TikTok Rally Unwinds a Bit But Risk On Kicks of the Week

Posted on

TikTok signals deal with Oracle
Dollar weakens
Nikkei 0.65% Dax 0.26%
UST 10Y 0.664
Oil $37
Gold $1946/oz
BTCUSD $10433

Asia and the EU

North America Open
No Data

Equity markets were higher at the start of week’s trade boosted by news that TikTok may have reached an agreement with Oracle but were off their best level by mid-morning European trade as sentiment remained cautious.

Stock index futures raced to near 2% gains by early European trade after TikTok announced a deal with Oracle, but the details remained murky and fell far short of an actual sale of US assets. Instead, Oracle would become a trusted partner if TikTok’s US customer data and Bytedance would restructure its operations. On the face of it, the TikTok deal appears more like a licensing arrangement rather than an outright purchase of assets along with the company’s vaunted algorithm which the Chinese government has stated cannot be transferred.

It remains to be seen if the Trump administration will accept the terms of the deal and more importantly how it will spin this as a political win if TikTok in effect did not give up its core technology while remaining a presence in the US market. But the minutiae of the terms may not be of interest to the border market as traders appear to be relieved that tensions could ease as a result of this arrangement and risk-on sentiment persisted in the market throughout the night.

In FX the dollar was lower across the board but only mildly as most pairs basically tread water with no eco data to move markets. For currencies, the big events happen later in the week with Fed BOJ and BOE meetings all scheduled between Wednesday and Thursday. It’s very likely that all monetary policymakers will maintain a dovish stance this week as the global rebound remains fragile and COVID hotspots still abound across the world. To that end, it will be interesting to see the contrast between Mr. Powell’s words and Ms. Legarde generally upbeat assessment and if the later continues to adhere to the ultra-accomodative monetary policy the euro could make another run at the 1.2000 level.

Meanwhile today the focus will be on equity flows during the US session. The tech-heavy Nasdaq has been a relative loser all week last week as Sino-US tensions have spurred profit-taking from traders and it will be interesting to see if the Tik Tok deal allays some of those fears and revives the rally. For now Nasdaq has found support at 11,000 and that remains the key support level to watch.

Boris Schlossberg
Managing Director

Leave a Reply

Your email address will not be published. Required fields are marked *