Stock market investors are finally facing up to global turmoil

Early declines signalled acknowledgment of US-China trade war and other events

Stock market investors’ ability to ignore big geopolitical events is legendary. Give them a whiff of lower interest rates and most big-picture troubles can be relegated to the status of passing worries. In the absence of cheaper money, however, the story can be different. Tuesday’s early declines, which were really a continuation of a losing run that has lasted for most of October, marked a moment when investors were obliged to acknowledge that, yes, some global forces look genuinely alarming.

First, the trade war between China and the US is having an impact that US companies can count. Caterpillar, the manufacturer of earth-moving equipment, said the full-year whack from higher steel and aluminium prices will be about $100m (£77m).

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Global markets take fright at cocktail of geopolitical risks

US/China trade dispute, US interest rates, Brexit and Italy’s budget spook investors

Wall Street and European stock markets followed Asian shares lower on Tuesday, as investors around the world took fright at the increasingly fractious global geopolitical outlook.

Investors are growing increasingly worried about a cocktail of risks that could act as a significant drag on the world economy. Potential headwinds include the trade dispute between the US and China, rising US interest rates, the fallout from the death of the Saudi journalist Jamal Khashoggi and the budget dispute between the EU and Italy.

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Supermicro CEO Joins Cook in Calling for Bloomberg to Retract Supply Chain Hack Story

Last week, Apple CEO Tim Cook called on Bloomberg to retract a highly controversial story suggesting Chinese spies planted microchips in the Supermicro server motherboards used in Apple’s data facilities, saying there was no truth to Bloomberg‘s claims.

Today, Supermicro Charles Liang joined Cook in calling for a retraction. In a statement shared by CNBC, Liang said that Supermicro has not found malicious hardware components in its products, nor has Bloomberg produced an affected Supermicro motherboard. Bloomberg, he says, should “act responsibly” and retract its “unsupported allegations.”



Liang’s full statement:

Supermicro is committed to making world-class servers and storage products. Bloomberg’s recent story has created unwarranted confusion and concern for our customers, and has caused our customers, and us, harm.

Bloomberg should act responsibly and retract its unsupported allegations that malicious hardware components were implanted on our motherboards during the manufacturing process.

The allegations imply there are a large number of affected motherboards. Bloomberg has not produced a single affected motherboard, we have seen no malicious hardware components in our products, no government agency has contacted us about malicious hardware components, and no customer has reported finding any malicious hardware components, either.

Supermicro, like Apple and other companies involved, has denied all of Bloomberg‘s claims since the story was first released. Supermicro previously said it was not aware of any investigation nor any companies that had found illicit hardware in their Supermicro products.

Amazon Web Services CEO Andy Jassy also spoke out against Bloomberg today, saying that the story is “wrong about Amazon, too.” Like Cook, Jassy says Bloomberg at no point offered proof or listened to what Amazon had to say about the situation.



Cook last week said that Apple “turned the company upside down” and dug “very deep” but could find absolutely no evidence that such an attack took place. “Each time we came back to the same conclusion: This did not happen,” said Cook. “There’s no truth to this.”

Since Bloomberg released its report, Apple has refuted the site’s claims in multiple clearly worded statements denying it happened. Bloomberg continues to stand by its original reporting, which, citing 17 sources, said Apple, Amazon, and other tech companies had purchased and installed Supermicro servers that had been tampered with by the Chinese government.

Along with Apple, Amazon, and Supermicro, multiple other sources have cast doubt on the information shared in Bloomberg‘s story. The UK’s Cyber Security Agency, the Department of Homeland Security, former FBI general counsel James Baker, and NSA Senior Advisor Rob Joyce, for example, have all questioned the veracity of Bloomberg’s claims and have denied knowledge of such an investigation.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

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China’s stock market surges on stimulus hopes – business live

Rolling coverage of the latest economic and financial news, as the Shanghai stock market leaps by over 4%

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

“Any words and practices that negate and weaken the private economy are wrong.

Supporting the development of private enterprises is the Party Central Committee’s consistent policy.

Chinese stocks rallying hard as Beijing’s verbal support reverberates through markets:

China H-Shares +3.1%
Hang Seng +2.2%
Shanghai Composite +4.1%
CSI 300 4.4%
ChiNext Index +5.7% pic.twitter.com/au8lCum3G9

Asian shares bounced higher on Monday, as Chinese stocks extended their rebound for a second straight session, pulling European futures higher in the process.

Beijing’s pledge of support for the economy is overshadowing geopolitical concerns over Saudi Arabia, Italy and Brexit.

It is all about China today whereby stimulus hopes lifted sentiment across the FX markets and helped traders to offset geopolitical and trade concerns. AUDUSD rebounded from this morning dip. Eyes on the GBPUSD as PM plans to announce that EU withdrawal is 95% settled. #AUDUSD pic.twitter.com/O2SP7Y9bxa

Related: Italian bank fears expected to grow after debt downgrade

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China is funding the future of American biotech

Silicon Valley is in the midst of a health craze, and it is being driven by “Eastern” medicine.

It’s been a record year for US medical investing, but investors in Beijing and Shanghai are now increasingly leading the largest deals for US life science and biotech companies. In fact, Chinese venture firms have invested more this year into life science and biotech in the US than they have back home, providing financing for over 300 US-based companies, per Pitchbook. That’s the story at Viela Bio, a Maryland-based company exploring treatments for inflammation and autoimmune diseases, which raised a $250 million Series A led by three Chinese firms.

Chinese capital’s newfound appetite also flows into the mainland. Business is booming for Chinese medical startups, who are also seeing the strongest year of venture investment ever, with over one hundred companies receiving $4 billion in investment.

As Chinese investors continue to shift their strategies towards life science and biotech, China is emphatically positioning itself to be a leader in medical investing with a growing influence on the world’s future major health institutions.

Chinese VCs seek healthy returns

We like to talk about things we can interact with or be entertained by. And so as nine-figure checks flow in and out of China with stunning regularity, we fixate on the internet giants, the gaming leaders or the latest media platform backed by Tencent or Alibaba.

However, if we follow the money, it’s clear that the top venture firms in China have actually been turning their focus towards the country’s deficient health system.

A clear leader in China’s strategy shift has been Sequoia Capital China, one of the country’s most heralded venture firms tied to multiple billion-dollar IPOs just this year.

Historically, Sequoia didn’t have much interest in the medical sector.  Health was one of the firm’s smallest investment categories, and it participated in only three health-related deals from 2015-16, making up just 4% of its total investing activity. 

Recently, however, life sciences have piqued Sequoia’s fascination, confirms a spokesperson with the firm.  Sequoia dove into six health-related deals in 2017 and has already participated in 14 in 2018 so far.  The firm now sits among the most active health investors in China and the medical sector has become its second biggest investment area, with life science and biotech companies accounting for nearly 30% of its investing activity in recent years.

Health-related investment data for 2015-18 compiled from Pitchbook, Crunchbase, and SEC Edgar

There’s no shortage of areas in need of transformation within Chinese medical care, and a wide range of strategies are being employed by China’s VCs. While some investors hope to address influenza, others are focused on innovative treatments for hypertension, diabetes and other chronic diseases.

For instance, according to the Chinese Journal of Cancer, in 2015, 36% of world’s lung cancer diagnoses came from China, yet the country’s cancer survival rate was 17% below the global average. Sequoia has set its sights on tackling China’s high rate of cancer and its low survival rate, with roughly 70% of its deals in the past two years focusing on cancer detection and treatment.

That is driven in part by investments like the firm’s $90 million Series A investment into Shanghai-based JW Therapeutics, a company developing innovative immunotherapy cancer treatments. The company is a quintessential example of how Chinese VCs are building the country’s next set of health startups using their international footprints and learnings from across the globe.

Founded as a joint-venture offshoot between US-based Juno Therapeutics and China’s WuXi AppTec, JW benefits from Juno’s experience as a top developer of cancer immunotherapy drugs, as well as WuXi’s expertise as one of the world’s leading contract research organizations, focusing on all aspects of the drug R&D and development cycle.

Specifically, JW is focused on the next-generation of cell-based immunotherapy cancer treatments using chimeric antigen receptor T-cell (CAR-T) technologies. (Yeah…I know…) For the WebMD warriors and the rest of us with a medical background that stopped at tenth-grade chemistry, CAR-T essentially looks to attack cancer cells by utilizing the body’s own immune system.

Past waves of biotech startups often focused on other immunologic treatments that used genetically-modified antibodies created in animals.  The antibodies would effectively act as “police,” identifying and attaching to “bad guy” targets in order to turn off or quiet down malignant cells.  CAR-T looks instead to modify the body’s native immune cells to attack and kill the bad guys directly.

Chinese VCs are investing in a wide range of innovative life science and biotech startups. (Photo by Eugeneonline via Getty Images)

The international and interdisciplinary pedigree of China’s new medical leaders not only applies to the organizations themselves but also to those running the show.

At the helm of JW sits James Li.  In a past life, the co-founder and CEO held stints as an executive heading up operations in China for the world’s biggest biopharmaceutical companies including Amgen and Merck.  Li was also once a partner at the Silicon Valley brand-name investor, Kleiner Perkins.

JW embodies the benefits that can come from importing insights and expertise, a practice that will come to define the companies leading the medical future as the country’s smartest capital increasingly finds its way overseas.

GV and Founders Fund look to keep the Valley competitive

Despite heavy investment by China’s leading VCs, Silicon Valley is doubling down in the US health sector.  (AFP PHOTO / POOL / JASON LEE)

Innovation in medicine transcends borders. Sickness and death are unfortunately universal, and groundbreaking discoveries in one country can save lives in the rest.

The boom in China’s life science industry has left valuations lofty and cross-border investment and import regulations in China have improved.

As such, Chinese venture firms are now increasingly searching for innovation abroad, looking to capitalize on expanding opportunities in the more mature US medical industry that can offer innovative technologies and advanced processes that can be brought back to the East.

In April, Qiming Venture Partners, another Chinese venture titan, closed a $120 million fund focused on early-stage US healthcare. Qiming has been ramping up its participation in the medical space, investing in 24 companies over the 2017-18 period.

New firms diving into the space hasn’t frightened the Bay Area’s notable investors, who have doubled down in the US medical space alongside their Chinese counterparts.

Partner directories for America’s most influential firms are increasingly populated with former doctors and medically-versed VCs who can find the best medical startups and have a growing influence on the flow of venture dollars in the US.

At the top of the list is Krishna Yeshwant, the GV (formerly Google Ventures) general partner leading the firm’s aggressive push into the medical industry.

Krishna Yeshwant (GV) at TechCrunch Disrupt NY 2017

A doctor by trade, Yeshwant’s interest runs the gamut of the medical spectrum, leading investments focusing on anything from real-time patient care insights to antibody and therapeutic technologies for cancer and neurodegenerative disorders.

Per data from Pitchbook and Crunchbase, Krishna has been GV’s most active partner over the past two years, participating in deals that total over a billion dollars in aggregate funding.

Backed by the efforts of Yeshwant and select others, the medical industry has become one of the most prominent investment areas for Google’s venture capital arm, driving roughly 30% of its investments in 2017 compared to just under 15% in 2015.

GV’s affinity for medical-investing has found renewed life, but life science is also part of the firm’s DNA.  Like many brand-name Valley investors, GV founder Bill Maris has long held a passion for the health startups.  After leaving GV in 2016, Maris launched his own fund, Section 32, focused specifically on biotech, healthcare and life sciences. 

In the same vein, life science and health investing has been part of the lifeblood for some major US funds including Founders Fund, which has consistently dedicated over 25% of its deployed capital to the space since at least 2015.

The tides may be changing, however, as the recent expansion of oversight for the Committee on Foreign Investment in the United States (CFIUS) may severely impact the flow of Chinese capital into areas of the US health sector. 

Under its extended purview, CFIUS will review – and possibly block – any investment or transaction involving a foreign entity related to the production, design or testing of technology that falls under a list of 27 critical industries, including biotech research and development.

The true implications of the expanded rules will depend on how aggressively and how often CFIUS exercises its power.  But a lengthy review process and the threat of regulatory blocks may significantly increase the burden on Chinese investors, effectively shutting off the Chinese money spigot.

Regardless of CFIUS, while China’s active presence in the US health markets hasn’t deterred Valley mainstays, with a severely broken health system and an improved investment environment backed by government support, China’s commitment to medical innovation is only getting stronger.

VCs target a disastrous health system

Deficiencies in China’s health sector has historically led to troublesome outcomes.  Now the government is jump-starting investment through supportive policy. (Photo by Alexander Tessmer / EyeEm via Getty Images)

They say successful startups identify real problems that need solving. Marred with inefficiencies, poor results, and compounding consumer frustration, China’s health industry has many

Outside of a wealthy few, citizens are forced to make often lengthy treks to overcrowded and understaffed hospitals in urban centers.  Reception areas exist only in concept, as any open space is quickly filled by hordes of the concerned, sick, and fearful settling in for wait times that can last multiple days. 

If and when patients are finally seen, they are frequently met by overworked or inexperienced medical staff, rushing to get people in and out in hopes of servicing the endless line behind them. 

Historically, when patients were diagnosed, treatment options were limited and ineffective, as import laws and affordability issues made many globally approved drugs unavailable.

As one would assume, poor detection and treatment have led to problematic outcomes. Heart disease, stroke, diabetes and chronic lung disease accounts for 80% of deaths in China, according to a recent report from the World Bank

Recurring issues of misconduct, deception and dishonesty have amplified the population’s mounting frustration.

After past cases of widespread sickness caused by improperly handled vaccinations, China’s vaccine crisis reached a breaking point earlier this year.  It was revealed that 250,000 children had been given defective and fallacious rabies vaccinations, a fact that inspectors had discovered months prior and swept under the rug.

Fracturing public trust around medical treatment has serious, potentially destabilizing effects. And with deficiencies permeating nearly all aspects of China’s health and medical infrastructure, there is a gaping set of opportunities for disruptive change.

In response to these issues, China’s government placed more emphasis on the search for medical innovation by rolling out policies that improve the chances of success for health startups, while reducing costs and risk for investors.

Billions of public investment flooded into the life science sector, and easier approval processes for patents, research grants, and generic drugs, suddenly made the prospect of building a life science or biotech company in China less daunting. 

For Chinese venture capitalists, on top of financial incentives and a higher-growth local medical sector, loosening of drug import laws opened up opportunities to improve China’s medical system through innovation abroad.

Liquidity has also improved due to swelling global interest in healthcare. Plus, the Hong Kong Stock Exchange recently announced changes to allow the listing of pre-revenue biotech companies.

The changes implemented across China’s major institutions have effectively provided Chinese health investors with a much broader opportunity set, faster growth companies, faster liquidity, and increased certainty, all at lower cost.

However, while the structural and regulatory changes in China’s healthcare system has led to more medical startups with more growth, it hasn’t necessarily driven quality.

US and Western investors haven’t taken the same cross-border approach as their peers in Beijing. From talking with those in the industry, the laxity of the Chinese system, and others, have made many US investors weary of investing in life science companies overseas.

And with the Valley similarly stepping up its focus on startups that sprout from the strong American university system, bubbling valuations have started to raise concern.

But with China dedicating more and more billions across the globe, the country is determined to patch the massive holes in its medical system and establish itself as the next leader in international health innovation.

Apple CEO Tim Cook Calls on Bloomberg to Retract Supply Chain Hack Story: ‘There’s No Truth to This’

For the first time since Bloomberg published a highly controversial story suggesting Chinese spies planted microchips in Supermicro server motherboards Apple used in its iCloud facilities, Apple CEO Tim Cook has gone on the record to vehemently deny the claims.

In an interview with BuzzFeed News, Cook said there is “no truth” to the story about Apple, before making the unprecedented move of calling on Bloomberg to publish a retraction.



Since the report went live earlier this month, Apple has refuted Bloomberg‘s claims in multiple clearly worded statements denying such an incident ever took place. Apple maintains that the story is “completely untrue,” malicious chips were never found in its servers, and there was never an FBI investigation into the incident.

Bloomberg has continued to stand by its original report, which, based on info obtained from 17 unnamed sources, said that Apple, Amazon, and other tech companies had purchased and installed Supermicro servers that had been tampered with by the Chinese government. Small chips were allegedly implanted into server motherboards, allowing China to access corporate secrets and other information.

Apple did have an issue with Supermicro servers that led to the company dropping Supermicro as a supplier, but the relationship ended after malware was discovered on a single server in an incident unrelated to Bloomberg‘s claims.

According to Apple CEO Tim Cook, though he only spoke out publicly about the Bloomberg story this week, he’s been involved in Apple’s response “from the beginning.”

“I personally talked to the Bloomberg reporters along with Bruce Sewell who was then our general counsel. We were very clear with them that this did not happen, and answered all their questions,” said Cook. “Each time they brought this up to us, the story changed and each time we investigated we found nothing.”

Cook went on to say that Bloomberg failed to provide Apple with specific details about the malicious chips the company supposedly found and removed, and that Bloomberg‘s claims are based on “vague secondhand accounts.” Cook told BuzzFeed that Apple did a deep search through all of its documentation and could find zero evidence of malicious chips or an FBI investigation.

“We turned the company upside down,” Cook said. “Email searches, data center records, financial records, shipment records. We really forensically whipped through the company to dig very deep and each time we came back to the same conclusion: This did not happen. There’s no truth to this.”

As BuzzFeed points out, Apple has never publicly called for a retraction of a story before, even in instances where incorrect information was published. Following Cook’s discussion with BuzzFeed, the site again contacted Bloomberg, and Bloomberg once again refused to budge.

“Bloomberg Businessweek’s investigation is the result of more than a year of reporting, during which we conducted more than 100 interviews,” a spokesperson told BuzzFeed News in response to a series of questions. “Seventeen individual sources, including government officials and insiders at the companies, confirmed the manipulation of hardware and other elements of the attacks. We also published three companies’ full statements, as well as a statement from China’s Ministry of Foreign Affairs. We stand by our story and are confident in our reporting and sources.”

Along with multiple strongly worded denials from Apple, including one to Congress, several other sources and government agencies have supported Apple’s claims that the information shared in Bloomberg‘s story is false.

The UK’s Cyber Security Agency, the Department of Homeland Security, former FBI general counsel James Baker, and NSA Senior Advisor Rob Joyce have all questioned the veracity of Bloomberg‘s claims and have denied knowledge of such an investigation.

Note: Due to the political nature of the discussion regarding this topic, the discussion thread is located in our Politics, Religion, Social Issues forum. All forum members and site visitors are welcome to read and follow the thread, but posting is limited to forum members with at least 100 posts.

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China moves quickly in bid to counter sharp slowdown in economy

Vice-premier and central bank governor intervene as GDP grows at lowest rate since 2009

Chinese officials have reacted quickly to a sharp slowdown in growth at the world’s second largest economy, promising that it remained strong despite an escalating trade war with the US.

The intervention on Friday by the vice-premier, Liu He, and the central bank governor gave China’s leading stock market a brief respite from six months of tumbling shares that have sliced more than a third from the value of Shanghai-listed companies.

Related: New Look to pull out of China with closure of 120 stores

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China growth slowest since financial crisis as trade war looms – business live

Economic growth of 6.5% in the third quarter was the weakest since early 2009 and is expected to slow further as the effects of China’s trade war with the US take hold

Putting China’s growth figures in context, Neil Wilson at markets.com says growth of 6.5% is “a nice problem to have”.

Growth of 6.5% rather than 6.6% is a pretty nice problem to have but the trade war with the US, higher debt levels and a depreciating currency remain a concern.

Any bounce in Chinese stocks needs to be seen in the context of the three-year collapse in equities.

One of the weaker spots in China’s economy was industrial production, with growth slowing to 5.8% year-on-year in September, from 6.1% in August.

Freya Beamish, chief Asia economist at Pantheon, says:

The slowdown makes sense in the context of the sharp downtrend in the manufacturing PMIs in recent months.

The breakdowns available at this stage offer little sign of green shoots. In particular, cement production is falling again, though this could reflect environmental curbs, rather than suggesting that the construction sector is back in the doldrums, after its recent positive contribution.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

China’s economy grew by 6.5% in the third quarter according to official figures published this morning.

Official GDP growth slowed last quarter consistent with broader evidence that the economy is cooling. There are some early signs in the September data that policy support is starting to gain traction, but we think more easing will still be needed in order to stabilise growth.

Looking ahead, we doubt the latest pick-up in infrastructure spending will be enough to prevent the economy from cooling further in the coming quarters. Policy easing has yet to reverse the downward trajectory in broad credit growth, a key headwind to the economy, and front-loading by US importers means that the impact of tariffs has yet to be felt.

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