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Unlike
the 2008 global financial crisis, which was mostly a large negative
aggregate demand shock, the next recession is likely to be caused by
permanent negative supply shocks from the Sino-American trade and
technology war. And trying to undo the damage through never-ending
monetary and fiscal stimulus will not be an option.
NEW YORK – There are three negative supply shocks that could trigger a global recession
by 2020. All of them reflect political factors affecting international
relations, two involve China, and the United States is at the center of
each. Moreover, none of them is amenable to the traditional tools of
countercyclical macroeconomic policy.
The first potential shock stems from the Sino-American trade and currency war, which escalated
earlier this month when US President Donald Trump’s administration
threatened additional tariffs on Chinese exports, and formally labeled
China a currency manipulator. The second concerns the slow-brewing cold
war between the US and China over technology. In a rivalry that has all
the hallmarks of a “Thucydides Trap,”
China and America are vying for dominance over the industries of the
future: artificial intelligence (AI), robotics, 5G, and so forth. The US
has placed the Chinese telecom giant Huawei on an “entity list”
reserved for foreign companies deemed to pose a national-security
threat. And although Huawei has received temporary exemptions allowing
it to continue using US components, the Trump administration this week announced that it was adding an additional 46 Huawei affiliates to the list.
The third major risk
concerns oil supplies. Although oil prices have fallen in recent weeks,
and a recession triggered by a trade, currency, and tech war would
depress energy demand and drive prices lower, America’s confrontation
with Iran could have the opposite effect. Should that conflict escalate
into a military conflict, global oil prices could spike and bring on a
recession, as happened during previous Middle East conflagrations in
1973, 1979, and 1990.
All three of these
potential shocks would have a stagflationary effect, increasing the
price of imported consumer goods, intermediate inputs, technological
components, and energy, while reducing output by disrupting global
supply chains. Worse, the Sino-American conflict is already fueling a
broader process of deglobalization, because countries and firms can no
longer count on the long-term stability of these integrated value
chains. As trade in goods, services, capital, labor, information, data,
and technology becomes increasingly balkanized, global production costs
will rise across all industries.
Moreover, the trade
and currency war and the competition over technology will amplify one
another. Consider the case of Huawei, which is currently a global leader
in 5G equipment. This technology will soon be the standard form of
connectivity for most critical civilian and military infrastructure, not
to mention basic consumer goods that are connected through the emerging
Internet of Things. The presence of a 5G chip implies that anything
from a toaster to a coffee maker could become a listening device. This
means that if Huawei is widely perceived as a national-security threat,
so would thousands of Chinese consumer-goods exports.
It is easy to imagine
how today’s situation could lead to a full-scale implosion of the open
global trading system. The question, then, is whether monetary and
fiscal policymakers are prepared for a sustained – or even permanent –
negative supply shock.
Following the
stagflationary shocks of the 1970s, monetary policymakers responded by
tightening monetary policy. Today, however, major central banks such as
the US Federal Reserve are already pursuing monetary-policy easing,
because inflation and inflation expectations remain low. Any
inflationary pressure from an oil shock will be perceived by central
banks as merely a price-level effect, rather than as a persistent
increase in inflation.
Over time, negative
supply shocks tend also to become temporary negative demand shocks that
reduce both growth and inflation, by depressing consumption and capital
expenditures. Indeed, under current conditions, US and global corporate
capital spending is severely depressed, owing to uncertainties about the
likelihood, severity, and persistence of the three potential shocks.
In fact, with firms
in the US, Europe, China, and other parts of Asia having reined in
capital expenditures, the global tech, manufacturing, and industrial
sector is already in a recession. The only reason why that hasn’t yet
translated into a global slump is that private consumption has remained
strong. Should the price of imported goods rise further as a result of
any of these negative supply shocks, real (inflation-adjusted)
disposable household income growth would take a hit, as would consumer
confidence, likely tipping the global economy into a recession.
Given the potential
for a negative aggregate demand shock in the short run, central banks
are right to ease policy rates. But fiscal policymakers should also be
preparing a similar short-term response. A sharp decline in growth and
aggregate demand would call for countercyclical fiscal easing to prevent
the recession from becoming too severe.
In the medium term,
though, the optimal response would not be to accommodate the negative
supply shocks, but rather to adjust to them without further easing.
After all, the negative supply shocks from a trade and technology war
would be more or less permanent, as would the reduction in potential
growth. The same applies to Brexit: leaving the European Union will
saddle the United Kingdom with a permanent negative supply shock, and
thus permanently lower potential growth.
Such shocks cannot be
reversed through monetary or fiscal policymaking. Although they can be
managed in the short term, attempts to accommodate them permanently
would eventually lead to both inflation and inflation expectations
rising well above central banks’ targets. In the 1970s, central banks
accommodated two major oil shocks. The result was persistently rising
inflation and inflation expectations, unsustainable fiscal deficits, and
public-debt accumulation.
Finally, there is an
important difference between the 2008 global financial crisis and the
negative supply shocks that could hit the global economy today. Because
the former was mostly a large negative aggregate demand shock that
depressed growth and inflation, it was appropriately met with monetary
and fiscal stimulus. But this time, the world would be confronting
sustained negative supply shocks that would require a very different
kind of policy response over the medium term. Trying to undo the damage
through never-ending monetary and fiscal stimulus will not be a sensible
option.
Gold
and silver were poised for their best month in more than three years as
fears of a global recession and uncertainty on U.S.-China trade
relations drove investors to safe havens, although a slight recovery in
equities curbed gains on Friday. Spot gold
rose 0.1% to $1,529.17 per ounce, but has gained nearly 8% so far this
month, which would be its biggest monthly gain since June 2016. U.S. gold futures rose 0.1% to $1,538.30.
The market is awaiting news on the trade front, said Suki Cooper, precious metals analyst at Standard Chartered Bank.
“At the moment, the gold market is focused on impact in terms of global
growth and whether we’ll continue to see central banks around the world
easing monetary policy,” Cooper added.
Chinese and U.S. trade
negotiating teams are maintaining effective communication, a day after
both sides discussed the next round of in-person negotiations in
September, China’s foreign ministry said on Friday.
On Thursday,
China’s commerce ministry said a September round of meetings was being
discussed by the two sides, but added it was important for Washington to
cancel a tariff increase.
Positive signs on the trade front also lifted world stocks to a one-week high, limiting bullion’s upside.
“Gold will have a very high beta to any reduction in trade tensions
given that they have driven so much of its rally,” OANDA analyst Jeffrey
Halley wrote in a note.
Escalation in the trade war between the
world’s biggest economies and heightened fears over a global downturn
contributed to a rise of more than $100 for gold in August.
A
recent inversion of the U.S. yield curve, where short-dated yields are
running above long-dated ones, has also unsettled investors as it often
precedes a recession.
Meanwhile, the U.S. Federal Reserve and the
European Central bank are widely expected to cut rates next month to
stimulate their economies.
Elsewhere, silver rose 0.8% to $18.38
per ounce, on track for its biggest monthly percentage gain since June
2016, gaining 13% so far in August.
“Silver will be volatile
going forward and is more likely to come under pressure when we see
prices rising given that the industrial picture looks a little bit weak
going forward,” Standard Chartered’s Cooper said.
Meanwhile,
consumers in top Asian hubs sold their physical gold holdings this week
to cash in on high prices with many opting for cheaper silver.
Spot
platinum gained 2.2% to $936.02 per ounce, holding near a 16-month high
while palladium jumped 4.3% to $1,538.55 per ounce after hitting a
one-month peak of $1,504.71 earlier.
One Administrative Hearing Scheduled for September 2019
FOR IMMEDIATE RELEASE August 30, 2019
The Federal Deposit Insurance Corporation (FDIC) today released a
list of orders of administrative enforcement actions taken against banks
and individuals in July. There is one administrative hearing scheduled
for September 2019.
The FDIC issued a total of 14 orders and one notice of charges in
July 2019.The administrative enforcement actions in those orders
consisted of four stipulated consent orders; four terminations of
consent orders; four Section 19 orders; one stipulated civil money
penalty order; one stipulated removal and prohibition order; and one
notice of charges and hearing.
To view orders, adjudicated decisions and notices online, please visit the FDIC's Web page by clicking the link below. July 2019 Enforcement Decisions and Orders
# # #
Congress created the Federal Deposit Insurance Corporation in 1933
to restore public confidence in the nation's banking system. The FDIC
insures deposits at the nation's banks and savings associations, 5,362
as of March 31, 2019. It promotes the safety and soundness of these
institutions by identifying, monitoring and addressing risks to which
they are exposed. The FDIC receives no federal tax dollars—insured
financial institutions fund its operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information Center (877-275-3342 or 703-562-2200). PR-75-2019
European
stocks rallied on Friday after China struck an accommodating tone over
its trade war with the U.S., while British opposition lawmakers plan to
trigger an emergency debate to prevent a no-deal Brexit.
European Markets: FTSE, GDAXI, FCHI, IBEX
TICKER
COMPANY
NAME
PRICE
CHANGE
%CHANGE
VOLUME
FTSE
FTSE 100
FTSE
7192.19
7.87
0.11
378049305
DAX
DAX
DAX
11909.86
70.98
0.60
48089101
CAC
CAC
CAC
5467.95
17.98
0.33
44617656
The pan-European Stoxx 600
climbed 0.8% by the afternoon, with China-exposed basic resources
stocks jumping 2.5% as all sectors traded in positive territory.
Bucking the trend, however, were Italian stocks, which fell on the back of new political developments in the country.
Luigi
Di Maio, leader of Italy’s Five-Star Movement, said on Friday his party
would only enter a coalition with opposition PD if it agreed to a
string of policy demands, denting hopes that some political stability
would soon be restored in Rome.
Italy’s FTSE MIB was more than 0.3% lower during afternoon deals, with Banco BPM slumping to the bottom of the Stoxx 600 on a 3% loss.
More broadly, stocks worldwide are experiencing a reprieve after the Chinese Ministry of Commerce on Thursday indicated that it would not escalate the trade war with Washington, urging negotiation and collaboration in pursuit of a “calm” resolution.
U.S.
stocks were trading in positive territory on Friday as investors became
more hopeful that a resolution to the Sino-U.S. conflict would soon be
reached.
Back in Europe, investors continued to monitor the fallout fromU.K. Prime Minister Boris Johnson’s suspension of parliament. The
main opposition Labour party said on Thursday that it would trigger an
emergency debate in parliament next week, in a bid to stop Johnson
taking Britain out of the European Union without a withdrawal deal on
October 31.
The no-deal scenario is widely opposed in the British parliament, and the elevated risk of it becoming reality has sent sterling lower.
In corporate news, Reuters reported on Thursday that French lender BNP Paribas plans to bid for Deutsche Bank’s equity derivatives book, with the intention of securing a deal within the next few weeks.
On
the data front, French August CPI (consumer price index) inflation came
in at 1.2% year-on-year, slightly softer than in July but in line with
forecasts. Spanish retail sales rose by 3.2% in July from a year earlier
after climbing by 2.5% in June.
U.K. consumer sentiment surveys
revealed that confidence ebbed away from British businesses and
consumers in August as the Brexit crisis metastasized, suggesting
political turmoil is increasingly impacting the economy.
Stocks on the move
Deutsche Wohnen
shares jumped 10.6% after a German newspaper reported that an incoming
rent freeze in Berlin could be more lenient than previously planned.
Shares of Danish hospital equipment maker Ambu saw its shares rise 6% after a positive recommendation from the U.S. Food and Drug Administration (FDA).
At
the other end of the Stoxx 600 was jewelry maker Pandora, which was
trading 3% lower during the afternoon session. The Danish company
recently announced it would undergo an extensive rebrand in a bid to
boost sales.
Check out the companies making headlines before the bell: Campbell Soup
– Campbell Soup reported adjusted quarterly profit of 49 cents per
share, 8 cents above estimates, with organic sales up 2%. Revenue did
fall below Wall Street forecasts, but Campbell said it has built a solid
foundation on which to improve its results in fiscal 2020. Big Lots –
The discount retailer beat estimates by 13 cents with adjusted
quarterly profit of 53 cents per share, with revenue also above
estimates. Comparable store sales rose 1.2%, shy of the 1.9% consensus
estimate of analysts surveyed by Refinitiv. Big Lots also said it was
confident it would be able to successfully navigate tariff-related
headwinds. Dell Technologies
– Dell reported adjusted quarterly profit of $2.15 per share, well
above the consensus estimate of $1.47. The computer maker also saw
revenue beat estimates on strong sales across its computer product line.
Dell also said it is successfully mitigating the impact of tariffs
imposed by the U.S. and China. Ulta Beauty
– Ulta missed estimates by 4 cents with quarterly earnings of $2.76 per
share, with the cosmetics retailer’s revenue essentially in line.
However, comparable store sales rose less than expected, and Ulta
lowered its profit forecast as sales of color cosmetics slow. Marvell Technology
– Marvell beat estimates by 1 cent with adjusted quarterly earnings of
16 cents per share, with the chip maker’s revenue also beating
forecasts. However, Marvell gave weaker-than-expected current-quarter
guidance for both revenue and profit, due to the impact of a ban on
sales to China’s Huawei, as well as what the company calls a difficult
macroeconomic environment. Walt Disney – Disney sold its 80% stake in the YES Network to an investor group that includes the New York Yankees, Amazon.com and Sinclair Broadcast Group. Tesla
– Sixteen Tesla models will be exempt from China’s auto import tax,
according to a government statement. Separately, Tesla raised prices for
some of its vehicles in China, as the yuan drops to its lowest levels
in more than a decade. General Electric
– GE won a partial dismissal of a shareholder lawsuit that had accused
it of fraudulent accounting. The judge did give shareholders permission
to amend their complaint. Workday
– Workday reported adjusted quarterly profit of 44 cents per share, 9
cents above estimates, while the maker of human resources and financial
software also saw revenue come in above forecasts. Workday saw
subscription revenue jump 34% during the quarter, and gave a
better-than-expected forecast for current quarter subscription revenue. Groupon –
Groupon is being targeted by activist investors, according to the Wall
Street Journal. The paper said those investors are hoping to persuade
management to buy back stock, enter a strategic partnership, or sell the
company. American Outdoor Brands
– American Outdoor Brands reported adjusted quarterly profit of 3 cents
per share, 4 cents shy of estimates, with the Smith & Wesson parent
also seeing revenue fall short of Wall Street forecasts. The company
also gave a weaker than expected full year forecast.
Indian gold imports reached just 37.7t in July 2019 – 49% lower than the same month last year
The domestic gold price was 2.3% higher in July compared to June; 23% higher y-t-d
The custom duty on gold was unexpectedly raised by 2.5% in the Union Budget on 5th July
With elevated domestic gold prices and a higher custom duty, the
discount in the local gold market reached a peak of US$28/oz in July
Volatile prices and weak physical demand encouraged healthy gold futures trading on MCX: volumes touched a high of 46.8t in July
No support for consumer demand
Following weak domestic retail demand in June, gold demand suffered a
big blow in July: the custom duty on gold was unexpectedly increased by
2.5% to 12.5% in the Union Budget. Demand received no support from the
domestic price either. The spot gold price (995 fineness) maintained its
positive trajectory and breached the Rs 35,000/10gm level on 19th July –
the highest gold price on record. The price finished the month 2.3%
higher than at the end of June, and year-to-date has increased 23%.
Economic indicators, such as IIP and domestic vehicle sales, also
further pointed towards a slowing economy, adding to the woe.
With the elevated domestic gold price and a higher custom duty, there
was understandably little demand for gold in July. During the
seasonally quiet period for Indian gold demand, the discount in the
domestic market widened further, to a peak of US$28/oz in July – the
biggest discount since August 2016 (Chart 1).
Imports declined m-o-m
Indian gold imports totalled 37.7t in July 2019 – 49% lower y-o-y and
39% lower m-o-m (Chart 2). The higher custom duty and elevated gold
price level were the primary reasons for the lower levels of imports.
Imports were further dampened by muted demand from rural communities,
who diverted their spending towards the sowing of Kharif crops 1.
Breaking down July imports, bullion accounted for the lion’s share (Chart 3).
A total of ten banks imported 7.4t of bullion during the month, while
six refineries imported a meagre 3.4t of gold doré (fine gold content).
Including jewellery exports and round-tripping estimates, net gold
imports in July were 10.6t, some way off the 55.2t seen in July 2018. 2
Most of the bullion was sourced from Switzerland (69%) and the UAE
(19%) in July. But gold doré imports came from a wider range of sources,
including Africa, Middle East and Latin America. The prominent gold
doré exporting countries to India were Tanzania, Saudi Arabia and
Bolivia – accounting for a combined 82% of gold doré imports in July (Chart 4).
Record trading volumes on MCX
Driven by the volatile domestic gold price and the widening spread
between futures and spot prices, trading volumes on MCX reached an
all-time high of 46.8t on 5th July (more than three times the average
volume of 15.2t in June) (Chart 5)3. Weak
physical demand also encouraged future trading on MCX. The trading
volume on 5th July was the highest trading volume level since 13th June
2013.
Monsoon is progressing well
Having delayed its arrival, the monsoon began on a weak note in June,
ending the month at 33% below the long period average rainfall (LPA).
But the monsoon gained momentum in July, ending at just 9% below the LPA
and has further gained strength in August. As of 28th August, the
monsoon rainfall is 1% above the LPA, with Kharif crop sowing now just
2.3% lower than last year (Chart 6)4. A normal monsoon and healthy Kharif sowing bodes well for rural gold demand in Q4 2019.
Outlook for August 2019
Aligned with rising international gold price, the domestic gold price
in August breached the Rs38,000/10gm level to reach a high of
Rs38,795/10gm - an increase of 12% from end of July price. At these
price levels, and during the seasonally quiet Q3, gold imports and
demand are expected to remain muted in August and September.
Footnotes
Kharif crop season sowing season is from June to October. The seeds
are sown at the beginning of Monsoon season and crops are harvested at
end of Monsoon season.
Round-tripping is the act of exporting gold, be it jewellery, bars
or coins, with the sole purpose of melting it down before re-importing
it back to the original exporting country.
The difference in spot and futures price widened to Rs300/10 gm
providing an arbitrage opportunity for traders- where they bought gold
in the spot market and sold it at profit on MCX
Monsoon rainfall is taken from India Meteorological Department and
Kharif crop sowing is from Ministry of Agriculture with data as of week
ending on 23 August
U.S. stock index futures were higher Friday as the world’s two largest economies showed a willingness to resolve their long-running trade dispute.
At around 7 a.m. ET, Dow Jones Industrial Average futures rose 168 points, indicating a positive open of more than 189 points. Futures on the S&P 500 and Nasdaq 100 were both higher, reversing earlier losses.
Market focus is largely attuned to global trade developments, after President Donald Trump said that some trade discussions had taken place on Thursday, with more scheduled over the coming weeks.
China’s commerce ministry said Thursday it was willing to calmly resolve the long-running trade dispute, but added it was against any further escalation in tensions. The comments spurred hopes for progress in talks.
Trade
tensions have dominated market sentiment for much of this year, with
wild swings in global markets as rhetoric between world’s two largest
economies fluctuates from conciliatory to combative.
The back and
forth between China and the U.S. on the trade front has led to a
volatile month on Wall Street. Entering Friday’s session — the last one
for August — the Dow and S&P 500 were both down nearly 2% while the
Nasdaq Composite had lost around 2.5%.
The Cboe Volatility Index
(VIX), widely considered to be the best fear gauge on Wall Street,
traded as high as 24.81 in August before pulling back to around 17.
Investors also loaded up on traditionally safer assets such as gold and
silver this month. The SPDR Gold Trust (GLD) is up more than 8% in
August while the iShares Silver Trust (SLV) has surged 12.2%.
At the same time, economic data has also pointed to a global growth slowdown, ramping up concerns of a possible recession.
On
the data front, personal income figures for July will be released at
around 8:30 a.m. ET. Consumer spending for July and the latest monthly
and annualized core personal consumption expenditures (PCE) index will
be released at the same time.
Chicago PMI (Purchasing Managers’ Index) and consumer sentiment data for August will follow slightly later in the session.
13 - 16 minutes - Source: NYT
Image A Walmart in Houston.CreditCreditDavid J. Phillip/Associated Press
Good
Friday. We’ll be taking a break for Labor Day, but will be back in your
inboxes on Tuesday. (Was this email forwarded to you? Sign up here.)
Talk of a downturn could make it a reality
President
Trump’s trade war with China and the gloom hanging over the global
economy have many people thinking about the threat of recession in
America. But some worry that there’s a danger of simply talking the U.S.
into a downturn. The U.S. economy is sending mixed messages about its health:
•
G.D.P. “rose at a seasonally adjusted annual rate of 2.0 percent in the
second quarter, a solid pace but down from a 3.1 percent rate in the
first quarter and 2.9 percent overall in 2018,” the WSJ reports.
• The Economist says that some parts of the U.S. may already be in recession.
•
But American corporate profits rose in the second quarter as companies
reduced investment, the WSJ notes, and “U.S. households boosted spending
at a 4 percent annual rate in the second quarter, the strongest pace
since late 2014.”
Mr. Trump’s advisers think the gloom is being overstated. Tomas Philipson, the acting chairman of the White House’s Council of Economic Advisers, told the NYT
that reporters who have focused on possible signs of a recession
appeared “to want people to lose jobs” and “become not economically
self-sufficient.”
• There is no guarantee that a recession is
coming. And “by several measures, the American economy continues to
thrive, particularly when compared with other rich countries,” Jim
Tankersley and Jeanna Smialek of the NYT write.
• But “consumers
drive about 70 percent of economic activity in America, and if they
become spooked and pull back on purchases, growth could slow more
sharply,” they add. “Stock market losses could unsettle Americans and
cause them to clamp their wallets shut.” Mr. Trump continues to shrug off economic worries. The economy is “doing GREAT, with tremendous upside potential,” he tweeted yesterday, while suggesting that he had little intention of backing down from the trade war with China.
But if the worst happens, he may have no choice.
“The trade war is categorically the single biggest risk” to the
economy, Seth Carpenter, the chief U.S. economist at UBS, told the NYT,
adding that reducing tariffs could provide economic relief.
Image Assemblywoman
Lorena Gonzalez, the sponsor of a California bill that would force
gig-economy companies to treat drivers as employees.CreditRich Pedroncelli/Associated Press
The expensive fight to keep gig workers as contractors
Uber,
Lyft and DoorDash each pledged $30 million to fight legislation in
California that would force them to treat their drivers as employees
instead of independent contractors, Kate Conger of the NYT reports.
•
The companies plan to fund a ballot initiative that would essentially
exempt them from the proposed law, which is part of California’s
Assembly Bill 5.
• “The companies said their proposed ballot
initiative would preserve drivers’ ability to set their own schedules,
while Uber and Lyft would offer a concession on minimum wage standards,
health benefits and collective bargaining rights,” Ms Conger writes.
•
“But the bill’s sponsor, Assemblywoman Lorena Gonzalez, a Democrat from
San Diego, has said she does not foresee a deal with the companies,”
Ms. Conger adds. The companies oppose classifying drivers as employees.
As contractors, drivers receive almost no regular benefits, such as
sick pay or vacation time, which saves businesses like Uber and Lyft
millions of dollars. Both have said that categorizing drivers as
full-time workers is a risk to their businesses. But time is running out. A
vote on the bill is expected before the legislative session ends in
mid-September, and the companies’ ballot has not yet been drafted.
Image
A drilling rig in Texas.CreditJames Durbin/Reporter-Telegram, via Associated Press
Parts of the energy industry don’t like Trump’s methane rollback
The
Trump administration announced plans to relax Obama-era methane
emissions rules this week, in a move that might be expected to be
welcomed by oil and gas producers. But not all of them approve, Cliff Krauss of the NYT writes. The benefit of the rollback to them isn’t clear cut.
It depends on whether the new rules would do more to benefit domestic
energy production or tarnish the reputation of natural gas as a clean
fuel:
• Natural gas often escapes unburned during production and
distribution. Its main component is methane, which is far more potent
than carbon dioxide as a greenhouse gas.
• Removing constraints on its emissions could hurt the argument that gas should replace coal in generating power. Many global energy companies distanced themselves
from the administration’s decision, Mr. Krauss writes. Royal Dutch
Shell and BP said they supported regulation of methane emissions in some
form, citing their commitments to environmental causes. But smaller domestic companies support the rollback, Mr. Krauss adds. They often produce as little as 10 barrels a day and say they can’t afford higher compliance costs. The difference in opinion mirrors larger divides over Mr. Trump’s other deregulation efforts,
Mr. Krauss writes. Oil executives have shown little enthusiasm for new
rules that could open the Arctic National Wildlife Refuge and deepwater
areas off the Atlantic coast for further exploration.
New accusations that Huawei stole U.S. tech
Federal prosecutors are studying new allegations that Huawei stole American technology, according to Dan Strumpf of the WSJ, citing unidentified sources.
•
“Among the situations being examined are episodes in which Huawei was
accused of stealing intellectual property from multiple people and
companies over several years.”
• The inquiries “suggest that the
government is investigating aspects of Huawei’s business practices that
weren’t covered in indictments of Huawei issued earlier this year.”
•
“They include alleged theft of smartphone-camera technology from a
Portuguese multimedia producer and Huawei’s practices of recruiting
employees from rival companies, the people said.” Huawei can’t catch a break from the U.S.
right now. It remains on the so-called U.S. entity list, which means
American companies can’t sell it components and software without a
license. (However, the Trump administration recently extended a waiver
that allows some transactions for another 90 days.) But China isn’t sitting still.
It plans to release its own “unreliable-entity list,” which would
restrict foreign organizations from dealing with Chinese counterparts.
And Beijing is reportedly studying Chinese companies’ exposure to U.S. suppliers to minimize the effect of current and future bans on purchases. More:
A court case brought by the Justice Department against the Chinese chip
maker Fujian Jinhua Integrated Circuit over theft of American
intellectual property, which was announced 10 months ago, still hasn’t gone to court. And the Chinese authorities effectively expelled a WSJ reporter after he wrote an article about a cousin of President Xi Jinping.
Image
CreditGeorge Frey/Getty Images
How Amazon is taking on FedEx and UPS
When
FedEx decided this month to cut ties to Amazon, it brought into focus a
new reality: that the e-commerce giant is now a shipping force in its
own right and a huge rival to incumbents, according to Sebastian Herrera and Vanessa Qian of the WSJ.
•
“Amazon has quietly blanketed the nation with hundreds of sprawling
suburban warehouses and neighborhood package-sorting centers, flooded
the streets with tens of thousands of vans and even taken to the
airways,” Mr. Herrera and Ms. Qian write.
• Amazon has increased
the number of its delivery facilities to roughly 400, from about 65 in
2013 , according to the consulting firm MWPVL International.
•
Over the past decade, Amazon’s spending on shipping and fulfillment has
risen to about $61.7 billion in 2018, from $5.5 billion in 2010. That
equals about a quarter of Amazon’s revenue.
• Amazon now handles
an estimated 4.8 million packages every day in the U.S., according to
MWPVL, as the company now delivers nearly half of its orders itself.
Investigators focus on how Epstein recruited girls
Since Jeffrey Epstein’s death, the federal authorities have refocused their investigation
on the more than half-dozen employees, girlfriends and associates who
prosecutors say recruited girls for him to abuse, the NYT reports. Mr. Epstein relied on a network of underlings, according
to civil suits. Some trained girls how to sexually pleasure him; others
ensured that he always had a fresh supply of teenage girls at the
ready. There was a hierarchy to the sex-trafficking ring,
accusers say. At the top was Ghislaine Maxwell, Mr. Epstein’s longtime
companion. Below her was Sarah Kellen, referred to as the “lieutenant”
in one lawsuit, who is accused of managing contact information for
girls. The federal authorities are eyeing possible charges
that include sex trafficking and sex trafficking conspiracy, the NYT
reports, citing people with knowledge of the investigation. So far,
federal prosecutors have not charged or named any co-conspirators.
Deals
•
Disney agreed to sell its stake in YES Network, the New York Yankees’
regional sports network, to a group including Amazon, the Sinclair
Broadcast Group and the team, for $3.47 billion. (CNBC)
•
G.E. said it planned to sell an aircraft-financing unit with $3.6
billion in receivables to Apollo Global Management and Athene Holding. (Bloomberg)
•
Sony plans to sell its $760 million stake in Olympus back to the
imaging company, a move called for by Third Point’s Dan Loeb. (Reuters)
•
Activist investors are taking stakes in Groupon with a goal of pushing
the e-commerce company to consider share buybacks or a sale of itself. (WSJ)
• CNH Industrial, the Italian-American industrial vehicles maker, is reportedly considering a spinoff of its Iveco truck unit. (Reuters) Politics and policy
•
The Democratic National Committee blocked plans to let Iowans vote by
phone in next year’s presidential caucuses, citing cybersecurity
concerns. (NYT)
• The Trump administration reportedly plans to unveil a new rule expanding the number of Americans eligible for overtime pay. (WSJ)
•
The Justice Department’s watchdog criticized James Comey for leaking
memos about his interactions with President Trump to people outside the
F.B.I. (NYT)
•
Mr. Trump authorized the creation of a U.S. Space Command yesterday,
describing it as a precursor to a full-fledged space branch of the
military. (NYT)
• Joe Biden dismissed a report that he has been telling an embellished story about a war hero while on the campaign trail. (NYT, WaPo) Brexit
•
Legal experts say that court challenges to a British government plan to
suspend Parliament, which would hurt efforts to block a no-deal Brexit,
would be unlikely to succeed. (FT)
•
Some members of the governing Conservative Party have allied themselves
with the opposition Labour Party to help prevent Britain from leaving
the E.U. without a deal. (FT)
• Negotiations between British and European officials over Brexit will take place twice a week starting in September. (Politico)
• Why Britain’s economy isn’t ready for a no-deal Brexit. (FT) Tech
• India’s restaurants are rebelling against food delivery apps like Zomato and Uber Eats. (NYT)
•
YouTube is removing its paywall for original content in favor of an
ad-supported model, rather than chasing subscription-based rivals like
Netflix. (FT)
• Apple will unveil its latest iPhones on Sept. 10. (Bloomberg)
• Here’s what the U.S. could learn from Europe about antitrust regulation of Big Tech. (Politico)
•
Uber’s C.E.O., Dara Khosrowshahi, said “it sure looked like” the
company’s former engineer Anthony Levandowski had taken information on
self-driving cars from Google. (Bloomberg) Best of the rest
•
State attorneys general say that a proposed deal for Purdue Pharma to
settle more than 2,000 lawsuits over its role in the opioid crisis
doesn’t offer enough money. (WSJ)
• The marketing practices of the e-cigarette manufacturer Juul are reportedly under investigation by the F.T.C. (WSJ)
• “Fears of a world domination by a handful of asset managers are overblown.” (Institutional Investor)
• China’s renminbi looks set to suffer its biggest monthly fall in value in more than 25 years. (FT)
• Most people who start successful tech companies are middle-aged. (NYT)
•
“American workers under 35 report being happier with their paychecks
than people over 55 for the first time since at least 2011.” (WSJ)
FMario
Draghi (C), president of the European Central Bank (ECB)speaks flanked
by Luis de Guindos, vice president of the European Central Bank (ECB),
and Christine Graeff, director general for communications to the media
following a meeting of the ECB Governing Council at ECB headquarters of
March 7, 2019 in Frankfurt, Germany.
Thomas Lohnes | Getty Images
Two
top officials have tried to temper market expectations of an immediate
quantitative easing (QE) package being launched by the European Central Bank (ECB). Earlier in the summer, ECB President Mario Draghi
said he was looking at further options to prop up the 19-member euro
zone economy, outlining that one of the possibilities included a new
program of asset purchases to stimulate lending and boost inflation.
Investors cheered his dovish comments with ECB members like François
Villeroy de Galhau highlighting that a major bond-buying program, also
known as QE, could come in the proceeding months if needed.
But
just as investors gear up for the ECB’s next meeting on September 12,
two notably hawkish members of the euro zone’s central bank have decided
to inject some reality back into the debate.
“In my opinion,
based on the current data, it is much too early for a huge package,”
executive board member Sabine Lautenschlaeger said in an interview with
Market News this week which was published on the ECB’s website Friday.
“I am still convinced that the Asset Purchase Programme (APP) is the
ultima ratio, and it should only be used if you have a risk of
deflation; and the risk of deflation is nowhere to be seen now.”
Fellow
ECB member and Dutch central bank chief Klaas Knot added his own words
of caution. “If deflation risks come back on the agenda then I think
the asset-purchase programme is the appropriate instrument to be
activated, but there is no need for it in my reading of the inflation
outlook right now,” he told Bloomberg Thursday. But there’s only been a muted market response
since these comments with European stocks posting gains on both
Thursday and Friday. Analysts at Rabobank put this down to traders
already being aware that there wasn’t unanimity among the ECB’s board
members on QE.
They also highlighted in a research note that the
reason the hawks “are stating their objections so vociferously is that
they know that it is very likely that the APP will imminently be
re-started.”
If implemented, it would be the second time in its
history that the central bank has announced a massive program to
directly inject money into the euro zone economy.
Last week, Erik
Nielsen, group chief economist at UniCredit, predicted QE would be
launched in September and could between 300 billion and 400 billion
euros ($333.07 and $444.10 billion) over a nine-month period.
The
euro area is still struggling to deal with its low inflation levels and
to grow at a significant rate. According to the central bank’s latest
forecasts, out in June, headline inflation is set to reach 1.3% in 2019 —
the ECB’s target is “below but close to 2%.” In terms of growth, the
central bank is expecting growth to reach 1.2% this year — having grown
at a rate of 1.8% in 2018.
Silvia Dall’Angelo, senior economist at
Hermes Investment Management, told CNBC via email last week that he
wouldn’t rule out an open-ended approach by the ECB.
“An ECB
official recently made the case for a more forceful move, a bigger
rather than smaller programme is likely, say 45 billion euros per month
for a year,” he said.
U.S. stock index futures
were higher Friday morning, as the world’s two largest economies showed
a willingness to resolve their long-running trade dispute.
At around 05:30 a.m. ET, Dow futures rose 138 points, indicating a positive open of more than 159 points. Futures on the S&P and Nasdaq were both higher, reversing earlier losses.
Market focus is largely attuned to global trade developments, after President Donald Trump said that some trade discussions had taken place on Thursday, with more scheduled over the coming weeks.
China’s commerce ministry said Thursday it was willing to calmly resolve the long-running trade dispute, but added it was against any further escalation in tensions. The comments spurred hopes for progress in talks.
Trade
tensions have dominated market sentiment for much of this year, with
wild swings in global markets as rhetoric between world’s two largest
economies fluctuates from conciliatory to combative.
At the same time, economic data has also pointed to a global growth slowdown, ramping up concerns of a possible recession.
On
the data front, personal income figures for July will be released at
around 8:30 a.m. ET. Consumer spending for July and the latest monthly
and annualized core personal consumption expenditures (PCE) index will
be released at the same time.
Chicago PMI (Purchasing Managers’ Index) and consumer sentiment data for August will follow slightly later in the session.
In corporate news, Campbell Soup and Big Lots are among the companies scheduled to publish their latest quarterly results before the opening bell.
Stocks in Asia were mixed on Friday as Beijing hinted that it will not retaliate against the latest round of tariffs from Washington for now.
In Japan, the Nikkei 225 rose 1.19% to close at 20,704.37 as shares of index heavyweight and robot maker Fanuc surged 2.73%. The Topix index also added 1.46% to end its trading day at 1,511.86.
Similar gains were seen in South Korea, where the Kospi finished the session 1.78% higher at 1,967.79 as chipmaker SK Hynix saw its stock soar 5.59%.
The
Bank of Korea left its benchmark interest rate unchanged on Friday, a
decision that was in line with expectations of analysts surveyed by
Reuters. The central bank had cut its base rate for the first time in
three years in July.
Australia’s S&P/ASX 200 jumped 1.49% to close at 6,604.20.
Mainland Chinese shares, on the other hand, slipped on the day. The Shanghai composite
was down 0.16% to about 2,886.24 and the Shenzhen component shedding
0.35% to 9,365.68. The Shenzhen composite fell 0.744% to approximately
1,579.25.
Hong Kong’s Hang Seng index was fractionally higher, as of its final hour of trading, with the city remaining in a state of turmoil as planned protests for the weekend were cancelled and pro-democracy activist Joshua Wong was arrested.
Overall, the MSCI Asia ex-Japan index gained 0.95%.
Positive signals from Beijing
Gao
Feng, a spokesman for China’s Ministry of Commerce, said Thursday that
Beijing is willing to resolve its trade fight with Washington calmly,
indicating that the Chinese are more interested in negotiations than
they are on retaliating.
“We firmly reject an escalation of the
trade war, and are willing to negotiate and collaborate in order to
solve this problem with a calm attitude,” Feng said, according to a CNBC
translation of his Mandarin-language remarks. He noted that the Chinese
and U.S. trade delegations have maintained “effective” communication.
Still, one strategist urged caution for investors.
“We have been telling our clients to somewhat de-risk portfolios a
month ago,” Vasu Menon, executive director of investment strategy at
Singapore’s OCBC Bank, told CNBC’s “Squawk Box” on Friday.
“In
some ways, we are neutral,” Menon said. “We’re not saying you should get
out of the market completely. I think that’s not a good idea,
fundamentals are not that bad right now. What’s dragging the market down
is sentiment.”
Meanwhile, a closely watched yield curve inversion
in U.S. Treasurys remained, with the yield on the 10-year Treasury note
below that of the 2-year note’s rate. That has raised concerns among
some investors as the phenomenon has historically preceded a recession.
The yields on the 10-year and 2-year Treasury notes were last at 1.5298%
and 1.5359%, respectively.
Asia-Pacific Market Indexes Chart
TICKER
COMPANY
NAME
PRICE
CHANGE
%CHANGE
NIKKEI
Nikkei 225 Index
NIKKEI
20704.37
243.44
1.19
HSI
Hang Seng Index
HSI
25724.73
21.23
0.08
ASX 200
S&P/ASX 200
ASX 200
6604.20
96.80
1.49
SHANGHAI
Shanghai
SHANGHAI
2886.24
-4.68
-0.16
KOSPI
KOSPI Index
KOSPI
1967.79
34.38
1.78
CNBC 100
CNBC 100 ASIA IDX
CNBC 100
7696.61
81.35
1.07
Currencies and oil
The U.S. dollar index,
which tracks the greenback against a basket of its peers, was at
98.579, recovering from lows below 98.0 seen earlier in the week.
The Japanese yen traded at 106.37 against the dollar after weakening from levels below 106.2 yesterday, while the Australian dollar changed hands at $0.6712 after seeing an earlier high of $0.6736.
Oil prices were lower in the afternoon of Asian trading hours, with international benchmark Brent crude futures slipping 0.36% to $60.86 per barrel and U.S. crude futures losing 0.67% to $56.33 per barrel. — Reuters and CNBC’s Evelyn Cheng contributed to this report.
Obtains Consent to Asset Freeze Preserving Retail Investor Assets
Washington D.C., Aug. 29, 2019 —
The Securities and Exchange Commission today
announced it has filed charges and obtained a consented-to asset freeze
against San Diego-based ANI Development LLC, its principal, Gina
Champion-Cain, and a relief defendant, for operating a multi-year $300
million scheme that defrauded approximately 50 retail investors.
According to the SEC’s complaint, beginning in 2012, defendants
fraudulently raised hundreds of millions of dollars from investors by
claiming to offer investors an opportunity to make short-term,
high-interest loans to parties seeking to acquire California alcohol
licenses. In truth, the SEC alleges, the investment opportunity was a
sham. Contrary to defendants’ representations, the SEC asserts,
defendants did not use investor funds to make loans to alcohol license
applicants. Instead, Cain directed significant amounts of investor funds
to a relief defendant that she controlled.
“The SEC took emergency action to stop what we allege is an egregious
fraud,” said Los Angeles Regional Director Michele Wein
Layne. “Importantly, the agreement we reached with the defendants to
freeze their assets during the litigation will give investors the best
chance to maximize their recovery going forward.”
The SEC’s complaint, filed in federal district court in San Diego on
August 28, 2019, charges defendants with violating the antifraud
provisions of Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933.
Without admitting any violations of federal law, defendants have agreed
to preliminary injunctions against violations of these provisions of the
federal securities laws, asset freezes, and the appointment of a
receiver over ANI and the relief defendant to marshal and preserve
assets. The stipulated order is subject to court approval. The complaint
seeks disgorgement of allegedly ill-gotten gains and prejudgment
interest, monetary penalties, and permanent injunctions.
The SEC’s ongoing investigation is being conducted by Alec Johnson
and Louis Boyarsky of the SEC’s Los Angeles Regional Office and
supervised by Marc J. Blau. The SEC’s litigation will be led by Kathryn
Wanner.
The Securities and Exchange Commission today charged
a Tallahassee-based investment adviser firm and its two former
principals with defrauding investors, most of whom were retired NFL
players who had joined a class-action lawsuit against the league
claiming they suffered brain injuries as a result of concussions.
The SEC charged Cambridge Capital Group Advisors, LLC (f/k/a
Cambridge Capital Advisors, LLC); Cambridge’s president Phillip Timothy
Howard, a Florida attorney who represented the retired players in the
class action lawsuit; and Don Warner Reinhard, a former registered
investment adviser previously barred by the SEC, with defrauding 20
investors in two proprietary hedge funds operating out of Howard’s law
offices. According to the SEC’s complaint, the defendants advertised
that the funds would invest in a variety of instruments, but unbeknownst
to investors, in fact invested almost exclusively in settlement advance
loans to more than 70 of Howard’s NFL class-action clients.
As alleged, the defendants represented that Reinhard was an
“extremely successful investment manager,” but failed to mention that he
had served jail time for bankruptcy and tax fraud, and had been barred
by the SEC from working for any investment adviser firm. The SEC
further alleges that Howard defrauded investors by borrowing $612,000 in
undisclosed personal mortgage loans from the funds, which he never
repaid, and that Howard and Reinhard used investor funds to pay
themselves fabricated “broker fees” on settlement advance loans to
Howard’s legal clients. Howard and Reinhard allegedly raised $4 million
from the retired NFL players, about half of whom rolled over their NFL
401(k) accounts to the hedge funds.
“We allege that Cambridge, Howard and Reinhard defrauded these
particularly vulnerable investors, many of whom invested their
retirement savings,” said Eric I. Bustillo, Director of the SEC’s Miami
Regional Office. “Instead of investing all of the funds’ assets as
promised, Howard and Reinhard used a significant portion of investor
money to line their own pockets.”
The SEC’s complaint filed in federal district court in the Northern
District of Florida charges Howard, Reinhard, and Cambridge with
violating the anti-fraud provisions of the federal securities laws, and
seeks permanent injunctions, disgorgement of allegedly ill-gotten gains,
prejudgment interest, and financial penalties.
The SEC’s investigation was conducted by David P. Staubitz and Mark
Dee, under the supervision of Chedly C. Dumornay and Glenn S. Gordon of
the SEC’s Miami Regional Office. The litigation will be led by Amie R.
Berlin, under the supervision of Andrew O. Schiff.
The Securities and Exchange Commission today charged
Live Well Financial, Inc. and its CEO, Michael Hild, both of Richmond,
Va., with perpetuating a multi-million dollar bond mismarking scheme
against Live Well's short-term lenders. The complaint also charges Live
Well's CFO, Eric Rohr, and Executive Vice President, Darren Stumberger,
both of whom consented to partial judgments against them.
The SEC alleges that Live Well, under the direction of Hild,
fraudulently inflated the value of its portfolio of complex
reverse-mortgage bonds. According to the complaint, Hild directed Live
Well to submit falsely inflated bond prices to an industry-leading
pricing service, who he knew would simply publish the prices Live Well
gave it. As Hild was aware, most of Live Well's lenders relied on those
inflated prices in loaning money to Live Well through repurchase
securities transactions. Through this alleged scheme – which Hild called
a "self-generating money machine" – Live Well was able to borrow tens
of millions of dollars more from its lenders through the securities
transactions than it could have borrowed had the bonds been priced
accurately and was able to fund lavish compensation packages for Hild
and others. During the 18 months following the implementation of the
scheme, Live Well's bond portfolio shot up in value from $71 million to
$570 million. According to the complaint, the fraudulent scheme
collapsed in 2019 when Live Well's lenders sought to sell the bonds back
to Live Well and Live Well did not have the requisite funds to complete
the repurchase securities transactions, leaving its counterparties
exposed to losses in excess of $80 million.
"Hild's 'self-generating money machine' was a brazen fraud through
which Hild enriched himself at the expense of Live Well's
counterparties," said Daniel Michael, Chief of the SEC's Complex
Financial Instruments Unit. "This case starkly underscores the risks of
improperly valuing assets, and we will remain focused on pursuing those
who misrepresent the value of their securities."
The SEC's complaint charges Live Well, Hild, Rohr, and Stumberger,
with violations of the anti-fraud provisions of the federal securities
laws. The complaint seeks a permanent injunction, disgorgement of
ill-gotten gains along with prejudgment interest, financial penalties,
and officer and director bars against Hild and Rohr. Stumberger and Rohr
have consented to the entry of a partial judgment that permanently
enjoins them from future violations of the charged provisions of the
federal securities laws.
In a parallel action, the U.S. Attorney's Office for the Southern
District of New York today announced criminal charges against Hild,
Rohr, and Stumberger.
The SEC's investigation was conducted by Gregory Smolar and Jeff
Leasure of the Complex Financial Instruments Unit and Robert Gordon of
the Atlanta Regional Office under the supervision of Natalie Brunson and
Reid Muoio of the Complex Financial Instruments Unit. The litigation is
being conducted by Mr. Gordon, Mr. Smolar, and H.B. Roback of the
Atlanta Regional Office. The SEC acknowledges the assistance and
cooperation of the U.S. Attorney's Office for the Southern District of
New York and the FBI in this matter.
The Securities and Exchange Commission
today announced settled charges with Bitqyck Inc. and its founders, who
allegedly defrauded investors in securities offerings of two digital
assets, Bitqy and BitqyM, and operated an unregistered exchange to
permit trading in one of them, a digital token called Bitqy.
According to the SEC’s complaint, Bitqyck and founders Bruce Bise and
Sam Mendez created and sold Bitqy and BitqyM in unregistered
securities offerings to more than 13,000 investors, raising more than
$13 million. Investors allegedly received $4.5 million for referring new
investors to Bitqyck but collectively lost more than two-thirds of
their investment in the Dallas-based company.
The SEC’s complaint alleges that Bise and Mendez misrepresented
QyckDeals, a daily deals platform using Bitqy, as a global online
marketplace, and falsely claimed that each Bitqy token provided
fractional shares of Bitqyck stock through a “smart contract.” The
complaint alleges that the defendants falsely told investors that BitqyM
tokens provided an interest in a Bitqyck cryptocurrency mining facility
powered by below-market rate electricity. In reality, Bitqyck did not
have access to discounted electricity and didn’t own any mining
facility. Bitqyck, aided and abetted by its founders, also is alleged
to have illegally operated TradeBQ, an unregistered national security
exchange offering trading in a single security, Bitqy.
“Because digital investment assets represent a new and exciting
technology, they can be very alluring, especially if investors believe
they are getting in on the ground floor and will own part of the
operations,” said David Peavler, Director of the SEC’s Fort Worth
Regional Office. “We allege that the defendants took advantage of
investors’ appetite for these investments and fraudulently raised
millions of dollars by lying about their business.”
The SEC’s complaint, filed in U.S. District Court for the Northern
District of Texas, seeks permanent injunctions, return of allegedly
ill-gotten gains with interest, and civil money penalties. Without
admitting or denying the allegations, Bitqyck, Bise and Mendez consented
to final judgments agreeing to all the injunctive relief. Bitqyck also
consented to an order requiring that it pay disgorgement, prejudgment
interest and a civil penalty of $8,375,617. Bise and Mendez consented
to the entry of an order that they each pay disgorgement, prejudgment
interest and a civil penalty of $890,254 and $850,022, respectively.
The SEC’s investigation was conducted by David Hirsch, Melvin Warren,
and Carol Hahn with litigation support from Keefe Bernstein, and
supervised by Scott F. Mascianica and Eric R. Werner of the SEC’s Fort
Worth Regional Office. The SEC appreciates the assistance of the Texas
State Securities Board, and the State of Hawaii Office of the Securities
Commissioner.
Democracy
activist Joshua Wong addresses crowds outside Hong Kong’s legislature
during a demonstration against the extradition bill on June 17. (Thomas
Peter/Reuters)
HONG KONG —
Joshua Wong and Agnes Chow, who rose to prominence as the student
leaders of pro-democracy street protests five years ago, were arrested
Friday, their organization said in a statement, in a widening crackdown
on activists and demonstrators in Hong Kong.
The
group, Demosistō, did not immediately have details on their charges. A
spokeswoman for the Hong Kong Police Force could not immediately confirm
the arrests and the circumstances under which the pair were detained.
Wong was seized at roughly 7:30 a.m. Friday “when he was suddenly pushed into a private car on the street,” his organization said.
Chow was arrested a short time later at her home, Demosistō added. Both
are being held in the Hong Kong police headquarters in the Wan Chai
district.
The group has sought help from its lawyers.
The
arrests come at a tense time in the semiautonomous Chinese territory,
where an official proposal to allow extraditions to mainland China triggered months of protests that have increasingly descended into street battles with police.
As
the demonstrations have turned violent, and grown to encompass a
broader push for democracy in Hong Kong, authorities have stepped up
arrests and the use of force. China’s government has issued increasingly strident threats in an effort to quell the protests.
Wong
rose to prominence as the face of the 2014 Umbrella Movement, a 79-day
street occupation aimed at securing universal suffrage for Hong Kong. He
was charged and sentenced several times in connection with those
protests, and served three stints in jail. Most recently, on May 16,
Wong was sentenced to two months in prison after losing an appeal
against a prison term for contempt of court. He was released in June.
Chow was arrested along with Wong and Nathan Law, another party leader, in 2017 ahead of Chinese leader Xi Jinping’s visit to the city, but was never charged or imprisoned.
Agnes
Chow, right, and Joshua Wong outside government offices in Hong Kong in
June. The pair were arrested Friday in a widening crackdown on the
pro-democracy movement. (Kin Cheung/AP)
This time, the protest movement in Hong Kong has taken a leaderless form
— in part to avoid arrests and detentions that plagued leaders like
Wong in the past, and also to empower a broader base of
participants. Demosistō members, unlike in 2014, have not delivered
speeches at rallies, nor have they been prominent faces on the front
lines, but have used the group’s social media presence to help the
movement gain awareness globally.
“We’ll use
our influence and connections with the international community to tell
the world about what’s happening,” Chow said in an earlier interview
with The Washington Post. “It’s still very important.”
Wong
and Chow were due to travel to Washington next month, where they were
to meet with lawmakers and participate in a Congressional Executive
Committee on China hearing on the Hong Kong Human
