‘Amid’

US equities came under a bit of “healthy” pressure Tuesday, amid… you know what? Let’s just not with “amid.”

There’s perhaps no more overused word in financial journalism than “amid.” Asset prices do what they do (namely, they fluctuate) and whatever that day’s top stories are go after “amid.”

The great thing about “amid” is that it always works. It’s infallible. It doesn’t ascribe causation and need not necessarily suggest correlation either. That makes it the safest word a journalist can use.

Stocks can surge “amid” something terrible. Other words are more risky because they require whoever’s writing the color to say something meaningful even if it’s only tacit. For example, if I say “equities fell despite XYZ,” implicit is the notion that XYZ should have been a bullish development. That, in turn, opens my assessment up to scrutiny from readers who may know something I don’t — maybe XYZ was actually bearish, and I just didn’t understand why. “Amid” carries no such risk.

I’ve been waiting for an excuse to lampoon the “amid” catch-all. Admittedly, I regularly resort to “amid,” but I doubt it was necessary Tuesday.

Market participants (those who inexplicably chose the desk over the customary July sojourn, anyway) weren’t particularly amused with ISM services, which missed. Insult to injury was a sub-50 read on the employment gauge and color which clearly suggested labor market frictions remain pervasive.

Bonds rallied. That may have surprised at least a few folks. It was easy to posit a bearish scenario given speculation about hawkishness from RBNZ and competing interpretations of Tuesday’s RBA rhetoric. 10-year US yields dropped more than 7bps at one juncture, falling below 1.35% (figure below).

30-year yields were below 2%. The long bond is flirting with its 200-day moving average. “The 50-day on [10s] is about to cross below the 100-day,” Bloomberg’s Alyce Andres noted, adding that anyone “hoping to ignore Friday’s rally as a half-day fluke” was left to ponder “strong follow through, forcing some shorts to capitulate.” That was according to brokers. Notably, German 30-year yields retreated 7bps, to the lowest in almost three months.

TD abandoned a short 10-year call. “We entered in the wake of the flush lower in rates in early-June, which we believed was driven by position squaring and delta hedging of short vol positions ahead of the June FOMC,” the bank said. “We think that price action triggered more short covering and thin summer markets likely exacerbated the move as both real rates and breakevens declined,” the bank added. “The position went through our stop, and we take it off.” They’re sticking with their 5s30s steepener.

Meanwhile, investors seemed spooked by China’s aggressive regulatory crackdown on Didi, which plunged (figure below). Full Truck Alliance and Kanzhun slid sharply as well.

Investors could have done without a proclamation from the State Council. The message was already loud and clear. But just in case, a Tuesday statement tipped revisions to data security regulations as well as tighter scrutiny of cross-border data flow. Chinese firms listing overseas will apparently be subjected to tighter supervision going forward.

Obviously, Beijing is concerned (indeed, it sounds as though Xi is alarmed) at the prospect of tech companies in possession of vast amounts of data on Chinese citizens enthusiastically embracing US listings. Publicly-traded companies are to be held to account for data security, the State Council warned. I suppose I don’t have to say this, but being “held accountable” to the Party is a deadly serious matter. One wouldn’t want to be an executive at a Chinese tech firm that suffers a data breach.

As Bloomberg wrote, “Beijing may also be seeking to close loopholes that allow Chinese firms to list overseas without approval if they are incorporated offshore.” The US is already an inhospitable place for Chinese companies to list, at least as it relates to requirements around bookkeeping and regulatory compliance. The push to force US-listed Chinese firms to comply is likely another source of consternation for Beijing. The same linked Bloomberg article noted that “some Chinese firms have said China’s national security laws prohibit them from turning over audit papers to US regulators.”

Still, the US is seen as a desirable place to raise capital. Chinese firms tapped US markets for almost $8 billion in June, for example. Things could be going better from a performance perspective, though. The figure (below) isn’t exactly flattering for US-listed Chinese shares.

Whatever the case, China’s post-centennial crackdown on Didi and reinvigorated efforts to zealously protect data collected by its home-grown tech firms, was as good a reason as any for US investors to fret, with domestic shares trading at dot-com multiples.

And remember: False optics are “a thing,” so to speak. When yields plunge, not everyone is inclined to play “whodunit” or otherwise blame positioning, technical factors and a lack of liquidity for exaggerated price action. Some folks just see falling yields and hear “growth scare.”

As one money manager told Bloomberg, “People are worried that [10-year yields below 1.45%] signals that you’re going to have an economic slowdown.”

An economic slowdown “amid” an economic boom. How 2021.