China tightens trading curbs as rout deepens

Good morning. Here's what happened overnight and what you need to know today.

1.

Relentless rout: China has tightened some trading restrictions for domestic and offshore investors to slow its deepening stock rout. Unnamed sources told Bloomberg that officials have imposed caps on cross-border total return swaps with clients for some brokerages, which will limit an avenue for China-based investors to short Hong Kong stocks. Quantitative hedge funds were also banned from placing sell orders from Monday, and others were stopped from cutting stock positions in their leveraged market-neutral funds. Chinese policymakers have been struggling to stabilise markets that have suffered a USD7 trillion ($10.8 trillion) loss in value over the past three years. (Bloomberg)

2.

Rate rumours: The US Federal Reserve expects to make three rate cuts this year, according to comments made by chair Jerome Powell during a 60 Minutes interview aired Sunday evening. He said that “almost all” of the central bank’s committee members think The Fed will cut rates from their 23-year high of 5.25-5.5%. Powell said that nothing has changed since the rate-setters’ December forecast of 75 basis points of cuts in 2024 that would cause these estimates to change. Powell’s comments, in addition to a stronger than expected US jobs report, prompted UK sterling to fall to its lowest since December, reaching USD1.2581. (Financial Times) (Reuters)

3.

China sentencing: Beijing’s suspended death sentence for Australian Yang Hengjun shows the true state of Australia-China relations, despite the government’s 18-month endeavour to stabilise ties with the country. While details of his case have not been made public, Dr Yang, a scholar and novelist who blogged about Chinese politics, was arrested at Guangzhou airport in 2019 and accused of spying for another country. Foreign Minister Penny Wong said the government was appalled at the “harrowing news,” adding that “stabilisation means we co-operate where we can, disagree where we must, and we engage in the national interest.” (Capital Brief)

4.

‘B**ch and fold’ politics: Neither the Coalition nor the Greens appear likely to block the government’s stage 3 tax cuts, which are due to be introduced to Parliament later today. The outcome of the shadow cabinet meeting held on Monday points toward a reluctant approval of the legislation, with a ‘b**ch and fold’ option likely to eventuate. A similar approach is set to be adopted by the Greens, as leader Adam Bandt has been open about maximising the party’s leverage on the tax-cuts decision to extract concessions on government policies. (Capital Brief)

5.

The Kremlin’s Google: Yandex, the leading internet provider and search engine in Russia has reached an agreement to sell its Russian unit for USD5.2 billion, in the biggest corporate exit of Russia since its invasion of Ukraine. Yandex has been trying to sever ties with Russia since the invasion almost two years ago. The Dutch-registered firm has been negotiating the terms of the exit for over a year, which will see the tech player fall entirely under Russian ownership. Under the deal, Yandex will retain some assets outside of Russia, including its autonomous-diving, cloud-computing and AI businesses, and plans to rebrand under a new name. (Bloomberg)(Wall Street Journal)

6.

Head in the clouds: Atlassian shares have continued a dramatic dive, losing almost USD10 billion in value since the company’s earnings announcement was published on Friday. The software provider’s cloud growth has slowed from 49% to 27.5% in the second quarter of FY23, the weak results prompting shares to decline 14.7% to $217.39 during trading on Friday. Citi’s US analysts are confident the stock will bounce back, giving Atlassian a ‘buy’ rating at a USD280 price target. (AFR)

7.

Chatbot journos: Microsoft is in talks with media startup up, Semafor, to use its AI chatbot to develop news stories. Under the agreement, Microsoft will pay Semafor an undisclosed sum to sponsor a breaking news feed called ‘Signals,’ according to unnamed sources cited by the Financial Times. Semafor has reiterated that 'Signals' would be written by journalists who only use AI as a research tool for their posts. The deal comes as Microsoft faces a multibillion dollar lawsuit from the New York Times for copyright infringement, with the paper alleging that OpenAI copied millions of its articles to power its generative AI products including ChatGPT. (Financial Times)

8.

Data deals: Amazon has struck a deal with UK publisher, Reach, to share “contextual” first-party data in efforts to compensate for Google’s plans to axe cookies. Google has begun removing cookies on its Chrome internet browser as part of a wider strategy to build a privacy sandbox, which it argues will improve user privacy. The partnership will allow Amazon and Reach to gather user information with tracking to help strengthen targeted advertising. (Financial Times)