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Market Morning: One Country One System, 7000 Boeing Woes, Mideast Tension, California Car Boycott

ME Staff

Beijing Threatens To End One Country Two Systems Hong Kong Status Quo

The stage might now be set for a complete Chinese takeover of Hong Kong. According to the South China Morning Post, the Legislative Affairs Commission of the National People’s Congress Standing Committee (NPCSC) criticized the Hong Kong Supreme Court’s decision to declare the mask ban unconstitutional. Beijing has not ruled out overruling the ruling, effectively quashing what remains of Hong Kong independence. Whether a local law is in accordance with the Basic Law “can only be judged and decided by the NPCSC, and no other organ has the right to judge or decide”, said Zang Tiewei, spokesman for the commission.

Meanwhile, the Hong Kong Human Rights & Democracy Act, which seeks to place even more trade restrictions on the entire island if its relative independence from China is encroached upon thereby making the situation there even worse, passed the Senate as expected and now awaits President Donald Trump’s signature. If he does sign it, any progress on a phase one trade deal will likely go off the rails followed by a hard plunge in stock markets globally. Trump may veto the bill, but this would look pretty bad during an election season so he may sign it and then blame the collapse in trade talks on China, absolving himself of culpability. The latter seems more likely.

More Boeing Woeings 7000x Over

Boeing (NYSE:BA) may have to retrofit new engines on 7,000 planes in order to remedy a fatal accident last year on a Southwest (NYSE:LUV) in which a blade flew off a propeller and slammed into the engine cover which ricocheted into the fuselage depressurizing the plane and killing a woman who was sitting by the window where the impact took place. Fortunately the crew was able to make an emergency landing, saving the rest of the passengers. Now the National Transportation Safety Board is recommending that Boeing replace all the engines on the 737 Next Generation series totaling 7,000 airplanes. The final decision is up to the Federal Aviation Administration, as the NTSB only investigates accidents and the FAA decides what to do about whatever the NTSB says. It’s a bureaucratic thing. One company that could benefit from an FAA decision to supply new engines to all those planes is General Electric (NYSE:GE), a big Boeing supplier. The good news for Boeing though is that it sold 30 787 Dreamliners to Emirates, the biggest carrier of the Middle East. So there’s that.

Israel Bombs Syria, Sends Warning to Russia, Watch Oil

The Middle East is flaring up again as Israel has bombed dozens of Iranian and Syrian military targets in Syria today, which happens to be the last day that Benny Gantz, the current nominee for a chance to form a government, has left to form a government. The strikes came in retaliation for rockets fired at Israel yesterday. Syria reported two killed. British media reported 11 killed. Prime Minister Benjamin Netanyahu, who may or may not still be prime minister by tomorrow, talked tough, saying “I have made clear that whoever hurts us, we will hurt him.” On a more worrying note, Russia called Israel’s air strikes a “wrong move” indicating that the Russians may come into the fray here. If so, the price of oil (NYSEARCA:UCO) could start to move higher.

California Government Boycotts GM, Chrysler, Toyota, Nissan , Others

The State of California is having a tizzy over car companies that sided with President Trump over emission standards, and pledges that the state government won’t use taxpayer money to buy any cars from General Motors (NYSE:GM), Chrysler (NYSE:FCAU), Toyota (NYSE:TM) or Nissan (OTCQB:NSANY). California will only spend taxpayer money on automakers committed to stringent emissions reduction goals. It also pledged to only use taxpayer money to buy cars that are not exclusively internal combustion. So basically taxpayers will be paying much more for cars for the California state government. “Car makers that have chosen to be on the wrong side of history will be on the losing end of California’s buying power,” said California Governor Gavin Newsom. “In court, and in the marketplace, California is standing up to those who put short-term profits ahead of our health and our future.” Luckily for these car companies, California isn’t banning the import of these cars into the state itself for private consumers, which would be unconstitutional.

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