Business Maverick

Business Maverick

February 19: Five Things You Need to Know to Start Your Day

U.S. President Donald Trump speaks in the East Room of the White House during an event with U.S. mayors on January 24, 2020 in Washington, DC. (Photo by Drew Angerer/Getty Images)

President Trump rebukes hardliners attempting to stymie sales to China, Nomura's finally making money from investment banking in Asia and Hong Kong is headed for its first back-to-back recession — ever. Here are some of the things people in markets are talking about today. 

Wait A Second

In a rare public rebuke of his own administration’s hardliners on China, U.S. President Donald Trump has intervened to stop plans to block sales of GE-made jet engines to China among other proposed restrictions on American exports. His reasoning? That national security is being used too often by his own officials to limit American companies’ ability to transact with China. “We don’t want to make it impossible to do business with us,” Trump said in a tweet on Tuesday. “That will only mean that orders will go to someplace else.” While some officials have been pushing stricter rules to curtail sales of U.S. technology to Beijing — from semiconductors to jet engines — Trump’s declaration now comes as the president is touting a “phase one” deal with China, meant to spur a $200 billion Chinese buying spree of American exports including commercial jets and other manufactured products. Meanwhile, the U.S. has also designated five Chinese media companies as “foreign missions,” a decision that reflects the Trump administration’s view that the communist party of Xi Jinping is imposing increasingly draconian government-control over news services, senior State Department officials said.

Virus Toll

As the coronavirus death toll in China hits 2,000 and Russia bars Chinese citizens from entry, a top official at the World Health Organization says the country’s aggressive quarantine tactics delayed the spread of the illness from the outbreak’s centre. Officials in China’s Hubei province locked down travel to and from the province, and later sharply restricted people’s ability to leave their homes. “Those measures on movement restriction have delayed the dissemination of the outbreak by two or three days within China, and two or three weeks outside China,” said Sylvie Briand, the WHO’s director of global infectious hazard preparedness. Hubei reported 1,693 new cases and 132 new deaths on Wednesday, bringing the total number of cases to 61,682. Here’s what virus experts think is coming next for the disease. Meanwhile, it’s out of the virus ship and back into quarantine for many Diamond Princess passengers.

Markets Mixed

Stocks in Asia were primed for a mixed open on Wednesday as investors assess the coronavirus’s effect on companies’ earnings. U.S. shares earlier slipped, while Treasuries advanced with gold. A warning from Apple Inc. that spurred losses across Asia on Tuesday followed through to Europe and the U.S. Demand disruptions due to the coronavirus continue to concern investors, though signs of recent policy support in Asia have helped ease worries. The offshore yuan weakened past 7 per dollar and the euro fell after a gauge of German investor confidence plunged. Elsewhere, oil stalled after American sanctions on Russia’s largest oil producer helped erase losses driven by concerns the coronavirus will cut demand.

Grim Outlook

Hong Kong is heading for its first back-to-back annual recessions on record, as the coronavirus shutdown cripples an economy already battered by months of political unrest. Economists’ forecasts since the start of February point to a contraction of more than 1% this year, following a 1.2% decline in 2019. That would mark a bigger decline and a slower recovery from the virus than from the SARS episode of 2003, when output roared back after the all-clear was signalled. Weakened by months of anti-China protests that have kept tourists away and slashed retail receipts, Hong Kong cannot rely on trade and arrivals from the mainland to stoke an economic comeback. China, the world’s second-largest economy, is struggling to restart production after shuttering factories and businesses in an effort to stem the spread of the illness. “The likelihood of rapid recovery is very slim this time around,” said Dong Chen, senior Asia economist at Pictet Wealth Management.

Money Making

Nomura’s finally making money from investment banking in Asia. The investment banking business is set to return to profit this fiscal year after more than a decade of losses since its Lehman Brothers Holdings Inc. acquisition, according to its division chief. Cost cuts and fees from financing will drive the profit rebound in the year ending March 31, said Kenji Teshima, head of investment banking for Asia excluding Japan. Revenue is set to rise by about one third, led by private financing and dealmaking in India and Australia, he said, while warning that some transactions in China may be affected by the coronavirus outbreak. Japan’s biggest securities firm last year unveiled plans to cut $1 billion of costs at its struggling global wholesale operation, helping to revive profit that’s been under pressure from years of losses abroad.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours.

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