Growth of the world economy is expected to slow as the US-China trade conflict takes its toll and undermines confidence, the World Bank said Tuesday in its semi-annual forecast.
The World Bank cut the global GDP forecast to 2.9 per cent this year and 2.8 per cent in 2020, slightly below the previous forecast, but warned that risks were rising and urging policymakers to prepare for a storm.
US economic growth is expected to slow this year by four-tenths of a point, falling to 2.5 per cent down from 2.9 per cent in 2018, and to slow even further next year to 1.7 per cent, according to the Global Economic Prospects report.
In a move that signals an increasingly aggressive stance by the US against Huawei, federal authorities in Seattle are investigating the Chinese technology giant for allegedly stealing trade secrets from US partner companies like T-Mobile US, according to people familiar with the matter.
The probe is tied to civil suits filed against Huawei, the second largest maker of smartphones worldwide, including a case in which a federal jury in Seattle in 2017 found Huawei liable for the theft of T-Mobile’s robotic technology, said the people, who asked not to be named because the information isn’t public.
The investigation is at an advanced stage and an indictment could come soon, one of the people said. It was reported earlier on Wednesday by The Wall Street Journal.
The US investigation includes allegations that Huawei stole information from T-Mobile, a US partner
Emily Langlie, a spokeswoman for the US Attorney’s office in Seattle, declined to comment, as did a spokeswoman for T-Mobile and a spokesman for Huawei.
Huawei has been under increasing pressure in the US, Europe and elsewhere amid growing concerns that Beijing could use the company’s equipment for spying, something Huawei executives have denied. US President Donald Trump’s administration has been pushing European allies to block Huawei from telecoms networks amid a wider dispute over trade with China. Last week, a company employee was arrested in Poland.
The company is also mired in a US criminal case alleging that its chief financial officer, Meng Wanzhou, conspired to defraud banks into unwittingly clearing transactions linked to Iran in violation of US sanctions.
Meng, the daughter of the company’s founder, was arrested in Canada on 1 December and released on bail four weeks ago. She is awaiting extradition hearings to the US while living under restrictions in her million-dollar Vancouver home.
The US investigation includes allegations that Huawei stole information from T-Mobile, a US partner, when one of its engineers visited its Bellevue, Washington, lab to see a diagnostic robot called “Tappy”, which simulated a phone user’s use, according to one person familiar with the matter.
In its 2014 suit, T-Mobile alleged a Huawei engineer slipped one of the robots into his laptop bag during the visit and left with it.
The jury sided with T-Mobile in 2017, saying the theft resulted in Huawei making “hundreds of millions of dollars” from T-Mobile’s technology. It found that Huawei misappropriated T-Mobile’s trade secrets and breached a supply contract between the two companies, saying T-Mobile should get $4.8-million in damages.
T-Mobile also claimed it wasn’t Huawei’s first victim, alleging that the Chinese technology giant also stole source code and other trade secrets from other companies.
In 2012, congressional committees and other US government entities criticised Huawei’s “pattern of disregard for the intellectual property rights of other entities and companies in the US”.
One of the rare market bright spots last year, the U.S. healthcare sector remains a Wall Street darling despite a slow start to 2019.
As 2019 begins, healthcare .SPXHC is the most favored of the 11 main S&P 500 sectors, according to a Reuters review of ratings from 13 large Wall Street research firms, which recommend how to weigh those groups in investment portfolios.
Healthcare shares overall rose 4.7 percent last year, one of only two S&P 500 sectors, along with utilities, to post positive returns in 2018 as the benchmark index fell 6.2 percent.
Proponents cite the healthcare sector’s reasonable valuations, strong balance sheets and dividend payments among many companies, as well as the group’s upbeat outlook for earnings, which are less susceptible to economic cycles than other businesses.
If economic growth is slowing, some investors are wary of being too invested in cyclical sectors that thrive during an upswing, but do not want to be too defensive either.
“We are trying to find things that skirt both of those two categorizations, and healthcare is a really nice diversified earnings stream,” said Noah Weisberger, managing director for U.S. portfolio strategy at Bernstein.
Such diversity stems from the variety of companies comprising the sector: manufacturers of prescription medicines, makers of medical devices, such as heart valves and knee replacements, health insurers, hospitals and providers of tools for scientific research.
From a stock perspective, that means the sector includes potential fast-growing stocks, such as biotechs that can carry more risk and more reward, or large pharmaceutical companies and others that offer steadier, slower growth.
Investment advisory firm Alan B. Lancz & Associates sold some pharmaceutical holdings late last year that had posted big gains, such as Merck & Co (MRK.N), to move into biotech stocks it believed were undervalued, said Alan Lancz, the firm’s president.
“We have maintained our overweighting, which is unusual for us with a sector that has outperformed so dramatically,” Lancz said. “But mainly there are segments within the sector that still offer opportunity.”
For 2019, healthcare companies in the S&P 500 are expected to increase earnings by 7.5 percent, ahead of the 6.3 percent growth estimated for S&P 500 companies overall, according to IBES data from Refinitiv.
Health insurer UnitedHealth Group Inc (UNH.N), the sector’s third-largest company by market value, kicks off fourth-quarter earnings season for healthcare on Tuesday.
“Healthcare is one of the few sectors with high quality, above-market growth and it’s relatively immune to the array of macro headwinds that we see out there,” said Martin Jarzebowski, sector head of healthcare for Federated Investors.
Healthcare shares could also benefit from anticipation of increased dealmaking activity after two large acquisitions of biotechs were already announced this year.
Despite healthcare’s outperformance last year, the sector is trading at the same valuation as the S&P 500 – 14.5 times earnings estimates for the next 12 months – whereas healthcare on average has held a premium over the market for the past 20 years, according to Refinitiv data.
The sector also is valued at a discount, by such price-to-earnings measures, to defensive sectors, including consumer staples .SPLRCS, which trades at 16.6 times forward earnings, and utilities .SPLRCU, which trades at 15.8 times.
According to the Reuters review of sector weightings, healthcare is followed by financials .SPSY, then technology .SPLRCT. Real estate .SPLRCR ranks as the most negatively rated group.
The healthcare sector has lagged in the early days of 2019, rising less than 1 percent against a 3 percent rise for the S&P 500.
Some investors doubt healthcare will maintain its outperformance. JP Morgan strategists downgraded the sector to “underweight” last month, pointing in part to political rhetoric possibly turning “more negative on healthcare leading up to the 2020 presidential elections.”
The healthcare sector struggled ahead of the 2016 election, with the high U.S. cost of prescription medicines a prominent issue during the presidential campaign. With renewed scrutiny on drug pricing, such concerns linger.
The sector could suffer if investors become more optimistic about economic growth and flee defensive stocks, while the popularity of healthcare as an investment could work against it if the trade becomes overly crowded.
“There is risk there,” said Walter Todd, chief investment officer at Greenwood Capital in South Carolina. But given issues affecting other sectors, he said, “when you look around the market…you arrive by default at healthcare, and so I think that’s why a lot of people are interested in the sector.”
US President Donald Trump is televised discussing the southern border wall as traders work on the floor at closing bell of the Dow Industrial Average at the New York Stock Exchange on January 10, 2019 in New York.
Wall Street stocks declined in early trading on Friday following tepid US inflation data, while General Motors surged on a strong profit forecast.
About 10 minutes into trading, the Dow Jones Industrial Average stood at 23,875.88, down 0.5 percent.
The broad-based S&P 500 and tech-rich Nasdaq Composite Index also shed 0.5 percent, with the former at 2,583.66 and the latter at 6,951.19.
The Consumer Price Index, which tracks costs for household goods and services, fell by 0.1 percent last month from November, the first decline since March, as falling fuel prices masked steady gains in food and shelter costs.
The new figures confirm the view of Federal Reserve bankers that they can hold off on raising interest rates again any time soon in the absence of inflation pressure.
US stocks have risen the last five sessions on dovish reassurances from Fed officials and hopes over US-China trade talks will yield a deal. Still, some analysts say stocks could be primed to retreat after the strong run due to technical factors.
Among individual companies, General Motors surged 7.0 percent after forecasting better-than-expected profits for 2018 and 2019 following job cuts announced in December.
Oil has rallied in the new year, with a nine-day run of gains for WTI, its best run since 2010.
Brent crude is also rallying, if those contracts close up today - a 10th consecutive session - it would be the futures' best streak for 30 years.
Traders have been buoyed by positive sentiment out of US-China trade war talks and efforts by Saudi Arabia and OPEC and others to stabilise markets, after plunging last month.
"The market [is] returning to some sort of order, having previously been out of whack," said Stephen Innes, head of trading for Asia Pacific at futures brokerage Oanda.
Brent crude is up 0.6% by mid-morning on Friday.
The wobbles in stock markets have been grabbing all the attention lately, but meanwhile, oil is enjoying a stunning rally into the new year.
Oil traders are factoring in an improvement in US-China trade relations and continued efforts by OPEC and others to stabilise the market after a brutal end to last year.
Brent crude futures are now trading up for their 10th consecutive day, which would mark its best performance since the introduction of futures contracts in June 1988. This week's performance has seen Brent rise 8.4%, its best weekly gains for over two years as improved sentiment boosts the commodity's performance.
Fore WTI, the US benchmark, oil has risen 24% since hitting a low on Christmas eve.
"The macro drivers of prices has been the more dovish Federal Reserve and better news coming out of the US-China trade dispute," Stephen Innes, head of trading for Asia Pacific at futures brokerage Oanda, sadi in an interview. "The market is reading between the lines that any deal would boost China's economy and really improve demand."
US trade representatives were in China for talks earlier this week, which raised hopes of a trade deal that would have a positive impact on oil prices.
Similarly, last December's "OPEC+" summit in Vienna brought a round of supply cuts to the oil market, which are now finally being priced in amid a greater risk-on atmosphere. Despite that prices are still around 30% lower than their October highs.
Saudi Arabia's energy minister, Khalid Al-Falih, said that pledged reductions of 1.2 million barrels a day are "more than sufficient to balance the market." Data out of Saudi Arabia supports the proposed axe in supply and demonstrated a cut in exports to the US with inventory figures also broadly positive.
Investor sentiment has also been boosted by comments from the Federal Reserve. Fed Chairman Jerome Powell and Richard Clarida have said that the central bank will be cautious about pushing ahead with future rate hikes after raising interest rates four times last year.
Brent crude is trading up 0.6% by midmorning on Friday while WTI is up 0.9%.
The United States of America has warned that widespread vote-buying could mar the general elections.
The US Deputy Ambassador Jonathan Cohen, who spoke on Thursday during a United Nations Security Council meeting on West Africa, urged politicians, civil society groups and community leaders to ensure that the election was free and fair.
Cohen said, “The United States sees a risk that widespread vote-buying could challenge the integrity of the election process.
“We are concerned about reports of intimidation and partisanship by security forces, heightened insecurity and inability of internally displaced persons or persons with disabilities to vote.”
Chambas said “tensions are high” in Nigeria ahead of the vote, but that prospects for peaceful elections had brightened with the signing of an accord last month in which parties pledged to support calm and order.
According to the time table released by the Independent National Electoral Commission, the presidential and parliamentary elections will hold on February 16, while the gubernatorial and state assembly elections will hold on March 2.
President Muhammadu Buhari, who in 2015 became the first opposition candidate to defeat a sitting president in Nigeria, is hoping to secure a second four-year term in the elections as he faces a former vice president, Atiku Abubakar.
In all, 71 candidates are vying for the presidency.
Recalled that the Chairman of the Independent National Electoral commission, Mahmood Yakubu, said a number of measures had been taken to combat vote-buying, which had been widespread in recent gubernatorial elections.
In the Ekiti governorship election last year, both the ruling and opposition parties were accused of offering voters cash for their voter cards.
During the primaries to pick presidential contenders, some candidates, including Abubakar, were accused of offering financial inducements to delegates for their support.
American Breweries can't get labels approved for new beers.
The US federal agency in charge of approving the labels has been closed as a result of the government shutdown in that country.
"We release new beers every other week," said Laura Dierks, CEO and founder of Interboro. "Right now, we're looking at not being to sell beer in February because of this."
Delays could persist even when the government resumes normal functioning. "It's almost certain there will be a backlog when the shutdown ends," said Bart Watson, chief economist for the Brewers' Association, a trade group representing breweries.
The American government shutdown is threatening to halt new beer releases from breweries across the US.
The Alcohol and Tobacco Tax and Trade Bureau approves labels and, in some cases, recipes for new concoctions of beer, wine, and spirits. The federal agency has been closed as a result of the shutdown, triggered by US President Donald Trump's insistence that US legislators approve funding for a border fence he promised Mexico would pay for.
Brooklyn, New York-based Interboro Spirits and Ales is already feeling the impact of the agency's closure.
"We release new beers every other week," said Laura Dierks, CEO and founder of Interboro. "Right now, we're looking at not being to sell certain beer in February because of this."
Dierks can continue selling new beers within New York state, but in order to sell across state lines, she needs federal approval.
"We're dependent on that revenue," she said.
The shutdown is also delaying the permitting process for breweries that have applied to open new locations.
Even if the shutdown ends soon, delays could persist for weeks.
"It's almost certain there will be a backlog when the shutdown ends," said Bart Watson, chief economist for the Brewers' Association, a trade group representing breweries.
Breweries can continue submitting their requests for approval on new labels, recipes, and locations during the shutdown. But none of them will be processed until the shutdown ends.
Oil prices rose by around 1 per cent on Wednesday, extending gains from the previous session on hopes that Washington and Beijing may soon resolve trade disputes that have cast a dark shadow over the global economy.
U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were at $50.42 per barrel at 0752 GMT, up 64 cents, or 1.3 per cent, from their last settlement.
That marked the first time this year that WTI has topped $50 a barrel.
International Brent crude futures LCOc1 were up 69 cents, or 1.2 per cent, at $59.41 per barrel.
Both crude price benchmarks had already gained more than 2 per cent in the previous session.
“Crude continues to extend gains as early reports from Beijing, regarding trade negotiations, are fuelling optimism around successful trade talks between the U.S. and China,’’ said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
“After a dreadful December for risk markets, crude oil continues to catch a positive vibe,’’ Innes said.
The oil price jumps were in line with Asian stock markets, which climbed to 3-1/2 week highs on Wednesday.
Trade talks in Beijing between the world’s two biggest economies entered the third day on Wednesday, amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased U.S. access to China’s markets.
State newspaper China Daily said on Wednesday that Beijing is keen to put an end to its trade dispute with the United States, but that it will not make any “unreasonable concessions” and that any agreement must involve compromise on both sides.
If no deal is reached by March 2, Trump has said he will proceed with raising tariffs to 25 per cent from 10 per cent on $200 billion worth of Chinese imports at a time when China’s economy is slowing significantly.
Citing the trade tensions, the World Bank expects global economic growth to slow to 2.9 per cent in 2019 from three per cent in 2018.
“At the beginning of 2018 the global economy was firing on all cylinders, but it lost speed during the year and the ride could get even bumpier in the year ahead,’’ World Bank Chief Executive Officer, Kristalina Georgieva, said in a semi-annual report released late on Tuesday.
More fundamentally, however, oil prices have been receiving support from supply cuts started at the end of 2018 by a group of producers around the Organisation of the Petroleum Exporting Countries (OPEC) as well as a non-OPEC member, Russia.
The OPEC-led cuts are aimed at reining in an emerging supply overhang, in part because U.S. crude oil output (C-OUT-T-EIA) surged by around two million barrels per day (bpd) in 2018, to a record 11.7 million bpd.
Official U.S. fuel storage data from the Energy Information Administration (EIA) is due at 1800 GMT on Wednesday.
A Chinese defense industrial giant recently showed off a Chinese version of the US military's GBU-43/B Massive Ordnance Air Blast (MOAB), which is more commonly called the "Mother of All Bombs."
The unnamed weapon developed by China North Industries Group Corporation Limited is said to be China's largest non-nuclear weapon.
Much smaller and lighter than the US MOAB, which is delivered by C-130 Hercules transport aircraft, China's weapon is dropped by the H-6K bombers.
China's got a new bomb, and it's a really big one.
A major Chinese defense industry corporation has, according to Chinese media, developed a deadly new weapon for China's bombers.
Referred to it as the "Chinese version of the 'Mother of All Bombs,'" this massive aerial bomb is reportedly China's largest non-nuclear bomb, the Global Times explained Thursday, citing a report from the state-run Xinhua News Agency.
People's Liberation Army Air Force's bomber H-6K is on display on the opening day of the Airshow China 2018 on November 6, 2018 in Zhuhai, Guangdong Province of China.
The weapon, said to weigh several tons, was developed by China North Industries Group Corporation Limited. A recent promotional video showed the weapon in action. The video, which was apparently released at the end of December, marked the first public display of this particular weapon.
Carried by the Chinese Xi'an H-6K bombers, which is a version of the older Soviet Tupolev Tu-16 bombers, the weapon almost completely fills the bomb bay, which would make it roughly five to six meters in length.
Chinese military analysts and observers argue that China's large bomb could eliminate fortified targets, clear out landing areas, and terrify enemy combatants.
Indeed, massive airdropped bombs with tremendous destructive power play an undeniable role in psychological warfare, and not just through seismic shock. During the Gulf War, two US MC-130E Combat Talons dropped a pair of BLU-82 Daisy Cutters, the largest conventional bombs in the US arsenal at that time. A British SAS commando about 160km away reportedly radioed to headquarters, "Sir! The blokes have just nuked Kuwait!"
The next day, a US aircraft dropped leaflets that read: "You have just experienced the most powerful conventional bomb dropped in the war ... You will be bombed again soon ... You cannot hide. Flee and live, or stay and die."
The GBU-43/B Massive Ordnance Air Blast bomb is pictured in this undated handout photo
Last year, while waging war against militants in Afghanistan, the US military dropped a GBU-43/B Massive Ordnance Air Blast (MOAB) weapon, more commonly known as the "Mother of All Bombs," on the Islamic State.Although China is using the same nickname for its bomb, the Chinese weapon is smaller and lighter than its American counterpart. Chinese media speculated that the size restrictions may have been intentional, ensuring the weapon could be dropped from a bomber.
The 11-ton US bomb is delivered by a C-130 Hercules transport aircraft.
The US state department has urged Americans to “exercise increased caution” when travelling to China after a spate of high-profile detentions.
Its updated advice warns that US citizens have been arbitrarily prevented from leaving the country.
The warning comes as two Canadian citizens remain in detention in China.
Former diplomat Michael Kovrig and businessman Michael Spavor were arrested last month as relations between the two countries worsened.
The pair face accusations of harming national security and, on Thursday, China’s top prosecutor said they had “without a doubt” violated the law.
Separately, three US citizens were accused of committing “economic crimes”and barred from leaving China in November.
Victor and Cynthia Liu, who are the children of a fugitive businessman, and their mother, Sandra Han, have reportedly been detained since June.
“US citizens may be detained without access to… consular services or information about their alleged crime,” the advisory reads.
“Individuals not involved in legal proceedings or suspected of wrongdoing have also been subjected to lengthy exit bans in order to compel their family members or colleagues to co-operate with Chinese courts,” the state department said in a separate warning issued last January.
The latest advice also warns of “special restrictions” on those who hold dual US-Chinese citizenship.
Dual-citizenship is not allowed under Chinese law, and the state department has warned that US-Chinese nationals can be detained and denied US assistance in China.
It advises travelling on a US passport with a valid Chinese visa and asking officials to notify the US embassy immediately if you are detained or arrested.