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Market Commentary

Impeachment inquiries are underway in Congress and a looming Brexit deadline has caused Parliament to descend into a state of anarchy of which Guy Fawkes could only dream, but the week’s most impactful story will likely take place in Hong Kong.

Tuesday, October 1st marks the 70th anniversary of Communist rule in China. Facing a slowing economy and bipartisan antagonism in both Washington and other Western capitals, Xi Jinping’s one party state is determined to project authority and defiance on China’s National Day. Coordinating an estimated 100,000 performers in Beijing amidst a coterie of tanks, fighter jets, and nuclear missiles, President Xi has initiated an unprecedented security crackdown across the country in the run-up to the celebration. From heightened censorship in coastal hubs of Shanghai and Guangzhou, to the mass internment of millions of Uyghurs and Hui Muslims in far-west Xinjiang, the Politburo is intent on starving dissenting mainland voices of oxygen, lest they mar the party’s triumph.

Unfortunately for Xi, demonstrations in Hong Kong will disrupt and distract from the coordinated procession. 17 weeks after protests first erupted on the island territory, over a planned extradition bill, discontent in Hong Kong has morphed into a generalized backlash against the One-Country-Two-Systems Basic Law upon which Hong Kong’s constitution and civil society rest. Upward of two million citizens, fully one quarter of the city’s population, have marched in anti-government, raging against the territory’s loss of political freedoms, the lack of a promised Universal Suffrage, and an increasingly unaccountable police force that has brutalized protesters since June.

Though senior members of the Communist Party appear reluctant to quell the protests using military force, likely born from the trauma surrounding the Tiananmen Square Massacre and the ensuing global sanctions, President Xi cannot afford to have his reputation besmirched at this sensitive time. Already, his desired goal of unification with Taiwan appears dead for a generation, as the democratically-governed island looks on at recent developments in Hong Kong with horror. Moreover, despite the Treasury Department’s denial, President Trump is apparently strongly mulling the possibility of delisting Chinese companies from American exchanges, which would further imperil China’s slowing economy.

 

9/27/2019 Market Strikes

10 Year Treasury:   

1.677

S&P 500:

2,961.79

FN 3.0:

101.234

FNCL 102:

3.207

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