DealBook Briefing: Can You See That Bear Market Coming?

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Stocks tumbled yet again on Thursday, taking the continuing sell-off to new depths.

The Nasdaq is now almost in a bear market. The tech-heavy index fell 1.6 percent yesterday, pushing it 19.5 percent below its late-August peak. (A fall of 20 percent puts it in bear territory.) The S&P 500 fell 1.6 percent, and is down more than 15 percent from its peak.

What they’re saying. “There’s just a constant selling pressure,” Paul Hickey, a founder of Bespoke Investment Group, a financial market research firm in Harrison, N.Y., told the NYT. “It’s just any excuse is an excuse to sell.”

And there’s a long list of excuses to pick from. Here are several worth singling out: New U.S.-China tensions after a fresh batch of hacking indictments (more on that below); a malaise over the Fed’s rate increases; technology stocks falling out of favor; the threat of a government shutdown; and the persistent slump in oil prices.

This upheaval is “of a magnitude on par with the two biggest market crashes of the past four decades,” according to Bloomberg. Nearly two-fifths of equities on the Nasdaq and the New York Stock Exchange are at 52-week lows, it reports. The proportion was higher only during the Black Monday crash of 1987 and in the wake of the 2008 financial crisis.

There’s little hope in sight. Asian markets followed U.S. markets down in trading today, and futures markets suggest Wall Street could open lower again.

The Justice Department has accused two Chinese citizens with ties to the Ministry of State Security in Beijing of infiltrating huge corporate and government computer systems in the U.S., write David E. Sanger and Katie Benner of the NYT.

While officials haven’t identified the companies compromised, unidentified sources tell Reuters and the WSJ that IBM and Hewlett Packard Enterprise are among them. The government said that aviation, telecommunications, pharmaceutical and satellite companies had been affected, as well as government agencies including the Navy and NASA. China denies involvement.

The charges are about China advancing its power. “The indictment unsealed on Thursday describes the broad outlines of what it calls a yearslong campaign by China to steal American technological secrets in a range of industries to allow Beijing’s companies to undercut international competitors and help its military erode the United States’ defensive edge,” Mr. Sanger and Ms. Benner write.

The indictment will most likely ratchet up tensions. It comes on the back of the U.S. helping to coordinate the arrest of Huawei’s C.F.O., and amid a tense trade dispute with China. Part of America’s wishlist in trade negotiations is to end intellectual property theft, but it’s unclear how these charges might affect negotiations.

The former Nissan Motor chairman was arrested again by the Japanese authorities today, this time on suspicion that he shifted to the automaker more than $16 million in personal losses incurred a decade ago, writes Motoko Rich of the NYT:

• “The authorities rearrested Mr. Ghosn on suspicion of breach of trust related to a financial investment that tumbled in value during the 2008 global financial crisis, according to the Japanese public broadcaster NHK.”

• “The authorities said he had transferred the investment, a derivative contract, to Nissan from his personal asset management company.”

• “The rearrest of Mr. Ghosn dealt a setback to his hopes for getting released from the Tokyo jail where he has been held for more than a month on different charges.”

• “It also adds to the legal problems of an executive who once oversaw a sprawling automotive global empire that sold more than 10 million cars last year.”

The European Commission suspects several major banks — including Deutsche Bank, Credit Suisse and Crédit Agricole — of price-rigging in the U.S. government-backed bond market, the WSJ reports.

The “preliminary view” of regulators is that the banks “exchanged commercially sensitive information and coordinated on prices” in supranational, sub-sovereign and agency debt markets from 2009 to 2015, the FT writes. That breaches the E.U.’s antitrust rules.

If they’re found guilty, the banks could be fined as much as 10 percent of their annual global revenue. The FT notes that Deutsche Bank doesn’t expect a fine, suggesting that it acted as a whistle-blower. The banks will now lay out their defenses.

This isn’t the first inquiry into the rigging of these markets,“the U.S. Department of Justice and the U.K.’s Financial Conduct Authority having also initiated investigations,” writes the FT.

The latest development in the continuing legal battle between Apple and Qualcomm resulted in the iPhone maker taking the drastic step of removing devices from sale in some stores.

A court in Germany has ruled that Apple infringed a Qualcomm patent and must stop selling the iPhone 7, 8 and X in that country. Apple said it would stop selling those devices in its German stores (third parties will still sell them), but that it plans to appeal the ruling.

This is the second time in two weeks that a court has judged Apple to have infringed Qualcomm’s patents. An injunction in China also calls for some older iPhones not to be sold in the country, although Apple has yet to withdraw the devices from the retail market and has instead released a software update to address concerns.

And Apple is hurting. The company’s stock is down more than 30 percent since the beginning of October after falling 2.5 percent yesterday on the news out of Germany. With its suppliers issuing profit warnings and President Trump warning that iPhones could be affected in a next round of tariffs, Apple is struggling to catch a break.

Big Tech companies have been eyeing a juicy government contract for months now: The Pentagon wants to migrate its systems to the cloud, and it is prepared to pay one company $10 billion to make it happen. Amazon is the favorite to win the contract, but IBM, Microsoft and Oracle would all like a piece of the action. Now Bloomberg reports that a mystery client has created a dossier intended to change the course of the decision:

• “One version of the dossier, which was obtained by Bloomberg, suggests that corporate executives, including one at Amazon, engaged in improper personal relationships and that Defense Department officials participated in shady activities, all of which gave Amazon an edge.”

• “The document was shopped around by RosettiStarr, a Bethesda, Maryland-based private-investigations company, according to Nextgov, a government information-technology website owned by Atlantic Media Co. An article posted on the Nextgov website in August said RosettiStarr declined to reveal who paid for the dossier’s compilation.”

• “The document relies on photos, charts and public records in an attempt to portray a web of conflicts to cast doubt on the integrity of the cloud procurement. It does contain certain accurate information regarding connections between industry executives and Defense Department officials, but offers no real proof that those relationships corrupted the process.”

Gatwick Airport, one of Britain’s busiest transport hubs, was brought to a standstill for more than 32 hours by humble drones, write Benjamin Mueller and Amie Tsang of the NYT.

“At least 800 flights were canceled, disrupting traffic throughout Europe and affecting upward of 100,000 passengers. Arriving flights carrying 10,000 passengers were diverted, with some travelers forced to land at airports as far away as Paris,” they write.

Officials called it a “deliberate act,” and the airport finally reopened around 6 a.m. local time today. But the episode highlights how vulnerable airports across the world are to drones, and how hard it is to protect against the malicious use of new technologies.

Could something similar happen in the U.S.? “Yes, absolutely,” Luke Fox, the founder and chief executive of WhiteFox, a drone airspace security company, told the NYT. “People will unfortunately see this and recognize there’s a vulnerability here.”

Campbell Soup named Mark Clouse, the former head of Pinnacle Foods, as its new C.E.O. (NYT)

Allen Smith, the C.E.O. of Four Seasons, will step down at the end of the month. The company does not have a successor lined up. (WSJ)

Joseph Otting, head of the Office of the Comptroller of the Currency, will become acting director of the Federal Housing Finance Agency. (Reuters)

UBS will reportedly consider external candidates to succeed its C.E.O., Sergio Ermotti. (Bloomberg)

Deals

• The tobacco giant Altria confirmed that it would pay nearly $13 billion for a 35 percent stake in the vaping company Juul. To sweeten the deal — and presumably to ease concerns about tying up with a tobacco company — Juul’s 1,500 employees will share a bonus of $2 billion. (NYT)

• Cigna closed its $54 billion deal to buy Express Scripts. (Reuters)

• Naspers led a $1 billion investment in the Indian food-delivery service Swiggy. (FT)

• Hillhouse Capital, Sequoia Capital and GIC invested $320 million in the South Korean food delivery start-up Woowa Brothers, valuing it at about $2.6 billion. (Reuters)

• SoftBank led a $385 million investment in the auto-finance start-up Fair. (WSJ)

• M.&.A. activity nose-dived at the end of 2018 as the confidence of deal-makers sagged amid market volatility and increased borrowing costs. (FT)

Politics and policy

• Defense Secretary Jim Mattis resigned in protest of President Trump’s decision to withdraw U.S. forces from Syria. That leaves the president unbound.

• Mr. Trump has torpedoed a spending deal, putting the government on course for a shutdown at midnight tonight. (NYT)

• Robert S. Mueller III, the special counsel, is said to be taking a cautious approach to implicating Mr. Trump in legal filings he is preparing. (Bloomberg)

• Prime Minister Theresa May of Britain is reportedly considering her options about a Plan B to avoid a “no-deal Brexit.” The Bank of England says that uncertainty over Brexit has “intensified considerably” in recent weeks.

• Here’s a report card on how populism is faring. (DealBook)

Trade

• China reportedly plans to order more soybeans from the U.S. (Reuters)

• How the Huawei debacle could divide the world. (Related: Some global banks have cut ties with the company.)

• The winner of this year’s Nobel in economic science says the big problem with the trade war is that people are overlooking how important it is to share. (Bloomberg)

Tech

• Facebook is said to be developing a cryptocurrency pegged to the dollar as a way of facilitating money transfers via WhatsApp. (Bloomberg)

• Speaking of WhatsApp, the platform is struggling to curb the sharing of child pornography. (FT)

• Uber’s driverless cars are back on the road, ending a hiatus after a fatal accident in Arizona. (NYT)

• AT&T’s first piece of 5G hardware, a mobile hot spot, goes on sale today. (Ars Technica)

• Mat Baxter, the C.E.O. of the ad agency Initiative, has called for the industry to “take a collective stand” against Facebook. (WSJ)

• Spotify settled a $1.6 billion copyright lawsuit with the music publisher Wixen. Terms have not yet been disclosed. (TechCrunch)

Best of the rest

• Singapore plans to expand its criminal investigation into the 1MDB scandal to include Goldman Sachs. (Bloomberg)

• Planned Parenthood has been accused of mistreating its pregnant employees. (NYT)

• Walgreens is to embark on a plan to save more than $1 billion a year. (Reuters)

• Should Disney have been allowed to trademark the phrase “Hakuna Matata”? (NYT)

• How so-called collateralized loan obligations have made a lot of people very, very rich. (Bloomberg)

• Why you should make sure your kids have PowerPoint skills. (NYT)

Thanks for reading! We’ll see you next week.

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