Wall Street Breakfast: Trump Tariff Threats Spook Markets

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Investors are dumping risk in markets all over the world as an equity selloff takes hold following a tweet from President Trump that threatened to upend trade talks with China. With discussions moving “too slowly,” tariffs on $200B worth of China-made goods will rise from 10% to 25% by the end of this week, and a similar levy on another $325B could be placed on China imports “shortly.” The Shanghai Composite tumbled 5.6% on the news, Europe is down 2% at midday and Dow futures are priced for an over 500 point plunge at the open, marking the biggest single-day decline of the year for U.S. stocks.

China’s response

Multiple media reports overnight suggested President Trump’s tariff threats would scupper a planned visit to Washington this week by Chinese Vice Premier Liu He and a 100-strong delegation of trade representatives, but the country’s foreign ministry announced that the trip was still on. China also called on its “National Team” of state investors to prepare to stabilize the stock market if needed as the Shanghai Composite Index plunged the most in seven months. Meanwhile China’s offshore yuan fell sharply before regaining some ground to trade about 0.7% weaker at 6.7810 per dollar, its weakest point since February.

Highlights from Capitalist Woodstock

At an annual shareholder meeting this weekend, Warren Buffett signaled his commitment to Kraft Heinz (NASDAQ:KHC) and defended his actions toward Wells Fargo (NYSE:WFC), two of the largest investments at his Berkshire Hathaway (BRK.A, BRK.B), despite mistakes at both that have caused many investors to sour on them. Operating income, a measure of Berkshire’s business performance, rose 5%, helped by Geico and BNSF railroad, though it fell just shy of analyst forecasts. Berkshire also repurchased $1.7B of stock, reflecting Buffett’s difficulty in finding better uses for the company’s $114.2B cash hoard.

May to Corbyn: Let’s do a deal

Writing in the Mail on Sunday, Theresa May told Labour leader Jeremy Corbyn: “Let’s do a deal.” She said a cross-party compromise was not her first choice, but “we have to find a way to break the deadlock.” The Conservatives are desperate to move forward after losing hundreds of positions in last week’s local elections, while Labour also sustained losses as voters punished both parties for the Brexit impasse.

‘Endgame’ enters $2B club in record time

Avengers: Endgame officially surpassed the $2B mark in its second weekend in theaters, becoming only the fifth movie to hit that milestone. It took Avatar, the previous record-holder for quickest film to $2B, 47 days to reach that benchmark. The success is the product of Marvel’s (NYSE:DIS) 11-year, 22-film franchise, which began back in 2008 with Iron Man, and has since built out its storyline and characters.

Music streaming battle escalates

The EU will launch a formal antitrust investigation into Apple (NASDAQ:AAPL) in the next few weeks after Spotify (NYSE:SPOT) accused the iPhone maker of “tilting the playing field to disadvantage competitors,” FT reports. The complaint centers on Apple’s policy of charging digital content providers a 30% fee for using its payment system for subscriptions sold in its App Store. The policy applies to Spotify and other music subscription services but not apps, such as Uber (UBER).

Latest developments in 737 MAX saga

Boeing (NYSE:BA) did not tell U.S. regulators for more than a year that it inadvertently made an alarm alerting pilots to a mismatch of flight data optional on the 737 MAX – instead of standard as on earlier 737s – but insisted on Sunday the missing display represented no safety risk. It was only after the second MAX crash, in Ethiopia, that Boeing reportedly became more forthcoming with airlines about the problem. The planemaker also did not publicly disclose the software error behind the problem for another six weeks, leaving the flying public and apparently the FAA’s acting chief unaware.

Occidental pushes to get Anadarko deal over the line

In connection with Occidental’s (NYSE:OXY) proposal to acquire Anadarko Petroleum (NYSE:APC), the company has agreed to sell the latter’s African assets to Total (NYSE:TOT) for $8.8B. This would go part of the way toward Occidental’s promise to sell $10B-$15B of assets to help finance its near-$40B purchase. The E&P company also increased the cash component of its bid to acquire Anadarko, removing a requirement for any deal to receive the approval of its shareholders.

Today’s Markets

In Asia, Japan closed. Hong Kong -2.9%. China -5.6%. India -0.9%.
In Europe, at midday, London closed. Paris -2%. Frankfurt -2%.
Futures at 6:20, Dow -1.9%. S&P -1.7%. Nasdaq -2.2%. Crude -1.2% to $61.17. Gold +0.2% to $1283.40. Bitcoin -1.4% to $5630.
Ten-year Treasury Yield -5 bps to 2.48%

Today’s Economic Calendar

6:00 Fed’s Evans Speech
9:30 Fed’s Harker: Economic Outlook
12:30 PM TD Ameritrade IMX

Companies reporting earnings today »

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