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Jul 15, 2020

DealBook: The ‘Moment of Truth’

18-22 minutes - Source: NYT

Credit...Jim Watson/Agence France-Presse — Getty Images

‘It’s just very peculiar times’
Three of America’s six biggest banks released second-quarter earnings yesterday. The others report today and tomorrow. Based on the first batch of results, there’s trouble ahead.
Citigroup, JPMorgan Chase and Wells Fargo set aside $28 billion for loan-loss provisions, on top of $19 billion earlier this year. That pummeled second-quarter profits, which were collectively down more than 80 percent versus the same time last year. There could be some “kitchen sinking” — that is, dumping all the bad news into one quarter so future periods look better by comparison. Even so, there was little to be hopeful about.
It could get worse before it gets better. Jamie Dimon of JPMorgan said that unprecedented economic stimulus measures had delayed the effects he’d expect in a “normal recession,” like falling incomes, savings and property prices. “It’s just very peculiar times,” he told analysts on a conference call. If the economy picks up before stimulus programs expire, the banks’ loss provisions could be excessive. But that’s not what executives seemed to suggest:
• “May and June will prove to be the easy bumps in terms of this recovery. And now we’re really hitting the moment of truth, I think, in the months ahead.” — Jennifer Piepszak, JPMorgan’s C.F.O.
• “Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter.” — Charlie Scharf, Wells Fargo’s C.E.O.
• “I don’t think anybody should leave any bank earnings call this quarter simply feeling like the worst is absolutely behind us and it’s a rosy path ahead.” — Mike Corbat, Citigroup’s C.E.O.
It’s not all bad. Trading and underwriting revenue surged, helping JPMorgan and Citi offset the gloom elsewhere. Retail-focused Wells Fargo wasn’t as lucky, recording its first quarterly loss in more than a decade. That could be particularly promising for Goldman Sachs, which reports today, and Morgan Stanley, which is up tomorrow. But ominously, lenders increased loss provisions for business loans more in percentage terms than they did for consumer debt, suggesting that they expect more corporate bankruptcies. (The Fed governor Lael Brainard warned as much yesterday).
Fun fact: Who needs cash when you’re stuck at home? Wells Fargo said that A.T.M. transactions were down 28 percent from a year ago, but the average withdrawal per visit was higher.
Credit...Mark Lennihan/Associated Press
A European court sided with the iPhone maker today, potentially saving it a $15 billion tax bill. The court ruled that the E.U. competition authority failed to show that Ireland had unfairly given Apple low taxes.
It’s a big loss for Margrethe Vestager, the E.U. competition chief. She has regularly targeted such arrangements, angering tech executives like Tim Cook of Apple, who derided the campaign as “total political crap.” (Even so, the bill would have amounted to a bit more than the tech giant earns in a quarter.)
The same court overturned a similar demand involving Starbucks last year. The directorate Ms. Vestager runs “did not succeed in showing to the requisite legal standard that there was an advantage,” the court ruled. Expect Ms. Vestager to appeal the decision.
Credit...Maddie Meyer/Getty Images
After opposition from universities, Silicon Valley and 20 states, President Trump backed off a hard-line immigration proposal.
The White House abandoned a policy that would have stripped international students of their visas if they did not attend some classes in person. “If they’re not going to be a student or they’re going to be 100 percent online, then they don’t have a basis to be here,” Ken Cuccinelli, the acting deputy secretary of homeland security, said this month.
The rules could have led to a huge loss in international students, a valuable source of income for schools and skilled workers for American businesses, particularly tech companies. The Times notes that the one million foreign students who enroll at U.S. schools each year contribute $41 billion to the economy and support more than 458,000 jobs.
Universities sued to challenge the policy, led by Harvard and M.I.T., which argued that it was an effort to force schools to reopen. The pressure grew when tech giants like Facebook and Google joined in. Then, 15 Republican lawmakers urged the White House to reverse course.
But damage has been done, The Washington Post columnist Catherine Rampell argues. Other immigration hurdles — including delays in visa processing and travel bans — will most likely contribute to a huge drop in international student enrollment this fall. (How steep? Between 63 percent and 98 percent, according to a new analysis.)
Moderna’s Covid-19 vaccine showed promise in a clinical trial. The vaccine, the first to be tested on humans, provoked a notable immune response and appeared safe for the first 45 people to receive it, researchers wrote in the New England Journal of Medicine. It is to move to Phase 3 trials this month.
President Trump signed a Hong Kong sanctions bill. The new law gives him additional power to punish Chinese officials over a security act that gives Beijing more control over the territory. (Separately, The Times said it would move part of its Hong Kong news operation to Seoul, South Korea, because of concerns over the law.)
A federal judge scuttled Harvey Weinstein’s civil settlement. Judge Alvin Hellerstein of the Southern District of New York picked apart the $25 million proposal, questioning its overall fairness and suggesting that the agreement was misconceived.
Delta said its comeback had stalled. The U.S. airline reported a $5.7 billion loss for its latest quarter and said it would scale back its flight schedule.
The N.F.L. has no plan for its upcoming season. Training camps are scheduled to start July 28, but the league has yet to figure out social distancing guidelines or the logistics that other leagues developed as part of their restarts.
Credit...Daniel Leal-Olivas/Agence France-Presse — Getty Images
Britain, reversing course, said yesterday that it would strip Huawei technology from its 5G wireless network. President Trump claimed a victory in his battle against the Chinese tech giant.
Prime Minister Boris Johnson bowed to political pressure, after saying Huawei products could be used in Britain’s networks on a limited basis. Huawei equipment purchases will be banned from December, and existing gear will be removed by 2027.

• British critics, including in its national security agencies, worry that Huawei products could be used to spy for Beijing. The company strongly denies those allegations.
Mr. Trump celebrated the announcement. “We convinced many countries, and I did this myself for the most part, not to use Huawei, because we think it’s an unsafe security risk,” he said at a news conference.
The move ends a relationship that began in 2005. Britain was the first European country to let Huawei sell products to its companies. Just last month, the Chinese company agreed to fund a $1.25 billion research center at Cambridge. And John Browne, the former BP chief and an elder statesman of British business, served as chairman of Huawei’s U.K. board — though he will now step down.
Britain faces potentially big consequences. It may have repaired strains in its relationship with the U.S., but the ban will add costs and delays to its 5G rollout. And Beijing threatened that Britain would “bear the consequences” of treating China with hostility.
For the past 25 years, Bank of America has surveyed fund managers about how they are positioning portfolios. When a consensus emerges, the bank’s pollsters say, investors generally profit by betting against it.
Buying tech stocks is now the “longest ‘long’ of all-time,” the latest survey found. Nearly three-quarters of fund managers agreed that holding big U.S. tech stocks was the “most crowded” trade in the market, the survey’s strongest ever consensus. For contrarians, that’s a sign that it’s time to sell, Bank of America says.
Tech giants’ dominance is a risk to long-term returns, Goldman Sachs analysts write in a new research note. The five largest stocks in the S&P 500 index — Alphabet, Amazon, Apple, Facebook and Microsoft — now account for 23 percent of its market cap. “We believe further equity upside would require participation from a broader subset” of the index, the analysts say. (For what it’s worth, Goldman concludes that the S&P 500 will generate a 6 percent annual return over the next decade, versus nearly 14 percent over the past decade and 10 percent since 1960.)
• Google agreed to invest $4.5 billion in Jio, the digital services arm of India’s Reliance Industries, joining the likes of Facebook and Silver Lake. (Bloomberg)
• Virgin Atlantic secured a $1.5 billion financial lifeline, made up of cash and concessions from partners like payments processors. (NYT)
• Electric-car makers like Fisker and Rivian are raising billions without having sold a single vehicle. (Axios)
Politics and policy
• Joe Biden unveiled a $2 trillion climate plan focused on expanding green energy as a way to bolster the economy. (NYT)
• The lobbyist Jack Abramoff pleaded guilty to illegally promoting a cryptocurrency. (Bloomberg)
• A German court ruled that Tesla had exaggerated promises about the capabilities of its autonomous vehicle technology. (NYT)
• Google reportedly prioritized YouTube in video search results to give it more leverage in negotiations with content providers. (WSJ)
Best of the rest
• BlackRock said that it recently voted against directors at 53 companies for failing to prepare for climate change, and threatened the same for 191 more. (Bloomberg)
• Many U.S. retailers have ended “hero” bonuses for essential workers, despite a surge in coronavirus cases. (NYT)
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Market Insider | Biggest Moves Premarket: Stocks making the biggest moves in the premarket: Moderna, UnitedHealth, Goldman Sachs & more

Peter Schacknow

Take a look at some of the biggest movers in the premarket:

Moderna (MRNA) – The drugmaker’s Covid-19 vaccine candidate produced neutralizing antibodies in all 45 patients involved in an early study, according to newly released data. Those antibodies were similar to those seen in patients who have recovered from Covid-19.
UnitedHealth (UNH) – The health insurer reported quarterly earnings of $7.12 per share, well above the consensus estimate of $5.28. Revenue came in below Wall Street forecasts. Profit was helped by pandemic-related deferrals of medical care, and the company is maintaining its prior full-year earnings forecast.
Goldman Sachs (GS) – Goldman earned $6.26 per share for its latest quarter, beating the consensus estimate of $3.78. Revenue was also well above forecasts, helped by strong performance in its investment banking and markets businesses.
Alphabet (GOOGL) – Alphabet’s Google unit will pay $4.5 billion for a 7.7% stake in the digital arm of India’s Reliance Industries. The unit’s largest operation is Jio Infocomm, India’s largest mobile carrier. It had been reported Tuesday that Google was close to striking the deal.
Apple (AAPL) – A European Union court sided with Apple, ruling that it did not have to pay $14.8 billion taxes to Ireland. EU antitrust officials had maintained that tax breaks received by Apple had constituted an illegal subsidy.
Best Buy (BBY) – The nation’s largest electronics retailer will require all customers to wear masks in its stores, becoming the latest retailer to do so. Other large chains, including Starbucks (SBUX) and Costco (COST), have instituted similar rules.
Facebook (FB), Sony (SNE) – The two companies are planning to increase output of upcoming gaming devices by as much as 50%, according to a report in the Nikkei Asian Review. Sony raised production orders for its PlayStation 5 to about 9 million units from 6 million, while Facebook is increasing orders for its Oculus virtual reality headsets by about 50% to a total of about 2 million.
Eldorado Resorts (ERI) – New Jersey regulators meet today to decide on the fate of Eldorado’s planned merger with Caesar’s Entertainment (CZR). New Jersey is the last state approval that the two casino operators will need to complete the deal, with Indiana and Nevada already giving their approval.
Sirius XM (SIRI) – The satellite radio and streaming service operator added $2 billion to its stock buyback program.
Uber Technologies (UBER), Lyft (LYFT) – Massachusetts filed suit against the ride-hailing companies, saying they incorrectly classified drivers as independent contractors rather than employees, depriving them of benefits. Uber and Lyft face a similar legal action in California.
PVH Corp. (PVH) – The apparel maker is shutting down 162 retail stores and cutting 450 jobs in North America, due to the impact of Covid-19 on apparel sales. The company behind brands like Tommy Hilfiger, Calvin Klein, and IZOD said the move affects 12% of its workforce and will save about $80 million annually.

News | Business | Finance: Chinese mutual fund industry sees jump in new funds and inflows

3-4 minutes - Source: REUTERS

SHANGHAI (Reuters) - China’s mutual fund industry saw another massive jump in new products and subscriptions in June, suggesting the swift rally in mainland stocks has room to run further.
FILE PHOTO: An electronic board showing the Dow Jones and S&P 500 indexes, at Lujiazui
financial district in Shanghai, China March 13, 2020. REUTERS/Aly Song/File Photo.

Some 73 new open-ended equity and balanced funds were launched in June, taking the total to 4,110, data from the Asset Management Association of China (AMAC) showed.
The net value of open-ended equity and balanced funds stood at 4.2 trillion yuan ($599.5 billion) for the month, up nearly 70% from 2.5 trillion yuan in the same period last year, according to AMAC.
Analysts also confirmed the trend that has helped propel China’s stock market to five-year highs.
“There are 639 mutual funds newly launched for the first half. I believe these new funds add fuel to a strong rally in the A-share market,” said Xav Feng, head of Asia Pacific Research, Lipper at Refinitiv.
Graphic: China's mutual fund industry grows rapidly here
Reuters Graphic
Graphic: Number of Chinese mutual funds increased significantly here
Reuters Graphic
Fund consultancy Z-Ben Advisors also pointed to intensive fundraising by mutual funds.
Mainland mutual fund managers raised 157 billion yuan in June for equity and balanced funds, which invest in both stocks and bonds, the highest monthly fundraising in five years, the fund consultancy said.

Z-Ben estimated there were outflows of 1.23 trillion yuan to 2 trillion yuan from safe-haven money market funds in the second quarter as investors switched to the stock market. [nL3N2EL0P5]
China’s CSI300 blue-chip index has risen to its highest in more than five years on hopes of an economic recovery, Beijing’s continued reform of the capital markets and monetary easing.
Graphic: China stocks rally as investors cheer reforms
Analysts and fund managers said investors were investing more via funds as stock picking had become more complicated for individuals due to uncertainties such as the coronavirus outbreak and Sino-U.S. geopolitical and economic tensions.

Investors in real estate and wealth management products offered by banks, two traditional retail investment channels, are being lured by the stock market rally.
The number of bond funds has also jumped this year.

In a sign of retail frenzy for funds, China Universal Asset Management Co launched a mid-cap investment fund on July 6, but suspended taking money after just half a day of sales, so as to “limit the fund size to ensure smooth operation after hot subscriptions” from investors.
“I am at a loss now as everyone is talking about gains from stocks. Maybe I could put some money into funds, as I’ve little knowledge about investing,” a user said in a post on China’s Twitter-like Weibo.

($1 = 7.0060 Chinese yuan)
Reporting by Luoyan Liu and Andrew Galbraith; Editing by Vidya Ranganathan and Jacqueline Wong

US Market | Futures Indicator Update: Dow futures surge 500 points after Goldman's blowout quarter, Moderna's vaccine news

Fred Imbert,Yun Li

Stock futures jumped Wednesday after drug developer Moderna said its coronavirus vaccine produced antibodies in all patients in an early trial, raising hopes for a faster economic recovery.
Futures on the Dow Jones Industrial Average jumped 503 points, or 1.9%. S&P 500 futures climbed 1.4%. Nasdaq-100 futures rose 0.6%.
Sentiment was also lifted by blowout quarterly numbers from Goldman Sachs, which sent the stock up more than 4%. The company’s results were driven by a 93% surge in trading revenue.
Moderna’s potential vaccine to prevent Covid-19 produced a “robust” immune response, or neutralizing antibodies, in all 45 patients in its early stage human trial, according to newly released data published Tuesday evening in the peer-reviewed New England Journal of Medicine.
Shares of Moderna surged 15% in premarket trading. Stocks directly tied to an economic reopening jumped following the vaccine news. American Airlines, United Airlines, Royal Caribbean Cruise Lines all popped more than 7% each in premarket trading.
“This should further increase confidence that we are getting a robust immune response, in that there should be greater confidence that this will be protective to a degree in transmission of Covid,” Michael Yee, a managing director at Jefferies, said on CNBC’s “Fast Money.” “This is all along our positive thesis and our view that both Moderna and Pfizer-BioNTech are definitely on a good track to get a vaccine by the end of the year.”
Stocks finished Tuesday’s volatile session on a high note with the Dow jumping more than 500 points to post its best day in two weeks. The S&P 500 jumped 1.3%, boosted by cyclical names sensitive to the economic recovery. The tech-heavy Nasdaq underperformed for a second day, rising 0.9% as the massive rally in Big Tech slowed down.
Investors will monitor another batch of corporate earnings results on Tuesday with Goldman Sachs, UnitedHealth, Bank of NY Mellon, U.S. Bancorp and PNC Financial all set to report before the bell.
Earnings from big banks so far have been mixed. JPMorgan Chase reported better-than-expected quarterly results on the back of a massive surge in trading revenue. Wells Fargo suffered a $2.4 billion loss and slashed its dividend to 10 cents per share.
Meanwhile, tensions between the U.S. and China continue to rise. President Donald Trump said Tuesday that he signed legislation to impose sanctions on China in response to its interference with Hong Kong’s autonomy.
—CNBC’s Jesse Pound contributed reporting.

News | Business | Finance: Goldman Sachs shares jump as earnings blow past the Street on the best trading results in years

Hugh Son

Goldman Sachs reported blowout second-quarter earnings as its reliance on trading and investment banking paid off amid the market turbulence caused by the coronavirus pandemic.
The bank earned $6.26 a share in the second quarter, crushing the $3.78 a share estimate of analysts surveyed by Refinitiv.

Here’s a list of the bank’s significant milestones for the quarter:
  • Revenue of $13.3 billion was the second-highest ever for the firm and up 41% from a year ago.
  • Fixed income trading revenue came  in at $4.24 billion, the highest in 9 years.
  • Equities trading revenue was $2.94 billion, the best quarter in 11 years.
  • Investment banking revenue was a record $2.66 billion.
Goldman shares jumped 4% after the results in premarket trading.

“Our strong financial performance across our client franchises demonstrates the inherent benefits of our diversified business model,” Chairman and CEO David Solomon said in a release. “The turbulence we have seen in recent months only reinforces our commitment to the strategy we outlined earlier this year to investors. While the economic outlook remains uncertain, I am confident that we will continue to be the firm of choice for clients around the world who are looking to reshape their businesses and rebuild a more resilient economy.”

The firm also said it set aside another $1.59 billion for potential credit losses due to the coronavirus.
Here’s what Wall Street expected:

Earnings: $3.78 per share, a 35% decline from a year earlier, according to Refinitiv.
Revenue: $9.75 billion, 3% higher than a year earlier.

Trading Revenue: Fixed income: $2.53 billion; equities: $2.04 billion.
Investment banking revenue: $2.1 billion.
Here’s a link to the full release.

Expectations for CEO David Solomon’s bank were running high after JPMorgan Chase and Citigroup posted strong trading and advisory results that helped the banks beat profit estimates for the second quarter.
Of the six largest U.S. banks, Goldman gets the biggest share of its revenue from Wall Street activities including trading and investment banking. For the past few years that has been a detriment to the firm, as retail banking fueled by cheap consumer deposits has driven the industry’s record profits.

Goldman shares were down 7% this year through Tuesday’s close, compared with the 36% decline of the KBW Bank Index. 

Analysis | The Cybersecurity 202: DNC’s email voting plan limits hacking risk but can’t eliminate it

By Joseph Marks

with Tonya Riley

The Democratic National Committee’s virtual convention next month will mark a major test for whether Internet-based voting can be done safely and securely.
The DNC, which is moving its convention online because of the coronavirus pandemic, released a plan Friday for delegates to vote by email for the Democratic presidential nominee and planks in the party’s platform.
Internet voting presents far fewer risks in this case than it would during a regular election because delegates’ ballots aren’t secret. That means they can verify their votes weren't altered either by hackers or technological snafus and correct any errors after the fact. There’s also no drama about the outcome of the most important vote because former vice president Joe Biden has basically already secured the Democratic nomination.
But it still presents numerous opportunities for hackers from Russia or elsewhere to disrupt the voting process, sow confusion about results or use disinformation operations to spread conspiracy theories or gin up hostilities between rival camps supporting Biden and Sen. Bernie Sanders (I-Vt.).
And any disruption is likely to spark painful memories of 2016 when information Russia hacked and leaked from the DNC helped wreak havoc on Hillary Clinton’s campaign.
That means the DNC must be hyper-prepared to knock back any allegations of digital interference or rapidly respond to attacks even as it runs a convention unlike any in history.
Even if they’re making a prudent decision for public health, this still remains a rich environment for bad actors,” Edward Perez, global director of technology development at OSET Institute, a nonprofit election technology organization, told me. “No one should lose sight of the fact that a purely electronic return of ballots is very high risk. The DNC needs to wear both hats at the same time: public health and cyber defense.”

Former vice president Joe Biden, the presumptive Democratic nominee. (Tom Brenner/Reuters)
The DNC has been working for months on how to make a virtual convention work during the pandemic. 
The party passed a resolution in May allowing smaller subcommittees to handle in advance some of the more complex votes that usually take place on the convention floor. The remaining votes, including nominating the party’s candidate for president, will go to all convention delegates on a single ballot delivered by email. They’ll have 12 days to fill that ballot out and forward it by email to state party officials between Aug. 3 and Aug. 15. The convention begins Aug. 17.
Those emailed ballots will include the delegate’s name and another unique identifier such as a bar code that connects the delegate with his or her vote, the party said in an email to delegates.
“The State Parties will be responsible for collecting all ballots from convention delegates as they would if we were conducting votes in person at the convention,” the letter states. “At the conclusion of voting, each state delegation chair will submit a tally sheet to the Secretary’s Office that formally records the number of votes cast on each item of convention business.”
There are a number of built-in security safeguards. 
Delegates will receive email updates when their votes are tallied by state party officials and will be able to reach out to those officials to ensure their votes were correctly recorded, a DNC official told me. Delegates will also have the option of voting by phone or conventional mail if they object to email voting or lack Internet, the official said.
Biden’s and Sanders’s campaigns hosted webinars this weekend outlining the email-voting system for their delegates.
We want delegates to play their critical role without risk to their personal or the public health,” said the official, who was not authorized to speak publicly about cybersecurity planning. “We know who all the delegates are. And because the votes are public, we feel confident that we could swiftly fix any problems that arise.”
The party is also taking measures to ensure that other elements of the convention aren’t disrupted by hackers such as speeches by Biden and top party officials. That includes buying services from cybersecurity companies and “deploy[ing] redundant and diverse connections and pathways for the programming and infrastructure that supports the programming,” the official said.

Sen. Bernie Sanders (I-Vt.), left, and Biden. (Matt Rourke/AP)
If a traditional election was held this way, election security experts would be sounding alarms about it. 
Indeed, when a handful of states piloted voting on mobile apps earlier this year, it sparked so much concern that the Department of Homeland Security, the FBI and the Election Assistance Commission sent states a guidance memo detailing the risks. The memo warned that returning ballots using the Internet poses “significant security risks,” including that hackers could change large numbers of votes, block votes from being recorded or undermine ballot secrecy.
Those risks are significantly mitigated when officials aren’t trying to both send a vote over the Internet and keep the voter’s identity secret. But they’re not eliminated.
The stakes are obviously a lot lower in a party convention setting than a general election context where online voting could be hacked to change the results,” Alex Halderman, a University of Michigan election security expert, told me. “But what’s at stake here is the legitimacy of the process and for that reason security is still very important.”
For example, hackers could prevent a state from forwarding votes to the DNC by locking up its computers with ransomware or overwhelming its networks with Internet traffic. They could also change large numbers of votes by hacking into delegates’ personal computers and mobile devices. That would probably be caught but not before it publicly embarrassed the party.
“I’m less concerned about this instance of remote voting because they won’t be anonymous,” Duncan Buell, a University of South Carolina election security expert, told me. “But [the DNC] should contract with a really good security firm. They should have backups on top of backups and delegates should be checking their votes were cast the way they expected.”
The committee should also be as transparent as possible so there’s less room for Russia or another hostile nation to spread phony rumors that votes aren’t being counted accurately or to otherwise spark fights between delegate factions, Perez said.
“Just like the DNC attack in 2016, this creates an opportunity for bad actors to cast doubts on results and further divide us as a nation,” he said.

The keys
Trump is taking credit for the U.K.’s decision to ban Huawei from its 5G networks.

President Trump exits a news conference. (Jabin Botsford/The Washington Post).

The president’s boast came after the United Kingdom reversed an earlier decision that would have allowed the Chinese firm to build less-sensitive parts of its next-generation phone and Internet system. 
I did this myself, for the most part, Trump said at a news conference. Its a big security risk. I talked many countries out of using it.
British Health Secretary Matt Hancock pushed back on Trump’s claims, saying ““All sorts of people can try to claim credit for the decision but this was based on a technical assessment by the National Cyber Security Centre about how we could have the highest quality 5G systems.”
Hancock told Sky News: “Well we all know Donald Trump don’t we.”
The U.K. government expects its 5G network to be totally Huawei-free by 2027 because it will be a lengthy and costly process for British companies to shed all their Huawei gear. The decision came after a U.S. ban on foreign firms selling computer chips made with U.S. equipment to Huawei.
U.S. security hawks hailed the ban as a victory. U.S. officials have long maintained that Huawei could serve as a back door for Chinese spying. Huawei denies the claims.
Sen. Mark R. Warner (D-Va.), vice chairman of the Senate Select Committee on Intelligence, urged the Trump administration to work with allies “on promoting secure and competitively priced alternatives to Huawei equipment.”
Sen. Roger Wicker (R-Miss.), chairman of the Senate Commerce Committee, also weighed in:
UK Prime Minister @BorisJohnson is making the right call. Huawei equipment can be used to facilitate Chinese espionage. I hope more of our allies will follow suit and secure their networks from compromised equipment.
— Senator Roger Wicker (@SenatorWicker) July 14, 2020
The decision could steer other European countries toward banning Huawei or seriously limiting its role in their 5G networks, Ellen Nakashima and William Booth report
Huawei, meanwhile, blamed the U.K. decision on politics. “This disappointing decision is bad news for anyone in the U.K. with a mobile phone, a company spokesman told Reuters. “Regrettably our future in the U.K. has become politicized, this is about U.S. trade policy and not security. Some trade groups have also criticized the move, saying the timeline could hurt U.K. consumers.
A Texas judge denied a request to allow voters with the coronavirus to cast ballots by email in yesterdays primary runoff.

Voters check in before casting their ballots Tuesday in Houston. (Steve Gonzales/Houston Chronicle/AP)

The last-minute request by Harris County officials came on behalf of thousands of quarantined people, Zach Despart at the Houston Chronicle reports. An Austin resident in a similar bind had to get a last minute doctor’s note that allowed her to have someone else return her ballot with minutes to spare, the Texas Tribune’s Alexa Ura reports.
The incidents shows the sort of thorny challenges that are likely to face officials in November as they attempt to run elections in the thick of the pandemic.
Meanwhile, some Dallas County voters had their ballots returned to them because of issues with preprinted envelopes, the U.S. Postal Service confirmed Monday. Its unclear how many voters were affected and if they ultimately risked catching the virus to vote in person. “We reviewed this issue with the Dallas County Board of Elections before the election as well as last week, advising them how to correct the problem,” USPS told Dallas news station WFAA in a statement.
Other primary and runoff elections went relatively smoothly yesterday in Alabama and Maine.
Spain is the latest nation accused of using spyware to go after political opponents.

Roger Torrent, president of the Catalonian parliament. (Jean-Francois Badias/AP)

Roger Torrent, the speaker of a regional parliament in Spain’s Catalonia region, alleges the Spanish government used controversial spyware from the Israeli company NSO Group to hack his phone, the Guardian reports
Torrent, an advocate for Catalan independence from Spain, was alerted about the hack by researchers working with WhatsApp. The Facebook division is suing NSO for helping government clients hack its customers. Torrent told the Guardian that it seemed clear the “Spanish state” was responsible for the alleged attack.
Two other advocates for Catalan independence were allegedly also targeted in what researchers called a “possible case of domestic political espionage, the Guardian reports. 
A former NSO employee confirmed to Motherboard that the Spanish government is a client. NSO maintains it only sells its spyware to governments for tracking terrorists and criminals.
WhatsApp is suing NSO for allegedly helping to hack approximately 1,400 of its users across 20 countries, including about 100 journalists, dissidents and activists. Amnesty International recently lost a case that would have stripped NSO of its license to export software outside of Israel.

Hill happenings

A Democratic lawmaker is calling on Apple and Google to require apps to disclose where they store data.

(Lam Yik/Bloomberg News)

Rep. Stephen F. Lynch (D-Mass.), chairman of the House Oversight Subcommittee on National Security, sent letters to Apple and Google saying that the companies are responsible for making consumers aware of potential security risks posed by the apps.
Neither company requires developers to disclose in which countries their data is stored. 
Intelligence officials have warned that foreign apps could be compelled to share U.S. user data depending on local laws. Some lawmakers and officials have pointed to the concern in advocating for restrictions on TikTok and other Chinese apps. (TikTok says it does not store U.S. user data in China.)
Lynch also asks the companies to provide details on any instances in which they removed an app for sharing personal data with a foreign government.

Securing the ballot

Major U.S. Postal Service operational changes could wreak havoc on mail-in voting.

(Caitlin OHara/Bloomberg News)

The changes, instituted by new Postmaster General Louis DeJoy, include directing carriers to temporarily leave some mail at distribution centers in order to finish their routes more quickly, according to a memo obtained by The Washington Post.
Mail voting advocates fear that could dramatically slow delivery of ballots and mail ballots and ballot applications. The changes come as the Trump administration has wrested increased control over the struggling agency.
“With our states now reliant on mail voting to continue elections during the pandemic, the destabilizing of the Post office is a direct attack on American democracy itself,” said Rep. Bill Pascrell Jr. (D-N.J.). He urged the Senate to pass a $25 billion rescue package that the House has already passed.
More election news:
Nearly 100,000 voters mailed in their choices on Saturday, July 11.
The decision marks a new development in the State House tug-of-war over how to conduct the upcoming primary and general elections.

Global cyberspace

TikTok tries to allay security concerns in Australia. 

(Lam Yik/Bloomberg News).

The company's general manager for Australia wrote a two-page letter to Australian lawmakers insisting that the company does not share any data with the Chinese government, the Wall Street Journal reports.
More international news:

A Chinese bank required a company to use a tax software for local tax purposes, but the software quietly deployed a backdoor, Trustwave researchers say.

Cyber insecurity

Microsoft issued a patch for a serious Windows flaw.

Microsoft headquarters in France (Photo by GERARD JULIEN / AFP) (Photo by GERARD JULIEN/AFP via Getty Images)
The 17-year-old vulnerability could have allowed hackers to take over a victim's entire IT system, including emails and servers, CyberScoop reports. The vulnerability, which was discovered by researchers at Check Point, is the third serious vulnerability Microsoft has patched this month.
More hacking news:

EXCLUSIVE: The MGM Resorts 2019 data breach is much larger than initially reported.

Chat room

There's no rest for our nations first line of defense against foreign interference:


  • The House Oversight Committee will hold a hearing to examine U.S. cybersecurity preparedness and the National Cyber Director Act today at 12 p.m.
  • The House Budget Committee will hold a hearing on the need for federal investments in technology in light of the coronavirus pandemic today at 2 p.m.
  • The Center for Democracy and Technology will host an event, “A Shared Responsibility: Protecting Consumer Health Data Privacy in an Increasingly Connected World” today at 4 p.m.
  • The Aspen Institute will host a discussion about U.S. Election security in the shadow of the coronavirus on Thursday at 1 p.m.
  • The House Homeland Security Committee will hold a hearing evaluating the Cyberspace Solarium Commission recommendations Friday at 12:30 p.m.
  • The House Administration Committee will hold a hearing on the security of remote voting in the House on Friday at 1 p.m.
  • The Center for Strategic and International Studies will host a discussion with former Google chairman and chief executive Eric Schmidt about technology, data and innovation policy on Friday at 4 p.m.
  • The Senate Commerce Subcommittee on Manufacturing, Trade, and Consumer Protection will hold a hearing on protecting Americans from coronavirus scams on July 21 at 2:30 p.m.
  • The Senate Rules Committee will hold a hearing on general-election preparations on July 22 at 10:30 a.m.

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The Daily Show throws its support behind a project to recruit poll workers during coronavirus:
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— The Daily Show (@TheDailyShow) July 14, 2020
A new Apple commercial capitalizes on our work-from-home nightmares.

US Market | Futures Indicator: Dow futures surge more than 400 points on vaccine hope, airline and cruise stocks jump

Fred Imbert,Yun Li

Stock futures jumped Wednesday after drug developer Moderna said its coronavirus vaccine produced antibodies in all patients in an early trial, raising hopes for a faster economic recovery.
Futures on the Dow Jones Industrial Average jumped 450 points, or 1.7%. The move implied a 420-point gain at the open. S&P 500 futures climbed 1.3%. Nasdaq-100 futures rose 0.9%.

Moderna’s potential vaccine to prevent Covid-19 produced a “robust” immune response, or neutralizing antibodies, in all 45 patients in its early stage human trial, according to newly released data published Tuesday evening in the peer-reviewed New England Journal of Medicine.
Shares of Moderna surged 15% in premarket trading. Stocks directly tied to an economic reopening jumped following the vaccine news. American Airlines, United Airlines, Royal Caribbean Cruise Lines all popped more than 7% each in premarket trading.

“This should further increase confidence that we are getting a robust immune response, in that there should be greater confidence that this will be protective to a degree in transmission of Covid,” Michael Yee, a managing director at Jefferies, said on CNBC’s “Fast Money.” “This is all along our positive thesis and our view that both Moderna and Pfizer-BioNTech are definitely on a good track to get a vaccine by the end of the year.”

Stocks finished Tuesday’s volatile session on a high note with the Dow jumping more than 500 points to post its best day in two weeks. The S&P 500 jumped 1.3%, boosted by cyclical names sensitive to the economic recovery. The tech-heavy Nasdaq underperformed for a second day, rising 0.9% as the massive rally in Big Tech slowed down.

Investors will monitor another batch of corporate earnings results on Tuesday with Goldman Sachs, UnitedHealth, Bank of NY Mellon, U.S. Bancorp and PNC Financial all set to report before the bell.
Earnings from big banks so far have been mixed. JPMorgan Chase reported better-than-expected quarterly results on the back of a massive surge in trading revenue. Wells Fargo suffered a $2.4 billion loss and slashed its dividend to 10 cents per share.
Meanwhile, tensions between the U.S. and China continue to rise. President Donald Trump said Tuesday that he signed legislation to impose sanctions on China in response to its interference with Hong Kong’s autonomy.

—CNBC’s Jesse Pound contributed reporting.

News | Business | US - China Politics: Trump hits China with order on Hong Kong trade

6-7 minutes - Source: BBC

US President Donald Trump has signed an order to end preferential economic treatment for Hong Kong, after China enacted a new security law there.
Hong Kong would be treated "the same as mainland China", Mr Trump said. He also signed a law to impose sanctions on officials who cracked down on rights.
China has strongly criticised the move, vowing to take retaliatory action.
The US sees the security law as a threat to the freedoms Hong Kong has enjoyed under a 1984 agreement.
That special status was agreed between China and Hong Kong's former colonial power, the UK, before sovereignty was returned to Beijing in 1997.
The new security law - which outlaws criticism of China's government - is the most sweeping change to the political landscape of Hong Kong since then.

Media playback is unsupported on your device
Media captionTea, drugs and war: Hong Kong's British history explained

What did President Trump say?

Speaking in the Rose Garden on Tuesday, Mr Trump said his executive order would end preferential treatment for Hong Kong.
"No special privileges, no special economic treatment and no export of sensitive technologies," said the president, who first announced in May that his administration would begin paring back the territory's special status.
He also told reporters he had signed the Hong Kong Autonomy Act, which passed unanimously in Congress earlier this month.
"This law gives my administration powerful new tools to hold responsible the individuals and the entities involved in extinguishing Hong Kong's freedom," Mr Trump told the news conference.
After being questioned by a journalist, the president said he had no plans to speak to Chinese President Xi Jinping.
He also told reporters that "we hold China fully responsible for concealing the [coronavirus] and unleashing it upon the world".
Mr Trump's own administration is under scrutiny for its response to the pandemic. The US has 3.4 million recorded cases, the highest in the world, and more than 136,000 deaths.
The president's policy address digressed into a lengthy political attack on his Democratic presidential challenger, Joe Biden, ranging from trade and immigration to policing and climate change.

Media playback is unsupported on your device
Media captionMany Hong Kong residents are worried the new security law means the "one country, two systems" principle no longer exists

How did China respond?

China's foreign ministry condemned the latest US moves, saying they were a "gross interference" in its domestic affairs.
In a strongly-worded statement, it said the country would also impose retaliatory sanctions against US individuals and entities to "safeguard China's legitimate interests".
"The US attempt to obstruct the implementation of the national security law for Hong Kong will never succeed," the statement said.
"We urge the US side to correct its mistakes, refrain from implementing the act and stop interfering in China's internal affairs in any way. China will firmly respond if the US goes ahead."

Hong Kong's new security law

Perception is reality
It was not a matter of if, but when. Scrapping Hong Kong's special status will mean companies based there will now have to evaluate what this means for them.
Hong Kong is a re-exporting hub, which means that goods that go through Hong Kong to the US but have come from somewhere else - like China for instance - have avoided the tariffs the US has slapped on China.
Now that Hong Kong's special status is gone - mainland Chinese companies may look for another place to send their goods - which would see Hong Kong's port and logistics businesses suffer.
And how much of an impact will this have on American and multinational companies using Hong Kong as a regional hub? Well, as one business consultant told me - the structural reasons for why a company would use Hong Kong as a hub are still there - low tax rates, good geographic location, convertibility of currency.
But perception is reality - and if the perception is that doing business in Hong Kong has become so much more onerous - why not decamp to mainland China or Singapore instead?
What is going on with US-China relations?
Washington-Beijing ties have become increasingly frayed in recent months.
With Mr Trump facing an uphill battle for re-election this November, he and Mr Biden have accused each other of being weak on China.
On Monday, the administration condemned China's military build-up in the South China Sea, accusing it of bullying neighbours.
Last Friday, Mr Trump told reporters on Air Force One that a "phase two" trade deal with China was in doubt because of its handling of coronavirus, which he called the "plague".

Media playback is unsupported on your device
Media captionJimmy Lai: China's security law "spells the death knell for Hong Kong"
The US also officially withdrew last week from the World Health Organization, which Mr Trump had accused of being beholden to China.
Last week, too, the Trump administration announced sanctions against Chinese politicians who it says are responsible for human rights violations against Muslim minorities in Xinjiang.

News | Business | UK's Inflation Rate: Clothing and games push up UK shop prices

4-5 minutes - Source: BBC

Woman in mask Image copyright Dan Mullan
The UK's inflation rate rose to 0.6% in June as the coronavirus lockdown began to ease.

The Consumer Prices Index (CPI) picked up slightly from May's four-year low of 0.5%, the Office for National Statistics (ONS) said.

Food and alcohol prices fell, but prices for clothing and games rose, the ONS said.

Despite the slight increase in the rate, inflation remains below the Bank of England's 2% target.
Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: "The inflation rate has increased for the first time this year, but remains low by historical standards.
"Due to the impact of the coronavirus, clothing prices have not followed the usual seasonal pattern this year, with the normal falls due to the start of the summer sales failing to materialise.

"Prices for computer games and consoles have risen, but food prices, particularly vegetables, have fallen."
Inflation has fallen sharply during the coronavirus crisis as consumer demand has slumped.
In June, men's clothing in particular rose in price, with increases coming "across almost the full range", the ONS said.

Women's clothing showed "a more mixed picture across the different products", but with the overall effect still upward.

Games, toys and hobbies, particularly computer games and computer games consoles, made the biggest contribution to the inflation rise, the ONS said.

"It is possible that prices have been influenced by the coronavirus (Covid-19) lockdown changing the timing of demand and the availability of some items, particularly consoles," the ONS added.

What is inflation?

Inflation is the rate at which the prices for goods and services increase.
It's one of the key measures of financial wellbeing because it affects what consumers can buy for their money. If there is inflation, money doesn't go as far.

It's expressed as a percentage increase or decrease in prices over time. For example, if the inflation rate for the cost of a litre of petrol is 2% a year, motorists need to spend 2% more at the pump than 12 months earlier.

And if wages don't keep up with inflation, purchasing power and the standard of living falls.
Since many areas of the economy were completely shut down in June, the ONS said it had to estimate or "impute" some of the data.
Jeremy Thomson-Cook, chief economist at financial services firm Equals, said the slight increase in the inflation rate was "a positive sign", but added that the outlook remained "messy".
"Food prices are falling from lockdown levels, clothing demand is out of kilter with typical seasonal patterns, demand for entertainment during lockdown provided a pronounced bump in prices, and the ONS has only been able to log 84% of the normal price quotes due to unavailability," he said.

"For now, however, inflation remains low, and both consumers and the Bank of England will be happy with that."
Paul Dales, chief UK economist at Capital Economics, said the small rise in inflation was unlikely to be sustained and that deflation was "around the corner".

"In fact, by July or August, CPI inflation may have fallen below zero," he said.
Discounting from retailers and the impact of Chancellor Rishi Sunak's "eat out to help out" scheme would push inflation down, he said.

Mr Dales said any bout of deflation would last just a few months, but added: "It will be a few years before the economy is strong enough to raise inflation to the 2% target."

News | Business | Electric Car Industry: Nissan faces Tesla in China's electric car market

By Justin Harper Business Reporter

Nissan has unveiled the new Ariya electric car as part of a new strategy. Image copyright Nissan
Nissan has unveiled the first of its new electric vehicles as part of a turnaround strategy for the loss-making company.
The Japanese carmaker is hoping its new all-electric sports utility vehicle (SUV) Ariya will sell well in China.
But it faces tough competition from Tesla which has a strong presence in the world's largest car market.
Electric cars are a cornerstone of Nissan's four-year plan to get it back to profitability.
The Ariya was launched online on Wednesday from the company's headquarters in Yokohama, Japan. Nissan chief executive Makoto Uchida referred to the all-electric SUV as the "flagship of the new Nissan".
By 2023 Nissan plans to launch more than eight new electric models, and sees China as a core market. The Chinese government offers generous incentives for buyers of electric cars below a certain price.
In 2019, just over 20 million cars were sold in China, compared to 17 million in the US.
Nissan was regarded as one of the early front-runners in electric vehicles (EV) but experts say it has lost momentum since it launched its all-electric Leaf back in 2010.
"The Ariya will be a brand builder for Nissan which has historically been an EV leader," said Nobuhito Massimiliano Abe, a principal at market research firm Kearney's Automotive Practice.
But its newly-launched model could face tough competition from Tesla which became the best-selling new energy vehicle in China in May.
Elon Musk's firm is currently expanding Teslas's "Gigafactory" in Shanghai to build more Model Ys - its own all-electric SUV.
"Clearly out in front is Tesla at the moment. It's got the EV cachet," said Calum MacRae, head of automotive R&A at GlobalData. "But given the sheer size of the Chinese market and technological lead that market could yet spawn a global competitor to Tesla."
In May, Nissan reported an operating loss of 40.5bn yen ($380m; £303m) for the year ending 31 March. It was the company's worst performance since 2009 - the height of the global financial crisis.
The brand has also been damaged by the controversial departure of former chairman Carlos Ghosn who fled Japan after being detained on financial misconduct charges last year.
Nissan has announced its Barcelona factory will close at the end of this year as part of its restructuring, but its UK factory will remain open.