13 July 2021
Taxi ban drives down Chinese stocks
Ride-hailing apps have had a love-hate relationship with local authorities. Uber, for one, has faced various protests and bans across Europe.
The latest taxi app to hit the headlines is Didi – last week, Chinese authorities ordered its removal from mobile app stores in the country over data concerns. The app, which had recently listed in the US, immediately saw its shares drop – but it took Chinese tech stocks down with it!
In recent months, Chinese authorities have signalled a strong will to crack down on fast-growing tech companies – Alibaba being another notable recent casualty.
Delta and doubts
It wasn’t just Chinese tech markets that struggled midweek. The threat of the Delta COVID-19 variant to the health of supply chains caused a dip in global markets, while concerns about the pace of the global recovery from COVID-19 also weighed heavily.
On Wednesday, minutes from a recent Federal Open Market Committee meeting revealed a division over the future US policy, and anxieties over growing pricing pressure. On the same day, the Chinese government said it would cut the reserve ratio for banks to keep money flowing around the economy. Is this a warning sign that the Chinese Q2 GDP data might not reach market expectations? Some experts certainly thought so.
As a result, investors, economists and central banks began to take a slightly more pessimistic view on the pace of recovery – and Thursday saw markets fall across Europe, America and Asia.
UK recovery hopes dampened
Adding to market turbulence was the UK’s economic data for May, which revealed a growth of 0.8% – still 3.1% below its pre-pandemic peak. This came despite the month seeing indoor hospitality continuing to open up in May. Explaining these GDP figures, Paul Dales, Chief UK Economist at Capital Economics, noted:
“The optimistic slant is that it was due to the unusually wet weather. The pessimistic take is that it could be an early sign that materials and labour shortages are restraining output.”
Looking ahead, Dales added:
“Of course, the pace of the recovery was always going to slow as the economy climbed back towards its pre-crisis level. But we hadn’t expected it to slow so much so soon. As such, whereas we previously thought that GDP would return to its pre-crisis peak in August, October now looks a better bet.”
Ending the week on a high
There was a more positive end to the week, however, with markets recovering some lost ground on Friday.
Markets performed somewhat better – the STOXX Europe 600, which fell 1.7% on Thursday, recovered 1.3% by the end of the day, meaning it actually finished the week slightly up. There was a similar story in the UK, where the FTSE 100 Index’s fall on Thursday was followed by a 1.18% gain on Friday (it still ended the week slightly down, however). US markets followed a similar trend, falling on Thursday, but recovering some of these losses on Friday.
Yesterday (12 July), UK Prime Minister Boris Johnson confirmed that many of the remaining lockdown measures will end on 19 July. However, the rhetoric surrounding ‘Freedom Day’ has shifted since the roadmap was first announced, with caution being urged. The PM told the Downing Street press conference:
“It is absolutely vital that we proceed now with caution, and I cannot say this powerfully or emphatically enough: this pandemic is not over.”