Daily Comment (March 17, 2021)

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

[Posted: 9:30 AM EDT] | PDF

Happy St. Patrick’s Day!

Turning to today’s Comment, we open with a preview of the Federal Reserve’s latest policymaking conclave.  The meeting decision will be released early this afternoon, followed by a press conference.  We also review a range of other international and U.S. news before turning to the latest coronavirus developments.

U.S. Monetary Policy:  The Fed will end its latest policy meeting with a statement and press conference by Chair Powell this afternoon.  No significant change in policy is expected, especially since policymakers over the last couple of weeks have insisted that the U.S. economic outlook is still very uncertain, and both unemployment and inflation remain far from their goals.  All the same, investors will be looking for any hint of an earlier-than-expected monetary tightening in the policymakers’ updated economic forecasts and interest-rate projections.

United States-China:  Wrapping up a meeting with Japanese leaders, Secretary of State Blinken issued a surprisingly pointed attack on Chinese geopolitical aggression and human rights abuses.  According to Blinken, “China uses coercion and aggression to systematically erode autonomy in Hong Kong, undercut democracy in Taiwan, abuse human rights in Xinjiang and Tibet, and assert maritime claims in the South China Sea that violate international law . . .. We will push back if necessary, on China’s coercions or aggressions.”

  • It was also telling that the discussion about China reportedly dominated the key 90-minute meeting between Blinken, Secretary of Defense Austin, and Japanese Foreign Minister Motegi.
  • Separately, Blinken also said the administration identified 24 Chinese officials whose actions had “reduced Hong Kong’s high degree of autonomy” after China passed a restrictive new election law for the city last week.  The move subjected the officials to sanctions under the Hong Kong Autonomy Act introduced by the Trump administration.  Blinken warned that any financial institution doing significant business with the officials would also be subject to sanctions.
  • In sum, the Biden administration continues to sound and act tougher on China than had been expected.  That will probably keep U.S.-China tensions high and present an ongoing risk that investors could be caught in the crossfire.

United States-United Kingdom-Northern Ireland:  Just as President Biden prepared to hold St. Patrick’s Day talks with Irish premier Micheál Martin today, Congress passed a resolution warning that it would oppose any U.K.-U.S. trade deal unless Britain upheld the terms of the 1998 Good Friday peace agreement on Northern Ireland.

  • The warning relates to British Prime Minister Johnson’s post-Brexit tussles with the EU over trade flowing through Northern Ireland.
  • Even though the U.K. has made modest progress in establishing new, post-Brexit trade agreements with countries outside the EU, a trade deal with the U.S. is critical to Johnson’s vision of transforming the U.K. into a new, hyper-competitive trading country.

United Kingdom:  Prime Minister Johnson’s government issued an updated, post-Brexit national security plan under which the newly unfettered U.K. will attempt to buttress its security by tightening its ties to fast-growing Asian economies like China.  It will also reorient its military forces toward a stronger nuclear deterrence.  For example, rather than cutting its nuclear stockpile to 180 warheads or fewer in the coming years, the ceiling will be raised to 260 warheads.

Russia-Ukraine:  The Ukrainian government’s State Security Service (SBU) said it prevented a large-scale cyberattack by Russian hackers targeting classified government data.  The agency didn’t say whether any damage had been caused in the latest incident, but it blamed a hacker group it identified as Armageddon, which is controlled by Russia’s intelligence services.

COVID-19:  Official data show confirmed cases have risen to 120,819,288 worldwide, with 2,672,857 deaths.  In the United States, confirmed cases rose to 29,549,701with 536,922 deaths.  Vaccine doses delivered in the U.S. now total 142,918,525, while the number of people who have received at least their first shot totals 72,135,616.  Finally, here is the interactive chart from the Financial Times that allows you to compare cases and deaths among countries, scaled by population.


 U.S. Policy Response

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