Monday’s narrative was just recycled, boilerplate copy: Solid earnings and decent data helped “offset” Chinese regulatory concerns and Delta variant jitters.
On another day, China’s regulatory blitz and some particularly ominous virus headline would “outweigh” the same corporate profit reports and economic figures.
Financial journalism, apparently, is just an exercise in identifying a handful of relevant storylines and suggesting the good “offset” the bad when the screens are green. And the opposite when risk assets are back-footed. (When European and US equities are higher, they were “tracking positive sentiment” in Asia. The next day, if Wall Street stumbles, Asian shares might “fall in sympathy.” And so on.)
That’s the benefit of a common denominator — namely, global, interconnected markets. Contrast the “market wraps” that show up in your inbox with morning and afternoon blasts from, say, the AP or the Washington Post. The latter are usually just lists of disparate stories with a few summarizing sentences. There’s rarely a common thread. The world is a complicated, chaotic place. It’s not amenable to “wraps.”
So, thank the deities (or “God,” if you’re the monotheistic type) for “markets,” that unifying, cosmic thread we imagine underpins reality.
In China, they (markets) were buoyant to kick off the new week. That’s a relief because last week was… well, “not good, not good,” as one former president might put it. The CSI 300 had its strongest session in more than two months, paring around half of last week’s tumble in the process (figure below). Maybe it’s state-buying. Who knows.
“Some investors are buying dips,” a Singapore-based “strategist” said (God bless her). Bonds rallied too. 10-year yields in China are now the lowest in more than a year.
Apparently, market participants found solace in the Politburo readout, which featured all the usual nods to “stability.” Investors expect fiscal support out of China in the second half after Beijing indicated the recovery is uneven and unstable against an “even more complicated and grim” external environment.
“Policymakers judged that the recovery progress remained unsatisfactory and that external risks are rising due to the Delta variant,” SocGen’s Michelle Lam and Wei Yao wrote. “Hence, it is probably time for some policy fine-tuning, which we already learned from the PBoC’s preemptive RRR cut [last] month,” they added, noting that considering “rising downside risks (either from de-risking, slowing exports or domestic/external outbreak), they no longer see the need to normalize policy and instead are holding patiently, or even starting to ease in case of potential disappointment further out.”
Also on Monday, the Foreign Ministry issued a familiar-sounding warning to “foreign politicians,” who lambasted the first prosecution under Hong Kong’s new national security law. The case against Tong Ying-kit, who got nearly a decade in prison for inciting secession and being a terrorist, was “underpinned by solid evidence,” Beijing insisted. (He hit a group of police officers while riding a motorcycle and waving a “Liberate Hong Kong” banner.) The security law went into effect just hours before he was arrested. As the AP wrote, “Tong did not speak during the reading of the verdict. He waved to his parents and others in the gallery as he was escorted from the chamber.”
It’s also worth noting that Beijing is now encouraging residents not to leave the capital if necessary. “Some flights, trains and buses have been cancelled and other control measures stepped up in a bid to stop an outbreak of the Delta variant from spreading through the Chinese capital,” SCMP reported, adding that “more than 350 people in 27 mainland cities have been infected since the more transmissible strain was first reported in Nanjing, in eastern Jiangsu province, last month.” Beijing, Party officials said, must be “guarded at all costs.”
In the pandemic era, markets aren’t the only unifying thread.
