MNI US Open: No Respite For Tech Stocks

EXECUTIVE SUMMARY:

• TECH EQUITY SELL-OFF CONTINUES; TREASURIES, BUNDS ALSO WEAKER
• U.K. GOVT TO OUTLINE POST-PANDEMIC AGENDA TODAY
• ZEW SURVEY SHOWS GERMAN INVESTOR CONFIDENCE HITTING 21-YR HIGHS
• FRANCE: LE PEN TELLS MACRON HE RISKS "CIVIL WAR" AFTER MILITARY WARNING
• GERMAN INFLATION COULD GO OVER 3%: ECB'S SCHNABEL

Fig. 1: Nasdaq Losses Continue

BBG, MNI

NEWS:

TECH STOCHS (BBG): The worldwide slump in technology stocks deepened Tuesday, with investor angst over inflation and stretched valuations adding to fresh signs of regulatory scrutiny in China. Losses in Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. helped send MSCI Inc.'s gauge of Asian tech stocks to its biggest drop since Feb. 26, while futures on the Nasdaq 100 slumped in Asia after the underlying index's 2.6% slide on Monday. The Hang Seng Tech Index sank as much as 4.5%, extending its tumble from a February high to about 30%. Meituan drove declines after the Chinese e-commerce giant's business practices were criticized by an influential consumer advocacy group, just days after the company's CEO shared and then deleted a poem on social media that some interpreted as a veiled criticism of Beijing.

U.K.: Tuesday's State Opening of Parliament will see the UK government outline its legislative programme for the upcoming parliamentary session, with expectations that around 25 new bills will be contained, giving a clear indication of the direction Prime Minister Boris Johnson is looking travel. Ministers have indicated that the speech will focus on a delayed environment bill ahead of the Cop26 gathering on climate change later in the year. It is also expected to see the inclusion of bills focusing on skills training and post-16 education -- aimed at both 'levelling up' inequality across the country and helping in the post-pandemic economic recovery.

FRANCE (BBG): Far-right leader Marine Le Pen said France is at risk of a civil war as she prepares to tackle President Emmanuel Macron in next year's election. After a group of retired generals last month hinted at the threat of a military uprising, another open letter to the president -- this time unsigned but attributed to serving officers -- stoked further controversy Sunday with a warning of "chaos and violence." "It's a lucid assessment," Le Pen told reporters Monday at a campaign event in western France. "There's always a risk of civil war." Le Pen, who could run Macron close in the presidential ballot according to the latest polls, said that she isn't calling for insurrection and urged those who supported the latest letter to join her movement.

GERMANY/ECB: Inflation in Germany could rise above 3% in the short-term, European Central Bank Executive Board member Isabel Schnabel said in an interview Tuesday with German broadcaster n-tv. However, the increase is likely to be only temporary, with the central bank expected to look through it, she added. "If we actually see that there was suddenly a very rapid development of inflation, which is really not in evidence at the moment, then of course we would have to adjust our measures and of course we would have to do that gradually," Schnabel said. "This must be prepared above all through communication. Everyone would then have the opportunity to gradually adapt to it."

EU/CHINA: The already-clear cracks in the EU's supposedly united front in the face of China were exposed further yesterday when Hungary vetoed a joint statement intended to accuse Beijing of a crackdown on democratic freedoms in Hong Kong.

• German Foreign Minister Heiko Maas called the decision "absolutely incomprehensible", with the statement already having been watered down in tone to try to gain Budapest's approval. To reporters Maas stated that "This is not the first time that Hungary has broken away from [the EU's] unity when it comes to the issue of China, I think everybody can work out for themselves where the reasons are — because there are good relations between China and Hungary".
• EU High Representative for Foreign Affairs and Security Policy Josep Borrell stated that he would attempt one more go at securing support from all 27 member states for a resolution on China, but said that if that was not possible then, "we have to take positions that don't reflect unanimity".
• Hungary was the first EU recipient of Chinese COVID-19 vaccines, something that has allowed the country to speed ahead of most other EU peers in its vaccination efforts. The close relations between Budapest and Beijing have also seen Chinese FDI flood into Hungary, but at the expense of many other EU nations' trust in Hungary as a reliable partner when attempting to provide a united European front against Beijing's actions in Hong Kong or Xinjiang.

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