Delivery riders for Meituan, one of China’s biggest food delivery companies.
AFP via Getty Images
Beijing’s ever-widening regulatory crackdown has spooked markets for much of the year. It’s easier to list the sectors that haven’t been targeted, as tech giants, online tutoring companies, food delivery companies, and property developers have each felt China’s wrath.
The extent of the fear that has built around China’s crackdown and its potential impact is perhaps best characterized by the relief spreading across Hong Kong markets on Monday amid signs it may not actually be that bad.
Food delivery giant Meituan was hit with a 3.44 billion yuan ($534.3 million) fine for monopolistic behavior, bringing a monthslong antitrust probe to an end. That may be around 3% of the company’s 2020 domestic revenue but, crucially, it was lower than expected.
Meituan stock surged more than 8% on Monday, and tech stocks continued their rebound from last week. E-commerce giant Alibaba rose 8% in Hong Kong trading and has now climbed 27% in the past five days, while Baidu and Tencent also made gains. Warren Buffett’s longtime partner Charlie Munger said his firm nearly doubled its stake in Alibaba’s U.S.-listed stock in the third quarter, in a filing last week. A proposed virtual summit between U.S. President Joe Biden and Chinese President Xi Jinping has also improved sentiment in recent days.
It may not be time to get carried away, though. China’s central bank governor Yi Gang said the bank will keep working to curb monopolistic practices by Big Tech.
—Callum Keown
*** In this week’s Barron’s Streetwise podcast, columnist Jack Hough and analysts from Jefferies and Wedbush Securities discuss supply-chain challenges for the Christmas selling period, stock picks, hit toys, and how to score a PlayStation 5. Listen here.
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Social-Media Companies in Spotlight for Their Policies
Social-media companies should be held accountable for the policies they say they are putting in place, Nick Clegg, Facebook’s vice president of global affairs, told ABC’s “This Week” on Sunday. “We understand that with success comes responsibility, comes criticism, comes scrutiny.”
- Clegg’s remarks followed last week’s congressional testimony by former Facebook data scientist Frances Haugen, who said the company’s algorithms favor content that provokes negative reactions from users and encourages them to spend more time on the site.
- Clegg said Facebook is developing new features, including prompts for teens on Instagram to take a break and a system to “nudge” users to other content if they spend too much time viewing posts that aren’t good for their well-being. It is also considering adding monitoring controls for parents.
- Haugen’s testimony rekindled debate over Section 230, a regulation that shields social-media companies from liability for the content users post on their platforms. Clegg said that protection should be “contingent” on platforms “applying the systems and their policies as they’re supposed to.”
- With one-third of the world’s population using Facebook, “of course we’re going to see the good, the bad and the ugly of human nature,” Clegg said, adding that Facebook’s algorithms “work almost like giant spam filters.”
What’s Next: Sen. Amy Klobuchar (D., Minn.) told CNN that Facebook and other social-media platforms must be held responsible for amplifying misleading or harmful content, and has introduced a bill to penalize platforms for promoting misinformation about Covid-19 vaccines.
—Janet H. Cho
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Southwest Airlines Canceled 1,800 Flights This Weekend
Southwest Airlines canceled 1,800 flights over the weekend, including more than 1,000 flights on Sunday, blaming air-traffic control issues and bad weather. Southwest’s staffing shortages forced the airline to cut hundreds of flights this summer.
- Southwest said the Federal Aviation Administration’s decision to impose an air-traffic management program because of severe weather and staffing issues on Friday had a “significant impact” on its Florida flights.
- Southwest canceled 808 flights on Saturday, compared with 66 cancellations for American Airlines and 54 cancellations for Spirit Airlines , according to FlightAware, a flight tracking site.
- The Southwest Airlines Pilots Association, which represents nearly 10,000 pilots, said: “Our pilots are not participating in any official or unofficial job actions.” In an email to Barron’s, Southwest said “We’re working diligently to accommodate our customers as quickly as possible, and we are grateful for their patience.”
- Southwest raised its starting pay to $15 an hour, offered retention and referral bonuses, and announced plans to hire 5,000 more workers this fall, but said it is seeing fewer applicants per job opening.
What’s Next: Southwest last week told its more than 54,000 employees they must get fully vaccinated against Covid-19, or approved for an exemption, by Dec. 8. Incoming CEO Bob Jordan has said Southwest could cut flights over spring break in March if it doesn’t have enough staff to operate.
—Janet H. Cho
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Rising Costs, Supply Shortages Weigh on Stocks Ahead of Q3 Reports
Investors are bracing to hear the effects of rising prices and ongoing supply and worker shortages on profits as companies report quarterly earnings starting this week.
- Analysts expect earnings to rise 28% over the same quarter last year. But net profit margin for the S&P 500 is expected to be 12.1%, down from a record 13.1% in the previous quarter, according to FactSet.
- Big companies on deck to report this week include Delta Air Lines, Domino’s Pizza , JPMorgan Chase & Co. and UnitedHealth Group . Worries have weighed on the S&P 500, which is down 1.5% in the past month.
- FedEx said last month that it was struggling with labor issues, cutting its outlook. Nike said plant shutdowns in Vietnam had slowed production and shipping the products to the U.S. and other markets.
- Retailing giants Walmart , Target , Home Depot and Costco hired their own cargo ships to haul goods to the U.S., fearing shipping delays before the holidays. The ships are smaller than typical and can be directed to less congested ports in places such as Portland, Ore., The Wall Street Journal reported.
What’s Next: Crippling delays in the flow of products from Asia to North America are creating shortages of holiday decorations, home appliances, furniture and even toys. It takes about 80 days to ship goods across the route, double what it was before the pandemic.
—Liz Moyer
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Oil Prices Keep Rising Along With Fears for Global Recovery
World oil prices continued their rise Monday, adding to fears that the global recovery could prove less vigorous than previously expected.
- Prices of U.S. crude oil topped $80 for the first time in seven years, with West Texas Intermediate up 2.5% to $81.3 a barrel in early European trading. Brent crude, the international benchmark, was up 2% to $84 a barrel.
- Natural-gas prices were still trading significantly down from last week’s historic highs, with Dutch benchmark at $90 per megawatt-hour after hitting highs around €160 ($185) last week. Prices fell Friday after Russian President Vladimir Putin had indicated that state-owned Gazprom would increase supplies to Europe to help ease the continent’s current crunch.
- In the latest sign that semiconductor shortages, production bottlenecks, and ongoing Covid-19 pandemic effects will hinder growth, Goldman Sachs Sunday downgraded its forecast for the U.S. economy for 2021 and 2022.
- The U.S. economy’s gross domestic product is now seen expanding at a rate of 5.6% this year and 4% in 2022, it said. That is down from previous forecasts of 5.7% and 4.4%, respectively.
What’s Next: Goldman’s downgrade comes after others. The Organization for Economic Cooperation and Development last month downgraded its U.S. growth forecast to 6% for this year, with the economy expected to expand by 3.9% in 2022. The International Monetary Fund is due to publish its World Economic Outlook Tuesday.
—Pierre Briançon
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‘Enjoy Halloween’ and Other Coming Holidays, Fauci Says
Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said families can “go out there and enjoy Halloween, as well as the other holidays that will be coming up,” especially if individuals are vaccinated, but cautioned against declaring premature victory over Covid-19.
- Fauci told CNN’s “State of the Union” the seven-day average of new infections is about 95,000 a day, new hospitalizations are averaging 7,400 a day, and deaths are around 1,400 a day. About 68 million people eligible for vaccines remain unvaccinated, he said.
- Asked when vaccinated people can stop wearing masks indoors, Fauci said 95,000 new cases a day is “still way too high,” adding that “I’d like to see it well below 10,000, and even much lower than that” before relaxing restrictions.
- People who recovered from coronavirus disease and are vaccinated probably don’t need booster shots, said Dr. Paul Offit, a member of the Food and Drug Administration’s advisory panel on vaccines. A U.K. study found infection and vaccination provided 94% protection up to six months after vaccination.
- The FDA will consider authorizing the Pfizer
– BioNtech vaccine for children aged five to 11 on Oct. 26. Former FDA commissioner Dr. Scott Gottlieb, who sits on Pfizer’s board, told CBS’ “Face the Nation” that pending approval, younger children could be vaccinated by Thanksgiving.
What’s Next: Gottlieb said clinical trials of Pfizer’s vaccine among children six months to four years, at dosages one-tenth the amount of people 12 and older, could be pushed to early 2022. He said the FDA will also consider that decision at its Oct. 26 meeting.
—Janet H. Cho
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MarketWatch Wants to Hear From You
As the end of the year approaches, some investors will turn to tax-loss harvesting. But what do you need to know first about how the Internal Revenue Service ‘wash sale’ works—does it apply to cryptocurrency losses?
A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to [email protected].
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—Newsletter edited by Liz Moyer, Camilla Imperiali, Steve Goldstein, Rupert Steiner
