21 September 2020

Trump Gives “Blessing” To Oracle’s TikTok Deal

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News shaping
the markets today

     

What’s happening: US President Donald Trump announced his approval for Oracle’s proposed deal to acquire TikTok, which will allow ByteDance’s video-sharing app to continue operations in the US.

What happened: Citing national security concerns, the US President had announced to ban TikTok, which was set to come into effect on Sunday.

ByteDance averted the ban with Trump giving his "blessing" to the Chinese firm’s partnership with US-based companies Oracle and Walmart. The ball is now in the court of the CFIUS (Committee on Foreign Investment in the US).

Why it matters: The latest development comes just days after the Trump administration announced plans to bar people in the US from downloading TikTok starting Sunday. TikTok's parent ByteDance had filed a complaint in response to the ban orders in the Washington federal court.

“I have given the deal my blessing, if they get it done that’s OK too, if they don’t that’s fine too,” Trump said on Saturday. With the US President lending his support to the acquisition deal, the US Commerce Department delayed the deadline to par downloads for another week.

TikTok, which currently has around 1,400 employees in the US, said it plans to create 25,000 new jobs in the country.

The deal will result in the development of a new company, named TikTok Global, with its headquarters in the US.

Oracle and Walmart will be acquiring a combined 20% stake in the newly formed company, with ByteDance committing to safeguard user data. Of the 20% stake, Oracle will buy 12.5% and Walmart will take the remaining 7.5% share.

What to watch: The deal is expected to result in massive job creation in the US, with TikTok Global also contributing more than $5 billion in taxes. Investors will keep an eye on the CFIUS giving its nod for the deal. The acquisition is also subject to approval by the Chinese government.

The Markets Today

     

US stocks will be in focus today, after closing lower last week.

Context: US stocks closed lower on Friday, with tech stocks continuing their sell-off. This marked Wall Street’s longest weekly losing streak in around a year.

Details: Investors were expecting another fiscal stimulus by the US government, which is considered crucial by various experts in supporting the economic rebound and stock market.

The country’s central bank kept interest rates unchanged at its meeting last week, while indicating that the rates will probably remain at this level until 2023.

On the economic data front, the University of Michigan’s consumer sentiment index improved to 78.9 in September, from 74.1 in the prior month. However, the US current account deficit surged to $170 billion in the second quarter, from $111.5 billion in the previous quarter.

Apple’s shares fell more than 3%, while Alphabet’s stock lost around 2.4% on Friday. Shares of both Amazon and Microsoft were down around 2%. Meanwhile, shares of Facebook and Netflix also headed south, albeit by less than 1%.

The Dow Jones Index fell 0.9% to close at 27,657.42 on Friday, notching around 0.1% loss for the week. The S&P 500 index declined by 1.1% to settle at 3,319.47, while the Nasdaq 100 tumbled 1.1% to 10,793.28. For the week, the S&P 500 and Nasdaq 100 lost 0.6% each.

What to watch: Markets await the Chicago Fed National Activity Index, which is expected to rise to 1.95 in August, after declining 1.18 in July. Investors also await Tesla’s Battery Day late Tuesday and earnings releases by KB Home Nike.

Investors will continue to monitor the covid-19 numbers, with total infections surpassing 6.8 million in the US.

Other Markets: European indices closed lower on Friday, with the FTSE 100, French 40 and Dax 30 index down by 0.71%, 1.22% and 0.7%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Spain’s balance of trade, Mexico’s consumer spending, Canada’s new housing price index, Brazil’s federal tax revenues as well as Turkey’s government debt.

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