DealBook Briefing: Don’t Bet on the Trade War Ending Quickly

July 29, 2019

Good Monday morning. On the agenda: The Fed is expected to cut interest rates this week for the first time since the 2008 financial crisis. (Was this email forwarded to you? Sign up here.)

U.S. and Chinese trade negotiators in March. Nicolas Asfouri/Pool photo by Associated Press

The U.S. and China don’t seem eager for a trade deal

Officials from the two countries are set to meet in Shanghai this week to continue negotiating a cease-fire for their trade battle, the WSJ reports. But neither side appears eager to strike a deal anytime soon.

On the agenda are smaller items, like Beijing’s buying more U.S. farm products and Washington’s easing restrictions on sales to Huawei.

But both sides were tamping down prospects of a big breakthrough:

• “I don’t know if they’re going to make a deal,” President Trump said Friday. “Maybe they will, maybe they won’t.” (He also suggested that China won’t want to strike a deal until 2021, and has pressed the W.T.O. to crack down on Chinese trade practices.)

• Beijing officials accused the U.S. of fomenting protests in Hong Kong, and said that they had discovered additional legal violations by FedEx, which had been criticized for misdirecting packages for Huawei.

“There doesn’t seem like there’s that much enthusiasm on either side,” Kenneth Jarrett, a senior adviser at the strategy firm Albright Stonebridge Group, told the WSJ. “Maybe they feel like they each have the upper hand.”

____________________________

Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York and Michael J. de la Merced in London.

____________________________

Mark Blinch/Reuters

The dismantling of Pfizer is set to continue

The pharmaceutical giant is expected to announce as soon as today that it will combine the division that controls Lipitor and Viagra with a rival, Mylan, Michael de la Merced and Katie Thomas report in DealBook.

The all-stock division would create a new giant in generic and off-patent drugs. Together, the Pfizer unit and Mylan reported about $5.5 billion in revenue in the first quarter of the year. (As part of the deal, Mylan’s current C.E.O., Heather Bresch, would step down.)

It would be the latest effort by Pfizer to sharpen its focus. The longtime giant of the American pharmaceutical industry announced plans to sell off huge chunks of its business to concentrate on high-margin proprietary treatments. Last year, it agreed to combine its consumer health care unit with GlaxoSmithKline’s.

But that doesn’t mean Pfizer will step away from big-ticket M.&A. The drugmaker announced last month that it would buy Array BioPharma, a producer of specialized cancer treatments, for $10.6 billion.

Peter Nicholls/Reuters

The London Stock Exchange wants to take on Bloomberg

The stock market confirmed on Friday that it’s in talks to buy Refinitiv, the financial data provider controlled by Blackstone and Thomson Reuters. Behind the effort is a thirst for financial market data — and an effort to challenge both bigger market operators and Bloomberg LP.

A deal would be pricey, valuing Refinitiv at $27 billion, including debt. It would also give Blackstone, which bought control of the business less than a year ago, a quick doubling of its investment.

But the talks show that the markets industry is changing. It’s not enough just to run an exchange, even as one as prominent as London’s. Market operators have been merging to gain more scale, and have sought to offer other services like financial data that they can charge huge sums for.

It’s a bold move for the L.S.E.’s new chief, David Schwimmer. A former Goldman Sachs banker, Mr. Schwimmer took over the stock exchange last year after it failed to complete several high-profile deals, including a merger with Germany’s Deutsche Börse Group.

Buying Refinitiv would come with challenges. Bloomberg still dominates the market for financial data terminals with a 33 percent market share, while Refinitiv’s Eikon product have 22 percent. And the companies reportedly expect intense scrutiny from antitrust regulators.

Here’s how to spot the next recession

With America’s record -long economic boom slowing, it’s natural to wonder whether the country is headed toward recession. Ben Casselman of the NYT has a handy guide on what signals to look out for and whether they’re showing danger.

Rapid increases in unemployment: Right now, there’s nothing to worry about.

An inverted yield curve, which occurs when the interest rate for 10-year Treasury bonds falls below that of three-month Treasuries: Looking worrisome, but not a reason to panic.

The I.S.M. Manufacturing Index falls below 45 for a while: It’s down, but that’s in part because of the trade war, and because manufacturing is less important for the U.S. economy than it once was.

Consumer confidence falls 15 percent over a year: Not a cause for concern yet.

Mr. Casselman’s caveat: None of these are perfect. “Historically, the best that forecasters have been able to do consistently is recognize that we’re in a recession once we’re in one,” the economist Tara Sinclair told him.

These may all play into the Fed’s thinking as it prepares to cut interest rates this week. Such a move would send a big signal, Jeanna Smialek of the NYT writes: “The current economy could be as good as it gets.”

A 737 Max parked in Renton, Wash. Ruth Fremson/The New York Times

How the F.A.A. missed problems with the 737 Max

The Federal Aviation Administration’s oversight process for Boeing was so riddled with holes that problems like the faulty autopilot software believed to be the cause of two fatal crashes completely escaped scrutiny, the NYT reports.

• “The company performed its own assessments of the system, which were not stress-tested by the regulator. Turnover at the agency left two relatively inexperienced engineers overseeing Boeing’s early work on the system.”

• “At crucial moments in the Max’s development, the agency operated in the background, mainly monitoring Boeing’s progress and checking paperwork.”

• “The nation’s largest aerospace manufacturer, Boeing was treated as a client, with F.A.A. officials making decisions based on the company’s deadlines and budget.”

• Former F.A.A. employees told the NYT that the official responsible for supervising Boeing, Ali Bahrami, appeared too deferential to the company.

• Boeing never submitted the autopilot software known as MCAS for formal F.A.A. review after expanding its role in flying the 737 Max, the NYT reports, leaving the regulator in the dark about a deeply flawed system.

More: Budget airlines around the world are suffering from the prolonged grounding of the 737 Max. Boeing believes that a newly discovered flaw in the plane can be fixed with a software update.

Charlie Ergen Andrew Kelly/Reuters

Charlie Ergen cashes in on his wireless bet

The Dish Network founder spent $20 billion over the years buying vast hunks of wireless spectrum, the radio frequencies that carry cellular signals — but never explained his plans. Now, his strategy has come into focus after he agreed buy $5 billion in assets from T-Mobile and Sprint, Drew FitzGerald of the WSJ reports.

Mr. Ergen famously honed his business skills at the card table. He is a former pro poker player who has been barred from some Las Vegas casinos. It taught him how to deal with “bad hands,” he told the WSJ.

With Dish he built a satellite-TV empire — and then started wagering on wireless spectrum. Analysts said Mr. Ergen appeared to be building a new telecom business to compensate for declining growth in the TV industry. But he never clarified his intentions beyond saying that he wanted to keep his options open.

T-Mobile’s bid to buy Sprint gave him his big chance. Owning all of that spectrum made Mr. Ergen the natural choice to buy assets that T-Mobile needed to win the Justice Department’s approval of its Sprint deal. “Dish is in a unique position to succeed,” Makan Delrahim, the Justice Department’s antitrust chief, said on Friday as he cleared the deal.

Mr. Ergen’s challenge now is convincing Wall Street that he can win as a wireless service provider. He acknowledges that others have a head start — but argues that’s a good hand, not a bad one. “Their legacy is mishmash. Their networks are plaid,” he told the WSJ. “We will be a solid color.”

It won’t be easy. Analysts estimate that Dish will need to spend $20 billion to build out a national network, at a time when it already carries $14.4 billion in debt. And Mr. Ergen must pay the federal government billions if he fails. Some experts think he may need to team up with a deep-pocketed partner like Amazon to pull off his plan.

Revolving door

Dan Coats will step down as the Trump administration’s director of national intelligence. President Trump plans to replace him with Representative John Ratcliffe, Republican of Texas.

CannTrust, a Canadian cannabis producer, fired Peter Aceto as C.E.O. amid an investigation by the authorities into unlicensed pot growing.

The speed read

Deals

• SoftBank is investing $2 billion in the Southeast Asian ride-hailing company Grab to finance its expansion in Indonesia. (CNBC)

• Two European restaurant delivery companies, Takeaway.com of the Netherlands and Just Eat of Britain, are in talks to combine, potentially creating a business worth about $11 billion. (Sky News)

• The investment firm Colony Capital is reportedly in talks to buy a stake in Legendary Entertainment, the film and TV company. (Bloomberg)

• Vice Media is reportedly in talks to buy the online publisher Refinery29. (WSJ)

• Debt investors desperate for high yields are turning to Chinese junk bonds. (WSJ)

Politics and policy

• Federal investigators examining foreign influence in the 2016 Trump campaign are looking at whether Tom Barrack, the financier and campaign adviser, violated foreign lobbying laws. (NYT)

• Senator Bernie Sanders, leading a bus trip to Canada with patients who use insulin, criticized drug prices in the U.S. (NYT)

• The government official in line to succeed Gov. Ricardo Rosselló of Puerto Rico, Justice Secretary Wanda Vázquez, said she didn’t want the job. (WSJ)

• President Trump rejected a proposal to weaken the U.S. dollar. (WSJ)

Brexit

• Britain’s chancellor of the Exchequer, Sajid Javid, said he would set aside an additional 1 billion pounds, around $1.2 billion, to help prepare for a no-deal exit from the E.U. (FT)

• His predecessor, Philip Hammond, is reportedly working with the opposition Labour Party to prevent Britain from leaving the E.U. without a deal. (Observer)

Trade

• China’s shrinking car market is worrying foreign automakers who have counted on the country for sales growth. (FT)

• President Trump suggested that he would impose tariffs on French wine in retaliation for France’s planned digital tax on tech companies. (NYT)

• Mr. Trump rebuffed Apple’s request for exempting Mac Pro components from tariffs and said the computers should be built in the U.S. (Business Insider)

Tech

• Amazon is said to be considering creating a new grocery business in addition to Whole Foods. (NYT)

• Oracle’s effort to block the Pentagon from awarding its cloud computing contract to Amazon reportedly went all the way to President Trump’s desk. (CNN)

• Apple contractors can reportedly hear private user interactions, including medical conversations and intimate moments, on a regular basis because of inadvertent Siri activations. (Guardian)

• Apple’s new credit card with Goldman Sachs is reportedly set to be introduced in early August. (Bloomberg)

• Elon Musk says Tesla drivers will soon be able to stream Netflix and YouTube in their cars when they’re not moving. (Bloomberg)

Best of the rest

• At least three people were killed at a shooting at a garlic festival in Gilroy, Calif. (NYT)

• U.S. companies say that violence in Hong Kong is making the territory a riskier place to do business. (FT)

• Generic drug makers like Actavis and Par Pharmaceutical — not Purdue Pharma, the creator of OxyContin — manufactured the bulk of opioids sold as the opioid crisis mounted, according to federal records. (WaPo)

• Deutsche Bank is reportedly investigating whether client data was compromised after former employees still had access to company systems and email after being laid off. (FT)

• Why James Dolan, who owns the New York Knicks, is struggling as an owner of a pro sports franchise. Plus: What it’s like to be kicked out of a venue by him. (Bloomberg Businessweek)

Facebook love scams are targeting vulnerable women. Who’s really behind that friend request? Impostors use stolen identities of U.S. soldiers to lure victims into online relationships and con them out of money. What are Facebook and the military doing to stop them? Watch an hourlong special of “The Weekly” on Hulu.

Thanks for reading! We’ll see you tomorrow.

You can find live updates throughout the day at nytimes.com/dealbook.

We’d love your feedback. Please email thoughts and suggestions to business@nytimes.com.