Good morning. David Meyer here, filling in for Alan from Berlin.
It’s crunch time for President Trump’s deal-making skills.
Having been much criticized in the past for touting unclear wins as major victories—in particular last year’s detail-light initial agreement with Kim Jong Un—Trump has now walked away from his summit with the North Korean dictator, after Kim pushed for the wholesale lifting of U.S. sanctions on North Korea. “Sometimes you have to walk and this was just one of those times,” said Trump.
True enough, though there are multiple ways in which to interpret this latest development. Perhaps the president has taken that previous criticism on board. Maybe he was just stung by Pyongyang’s continuation of its nuclear program after last year’s vague promises. Or Trump may have just taken heed of what his advisors have been telling him: that abandoning sanctions would be a bridge too far at this stage of the negotiations, even if it meant Kim’s regime agreeing to take significant steps towards denuclearization.
Either way, the abandonment of the summit points to a change in tack that leaves Trump’s negotiating style less easy to pigeonhole than it previously was. The question now is whether Trump’s style in relation to the Chinese trade negotiations—also fairly conciliatory, judging by the last meeting between Trump and Xi—will also change.
Last week provided a near-satirical episode in which, in front of the media, chief negotiator Robert Lighthizer directly contradicted the president over the meaning of memorandums of understanding—a standard device that would have formed the basis of any new deal, but a term that Trump clearly doesn’t like, believing incorrectly that MOUs cannot be binding. After Lighthizer explained that MOU was a contract of sorts, Trump said “I disagree,” prompting the top Chinese negotiator to laugh out loud, and browbeating Lighthizer into agreeing that any deal must be referred to as a “trade agreement.”
Will Trump listen to his experienced, expert U.S. trade representative as the China talks enter what may be their final stages? Or will he settle for a weak deal in order to achieve a conclusion, as the Hoover Institution’s Niall Ferguson has warned might happen?
There are many variables in play right now, especially considering China’s role in the North Korea talks, but as these sagas develop we should get to see how good a dealmaker Trump really is.
More news below.
Factory activity in China has been plummeting thanks to falling export orders. The latest PMI figures suggest activity has now contracted for three straight quarters, and is now at a three-year low. ING economist Iris Pang: “Unless the trade war truly turns into an extended truce, the weakening trend may not end quickly.” Reuters
A bunch of tech stocks fell yesterday after earnings reports, including Box—which lost a quarter of its value—as well as Booking Holdings, Fitbit, HP and Square. Nonetheless, Bloomberg reports that 84% of S&P 500 tech stocks beat earnings estimates in Q4. Bloomberg
A $1.4 billion Bank of America loan reportedly funded the majority of Edward Bramson’s stake in Barclays. The activist investor wants to get onto Barclays’ board of directors so he can force the divestment of parts of Barclays’ investment operations. It is generally frowned upon for a bank to fund an activist attack on a rival. Financial Times
Deutsche Bank and Commerzbank
The mooted merger between Germany’s biggest banks does not currently make economic sense, according to a key advisor to the German government, which has been quite keen on the deal due to Deutsche Bank’s underperformance. “Deutsche Bank has just made its first profit in several years and even exceeded its cost targets,” Jörg Rocholl told Reuters. “One should give the bank and its management time to continue along this path.” Reuters
Around the Water Cooler
Rolls-Royce recorded a whopping $3.86 billion loss for last year, largely thanks to the cost of fixing problems with its Trent 1000 engines, as used in Boeing’s 787 Dreamliner. The aerospace firm also took a $247 million charge for Airbus’s discontinuation of the A380 superjumbo, for which Rolls-Royce supplies Trent 900 engines. BBC
The video app TikTok has agreed to pay the FTC a record $5.7 million fine for collecting children’s personal information without parental consent. FTC Chair Joe Simons, who is angling for his agency to enforce new federal privacy legislation if it appears: “The operators of Musical.ly—now known as TikTok—knew many children were using the app, but they still failed to seek parental consent before collecting names, email addresses, and other personal information from users under the age of 13.” Fortune
The Californian power utility reportedly postponed its replacement of ageing infrastructure on the Caribou-Palermo line several times, after first proposing it in 2013. The century-old line, which never saw those upgrades, is suspected to have caused California’s deadliest-ever wildfire. PG&E’s shares fell almost 4% on the revelation. Wall Street Journal
In a viral video that obviously refers to a totally normal technology firm without excessive ties to the state, Chinese children are seen singing “Huawei is beautiful,” “What is the best phone in the world? Everyone says it’s Huawei,” and “Huawei is earning reputation and honor for China.” The video’s virality was reported by the state-run Global Times, and Huawei claims to have nothing to do with it. CNBC