DealBook Briefing: Europe’s Big Trip to Fix Trade
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Europe seeks to defuse the trade war
The Group of 20 meeting in Buenos Aires this weekend gave finance ministers a chance to compromise over trade. They didn’t. Steven Mnuchin, the U.S. treasury secretary, dismissed concerns from the International Monetary Fund that tariff wars might hurt America through a global slowdown. Friction, Alan Rappeport of the NYT writes, is now likely to intensify.
Not helping: President Trump accused Europe, and China, of manipulating currency rates. (He attacked the Fed, too.)
The E.U. is sending Jean-Claude Juncker, president of the European Commission, to Washington for discussions with Mr. Trump on Wednesday. Anonymous E.U. officials tell the FT that the aim is “de-escalating.”
Some anonymous White House officials tell Politico that the talks might avert tariffs on foreign cars. But European officials tell Axios that they’re developing retaliatory measures on the assumption of tariffs before November. Mr. Juncker has said that the bloc will “continue to react tit-for-tat to the provocations that might be thrown at us.”
Taking the wheel at Fiat Chrysler won’t be easy
Mike Manley, formerly head of the Jeep and Ram truck brands, is now chief executive of Fiat Chrysler, after Sergio Marchionne became gravely ill.
Mr. Marchionne revived an automaker that many people thought was doomed. But the company still has challenges, as Neal E. Boudette of the NYT notes. Most of its profits come from North America, it’s not big on electric vehicles or self-driving technology, and its rivals are doing better in China.
It’s possible that Manley will decide that the best way to deal with all these challenges is to pursue a merger with a peer — as Marchionne tried and failed to do with G.M. Marchionne’s assessment in his 2015 “Confessions of a Capital Junkie” remains correct: it is madness for automakers to each spend heavily developing near identical technologies, when sharing the burden would be more efficient.
How Google tried (and failed) to avoid a $5.1 billion antitrust fine
A full year before last week’s record fine over Android smartphone deals, the search giant was quietly seeking a settlement with Margrethe Vestager, the E.U’s competition commissioner.
She wasn’t impressed, say Aoife White and Stephanie Bodoni of Bloomberg:
The Silicon Valley search giant had waited at least a year too long to broach the subject of a settlement, the 50-year-old Vestager said in an interview. When a company wants to settle, it needs to “reach out immediately after” getting the E.U.’s initial complaint or statement of objections. “That didn’t happen in this case and then of course it takes the route that it has now taken,” Vestager said of the settlement talks, which haven’t been previously reported. “So no surprises.”
A derivatives loophole that Wall Street loves
The 2010 Dodd-Frank law was supposed to make derivatives — the financial instruments that helped cause the 2008 crisis — easier to regulate. But Emily Flitter of the NYT reports that it’s also letting banks avoid reporting some trades:
Banks don’t have to disclose to American regulators their holdings of derivatives housed in certain offshore entities. The critical variable is whether the American parent company is legally on the hook to bail out its foreign subsidiary if it gets into trouble. As long as the answer is no, the foreign entity isn’t subject to the Dodd-Frank requirements.
Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America and Morgan Stanley all appear to use the loophole — though mostly only for a fraction of their derivatives trading.
Tesla needs cash. It’s asking suppliers for help.
The automaker’s memo, sent by a global supply manager, described the request as essential to Tesla’s continued operation and characterized it as an investment in the car company to continue the long-term growth between both players.
Tesla reportedly requested a “meaningful” amount of money, though it’s unclear from how many companies.
Was that wise? Dennis Virag, a manufacturing consultant, told the WSJ that big refunds could hurt suppliers enough to risk parts problems.
Bill De Leon, head of portfolio risk management and a managing director at Pimco, resigned after allegations of inappropriate behavior. (WSJ)
Corrado Passera, a veteran Italian banker and former government minister, is launching a digital business lender. (FT)
Philippe Vollot, previously at Deutsche Bank, will join Dankse Bank in December as chief compliance officer. (WSJ)
The speed read
■ Atos of France will buy Syntel of Michigan, an I.T. company, for $3.4 billion. (WSJ)
■ Alibaba has joined a $600 million round of investment in Megvii, a Chinese facial-recognition developer. (Bloomberg)
■ Alongside Tencent, Alibaba is reportedly in talks to buy a $2.5 billion stake in WPP’s Chinese operations. (Sky)
Politics and policy
■ President Trump warned Iran that threatening America carried severe “consequences.” (NYT)
■ Russia plans what it calls a “fake news” law. Critics say it targets dissent. (NYT)
■ The E.U. rejected Britain’s proposals for the finance sector after Brexit. (FT)
■ The Chinese e-commerce company JD.com has European hopes. (Reuters)
■ Facebook, having dropped its internet drones, is working on a broadband satellite. (Verge)
■ SoftBank reportedly plans a mobile digital payments service in Japan. (Bloomberg)
Best of the rest
■ Saudi Arabia is said to be planning two funds worth more than $18 billion to encourage foreign investment. (WSJ)
■ The Federal Reserve isn’t worried about the yield curve — for the same reason as before the financial crisis. (WSJ)
■ Factor investing might be ready to challenge hedge funds. (FT)
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