EU Up, China Down after Huawei Headlines

The global stock market is mixed this Tuesday as European stocks went up with the shares in London on the lead while the China Stocks went down right after the news that the US will sue Huawei, China’s biggest technology company, with allege stealing trade secrets and bank fraud.

Huawei, according to US prosecution, has allegedly sold telecommunications equipment which could be used to spy by the Chinese government. According to Bloomberg, there was a 13-count indictment filed in Brooklyn against Huawei, its two affiliated companies and its CFO Meng Wanzhou for purportedly conspiring business with Iran and bank fraud. There was also a separate charge filed in Washington for stealing trade secrets from T-Mobile USA.

Huawei, however, denies the allegations saying it had done nothing wrong in both cases, here is their official statement:

“The company denies that it or its subsidiary or affiliate have committed any of the asserted violations of U.S. law set forth in each of the indictments, is not aware of any wrongdoing by Ms. Meng, and believes the U.S. courts will ultimately reach the same conclusion,”

Despite their statement, China stocks still went down today as fear escalates that this can hit the corporate profits and that this will negatively affect this week’s talks regarding trade war. Below is Huawei’s current stock chart:

On the other hand, in the US Stock Markets is flickering with APPLE to announce their quarterly earnings and the PG & E filing for a $5.5Billion two-year fund while they resolve their looming bankruptcy.

Gone are the days when the utility companies are the safe haven for investors who plan for their retirement, thanks to PG & E who now face a potential $30billion in liabilities and its news of bankruptcy echoing in the power industry. The company’s debt rating now has now been trashed and considered junk, suppliers are downgraded and renegotiation to contracts may be on the table and 5 banks are on the hook. These banks are JPMorgan Chase & Co., Bank of America Corp., Barclays Plc and Citigroup Inc. with JP Morgan hosting the lender call on Wednesday. 

This though is not the first time that the bank sought for protection from creditors, the first one was in 2001 when their Pacific Gas & Electric utility unit filed for bankruptcy. While looking for a way to protect itself from liabilities caused by wildfires in 2017 and 2018, they must also find a way to serve its 16 million customers. According to the data by Bloomberg, Pacific Gas & Electric’s 5.125 percent bonds due 2043 rose about 1 cent on the dollar to 80 cents Tuesday morning, yielding nearly 7 percent. Its 6.25 percent notes maturing in 2039 gained about 1 cent to 84 cents on the dollar to yield 8.1 percent.

Below is PG & E’s chart today:

There are a lot of factors that could slow down or cause a sudden slide in what has been a good start this year, amongst others are the US-China tension, Federal Reserve rate decision, the Venezuela situation, and the UK’s Brexit process. With all these, there is every reason for the investors to be skeptical.

Upcoming events to look out for are the following:

1. VP Liu He of China to meet with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Wednesday and Thursday.

2. Fed Chairman Jerome Powell will hold a news conference on Wednesday after the FOMC rate decision.

3. U.K. Parliament to vote on amendments to Theresa May’s Brexit deal with the EU. The EU Parliament debates Brexit on Wednesday.

4. Apple, Microsoft, Facebook, Alibaba, Qualcomm, Tesla, Samsung, and Sony announce earnings.