Good morning. David Meyer here, filling in for Alan from Cape Town.
The U.S.-China trade war truce led to the expected stock market rally yesterday, but the party may already be over. With the markets apparently less than thrilled at the continuing ambiguity surrounding the deal’s terms—President Donald Trump’s assertion about China dropping auto tariffs still hasn’t been confirmed by anyone—Japan’s Nikkei 225 index fell 2.4% today, Chinese indices went flat, Europe’s Stoxx 600 fell by 0.35%, and U.S. futures suggest a similar drop this morning.
Meanwhile, Robert Lighthizer, the U.S. Trade Representative and a hardliner on China, has been appointed to lead the U.S. team in its trade negotiations with China. Trump’s decision to go with Lighthizer points to the maintenance of a tough approach in the negotiations, which will take place over the next few months—if they fail, the trade war between the countries will be ratcheted up with more tariffs.
There’s some evidence to suggest that the tough approach is working. Today the Chinese government made an announcement that could unstick one of the stickiest elements of the dispute: the theft of Western intellectual property by Chinese companies.
According to new rules issued by Beijing, IP thieves will be subject to a range of punishments under the country’s somewhat dystopian “social credit” system, which sets limits on what people are allowed to do, based on their behavior and habits. Violators will be publicly shamed; they may find it harder to get credit; they will be banned from government procurement and the registration of companies; and they will also be cut off from foreign trade.
This is a glimmer of hope regarding what comes after the 90-day negotiation period (a timescale that, incidentally, has only been mentioned by the U.S.; not by China.) As I noted yesterday, China has consistently denied accusations of IP theft, which makes it difficult to settle U.S. concerns over the subject. The new penalties could provide a way for both sides to save face.
The question now is whether the White House will accept the gesture, or whether Lighthizer and his team will try to push harder on this issue.
More news below.
Ernst & Young CEO and global chair Mark Weinberger will step down next July. His successor will be named in January. Weinberger said the company’s 2020 financial year was the right time to leave, given that his grand strategy was entitled Vision 2020. Under his stewardship, the company has made notable strides toward greater inclusivity and diversity. Fortune
Marlboro maker Altria is in talks with Canada’s Cronos Group about an investment in the cannabis producer. There had been reports that Altria was considering buying Cronos. Cronos: “No agreement has been reached with respect to any such transaction and there can be no assurance such discussions will lead to an investment or other transaction involving the companies.” BBC
VC firm Atomico says the EU has in the last year seen twice as many IPOs for tech startups than the U.S. has, and new European listings have heavily outperformed their American counterparts. Per the report, a big factor here is the relative willingness of European exchanges to support listings by smaller companies. CNBC
If you thought you knew everything about Uber’s bad behavior, you may be wrong. Four former security employees claim the company is trying to stop them from revealing details of “potentially criminal initiatives against competitors, secret capabilities embedded in Uber’s smartphone applications, and offensive intrusions into the privacy of users.” Bloomberg
Around the Water Cooler
The U.K. can simply cancel Brexit unilaterally, without asking permission from the other EU countries. That’s the view of Advocate General Manuel Campos Sánchez-Bordona, a top advisor to the EU’s top court—the court’s advocates-general don’t get to decide cases, but their non-binding advice usually aligns with the subsequent judgement. CNN
The French government is temporarily suspending a deeply unpopular increase in fuel taxes, as a response to the unrest that has gripped the nation. The riots have been so bad that the government has considered instituting a state of emergency. The suspension of the fuel tax is the first major U-turn by Emmanuel Macron’s government. Reuters
Bitcoin’s slump continued yesterday with a fall down to $3,790 per virtual coin. That’s a 39% drop in a month. It recovered a bit after it hit that point, though, and is currently back up to $4,000 or so. Some observers reckon Bitcoin is now in a “death spiral,” though who knows, really? Fortune
Crazy Rich Asians
The film Crazy Rich Asians may have been a surprise hit in the U.S., but it hasn’t gone down so well in China, where it flopped on its opening weekend. Social media users there indicated that the Cinderella-esque plot was “bland” and reminiscent of typical Chinese TV plotlines. Some also took offense at the title. South China Morning Post