The U.S. is likely to preserve a Trump-era ban on China investments. Wall Street firms are getting swept up in India's Covid crisis. Goldman is wading deeper into Bitcoin. Here's what you need to know to start your day.
The Biden administration is likely to maintain pressure on China by preserving limits on U.S. investments in certain Chinese companies imposed under former President Donald Trump, bucking entreaties from Wall Street to ease restrictions. Trump's blacklist of companies linked to China’s military, announced in November, includes three of the country’s biggest telecommunications firms. President Joe Biden is trying to navigate a fraught relationship with Beijing, as tensions flare over issues ranging from trade to human rights to military postures in the South China Sea. Meanwhile China has urged Western nations to stay out of its affairs after G-7 foreign ministers unified behind a litany of grievances with the world’s second-largest economy.
Asian stocks looked set for a muted start amid a warning from the Federal Reserve on stretched valuations and gains in U.S. shares on positive economic data. The dollar retreated. Futures pointed to modest gains in Japan and Australia, though Hong Kong contracts slipped. S&P 500 futures were little changed after rallies in U.S. benchmarks overnight, which included a fresh record for the Dow Jones Industrial Average. China’s shares traded in New York briefly extended losses after Bloomberg News reported the Biden administration is likely to preserve limits on U.S. investments in certain companies from the Asian nation. Treasuries held steady, with the 10-year yield hovering well below recent highs at 1.57%.
The world is fast becoming ever more reliant on China for vaccines, with India’s raging virus outbreak — which is expected to peak in the coming days — stifling its ability to deliver on supply deals, even as the U.S. tries to position itself as a champion of wider access. Rising demand for China's shots is expected to accelerate if they receive WHO authorization, allowing developing countries in Asia, Africa and Latin America to access them. New York is in talks to offer free vaccines to visitors as a way to spur tourism. And after decades of outsourcing back-office functions to India, Wall Street firms are getting swept up in the country's Covid crisis.
Hong Kong billionaire Li Ka-shing is betting on Southeast Asia's tech startups. His private investment firm Horizons Ventures will focus in particular on Southeast Asia’s biggest market, Indonesia, co-founder Solina Chau told Bloomberg News. The firm, which made an early bet on Zoom, has over the past year invested in online stock brokerage Ajaib, coffee chain Kopi Kenangan and capsule hotel operator Bobobox. Covid-19 is fueling a rapid digital transformation in Southeast Asia, where new internet users quadrupled year-on-year in 2020 to 40 million in its six largest economies — bringing 70% of their total population online.
Goldman Sach is wading deeper into the $1 trillion Bitcoin market, offering Wall Street investors a way to place big bets. The investment bank has opened up trading with non-deliverable forwards, a derivative tied to Bitcoin’s price that pays out in cash. Goldman, which still isn’t active in the Bitcoin spot market, introduced the wagers to clients last month without an announcement. The push into forwards dramatically increases its capacity to help big investors take positions. Meanwhile, Securities and Exchange Commission Chairman Gary Gensler says U.S. investors lack protections when they trade Bitcoin on cryptocurrency exchanges. And the operator of the largest exchange, Coinbase, slumped to a record low as investors fled high-flying market newcomers.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours:
And finally, here's what Tracy's interested in today
Casting an eye over next week's calendar for market events, I see we have U.S. inflation data, another spate of earnings and ... Elon Musk's guest spot on Saturday Night Live. It sounds like a joke that the appearance of a CEO on a U.S. comedy sketch show could move markets, but it really isn't. In a market ruled by memes and flows, Musk's monologue really does have the potential to shake things up.
Musk has become the epitome of meme markets. As Justin Sun put it to me in an interview in February: "Musk is not only a company CEO, but he is also the representative of this kind of meme culture and the representative of this kind of new generation movement." I wrote that same month that: "In the world of socially-networked swarm trading, Elon Musk tweeting marks the height of retail momentum? In that kind of world, one in which flows trump fundamentals, attention from Elon Musk's Twitter followers might mark some kind of upper bound on the theoretical limit of just how crazy things can get." But imagine how crazy things could get when you throw prime time TV into the mix.
So how could Musk move markets exactly? We've already seen Dogecoin jumping ahead of his appearance on SNL. Musk has previously supported the joke coin, and some are hoping that the Dogefather will give it another plug, which could send it soaring. What if that doesn't happen? Or what if Musk messes up his monologue in some other way? Dogecoin will be open and trading on Saturday night and could take a hit. Tesla shares could drop when they open on Monday. That could set off a chain of events that impacts other holdings, say the ARK funds, which then have to offload other holdings to make up for the drop. And so on and so on. It's a weird time in markets, and it's about to get weirder.
You can follow Tracy Alloway on Twitter at @tracyalloway.
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