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The U.S. stock market (Dow Jones Industrial Average) closed around 27657.42 Friday, slumped almost -0.88% (-245 points) on less dovish Fed hold, Trump tech war, and political uncertainty. The U.S. Commerce Department issued an order Friday to block Chinese social media giants TikTok and WeChat in the U.S. from Sunday (20th Sep) on national security issues (to force TikTok deal with an American company).
The U.S. Commerce Secretary Ross said in a statement the order might still be revoked by President Trump if TikTok owner ByteDance reaches a deal to sell its U.S. operations to an American company: Today’s actions prove once again that President Trump will do everything in his power to guarantee our national security and protect Americans from the threats of the Chinese Communist Party. In the event a deal is not reached, the Commerce Department will order both apps to be removed from Google Play and Apple's App Store, so TikTok and WeChat will be inaccessible from the U.S.
On late Thursday, there was a report that Trump is not fully comfortable with the proposal which would make Oracle as TikTok's technology partner in the U.S. Trump reportedly concerned that the Oracle proposal means TikTok would remain in the control of its parent company ByteDance (and effectively with the CCP). But Oracle and TikTok had agreed to make some changes to their deal regarding data security after a request from the Treasury Department. Meanwhile, White House Chief of Staff Meadows said he is still not certain the proposed deal between TikTok and Oracle meets the security threshold set by the U.S.
But on late Saturday, a U.S. District Court in San Francisco gave a temporary stay on the WeChat ban after a petition filed by a group of WeChat users last month The Judge said the lawsuit ‘showed serious questions going to the merits of the First Amendment claim, the balance of hardships tips in the plaintiffs' favor’.
The U.S. Commerce Department also issued an official statement on delayed prohibitions related to TikTok, announcing 7-more days for the deal:
In light of recent positive developments, Secretary of Commerce Wilbur Ross, at the direction of President Trump, will delay the prohibition of identified transactions pursuant to Executive Order 13942, related to the TikTok mobile application that would have been effective on Sunday, September 20, 2020, until September 27, 2020, at 11:59 p.m.
On late Saturday, the TikTok deal oracle between has his blessing: I have given the deal my blessing---I have approved the deal in concept.
The TikTok agreement will also have to be approved by the Chinese government, which, according to reports, is unlikely to oppose the deal. But China also asked the U.S. to stop discriminating against Chinese companies. And China also threatened retaliatory action. The market is concerned about the growing U.S.-China tech/digital war, which may affect big U.S. techs, have a big market in China. Thus, China's sensitive techs and other MNCs are in pressure, dragging the overall market.
The market is also concerned about growing U.S. political uncertainty and policy paralysis amid closely contested Nov election, still slightly in favor of Biden (as per latest opinion polls). The death of U.S. Supreme Court Judge Ginsburg’s Saturday also opened a political Pandora box as Trump vowed to nominate her replacement even just 50-days before the election, while some of Trump’s Senate colleagues are opposing the idea. The U.S. House Speaker Pelosi (RNC) also warned about another impeachment of Trump for the Supreme Court Judge nomination issue. Pelosi said on the weekend, declining to comment on any specific actions: We have our options. We have arrows in our quiver that I'm not about to discuss right now---
The market was already under stress on lingering uncertainty over CARES Act 2.0 and after Ginsburg’s death; there may be also added suspense over stopgap funding bill to avoid another U.S. government shutdown (partly). In his Sep monetary policy meet last Wednesday, Powell repeatedly stressed on additional fiscal stimulus, especially for the vulnerable people and stressed business to continue the economic recovery and also warned various negative consequences in the absence of targeted CARES Act 2.0.
The market is under stress on possible political and policy paralysis after the Nov election.
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