Daily Brief: Big Tech Is In The Crosshairs – And Its Fate Is Our Fate

Daily Brief: Big Tech Is In The Crosshairs – And Its Fate Is Our Fate

over 2 years ago3 mins

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The US president launched a fresh offensive on Friday against anticompetitive company practices in several sectors, with Big Tech a particular target.

What does this mean?

The American administration is worried that tech giants currently have too much power to exploit users’ personal data and squeeze out smaller competitors. Friday’s executive order proposes to tackle this problem in two ways. First, it calls for regulatory reforms improving scrutiny of merger deals in the tech sector and preventing dominant companies from taking would-be rivals out of the market. Second, it suggests new rules increasing oversight of firms’ data-collection and user-surveillance practices.

But the president’s new plans cover more than just the tech sector. Also in his crosshairs is the pharmaceutical industry – with government health officials asked to help drive down the prices of prescription drugs by importing cheaper alternatives from Canada, among other things.

Why should I care?

For markets: We’re all tied to tech.

If successfully implemented, this latest crackdown could hit tech firms’ growth – and with valuations sky-high, their share prices are vulnerable. The five biggest tech companies – Apple, Microsoft, Alphabet, Amazon, and Facebook – are currently worth an average 31x next year’s forecast earnings, almost 50% more than the US S&P 500 overall. But even those passively invested in the index should be worried: these five firms represent almost a quarter of its total market value.

Big tech dominates

Zooming out: Tech today, crypto tomorrow?

If regulators are being asked to reduce consumer harm, then the crypto industry looks ripe for intervention. That could be bad news for Circle, the crypto-focused payments firm that last week announced plans to “go public” later this year via a $4.5 billion merger with a special-purpose acquisition company (SPAC). Circle’s popular USDC stablecoin is pegged to the value of the US dollar – but with 90% of the world’s central banks exploring digital versions of their respective currencies, such unofficial competitors’ days may be numbered.

Keep reading for our next story...

The British Economy Barely Grew In May

UK image

Three lines on a chart late last week showed British economic growth slowed to a mere 0.8% in May, disappointing pundits.

What does this mean?

Despite strong showings from its soccer teams, the UK’s post-coronavirus recovery lost a little steam in May. Fresh data out on Friday showed the country’s economy grew just 0.8% compared to the month before – barely half what investors were expecting, and a marked slowdown from April’s 2% rate. While relaxed restrictions saw restaurants, hotels, and movie theaters reopening their doors, increases there were outweighed by contractions in the construction and manufacturing sectors – thanks in part to the global microchip shortage dragging down British carmakers.

Parts shortage

But it ain’t all bad, guv. The UK economy is now just 3% smaller than it was before the pandemic – and the country’s central bank reckons the difference will have been made up by the end of the year, thanks to plucky Brits spending the savings they accumulated during last year’s lockdowns.

UK growth slows

Why should I care?

The bigger picture: They think it’s all over...

With Britain’s economy getting back to winning ways, the Bank of England may soon begin withdrawing some of its antiviral support measures. That’s if nothing derails the recovery – a not insignificant risk, given the fast-spreading Delta variant’s potential to wreak further havoc. Ensuring economic growth continues may yet necessitate further work: just look at China, which decided on Friday to reduce local banks’ cash reserve requirements in order to boost lending and spending.

Zooming out: Out of puff.

At least one British manufacturer got a boost on Friday: medical device maker Vectura accepted a $1.2 billion takeover offer from American-Swiss tobacco firm Philip Morris International. Ironically, Vectura mainly produces the sort of inhalers used by asthma sufferers – a condition that smoking helps trigger. Still, the deal should help Philip Morris towards its goal of $1 billion in annual non-nicotine sales by 2025…

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