Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
China’s crackdown on technology companies is hitting the markets again today, amid concerns that the rebound in global growth may be fading.
Stock markets across Asia have fallen to a six-week low after Beijing sent shockwaves through global financial circles with plans to tighten restrictions on overseas listings of Chinese companies, as it puts its tech giants under much tighter scrutiny.
China’s CSI 300 index has fallen over 1%, while Hong Kong’s Hang Seng has tumbled 2.75%, helping to pull the MSCI’s index of Asia shares outside Japan down 1% to its lowest since late May.
An index of tech shares in Hong Kong (where several of China’s biggest online giants are listed) fell 3.75%, and has now slumped by almost 12% over the last seven sessions.
Technology giants Tencent (-3.75% today) and Alibaba (-3.8%) have both fallen to their lowest levels of this year today.
Last night, shares in ride-hailing operation Didi slumped another 5% in New York, further below last month’s float price, having crashed 22% on Tuesday after regulators launched a probe into allegations it had illegally collected users’ personal data.
CNBC says the proposal to tighten restrictions on overseas listings could disrupt “a $2 trillion market loved by some of the biggest American investors”, and threaten IPO plans.
CNBC
(@CNBC)China is cracking down on domestic companies that list on U.S. exchanges — here’s what you need to know. https://t.co/Rm5mNG0oUG
Beijing’s State Council said in a statement on Tuesday that the rules of “the overseas listing system for domestic enterprises” will be updated, while it will also tighten restrictions on cross-border data flows and security.
China’s market regulator also revealed yesterday it has fined a number of internet companies for failing to report earlier merger and acquisition deals for approval — another ratcheting up of pressure.
Associated Press explains:
Companies including internet giants Alibaba and Tencent were fined Wednesday by anti-monopoly regulators in a new move to tighten control over their fast-developing industries.
In 22 cases, companies were fined 500,000 yuan ($75,000) each for actions including acquiring stakes in other companies that might improperly increase their market power, the State Administration for Market Regulation announced. It said violators include six companies owned by Alibaba Group, five by Tencent Holding and two by retailer Suning.com.
Kyle Rodda of IG says the clampdown is causing nervousness in the markets:
The Hang Seng has copped a fair whack today, as Hong Kong equities remain at the coal front of the Chinese Communist Party’s crackdown on big-tech, the private sector and, really, the region as a whole. That risk will eventually be priced-out of the market, when the CCP thinks it’s made its authority clear enough.
But while that brinkmanship persists, it’ll keep investors on their toes and perhaps away from investing in the region’s tech giants.
Investors are also pondering whether the recovery rebound is fading, after America’s service sector saw growth slow last month.
This has sent yields (or interest rates) on US government debt sliding, indicating traders are less worried about a surge of inflation forcing a tightening of monetary policy.
有 you
(@sakiop225)Treasury yields have dropped to a four-month low as a gauge of U.S. service-sector activity faltered, with short covering exacerbating the move.
The benchmark 10-year yield fell as much as eight basis points on Tuesday to print under 1.35%, the lowest level since Feb. 24. pic.twitter.com/lEY9Oz2iXf
The minutes of the Federal Reserve’s latest meeting, released yesterday, show that officials held a vigorous discussion on whether the economic rebound in the US would soon be strong enough to justify slowing, or tapering, its pandemic-era stimulus measures.
Also coming up today
The European Central Bank is publishing the results of a strategy review today, which could see a change to its price stability target for the first time in almost two decades.
The current goal of inflation “below, but close to, 2%” could be replaced with a more flexible target, with more room to overshoot (although the ECB’s problem has been undershooting inflation).
The ECB is also expected to announce a green shift in its monetary policy, by tilting its asset purchase schemes and collateral rules away from companies with high carbon emissions without a plan to hit net zero by 2050.
Bloomberg explains:
Some officials were in favor of a precise goal of 2% with flexibility around it, while others preferred a policy closer to the Federal Reserve’s average inflation targeting.
A key tussle in the climate-change talks was over whether the ECB should stick to its principle of mirroring the composition of the market when buying bonds — known as “market neutrality.” That was resolved when Bundesbank President Jens Weidmann signaled last month that he could support tilting purchases toward greener assets if it means protecting the balance sheet from climate and transition risks.
European Central Bank
(@ecb)On Thursday at 13:00 CET, we will announce the results of our strategy review.
Watch live on Twitter from 14:30 CET as President @Lagarde and Vice-President de Guindos explain what the outcome is in a press conference. More info https://t.co/BKFbEcx37D pic.twitter.com/Gx4i1q9hlI
The agenda
- 9.30am BST: Economic activity and social change in the UK, real-time indicators, published by Office for National Statistics:
- Noon BST: European Central Bank publishes results of its strategy review
- 1.30pm BST: US weekly jobless figures
- 4pm BST: EIA weekly oil inventory data