Daily Comment (August 27, 2021)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT] | PDF

Good morning! U.S. equity futures are signaling a higher open this morning. Our report begins with international news focusing on the two attacks at the Kabul airport on Thursday. We also cover U.S. economics and policy, including details about growing support for Fed tapering.  China news follows, and we end with our pandemic coverage.

International news: 

  • Two explosions at the Kabul airport killed at least 90 Afghans and 13 U.S. servicemen. On Thursday, Islamic State claimed responsibility for the attack. The blast represents an escalation of tensions in the region and could further complicate President Biden’s efforts to withdraw troops by the August 31 deadline. In response to the attack, President Biden has directed the Pentagon to target ISIS leadership and facilities. The incident highlights growing fears that the Taliban will not be able to control the competing factions within the region after the U.S. has left. This could mean that Afghanistan will turn into another conflict zone in the Middle East. The attack has also put President Biden in a negative light as he has received flak for the hasty and chaotic exit from the region by the U.S. The controversy surrounding the Afghanistan withdrawal could hinder efforts from the Biden administration to pursue policy goals as it struggles to contain the political fallout. The president has already been forced to cancel and delay meetings, and Vice President Kamala Harris was forced to back out of the rally for Governor Newsom.
  • The Brazil Supreme Court upheld the constitutionality of a law granting the central bank autonomy. The decision was likely favorable to investors who feared that President Bolsonaro would interfere with monetary policy. Bolsonaro has sought to rein in the central bank after its chief, Roberto Campos Neto, linked an increase in inflation expectations to political infighting.
  • The European Central Bank’s revised forward guidance received a lukewarm reception on Thursday after a few members dissented. The dissidents were concerned that the new policy understates the risk of rising inflation and downplays the possibility of reversal. The ECB has stated that inflation will reach its 2% target prior to the bank’s projected horizon.
  • Taiwan Semiconductor Manufacturing Co. (TSM, $118.10), the world’s largest contract chipmaker, is raising prices for its chips. The company announced that it will increase the price of its most advanced chips by 10% and its less advanced chips by 20%. The price change is expected to take place later this year or early next year.
  • The Cuban government announced that it will recognize and regulate cryptocurrencies for payments on the island. The change appears to address the country’s need for remittances. The country has struggled to get dollars from abroad following stiffer embargo rules imposed by former President Trump. Crypto has been used to avoid sanctions imposed by the U.S.

Economics and policy:


COVID-19: The number of reported cases is 214,711,514 with 4,476,459 fatalities.  In the U.S., there are 38,387,116 confirmed cases with 633,591 deaths.  For illustration purposes, the FT has created an interactive chart that allows one to compare cases across nations using similar scaling metrics.  The FT has also issued an economic tracker that looks across countries with high-frequency data on various factors.  The CDC reports that 434,582,185 doses of the vaccine have been distributed with 365,767,674 doses injected.  The number receiving at least one dose is 202,961,676, while the number of second doses, which would grant the highest level of immunity, is 172,171,009.  The FT has a page on global vaccine distribution.

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