The prospect of an all-out trade war between America and China became real. Donald Trump said he would impose tariffs on $50bn of Chinese goods, because Beijing was not dealing with American complaints about stealing intellectual property. China responded in kind by announcing penalties on $50bn of American goods, which prompted Mr Trump to threaten to levy additional tariffs on goods worth $400bn. See article.
Taking the war seriously
Global stockmarkets took fright at the trade news, none more so than in China. The Shanghai Composite fell by 4% in a day to its lowest level in 20 months. The Shenzhen Composite dropped by 6%. Yi Gang, the governor of the People’s Bank of China, said investors should “stay calm and rational”. The central bank pumped 200bn yuan ($31bn) into financial institutions, followed by a smaller intervention, to ensure they remain liquid. See article.
Oil prices swung up and down in part because of China’s plan to target tariffs at American energy supplies. Investors were also jittery ahead of an OPEC meeting on June 22nd to discuss whether to increase oil production after an 18-month freeze in output.
Germany’s central bank cut its forecast of the country’s economic growth rate this year to 2%, from 2.5%. The Bundesbank thinks the “external environment” is driving up uncertainty in the German economy.
Mario Draghi hinted that the European Central Bank could restart its bond-buying programme if economic conditions deteriorate, just days after the bank announced that it would phase out its purchasing of assets. The ECB’s president emphasised that interest rates would remain ultra-low until at least September 2019. The ECB is to halve the amount of assets it buys each month to €15bn ($17bn) from this September and will end all purchases in December.
MSCI, a company that designs stockmarket indices, said that Argentina would return to its emerging-market index in 2019 after an absence of ten years. That should lower the country’s borrowing costs and increase investment in its stock and bond markets, a boost for Argentina, which is battling a run on the peso and has had to turn to the IMF for help. Saudi Arabia will also be added to the MSCI emerging-market index for the first time.
Chasing the Fox
Disney raised its bid for the bulk of 21st Century Fox’s assets to $71bn, almost half of which is in cash and the rest in shares. That tops an unsolicited rival all-cash offer of $65bn from Comcast.
The White House announced that Kathy Kraninger would be nominated to head the Consumer Financial Protection Bureau, a bugbear for Republicans ever since its creation as part of the Dodd-Frank reforms. The agency is being led by Mick Mulvaney, who is also the head of the White House budget office, where Ms Kraninger currently works. Some (mostly Democrats) questioned Ms Kraninger’s appointment, claiming that—as a White House insider—she lacks the experience to run an independent office.
The flow of European venture capital hit its highest level for a decade last year, according to Invest Europe, a trade association for the industry. Of the €6.4bn ($7.2bn) in investments, 45% went to information and communications startups and 23% to biotech and health care.
In the biggest banking merger in Britain in a decade, CYBG, the owner of Clydesdale and Yorkshire banks, agreed to pay £1.7bn ($2.3bn) for Virgin Money. The deal creates Britain’s sixth-largest bank.
Ford and Volkswagen said that they were talking about a “strategic alliance” which could see them develop commercial vehicles together. Ford also unveiled plans to create a hub for electric and autonomous cars, technologies where it has lagged behind its rivals.
Rupert Stadler, the chief executive of Audi, Volkswagen’s luxury brand, was sent to jail in Germany while a judge looked into allegations that he might try to interfere with an investigation into VW’s emissions cheating. He is the most senior executive at the VW group to have been arrested over the scandal.
Down and out
General Electric was booted out of the Dow Jones Industrial Average. The company had been on the index of 30 share prices continuously since 1907 and was one of its original components in 1896. It is replaced by Walgreens Boots, a pharmacy chain. GE was the most valuable American company in 2000, but its share price has halved over the past year owing to a difficult restructuring process.