European companies are worried about China's tech ambitions, too

It's not just the United States �� European companies are worried about China's high-tech ambitions, too.

In a report published Wednesday, the European Union Chamber of Commerce in China reported "significant concerns" among its members about "Made in China 2025," Beijing's plan to boost industries like robotics, electric cars and computer chips with the aim of becoming a global leader in those areas.

European firms operating in China fear such industrial policies "are tilting the playing field in favor of Chinese players," the report said.

"Made in China 2025" is one of the central justifications given by the US government for escalating a trade fight between the two countries. President Donald Trump has said the plan and other similar policies "harm companies in the United States and around the world."

In its annual report, which surveyed 532 companies in February and March, the European chamber gave a more nuanced view. It said that 43% of firms reported they had seen "increased discrimination" under the 2025 plan, which is viewed as promoting Chinese businesses.

But some larger European companies said they are benefiting from the strategy because they are gaining increased access to Chinese government subsidies, particularly in the auto and machinery industries, according to the report. And some machinery firms say the plan is lifting demand for their parts and tools.

"The onus is now on China to further expand" opportunities under the plan for foreign companies "to clearly demonstrate that it is not just aimed at achieving domestic dominance," the report said.

This is what a trade war looks like

Chinese officials have repeatedly rejected the American criticism of the country's trade practices and industrial policies. A Chinese Foreign Ministry spokesman on Tuesday said the US government is "making groundless accusations against China in order to get away with its unilateral and protectionist behavior."

The European chamber echoed US government concerns about foreign companies being forced to hand over intellectual property in order to do business in China. The report said it was "concerning" that 19% of respondents to the survey "have felt compelled to transfer technology in exchange for market access."

Chinese companies are edging ahead

But it also said that European companies' view of their Chinese rivals is shifting.

For the first time, a majority of respondents to the survey (61%) said "they perceive Chinese companies to be equally or more innovative than European firms," according to the report.

Over all, European companies found China to be a harder place to do business than the year before because of problems like regulatory barriers and limits on market access, the report said.

"We are still far from an environment that fosters fair competition," Mats Harborn, the chamber's president, said in a statement accompanying the report.

Fed official: Trade fears are hurting business optimism

Escalating trade tensions have all but wiped out the optimism that businesses felt because of tax cuts, a Federal Reserve official says.

Raphael Bostic, president of the Atlanta Fed, said Monday that trade fears have dimmed his forecast for economic growth.

In prepared remarks for a speech in Savannah, Georgia, Bostic said he began the year picking up optimism from businesses about the corporate tax cut.

"However, that optimism has almost completely faded among my contacts, replaced by concerns about trade policy and tariffs," he said.

He said businesses are pushing ahead with projects that are already under way. But "I get the sense" that the bar for investing in new projects is "quite high," he said.

"'Risk off' behavior appears to be the dominant sentiment among my contacts," Bostic said.

Fed officials have been hearing concerns from business leaders about changing US trade policy.

The Trump administration recently imposed steel and aluminum tariffs on Canada, Mexico and the European Union, all US allies. On Friday, the United States announced a 25% tariff on $50 billion of imports from China. China quickly announced plans to retaliate.

Last week, Fed Chairman Jerome Powell played down the impact that trade frictions were having on businesses' behavior.

"Right now, we don't see that in the numbers at all," said Powell at a press conference. "The economy is very strong. The labor market is strong. Growth is strong. We really don't see it in the numbers. It's just not there. I would put it down as more of a risk."

World Cup Fever Is Coming as Traders Seek Market Mayhem Rescue

There may be hope in sight for traders reeling from the recent market swoons and it comes from an unlikely source - Russia.

An adage among the soccer faithful has it that the summer lull in markets kicks off early whenever the World Cup takes place. A look at historical volatility data suggests they may -- just -- have a point.

As humanity’s most popular sport, the quadrennial World Cup is one of the biggest events in the global calendar -- an occasion that in theory is global enough to compete for the attention of traders, with muted price swings the result.

“There’s nothing like a World Cup to keep people completely distracted,” said Greg Saichin, a bond investor at Allianz Global Investors in London. “Hopefully volatility will come down and we’ll be able to clip the coupon for five weeks.”

Out of Play

Stock volatility declined during four out of the last five World Cups

Source: Bloomberg

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Indeed, in four out of the last five World Cups, market volatility did show declines in June, according to a Bloomberg analysis. The drops were bigger when the tournament was held in Europe, when matches were more likely to take place in busier trading hours, and volatility rose in 2002, when the competition took place in Asia.

This year’s event will take place in Russia from June 15 until July 15 and will include teams from 32 countries.

The volatility declines are slight, suggesting investors might not be able to lavish the championship with their full attention. Party poopers will tell you that trading volumes don’t show similar falls, failing to back up the hoped-for trend.

Still, the good news is that most of the participating squads hail from Europe and emerging markets, suggesting traders from sources of the recent market gyrations may be distracted.

The bad news is that the U.S., China and North Korea aren’t taking part.

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