Some Chinese consumers are calling for a boycott of Nike.
GREG BAKER/AFP via Getty ImagesTensions between the U.S. and China are on the rise—and the sometimes impenetrable geopolitical issues are getting real for investors.
Hopes that the state of Sino-American relations might improve under President Joe Biden were dashed at last week’s Alaska summit, which devolved into a back and forth about democracy, governance, and human rights.
Investors noticed, even if they didn’t react much. The S&P 500 has dropped about 0.6%. The Shanghai Composite is down about 1.1%, and it’s hard to pin the move on geopolitical fears.
The tensions are having an impact on individual stocks, however. Nike shares are down almost 4% in premarket trading after human rights activists scoffed at a statement by the company saying it was “concerned about reports of forced labor” in the Uyghur Autonomous Region, while Chinese consumers took to social media to call for a boycott of the company.
Chinese tech stocks, meanwhile, took a hit in overseas trading as the Holding Foreign Companies Accountable Act, which became law in December, took a step forward. The law would require the delisting of Chinese stocks not meeting U.S. accounting and audit standards. Baidu and JD.com fell around 10% and 4%, respectively, in Hong Kong trading.
It’s just one more risk for investors in a world that seems to have more than enough already.
—Al Root
*** Join Lauren R. Rublin, Barron’s senior managing editor; Josh Nathan-Kazis, Barron’s healthcare reporter; and Joel Marcus, executive chairman and founder of Alexandria Real Estate Equities; today at noon to explore the future of the life-sciences industry. Sign up here.
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Tech CEOs to Propose Better Tactics for Fighting Disinformation Online
Under fire over widespread disinformation online, the CEOs of Facebook, Alphabet and Twitter will testify on Thursday before the House Committee on Energy & Commerce, which is considering changes to Section 230 of the Communications Decency Act that grants sites legal immunity from objectionable content posted to them.
- Facebook CEO Mark Zuckerberg will testify that platforms’ liability protection should be contingent upon demonstrating “that they have systems in place for identifying unlawful content and removing it,” adding, “platforms should not be held liable if a particular piece of content evades its detection—that would be impractical.”
- Twitter CEO Jack Dorsey will argue that the best way to combat misinformation is by “enhancing transparency, ensuring procedural fairness, enabling algorithmic choice, and strengthening privacy,” according to his prepared testimony.
- Alphabet CEO Sundar Pichai will testify that repealing Section 230 “would have unintended consequences—harming both free expression and the ability of platforms to take responsible action to protect users.” Like Dorsey, he proposes instead a focus on “transparent, fair, and effective processes for addressing harmful content and behavior.”
- The CEOs are likely to face tough questioning from the committee. “For far too long, big tech has failed to acknowledge the role they’ve played in fomenting and elevating blatantly false information to its online audiences. Industry self-regulation has failed,” the committee said in the hearing’s announcement in February.
What’s Next: Despite calls to regulate tech firms more tightly, political deadlock has impeded progress. Some Republicans have argued that the sites remove more right-leaning content, while Democrats argue that the sites haven’t gone far enough.
—Janet H. Cho and Anita Hamilton
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Britain, EU Headed to Vaccine Truce as Pandemic Keeps Spreading
The U.K. and the European Union said Wednesday they had begun talks to work toward a negotiated solution of their quarrel over the export of vaccines, in an attempt to avoid bans and countermeasures that would have slowed inoculation campaigns on both sides of the Channel.
- The two sides pledged in a joint statement to “create a win-win situation and expand vaccine supply for all [their] citizens.” The news come as a video summit of EU leaders was about to discuss a proposal giving member states new powers to ban the export of vaccines to countries that do not reciprocate.
- Europeans’ criticism is mostly focused on British-Swedish group AstraZeneca, which provided 30 million doses of its vaccine to the EU in the first quarter of the year, out of the 120 million it had promised in its contract with the union.
- The pandemic keeps spreading in France, with daily hospitalizations in Paris now as high as the level reached during the first wave of the pandemic a year ago, according to the CEO of the Paris hospitals system.
- The number of new coronavirus cases in Germany jumped Thursday at the highest rate since early January, while the government is trying to overcome differences with the country’s regions and among the ruling coalition parties on which new restrictive measures should be taken.
- The British government is considering putting France, and possibly even Germany, on the list of countries whose residents would need a strict quarantine, in designated hotels, before being allowed into the country, Prime Minister Boris Johnson said Wednesday.
What’s Next: Vaccination campaigns have hardly accelerated in Europe in the last weeks. Only 9% of EU residents have received one shot as of Wednesday, according to Bloomberg. That’s compared to 43% in the U.K. and 26% in the U.S. The surge in cases could delay the recovery further in most of Europe.
—Pierre Briançon
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Fidelity Seeks Approval for a Bitcoin ETF
Fidelity has plans for a Bitcoin exchange-traded fund, expanding on the firm’s push into cryptocurrencies. The money manager is known for being one of the first high-profile names to take an early interest in the asset class.
- The fund’s sponsor is FD Funds Management, which shares the same Boston address as Fidelity. The ETF would be tracked by Fidelity’s own Bitcoin price-index, and Fidelity would be the custodian.
- At least six companies have attempted to win approval from the Securities and Exchange Commission for a Bitcoin ETF in the U.S. in the past few years, but were either rejected or withdrew their proposals.
- The SEC has expressed concerns that Bitcoin is vulnerable to fraud or manipulative trading on unregulated spot exchanges. U.S. government entities remain wary of Bitcoin because of its association with illegal activities like ransomware.
What’s Next: Some industry participants think that this is the year an ETF wins approval. The next chairman of the SEC, Gary Gensler, has been a proponent of blockchain technology, and even taught about it at M.I.T. At least three other ETF applications are pending, including from WisdomTree and VanEck.
—Avi Salzman and Connor Smith
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New York Gets Ready to Legalize Marijuana for Recreational Use
New York is poised to join 14 other states that have already legalized the sale of recreational marijuana when lawmakers take up the measure next week.
- Under the proposed deal, anyone 21 and older could possess up to three ounces of pot as well as grow marijuana for personal use. A new Office of Cannabis Management would issue licenses to grow or sell cannabis. Local jurisdictions could also allow businesses to let people consume weed on site.
- Legal sales could begin one year after the bill is enacted, Senate Finance Committee Chair Liz Krueger, a co-sponsor of the bill, told Bloomberg. The program is estimated to bring in around $300 million a year to the state through taxes, including a 9% state tax and a 4% tax by localities.
- Some Republicans, who are in the minority, are expected to oppose the measure. The New York state PTA issued a statement earlier this month objecting to legalization, saying “there is no amount of revenue that can possibly offset the harm of the legalization of marijuana on our children.”
What’s Next: Neighboring state New Jersey legalized recreational use of pot in February, while Connecticut Gov. Ned Lamont has proposed doing the same. New York Gov. Andrew Cuomo, who first proposed legalizing marijuana in his 2019 budget proposal, said Wednesday, “we’re close, but we’ve been close three times before.”
—Janet H. Cho
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Powell, Yellen Press for Continued Economic Support During Recovery
In their second day of testimony Wednesday, Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell defended stimulus spending measures and outlined next steps to sustain the recovery while speaking to the Senate Banking Committee.
- Stimulus helped the U.S. avoid the worst economic fallout, Powell said. “But the recovery is far from complete, so, at the Fed, we will continue to provide the economy the support that it needs for as long as it takes.”
- The government is crafting guidance on how cities and states can use the $200 billion allocated to them in the last stimulus package, Yellen said. While a provision attached to that aid states that it cannot be used to subsidize tax cuts, Yellen suggested there may be some wiggle room.
- Calling the supplemental federal unemployment benefits “important,” Yellen acknowledged that “longer-run, we do have to raise revenue to support permanent spending that we want to do.”
- In a fresh sign that the economy has yet to resume its pre-pandemic vigor, new orders for durable goods fell in February for the first time since last spring, the Commerce Department said. Orders of products meant to last at least three years decreased 1.1% to $254 billion after rising 3.5% in January.
What’s Next: While Powell said he expects prices to rise this year due to pent-up demand, he said the increase will be temporary. Regarding the recent rise in 10-year Treasury yields, he said, “it seems that rates have responded to news about vaccination and ultimately about growth.”
—Anita Hamilton
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A timely question after the GameStop saga: What are the tax advantages of qualifying for “trader status” with the IRS?
The recent GameStop short-squeeze episode provided some eye-opening drama. It also brings attention to the question of who is eligible for the favorable federal income tax treatment that’s available to individuals who trade stocks with sufficient intensity to qualify as securities traders for tax purposes.
Less-favorable tax treatment applies to individuals who actively trade stocks, but with insufficient enthusiasm to be classified as anything other than garden-variety investors with short attention spans.
Achieving trader status confers more tax advantages than simple active investor-hood. Of course, it also comes with the inherent financial risks of being a trader. In this column, I’ll go into more detail on what it takes to meet the tax-law definition of a “trader” and what happens if you do.
Read more here.
—Bill Bischoff
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—Newsletter edited by Anita Hamilton, Stacy Ozol, Mary Romano, Ben Levisohn, Matt Bemer
March 25, 2021 at 08:32PM
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U.S.-China Tensions Are Rising. Nike Stock Is Paying the Price. - Barron's
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