The flare-up in tensions has fed concerns among investors that the situation could escalate from here, either intentionally or inadvertently. China’s ruling Communist Party claims Taiwan as its own, despite never having controlled it. China’s offshore yuan has pulled back slightly this week.
“It’s something investors have known about for a while as a potential flash point,” Manik Narain, head of cross-asset strategy for emerging markets at UBS, told me. “It’s been very hard to trade it. We don’t know if it will be a flash point tomorrow or in five years’ time.”
One 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 be making that same mistake twice.”
Excising China from the global economy would be a near-impossible task given its integration with supply chains, the importance of the market to large Western corporations and the country’s manufacturing might. But the threat of such a significant geopolitical breakdown looms.
It’s not the only factor weighing on China’s currency. Emerging markets are struggling to attract investments as US interest rates rise, which makes parking money in higher-risk locations look less attractive.
“At a time when exports will likely run out of steam soon on weaker global demand, China’s domestic demand recovery is unlikely to materialize soon, in our view, given continued Covid curbs and recent shocks to the property market,” Bank of America economists Helen Qiao and Miao Ouyang said in a research note this week.
Plus, as the economy stutters, the People’s Bank of China is on track to ease policy while most other central banks are tightening it. That could add downward pressure on the yuan.
“The pace at which the US raises interest rates could be crucial,” Narain said, noting the potential for a sharp “divergence.”
Inflation anxiety isn’t crimping the gig economy
Demand for Ubers and Airbnbs is at an all-time high as consumers snap up 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 was down slightly compared to the first three months of 2022 but up 40% versus the same period in 2019.
Still, shares are off 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 are “at all-time highs,” the company said, pointing to a shift to more spending on services like dining out and attending live events. There are about 122 million people utilizing the platform each month, up 21% from the prior year.
Uber also said it’s making progress on enrolling more drivers to reduce wait times, with sign-ups rising 76% year-over-year in the United States.
“We’re not where we want to be, but they’re certainly moving 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 between five and six minutes.
Uber’s shares dropped 19% on Tuesday. Rival Lyft also rode the wave, climbing more than 16%.
The pandemic is still hammering dating apps
People may be shedding their sweatpants, ditching Zoom and hopping into Ubers much as they did before Covid-19 entered the scene.
But some singles are holding back. Match Group — the biggest owner of dating apps in the world, with a portfolio that includes Tinder, Hinge and OkCupid — said on Tuesday that the pandemic is still affecting user behavior and hurting its business.
“While people have generally moved past lockdowns and entered a more normal way of life, their willingness to try online dating products for the first time hasn’t yet returned to pre-pandemic levels,” CEO Bernard Kim said in a letter to investors.
Engagement from pre-existing users is up. But attracting fresh recruits remains a challenge.
Investor insight: Revenue grew 12% year-over-year last quarter to $795 million, missing Wall Street’s expectations. It also posted a surprise operating loss of $10 million. Shares are down 21% in premarket trading. They were already 42% lower so far this year.
Kim said the company will attempt to turn the tide by making changes to its product and incorporating more features like livestream video. He also sees huge potential for growth in Asia, pointing to last year’s acquisition of South Korea’s Hyperconnect.
- OPEC+ announces whether it will boost oil output in September.
- The ISM Non-Manufacturing Index, which tracks the US services sector, posts at 10 am ET.
Coming tomorrow: The Bank of England is expected to hike interest rates by half a percentage point, its biggest increase since 1995.