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Chinese Balloon: Possible Market Implications


Social media was not concerned with the Chinese balloon, but it was the biggest story of the weekend. China says the balloon was a weather balloon that lost its course. The US claims it contains spy equipment. The incident provides plenty of political fodder for Washington and Beijing and has increased tensions. First was the suspension of a US Secretary-of-State Blinken’s trip to China.

It was entertaining, but also worrying depending on your perceptions. What does this mean for the markets? What can we do here?

Are there more to chips?

The issue of advanced semiconductors was being discussed even before the balloon was brought down. Recent agreements were reached by Japan, the Netherlands, and the US to restrict the supply of advanced semiconductor technology to China. A large amount of chips would be required to collect, process, and transmit information by a spy balloon.

The primary reason for shooting down the balloon to retrieve the payload was not known. Analyzing the contents of the balloon could reveal the type of chips used and whether they were supplied by the US, or other allies. These potential consequences could lead to another round of export restrictions, especially for advanced chips .

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