The Economist USA - 19.10.2019

(Axel Boer) #1

10 The EconomistOctober 19th 2019
The world this week Business

Steven Mnuchin, America’s
treasury secretary, warned
China that a new round of
tariffswould be imposed on
Chinese goods in December if
it did not adhere to the accord
struck between the two coun-
tries on October 11th. Under the
deal China will buy more
American agricultural pro-
duce, toughen protections for
intellectual property and
provide more access to its
financial-services market,
enough concessions to stop
America raising tariffs on
$250bn-worth of exports.
China was cautious about the
prospect for a breakthrough
that will end the trade war.
Donald Trump was more ebul-
lient, declaring that the deal
amounted to a “love fest”.

Doing nicely, thank you
Huaweireported that its busi-
ness supplying 5gnetwork
equipment is thriving, despite
being blacklisted by the Ameri-
can government, and that to
date, it has signed 60 contracts
with telecoms companies
around the world. The Chinese
maker of telecoms equipment
has stockpiled essential com-
ponents that are in limited
supply from American firms
because of the ban.

Goldman Sachsreported a big
drop in quarterly profit and
revealed that it had lost $80m
so far on its investment in
WeWork, a loss-making office-
rentals startup that had to
abort its long-awaited stock-
market debut when its valua-
tion sank. By contrast, JPMor-
gan Chase, which was the lead
underwriter on WeWork’s ipo,
recorded a rise in net profit, to
$9.1bn. The bank is said to be
working on a financing pack-
age for WeWork to stop it run-
ning out of cash next month.

An international panel of
experts reviewing the certifica-
tion process of Boeing’s 737
maxjetliner, which has been
grounded following two crash-
es, published a report that was
highly critical of the aerospace
company and the Federal
Aviation Administration. The
report found that the faahad

“inadequate awareness” of
what the plane’s new automat-
ed system was supposed to do.
On the day it was published,
Boeing separated Dennis
Muilenburg’s dual positions as
chief executive and chairman,
in order to augment the board’s
“active oversight role”.

Nestlésaid it would return
SFr20bn ($20bn) to share-
holders over the next few
years, after reporting solid
revenues and a boost from the
sale of its skincare business.
The Swiss food-and-drink
maker’s share price has risen
by a third since January.

Investors responded positively
to Netflix’squarterly earnings.
The video-streaming company
undershot its forecast for new
subscribers in America during
the third quarter, though that
was still a rebound from the
previous three months, when
it lost domestic users. It added
6.3m international customers,
above expectations. Netflix
also lowered its outlook, as it
braces for the launch of rival
streaming services from Apple
and Disney next month.

Facebook held the first meet-
ing of the association that will
oversee its proposed Libra
digital currency, despite a
barrage of objections raised by

global regulators. Facebook
insists Libra will be up and
running next year, even though
eBay, Mastercard, PayPal and
Visa have pulled out. Still, 21
companies have signed up to
the payments network, in-
cluding Uber and Vodafone.

Theimfagain downgraded its
growth forecasts amid “uncer-
tainty about the future of the
global trading system and
international co-operation”.
The world economyis project-
ed to grow by just 3% this year,
the slowest pace in a decade.
The “systemic economies” of
America, China, the euro zone
and Japan can expect only a
moderate expansion over the
next few years. The imfpoint-
ed out that subdued growth has
coincided with easy monetary
policy, but warned that central
banks have little ammunition
left when economies are in a
“tougher spot”.

The Federal Reservebegan
buying short-term government
bonds at a monthly rate of
$60bn in order to refill its
portfolio until at least the
second quarter of next year. It
is doing this to ease a cash
crunch and sharp rise in banks’
overnight lending costs (the
repo rate). The size of the in-
tervention took many by sur-
prise. The central bank de-
scribed it as a technical move,
not a return to quantitative
easing, which involved buying
longer-dated treasuries.

The United Automobile Work-
ers union reached a tentative
deal over a new contract with
General Motors. The workers
have been on strike for over a
month, which is said to have
cost the carmaker up to $1.5bn.

Dyson sucks it up
James Dysonscrapped his
firm’s project to build electric
cars, acknowledging that it was
not commercially viable. The
British inventor, whose cord-
less vacuum cleaners and other
gadgets have eased the burden
of household chores, reported-
ly pulled the plug on the Dyson
vehicle in the face of intense
competition from established
carmakers, who are ramping
up production of their own
battery-powered models.

GDP forecasts

Source: IMF

2019, % increase on a year earlier
United States
Euro area
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