Xi won’t attend the Rome G-20 summit. The Facebook whistleblower testifies before the Senate. Asian stocks look set to track U.S. rebound. Here’s what you need to know today.
Xi Jinping won’t be dusting off his passport for the G-20 summit in Rome at the end of October. Chinese diplomats have informed officials from the G-20 nations that the Chinese president
does not currently plan to attend, citing China’s Covid protocols. After New Zealand revealed it was planning to move away from its failed Covid zero strategy, China has become the last holdout, sticking to its aim of zero cases within its borders. Meanwhile, Western investors are backing away from Chinese companies, blaming politics and uncertainty for their souring stance. Representatives of Man Group, Soros Fund Management and Elliott Management raised concerns about the outlook for Chinese stocks traded in New York and in Asia. The investor warnings follow Beijing’s sweeping crackdown and drive for “common prosperity.”Asian stocks look set to track a rebound in U.S. equities as traders assess the resilience of the economic recovery to elevated inflation fanned by surging energy costs. Treasury yields and the dollar advanced. Futures rose in Japan, Australia and Hong Kong after bargain-hunting for technology stocks that bore the brunt of a recent selloff boosted U.S. shares. The 10-year Treasury yield spiked above 1.50%, oil extended its rally from a seven-year high and Bitcoin pushed past the $50,000 mark.
Facebook's "Big Tobacco" moment was the theme of Tuesday's Senate hearing, when whistle-blower Frances Haugen said the company had put its " astronomical profits before people." Lawmakers shared concerns over the tech giant's algorithms, its effects on children and user privacy. Following the hearing the social network’s vice president of content policy said the company needed to have a “serious conversation” with lawmakers and regulators about a standard set of rules for policing online content. Meanwhile, the hours-long outage of Facebook and WhatsApp was great for messaging apps Signal and Telegram, which added millions of users.
China’s expansive crackdown on dissent in Hong Kong has transformed the Asian financial hub and raised big questions for individuals and companies alike. Imposed by Beijing without public debate last year after historic mass protests calling for greater democracy, the national security law carries harsh sentences. The new laws and subsequent arrests have sent a powerful signal to Hong Kong, and to the rest of the world: Beijing is clearly running the show.
The U.S. will not ban crypto. SEC Chair Gary Gensler has had multiple dust-ups with crypto firms but even he says the U.S. won’t follow China’s lead in banning digital tokens. The government’s focus will be on ensuring that the industry adheres to investor and consumer protection rules, anti-money laundering regulations and tax laws, he said Tuesday at a House hearing, after a Republican lawmaker asked if a China-like prohibition was on the table in the U.S.
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
With Bitcoin once again over $50,000, it's worth asking the question: What if crypto really has changed everything? On the upcoming episode of Odd Lots, Joseph Wang — a.k.a “Fed Guy” — makes an argument that rising crypto prices may be fundamentally altering the economy, viz. wealth effects and the labor market, in a way that has yet to really be appreciated or understood by old school economic authorities like the U.S. central bank. The basic gist is that since cryptocurrencies sit outside of national reporting systems, it's hard for policymakers to estimate or gauge their impact. Anecdotally for instance, we know that rising crypto prices have changed lives, but we don't really have a good way of tracking the aggregate effects on households, for obvious reasons.
Central banks are generally familiar with the idea of a wealth effect tied to the price of more traditional financial assets. If stocks get more valuable, people who own them might feel wealthier and more confident and then go out and buy more things. But Wang's argument is that with crypto having jumped from essentially nothing to a $2 trillion market, there is a hidden wealth effect that the Fed has yet to factor in. If enough people are wealthier because of crypto, then it could boost demand at a time when stocks and bonds are already at multi-year highs. It could also explain why labor shortages persist even with the unemployment rate relatively high. Why go to work if you can stay at home and make money from crypto? In that sense a crypto wealth effect may have permanently changed the labor market, and potentially raises the risk that the Fed inadvertently overheats the economy.
The new episode will be out on Thursday and you can subscribe to Odd Lots for free from any podcast player.
— With assistance by Tracy Alloway
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