TikTok dragged into US-China cold war, Europe falls accordingly

Much like Huawei and ZTE, TikTok has become part of the geopolitical cold war between the US and China, getting the month of August off on the wrong foot for the Western markets.

The video-sharing social media app – which has more than half a billion active users – is owned by Chinese company ByteDance, opening it up to accusations over personal data abuses.

And that’s exactly what Trump did, stating he would ban the app if changes weren’t made – namely ByteDance divesting its ownership of TikTok.

Trump’s comments came as Microsoft and ByteDance were in late-stage talks over buying TikTok’s US operations, a move that would also involve the American firm handling the app’s data domestically (as well as in Canada, Australia and New Zealand).

Those talks paused momentarily as both sides tried to ascertain the position of the US government, but are now set to continue after a conversation between Microsoft CEO Satya Nadella and the President.

What actually happens with TikTok is less important than the fact Trump went after the company – a soft way to attack China via a service that is becoming an increasingly prominent part of American teenage life. Though it isn’t as traditional as closing the consulate in Houston, it is another needling move by the President ahead of November’s election, designed to draw focus away from domestic issues.

It was enough to cause Europe to broadly open in the red, despite a positive session in Asia. The CAC fell 0.4%, with the Italian FTSE MIB slipping 0.6% and the Spanish Ibex dropping 1.1%. The DAX, however, managed to eke out a 0.2% rise.

The FTSE was the worst performing major index, hurt not only by the TikTok fiasco, but another severe statement from its banking sector. After Lloyds’s losses last week, HSBC posted a greater than forecast 65% plunge in pre-tax profit to $4.3 billion, as it set aside another $3.8 billion to cover bad debts, and warned on the impact of tensions between the US and China.

This left the stock down closer to 5%, and sparked a wave of losses from its peers, with Standard Chartered and Natwest Group – the former RBS – slipping 3.3% and 2% respectively. The FTSE in turn dropped 1.1%, sending the UK index to a fresh 11-week low of 5860.

As for the Dow Jones, it is heading for a 110 point fall when trading starts stateside, leaving it at its worst price for 3-weeks.