What’s Going On Here?The temperature crept up again between China and the US last week, and investors certainly weren’t playing it cool. What Does This Mean?The brouhaha this time around mostly surrounds a few government buildings in one another’s countries. First, the US shut China’s Houston consulate last week, alleging China was using the base to steal intellectual property. Then China hit back by shutting the US’s Chengdu consulate, accusing Americans there of meddling in its internal affairs.
Tensions between the two countries have been rising for years. And while they looked like they might be easing up after a partial trade war truce earlier this year, things kicked off again after a new Chinese security law against Hong Kong led to retaliatory action from the States. Why Should I Care?For markets: This time, it’s personal.
Public spats between the US and China are par for the course these days. But investors do seem to be more worried than usual by the latest developments: on Friday, they sold off Chinese, European, and US stocks and bought into safe havens like gold, which hit its highest price in eight years. America’s struggle to manage coronavirus might be compounding investors’ concerns this time around, and so might its government’s apparent inability to decide exactly how to support the economy. That’s particularly bad news given that, late last week, the number of Americans newly filing for unemployment benefits unexpectedly rose for the first time since March.
The bigger picture: Eyes front, America.
The US could learn a thing or two from the eurozone: the bloc agreed an $860 billion fund last week to help the region survive the pandemic. If the US can reach a resolution of its own soon, it might restore investors’ confidence in the country. Some have, after all, already been selling off the dollar and looking instead to European stocks, arguing they’re poised to climb more than those Stateside now the region’s on surer financial footing. | 