| | | | | | | Presented By Boxabl | | | | Axios Markets | | By Matt Phillips and Emily Peck · Aug 30, 2022 | | 🌮 Tuesday! It's Emily. Welcome to the newsletter; we're glad you're here. I'm also, personally, excited about the headline on the fourth item. But first, a check-in on U.S. - China relations. Plus: The trailer is out for the new season of our podcast How It Happened, "Elon Musk vs. Twitter," featuring exclusive reporting. Subscribe and listen. Today's newsletter, edited by Kate Marino, is 1,029 words, a 4-minute read. | | | | | | 1 big thing: China de-listing risk ebbs, for now |  | | | Illustration: Gabriella Turrisi/Axios | | | | A deal signed by the U.S. and China last week allowing U.S. inspectors to review the audit records of U.S.-listed Chinese companies could prevent scores of firms from being booted off U.S. stock exchanges, while ensuring the companies follow U.S. law, Axios China author Bethany Allen-Ebrahimian writes. Why it matters: There are more than 260 Chinese companies listed on U.S. exchanges, with a total worth of around $1.3 trillion. U.S. investors want access to those firms, but until now, Beijing has prioritized maintaining a tight domestic grip over company data. - The deal between the two countries lifts one of the weights that's pummeled the share prices of U.S.-listed Chinese companies over the last year and a half.
Details: U.S. inspectors will be permitted to travel to Hong Kong and will have complete access to audit papers and the company personnel who conducted the audits, according to an announcement by Public Company Accounting Oversight Board (PCAOB), the U.S. organization that oversees audits of companies listed on U.S. exchanges. What they're saying: "On paper, the agreement signed today grants the PCAOB complete access to the audit work papers, audit personnel, and other information we need to inspect and investigate any firm we choose, with no loopholes and no exceptions," PCAOB chair Erica Williams said in the statement. - "But the real test will be whether the words agreed to on paper translate into complete access in practice," she added.
- China's Securities Regulatory Commission called the deal a "crucial step to solve the audit regulatory issue of U.S.-listed Chinese companies through enhanced cooperation" and expressed hope that delisting can be averted.
Catch up quick: U.S. law requires that publicly listed companies provide access to their audits to U.S. regulators. But Chinese companies often haven't complied, citing Chinese national security law, which prohibits handing over data to foreign governments. - Around 200 U.S.-listed Chinese companies are at risk of being delisted due to the lack of compliance with U.S. transparency requirements, including e-commerce giant Alibaba.
💭 Our thought bubble, via Axios' Felix Salmon: Neither U.S. legislators nor the Chinese Communist Party is particularly happy about the fact that Chinese companies are listed on U.S. stock exchanges. But the financial imperatives on both sides are so enormous that the uneasy truce continues — for now. What to watch: U.S. inspectors are expected to be in Hong Kong by mid-September. |     | | | | | | 2. Charted: The Golden Dragons' reaction |  Data: YCharts; Chart: Erin Davis/Axios Visuals Chinese companies listed on U.S. exchanges are one of the rare bright spots in the market right now — up 7.7% over the past five sessions, compared with a 2.6% decline for the S&P 500, Felix writes. How it works: The Nasdaq Golden Dragon Index comprises 72 Chinese companies, including Baidu, Tencent, Petrochina and Weibo. - Fears that they might be delisted have weighed on share prices of late — but as those fears abated over the past week, the stocks gained ground.
The big picture: China stocks are still out of favor, as the world's second-largest economy faces ongoing COVID-related clampdowns, an imploding housing market and a sputtering industrial sector. - As a result, Chinese stocks have now significantly underperformed their U.S. counterparts even over the past 10 years — and technical factors surrounding listing venues aren't going to change that.
| | | | | | | | 3. Catch up quick | | 💵 Fed gives timeline for FedNow payments platform. (Axios) ⚖ Musk cites whistleblower's claims as reason to terminate Twitter deal. (Bloomberg) 🔌 Calif. gov racing to keep state's last nuclear plant open to head off power shortages. (WSJ) | | | | | | | | A message from Boxabl | | Invest in the future of housing | | |  | | | | Imagine if houses were built like cars, with one home coming off the assembly line every minute — wouldn't that change the world? What you need to know: Cutting-edge housing manufacturer Boxabl plans to do just that by setting up the world's largest and most advanced housing factory. Find out more. | | | | | | 4. The "new bull market" was, uh, bull |  Data: FactSet; Chart: Kavya Beheraj/Axios A few weeks back, we started to hear declarations that a new bull market was underway. Now ... not so much, Matt writes. Driving the news: Stocks slumped again on Monday, as the market momentum that drove a rally through much of the summer continued to ebb. Flashback: After the ugliest start to a year since 1970, the S&P 500 was down as much as 23% this year by mid-June. - Stocks then rallied hard for two months, cutting those losses to about 10%.
- The Nasdaq soared over 20% at the same time, prompting the Wall Street Journal to declare a new bull market had begun for the tech-heavy index.
Between the lines: The wind in the market's sails over the summer came from a sharp tumble in long-term interest rates — essentially the yield on the U.S. 10-year Treasury note — as oil prices and other inflationary pressures started to relax a bit. - If you're interested in how lower rates buoy stock prices, see here and here.
Reality check: More recently, rates have been rising again, as the economy has stayed fairly strong and Fed chair Powell has warned that the central bank may keep fighting higher inflation for the foreseeable future — sending stocks back down. - The S&P 500 is now down more than 15% for the year.
- That 20% Nasdaq rally has now shrunk to 13%.
The bottom line: That doesn't look like a bull market to me. | | | | |  | | | | If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. | | | | | | | | 5. $20 is the new $15 |  Data: Indeed; Chart: Erin Davis/Axios Visuals More job searchers are looking for work that pays $20 an hour, surpassing searches for $15 an hour, according to data released yesterday by job search platform Indeed, Emily writes. Why it matters: It's a sign of how inflation and a labor shortage pushed up wages faster than anyone could've imagined a decade ago, when Fight for $15, a union-led push to organize fast-food workers, was founded. Case in point: In California, fast-food workers could soon start earning as much as $22 an hour after a bill meant to improve conditions in the industry passed the state's senate yesterday. The bill is headed to Governor Gavin Newsom's desk — but the governor hasn't said whether he'll sign it, the NYT reports. - Meanwhile: Back in May, Chipotle workers protested in New York City, demanding a $20 per hour wage. Now, Democratic state lawmakers and activists are pushing to raise the state's minimum wage to $20 from its current $15.
What's next: "We're trying to encourage the original states and cities that moved to $15 to consider a higher [wage]," Mary Kay Henry, the president of Service Employees International Union, which backs Fight for $15, told Axios earlier this year. The bottom line: Whether a $20 minimum wage becomes a thing, job searchers are increasingly expecting more than $15 per hour. | | | | | | | | A message from Boxabl | | Be a part of this company's solution to housing | | |  | | | | Boxabl is on a mission to solve the affordable housing crisis. The company known for its patented home construction technology has raised over $110 million and has backing from America's largest homebuilder, D.R. Horton. Housing is a global problem, and Boxabl has a solution — invest today. | | | | 🍿1 thing Emily absolutely loves: "Grease"! The 1978 movie starring absolute legend Olivia Newton-John, who died earlier this month at the age of 73. This movie remains the only one I ever watched twice in a row in the theater — we just stayed put after the first showing of the day. I watched last night with my family — perfect for a Summer Night — and I'm still bopping to the soundtrack. Please reply to this email with your "Grease" memories and/or favorite movies from when you were a kid. (Any feelings on "Grease 2"?) Include your name and where you live and we might include it in a future email. Axios Markets was copyedited by Lisa Hornung. |  | | Why stop here? Let's go Pro. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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