WSJ : Huawei Accuses the U.S. of Cyberattacks and Threats to Its Employees

Huawei Accuses the U.S. of Cyberattacks and Threats to Its Employees
Chinese tech giant didn’t provide specific evidence to back up allegations

HONG KONG—China’s Huawei Technologies Co. accused the U.S. of “using every tool at its disposal” to disrupt its business, including launching cyberattacks on its networks and instructing law enforcement to “menace” its employees.

Huawei detailed the numerous allegations against the U.S. in a press release issued on Tuesday, in which it also denied stealing smartphone-camera technology from Portuguese multimedia producer Rui Oliveira and accused him of “taking advantage of the current geopolitical situation.” China is locked in a trade dispute with Washington and struggling to deal with protests in Hong Kong.

The Wall Street Journal last week reported that U.S. prosecutors were probing several new alleged instances of intellectual-property theft by Huawei, including allegations that it stole smartphone-camera technology from Mr. Oliveira. Huawei received a subpoena requesting documents about the instances of alleged theft, the Journal reported.

In addition to denying Mr. Oliveira’s claims, Huawei leveled a number of new accusations against the U.S. Among them, it said the U.S. was “instructing law enforcement to threaten, menace, coerce, entice and incite both current and former Huawei employees to turn against the company and work for them.”

Huawei accused the U.S. of “sending FBI agents to the homes of Huawei employees” to pressure them into spying on the company. The company also said the U.S. has launched “cyberattacks to infiltrate Huawei’s intranet” and has searched, detained and arrested Huawei employees and its business partners.

Huawei didn’t provide specific evidence to back up the allegations. Representatives for the Justice Department and the Eastern District of New York, which is probing the new allegations of IP theft, didn’t immediately respond to requests for comment.

Huawei, the world’s largest maker of telecommunications equipment and the No. 2 smartphone maker, has been fighting a series of escalating actions by the U.S. in the past year, including two criminal indictments and a campaign to pressure U.S. allies against using Huawei gear in their 5G network rollouts.

The fresh lines of investigation by American officials cover issues raised over two decades by people and companies that have accused Huawei of stealing their intellectual property. They overlap with a Journal story in May that detailed allegations by accusers ranging from longtime tech peers, including Cisco Technology Inc. and T-Mobile US Inc., to smaller businessmen including Mr. Oliveira and a musician in Seattle.

On Tuesday, Huawei singled out Mr. Oliveira, saying he was providing a “false narrative” to the media to hurt Huawei and extort from it. Mr. Oliveira told the Journal earlier this year that he met Huawei executives in May 2014 due to their interest in his patents for a camera attachment to smartphones. He accused Huawei of stealing his camera designs and threatened a lawsuit against Huawei.

The company sued Mr. Oliveira in March, asking a Texas federal court to issue a noninfringement ruling. The litigation remains unresolved. Huawei said it didn’t use Mr. Oliveira’s design, and that its product was different from Mr. Oliveira’s in key aspects. Mr. Oliveira referred the accusations to an attorney and had no immediate comment on Tuesday.

WSJ : Beijing Asserts Power to Declare Emergency to Quell Hong Kong Unrest

Beijing Asserts Power to Declare Emergency to Quell Hong Kong Unrest
China’s top office for Hong Kong affairs lays out specific measures for the city’s leader to address protests

China’s top office for Hong Kong affairs said it had legal power to unilaterally declare a state of emergency in the city if unrest continues unabated, while laying out specific measures for the city’s leader to address protests.

The comments came amid hints of tensions and disagreements between Hong Kong’s chief executive, Carrie Lam, and her bosses in Beijing over what should be done to try to allay widespread public sentiment against the government in the former British colony.

Beijing made the comments—in which officials referred to the protest movement becoming more like the “color revolutions” that unseated governments in the Middle East and Eastern Europe—after a weekend of clashes that disrupted the city’s airport. A workers’ strike and a class boycott by thousands of students have extended demonstrations into the workweek.

Earlier Tuesday, Mrs. Lam had insisted her government can deal with the long-running protests. The chief executive also said she had never tendered her resignation and was committed to pulling the city out of the political crisis.

Mrs. Lam said she was disappointed that comments she made at a recent closed-door meeting with businesspeople—in which she lamented the difficulties of serving both the central government and the people of Hong Kong—had been leaked.

Beijing officials said they saw the situation in Hong Kong as taking a positive turn recently as more sections of society denounce violence and reiterated their backing for Mrs. Lam to resolve the protests, which have rocked the city and damaged its economy during the past three months.

Beijing made clear Tuesday that it is laying the groundwork to step in if needed. Chinese officials floated a slate of detailed measures for a crackdown, including raising the idea of outlawing masks for Hong Kong protesters and saying that teachers who encouraged students to protest must be punished for their “heinous crime.”

Patriotic education must be introduced into Hong Kong schools, said Xu Luying, a spokeswoman for the Hong Kong and Macau Affairs Office. An effort to introduce patriotic education in 2012 triggered mass street protests that galvanized a new generation of young political activists who are prominent in this summer’s uprising.

The comments from the Hong Kong and Macau Affairs Office of the State Council were the first time officials had mentioned unilateral intervention and raise questions about how much autonomy Hong Kong’s government has.

Under “one country, two systems,” Hong Kong was promised 50 years of no change and more freedoms than mainland Chinese citizens enjoy, until 2047. The protests this summer were sparked by fear of Beijing’s increasing reach, as residents took to the streets to oppose a law that would have allowed local suspects to be tried under the mainland’s opaque judicial system. Protesters’ demands have since broadened to include greater democracy.

“It’s a wrong notion that the deployment of the People’s Liberation Army in Hong Kong would be the end of one country, two systems,” Ms. Xu said at the briefing in Beijing. “Hong Kong’s Basic Law allows for Hong Kong to request help or for the Standing Committee of the National People’s Congress to declare a state of emergency.”

Victor Gao, an interpreter for former Chinese leader Deng Xiaoping, said the latter stipulation of the Basic Law means Beijing can intervene unilaterally without Mrs. Lam’s request, but that they are still giving her a chance first.

Mr. Gao, who is no longer serving in government, said he believed that if Beijing intervenes, it will be with police officers or other methods, not with the PLA.

In a sign of Beijing’s concerns over the optics of cracking down on students, Yang Guang, a spokesman for the Hong Kong and Macau affairs office, harshly criticized “separatists” Tuesday for turning teenagers into “foot soldiers and pawns” in Hong Kong.

Earlier Tuesday, Mrs. Lam renewed her commitment to staying in her position after the Reuters news agency reported a day earlier that she had told a meeting of business leaders that her role in the continuing unrest was unforgivable and that she would quit if she had the choice.

Mrs. Lam said her words, spoken in a private capacity, reflected her musings rather than reality, and she maintained that she had never tendered her resignation. In an audio recording of her remarks released by Reuters, Mrs. Lam can be heard lamenting the precarious nature of being a chief executive.

“The political room for the chief executive, who unfortunately has to serve two masters by constitution—that is the central people’s government and the people of Hong Kong—that political room for maneuvering is very, very, very limited,” Mrs. Lam said in the recording. She added that the situation was more difficult to address locally because it had been elevated to a national level with regards to sovereignty and security.

The leaked audio recording puts forth the idea that the local government is no longer governing Hong Kong in an autonomous manner, said Ho-Fung Hung, a political economy professor at Johns Hopkins University. “It turns from open secret to official knowledge that Beijing is masterminding the response to the protest,” he said.

In recent weeks, Mrs. Lam said she would start a dialogue with people from all backgrounds and political platforms, though she hasn’t met any key figures from the opposition movement.

“Hong Kong needs constructive dialogue badly,” said Mr. Yang, the government spokesman in Beijing. He said Beijing supports Mrs. Lam’s talks with Hong Kongers, adding that he hoped discussion could turn “rage into harmony.”

Beijing policy experts have also been floating possible changes to Hong Kong’s political system that would put more centralized power in the hands of the city’s executive chief. Such changes would almost certainly face intense public resistance in Hong Kong.

The city is entering a fourth month of social upheaval sparked by protests over a bill that Mrs. Lam proposed. Mass protests and, in recent weeks, near daily clashes between hard-core protesters and police have occurred in the city’s streets and subway stations. Protesters have a slate of demands including democratic changes and an independent inquiry into how police have handled the demonstrations.

At Tuesday’s news conference in Beijing, spokeswoman Ms. Xu said that Hong Kong schoolteachers who encouraged students to protest had lost their decency and must be punished to the fullest extent of the law.

Thousands of high school and university students are participating in their second day of class boycotts in Hong Kong. The government’s proposal to introduce patriotic education in Hong Kong in 2012 is often cited by young activists as the moment of their political awakening. Amid protests at the time, the measures were never introduced.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance
:

  • CCC -1.4%

Select EU financial related names showing weakness:

  • RBS -3.1%, LYG -2.1%, BCS -2.1%, SAN -1.9%, CS -1.5%, ING -1.3%

Select stocks trading lower impacted by new tariffs:

  • AKS -3.7%, FCX -3.3%, MT -2.9%, RIO -2%, CLF -1.3%, CAT -1.1%

Select oil/gas related names showing early weakness:

  • TOT -2.1%, SLB -1.5%, RDS.A -1.4%, CPE -1%, XOM -0.7%

Other news:

  • ARDS -27.1% (announces results from first-in-patient Phase 2 clinical trial evaluating AR-105 for the treatment of ventilator-associated pneumonia -- study did not meet its primary endpoint)
  • TGTX -3.4% (files mixed securities shelf offering)
  • WYNN -3% (after Macau Gaming results)
  • BA -2.3% (737 Max 8 jets could be grounded into the 2019 holiday travel season, according to WSJ)
  • CNHI -1.7% (presents new five-year 2020--2024 business plan; announced its agreement to acquire AgDNA)
  • ULTA -1.7% (continued weakness)
  • MGM -1.7% (after Macau Gaming results)
  • FOCS -1.6% (files for mixed securities shelf offering)
  • NVS -1.4% (Paragon-hf trial suggests Entresto benefit in HFPEF patients but narrowly misses primary endpoint)
  • CCC -1.4% (announced affiliated shareholders of Onex Corporation and Baring Private Equity Asia Group intend to offer an aggregate 34.5 mln of the Company's ordinary shares in an underwritten public offering)
  • IOVA -1.2% (files for $400 mln mixed securities shelf offering)
  • LVS -0.8% (after Macau Gaming results) .

Analyst comments:

  • SAM -2.6% (downgraded to Underperform from Hold at Jefferies)
  • HEI -2.5% (downgraded to Sell from Neutral at UBS)
  • PLNT -1.7% (downgraded to Hold from Buy at Berenberg)
  • SAVE -1.6% (downgraded to Mkt Perform from Strong Buy at Raymond James)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance
:

  • CONN +13.1%, AFYA +1.4%

Select metals/mining stocks trading higher:

  • EGO +5.8%, DRD +4.9%, AG +2.2%, KGC +1%, SLV +1%, AUY +0.6%, GDX +0.6%, NEM +0.5%

Other news:

  • MDCO +14.4% (presents First Phase 3 Trial results of Inclisiran; achieved 54% LDL-C lowering)
  • MAMS +12.3% (agrees to be acquired by Kerridge Commercial Systems for $12.12/share in cash)
  • CXO +3.9% (to sell its assets in the New Mexico Shelf to an affiliate of Spur Energy Partners LLC for $925 million; additionally, Board authorizes $1.5 bln common stock repurchase plan)
  • CRSP +3.2% (enters into $200 mln market sale agreement with Jefferies)
  • OBSV +2.2% (reports results from mechanism of action trial of its oral oxytocin receptor antagonist, nolasiban)
  • KURA +1.3% (announces 'positive' results from an investigator-sponsored Phase 2 trial of its lead drug candidate, tipifarnib, in patients with relapsed or refractory urothelial carcinomas that carry HRAS mutations)

Analyst comments:

  • GERN +5% (initiated with a Buy at H.C. Wainwright; tgt $4)
  • SNAP +1.6% (upgraded to Outperform from In-line at Evercore ISI)
  • SQ +1% (upgraded to Buy from Hold at SunTrust)

>>> US Early premarket gappers

Early premarket gappers

Gapping up:

  • MDCO +17%, EGO +4.9%, DRD +4.2%, SNY +3.1%, SEAC +2.2%, MOMO +1.5%, NVO +1.4%, KGC +1.4%, AUY +1.1%, AG +1.1%, TEVA +1%, CTXS +1%, SLV +0.8%, GDX +0.8%, SQ +0.7%, NEM +0.7%, LRCX +0.6%

Gapping down:

  • AKS -4.2%, CLF -4%, MT -3.5%, WYNN -3.3%, RBS -3.1%, CNHI -2.7%, FCX -2.4%, LYG -2.1%, BCS -2.1%, TOT -2.1%, RIO -2%, ING -2%, AMD -1.8%, STM -1.8%, SAN -1.6%, RDS.A -1.5%, JD -1.5%, BA -1.5%, CPE -1.5%, NOK -1.4%, CAT -1.3%, NVDA -1.3%, NVS -1.3%, ASML -1.3%, ULTA -1.2%, NLY -1.2%, NFLX -1.2%, BABA -1.2%, SLB -1.1%, GE -1.1%, CSCO -1%, OLLI -0.8%, XOM -0.7%

FT : Iran renews threat of uranium enrichment

Iran renews threat of uranium enrichment
No details yet from Tehran delegation’s talks in Paris on French initiative to help Islamic republic export oil

Iran will this week enrich its uranium beyond the limits agreed in the nuclear deal with world powers unless cosignatories deliver the promised economic benefits, president Hassan Rouhani warned on Tuesday.

In the deal brokered in 2015, the Islamic republic agreed to limit its nuclear activities in return for the lifting of sanctions, particularly on the export of oil. But ever since President Donald Trump pulled the US out of the nuclear accord last year, the reimposition of US sanctions has hit the Islamic republic hard.

The other signatories — Britain, France, Russia, China and Germany — have said they remained committed to the landmark agreement.

“We will reconsider our decision to decrease our commitments [to the nuclear deal], if 4+1 [ world powers excluding the US] will meet part of their commitments,” Mr Rouhani said in the Iranian parliament. Already this year, the Iranians have taken two retaliatory steps enriching uranium beyond the agreed purity level of 3.67 per cent.

“But if they fail to take a significant step, we will definitely go into the third phase in the coming days. It could further complicate the problem . . . but we will continue our negotiations even after the next step is taken,” he said.

His comments come after an Iranian delegation visited Paris on Monday to discuss an initiative by French president Emmanuel Macron to help Iran export oil. No details have yet emerged on the meetings in Paris or on US reaction to the initiative.

In May, Iran said that it would start violating the limits set on its nuclear programme every two months in protest at the other signatories’ failure to help Iran export oil — the country’s lifeline. It has previously said that these measures would be reversed once it was able to export crude oil.

Mr Rouhani said Iran would continue “domestic resistance” against the US pressure while it continues talks with European states, Russia and China. He said no bilateral negotiations could happen with the US unless it lifted all sanctions and joined multilateral talks. “When we talk about negotiations, it means all sanctions should be lifted [first]. Our stance is clear,” he added. “Our strategy is based on two principles of domestic resistance and active diplomacy.”

Meanwhile, Iran’s hardline forces have urged the government to increase its uranium enrichment activities. Kayhan daily newspaper, a mouthpiece for hardliners, urged Mr Rouhani on Tuesday “to decisively take the next step” by Friday and “then start bargaining with Europe”.

FT : Will the US follow Germany and Japan below zero?

Will the US follow Germany and Japan below zero?
Investors are preparing for the possibility of negative 10-year Treasury yields

Some US investors are girding themselves for the once-inconceivable prospect that the 10-year Treasury yield could be headed towards zero, as this year’s giant rally in bonds shows few signs of easing.

In a world awash with roughly $17tn of negative-yielding government debt — meaning buyers are guaranteed to get back less than they paid, via interest and principal, if they hold to maturity — America’s government bond market has long offered refuge to investors seeking higher returns.

German government bonds maturing in 10 years now yield minus 0.70 per cent, while Japan’s 10-year debt yields minus 0.27 per cent. In that context, the 1.5 per cent yield on the 10-year Treasury looks attractive.

But roughly a month ago the 10-year note was yielding about 2 per cent. The tight timeframe of that 50 basis-point slide has caught investors by surprise, leading some to put the prospect of further heavy falls on their radars.

“We could see zero,” said Nick Maroutsos, the co-head of global bonds at Janus Henderson in Newport Beach, California, noting that any sell-off in bonds so far, causing yields to rise, has been met with immediate buying. “The probability is increasing, particularly as we drop so rapidly.”

However, while he expects 10-year yields to break 1 per cent before long, he is more cautious on putting a timeframe on a move through zero. For one thing, he points out that the policy likely to turbocharge the move downwards — negative short-term interest rates from the US Federal Reserve — seems a very remote prospect.

“While central banks in Europe and Japan have put all their eggs in one basket to use negative interest rates to stimulate growth, [and] the Fed is watching closely . . . we’re not at the point yet where the US is going to fully embrace that unless they see some real-life concrete examples of it working,” Mr Maroutsos said.

The European Central Bank’s deposit rate currently sits at minus 0.4 per cent, having been set below zero since June 2014. Japan’s central bank adopted a negative benchmark interest rate in 2016, and it now charges commercial banks 0.1 per cent interest for some of the reserves they keep on deposit.

In the face of gloomy global growth and the US-China trade dispute, both the ECB and Bank of Japan have signalled a willingness to lean more heavily on this negative-rate policy.

US central bank has also left the door open for additional stimulus, but its target policy rate is well above zero, aiming at 2 to 2.25 per cent. Moreover, the relative strength of the US economy means there is resistance to pulling too forcefully on this lever.

For these reasons Bill O’Donnell, a rates strategist at Citigroup, said that while the 10-year note was headed to zero, it could be some time before it reached this level.

“One thing that is very clear to me in the midst of all of this cacophony of headlines is that there is absolutely no indication that rates are set to rise from here,” he said. But, he added: “Right now stocks are still not far from their record highs, the labour market looks to be in really solid condition and the US economy is still doing fine.”

Steve Major, global head of fixed income research at HSBC, has a similar view. “To jump from here to zero is a long way,” he cautioned. “But the chances of yields going back to where they were at the beginning of the year? Forget it.”

Fed chair Jay Powell recently underlined the strength of the US economy, stating at the central bank’s annual meeting in Jackson Hole that it was in a “favourable place”. While Mr Powell prefaced his remarks with a pledge to “sustain the expansion”, other members of the policy-setting committee have publicly pushed back on the need for additional stimulus.

As such, Scott DiMaggio, the co-head of fixed income at AllianceBernstein in New York, said there was a risk that the Fed underdelivered.

“The dissension . . . paints a picture that the Fed is trying to stay more balanced,” he said. “They are trying to keep some optionality.”

Traders are currently pricing in a more than 90 per cent chance that the Fed will cut its benchmark interest rate a quarter point at its upcoming meeting in September, with at least another three cuts by the end of next year.

Still, if the Fed were to follow through with the over 100 basis points of easing built into market expectations at the moment, its benchmark interest rate would be down to roughly 1 per cent.

For investors to ratchet their easing expectations higher, paving the way for the 10-year note to hit zero, the outlook for US growth would have to change dramatically, said Mr O’Donnell.

“I hope it’s not sooner than a couple of years,” he said. “I can’t imagine the news that would cause that. It would be nothing good.”