Market shares: Pelosi’s Taiwan trip is another hit for the Chinese yuan

What’s happening: Pelosi’s high-profile visit to Taipei, where she asserted on Wednesday that Washington will “don’t give up” democratically administered island, has raised concerns that relations between China and the United States, the world’s two largest economies, will deteriorate further.

The outbreak of tension has raised concerns among investors that the situation could escalate from here, whether intentionally or unintentionally. China’s ruling Communist Party claims Taiwan as its own, though has never controlled it. China’s offshore yuan has fallen slightly this week.

“It’s something investors have known for a while as a potential bright spot,” said Manik Narain, head of cross-asset strategy for emerging markets at UBS. “It’s very difficult to trade it. We don’t know if it will be a bright spot tomorrow or in five years’ time.”

One big unknown: If China waged a military confrontation, would Western countries impose harsh economic sanctions as they did when Russia invaded Ukraine? What does it mean for foreign investors if they do?

“They can see what happened to the Russian markets,” Narain said. “Investors don’t want to make that mistake twice.”

Removing China from the global economy would be a near-impossible task given its integration with supply chains, the importance of the market to major Western corporations, and its manufacturing power. country’s output. But the threat of such an important geopolitical breakdown remains.

It is not the only factor affecting the Chinese currency. Emerging markets are having a hard time attracting investments as U.S. interest rates rise, which makes it less attractive to deposit money in riskier locations.

There are also questions about China’s economic growth. Factory Operations contract in july, according to data released late last week. The global economic downturn will hurt the country’s robust export machinery. And domestic demand remains volatile, as the country deals with the aftershocks of recent Covid-19 shutdowns in major cities and a vulnerable real estate sector.

“At a time when exports are likely to soon dry up due to weaker global demand, a recovery in China’s domestic demand is unlikely to materialize anytime soon, in our view, given the restrictions Covid continues 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 stagnates, the People’s Bank of China is on track to ease policy while most other central banks are tightening it. That could add more downward pressure on the yuan.

“The pace of US rate hikes could be crucial,” Narain said, noting the possibility of a marked “divergence”.

Inflation worries don’t affect gig economy

Demand for Ubers and Airbnbs is at an all-time high as consumers buy and share homes despite concerns about rising costs of living.

The Latest: Airbnb said on Tuesday that it recorded 103.7 million pre-orders between April and June, a new quarterly record and up 24% year-over-year in 2019. The spike in bookings generated $2.1 billion in revenue and $379 million in profit.

The company also benefits from a higher average daily rate. At $164, the rate is down slightly from the first three months of 2022 but up 40% year-on-year in 2019.

Still, shares fell 6% in pre-market trading after the company’s outlook was worse than Wall Street expected.

Uber’s revenue, meanwhile, reached 8.1 billion dollars last quarter, more than double the previous year. It also reported positive cash flow for the first time, meaning it earned more money from its operations than it spent.

Booming: The number of consumers and drivers using Uber is at an “all-time high”, the company said, indicating a shift towards spending more on services like dining and Attend live events. About 122 million people use the platform every month, up 21% year-over-year.

Uber also said it is making progress in enrolling more drivers to reduce wait times, with signups up 76% year-over-year in the United States.

“We’re not where we want to be, but they’re definitely on the right track,” Chief Executive Officer Dara Khosrowshahi told analysts.

Know this statistic: Wait times in the US are now averaging four and a half minutes, down from five to six minutes.

Shares of Uber jumped 19% on Tuesday. Rival Lyft also rode the waves, up more than 16%.

The pandemic is still hitting dating apps

People can shed their sweatpants, ditch Zoom, and jump into Ubers as much as they did before Covid-19 entered the scene.

But some singles are holding back. Match Group — the world’s largest dating app owner, with a portfolio that includes Tinder, Hinge and OkCupid — said Tuesday that the pandemic is still affecting user behavior and hurting harm their business.

CEO Bernard Kim said in a letter to investors: “Although people have generally let go of the locked-down past and entered a more normal life, there is a level of willingness to try products. Their online dating product for the first time has yet to return to pre-pandemic levels.

Interaction from existing users has increased. But attracting new recruits remains a challenge.

Investor Insights: Revenue rose 12% year-over-year to $795 million, falling short of Wall Street expectations. It also announced an unexpected operating loss of $10 million. Shares fell 21% in pre-market trading. So far, they have been 42% lower this year.

Kim said the company will try to turn the tide by changing its product and incorporating more features like live video. He also sees huge growth potential in Asia, pointing to South Korea’s acquisition of Hyperconnect last year.

Next (CAR), CVS (CVS), Moderna (mRNA), New York Times (NYT), Yum! Brand (YUM) and Under armour (United States) report results before the US market opens. Booking Holdings, Clorox (CLX), eBay (EBAY) and Hostess brands (TWNK) Follow up after finishing.

Also today:

  • OPEC+ announces whether it will increase oil production in September.
  • The ISM Non-Manufacturing Index, which tracks the US services sector, is posted at 10 a.m. ET.

Coming up tomorrow: The Bank of England is expected to raise interest rates by half a percentage point, the biggest increase since 1995.

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