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Trade negotiators offer hope but few details
Trade talks between midlevel American and Chinese officials, extended from a planned two days to three, ended yesterday in Beijing after negotiators made progress but released few details.
What happened: According to U.S. officials, negotiators discussed intellectual property protections, so-called forced tech transfer and China’s promise to buy “substantial” amounts of American agricultural, energy and manufacturing products. China’s commerce ministry spoke of “extensive, in-depth and meticulous exchanges.” Wang Qishan, China’s vice president, said today that the two countries “must adapt to the new reality, keep looking for and expanding our common interests, deepening and promoting practical cooperation.”
What’s next: No date or location is set for the next round of talks. Higher-level discussions could occur in Davos, Switzerland, if President Trump attends the World Economic Forum meeting there, starting Jan. 22. But he may cancel if the partial government shutdown is not resolved by then. China’s economic czar is expected to visit Washington sometime after that. The Trump administration has set a March 2 deadline to wrap up negotiations, after which it says it could raise tariffs.
What’s at stake: If China and the U.S. let tensions escalate and investors pull back, “you’re looking at enough of a tightening in financial conditions to say that a global recession is a real risk,” Peter Hooper, a former Federal Reserve official and Deutsche Bank’s chief economist, told Bloomberg.
President Trump wants to calm volatile financial markets. And China’s leader, Xi Jinping, needs to perk up a slowing economy. A measure of factory prices in China last month showed the slowest increase since late 2016. Former Treasury Secretary Lawrence Summers told Bloomberg Television yesterday that there is “pretty clear evidence that things have slowed down a fair amount in China.”
“There are a lot of grounds for concern,” he added.
• Auto importers in the Chinese port city of Tianjin are rushing to get American-made cars through customs, taking advantage of a temporary cut in the 40 percent tariff that Beijing imposed on them last July.
• Amid suspicion from the F.B.I. and American universities, China is going quiet about its “Thousand Talents Program,” which has attracted thousands of scientists and experts to the country since 2008.
• The Hang Seng stock index in Hong Kong recorded its best day in more than a month yesterday and closed on its fifth straight rally today. U.S. equities also rose, though not as much as in recent days.
Today’s DealBook Briefing was written by Andrew Ross Sorkin and Stephen Grocer in New York, and Tiffany Hsu and Gregory Schmidt in Paris.
A presidential ‘tantrum’ over the border wall
Welcome to Day 20 of the shutdown, which could become the longest in history on Saturday. Yesterday, President Trump stormed out of a meeting with congressional leaders, throwing what Democrats described as a “temper tantrum” over his demand to fund a border wall, a key sticking point in talks to reopen the government. On Twitter, he called the session “a total waste of time.” The NYT writes:
The contentious, brief and futile session underscored an impasse that is looking each day like an insurmountable gulf between the two sides.
Today, President Trump will visit the border in McAllen, Tex. Yesterday, he reiterated a threat to invoke emergency powers to fund his wall without congressional approval. That, writes Charlie Savage in the NYT, “would be an extraordinary violation of constitutional norms — and establish a precedent for presidents who fail to win approval for funding a policy goal.”
Some consequences of the stalemate:
• In Washington, one of the richest areas in the country, it’s affecting retailers, tourist centers, salons, garbage bins and more.
• Coast Guard employees received a five-page tip sheet suggesting that they could stay afloat without their paychecks through garage sales, babysitting, dog-walking, serving as “mystery shoppers” or, as a last resort, declaring bankruptcy.
• This was expected to be a banner year for I.P.O.s. But with work halted at regulators, it could be only the fourth year since 1995 when no major company goes public in January. Other deals, including CVS’s purchase of Aetna, could also be delayed.
The Fed is ready to pause
Two Federal Reserve officials said yesterday that the central bank should assess economic conditions before it considers raising rates again. And they did so as the Fed released the minutes of its December meeting, showing that it reached the same conclusion.
The takeaway: Central bank officials are now not likely to raise the benchmark interest rate at their January meeting nor at one in mid-March, writes the NYT’s Binyamin Appelbaum. But they still expect strong enough economic growth to justify increases this year.
The reaction: Jerome Powell, the Fed chairman, was criticized for not saying more to soothe investors in December. “He could have handled that differently, and better,” one economist said. The dollar fell to a three-month low against the euro after the meeting minutes were released.
The next step: The Fed is considering options to keep interest rates in its target range. One approach would be to slow the decline of bank reserves in the system.
Brexit is becoming a divorce by committee
Theresa May, Britain’s prime minister, is getting backed into a corner over Brexit — and she knows it.
Her plans for how Britain’s departure from the European Union will play out are strongly expected to be rejected by Parliament in a vote next week — two and a half years after Britons voted to leave the bloc in a referendum, and a month after this vote was first scheduled.
Yesterday, lawmakers moved to block Mrs. May from stalling further. They have also passed a measure aimed at making it harder for the government to exit the E.U. without a deal.
The withdrawal is scheduled for March 29. Many are concerned that, without an agreement with Brussels in place, economic chaos could ensue. Japan’s prime minister, Shinzo Abe, meets with Mrs. May today, and automakers such as Honda, Nissan and Toyota, which manufacture in Britain for export into continental Europe, are pushing him to press the case against a no-deal Brexit.
South Korea’s bid for growth stumbles
President Moon Jae-in of South Korea has embraced a pro-labor program of higher wages and taxes, but the early results have been discouraging, writes the NYT’s Michael Schuman.
Growth has slowed, unemployment has risen and small-business owners are complaining. The troubles suggest South Korea’s limits in solving economic problems, especially without addressing underlying structural issues. Rapid changes like Mr. Moon’s can also have unintended consequences. The biggest is the strain on small businesses, which are often unable to pass on higher costs to their customers.
U.S.-North Korea talks: A second summit meeting between the North Korean leader, Kim Jong-un, and President Trump to negotiate the terms of denuclearizing the North is “close,” Mr. Moon said today after Mr. Kim’s visit to China this week. He added that North Korea should take more concrete steps to secure U.S. concessions.
Fiat’s $650 million emissions settlement
Fiat Chrysler Automobiles will pay nearly $650 million to settle lawsuits over illegal software that allowed diesel vehicles to thwart emissions tests and release higher levels of pollutants, according to the NYT.
The settlement, which is expected to be announced today, does not include an admission of guilt by the company or a declaration of wrongdoing by the Environmental Protection Agency. Earlier, the agency found that Fiat used technology that could turn off pollution controls under certain driving conditions.
The Justice Department sued Fiat over the issue in 2017. The company will recall 104,000 diesel-powered Ram 1500 trucks and Jeep Grand Cherokee sport utility vehicles to install new software.
Other auto news:
• Tesla’s chief, Elon Musk, wrote on Twitter yesterday that it will stop selling the cheapest versions of its Model S sedan and Model X sport utility vehicle from Monday, and suggested that the upcoming Roadster sports car might be able to levitate.
• Rolls-Royce had record sales last year, as wealthy buyers spent some of their gains from the Trump administration’s tax cuts.
• Toyota is recalling 1.7 million vehicles in North America, 1.3 million in the U.S., to replace potentially lethal Takata front passenger airbag inflaters.
• The Pixar co-founder John Lasseter, who resigned from Disney in June after complaints about unwanted touching, will build an animation production company affiliated with Paramount. (NYT)
• Larry Fink, chief executive of the asset manager BlackRock, promoted Mark Wiedman to a new international role that positions him as a likely heir. (FT)
• Greg Palm is retiring as Goldman Sachs’s co-general counsel after more than 20 years there. (Bloomberg)
• Michael Bright, a top official at the government-owned mortgage guarantor Ginnie Mae, is said to be stepping down to join a trade group. (Bloomberg)
• Gordon Brown, the former British prime minister, will advise the Partners Group, a private equity firm in Switzerland, on so-called impact investments. (WSJ)
The speed read
• Edward Lampert, the hedge fund founder and chairman of Sears, has submitted a revised bid of roughly $5 billion in an effort to save the retailer from liquidation. (CNBC)
• Check out A.I. assistants, 5G wireless and other trends in a visual tour of the CES electronics trade show. (NYT)
• Also at CES, a battle between two vegan burger start-ups. (FT)
• Liverpool John Lennon Airport is testing anti-drone equipment after shutdowns at Heathrow and Gatwick. (FT)
• Oracle has paid more than $200 million for naming rights to the San Francisco Giants’ stadium. (Bloomberg)
• China’s top media regulator omitted Tencent from its list of approved video game titles. (FT)
Politics and policy
• Rod Rosenstein, the deputy attorney general, is expected to leave the Justice Department once an attorney general is confirmed. (NYT)
• House Democrats have summoned Treasury Secretary Steven Mnuchin to explain his plan to end sanctions on companies controlled by Oleg Deripaska, a Kremlin ally. (NYT)
• Prime Minister Edouard Philippe of France promised to forge ahead with an economic overhaul, despite “yellow jackets” protests. (FT)
• The billionaire environmentalist Tom Steyer said he would not run for president in 2020, but would spend at least $40 million this year to promote impeaching President Trump. (WSJ)
Best of the rest
• Ford said today that it would cut thousands of jobs, exit unprofitable markets and discontinue loss-making vehicle lines as part of a turnaround effort in Europe. (Reuters)
• The U.S. food company Mondelez sued its insurance company for refusing to pay a $100 million claim for damage caused by a cyber attack, the first legal dispute of this kind on that scale. (FT)
• The Chrysler Building in New York is for sale. The current owners are an Abu Dhabi government fund and Tishman Speyer, a local developer. (WSJ)
• Trend-following algorithms, an increasingly important market force, have turned bearish. (WSJ)
• MacKenzie Bezos and the Amazon founder Jeff Bezos are divorcing. The split could make her the richest woman in the world, surpassing Francoise Bettencourt Meyers, from the family that founded L’Oreal cosmetics. (Bloomberg)
• Ice Cube, the rapper, actor and entrepreneur, wants Viacom’s backing to bid for Fox’s 22 regional sports networks. (Fox)
• Why do so many of Eastern Europe’s central bankers face criminal investigations? (Bloomberg)
• Avocado demand and prices appear to be in retreat. (WSJ)
• Saudi Aramco, the world’s largest oil producer, is likely to issue its first international bond to help finance its potentially $70 billion purchase of the petrochemical giant Sabic. That means disclosing accounts and operational details. (Bloomberg)
• An Australian government review recommended closing underperforming funds in the country’s $2 trillion pension system, and letting new employees choose among top performers. (Bloomberg)
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