Good morning. Fears about the spread of the coronavirus whacked stock futures this morning — and led to the cancellation of Mobile World Congress. More on that below. (Want this in your inbox each morning? Sign up here.)
The race to be the next Fed chair is getting interesting
Judy Shelton, who has been nominated to the central bank’s board of governors, is scheduled to testify before the Senate today.
She is a contentious choice for the job, Jeanna Smialek of the NYT notes:
• Ms. Shelton has questioned whether America needs the Fed at all.
• She favors pegging the value of the dollar to something like gold, an idea the U.S. abandoned decades ago.
• She’s seen as open to bending her ideological positions to please President Trump, eroding the Fed’s political independence.
But she appears to be moving into a prime position to become the next Fed chair if Mr. Trump wins re-election, Ms. Smialek adds. The president has openly derided the current chairman, Jay Powell, and could well pick someone more in tune with him ideologically when Mr. Powell’s term is up in 2022.
Washington speculation had focused on a different candidate for Fed chair: Kevin Warsh, who was on the central bank’s board during the financial crisis. Mr. Trump has praised Mr. Warsh before, but some wonder whether a strong performance by Ms. Shelton today would give her the inside track.
Is ‘Beyond Petroleum’ for real this time?
BP announced yesterday that it plans to be carbon-neutral by 2050, an ambitious target for one of the world’s biggest energy companies. What that actually means, however, is up for interpretation.
The oil giant’s proposal is its latest climate-minded initiative, with a twist. Not only is the company seeking to reduce its own carbon emissions, it said, but it also wants to offset the emissions from use of the oil and gas that it produces.
The proposal is more complicated than it looks. It has to do with the “scope” of emissions targeted by the plan: The bulk of pollution created by BP’s products are generated when customers burn the fuels, which are called Scope 3 emissions. BP’s net-zero pledge covers only its more direct operations, although the company plans to reduce Scope 3 emissions significantly.
U.K. regulators investigate Barclays C.E.O.’s ties to Epstein
The context: The two men had known each other since at least 1999, when Mr. Staley led JPMorgan Chase’s private bank, where Mr. Epstein was a client. The financier had helped funnel dozens of wealthy clients to Mr. Staley, and the two men stayed in touch even after Mr. Epstein was accused of sexually abusing scores of women.
Mr. Staley has the backing of the Barclays board, for now. The bank said he had been “sufficiently transparent” about the nature of his ties to Mr. Epstein, and the C.E.O. said that he hadn’t had any contact with the disgraced financier since taking up his post in December 2015.
Mobile World Congress was canceled. Does anybody care?
Mobile World Congress, the annual jamboree for the telecom industry in Barcelona, was canceled yesterday over fears about the coronavirus outbreak. It raises an interesting question: Do these kinds of conferences matter?
Last year, MWC drew around 110,000 attendees (including 7,900 C.E.O.s) from 200 countries. Cancellation of this month’s edition was inevitable, after major exhibitors like Nokia, Ericsson and Amazon pulled out over the past week or so.
This presents a natural experiment in the value of industry events, seen by some as essential for networking and deal making and by others as price-gouging junkets. Thousands of meetings that would’ve taken place at MWC this year now won’t happen, which could have knock-on effects later in the year. (Or not.)
The view from a veteran: We spoke with Ben Wood, a telecom analyst at CCS Insight in London who would have made his 23rd consecutive appearance at MWC this year.
• For the companies that blow huge portions of their marketing budgets on MWC, “if you find that you can cope without going, and the costs associated with it, you may choose to deploy your resources in different ways,” he told DealBook.
• That’s harder for small companies that rely on “serendipitous moments” with big buyers or potential partners wandering the halls of events like MWC, he added.
No touching. In the meantime, conference etiquette will change. The organizers of a big tech event in Amsterdam now underway praised attendees for “safe greeting practices such as fist or elbow bumps.” Generally speaking, it must be said, handshakes are incredibly unhygienic.
Credit Suisse’s chief leaves on a defiant, awkward note
Tidjane Thiam delivered his final earnings call as the Swiss bank’s chief this morning, after being pressured to resign amid controversy over a spying scandal.
He presented the growth in net income of 69 percent as the result of his changes in the structure and strategy at the company. “We’ve built something of quality, the numbers are coming through,” he said at a press conference.
There was a notable moment of reflection on his uneasy tenure at the bank, notes the NYT’s Amie Tsang, who was listening in on the call. “There are differences within Switzerland in how people feel about me,” Mr. Thiam said. “Every second I’ve done the best I could. I am who I am, I cannot change who I am.”
How Marc Benioff sold Trump the trillion-tree idea
President Trump has openly dismissed climate change activists as “prophets of doom.” But Marc Benioff of Salesforce managed to win him over on one particular environmental initiative, Lisa Friedman of the NYT writes.
Mr. Benioff pitched Jared Kushner, a top White House adviser and Mr. Trump’s son-in-law, about the initiative to plant one trillion trees to help offset carbon emissions. The idea eventually — and unexpectedly — wound its way into Mr. Trump’s speech to the World Economic Forum in Davos, Switzerland, last month.
“Trees are the ultimate bipartisan issue,” Mr. Benioff told the NYT. “Everyone is pro-tree.”
There are two lessons to draw from this:
• Successfully lobbying Mr. Trump is an unconventional process that involves back-channeling with trusted advisers.
• The idea of one trillion trees appears to have taken hold with the president because, as Ms. Friedman notes, “it was practically sacrifice-free.”
Jeff Bezos’ latest takeover: David Geffen’s L.A. mansion
• David Geffen’s palatial Los Angeles home, which Mr. Bezos bought for $165 million — setting a record for the city in the process.
• A plot of undeveloped land in the L.A. area, purchased from the estate of the Microsoft co-founder Paul Allen.
They follow Mr. Bezos’ $80 million purchase of the top four floors of a Manhattan apartment building last year, reportedly with the goal of turning them into a gigantic pied-à-terre.
It’s a windfall for Mr. Geffen, who bought the L.A. mansion — the former estate of the movie mogul Jack Warner — for $47.5 million in 1990.
The speed read
• The parent company of T-Mobile reportedly wants to renegotiate the price of its takeover of Sprint. (FT)
• The venture capital firm Battery Ventures has raised $2 billion for its two latest funds, which will focus on investments in enterprise software companies. (Bloomberg)
• Meet the Korean hedge fund that scored big by backing “Parasite,” the movie that won the Academy Award for best picture. (Bloomberg)
Politics and policy
• Moderate Democratic leaders are slowly warming up to Mike Bloomberg as Senator Bernie Sanders becomes the front-runner in the party’s presidential race. (NYT)
• Larry Ellison of Oracle is doing a rare thing in Silicon Valley: hosting a fund-raiser for President Trump. (Recode)
• The Education Department is reportedly investigating Harvard and Yale over their sources of foreign funding. (WSJ)
• The Justice Department’s antitrust chief, Makan Delrahim, has reportedly said in private conversations that he expects a criminal antitrust case in Silicon Valley in the next few months. (Hollywood Reporter)
• Read up on Mark Zuckerberg’s approach to crisis management. (Wired)
• Britain plans to give its media regulator additional oversight over internet content. (NYT)
• Huawei of China is said to be in talks to fund research into 5G wireless technology at the London School of Economics — for £105,000, or $136,000. (FT)
Best of the rest
• Massachusetts’ attorney general sued Juul yesterday, accusing the vaping company of buying ads on youth-focused websites to target young nonsmokers. (NYT)
• The coronavirus outbreak cost Bernard Arnault his title of world’s richest man. (Fortune)
• Charlie Munger on the world today: “There’s too much wretched excess.” (CNBC)
We’d love your feedback. Please email thoughts and suggestions to firstname.lastname@example.org.
Amazon’s first employee says the company scares him
Nikki Kahn | The Washington Post | Getty Images
Amazon’s first employee says he’s concerned about how big the company has become.
Shel Kaphan, who joined Amazon after it was founded in 1994, gave a rare interview to PBS “Frontline” for its two-hour special, “Amazon Empire: The Rise and Reign of Jeff Bezos,” which aired on Tuesday. Kaphan was Amazon’s chief technology officer and was a key architect of the website.
“I built a substantial part of the early system that allowed them to come into existence, so I feel responsibility because of that,” said Kaphan, who left Amazon in 1999. “On one hand, I’m proud what it became, but it also scares me.”
Kaphan said Amazon should be broken up, given its size and influence over small businesses’ ability to thrive online. It’s an idea that’s being weighed by U.S. antitrust enforcers and has been brought up on the campaign trail by candidates including Sen. Elizabeth Warren.
“I think the characterization of Amazon as a ruthless competitor is true,” Kaphan said. “Under the flag of customer obsession they can do a lot of things which might not be good for people who aren’t their customers.”
An Amazon spokesperson said the company represents less than 1% of global retail and less than 4% of U.S. retail.
“Amazon’s retail business competes in the worldwide market for retail sales,” the spokesperson added. “Our competitors include all the other online and brick and mortar stores that people shop at every day.”
Several Amazon executives who appeared in the documentary pushed back on the idea that Amazon should be broken up, including the CEO of Amazon’s consumer business, Jeff Wilke. Wilke acknowledged that Amazon and “everything that’s large in the economy and in society” deserves scrutiny, but stopped short of saying Amazon has dominated industries. He said Amazon competes with a number of companies in retail, such as Walmart, Target, Costco and Alibaba.
“We’re in a lot of verticals, yes. There’s video and there’s commerce, and there’s web services. But in every one of them, we have intense competition,” Wilke said. “If we were everywhere, that means we’re talking about the global economy, not just global retail. It’s so vast. We’re just — you know, we’re a speck.”
Javid out, Sunak in – What Does This Mean For Markets?
Head of Market Analysis Anthony Cheung delivers a look ahead for the session. Topics covered include:
– Update on coronavirus and general market sentiment at the open (00:00)
– German GDP shows no growth Q4 2019, what does this mean for the EUR (4:28)
– UK Chancellor Sajid Javid steps down and is replaced by Rishi Sunak, what does this mean and why did it happen (7:42)
– A overview of the calendar of events for today (12:21)
– Technical review of the charts from trader Sam North (14:53)
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Iran confirms two deaths, IMF chief issues warning
This is a live blog. Please check back for updates.
All times below are in Eastern time.
- Total confirmed cases: More than 75,200
- Total deaths: At least 2,007
2:19 pm: Tyson Foods sees business slow in China due to outbreak
Tyson Foods’ CEO said at a conference that the company has seen Chinese ports backed up as a result of the virus, slowing down the import of its U.S. meat products. Shares of the world’s second-largest meat processor fell 1% in afternoon trading on the comments. “There’s a definite need within the country to fulfill customer demand, to feed the people and we are continuing to ship product,” Tyson CEO Noel White said. In the next few years, Tyson expects to see higher demand as a result of African swine fever, which has hit China’s pork supply and global pork prices. Beijing lifted a years-long ban on importing U.S. poultry meat in November.
1:53 pm: The market continues to take outbreak in stride
1:12 pm: Diamond Princess cruise passengers disembark quarantined ship in Japan
Hundreds of passengers trundled off a cruise ship in Japan after being held on board in quarantine for more than two weeks, as criticism mounted of Japan’s handling of the biggest coronavirus outbreak outside China. More than 620 passengers and crew became infected with the virus over the course of the quarantine, raising questions about whether it helped or hurt efforts to contain the outbreak. The Diamond Princess has been quarantined at a dock at Yokohama near Tokyo since Feb. 3, initially with 3,700 people aboard. Passengers who test negative and show no symptoms are free to leave. Around 500 were expected to disembark on Wednesday, with the rest of those eligible leaving over the next two days. Confirmed cases were to be sent to hospital, while those who shared cabins with infected passengers may still be kept on board. The United States flew more than 300 passengers to air bases in California and Texas this week. — Reuters
A bus leaves the quarantined Diamond Princess cruise ship at a port Sunday, Feb. 16, 2020, in Yokohama, near Tokyo. The U.S. says Americans aboard a quarantined ship will be flown back home on a chartered flight Sunday, but that they will face another two-week quarantine.
Jae C. Hong | AP Photo
12:49 pm: Fed’s Kashkari warns US could feel economic impact from persistent outbreak
Minneapolis Federal Reserve President Neel Kashkari warned the U.S. would likely feel economic effects if the coronavirus continues to plague Asian commerce. Speaking at a symposium in Mankato, Minnesota, Kashkari explained the impact to Asia could bleed into the U.S. if the outbreak persists. “China’s economy is a big engine of the world economy. So that will affect all of us,” he said. “It’s unlikely that if this continues that we’re going to be completely immune from the economic effects of a slowdown in Asia.” — Franck
People wearing face masks move packs of vegetables at a wholesale market for agricultural products, as the country is hit by an outbreak of the novel coronavirus, in Beijing, China February 19, 2020.
Tingshu Wang | Reuters
12:08 pm: China reportedly plans to take over HNA Group and sell its airline assets
China plans to take over HNA Group and sell off its airline assets, as the coronavirus outbreak hits the Chinese conglomerate’s ability to meet financial obligations, Bloomberg reported, citing people familiar with the matter. The government of Hainan, the southern province where HNA is based, is in talks to take control of the conglomerate, the report said. HNA did not immediately respond to an e-mailed request for comment on the Bloomberg report. — Higgins-Dunn
11:05 am: Iran reports two deaths
Two Iranians have died in the
hospital after testing positive for the new coronavirus in the holy Shi’ite city of Qom, the head of the city’s University of Medical Sciences told Mehr news agency on Wednesday. “Two Iranians, who tested positive earlier today for new coronavirus, died of respiratory illness,” the official told Mehr. Iran’s health ministry spokesman Kianush Jahanpur confirmed their death on Twitter. Iran confirmed earlier in the day its first two cases of the virus, government spokesman Ali Rabiei said, shortly after reports that preliminary tests on the two had come back positive.The health ministry said earlier that the patients had been put in isolation. — Reuters
10:04 am: IMF chief calls outbreak the ‘most pressing uncertainty’ for global economy
International Monetary Fund head Kristalina Georgieva said the COVID-19 outbreak is the “most pressing uncertainty” for the global economy. The new coronavirus has already slowed China’s economic growth for the year — just how much depends on how well world leaders can contain the fast-spreading outbreak, she said in a blog post. “There are a number of scenarios, depending on how quickly the spread of the virus is contained,” she said. If it’s contained quickly, she said, China’s overall 2020 GDP growth will be hurt, but just slightly and cross-border spillover would remain minimal. “However, a long-lasting and more severe outbreak would result in a sharper and more protracted growth slowdown in China. Its global impact would be amplified through more substantial supply chain disruptions and a more persistent drop in investor confidence, especially if the epidemic spreads beyond China.” — Feuer
9:15 am: Plugable Technologies warns the worst of its supply disruption won’t hit for months
The CEO and founder of Plugable Technologies, which sells USB, Bluetooth and power devices and partners with 15 factories in China, told CNBC’s “Squawk Box” he is expecting the virus to disrupt his supply chain during March and April the most because securing any extra inventory will take at least two months to move through the supply chain. CEO Bernie Thompson said he has also had trouble with factories outside China since it only takes one part built in the country to disrupt the entire supply chain, especially in the electronics industry. —Higgins-Dunn
9:01 am: Virus hits small business owners who import products from China
As coronavirus spreads around the world, small business owners who import from China are on edge. CNBC spoke with Kyle Kirshner, who has been doing business in China for several years. He knew to stock up on supplies ahead of the Lunar New Year, but prolonged factory shutdowns threatened his business and that of others who import products from China. Kirshner owns Kyndley, which sells outdoor products via Amazon and imports 90% of its goods from China. He expects his supply will be impacted within a month if things don’t turn around. And if he doesn’t have product to list on Amazon, his rankings may drop and hurt sales. — Rogers
8 am: China expels three WSJ journalists
China has revoked the press credentials of three journalists from The Wall Street Journal after the newspaper declined to apologize for a column that called China the “real sick man of Asia,” China’s foreign ministry said. Spokesman Geng Shuang told a daily briefing that Beijing made several representations to the paper over the column, which China criticized as racist and denigrating its efforts to combat the coronavirus epidemic, but that the paper had failed to apologize or investigate those responsible. Deputy Bureau Chief Josh Chin and reporter Chao Deng, both U.S. nationals, as well as reporter Philip Wen, an Australian national, have been ordered to leave the country within five days, the WSJ reported. — Feuer
7:30 am: Adidas reports 85% drop in China business activity
German sportswear maker Adidas said business in China dropped by about 85% year on year as the coronavirus outbreak has resulted in store closures and fewer customers visiting the remaining outlets. Adidas said it had seen lower traffic, mainly in Japan and South Korea, but added that it had not yet registered any major business impact beyond Greater China. “As the situation keeps evolving on a daily basis, the magnitude of the overall impact on our business for the full-year 2020 cannot be quantified reliably at this point in time,” it said. — Reuters
A masked man guards at the entrance to a village as a measure to contain the COVID-19 spread in Zhangye in northwest China’s Gansu province Tuesday, Feb. 18, 2020.
Barcroft Media | Getty Images
6:30 am: Iran says two people have tested positive for coronavirus
Iranian authorities reported two suspected cases of the coronavirus, according to the country’s semi-official ISNA news agency. A health ministry spokHesperson said both cases were in the city of Qom and the patients had been put into isolation. “The next stages of testing are underway and the final results of these tests will be released to the public once they have been determined,” Kiyanoush Jahanpour, a spokesperson at Iran’s health ministry, said in a statement, ISNA reported. Iran has not previously confirmed any cases of the coronavirus. — Meredith
5:40 am: Japan says 79 more people have tested positive for coronavirus on Diamond Princess cruise ship
Japan confirmed 79 new cases aboard the Diamond Princess cruise liner, taking the total number of on-board infections to 621. Japan’s public broadcaster, NHK, citing the health ministry, said 68 of the 79 people with COVID-19 didn’t have any symptoms. Earlier, passengers and crew members on board the quarantined cruise ship, who were not taking government repatriation flights, started the process of disembarking. There may be more positive test results as people need certificates indicating they tested negative for the virus before they can leave. — Meredith
Read CNBC’s coverage from CNBC’s Asia-Pacific and Europe teams overnight here: Iran says two test positive for virus, death toll tops 2,000.
— Reuters and CNBC’s Thomas Franck, Noah Higgins-Dunn, Kate Rogers, Sam Meredith contributed to this report.
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