TikTok faces potential ban in the US amid national security concerns
Since its inception in 2016, TikTok has soared in popularity, amassing over 1 billion active users globally, with a significant portion based in the United States (US). However, its Chinese ownership, under ByteDance, has raised substantial national security concerns in the US, leading lawmakers to push for its ban. Here’s why:
Data privacy and security
The crux of the issue lies in fears that China’s Communist Party could access sensitive data of American users through TikTok. As a Chinese company, ByteDance is bound by Chinese law to hand over data to authorities upon request, which could potentially compromise user privacy and US national security.
Congressional concerns
Lawmakers, particularly Republicans, have spearheaded efforts to ban TikTok, citing worries that user data could be exploited for tracking and misinformation campaigns. Representative Michael McCaul emphasised that downloading TikTok could inadvertently grant the Chinese Communist Party access to personal information.
Growing bipartisan support
While Democrats historically haven’t focused as much on security measures, they are now aligning with calls to ban TikTok. The Committee on Foreign Investment in the US (CFIUS) has demanded ByteDance divest its TikTok stake, although TikTok argues this won’t effectively address security concerns.
Legislative action
The US House of Representatives passed a bill aiming to ban TikTok unless it separates from its Chinese parent company. China has criticised this move, accusing the US of unfair competition practices. However, the bill’s fate lies with the Senate, with US President Joe Biden signalling he would sign it if passed.
Global Ramifications
China’s opposition to the TikTok ban mirrors its own restrictions on American social media platforms. The standoff reflects broader tensions between the two nations, extending beyond economic and trade issues and into technological and security spheres.
TikTok’s response
TikTok contends that it has taken steps to safeguard user data, including moving American user data to US servers. However, scepticism remains, and the company faces an uphill battle to dispel security concerns and navigate potential legislative action.
As the debate rages on, the fate of TikTok in the US hangs in the balance, emblematic of broader geopolitical tensions and the complexities of global technology regulation.
STOCK MARKET RECAP
On Thursday, US stocks ticked down slightly, with the S&P 500 and Nasdaq losing 0.3% each, and the Dow Jones down by 138 points. This movement comes as traders digest a mix of economic data. Producer prices climbed higher than anticipated last month, while initial jobless claims unexpectedly declined. However, retail sales figures fell short of expectations. The likelihood of a 25 basis points cut in the US Federal Reserve (Fed) funds rate in June now stands at 54%, down from 61% before the data releases. Energy and tech sectors led the gains, while utilities weighed down the market. Corporate giants like Microsoft, Apple, Amazon, and Alphabet saw positive movement, while computer chip manufacturer Nvidia slipped 3.2% and Tesla was down 4.1% following analyst predictions of stagnant sales growth for the electric vehicle maker this year.
In Europe, Frankfurt’s DAX 40 index edged higher, nearing a record-high of 17,980 points. Investors focused on a slew of economic data from the US and corporate updates from German firms. Meanwhile, on the FTSE 100, trading remained slightly higher with attention on corporate announcements. Online food delivery company Deliveroo surpassed expectations in core earnings, while house-building company Vistry announced plans for increased home construction. However, banking company NatWest Group and resources giant Anglo American saw their shares experience declines due to ex-dividend trading.
In Asia, the Nikkei 225 Index and the broader TOPIX Index rebounded, closing higher after three consecutive days of losses. Speculation grew regarding potential adjustments to the Bank of Japan’s monetary policy amidst rising wages, inflation, and a robust economy.
OIL PRICES SURGE AS US CRUDE STOCKPILES DECLINE, GOLD TAKES A BREATHER
Brent Crude futures soared above $84/barrel on Thursday, propelled by a surprising drop in US crude inventories, indicating robust demand in the world’s largest oil consumer. According to Energy Information Agency data, US crude stockpiles plummeted by 1.536 million barrels last week, defying expectations of a 1.338-million-barrel increase. This marked the first decline in seven weeks, aligning with industry data reported earlier by the American Petroleum Institute. The report also underscored a decrease at the Cushing hub in Oklahoma, alongside dwindling gasoline stocks. Further boosting oil prices were Ukrainian drone strikes on Russian refineries, causing significant damage to a plant, coupled with ongoing geopolitical tensions in the Middle East and extended supply cuts from the expanded Organization of Petroleum Exporting Countries, OPEC+.
In contrast, gold prices dipped to approximately $2,160/ounce on Thursday, as hotter-than-expected US producer inflation and a decrease in initial jobless claims prompted investors to reassess their predictions regarding the Fed interest rate policies. The Producer Price Index (PPI) for final demand in the United States jumped by 0.6% month-on-month in February 2024, marking its largest increase since last August and doubling initial forecasts. Meanwhile, the number of individuals claiming unemployment benefits dropped to 209,000 over the week, surpassing projections of 218,000. However, disappointing retail sales growth, which stood at 0.6% in February, tempered market sentiment.
Volatility ensues in currency markets
The US Dollar Index surged to over 103 on Thursday, rebounding from its earlier losses, fuelled by persistent inflationary pressures that dampened hopes for Fed interest-rate cuts this year. Factory gate prices, as indicated by the latest PPI report, surpassed expectations both on a monthly and yearly basis.
Meanwhile, the euro hovered around $1.09/€, closely monitored by traders amidst signals of impending interest rate cuts from both the Fed and the European Central Bank (ECB). June is earmarked for potential reductions, with the ECB eyeing a one-percentage-point decrease in borrowing costs for 2024. In its March meeting, the ECB maintained record-high borrowing costs, citing progress in inflation control, yet revised its inflation forecasts down to 2.3% for the year.
The pound remained steady at $1.28/£, below its recent peak, as investors digested economic data ahead of the Bank of England’s (BoE’s) interest rate decision. Amidst GDP growth of 0.2% in January and a 6.1% increase in regular pay year-on-year, the BoE is expected to maintain rates at 5.25%, possibly delaying cuts until August.
Key Indicators:
GBPUSD: 1.2754
GBPEUR: 1.1718
Brent Crude: $85.25
Gold: $2168.90
* Please note that due to a public holiday on 21 March 2024 and Good Friday on 29 March 2024 the Weekly Market Wrap will resume on 5 April 2024.
Sources: Reuters, Bloomberg and Trading economics.
Written by Citadel Global Director, Bianca Botes
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