The spike in tensions has fueled investor concerns that the situation could escalate from here, either intentionally or inadvertently. China’s ruling Communist Party claims Taiwan as its own, though it has never controlled it. The offshore Chinese yuan has retreated slightly this week.
“This is something that investors have known for some time as a potential flashpoint,” Manik Narain, head of cross-asset strategy for emerging markets at UBS, told me. “It was very difficult to trade him. We don’t know if it will be a flashpoint tomorrow or in five years.”
A big unknown: If China were to launch a military confrontation, would Western countries impose harsh economic sanctions, as they did when Russia invaded Ukraine? What would that mean for foreign investors if they did?
“They can see what happened to Russian markets,” Narain said. “Investors don’t want to make the same mistake twice.”
Excluding China from the global economy would be an almost impossible task given its integration into supply chains, the importance of the market for large Western companies and the country’s manufacturing power. But the threat of such a major geopolitical collapse looms.
This is not the only factor weighing on the Chinese currency. Emerging markets are struggling to attract investment as US interest rates rise, making parking money in high-risk places less attractive.
“At a time when exports are likely to run out of steam soon due to weaker global demand, China’s domestic demand recovery is unlikely to materialize soon, in our view, given continued restrictions. of Covid and recent housing market shocks,” Bank of America economists Helen Qiao and Miao Ouyang said in a research note this week.
Moreover, as the economy stutters, the People’s Bank of China is on track to ease policy while most other central banks are tightening it. This could add downward pressure on the yuan.
“The pace at which the United States raises interest rates could be crucial,” Narain said, noting the potential for strong “divergence.”
Inflation anxiety doesn’t serve the gig economy
Demand for Ubers and Airbnbs is at an all-time high as consumers buy shared homes and rides despite concerns about the rising cost of living.
The company also benefited from higher average daily rates. At $164, the rate is down slightly from the first three months of 2022 but up 40% from the same period in 2019.
Still, the shares are down 6% in premarket trading after the company’s outlook was worse than Wall Street expected.
Going strong: The number of consumers and drivers using Uber is “at record highs,” the company said, pointing to a shift toward more spending on services like dining out and attending live events. Around 122 million people use the platform each month, up 21% from the previous year.
Uber also said it was making progress in signing up more drivers to reduce wait times, with registrations up 76% year-over-year in the United States.
“We’re not where we want to be, but they’re definitely going in the right direction,” CEO Dara Khosrowshahi told analysts.
Know this stat: Wait times in the United States now average four and a half minutes, down from five to six minutes before.
Uber shares jumped 19% on Tuesday. Rival Lyft also rode the wave, climbing more than 16%.
The pandemic is still hammering dating apps
People can ditch their sweatpants, ditch Zoom and hop on Ubers like they did before Covid-19 hit the scene.
But some singles hold back. Match Group – the world’s largest dating app owner, with a portfolio that includes Tinder, Hinge and OkCupid – said on Tuesday the pandemic was still affecting user behavior and hurting its business.
“While people have generally moved past lockdowns and into a more normal lifestyle, their willingness to try online dating products for the first time has yet to return to pre-pandemic levels” , CEO Bernard Kim said in a letter to investors.
Engagement of pre-existing users is on the rise. But attracting new recruits remains a challenge.
Investor Outlook: Revenue rose 12% year over year last quarter to $795 million, which fell short of Wall Street expectations. It also posted a surprise operating loss of $10 million. The shares are down 21% in premarket trading. They were already 42% lower so far this year.
Kim said the company will try to buck the trend by making changes to its product and incorporating more features such as live video. He also sees huge growth potential in Asia, pointing to last year’s acquisition of South Korean company Hyperconnect.
Also today :
- OPEC+ announces whether it will increase oil production in September.
- The ISM non-manufacturing index, which tracks the services sector in the United States, shows at 10 a.m. ET.
Coming tomorrow: The Bank of England is expected to raise interest rates by half a percentage point, its biggest increase since 1995.