By Geoffrey Smith
Investing.com -- Nancy Pelosi promises the U.S. will not abandon Taiwan. China reacts by ordering a massive four-day live-fire drill immediately off the island's coast. Uber stock soars but Airbnb plunges after the sharing economy giants give contrasting takes on inflation. OPEC meets with its allies to discuss output policy for the first time since unwinding its pandemic-era production cuts. Another hack hits crypto, with Solana wallets the chief target, while Robinhood is to lay off 23% of its staff due to a slump in trading activity. Stocks are set to open higher ahead of the ISM's non-manufacturing survey. Here's what you need to know in financial markets on Wednesday, 3rd August.
1. Pelosi promises not to abandon Taiwan; China orders massive live-fire drills
Nancy Pelosi, Speaker of the U.S. House of Representatives, pledged that the U.S. will not abandon Taiwan, in a keynote speech during her visit to the island.
"Today the world faces a choice between democracy and autocracy," Pelosi said. "America’s determination to preserve democracy here in Taiwan and around the world remains ironclad."
Pelosi’s visit, the highest level one by a U.S. politician since the 1990s, has angered China, which has announced four days of live-fire drills in the seas around Taiwan, starting on Thursday.
Chinese stock markets fell for a second day amid the worsening rhetoric, but European bourses stabilized overnight on relief that Pelosi’s visit will end without an actual military confrontation.
2. Sharing economy giants see diverging fortunes
Two giants of the ‘sharing economy’ – Uber (NYSE:UBER) and Airbnb (NASDAQ:ABNB) – suffered contrasting fortunes after their quarterly updates late on Tuesday.
Uber stock rose 19% after the company said revenue doubled from a year earlier, thanks to inflation solving its driver shortage problem. Chief executive Dara Khosrowshahi said that the rising cost of living had been a factor for 70% of the platform’s new drivers.
A sharp rebound in its core ride-hailing business and continued, but slowing, growth in food delivery helped it post its best-ever quarterly adjusted earnings, although it continued to lose money on its investments overseas, the legacy of overreach during its startup phase.
Airbnb stock went in the other direction after warning that this year’s rebound in bookings is likely to top out in the current quarter. The company’s swing to profit in the second quarter, bolstered by higher prices, couldn’t stop the stock falling 7.4% in premarket.
3. Stocks rise on Pelosi relief; ISM non-manufacturing eyed
U.S. stock markets are set to open higher later, shrugging off the latest warnings from Federal Reserve officials that interest rates will have to keep rising until inflation falls. Uber’s earnings, along with beats after hours on Tuesday from AMD (NASDAQ:AMD), PayPal (NASDAQ:PYPL), Occidental Petroleum (NYSE:OXY) and Gilead Sciences (NASDAQ:GILD), are all lending support.
By 6:30 AM ET (1030 AM ET), Dow Jones futures were up 112 points or 0.4%, while S&P 500 futures and Nasdaq 100 futures were both up 0.3%.
The Institute of Supply Management’s non-manufacturing PMI heads the data roster for the day at 10 AM ET. The earnings calendar is led by Regeneron (NASDAQ:REGN) and Moderna (NASDAQ:MRNA) ahead of the opening, with later highlights including Booking (NASDAQ:BKNG), MetLife (NYSE:MET), McKesson (NYSE:MCK), and lithium miner Albemarle (NYSE:ALB).
4. Solana wallets plundered; crypto winter causes Robinhood layoffs
Solana slumped some 10% before recovering around half of its gains, after thousands of wallets holding the cryptocurrency were targeted by hackers.
Over 7,000 wallets were affected, with total losses estimated at around $8 million. It’s the second high-profile embarrassment for the crypto sphere in as many days, after a hack of Nomad Bridge on Monday.
Cryptocurrencies nonetheless shrugged off the incident, Bitcoin and Ethereum both rising some 2.5%.
Elsewhere, Robinhood (NASDAQ:HOOD) – which announced its was laying off nearly a quarter of its staff on Tuesday after a slump in crypto trading activity – was fined $30 million for anti-money laundering failings.
5. OPEC+ mulls modest output increase after unwinding pandemic cuts
The Organization of Petroleum Exporting Countries meets with its allies to determine what happens next with oil output, now that the 10 million barrel-a-day output cut at the start of the pandemic has been fully unwound.
Reports indicate some pressure for a modest increase in output quotas, with OPEC itself seeing an uninterrupted, if slower, rise in demand in the second half of this year. U.S. President Joe Biden’s pressure for more output, and the looming end of releases from the U.S. Strategic Petroleum Reserve in November, may sway some minds in that direction.
However, this is the first OPEC+ meeting since February at which crude prices are trading below $100 a barrel, which may encourage the bloc to hold off from increasing supply just yet. Talks start at 7:30 AM ET (1130 GMT).