Dow Jones industrial average dropped more than 700 points as investors feared trade tensions between the world’s largest economies would escalate.

That fear rippled into Asia, where markets went on a stomach-churning ride. Japan’s benchmark Nikkei 225 index plunged 4.5 percent to 20,617.86 and South Korea’s Kospi tumbled 3.2 percent to 2,416.76. Hong Kong’s Hang Seng lost 3 percent to 30,139.70 and the Shanghai Composite in mainland China sank 3.4 percent to 3,152.76. Australia’s S&P/ASX 200 skidded 2 percent to 5,820.70. Benchmarks in Taiwan and Southeast Asia also fell.

“If the tariffs go ahead as planned, then we believe China will retaliate. It is impossible to imagine that they cannot. And then we expect the U.S. to retaliate further,” said Rob Carnell, ING’s chief Asia economist. “This can turn ugly on a global scale very quickly.

The planned U.S. sanctions include tariffs on $48 billion worth of Chinese imports as well as restrictions on Chinese investments. Trump said he was acting in response to theft of American technology.

The U.S. Trade Representative identified 1,300 product lines as potential targets, including aerospace, information and communication technology, and machinery. A more complete list is due soon, to be followed by a 30-day comment period.

Concern that trade conflicts could wreak havoc on the world economy deepened as China responded to Trump’s recent tariff hikes on steel and aluminum by warning it could order higher import duties on U.S. goods including pork, apples and steel pipe.

China’s Commerce Ministry urged Washington to negotiate a settlement, saying tariffs undermine the global trading system.

“Everbody’s pushing each other around to do some negotiating,” said David Collins, chief operations officer at CMC China Manufacturing Consultants, which advises companies on setting up factories in China. “Trump is negotiating. He’s pushing back on the Chinese, and the Chinese will push back.”

On Thursday, investors fled stocks and bought bonds, which sent bond prices higher and yields lower. With interest rates falling, banks took some of the worst losses. Technology and industrial companies, basic materials makers and health care companies also fell sharply.

The S&P 500 index skidded 2.5 percent to 2,643.69. The Dow Jones industrial average shed 2.9 percent to 23,957.89. The Nasdaq composite gave up 2.4 percent to 7,166.68.

Investors sold some of the market’s biggest recent winners. Among technology companies, Microsoft fell 2.9 percent, Google parent Alphabet fell 3.7 percent and online retailer Amazon slid 2.3 percent.

Peter Donisanu, an investment strategy analyst for the Wells Fargo Investment Institute, said the risk of a damaging trade war is still low because the Trump administration is targeting specific goods that aren’t central to China’s economy. That could change if it puts tariffs on products like electronics or appliances imported from China.

“If the Trump administration really wanted to hurt China and start a trade war, then they would go after those larger sectors,” he said.

The risk of a U.S-China trade war is a regional concern, given the myriad supply chains and other ties across Asia. For example, South Korea’s largest trading partner is China. The U.S. is its second biggest.

“I’m worried that it would affect the national economy,” said S. E. Kim, an employee at a construction company in Seoul. “If the U.S. imposes tariffs on China like that, I think there would be some damage on us in the long term as well.”

Concern over higher U.S. tariffs on steel and aluminum eased somewhat when the Trump administration said some countries will be exempt. U.S. Trade Representative Robert Lighthizer said Thursday that the tariffs won’t apply to the European Union, Canada, Mexico, Argentina, Brazil and Australia.

Japan’s trade minister described the U.S. decision not to exclude Japanese exports as “extremely regrettable.”

“We will continue our effort patiently to persuade the U.S. to remove Japan from the list,” Japanese Minister of Economy, Trade and Industry Hiroshige Seko told reporters.

A traditional “safe haven” from risk, the Japanese yen rose to a 17-month high against the U.S. dollar response to the jitters over trade.

The dollar fell to 104.85 yen from 105.28 yen in late trading Thursday. The euro rose to $1.2336 from $1.2302.

Oil futures rallied. Benchmark U.S. crude rose 70 cents to $65.00 a barrel in electronic trading on the New York Mercantile Exchange. The contract shed 87 cents, or 1.3 percent, to close at $64.30 a barrel in New York. Brent crude, used to price international oils, rose 59 cents to $68.97 a barrel in London.

Can Zuckerberg’s Media Blitz Take The Pressure Off Facebook?

In the wake of a privacy scandal involving a Trump-connected data-mining firm, Facebook CEO Mark Zuckerberg embarked on a rare media mini-blitz in an attempt to take some of the public and political pressure off the social network.

But it’s far from clear whether he’s won over U.S. and European authorities, much less the broader public whose status updates provide Facebook with an endless stream of data it uses to sell targeted ads.

On Wednesday, the generally reclusive Zuckerberg sat for an interview on CNN and gave another to the publication Wired, addressing reports that Cambridge Analytica purloined the data of more than 50 million Facebook users in order to sway elections. The Trump campaign paid the firm $6 million during the 2016 election, although it has since distanced itself from Cambridge.

Zuckerberg apologized for a “major breach of trust,” admitted mistakes and outlined steps to protect users following Cambridge’s data grab.

“I am really sorry that happened,” Zuckerberg said on CNN. Facebook has a “responsibility” to protect its users’ data, he added, noting that if it fails, “we don’t deserve to have the opportunity to serve people.”

His mea culpa on cable television came a few hours after he acknowledged his company’s mistakes in a Facebook post , but without saying he was sorry.

Zuckerberg and Facebook’s No. 2 executive, Sheryl Sandberg, had been quiet since news broke Friday that Cambridge may have used data improperly obtained from roughly 50 million Facebook users to try to sway elections. Cambridge’s clients included Donald Trump’s general-election campaign.

Facebook shares have dropped some 8 percent, lopping about $46 billion off the company’s market value, since the revelations were first published.

While several experts said Zuckerberg took an important step with the CNN interview, few were convinced that he put the Cambridge issue behind hm. Zuckerberg’s apology, for instance, seemed rushed and pro forma to Helio Fred Garcia, a crisis-management professor at NYU and Columbia University.

“He didn’t acknowledge the harm or potential harm to the affected users,” Garcia said. “I doubt most people realized he was apologizing.”

Instead, the Facebook chief pointed to steps the company has already taken, such as a 2014 move to restrict the access outside apps had to user data. (That move came too late to stop Cambridge.) And he laid out a series of technical changes that will further limit the data such apps can collect, pledged to notify users when outsiders misuse their information and said Facebook will “audit” apps that exhibit troubling behavior.

That audit will be a giant undertaking, said David Carroll, a media researcher at the Parsons School of Design in New York — one that he said will likely turn up a vast number of apps that did “troubling, distressing things.”

But on other fronts, Zuckerberg carefully hedged otherwise striking remarks.

In the CNN interview, for instance, he said he would be “happy” to testify before Congress — but only if it was “the right thing to do.” Zuckerberg went on to note that many other Facebook officials might be more appropriate witnesses depending on what Congress wanted to know.

At another point, the Facebook chief seemed to favor regulation for Facebook and other internet giants. At least, that is, the “right” kind of rules, such as ones requiring online political ads to disclose who paid for them. In almost the next breath, however, Zuckerberg steered clear of endorsing a bill that would write such rules into federal law, and instead talked up Facebook’s own voluntary efforts on that front.

“They’ll fight tooth and nail to fight being regulated,” said Timothy Carone, a Notre Dame business professor. “In six months we’ll be having the same conversations, and it’s just going to get worse going into the election.”

Even Facebook’s plan to let users know about data leaks may put the onus on users to educate themselves. Zuckerberg said Facebook will “build a tool” that lets users see if their information had been impacted by the Cambridge leak, suggesting that the company won’t be notifying people automatically. Facebook took this kind of do-it-yourself approach in the case of Russian election meddling, in contrast to Twitter, which notified users who had been exposed to Russian propaganda on its network.

In what has become one of the worst backlashes Facebook has ever seen, politicians in the U.S. and Britain have called for Zuckerberg to explain its data practices in detail. State attorneys general in Massachusetts, New York and New Jersey have opened investigations into the Cambridge mess. And some have rallied to a movement that urges people to delete their Facebook accounts entirely.

Sandy Parakilas, who worked in data protection for Facebook in 2011 and 2012, told a U.K. parliamentary committee Wednesday that the company was vigilant about its network security but lax when it came to protecting users’ data.

He said personal data including email addresses and in some cases private messages was allowed to leave Facebook servers with no real controls on how the data was used after that.

Paul Argenti, a business professor at Dartmouth, said that while Zuckerberg’s comments hit the right notes, they still probably aren’t enough. “The question is, can you really trust Facebook,” he said. “I don’t think that question has been answered.”

Jim Rogers: Will Bitcoin Succeed? A Few Thoughts

Regarding Bitcoin I repeat what I said about IBM and computers: the people who invent something don’t necessarily become the ones who succeed.
We do know that the world has a money problem. We do know that the Internet is changing everything we know. My children will probably never go to a bank when they’re adults. My children will probably never go to a post office when they’re adults. So the Internet is changing everything we know and it’s going to change money.
If you go to China now most people don’t have money. If they want to buy a cup of tea they put their phone on the spot. If they want to buy a car they put their phone on the spot. So the Internet is gonna change everything we know.
How it’s going to evolve I don’t know. I do know that governments do not like to lose control., governments want to control everything, the crypto people say, “yes, but we’re smarter than the government” and they are. Everybody’s smarter than the government but the government has more guns than everybody else so if the government wants to control money they will.

Dovish Hike

The Fed raised rates but left the dot-plot unchanged for 2018 at a total of three hikes. An upgrade for 2019 by 0.2%, for 2020 by 0.3% and 01.% for 2020 was not enough for the US Dollar.

The statement contained an upbeat comment on the economy and caused initial confusion, but as time passed by, the lack of an upgrade for 2018 had the upper hand.

In his press conference, Powell sounded more direct than Yellen but did not provide any clear-cut answers. He downplayed the importance of the dot-plot and said things can change.

More importantly, Powell said he was surprised that wages did not rise and discussed productivity.

About trade, he said that while it did not impact this decision, some business contacts said that they are concerned about trade policy.

All in all, the Fed made a reluctant upgrade of the dot plot and Powell did not sound very enthusiastic.

The US Dollar extended its losses during the press conference and we can expect further pressure down the road.

Trump Considers TV Commentator As Possible Economic Adviser

President Donald Trump said Tuesday he’s strongly considering selecting CNBC senior contributer Larry Kudlow to succeed Gary Cohn as his top economic adviser, praising the veteran financial commentator and campaign supporter.

Trump told reporters he was “looking at Larry Kudlow very strongly” and noted that while he and Kudlow didn’t agree on the president’s recent decision to impose tariffs on steel and aluminum imports, Kudlow’s views would be helpful to him.

“I think Larry has a very good chance,” Trump said. He noted that Kudlow, an advocate of free trade, is a longtime friend who had been an early supporter of Trump’s 2016 presidential campaign.

Kudlow is CNBC’s senior contributor and was previously the host of CNBC’s prime-time “The Kudlow Report.” He served in the Office of Management and Budget during President Ronald Reagan’s administration.

Trump has been considering a potential replacement for Cohn as director of the National Economic Council. In addition to Kudlow, the potential successors include Chris Liddell, who serves as the White House’s director of strategic initiatives, and Shahira Knight, Cohn’s deputy at the National Economic Council and a key architect of the president’s tax overhaul law.

The president said last week that Cohn, the former top Goldman Sachs executive, was likely to return to his administration in the future. Cohn strongly opposed the president’s plan to slap tariffs on the steel and aluminum imports and worked to provide exemptions to U.S. allies such as Canada and Mexico.

Cohn played a central role in helping Trump enact a sweeping tax overhaul law, coordinating with members of Congress. His departure has been worrisome for Capitol Hill Republicans and business groups who have been concerned that Trump may install more protectionist economic policies amid a renegotiation of the North American Free Trade Agreement.

Industry Caught Off Guard After Trump Scuttles Tech Deal

The decision by President Donald Trump to scuttle a hostile takeover by Singapore’s Broadcom of the U.S. chipmaker Qualcomm caught some on Wall Street off guard.

Shares of Qualcomm slid more than 4 percent in early trading Tuesday.

Industry analysts speculate that Qualcomm’s advanced work on 5G technology, which is expected to provide speeds needed to fuel the “internet of things,” was the reason.

Trump said late Monday that a takeover of Qualcomm would imperil national security, ending Broadcom’s $117 billion buyout bid.

Chris Caso, an industry analyst with Raymond James, pointed out how brief the review of the deal was by U.S. Committee on Foreign Investment, and how rare it is for a U.S. president to intervene.

Kevin Cassidy, an industry analyst with Stifel Nicolaus, said Qualcomm is well ahead of foreign and domestic competitors in 5G technology, giving that as a leading reason for the executive action from the White House.

GOP Sen. Rob Portman of Ohio said he wasn’t surprised Trump’s actions.

“Given the Chinese influence at least, and ownership, to a certain extent, of Broadcom, and their interest in getting some of this 5G technology, that it is a national security issue, so I think that it’s appropriate that CFIUS look at it,” Portman told CNBC in an early interview Tuesday.

Although its name isn’t widely known outside the technology industry, Qualcomm is one of the world’s leading makers of the processors that power many smartphones and other mobile devices. Qualcomm also owns patents on key pieces of mobile technology that Apple and other manufacturers use in their products.

“We’ve got to wake up and realize that China, Russia and other competitors are out there constantly trying to get technology,” Portman said.

Qualcomm is fending off allegations in complaints filed by Apple and government regulators around the world that it has abused the power of its mobile patents to throttle competition and charge excessive royalties for its technology.

Goldman’s Lloyd Blankfein: ‘The odds of a bad outcome have gone up’


CNN’s Christine Romans, in an interview airing on Wednesday, asked Goldman Sachs CEO Lloyd Blankfein, “what could possibly go wrong” in this roaring economy? His answer should send shivers through the investor community:

‘I haven’t felt this good since 2006.’

For one moment, we were all Christine Romans when she replied, “yeah, that’s not what I want to hear.” Needless to say, everybody was feeling pretty good about the economy and the stock market back then, until the wheels fell off and the financial system was pushed to the brink of collapse.

This, obviously, was not lost on Blankfein, as his chuckle made clear. The truth is, the Goldman boss does have plenty of concerns, including fears that a spending spree by the Trump administration could overheat the U.S. economy.

“The odds of a bad outcome have gone up,” he said, explaining that the economy was already growing nicely before the $1.5 trillion in tax cuts, $300 billion of additional spending, and now, the proposed a $200 billion infrastructure package.

“Don’t forget, all of these deficits have to be paid for,” and all this stimulus could be “too much of a good thing,” he said.

Blankfein knows all too well what can happen under such conditions.

 “If the economy starts to overheat, and the Fed feels that it’s behind” it will need to act, Blankfein said, pointing to the period leading to the dot-com bubble.

“I remember 1994,” he said. “That’s possible, too. That would be quite jarring to the economy.” At that time, the Federal Reserve tried to keep inflation in check with a hefty does of rate hikes that took Wall Street by surprise.

Despite his concerns, Blankfein’s “base case” remains that the economy will remain on track, though he’s urging caution moving forward for retail investors.

“I’d be planning for the contingency that this turns out to be a worse time than people are thinking,” Blankfein told Romans. “With the Fed raising rates, with the withdrawal of QE, with the budget deficit widening out, I wouldn’t say this is the time I would max out on my risk.”

As of Wednesday afternoon, risk-on is back. For now. The Dow Jones Industrial was last up 171 points in another volatile session.

Jim Rogers says the next bear market will be ‘the worst in our lifetime’

We’re not there yet, but veteran investor Jim Rogers says the next bear market we see is going to be a doozy.

“When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime.”

Jim Rogers

That’s what the chairman of Rogers Holdings Inc. told Bloomberg News on Thursday.

“Debt is everywhere, and it’s much, much higher now,” he said, adding that he expects the current stock-market rout to continue, though he wouldn’t go so far as to say this was the start of a bear market, which is typically defined as a drop of 20% or more from a significant peak.

On Thursday, the S&P 500 and Dow Jones Industrial Average officially entered correction territory, down more than 10% from recent highs.

Now 75, Rogers founded the Quantum Fund in 1973 with George Soros. The hedge fund famously gained 4,200% by 1980, compared to the S&P 500’s 47% return. Rogers has seen his share of bear markets, including the crash of 1987 (a 36% decline), the bursting of the dot-com bubble of 2000-’02 (a 38% drop) and the Great Recession of 2007-’09 (a 54% fall).

Rogers said the market may sputter for the next several weeks, rallying only after the Fed raises interest rates in March, as is expected.

This isn’t the first bear-market warning from Rogers in recent months.

In November, Rogers told MarketWatch columnist Michael Brush that the U.S. was “overdue” for a bear market, and predicted market turmoil within the next two years. Rogers said at the time he was light on U.S. stocks because he thought a bubble was forming, and that Japan, China and Russia offered better investment opportunities. He also warned to stay away from bitcoin: “It looks and smells like all the bubbles I have seen throughout history.”

In September, Rogers said the next bear market will be “horrendous, the worst” in an interview with RealVision TV.

Most cryptocurrencies to hit zero – Goldman Sachs

According to Goldman Sachs Group Inc.’s global head of investment research, Steve Strongin, most digital currencies are unlikely to survive in their current form, and investors should prepare for coins to lose all their value as they’re replaced by a small set of future competitors, Bloomberg reports.

Key Quotes:

Recent price swings indicated a bubble and that the tendency for different tokens to move in lockstep wasn’t rational for a “few-winners-take-most” market.

“The high correlation between the different cryptocurrencies worries me.”

“Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.”

“Are any of today’s cryptocurrencies going to be an Amazon or a Google, or will they end up like many of the now-defunct search engines? Just because we are in a speculative bubble does not mean current prices can’t increase for a handful of survivors.,”

“At the same time, it probably does mean that most, if not all, will never see their recent peaks again.”

Draghi Says Exchange Rate Volatility Source Of Uncertainty

Concerns over exchange rate volatility and its causes dominated European Central Bank President Mario Draghi’s press conference on Thursday, where he concluded that the recent surge in euro was a source of concern and asserted that an interest rate hike was unlikely this year.

He also said that “several ECB policymakers expressed concern” over the recent statements from the US and such worries were “broader than the exchange rate, but the status of international relations right now.”

Recent comments from US Treasury Secretary Steve Mnuchin have sent the dollar to three-year lows this week. His remark at the WEF forum in Davos that a weak dollar is good for the US economy has raised eye-brows.

Referring to the latest International Monetary and Financial Committee agreement, Draghi signaled that talking up or down currencies could be in violation of the G20 agreement that countries will not indulge in currency wars.

Christine Lagarde, the IMF managing director, has called on Mnuchin to clarify his comment after the dollar plumbed new lows.

Mnuchin sought to talk down his statement on Thursday, saying it was consistent with his earlier comment that “we are not concerned where the dollar is in the short term.”

Back in Eurozone, Draghi said euro area expansion was continuing at a robust pace and has strengthened the bank’s confidence that inflation will move near to its target of about 2 percent.

However, domestic price pressures remain muted overall and have yet to show convincing signs of a sustained upward trend, he reiterated.

“Against this background, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability,” the ECB Chief said.

Draghi also said, “Based on today’s data I can see very few chances that interest rates could be raised at all this year.” Markets also expect a rate hike only in the second half of 2019.”Overall, an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium term.”

Answering reporters’ questions, Draghi said, “We don’t target exchange rates. They are important for growth and price stability.”

Quizzed on the chances of ending stimulus, Draghi said there was a need to distinguish between a sudden stop, extension of the asset purchase programme and gradual tapering.

The Governing Council has agreed to discussing these, he suggested. He also said that the bank has taken note of the market sensitivity to signals in the minutes of the previous meeting that the forward guidance language would be altered soon.

Draghi also said that policymakers did not discuss the link between inflation and stimulus.

Earlier on Thursday, the ECB left all three interest rates and assets purchases unchanged. There was also no change in the wording of the forward guidance, contrary to market expectations.