America's economic reopening, for now, eclipses growing U.S./China tensions
In Today’s Updates
* Chinese approves sweeping new national security legislation in Hong Kong
* China moves comes despite a threat of retaliation from President Trump
* China vows to retaliate if the U.S. takes strong actions re: Hong Kong, etc.
* China’s yuan weakened to lowest level since offshore trading allowed in 2010
* Huawei CFO Meng loses key court fight against extradition to U.S.
* Trump plans to sign executive order leaving social media platforms open to lawsuits
* Jobless claims…
* Fed's Beige Book shows uncertain outlook
* Deflation even comes to Tesla
* Saudi Arabia, other OPEC members urge Russia to extend production cuts
* Trudeau: 'Significant' health questions remain re: in-person G7 meeting in U.S.
* U.S. food supply update
* Livestock sector challenges noted in Fed update
* Schumer, Stabenow, others introduce bill re: U.S. food chain issues
* Update on reopening America... and around the world
* Disney World will reopen in July but with lots of changes
* Washington D.C. begins a gradual reopening tomorrow
* Coronavirus update
* U.S. surpasses 100,000 coronavirus deaths
* Dr. Anthony Fauci: Hydroxychloroquine isn’t an effective treatment
* Congressional panels will soon hold annual hearings on president's trade agenda
* Australia will soon begin negotiations for a trade deal with the U.K.
* States, cities challenge Trump mileage standards rollback
* Domestic spying law vote in House postponed
* Biden says he hopes to choose a running mate by Aug. 1
Equities today: International markets mostly climbed higher. The Stoxx Europe 600 rose 1.2%, led by gains in travel-and-leisure stocks. Japan’s Nikkei 225 jumped 2.3% by the close of trading. But Hong Kong’s Hang Seng Index fell 0.7% by the close of trading on accelerating U.S./China tensions. U.S. equity futures signal a higher opening.
U.S. equities yesterday: The Dow gained 553.16 points, 2.21%, at 25,548.27. The Nasdaq rose 72.14 points, 0.77%, at 9,412.36. the S&P 500 moved up 44.36 points, 1.48%, at 3,036.13.
President Donald Trump is again beating predecessor Barack Obama in stock market performance following a major recovery on Wall Street.
Applications for unemployment insurance declined for the eighth straight week. But the number of workers seeking assistance remains about 10-times higher than before coronavirus-related lockdowns began in March.
Another 2.123 million new unemployment claims were filed last week, the Labor Department reported, in line with expectations of 2.1 million. More than 40 million people — the equivalent of 1 in 4 U.S. workers — have now filed for unemployment benefits since the pandemic took hold.
Fed's Beige Book shows uncertain outlook. U.S. businesses saw limited evidence of a recovery in recent weeks, with economic activity continuing to decline amid the coronavirus pandemic, the Federal Reserve said Wednesday. "Although many contacts expressed hope that overall activity would pick up as businesses reopened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery,” the central bank said in its Beige Book report. The latest edition of the beige book contains information through May 18.
Deflation even comes to Tesla. Tesla has cut prices of its electric vehicles by as much as 6% in North America following a decline in auto demand in the region during weeks of lockdown that have now started to ease.
Crude oil futures are under pressure ahead of U.S. government inventory data due later this morning, delayed a day by Monday’s U.S. holiday. U.S. crude was trading around $32.50 per barrel and Brent around $35.25 per barrel.
Saudi Arabia, other OPEC members reportedly urge Russia to extend production cuts. Led by de facto leader Saudi Arabia, members of the Organization of the Petroleum Exporting Countries are considering extending their record-high oil production cuts until the end of the year but still have to convince Russia, according to OPEC+ and Russian industry sources. Russian Energy Minister Alexander Novak met earlier this week with the country's domestic oil companies to discuss the potential for an extension, though reportedly no decision was made. Link to Reuters item.
Canada's Trudeau says 'significant' health questions remain about in-person G7 meeting in United States. Canadian Prime Minister Justin Trudeau said that there are still many health-related questions to be answered before he can say whether he will attend a face-to-face G7 meeting that President Donald Trump has said he wants to host.
Who turned the lights out? GE did... General Electric is getting out of the business of making lightbulbs, selling a unit that was its last direct link to consumers.
— Update on China:
- China votes to override Hong Kong’s autonomy. Breaking a pledge it made to the western world, China’s legislature approved a resolution to impose national-security laws on Hong Kong in a bid to crush anti-Beijing protests that have challenged Chinese leader Xi Jinping. The resolution passed by China’s legislature would allow senior lawmakers in Beijing to write legislation to prevent and punish acts of separatism, subversion, terrorism and foreign interference in Hong Kong. The laws would then be promulgated by the city’s leader. The resolution would also allow mainland Chinese state-security agencies to operate officially in Hong Kong, according to the draft. China's move raises concerns about the territory's future as a financial center. Currently the city is not subjected to the same U.S. tariffs and restrictions as mainland China due to its "high degree of political and legal autonomy." If the bill is enacted, however, it would represent the first time Beijing has introduced a law that imposes criminal penalties into Hong Kong's legal code and bypassed the city's legislature.
Pro-democracy supporters scuffled with police at a rally in Hong Kong on Wednesday. PHOTO: ANTHONY KWAN/GETTY IMAGES
- The U.S. House passed a bill late Wednesday that would sanction Chinese officials involved in the suppression of Muslim minority groups. The bill passed overwhelmingly in the Senate earlier this month.
- The State Department determined that Hong Kong no longer has a high degree of autonomy from China, opening the way for President Trump to take several steps including revoking special arrangements on trade.
Some U.S. options. Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell told reporters it was up to Trump to decide what moves to take. The possibilities “are across the spectrum,” Stilwell said Wednesday. “It can be personnel; it can be visa sanctions as determined in the Hong Kong Policy Act and the Human Rights and Democracy Act. Obviously, there’s economic sanctions and other things that we can do.”
- China has vowed to retaliate if the U.S. takes strong actions over its Hong Kong moves. An estimated 85,000 U.S. citizens live in Hong Kong and more than 1,300 U.S. companies have operations there. Reports note that nearly every major U.S. financial firm has a presence in Hong Kong, with hundreds of billions of dollars in assets under management.
The U.S. ran a $26 billion trade surplus with Hong Kong last year, one of its largest anywhere, because the city acts as a bridge to mainland China. Extending tariffs there could invite retaliation from Beijing, hurting American exporters.
- China’s yuan weakened to as low as 7.1872 to the U.S. dollar in offshore markets, putting it close to its weakest levels since offshore trading was allowed in 2010. Later in the day, the currency regained ground, rallying to 7.1715 per dollar.
- Huawei CFO Meng loses key court fight against extradition to United States. Huawei Technologies' Chief Financial Officer Meng Wanzhou was dealt a setback by a Canadian court as she tries to avoid extradition to the U.S. to face bank fraud charges. She’ll face another hearing next month.
— U.S. food supply/industry update:
- Livestock sector challenges noted in Fed update. The Fed’s Beige Book report was replete with notations of pandemic-related impacts in a host of sectors Chicago, Minneapolis, St. Louis, Kansas City and Dallas Fed banks focusing on the livestock sector impacts from meat plans being closed or running at reduced capacity. “With no place to deliver market-ready animals, farmers were forced to slow herd growth (including by euthanizing hogs),” the Chicago Fed noted. “On net, the supply disruptions led to higher prices and shortages of meat at grocery stores and restaurants, but lower prices for cattle and hogs.” The Kansas City Fed pointed out, “roughly a quarter of U.S. meatpacking and food processing plants with confirmed Covid-19 cases were located in the District.” In terms of overall ag conditions, the Chicago recap included an observation that “Farmers anticipated government programs would help during the downturn, but observers expected some distressed farms to be forced to liquidate.”
- Schumer, Stabenow, others introduce bill re: U.S. food chain issues. Democrats on the Senate Agriculture Committee — as well as Senate Minority Leader Chuck Schumer (D-N.Y.) — released a bill on Wednesday detailing some things they want in the next CARES or Phase 4 Covid aid package. “The Covid-19 crisis has tested the strength of our nation’s food supply chain, creating a ripple effect that’s harming our families, farmers and workers,” said Sen. Debbie Stabenow (D-Mich.), ranking member of the Senate Agriculture Committee, in a statement.
The Food Supply Protection Act would provide $5.5 billion in grants, loans and loan guarantees to help small- and medium-sized companies shift their operations to respond to Covid-19, including procuring more personal protective equipment and testing.
”This funding will assist farmers and small and medium-sized food processors in protecting their workers and help them cater to new markets so they can continue operations and alleviate bottlenecks in the supply chain,” Stabenow’s office said in a statement.
The proposal also seeks $1 billion for grants to help food banks and other nonprofits boost their capacity to handle food and $1.5 billion for more surplus food purchases, including a new clearinghouse to help connect excess products with groups that need it.
— Update on reopening America... and around the world:
- Washington D.C. begins a gradual reopening tomorrow, even as Mayor Muriel Bowser warns that it probably will result in more coronavirus infections. Restaurants will be permitted to seat guests outdoors, barbers and hair salons will open with limited capacity, and nonessential businesses will be allowed to offer curbside or front-door pickup services. But nail parlors, gyms and public playgrounds will remain closed. Gatherings of more than 10 people will be prohibited.
The nation's capital had 263.2 new cases per 100,000 people over the past two weeks, which ranks first in the country for new cases per capita.
- Some workers now say they are just fine working from home and would like to do so permanently. In response, employers are formulating plans to allow many of their staffers to keep working remotely when the crisis is over. Such a move would have significant implications for everything from rent to congestion to migration in urban work environments, the Wall Street Journal reports (link).
- Walt Disney said it plans to begin reopening its Disney World theme park at reduced capacity in mid-July. There will be major changes. Customers and staff will be required to wear masks and complete temperature checks before entering the park. Plexiglass will separate employees from guests in certain stores, and cashless transactions will be encouraged. Parades and fireworks presentations have been temporarily suspended, as well as meet-and-greets with performers portraying Disney characters.
— Coronavirus update:
- Summary: Global Covid-19 cases are at 5,710,393 with deaths at 356,042 according to data from the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The U.S. case count is at 1,699,933 and deaths have now hit 100,442.
- U.S. infectious-disease expert Dr. Anthony Fauci said hydroxychloroquine isn’t an effective treatment and also urged caution as Republicans and Democrats plan their conventions. CNN kept repeating the segment with Fauci. “I’m not so sure it should be banned, but clearly the scientific data is really quite evident now about the lack of efficacy for it,” Dr. Fauci said during a CNN interview, when asked whether the U.S. should ban the drug for treating Covid-19, as France recently did. Dr. Fauci, the director of the National Institute of Allergy and Infectious Diseases, also warned of the risk of “adverse effects” from the drug for some patients with pre-existing heart conditions and other health problems.
- South Korea, facing its biggest one-day uptick in infections in more than 50 days, re-imposed some social-distancing measures around th capital, Seoul, after a rise in new infections linked to a recently discovered cluster.
- Group of WTO members will meet in early June to discuss a Covid-19 action plan on trade, according to Politico. Canadian Trade Minister Mary Ng mentioned the meeting during an online discussion last week hosted by the Washington International Trade Association.
OTHER ITEMS OF NOTE
- President Trump plans an executive order about social-media companies that includes a review of Section 230 of the Communications Decency Act, which exempts online platforms from liability for users' posts, Reuters reports. A draft of the order says the White House Office of Digital Strategy will re-establish a tool for reporting online censorship, the White House Tech Bias Reporting Tool. The law largely exempts online platforms from legal liability for the material their users post, and such changes could expose tech companies to more lawsuits. The order would also address political bias on the platforms and review advertising spending on platforms like Twitter, Facebook, Google and Snap. In a CNBC interview that aired this morning, Facebook CEO Mark Zuckerberg was asked about it. He said he does not think social networks should be fact-checking what politicians post.
- Congressional panels will soon hold annual hearings on president's trade agenda. And up as a key witness will be U.S. Trade Representative Bob Lighthizer. Trade topics likely to be addressed will be USMCA implementation, pending new trade negotiations (EU, Kenya, etc.) and of course an update on the Phase 1 trade agreement with China.
- Australia will soon begin negotiations for a trade deal with the United Kingdom, the Australian Associated Press reports (link).
- States, cities challenge Trump mileage standards rollback. Nearly two dozen states and several cities on Wednesday filed a legal challenge to the Trump administration’s rollback of Obama-era mileage standards, saying science backed up the old regulations developed with the help of the nation's car makers.
- Domestic spying law vote postponed. The House postponed a vote on legislation to renew expired domestic surveillance powers after passage appeared uncertain because of a veto threat by President Trump.
- Biden says he hopes to choose a running mate by Aug. 1. The Washington Post reports that Joe Biden “told supporters Wednesday night that his campaign has interviewed every candidate on his short list to be his running mate and hoped to name the woman by Aug. 1.” Speaking during a virtual fundraiser with former presidential primary opponent and now top surrogate, Pete Buttigieg, Biden “said he’s looking for someone whose views align with his, but who also brings different qualities to the ticket.” Biden “added that he wants someone who isn’t afraid to be ‘completely candid’ with him.” The WaPo says Biden “is only looking at women for the job. Those rumored to be under consideration include Sens. Kamala Harris (Calif.), Elizabeth Warren (Mass.), Amy Klobuchar (Minn.), Tammy Duckworth (Ill.), Michigan Gov Gretchen Whitmer, Rep. Val Demings (Fla.) and former Georgia state representative Stacey Abrams.”