Topical Topics

The new week dawned with a smattering of familiar headlines, flung haphazardly across the digital front pages like paint from a brush.

There was more chatter about Beijing’s sweeping, multi-faceted tech crackdown. TikTok owner ByteDance shelved an overseas listing earlier this year, Dow Jones reported. The plans were “put on hold indefinitely” after the Party advised the company to direct its energy towards addressing data security risks. That’s according to the ubiquitous “people familiar with the matter.”

The company, valued at some $180 billion late last year, was considering listing in the US or Hong Kong, but founder Zhang Yiming “decided it would be wiser to put the plans on ice in late March, after meetings with cyberspace and securities regulators in which they asked the company to focus on addressing data security risks and other issues,” the Wall Street Journal said. Remember my (serious) joke about “other issues” over the weekend? If not, see the linked article below.

Read more: Xi Tightens Tech Noose. Sets Up Veto For Overseas IPOs

“This is seen as a wake-up call for US capital that was somnolent over the risks of Chinese stocks,” Rabobank’s Michael Every wrote Monday. “However, the same money still has no issue with Chinese bonds, and let’s see how long the equity ire holds if future IPOs now just happen in Hong Kong instead.”

Meanwhile, China’s antitrust regulator will instruct Tencent’s music streaming business to surrender exclusive rights to labels it leverages in competition with smaller firms, Reuters reported, citing sources. The company will also be fined for apparent reporting “lapses” around a pair of acquisitions. That, Reuters noted, is “a milder penalty than the forced sale indicated earlier this year.”

The same article called the move “the latest in a clamp-down to curb the economic and social power of China’s once-loosely regulated internet giants.” There’s something new on that front every, single day. And you should expect more.

No one seemed particularly excited about China’s RRR cut. Fatalistic takes and sarcastic quips about the futility of the move aside, I’d still contend that you don’t need the tacit derision to spin a dour narrative on this one. The dovish pivot is an indication that the Party is concerned about growth. That has implications for the global economy.

But who knows, maybe all of those implications aren’t bad. “China’s troubles could be a sign that demand is pivoting from goods to services,” Bloomberg’s Eddie van der Walt mused. “That may take some pressure off inflation, freeing central banks to keep rates lower for longer.”

Speaking of central banks and lower for longer, Christine Lagarde delivered a series of cryptic (some might even call them bizarre) comments while chatting with Bloomberg in Venice. The ECB’s July meeting will have “some interesting variations and changes,” she said, adding that it’ll “be an important meeting.” The ECB’s forward guidance “will certainly be revisited,” Lagarde continued, noting that policymakers need to “demonstrate persistence” when it comes to “deliver[ing] on our commitment.”

That “commitment” now includes a tweaked inflation mandate. Apparently, PEPP (the ECB’s QE program designed specifically to combat the pandemic) will “transition into a new format” when it winds down next year. You’re reminded that PEPP runs alongside what I humorously describe as “regular QE.” Since the inauguration of PEPP in the wake of the lockdowns last year, the ECB has been running two QE programs simultaneously. In a testament to the idea that the “state of exception” is now permanent (as Deutsche Bank’s Aleksandar Kocic has put it), Lagarde told Bloomberg it’s important the ECB “not start creating the anticipation that the exit is in the next few weeks [or] months.” (Or in the next few ever.)

Finally, market participants continue to debate the implications of Joe Biden’s bid to fix American capitalism by executive order, an effort playing out alongside the global push to establish a framework for taxing giant multinationals before they consume humanity. (Too late!).

“As I have said before, talk is cheap – and so are imports, outsourced labor, and monopsony purchase prices,” Rabobank’s Every said. “But let’s see if key US appointments are made to allow the promised structural changes to be pushed through.”

Weighing in, JonesTrading’s Mike O’Rourke called Biden’s antitrust agenda “legitimate.” “First and foremost, the mega-cap companies in the US are monopolies,” O’Rourke wrote, imploring market participants to “think of all of the times you’ve pitched them or been pitched them as investment ideas because they are monopolies.” (Good point.)

“We’re all well aware that Executive Orders are one of the weakest forms of government rule-making [and] we’re a long way from successful execution, but this could be an early step in what may be a very important structural shift in the US economy,” O’Rourke went on to posit.

Here’s hoping. But not expecting.