The Boston Globe - 08.08.2019

B8 Business The Boston Globe THURSDAY, AUGUST 8, 2019

25

THEBOSTONGLOBE

Indexof publicly tradedcompaniesin Massachusetts

Stocks overcame a big loss on Wall Street Wednesday,
though the recovery left plenty of signs of that the fallout
from the US-China trade war will spread. A late rally lifted
the major indexes mostly out of the red, after an early slide
briefly pulled the Dow downmore than 580 points. Tech
and consumer staples stocks powered muchof the gains,
offsetting losses in banking, energy, and othersectors. Yet
movesin the bondand commodities markets signaled that
investors are nervous the escalating trade war may derail
the global economy. Bondyields sank around the world,
something that happens when investors see a weaker econ-
omy and low inflation on the way. The price of oil tanked,
and the price of gold hit a six-year high as traders sought
safe-haven holdings. The yield on the 10-year Treasury
touchedits lowest level in nearly three years, before climb-
ing back to 1.73 percent. It was above3 percent in Novem-
ber. The stock market turbulence comes less than two
weeksafter the S&P 500 hit a recordhigh. Bankssustained
some of the worst losses Wednesday. Lower bond yields
mean lower interest rates on loans,and lower profits.

Markets

Vo latility rattlesthe stock market

DOW JONES industrialaverage

NASDAQComposite index

S&P 500 index

Globe 25index

SOURCE:BloombergNews

ByAlexandra Stevenson

NEWYORK TIMES

NEWYORK — Central banksin

India, Thailand,and New Zealand

movedto shoreup their economies

Wednesday amid fears that global

growthwill become the biggest ca-

sualty in the spiraling trade war be-

tween the United States and China.

Monetary authorities in all three

countries cut interest rates in a se-

ries of unexpected decisions that

shookcurrency markets just two

days after China allowed the yuanto

weaken, a move that prompted Pres-

identTrumpto labelBeijing a cur-

rency manipulator.

China’s currency has steadiedin

the days since it crossed a critical

thresholdMonday, but the world’s

markets are still uneasy. On

Wednesday, stockson Wall Street

tumbledat the open,losingmore

than1.5 percent. The rate cuts sig-

naled that morecountries are brac-

ing for tougherweeksand months

ahead.

“This is a defensiveaction by

countries seekingto protect them-

selves from the collateral damage of

risingglobal trade tensions,amid

weakeningdomestic growth,” said

Eswar Prasad, former headof the In-

ternationalMonetary Fund’s China

division.On Wednesday:

RThe Reserve Bankof India cut

its benchmark rate by 0.35 percent-

age point, insteadof an expected

quarter-point cut. It was the bank’s

fourth rate cut this year as the gov-

ernmentbattles a punishing eco-

nomic slowdown.

RNew Zealand’s central bankcut

its rate by half a percentage point in

a move that was interpreted as a de-

fensiveeffort to cushiona sluggish

export-oriented economy.

RThailand’s central bankcut its

rate by a quarter percentage point,

its first rate reduction since 2015.

Thailandis a big exporter to China

and the United States, and a weaker

Thai currency will help keep it com-

petitive in the face of a weaker Chi-

nese currency.

The movescome at a timewhen

the globaleconomy is at a cross-

roads:Last year, every majorecono-

my finally appeared to be growing in

unison, a decade after the ravages of

a global financial crisis. That growth

is now increasinglythreatened by

the bruising trade war between the

world’s two biggest economies.

China’s currency move,in partic-

ular, could have a profound impact

on globalfinances. If Beijing contin-

ues to allow its currency to weaken

against the US dollar, morecoun-

triescould feel forced to respond,

leadingto a damagingcurrency war

that could revive inflation and fur-

ther fray the bonds of global trade.

Investors’ worries that Australia’s

central bankmay be next to act sent

the Australian dollar sliding to its

lowest level against the US dollar in

a decade.

“These movessignalthe possibil-

ity of the trade wars morphing into a

broadcurrency war that involves

not just the mainparticipants in the

tradedisputesbutalsocountries

that are on the sidelines but exposed

to the fallout,” Prasad said.

The cuts in India and New Zea-

land werelarger thanexpected, and

Thailand’s cut surprised many econ-

omists. Caughtoff guard,investors

sold the currencies of all threena-

tions, weakeningtheirvalue against

the dollar.

Last week, the US Federal Re-

serve cut its benchmarkinterest rate

for the first time in a decadein a pre-

cautionary movethat may have also

helpedpromptothercentral banks

to consider rate cuts.

Last week, only days after Ameri-

can and Chinesenegotiators met in

Shanghaifor fresh talks and agreed

to meet again in September, Trump

threatenedtariffs of 10 percenton

$300billion moreof Chinese goods.

“Thesenewtariffsraiserecession

risks for the US sometime next year

due to increaseduncertainty, an un-

willingness to invest in such an envi-

ronment, and ultimately an unwill-

ingness to hire,” said Steve Co-

chrane, chief Asia Pacific economist

at Moody’s Analytics.“International

trade will slow further and is at risk

of an outrightdecline.”

Wary of trade war, 3 nations cut rates

el of safety,” the agency saidin a

statement. “The FAA is following a

thorough process,not a prescribed

timeline, for returning the Boeing

737 Max to passenger service.”

Boeing said it was workingwith

regulators to ensure the Max was

safe.

“We extendour deepest sympa-

thies to the lovedones of all those on

board these flights,” the company

said in a statement. “We will contin-

ue to follow the lead of the FAA and

globalregulatory agencies in certify-

ing the aircraft and ensuringits safe

return to service.”

Were the FAA to conduct a full re-

certification, it would throw Boeing

and muchof the aviation industry

into turmoil. The company is reeling

from the protracted grounding of

the Max. Airlines are counting on

Boeing to deliver thousands of Max

jets in coming years.And Boeing

suppliers, already feeling the effects

of a slowdown in production of the

Max, could be devastated by a years-

long delay.

The FAA has never conducted a

full recertification of a plane once it

enteredservice.Scott Hamilton,

managing director at LeehamCo.,

an aviation consultancy, said the

odds of a full recertification were

slim.

“I don’t see it as plausible at all,”

Hamilton said. “If it were going to

happen, it wouldhave happened

long ago.”

Despitethe long odds, the fami-

lies are calling for it as a way to high-

lightwhat they say was flawed de-

uBOEING

Continued fromPageB6

sign and regulatory approval of the

Max.

“I don’t think there’s been

enoughscrutiny to determine

whether this product is airworthy,”

said Chris Moore, whose daughter

Danielle was killed in the Ethiopian

crash. “Essentially, what happened

is my daughter and 156 others were

on the second phase of a flight test.

They were guinea pigs.”

The Max featured larger engines

than the previous737, and they had

to be mounted farther forwardon

the wings, changing the aerodynam-

ics of the plane.In response, Boeing

addedan automated system, known

as MCAS. The system malfunc-

tioned in both crashes, sending the

planesintounrecoverable nose

dives.

While the planewas beingdevel-

oped,Boeing concluded that the sys-

tem was not particularlydangerous,

and key FAA engineers never fully

reviewed MCAS as part of the certifi-

cation.

“At what pointdoesit becomea

new plane?” Stumo said. “They nev-

er tooka holistic look at the whole

plane.”

Stumo and Moore also called for

the resignation of the FAA’s safety

chief, Ali Bahrami.

Bahrami oversaw the creation of

the FAA office that certified the Max,

and he was criticized by somein the

regulator for being too deferential to

Boeing. Bahrami then went to work

for an aviation industry association

that countsBoeingas a member, be-

fore returning to the FAA.

Last week,Bahrami defended the

certification of the Max at a congres-

sional hearing. The next day, Stu-

mo’s wife,Nadia Milleron,and their

son, Tor, met with Bahrami and

were dissatisfied with his response.

“We think Bahrami is morecon-

cerned with getting the planein the

air than safety,” Stumosaid.

The FAA has said it will permit

the Max to fly againonly onceit is

convincedthe plane is safe.But to

the families of some victims, that is

not sufficient.

“We do not want any morefami-

lies to experience the pain, anguish,

sadness and loss that we have expe-

rienced,” the families wrote.

Full FAA

review of

Boeing jet

is sought

BySteve Lohr

NEWYORK TIMES

The Trumpadministration on

Wednesday took a tactical step in its

trade confrontation withChina, by

releasing a rule that restricts gov-

ernmentagenciesfromdoingbusi-

ness with Huawei, the giant Chi-

nesemaker of telecommunications

equipment and smartphones.

The prohibition was mandated

by Congress as part of a broader de-

fense bill signedinto law last year. It

coversdirect purchasesof telecom

gear and videosurveillanceequip-

mentand services. And it extends to

otherChinese companies that, like

Huawei, have raised security con-

cerns inside the US government, in-

cludingtelecomequipment maker

ZTE and Hikvision, which develops

facial-recognition technology.

But Huawei, China’s largest tele-

com company, has beenthe main

focus of attention for the White

House and an on-again, off-again

bargainingchip in the administra-

tion’s trade battle.

In a statement, Huawei said the

WhiteHouse movewas “not unex-

pected” since it was required by the

defense bill. The Chinese company

said it would continueto challenge

the ban in court and calledit a

“trade barrierbasedon country-of-

origin, invoking punitive action

without any evidenceof wrongdo-

ing.”

The administration’s various an-

nouncementsregardingHuawei

have causedconfusionfor the Chi-

nese company and amongits Amer-

ican suppliers.

In May, the Commerce Depart-

ment put Huawei on a so-called en-

tity list, which bansUS corpora-

tionsfrom supplying foreign com-

panies deemed potential security

threats. The administration has

warned that Huawei’s equipment

could give the Chinese access to

phone calls and other communica-

tions, and it has tried to persuade

allies not to use the company’s

equipment in their build-out of the

next generation of wirelessnet-

works, known as 5G.

But the CommerceDepartment

blacklist, like the rule released on

Wednesday, includesopeningsfor

exceptions.And after meeting in

June withPresident Xi Jinping of

China at the G-20 summitin Japan,

President Trumpsaid American

companies could sell sometechnol-

ogy to Huawei. That easing, he said,

camebecauseChina had agreedto

buy more farm products from the

United States.

Last month, Trumpmet with the

leaders of companies that supply

Huawei with technology like net-

working chips and smartphone

software, including Google, Qual-

comm,Intel, Broadcom, and others.

At the time,White House offi-

cialssaid chief executives fromthe

companies “requested timely licens-

ing decisions from the Department

of Commerce, and the president

agreed.”

But in the past week,talksbe-

tween Chinese and American trade

negotiators broke down.

And on Wednesday, the White

House finallyreleasedthe congres-

sionallymandated rule to prohibit

governmentagencies frombuying

certain kinds of Huawei equipment.

The rule goes into effect on Aug. 13.

US moves to ban Huawei from government deals

MARK WILSON/GETTYIMAGES/FILE 2019

‘These

moves

signalthe

possibility

of the

trade wars

morphing

into a

broad

currency

war... ’

ESWAR

PRASAD,

a formerIMF

official

Huawei

has been

themain

focusof

attention

forthe

White

House.

MichaelStumo

andhiswife,

NadiaMilleron,

whose

daughterdied

in a Boeing

crash,listened

to testimony at

a congressional

hearingin

June.