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Investors wipe $3 billion off China’s ZTE market value after US settlement

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Signage is displayed at the ZTE headquarters in Shenzhen, China, on Monday, June 4, 2018.

Giulia Marchi | Bloomberg | Getty Images

Signage is displayed at the ZTE headquarters in Shenzhen, China, on Monday, June 4, 2018.

Chinese telecommunications giant ZTE Corp had about $3 billion wiped off its market value as it resumed trade on Wednesday after agreeing to pay up to $1.4 billion in penalties to the U.S. government.

China’s No. 2 telecommunications equipment maker was crippled when a seven-year supplier ban was imposed on the company in April for breaking a 2017 agreement reached after it was caught illegally trading with Iran and North Korea.

The ban, which has prevented ZTE from buying the U.S. components it relies on to make smartphones and other devices, will not be lifted until ZTE pays a fine and places $400 million more in an escrow account in a U.S.-approved bank.

The Hong Kong-listed shares of ZTE slid as much as 41 percent to HK$14.98, their lowest in a year, following a two-month trading suspension, while its Shenzhen shares fell by their 10 percent limit after it confirmed details of the agreement publicised by the U.S. government on Monday.

Hong Kong’s benchmark Hang Seng index was down 0.5 percent in early trade.

Confirming details of the deal, ZTE said late on Tuesday it would replace its board of directors and that of its import-export subsidiary ZTE Kangxun within 30 days of the June 8 order being signed by the United States.

All members of its leadership at or above the senior vice president level would be removed within the 30-day period, with a commitment that they would not be re-hired, along with any executives or officers tied to the wrongdoing, it said.

It also said in filings on Tuesday that it would work to resume operations as soon as possible after the ban gets lifted, and would republish its first-quarter financial results after assessing the impact of the ban and the settlement agreement.

The case has become highly politicized and a key focus of bargaining talks as Washington and Beijing look to avert a trade war.

U.S. lawmakers have attacked Washington’s agreement with ZTE and plan legislation to roll it back, citing intelligence warnings that ZTE poses a national security threat.

ZTE, with a market value of around $20 billion before its shares were suspended in April, is the world’s fourth-largest telecom equipment maker after Huawei Technologies, Ericsson and Nokia.



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Global stock market sell-off not an isolated event

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A trader works at the New York Stock Exchange in New York, the United States, Dec. 4, 2018. 

Xinhua News Agency | Getty Images

A trader works at the New York Stock Exchange in New York, the United States, Dec. 4, 2018. 

The latest wave of heavy selling in financial markets is a clear sign of things to come, according to a new report from the world’s oldest international financial organization.

The Bank of International Settlements (BIS), an umbrella group for the world’s central banks, warned on Sunday that a normalization of monetary policy is likely to trigger a flurry of sharp sell-offs over the coming months.

“The market tensions we saw during this quarter were not an isolated event,” Claudio Borio, head of the monetary and economic department at the BIS, said in the report.

“Monetary policy normalization was bound to be challenging, especially in light of trade tensions and political uncertainty,” Borio added.



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Fed is missing critical inflation trend, economic forecaster worries

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A veteran economic forecaster is worried the Federal Reserve and Wall Street are looking at inflation all wrong.

According to Economic Cycle Research Institute co-founder Lakshman Achuthan, they’re largely missing a critical economic trend that shows inflation is in a downturn.

“Inflation is cyclical, and I don’t think everybody really understands that — in particular, the Fed and a lot of market participants,” he said Wednesday on CNBC’s “Trading Nation.” “They’re looking at the level of inflation, and it’s generally up there around near target. But what’s really important is the direction.”

Achuthan highlighted a chart as evidence the inflation cycle is rolling over. He believes it could have market-moving consequences because it could affect the Federal Reserve’s interest rate policy.

“This is just a couple years of inflation cycles here,” he said. “We have PPI growth now and CPI growth both sitting at around 10 and 11 month lows. It’s not simply about oil. The peak in these things happened back in July.”

Achuthan, a self-proclaimed former super bull, has been bearish this year. On “Trading Nation” last April, he turned sour on economic growth because leading indicators were pointing to a slowdown that was picking up momentum.

For Achuthan to become bullish again, he said two things need to happen: The Fed must become more aware of the inflation downturn and leading growth indicators must turn up. The Fed meets on Tuesday and Wednesday to decide whether to raise rates for the fourth time this year.

“With inflation ticking lower, they should consider stopping. But fixated on a 49-year low in the jobless rate and a 9 ½-year high in wage growth, it’s not clear that they will stop just yet,” Achuthan told CNBC by email.



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Harvard professor Roland Fryer faces reports of sexual harassment

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Harvard University professor Roland Fryer speaks at the Clinton Global Initiative in New York on Sept. 25, 2008.

Ramin Talaie | Corbis Historical | Getty Images

Harvard University professor Roland Fryer speaks at the Clinton Global Initiative in New York on Sept. 25, 2008.

A prominent Harvard University economics professor is being investigated for sexual harassment, according to a new report.

Roland G. Fryer Jr., a 2011 MacArthur “Genius” fellowship recipient, is the one of the latest powerful men to get flagged amid the #MeToo movement, which took hold last year. More than 200 men have lost their jobs or major roles as a result, the New York Times said in October.

A Harvard investigator found that Fryer was involved in “unwelcome conduct of a sexual nature” with four women who worked at Fryer’s research lab, the New York Times reported on Friday. The investigator learned that one person who made an accusation about Fryer took disability leave in response to Fryer’s behavior, according to the report.

Allegations about Fryer came to light earlier this year but Friday’s New York Times article provides new details.

One woman who worked in the lab reportedly said that Fryer regularly made inappropriate comments about women, but that his reputation for being vindictive made it difficult for people to speak up. And two women told the investigator they disapproved of how Fryer had put his crotch in the face of a woman at the lab by placing his foot on her desk, the article said.

Read the full article here.



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