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Businesses breathe a sigh of relief over the midterms
Corporate leaders still have much to fear, including President Trump’s trade fight with China. But they view Washington gridlock as largely positive, as it will ward off sweeping policy changes that could upset the strong environment for business. (These are the economic indicators that will show if that theory holds.)
Here are some other key corporate takeaways from the midterms:
• Energy: Renewables companies benefited from Democratic victories on the state level, where a lot of energy policy is set. Oil producers suffered setbacks in some states, but blocked a carbon tax initiative in Washington State.
• Tech: Both parties are expected to come together on potential new privacy regulations, but they are likely to clash on net neutrality rules.
• Health care: Insurance providers are happy that no repeal of the Affordable Care Act is on the table. Both Democrats and Mr. Trump want to lower drug prices, but it’s unclear what they can accomplish.
• Finance: Representative Maxine Waters of California, a skeptic of the industry, is likely to take over the House Financial Services Committee. Among her expected targets is Deutsche Bank, which she wants to scrutinize over its ties to Mr. Trump.
• Taxes: Mr. Trump said yesterday that he’s open to a rise in corporate taxes — which he cut last year to 21 percent from 35 percent — to pay for a middle-class tax cut.
One big boon for business: Continued Republican control of the Senate, which will help Mr. Trump to keep adding judges that are seen as favorable to corporate interests.
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.
Tesla names a new chairwoman
The automaker chose Robyn Denholm, the C.F.O. of the Australian telecommunications company Telstra, to replace Elon Musk as chair of the company’s board. Ms. Denholm has been an independent director at Tesla since 2014, and will step down from her role at Telstra.
The move is the result of a settlement between Tesla and the S.E.C. over Mr. Musk’s tweets about plans to take the company private. To end a lawsuit over the posts, the S.E.C. demanded that the automaker separate the roles of chairman and C.E.O., and Mr. Musk is now unable to serve as chairman for three years.
Tim Higgins of the WSJ considers Ms. Denholm’s appointment:
The decision thrusts into one of the brightest spotlights in American business a woman who is little known in the U.S. but has extensive experience as a finance executive in Silicon Valley and her native Australia. As a Tesla board member, Ms. Denholm has provided some rare automotive experience to a company that prides itself on being an industry outsider. She spent seven years at Toyota Motor Corp. in Australia, where she was a senior financial manager.
More Tesla news: The venture capitalist Tim Draper says that Elon Musk should have tried to take the company private sooner.
Google looks to expand in New York
It isn’t just Amazon that’s reportedly planning to open huge new offices there. The NYT reports that Google is in discussions to move into a planned 1.3 million-square-foot office complex at the St. John’s Terminal building on the West Side of Manhattan.
Google currently employs around 7,000 people in New York. The new space could house up to 8,500 people, according to the WSJ. As it expands throughout the city, the company could eventually have space for as many as 20,000 staff members.
With Amazon also reportedly planning to locate half of its proposed HQ2 (and about 25,000 jobs) in Long Island City, Queens, New York could become a tech hub. Not everyone will be pleased about that: Daisuke Wakabayashi of the NYT notes that “as tech companies expand in New York, they are likely to compete with Wall Street for engineering talent.”
Amazon HQ2 news: What we don’t know about its plan to split the new office in two. What it could mean for Long Island City’s infrastructure. And how the decision could leave the rest of the country behind.
The Fed announces its latest policies. The central bank isn’t expected to raise rates today. Some economists believe it could point to softening business investment and housing markets as signs of slowing growth.
Ouster of Jeff Sessions spells trouble for Robert Mueller
President Trump has long been expected to replace Jeff Sessions as attorney general. Yesterday, he did.
But the new acting attorney general, Matthew Whitaker, has been publicly skeptical of the special counsel, Robert Mueller. Though Mr. Trump has said that he won’t fire Mr. Mueller, Mr. Whitaker could make the special counsel’s job much harder. He could slash Mr. Mueller’s budget — an idea he floated last year — or block off lines of inquiry, like Mr. Trump’s finances.
Democrats have called on Mr. Whitaker to recuse himself, given his previous public comments. Expect the political battling to drag on.
Hedge funds had an awful October
Hedge funds suffered their worst October in seven years, according to Hedge Fund Research. Energy and tech stocks are to blame for their poor performance, according to Lindsay Fortado of the FT:
H.F.R.’s equity hedge fund index fell 4.25 percent in October — its worst performance in nearly three years — while the index that tracks funds that invest in technology stocks fared the worst, with a decline of 4.7 percent.
Those strategies weren’t even the worst performers for the month. That title went to H.F.R.’s index that tracked funds that invest in energy stocks, which was down just over 8 percent for October.
Among the losers: Dan Loeb’s Third Point, which lost 6.7 percent, and Bill Ackman’s Pershing Square Capital Management, which was down 8.4 percent. David Einhorn’s Greenlight Capital Management, which has struggled so far in 2018, was among the few funds that showed a gain.
China spent $32 billion last month on propping up its currency
The renminbi has slid in value for months, but the country has been working hard to keep it from plummeting. The FT reports that China spent roughly $32 billion in foreign exchange reserves to strengthen the currency last month, the heaviest monthly investment into propping up the renminbi in almost two years.
Analysts broadly think that China sees a renminbi exchange rate of 7 to the dollar as a big psychological barrier (the currency is currently just below that level). The big spending suggests that is the case, but the FT also notes that the Chinese central bank is treading a careful line to avoid eroding its foreign exchange reserves below $3 trillion.
The news may assuage some concerns about whether China is unfairly manipulating its currency. Treasury Secretary Steven Mnuchin has warned China not to reduce the renminbi’s value as a weapon in its trade war with the U.S.
CDK, a maker of software for car dealerships, hired Brian Krzanich, the former Intel C.E.O., as its new chief executive.
Tom Barrack ousted Richard Saltzman as C.E.O. of Colony Capital and took the role for himself.
Vice Media will shrink its staff by up to 15 percent through a hiring freeze and close at least half of its websites.
Toshiba plans to cut 7,000 jobs over the next five years.
The speed read
• The Australian government plans to block the Hong Kong billionaire Li Ka-shing from buying APA Group, the country’s biggest gas pipeline company, as being “contrary to the national interest.” (NYT)
• Qatar’s reported purchase of a high-end London hotel may signal the nation’s return to flashy deal making. (Breakingviews)
• The chipmaker Xilinx is reportedly working on a takeover bid for Mellanox, a computer networking company. (CNBC)
• Wells Fargo is said to be considering selling its retirement plan services unit. (Bloomberg)
• Ford Motor agreed to buy Spin, an electric scooter start-up. (WSJ)
Politics and policy
• What Democratic control of the House means for your wallet. (NYT)
• The Trump administration barred the CNN reporter Jim Acosta from the White House following a testy exchange with the president yesterday. (NYT)
• San Francisco voters approved a new business tax to pay for homeless services. (Bloomberg)
• Nevada voters rejected a ballot measure to deregulate the state’s power market, preserving Warren Buffett’s near-monopoly there. (FT)
• Annegret Kramp-Karrenbauer, a contender to become Germany’s next chancellor, would probably continue the policies of her mentor, Angela Merkel. (CNBC)
• Chinese exports to the U.S. grew last month, suggesting that a weak currency in China and the strong American economy are undermining President Trump’s tariffs. (FT)
• The surprise beneficiary of sanctions on Iran? Russia. (WSJ)
• The midterms have left Canada worried about its trade relations with the U.S. (NYT)
• Facebook might have survived election meddling this week, but it shouldn’t rest easy. (NYT)
• Mark Zuckerberg rejected an invitation to give evidence on misinformation before an international panel of politicians. (Verge)
• How health care I.T. systems get in the way for doctors. (New Yorker)
• Hiring cybersecurity workers is proving to be difficult. (NYT)
• Google’s walkout may have been a watershed moment for the tech industry. (NYT)
• Sundar Pichai of Google says that “technology doesn’t solve humanity’s problems.” (NYT)
Best of the rest
• Venezuela’s 12-month inflation rate now stands at 833,000 percent. (WSJ)
• A “calculation error” at Wells Fargo was part of 545 mistaken home foreclosures over the last eight years. (Fortune)
• Fewer companies are holding holiday parties this year. Many of them cite #MeToo as a reason. (Business Insider)
• New accounting rules make it harder to understand annual reports. (WSJ op-ed)
• The former Uber C.E.O. Travis Kalanick has bought a $36 million Manhattan penthouse. (WSJ)
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