by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA
[Posted: 9:30 AM EDT] | PDF
Investors today are hoping for more clarity on future monetary policy after the Federal Reserve finishes its latest policy meeting. Also in Washington, top tech firm executives are being grilled remotely by a House antitrust committee regarding the market dominance of their online platforms. Finally, we note signs that both the EU and Japan may be swinging toward the U.S. administration’s “Tough on China” policy, which could have a significant impact on global stock markets in the coming years. After reviewing the latest coronavirus news, we examine these developments and others below.
COVID-19: Official data show confirmed cases have risen to 16,762,605 worldwide, with 661,012 deaths and 9,771,236 recoveries. In the United States, confirmed cases rose to 4,352,304, with 149,260 deaths and 1,355,363 recoveries. Here is the interactive chart from the Financial Times that allows you to compare cases and deaths among countries, scaled by population.
- Pfizer, Inc. (PFE, 39.02) said it expects global demand for coronavirus vaccines, including the one it’s developing, to last at least into 2022, while booster shots may be needed annually or every few years if the new virus becomes a seasonal or long-term health concern. Although the multiple vaccines under development have helped convince many investors that the disease is likely to be brought under control eventually, the long time frame mentioned by Pfizer is a reminder that getting the world’s population vaccinated will likely be a long, drawn-out affair.
- Echoing the likely need for future booster shots, the chairwoman of the British government’s vaccine task force has warned that scientists are unlikely to develop a “silver bullet” vaccine that provides lifetime immunity against COVID-19. According to the chairwoman, it’s more likely that scientists will only be able to develop a vaccine that provides one year of immunity or one that only mitigates the symptoms of the virus.
- Tech companies and medical researchers are reportedly investigating whether wearable devices can spot COVID-19 and function as a personal early-detection system to contain the virus. The systems under investigation would collect wearable sensor data from both healthy people and those afflicted by the disease, compare and look for patterns in the data, and then create artificial intelligence that could alert others whose data patterns point to a possible infection.
- Meanwhile, against a plateauing of total new confirmed cases in the U.S., many states and some other foreign countries continue to see a resurgence in infections after recently easing their lockdowns and as people tire of mask wearing and social distancing. In Europe, public health officials are sounding the alarm over rebounding cases in Spain, Germany, eastern Europe, and the Balkans.
- The U.K. has imposed quarantine on people returning from Spain, while Germany and France have ordered mandatory testing for travelers from high-risk areas.
- Belgium moved on Monday to toughen social distancing and urge teleworking after a spike around the city of Antwerp, where a curfew has been imposed.
- Illustrating the extensive spread of the coronavirus in many large, resource-poor developing countries, a study has found that more than half of residents in several of Mumbai’s slums may have been infected. The study suggests the spread of the virus in India could be far greater than previously thought.
- Separately, after Maltese officials succumbed to outside political pressure and rescued almost 100 immigrants adrift in the Mediterranean Sea, tests showed 65 of the migrants were infected with the coronavirus. Not only will that number raise the risk of a significant epidemic within Malta’s small population, but it threatens to rekindle the European migration crisis and again empower right-wing populists throughout the EU.
- Illustrating the threat of disinformation regarding the pandemic, U.S. officials have identified three English-language websites that they say Russian intelligence services are using to spread disinformation about the coronavirus and complicate the U.S. struggle to contain the outbreak.
U.S. Policy Response
- The Federal Reserve will wrap up its latest policy meeting today, but there is little expectation that it will announce any significant change in monetary policy. Rather, speculation centers on what clues may be offered in the post-meeting statement or Chair Powell’s press conference regarding additional monetary stimulus in the future. We note that yesterday the Fed extended all seven of its emergency coronavirus lending programs that had been set to expire in September. That brings to eight the programs that will last through December, while one is set to expire at the end of next March.
- As congressional leaders prepare to negotiate over the next round of virus relief spending, much of the debate is focusing on the supplemental federal unemployment benefit of $600 per week and the extent that it may be discouraging employees from going back to work. Although many business owners say the benefit is making it unattractive for workers to go back to their jobs, some economists say the data shows that workers with more generous jobless benefits didn’t experience larger employment declines when the benefits took effect and that they have returned to their previous jobs at similar rates as others.
- In a sign of how the coronavirus crisis is playing into major economic trends that existed even before the pandemic hit, Eastman Kodak (KODK, 7.94) won a $765 million government loan under the Defense Production Act to help it develop U.S. production capacity for “active pharmaceutical ingredients” and other pharmaceutical chemicals. The goal of the loan, which is meant to leverage Kodak’s century-old expertise in chemicals, is to reduce U.S. dependency on ingredients from China and other countries. Similar moves to bring home pharmaceutical and medical equipment production are also being seen in Europe, especially in France.
European Union-China: The EU announced it will impose sanctions on China over the new security law it has imposed on Hong Kong. The sanctions include limiting exports of equipment that China could use for repression and reassessing extradition arrangements with Beijing. The move is notable because EU governments have sometimes been reluctant to put their Chinese export markets at risk. If EU governments are now becoming more convinced of China’s geopolitical, military, and economic threats, they may eventually adopt a “Tough on China” policy like the one developing in the U.S. If such a conflict arises between the broader West and China, new anti-China capital regulations and other measures could be especially negative for Chinese assets.
Japan-China: Adding to the evidence that the developed democracies could be coalescing around a “Tough on China” policy, China hawks in Japan also appear to be gaining influence and are pushing Prime Minister Abe to take a harder line on Beijing.
China-Hong Kong: Prominent pro-democracy campaigner Benny Tai was fired from his job as an associate law professor at the University of Hong Kong based on his participation in a 2014 protest. The move illustrates how academic freedoms in the city are becoming constricted as China asserts its authority. Separately, Hong Kong officials drew a rebuke from the U.S., the U.K., and Australia after they said they may postpone their September legislative elections for up to one year due to the city’s recent rebound in coronavirus cases.
United States: The chief executives of several major U.S. technology firms including Amazon.com (AMZN, 3,000.33), Apple (AAPL, 373.01), Facebook (FB, 230.12), and Google (GOOG, 1,500.34) are being hauled before the House Antitrust Subcommittee today to be grilled on the market dominance of their online platforms. With politicians across the political spectrum signaling their displeasure with the companies, for various reasons, there is a risk that tough questioning of the CEOs could spook investors in the tech sector.
United States: Presumptive Democratic nominee for president Joe Biden issued a plan to tackle racial inequality that would include pushing the Federal Reserve to monitor and target gaps in employment, wage rates, and wealth. The proposal would “require the Fed to regularly report on current data and trends in racial economic gaps—and what actions the Fed is taking through its monetary and regulatory policies to close these gaps.” However, the plan stops short of calling for the Fed to directly target the unemployment rates of Black and Hispanic communities, instead of the U.S. average, as has been backed by some economists (including Jared Bernstein, one of Biden’s economic advisers while he served as vice president).