China tech spillover
July 27, 2021
–The China tech sell-off is continuing, leading to spillover weakness in US index futures. Hang Seng down 4.6%, and Shanghai Comp down 2.5%. Alibaba fell 5.5% and Meituan was crushed, falling 17.6%. The latter company is something like Groupon, but the clip I read was that both companies were hit as they are expected to face regulations on employee pay structure for their respective food delivery service arms. A headline on FT says, “Big fines can change big tech, says French competition chief”. Maybe the global trend of gov’ts leaning against big tech is getting legs… as juggernauts in the US release earnings reports today: Alphabet, Apple and Microsoft, with AMZN on Thursday. China’s Evergrande is also making a new low (HK:3333 is symbol).
–US news today includes Durables and 5 year treasury auction.
–Activity in rates was light, but there are a couple of things to note: The ten-year inflation indexed note made a new low yield of -112.6 bps. We know that real yields are much lower of course, as inflation data has been quite high and yields are in the dirt, but a lot of news sources are writing that real yields are making a new low at negative 1.12%. Secondly, 5/30 squeaked up to a new monthly high at 121 bps. The low last week was 112.5, so this 8.5 bp rally is more in the category of a mild bounce for now. Finally, there has been consistent buying of 2EH 100 call for 0.5. 10k yesterday, bring the total to nearly 80k. Probably not even worth highlighting, except that it’s the zero percent strike on a contract 2.5 years forward (option expires 11-March 2022). Certainly not worth selling as there’s an asymmetric reaction whenever disaster strikes. EDH’24 settled 9898.5.
