Good morning. David Meyer here, filling in for Alan from Berlin.
Yesterday’s selloff in the U.S., which saw the Dow tumble by 600 points, continued in Asia today. The original spark for the rout was Apple, which fell 5% after a key supplier of its facial recognition technology cut its outlook, pointing to weaker-than-expected iPhone demand.
So it was not very surprising to see other Apple suppliers take a hit. Japanese parts manufacturers TDK and Taiyo Yuden fell by around 6% and 7% respectively. Hon Hai Precision, better known as Foxconn, was down 2.3%. As noted by Bloomberg, Apple can make up for volume drops by raising prices, but its suppliers live on volume.
Looking at the indices, the Nikkei 225 was down by more than 2%, the Shanghai Composite by 1.2%, and the Hang Seng by 2.1%.
However, the Chinese markets rose again in the afternoon on the news that the U.S. and China have resumed trade talks. Europe’s Stoxx 600 began the day with a skip in its step, up 0.3% at the time of writing, and U.S. futures indicated a similarly bright start to Tuesday there.
The wobble serves as a reminder of how influential the tech giants—Apple in particular—are to wider sentiment, but also of how much is riding on those China talks.
The Japanese markets’ bad day wasn’t just due to Apple suppliers catching a cold, but also the fact that the country’s machine tool suppliers saw declining orders last month for the first time in two years. That reflects a Chinese slowdown that’s largely attributable to the trade war. And don’t forget how badly an escalation in the argument could hurt the tech sector, if it starts to more seriously threaten supply chains and manufacturing deals.
Consider this latest stumble a taste of what is to come if Washington and Beijing can’t find a solution to their spat. More news below.
Amazon is expected to announce today that the winners of its HQ2 hunt are—as previously reported—New York City and Crystal City in Northern Virginia. The latter gives it a base close to Washington, D.C., where CEO Jeff Bezos owns a certain newspaper. Apparently, the decision to split HQ2 removes the possibility of either city claiming to be Amazon’s co-headquarters with Seattle. Wall Street Journal
Goldman Sachs shares fell 7.5% yesterday—the bank’s worst day in years. The cause was the constant dripfeed of news coming out of the investigation into the Malaysian 1MDB scandal, related to the state investment company of that name. Goldman’s former Southeast Asia chair, Tim Leissner, admitted to bribing officials to get the privilege of handling $6.5 billion in fundraising deals, and Malaysia wants a refund for the $600 million in fees that Goldman took. Bloomberg
U.S. National Security Advisor John Bolton said the tape of the killing of Saudi journalist Jamal Khashoggi does not implicate the Saudi crown prince and de-facto ruler, Mohammed bin Salman. However, the New York Times reported that, on the tape, a member of the kill team was heard saying to a superior to “tell your boss” that the mission had been accomplished, and that U.S. intelligence officials believe the “boss” is MBS. New York Times
A Brexit deal may emerge in the next day or two—or it may not. That’s the heartening or disheartening news from Theresa May deputy David Lidington, following late-night talks between the two sides. The prime minister will discuss the Brexit “endgame” with her cabinet today. Of course, there won’t be any deal without resolution of the seemingly intractable Northern Ireland border issue. Financial Times
Around the Water Cooler
GE and its investment bankers are reportedly running through various scenarios for a restructuring, in order to stop being slapped around by Wall Street. Fox Business reports that one scenario involves “possible spin-offs of all or part of its various units, such as its power, health care and aviation units into separate publicly traded companies.” Fox Business
Google’s users in the U.S. suddenly found their connections to the tech giant being rerouted through Russia and China yesterday. This was apparently a textbook example of what is known as a Border Gateway Protocol hijacking attack, where the links between the systems that make up the Internet are corrupted. It looks like the hijacking was intentional—the motive, though, remains unclear. The Register
Stan Lee, the man behind superheroes such as Spiderman, Iron Man and all the other characters you see on-screen pretty much every year now, has passed away at the age of 95. Marvel Studios president Kevin Feige: “Stan leaves an extraordinary legacy that will outlive us all. Our thoughts are with his daughter, his family and the millions of fans who have been forever touched by Stan’s genius, charisma and heart.” Hollywood Reporter
The EU’s top court has ruled that no, you can’t copyright the taste of a food. The case involved two Dutch manufacturers of spreadable cheese, one of which made the copyright claim against the other based on an earlier ruling about copyrighting the smell of perfume. But the Court of Justice of the European Union said this morning that everyone tastes things differently, so defining the “work” under copyright law isn’t possible. Fortune