News out this morning that China’s foreign exchange reserves fell below $3 trillion for the first time in six years. Nothing magic about that number, except as a sign of another source of potential instability for the global economy. China has bled more than a trillion dollars in reserves in the last year and a half, as its investors rushed to move money offshore and its corporates repaid some of the dollar debt they had gorged on as they exploited the Federal Reserve’s zero interest-rate policy post-2008.
Rising U.S. interest rates plus threats of U.S. trade action against China mean that pressure will only increase. As a result, the Chinese government will face a tough set of choices: either allow the yuan to fall, which reduces Chinese purchasing power; impose stricter capital controls, which moves China away from financial integration with the global economy; or see its mountain of foreign currency continue to crumble.
It’s probably worth pointing out again that what’s happening in China is precisely the opposite of what President Trump accused it of repeatedly during his campaign: manipulating the yuan down to encourage exports. Let’s hope Gary Cohn has scheduled a briefing on this topic.
Meanwhile, the rollback of Dodd-Frank financial rules continues. The head of the U.S. Securities and Exchange Commission took steps Monday to delay the controversial rule that requires companies to disclose a ratio that compares a chief executive’s pay to that of the median pay of his or her workforce. Acting SEC Chairman Michael Piwowar invited companies to submit comments on “any unexpected challenges” they are facing in complying with the rule, which is scheduled to take effect later this year.
More news below.
• Chickens Come Home to Roost at Tyson
Shares in Tyson Foods, the U.S.’s biggest meat company, fell 3.5% after it said the Securities and Exchanges Commission was investigating possible collusion with rivals in fixing the price of chicken. The company is already contesting parallel civil actions brought by poultry buyers. Chicken is not so much a thorn in Tyson’s side as a bone stuck in its investors’ throat: the company’s fourth-quarter results, reported yesterday, showed margins barely half the 20% posted by pork. Despite that, the company raised its profit forecast for 2017 against a background of strong demand. WSJ, Subscription required
• Solid Super Bowl Ratings for Fox
According to market research firm Nielsen, 111.3 million people tuned in to Super Bowl LI on Sunday evening, the second straight drop in viewer numbers. But the NFL’s marketing team can relax: Fox, which broadcast it, argued that the total audience figure rose to a more respectable 113.7 million, once its online and Spanish-language channels were included. That compares to 111.9 million for last year’s Denver-Carolina showdown and is only just shy of the 114.4 million record set in 2015, when the Patriots beat the Seattle Seahawks. Shares in 21st Century Fox shares fell yesterday despite beating Wall Street’s expectations on profit in the fourth quarter. The company is spending big to get complete control of European pay-TV and Internet provider Sky. Fortune
• BP Gambles on Higher Prices
BP said it will focus on growth this year after finally putting its Deepwater Horizon liabilities “substantially behind” it. But its shares still fell in London after its fourth-quarter numbers disappointed (as with many others of its Big Oil brethren, the disappointment came from downstream operations of refining and marketing). BP has made a flurry of deals and investment decisions since November. The heavier spending that will require led it to raise its “breakeven” price to $60/barrel from $55. That’s the crude price that it needs to keep its dividend and its capital expenditure fully financed—still clearly above prevailing levels of $53 a barrel. Reuters
• Here Comes the Sun (Your Tax Refund Is in the Mail)
The number of jobs in the U.S. solar industry hit 260,000 last year, according to a new report by sector advocacy group Solar Foundation. That’s around four times as many as are now employed in the coal mining sector. Falling technology prices have helped to underpin broad-based growth (jobs increased in 44 out of 50 states), but generous tax subsidies—including a federal 30% tax credit that many fear will be cut by the new administration—still play a crucial role. Two of the states where the number of jobs fell last year were Nevada and Massachusetts, which had cut state subsidies. The industry also remains heavily concentrated in California, which is home to over one-third of all solar-related jobs. Fortune
Around the Water Cooler
• Schultz Gets a Vente To Go
Howard Schultz may be stepping down as CEO of Starbucks, but he may not be taking a pay cut to do so. A company filing says, “Mr. Schultz will continue to be compensated as an executive officer upon his transition to the role of executive chairman on April 3, 2017,” allowing him to sidestep the company’s $260,000 cap on board directors’ pay. Quite how much he’ll be paid in his new role in overseeing the development of Starbucks Reserve Roasteries isn’t clear. But incoming CEO Kevin Johnson may wish for a differential big enough to make clear who’s actually in charge come April. Fortune
• Teva CEO Steps Down
The bucking bronco that is Teva’s CEO seat claimed another victim Monday. The Israeli generic drug giant said Erez Vigodman would step down with immediate effect after only three years in the job. It didn’t give any reason for the move. Vigodman had replaced Jeremy Levin, whose short tenure ended after a bust-up with the board. Chairman Yitzhak Peterburg will step in as interim CEO while a permanent replacement is found. Teva is the world’s largest maker of generic drugs after its $40 billion acquisition of Allergan’s generics business last year. However, it’s getting a taste of its own medicine (sorry) now that a court has allowed Mylan to launch a generic version of Teva’s best-selling branded drug, Copaxone, which is used to treat multiple sclerosis. Fortune
• Zenefits Looks to the Future With Fulcher
Business software maker Zenefits tapped Jay Fulcher as its new CEO, ending a search for a leader to take it into a new era and leave the shenanigans of last year firmly behind it. Fulcher is a tech industry veteran, having led streaming company Ooyala and Agile Software, a business software company that was bought by Oracle in 2007. Zenefits had to write down the value of its stock by over half last year after allegations that CEO Parker Conrad had written programs allowing Zenefits software to bypass state insurance licensing requirements. Fortune
• Fiat Chrysler’s Diesel Woes Deepen
Fiat Chrysler got sucked further into the scandal over excess emissions from diesel engines as French authorities referred its case for possible prosecution. The company is now in trouble with U.S., German and French regulators, amid suspicions that its test results, authenticated by the Italian type approval agency, don’t match what has been discovered locally. FCA again insisted yesterday its vehicles were all legally compliant. Reuters
Summaries by Geoffrey Smith Geoffrey.firstname.lastname@example.org;