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Tech stocks tumble after Tencent’s terrible results, commodity prices plunge, and Qatar comes to Turkey’s rescue. Here are some of the things people in markets are talking about.
U.S. stocks had their worst day in seven weeks Wednesday amid a broad decline in global equities as technology shares were roiled by disappointing results from Chinese internet giant Tencent Holdings Ltd. and copper sank into a bear market, weighing on commodities. Crude oil slipped below $65 a barrel following a report that American stockpiles rose the most since March 2017. Emerging-market equities are on the cusp of a bear market, with the MSCI Emerging Markets index tumbling close to 20 percent from its January high. South Africa’s rand was battered by a downbeat assessment by Moody’s Investors Service, while a surprise rate hike by Indonesia failed to lift the rupiah for long. The rout in Chinese technology shares spiraled into a broad selloff, with the offshore yuan breaching 6.95 per dollar.
Tencent stunned investors, reporting its first drop in profit in at least a decade amid a freeze on new game approvals in China. Executives said they had little clarity on when the process would return to normal. The surprisingly poor report puts even more strain on a company that’s shed more than $160 billion in market value from its January peak, and is the latest in a string of bad news for China’s tech darlings. Tencent’s net income fell 2 percent to 17.9 billion yuan ($2.6 billion) in the three months ended June, well short of the 19.3 billion-yuan average of analysts’ estimates. Mobile gaming revenue dropped 19 percent from the first quarter. The company’s New York-traded ADRs plunged as much as 10 percent Wednesday.
Qatar Comes to Turkey’s Rescue
President Recep Tayyip Erdogan has found a benefactor to help pull Turkey from the brink of a financial crisis as Qatar promised to invest $15 billion in the country. Qatar’s Emir Sheikh Tamim Bin Hamad Bin Al Thani made the pledge after a three-and-a-half hour meeting with Erdogan in Ankara on Wednesday. It follows a string of urgent steps Erdogan has taken to protect its economy from an escalating feud with U.S. counterpart Donald Trump over an American pastor held in Turkey. With the pledge, Turkey is reaping the rewards of standing by its wealthy Arab ally while Gulf neighbors led by Saudi Arabia cut off diplomatic ties with Qatar last year. The lira strengthen as much as 8 percent versus the dollar Wednesday as almost all other developing-nation currencies slid.
Central Bankers Step Up
Emerging-market central banks are boosting investors’ confidence in their ability to withstand shocks by pursuing orthodox economic policies and ignoring political pressures. As the economic crisis in Turkey this week threatened to roil markets in developing nations, policy makers from Jakarta to Buenos Aires reacted with a steady hand. Their response — raising interest rates, selling reserves or just providing reassurance that they’re paying attention — stands in stark contrast to Turkey’s refusal to follow convention and raise interest rates to defend a currency that earlier this week appeared to be in a free fall. The result of all the textbook governance is that what could have been a full-blown crisis set off by contagion has instead been largely taken in stride, with an index of emerging-market currencies down only about 2 percent over the past week. Investors are saying central banks across emerging markets are now much stronger than they were 10 or 20 years ago.
Bitcoin Bulls Regain Upper Hand
Bitcoin recovered from the lowest level since June and scores of smaller digital tokens rallied as concern eased that investors are giving up on the virtual alternatives to cash after this year’s collapse in prices. The biggest cryptocurrency gained as much as 9 percent to $6,619, helping to temper the losses over the past two days that drove this year’s decline to almost 60 percent. Ether climbed as much as 18 percent, while Ripple jumped as much as 16 percent. The total market capitalization of virtual currencies had dropped to about $190 billion, down from a peak of about $835 billion in January.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- China’s tumbling stocks are starting to look attractive to some.
- Korea better brace for more activist funds, warns the lawyer who advised billionaire Paul Singer in his proxy fight against Samsung.
- Tesla shares dropped on reports the SEC sent a subpoeona to the electric car maker over Elon Musk’s “funding secured” tweet.
- One Barclays trader faces a $19 million loss on Turkey bonds.
- This $263,800 safe provides peace of mind for the ultra-rich.
- New Zealand’s government passed a law banning foreigners from purchasing residential property.
- Move aside, Erdogan. Trump now prefers other strongmen.
©2018 Bloomberg L.P.