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Morning Wrap your day:
- Google got fined and it just said fine without fighting back.
- Janet Yellen is trying to make rates-hike less “scary”.
- Hong Kong’s IPO market is frozen.
US shares closed little changed at near record high, while Nasdaq was boosted by Biogen (+38.3%) after the approval of its Alzheimer’s drug.
Asia: Japanese and S.Korean shares closed higher as US jobs data eased Fed taper concerns. China stocks ended mixed and Hong Kong closed lower reacting to China’s mixed trade data:
- It’s imports grew at their fastest pace in 10 years in May, fuelled by surging commodity prices. But export growth missed expectations, likely because of the disruptions due to covid cases at major ports in the country’s south.
European stocks hit record highs on Monday as automakers gained, paring early losses in commodity-linked shares sparked by downbeat China export data.
Google got fined and said fine
Source: Life of Brand, Morning Wrap
Bonjour. The French antitrust watchdog just gave Google a huge fine for abusing its online advertising dominance, and Google just said “fine” without fighting back… It could be a big deal for other big tech and other countries.
What did Google do wrongly here?
A little background knowledge to start off: Google operates a huge online advertising infrastructure - like a system that all publishers would use to manage and sell their ad spaces. This makes Google the most powerful online marketer in the world.
But maybe it’s “too powerful”... said the French regulator. After its investigation, it found that Google didn’t treat all ad sellers fairly when selling ads. 🤯 It instead favors its own services and undermines others, through a “complex algorithmic auction processes”.
- E.g. Its own platform would enjoy some privilege when requesting data.
Google didn’t admit, nor did it deny. It said that it would not appeal the decision, and just accepted the USD 270 mln fine. Is this a de facto acknowledgement? 🤔
Is this a big deal?
A big Yes. Though the settlement only applies to France, Google has already pledged to improve its ad selling services, while making efforts to improve the transparency of its online ad service globally. 🌎
This is also the first ruling of this kind targeting big techs 📖 Other countries, other tech firms may follow. Seems that there’s more to come...
Test the Waters?
Source: Hedgeye, Morning Wrap
Is the Federal Reserve’s rate hikes scary for investors? Treasury Secretary, also the former US Fed chairman, Janet Yellen is trying to make it less “scary” - saying that it could be a “plus”.
What did Yellen say to the wary investors?
Yellen said Biden’s USD 4 tln spending plans should be pushed forward, even if they trigger inflation that persists into next year and higher interest rates.
- It’s a plus: ✅ “If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view.”
It reminds me of something similar before…
I’ll be very glad if you still remember. Exactly one month ago, Yellen suggested that interest rates may need to rise slightly to keep the economy from overheating. Bang! 📉 Those remarks soon rattled financial markets, with tech shares leading the declines.
Just hours later, Yellen clarifies that she is not “predicting or recommending” interest-rate increases. A way to calm down investors? 🤔 Stocks slid further after her remarks, though later pared losses.
Then how did investors react to Yellen’s remarks this time?
The market got some time to digest before Monday’s market opening. But it comes together with the tax deal that targets tech giants. (see our story yesterday). 👈
- The S&P 500 and Dow Jones turned lower after earlier climbing toward all-time highs, as investors weighed inflation risks and the impact of global minimum tax.
- Ten-year US Treasury yields rose from the lowest since late April after Yellen’s “plus” remark.
Hong Kong’s IPO market is frozen
Source: Morning Wrap
Seems that there are fewer HK IPO stories than before in Morning Wrap? Arr… that’s not our fault - because Hong Kong’s IPO market is almost at its slowest pace since the 2008 financial crisis, per Bloomberg data.
Ugh? HK IPO is no longer hot?
Believe it or not, there were only 7 companies that went public in Hong Kong this second quarter... and instead of popping up, their first-day performance just sucks. In May, the average first day gain of new IPOs is -6.2%.
- For our easier comparison: total IPO of 2Q19 - 22; average debut gain of May 2020 - +56.1%. What a... slowdown. 📉
Is it the same elsewhere? Not really… The total fund raising volume on Nasdaq this year has already exceeded the whole of 2020, riding on the SPAC boom. Though its first-day pop also drifted lower by half.
- vs HK: fund raised year-to-date is only half of 2020; but the year-to-date volume over the same period is still higher.
That’s slow. What’s the reason? 👀
The sentiment isn’t good. Following the landmark fine on Alibaba and a series of antitrust inspections on other local tech firms, many Chinese firms are reluctant to go public now in fear of being the next target.
Inflation fears could be counted as the second factor. It’s not as easy as before for stocks to get a higher valuation than before.
+ But maybe it’s recovering? The city’s latest go-public Angelalign has been oversubscribed 800 times (ongoing now). Look forward to its final debut.
What’s Moving in the Business World?
😃 Covid is “over”? A Norwegian public health official said the pandemic is over in the country after seeing its lowest hospital admissions rate since the outbreak. (more)
👨🚀 Jeff Bezo will go to space next month! The Amazon founder plans to travel to space next month as one of the first passengers carried by Blue Origin, his space company. Bezos v.s Musk, who will win? (more)
😦 The top tax haven also impacted? A Hong Kong official said the city may be “restrained” by the global new tax regime, referring to G7’s deal of “at least 15%” corporate minimum tax. (more)
💰 Oops, Walmart’s big deal. Flipkart, the Indian e-commerce giant backed by Walmart, is under discussion to raise USD 3 bln from Softbank and several sovereign funds, with a USD 40 bln pre-IPO valuation. (more)
🚘 We’ve missed you, Uber! Uber’s UK ride-hailing business recovered to pre-Covid levels. Seems like people can’t wait for a weekend ride as lockdown rules ease. (more)
🏎️ Disappointing for Tesla’s investors. Tesla cancelled the production of Model S Plaid+, the most expensive variant of its flagship sedan. Shares fell as much as 2.7%, but reversed higher for a slim gain. (more)