China In Flux And Tech Earnings
Ashraf Laidi | Jul 28, 2021 01:06AM ET
by Adam Button
China's markets resumed their selloff in light of the escalating crackdown on educational tech companies but that's not the only reason to worry. Durable goods orders, consumer confidence and the Richmond Fed were next.
After the closing US bell, earnings from US tech giants Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL) were released.
The chart below suggests Bitcoin was gradually breaking out of the negative cycle of daily changes, as the gains grow and the decline shrunk.
The Hong Kong Hang Seng fell 4.1% on Tuesday after a similar decline on Monday, erasing the gains for the year while the Shanghai Composite fell 2.5% after shedding 2.3% the prior session. The trigger was a new set of regulations banning education tech firms (that teach school curricula) from making profits, raising capital or going public. Those particular companies were crushed, but the move sparked fear of regulations hitting elsewhere.
For broader markets, Chinese regulation isn't yet a worry, which is why they shrugged off the Chinese news. But observers are increasingly worrying about the downdraft spilling onto Western markets. Don't forget the Fed decision today.
What could undermine sentiment in the days ahead is the increasing difficulty in controlling the Delta variant. The city of Nanjing—population 8.5m—went into a strict lockdown on Monday after an outbreak of 76 cases, with about half transmitted locally. Officials have mandated mass testing to stop the spread.
The fear is that every country will have to transition to a strategy for living with COVID, rather than completely suppressing it. Australia is struggling with this right now that has weighed heavily on AUD, which was just above the lowest levels since December. China has more tools in the toolbox to control the virus but everything we learn about Delta highlights how tough it is to contain. If lockdowns like in Nanjing begin to spread, it could spark a rethink on global growth.
We will continue to watch that front, but the economic calendar will offer plenty to monitor in the days ahead with a busy slate and the Fed today.
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