WSJ What’s News - Global Stock Selloff Deepens

Episode Date: August 5, 2024

A.M. Edition for August 5. Japan’s Nikkei suffers a dramatic fall and U.S. stock futures drop as concerns about a slowing U.S. economy mount and popular trades continue to unravel. Plus, Mars eyes a multibillion-dollar snack deal. And, Journal Heard on the Street Columnist Jinjoo Lee discusses whether Donald Trump would really be better than Kamala Harris for oil and gas investors. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Summers here and you can now get almost anything you need delivered with Uber Eats. What do we mean by almost? You can't get a well-groomed lawn delivered, but you can get chicken parmesan delivered. Sunshine? No. Some wine? Yes. Get almost, almost anything delivered with Uber Eats. Order now. Alcohol in select markets. See app for details. Stock futures slide and investors flock to safety as a global sell-off deepens. Plus Kamala Harris closes in on her VP pick.

And misinformation sparks violent anti-immigration protests across the UK. We've seen protests in the last five days in Manchester, in Liverpool, Belfast. But it's really caught the government here on the back foot because it's indiscriminate and it's spread quite randomly. It's Monday, August 5th. I'm Luke Vargas for the Wall Street Journal and here is the AM edition of What's News, the top headlines and business stories moving your world today. Global financial markets are opening the week on uneasy footing amid concerns of a U.S.

economic slowdown. That follows a disappointing jobs report and other signs of eroding consumer demand, which have quickly unraveled some of the year's most popular trades, including around the magnificent seven tech stocks. But nowhere have market jitters been more evident than in Japan, where the Nikkei closed down more than 12 percent today in its biggest single-day fall since 1987. Peter Landers is the journal's Tokyo bureau chief. Peter, we talked about the Nikkei's smaller falls last week being driven by a strengthening

yen caused by a Bank of Japan rate increase, but I assume that more is now at play here. The rising yen is certainly a part of what's going on here because when the yen strengthens, it makes Japanese exporters less competitive, reduces their earnings in yen terms. But I think it's also markets doing what markets do sometimes. People are selling because other people are selling. South Korea's KOSPI index is down by quite a bit, and those indexes are in turn responding to the fall in the Dow on Friday in the U.S.

And the Dow probably will respond to what these Asian markets are doing. So the only question is at what point do the breaks kick in? Nat. Staying on the end, Peter, the Journal's Jack Pitcher has reported that one thing driving markets lower is that hedge funds had piled into the Japan trade this year, betting on more yen declines and that the interest rate gap between the U.S. and Japan would remain wide, only now we are essentially seeing the opposite. Exactly. The two often, although not always go in reverse directions, the yen would fall.

That might help Japanese companies and therefore help the Japanese stock market go up. And so now that connection is unwinding in the opposite direction. So a popular trade, the carry trade, has been to borrow in yen at a very low rate and invest that money in dollars where you can earn a higher return on your investment.

And so once that trade begins to unwind, it can drive the end up and when the end goes up, it unwinds the trade further. So it's another example of markets feeding on themselves until they run out of food to drive the market direction. That was the Journal's Peter Landers. In further evidence of a global sell-off, stocks in Europe are deep in the red in midday trading, US stock futures have tumbled led by the Nasdaq 100, Bitcoin is sliding, and Wall Street's fear gauge, the VIX, is trading at its highest level since March 2022. And as investors rush for safety, gold futures are advancing and global bond yields tumbling, with a 10-year U.S. Treasury yield on pace

for its lowest settle in more than a year. And another thing on the mind of not just investors, but everyday Americans, too, inflation. Economic data says it's coming down, but the situation in the real economy can feel a lot different. What's your view? From food to housing, healthcare to utilities, what costs that are a big part of your budget are still going up, which aren't, and overall, how confident are you that your situation is going to get better?

Send a voice memo to wnpod at wsj.com or leave a voicemail at 212-416-4328. We just might use it on the show. In other news that could move markets today, we are reporting that candy giant Mars is in advance talks to buy Kelenova, whose brands include Pringles, Pop-Tarts, and Eggo waffles. A deal could come together imminently, presuming the talks don't break down. Kelenova, which was spun off from Kellogg last year, has a market value of around $22 billion and could be valued at around $30 billion in a deal, making it one of the biggest so far this year.

Kelenova's shares are up in off-hours trading. Coming up, Kamala Harris is about to pick her running mate, and we'll break down what each presidential candidate might mean for the oil industry. We've got those stories and more after the break. Introducing TD Insurance for Business with customized coverage options for your business. Because at TD Insurance, we understand that your business is unique, so your business insurance should be too. Whether you're a shop owner, a pet groomer, a contractor, or a consultant, you can get

customized coverage for your business. Contact a licensed TD Insurance advisor to learn more. Vice President Kamala Harris is getting closer to choosing her running mate and is expected to announce her pick ahead of a first joint appearance tomorrow in Philadelphia. Harris, who's expected to become the Democrats' formal nominee today when voting ends in the party's virtual roll call, spent the weekend interviewing finalists for her VP pick, including Pennsylvania Governor Josh Shapiro, Senator Mark Kelly of Arizona, and Minnesota Governor Tim Walls, a crop of white male candidates whom the Democrats believe will help her win over voters in swing states. The UK has been hit by some of the worst unrest in more than a decade

as British police battle to contain a series of violent anti-immigration protests that have swept through a number of major cities. I asked our UK correspondent Max Colchester what ignited the protests. These protests really stem back to a tragic case about a week ago when three young girls were murdered in a town in northern England by a man wielding a knife. The stabbings were perpetrated by someone aged under the age of 18, and in the UK you

can't name that person. And so the void of information was filled by people claiming that an undocumented Muslim migrant who was on a sort of terror watch list had been allowed to perpetrate this crime. And these false rumors spread like wildfire across social media platforms and were leapt upon by far-right activists who used this tragic case to try and inflame a wider debate about race and migration in the UK. Max, a debate that we've also just seen plain violence from Manchester to Liverpool to Belfast, where a supermarket was burned, elsewhere we've seen houses attacked. In one town yesterday, even rioters tried to break into a hotel that

was allegedly containing asylum seekers. The new Labour Party Prime Minister Keir Starmer has promised to bring people who've taken part in all of this to justice, but how easy will that be? It's really caught the government here on the back foot because it's not like a mastermind on the far right. It's pulling strings here to make this happen. There seems to be quite a morphous and organic. We're seeing lots of individual telegram groups taking inspiration from far right commentators

online and then organizing their own ad hoc protests. So it's quite hard to go to someone at the top and say, please stop this. The police have arrested close to 500 people now since the unrest started last week. But at the moment, the British government simply has to try and call for peace and call out what it says is right wing thuggery. We will have to see whether that message resonates or not. As we approach November's US presidential election, oil and gas companies are taking a hard look at both parties' stance on the energy industry. Their choice might sound simple.

Former President Donald Trump has said he wants the U.S. to quote, drill baby drill, while Vice President Kamala Harris has previously voiced support for a fracking ban. However, our Kate Bullivant spoke with journal Hurt on the Street columnist Jinju Lee, who said figuring out which politician is more favorable to the industry is actually trickier than it seems. So one industry veteran I talked to put it this way, Trump is friendlier to the industry and riskier for the commodity price, while Harris is riskier for the industry and bullish for price. So what does that mean?

Well, Trump is likely to push forward policies that encourage more drilling, and that can invite more competition on the oil field and bring oil prices down and hamstring industry profits in the near term. And the opposite is true too. So if Harris pushes forward policies that make it difficult to drill more oil and gas, that could in turn lead to better commodity prices and higher industry profits. So can you break this down for us? What do industry insiders believe could be the possible

outcome of a Trump presidency? So Donald Trump presidency has sort of a wide band of possible outcomes. The dream scenario for the industry would be if he has congressional backing to codify into law changes that will encourage long termterm growth. For instance, diminishing the Department of Energy's role in permitting or granting export authority. He also comes with a potential nightmare scenario, which would be if he imposes all the anti-trade policies that he's talked about. So imposing 10% import tariffs across the board and 60% tariffs on China.

And that has potential to chill the economy and energy demand and could really hurt the energy industry. So a bit of a mixed bag there, Jinju. If Kamala Harris were to secure the top job in November. How is the oil and gas industry expecting that scenario to play out for them? So Harris is seen as much more friendly to green energy than to fossil fuel, but she might also come with a narrower band of outcomes. She's already walked back comments about wanting to ban fracking. She is more likely to try to create additional costs for the oil and gas industry and to try to push policies that favor greener sources.

But there's a limit on how lasting some of those anti-oil efforts will be. So if you look at some of Biden's efforts, his moratorium on new federal oil and gas leases, and the ban on new LNG export projects, they've already been blocked by courts. Sounds like both candidates come with risks for the energy industry, Jinju, but you write that the question of who will be in the White House may ultimately not be the most important thing. Yeah, if we look big picture, oil and gas is ultimately driven by global supply and demand. The fate of the industry is driven by bigger forces, maybe more so than the intentions of any single US president. So, for example, former President Obama was clearly more green friendly than oil friendly,

but his term also coincided with the shale boom. And that really had to do with the fast improving fracking technology. And Trump, who very much wanted the oil industry to succeed, his term coincided with the peak coronavirus pandemic, which caused some really painful quarters. So, energy policies can make a big difference in the long term. But if we're looking near to medium term, the stuff that really moves the needle are policies that have potential to move the economy.

That was the Journal's Heard on the Street columnist, Jinju Lee. Jinju, thanks so much for joining us. Thank you. And that's it for What's News for Monday morning. Today's show was produced by Daniel Bach and Kate Boulevant with supervising producer Christina Rocca and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.