Jan 16, 2019

Five Things You Need to Know to Start Your Day

Randall Jensen, Bloomberg News

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U.S. stocks held onto gains, paring an earlier advance on reports that the U.S. is investigating Huawei Technologies. And U.K. Prime Minister Theresa May’s government survived a no-confidence vote tied to Brexit. Here are some of the things people in markets are talking about.

Stocks Rise

Asian shares may be in for a rocky start after U.S. stocks pared gains late in the day on a report by the Wall Street Journal that said federal prosecutors are investigating Huawei Technologies for allegedly stealing trade secrets. Banks buoyed major indexes Wednesday as Goldman Sachs and Bank of America surged following quarterly reports. The 10-year Treasury yield rose to around 2.72 percent, while the dollar gained against almost all major currencies. In Europe, Deutsche Bank advanced after regulators were said to favor a merger with a European lender. Oil closed higher for the second straight day as Russia and Saudi Arabia signaled they’re on track with production cuts designed to avoid a global supply glut.

Huawei Targeted

Federal authorities in Seattle are investigating Huawei Technologies Co. for allegedly stealing trade secrets from U.S. companies such as T-Mobile US Inc, according to a person familiar with the matter. The investigation is tied to civil suits filed against the Chinese telecommunications giant, 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 person, who asked for not to be named as the matter isn’t public. The probe was first reported in the Wall Street Journal Wednesday.

May Survives

U.K. leader Theresa May survived an attempt to oust her government and immediately opened talks with rival political parties in an attempt to break the Brexit deadlock, as time runs out to reach a deal. The prime minister fought off the threat of a national election and won the right to continue running the country when the House of Commons voted 325 to 306 against a motion of “no confidence” in her administration. The pound edged higher. May invited other party leaders, who back keeping much closer ties to the European Union, for talks tonight to discuss how to forge a compromise Brexit plan that Parliament can support.

China Quietly Cuts Borrowing Costs

The People’s Bank of China has been quietly guiding interbank borrowing costs down without actually cutting official interest rates, with the latest move a record one-day injection of cash into the market. The central bank pumped in a net 560 billion yuan ($83 billion) into the financial system on Wednesday, the biggest open market operation on record. While that action was mostly aimed at addressing a funding shortage ahead of the Chinese New Year, it also speaks to a policy priority for the PBOC -- providing cheaper funding to banks to allow them to lend to companies at lower rates.

Yen in the 80s

The yen is likely to reach its strongest level in more than six years if Japan enters a recession, which could come as early as the fall of this year, according to a former central bank official. “I don’t think it will hit the 70s but the 80s is quite likely,” Hideo Hayakawa, a former chief economist at the Bank of Japan, said in an interview with Bloomberg on Tuesday. He was referring to the yen’s exchange rate against the dollar. The BOJ would be powerless to stop such a move, though it could slow it down by introducing a negative lending rate, one of the few policy options it has left, said Hayakawa, a consistent critic of the BOJ’s current stimulus policies.

What we’ve been reading

This is what caught our eye over the last 24 hours.