by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA
[Posted: 9:30 AM EDT] | PDF
Good morning, all! U.S. equity futures are pointing toward a lower open this morning. It has been a fairly quiet news day so far. Today’s report begins with an international news roundup followed by U.S. economics and policy. China news is next, and we end the report with our pandemic coverage.
- The World Bank will not release its “Doing Business” report over ethics concerns. International Monetary Fund Managing Director, and former employee of the World Bank, Kristalina Georgieva was accused of pressuring the authors of the report to boost China’s ranking. The controversy will likely hurt the World Bank’s ability to portray itself as unbiased.
- China accused the U.S., U.K., and Australia of igniting an arms race after they agreed to a trilateral security agreement. The deal will allow Canberra to build a fleet of nuclear submarines. The U.S. responded by accusing China of “aggressive” and “destabilizing” behavior within the South China Sea.
- The U.S. also reassured France that it considers Paris a vital partner in maintaining stability in the Indo-Pacific region. The remark came as France had expressed outrage over the deal after its agreement to build submarines with Australia was scrapped. In response, France cancelled plans for a celebration of U.S.-France relations in D.C.
- The European Central Bank may raise rates earlier than expected after an unpublished report showed that the central bank expects to hit its 2% target by 2025.
- Parliamentary elections in Russia are expected to favor the United Russia party. However, there is growing sentiment that there could be a sizable protest vote for an opposition candidate.
- In an open letter, former Argentine President and current Vice President Cristina Fernandez de Kirschner blamed President Alberto Fernandez for the ruling coalition’s loss in a primary election. She attributed the loss to the president’s decision to impose fiscal austerity and is urging him to move in another direction.
- European food supply is under threat as a shortage in natural gas, a key component in ammonium nitrate, has made it difficult for fertilizer companies to maintain production. Additionally, lockdowns in Asia have added to these woes. Key inputs such as palm oil, tin, and cocoa prices have soared as firms have been forced to close down.
- If you are looking to get away, Thailand is offering 10-year visas for rich pensioners and retirees. Under the scheme, pensioners would need to invest $500,000 into government bonds or real estate and have an income of $80,000 a year. Retirees would need to invest $250,000 in government bonds or real estate and have an income of $40,000 a year. The government has struggled to bounce back from the pandemic as its key industry, tourism, has been hit hard by the lack of travelers.
Economics and policy:
- Federal Reserve Chair Jerome Powell has authorized a review of the central bank’s ethics rules regarding trading by policymakers. The review comes after financial disclosures of Fed officials Eric Rosengren and Robert Kaplan showed that the two traded securities while the Federal Reserve was implementing controversial policy accommodation.
- Transportation prices continue to be a problem for firms. Rising shipping costs are making it harder for firms to fill orders. So far, firms have been reluctant to push these prices on to consumers. However, if these problems persist, suppliers may have no choice.
- Democrats are considering a carbon tax to incentivize moderates to support the $3.5 billion spending bill.
- President Biden announced that his administration will look into why retail gasoline prices are so high. Gasoline prices rose $3.19 per gallon on Wednesday, the highest since October 2014.
- On Thursday, House Representatives Alexandria Ocasio-Cortez (D-NY) and Cori Bush (D-MO) pushed Congress to include an expansion of enhanced unemployment aid in the $3.5 trillion tax plan.
- China officially applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership on Thursday. The deal is a revised version of the Trans-Pacific Partnership (TPP). China’s acceptance into the trade bloc is not certain given its ongoing disputes with two members, Australia and Canada. However, China’s strong growth during the pandemic may sway countries to admit it.
- Evergrande (EGRNF, $0.35) is on the brink of default and fears of contagion have spread throughout China’s financial system. Shares of Ping An Insurance (PNGAY, $14.75), China’s largest insurer, fell due to concerns that it may have some exposure to the property group. The company issued a statement on Friday to reassure investors that it wasn’t exposed; however, angst throughout China still remains. In response to the crisis, the People’s Bank of China has injected $14 billion into the financial system.
- The world’s largest stablecoin, Tether, stated that it doesn’t hold any Evergrande commercial paper.
COVID-19: The number of reported cases is 227,089,247 with 4,670,690 fatalities. In the U.S., there are 41,785,979 confirmed cases with 670,009 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 462,384,885 doses of the vaccine have been distributed with 383,038,403 doses injected. The number receiving at least one dose is 210,700,361, while the number receiving second doses, which would grant the highest level of immunity, is 180,086,143. The FT has a page on global vaccine distribution.
- Italy is making it obligatory for all workers to show proof of vaccination, a negative test, or a recent recovery from infection before going to work.
- Brazilian authorities have halted vaccinations of teenagers to investigate a reported death.
- Idaho has authorized hospitals to ration care as the healthcare system has become overwhelmed with COVID-19 cases.
- Public health officials in Africa have requested that the United Nations speed up delivery of the vaccines.
- The U.K. is considering easing COVID-19 restrictions for international air travel.
- A panel of independent vaccine advisors is set to meet on Friday to discuss whether the FDA should approve Pfizer’s booster shot for those 16 years and older. The FDA is not obliged to follow the advice of the panel; however, the panel does hold a lot of influence over the FDA’s decision to approve the shot.