Chinese Leader Xi Speaks at Virtual World Economic Forum

Posted on 01/25/2021 6:36 AM

House will transmit article of impeachment to Senate this evening


In Today’s Updates


Market Focus:
• Chinese leader Xi Jinping speaks today at virtual World Economic Forum
• China in 2020 became world’s top destination for foreign direct investment
• Lumber prices fading?
• Prices for prime steel scrap used to make new steel up 60% since November
• Ukraine’s economy ministry raises its corn production and export forecasts

• Russian wheat export prices ease

• South Korea’s bird flu nears 22 million, with related food prices climbing

• COF could temper bullish enthusiasm to start the week


Policy Focus:
• Texas sues to overturn Biden's deportation halt
• Biden’s Buy American initiative coming today


Biden Administration Personnel

• Senate set to vote today on Blinken’s nomination as secretary of State
• Chemical law overhaul negotiator to run EPA chemical safety and pesticide offices


China Update:
WSJ: China pushes for high-level meeting to ease tension with U.S.
• U.S. reaffirms Taiwan support after China sends warplanes
• U.S. State Dept. urged China to engage in dialogue with Taiwan
• Demand for wheat at Chinese auctions on the rise


Trade Policy:
• Biden administration promising very different approach to international trade


Energy & Climate Change:

• Biden to convene climate talk on Earth Day

Coronavirus Update:
• Allergic reactions to the Moderna vaccine are rare
• Fauci: 'We have to assume now' that British virus strain can 'cause more damage’
• Update on J&J vaccine
• Biden to reinstate Covid-19 restrictions on non-U.S. travelers from several countries
* Mexico's president tested positive for Covid


Politics & Elections:
• House will transmit article of impeachment to Senate this evening

Other Items of Note:
• Indian farmers rejected a gov’t  proposal re: reforms to agriculture laws
• Poland’s president called on EU leaders to increase sanctions on Russia




Equities today: Global stock markets were flat to mostly firmer overnight. U.S. stock indexes are pointed toward modestly higher openings. It’s a big earnings week for the stock market — more than a fifth of the S&P 500 are expected to provide quarterly updates over the next five sessions. Apple, Tesla, Advanced Micro Devices, Facebook, Microsoft and Caterpillar are coming.


     U.S. equities Friday: The Dow ended down 179.03 points, 0.57%, at 30,996.98. The Nasdaq closed up 12.15 points, 0.09%, at a record 13,543.06. The S&P 500 ended 11.60 points lower 0.30%, at 3,841.47. The 10-year Treasury yield, which rose close to a 10-month high of 1.19% earlier in the week, slipped 4 basis points to 1.09%.


     For the week, the Dow rose 0.6%. The S&P 500 index climbed 1.9%. The Nasdaq jumped 4.2%.


On tap today:


     • World Economic Forum holds a virtual summit this week. Chinese President Xi Jinping's speech at 7 a.m. ET highlights today's agenda. Monday's panels include European Central Bank President Christine Lagarde on restoring economic growth at 11 a.m. ET, and Bank of England Gov. Andrew Bailey on digital currencies at 12 p.m. ET.
     • Dallas Fed's manufacturing survey for January is out at 10:30 a.m. ET.
     • USDA Export Inspections report, 11 a.m. ET.


China overtook the U.S. as the world’s top destination for new foreign direct investment last year. New investments by overseas businesses into the U.S., which for decades held the No. 1 spot, fell 49% in 2020, according to U.N. figures, as the country struggled to curb the spread of the new coronavirus and economic output slumped. China, long ranked No. 2, saw direct investments by foreign companies climb 4%. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China’s gross domestic product grew even as most other major economies contracted last year. The 2020 investment numbers underline China’s move toward the center of a global economy long dominated by the U.S. — a shift accelerated during the pandemic as China has cemented its position as the world’s factory floor and expanded its share of global trade.




Market perspectives:


     • Outside markets: The U.S. dollar index is near steady. Nymex crude oil futures prices are higher and trading around $52.75 a barrel. The yield on the benchmark 10-year U.S. Treasury note stands at 1.10%.

     • Crude oil futures are moving higher ahead of U.S. trading but Covid limits remain a limiting factor. U.S. crude is trading above $52.40 per barrel while Brent crude is above $55.50 per barrel. Crude prices have shifted higher after initial overnight Futures were weaker in Asian action, with U.S. crude down five cents at $52.22 per barrel and Brent crude was down 14 cents at $55.27 per barrel.


     • Lumber prices fading? That’s what a Barron’s article signals (link/paywall). Lumber futures climbed 115% in 2020, after hitting a record settlement of $928.20 per 1,000 board feet on Sept. 1. But the rally has faded on the back of a rebound in supplies. With the value of the commodity down by 20% in the new year, prospects for fresh records have dimmed. But the item notes that people want to build additions to their homes for better teleworking environments and there will likely be increased demand for a larger house design, which could bolster lumber prices ahead. Westline Capital sees a wide trading range of $450 to $1,150 this year but admits that price forecasting “with any degree of certainty is…useless for the foreseeable future,” as the industry grapples with the new norm “coming out of a case study year like 2020.”


     • Domestic price for prime steel scrap used to make new steel has risen 60% since November, aided by increased overseas demand. A quicker-than-expected recovery in U.S. manufacturing is resulting in supply disruptions and higher costs for several commodities.


       Scrap prices


     • Ag demand: Turkey purchased just 95,000 MT of the 400,000 MT of wheat it tendered for late last week. Saudi Arabia grain organization bought 660,000 MT of feed barley from global suppliers. Taiwan’s flour millers association issued an international tender to buy 85,3460 MT of grade 1 milling wheat from the United States. Bangladesh suspended its international tender to buy 50,000 MT of milling wheat, citing “unavoidable” circumstances.


Items in Pro Farmer's First Thing Today include (Link to subscribe to FTT):

Ukraine’s economy ministry raises its corn production and export forecasts
• Russian wheat export prices ease
• South Korea’s bird flu nears 22 million, with related food prices climbing
• COF could temper bullish enthusiasm to start the week




—  Texas sues to overturn Biden's deportation halt. Texas Attorney General Ken Paxton urged a federal court on Friday to strike down the Biden administration’s moratorium on deportations, slamming the action as a “seismic change to this country’s immigration laws merely by memorandum.” In a lawsuit filed in U.S. District Court for the Southern District of Texas, the state argued that the Biden administration’s moratorium, which shields some immigrants from deportation for the next 100 days, is unconstitutional and conflicts with a federal agreement to consult the state on immigration enforcement.      “On its first day in office, the Biden Administration cast aside congressionally enacted immigration laws and suspended the removal of illegal aliens whose removal is compelled by those very laws,” the lawsuit says.


     The moratorium bars the U.S. government from deporting certain foreign citizens who entered the U.S. before Nov. 1 while the Biden administration reviews immigration enforcement priorities.


     The filing marks the second pending lawsuit challenging the Biden administration’s immigration priorities. Texas, along with several others, is behind a legal challenge to the Obama-era Deferred Action for Childhood Arrivals program, which provides deportation relief and work permits to certain unauthorized immigrants brought to the U.S. as children. Biden issued an executive order his first day in office reaffirming his support for the program.


— Buy American executive order coming today. President Biden will sign an executive order today imposing tougher rules on government procurement practices to increase purchases of products made in the U.S., a step toward fulfilling his Buy American campaign pledge to strengthen domestic manufacturing. The policy is being watched closely by America’s allies, which are hoping for friendlier trade relationships than during the Trump administration.



—  Senate is set to vote on Antony Blinken’s nomination as secretary of State today. The outcome is in little doubt; he has spent two decades in national-security jobs, most recently as deputy secretary of State under Barack Obama.


— Chemical law overhaul negotiator to run core EPA chemical safety and pesticide offices. Michal Ilana Freedhoff, who directed federal oversight for Democrats on the Senate Environment and Public Works Committee, will manage the EPA’s chemical and pesticide offices starting today. The EPA announced her selection as the principal deputy assistant administrator for chemical safety and pollution prevention, or OCSPP. That position — which doesn’t need Senate confirmation — means Freedhoff will run the office until the Senate confirms a yet-to-be-nominated assistant administrator.



WSJ: China pushes for high-level meeting to ease tension with U.S. Looking to reset the contentious U.S./China relationship, Beijing is pressing for a meeting of its top diplomat with senior aides to President Biden to explore a summit between the two nations’ leaders, the Wall Street Journal reported (link), citing people with knowledge of the initiative. The proposal, made soon after President Xi Jinping congratulated Joe Biden on his election victory, was through letters by the Chinese ambassador to the U.S., Cui Tiankai, and through conversations with intermediaries, the WSJ noted.


     Shift away from trade policy and towards climate change and the pandemic. Beijing raised the idea starting in December of dispatching Yang Jiechi, a member of the Politburo, the Communist Party’s top decision-making body, to Washington. Yang plans to focus on climate change, the pandemic and getting an initial meeting between Biden and Chinese President Xi Jinping.


     Biden has said he would meet first with allies to discuss issues including how to jointly confront China. He has already spoken with Canadian Prime Minister Justin Trudeau and reportedly will soon with Mexico President Andrés Manuel López Obrador. U.K. Prime Minister Boris Johnson and Biden struck different tones on the prospects of a trade deal between their respective countries, as Johnson became the first European leader to receive a phone call since Biden’s inauguration. Meanwhile, sources note that Japan wants to be the first official visit to the White House in a Biden administration.


     The WSJ article said Chinese officials believe that the Biden administration will eventually want to renegotiate the U.S./China trade deal, which has been criticized in both countries as unrealistic. But it added it is unclear whether Biden’s choice for U.S. Trade Representative, Katherine Tai, will push for enforcement of the Phase 1 deal or press for a new round of negotiations. The WSJ quoted Brookings Institution China expert David Dollar, who was the Obama administration’s Treasury representative in China, as saying he expected talks between the U.S. and China to begin at a level below Yang and a senior U.S. official such as Secretary of State nominee Tony Blinken and to take most of 2021 to work out a meeting between the two leaders. “The agenda sis global public goods,” he said. “It’s not ‘We’ll buy more soybeans.’ That’s the old days.”


— U.S. reaffirms Taiwan support after China sends warplanes. The U.S. has reaffirmed support for Taiwan following China’s dispatch of warplanes near the island in an apparent attempt to intimidate its democratic government and test American resolve. The State Department on Saturday said it “notes with concern the pattern of ongoing (China’s) attempts to intimidate its neighbors, including Taiwan… We urge Beijing to cease its military, diplomatic, and economic pressure against Taiwan and instead engage in meaningful dialogue with Taiwan’s democratically elected representatives,” spokesperson Ned Price said in a statement.


— U.S. State Department urged China to engage in dialogue with Taiwan’s democratically elected representatives and cease putting military, diplomatic and economic pressure on the island. The U.S. statement on Saturday came as Taiwan said a fleet of 13 Chinese military planes, including eight H-6K bombers, entered its air defense identification zone, in an apparent stepping up of Beijing’s almost constant military incursions around the Taiwan Strait.


— Demand for wheat at Chinese auctions on the rise. China sold more than 4.026 MMT of wheat at its latest weekly auction, representing 99.9% of the total offered. This represented the highest volume and percentage sold since the auctions began in June. The wheat sold at an average price of 2,455 yuan per metric ton, a 49 drop from the previous week but still the second highest average price since the auctions started. The rise in demand for wheat at these auctions reflects the rise in corn prices within China and around the world amid a much tighter supply situation. A mid-January update from China-based JCI projects that based on the current pace of sales the country’s wheat reserves could be exhausted in 15 to 20 weeks.


U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link




— Biden administration is promising a very different approach to international trade. No longer would American negotiators focus on opening markets for financial-service firms, pharmaceutical companies and other companies whose investments abroad don’t directly boost exports or jobs at home. Those making the case include President Biden’s national security adviser, Jake Sullivan, and members of his transition team who are likely to get senior trade jobs, the Wall Street Journal reports (link). Instead, trade and tax policy will promote U.S. exports of manufactured goods, a call picked up by Sullivan and incoming U.S. Trade Representative Katherine Tai.




— Biden to convene climate talk on Earth Day. The Biden administration is planning to host world leaders in a climate summit on Earth Day according to reports. The U.S.-hosted meeting on April 22 could be virtual, similar to a United Nation’s climate summit in December.  The event could be announced this week as part of a package of climate-related policies.



 Summary: Global cases of Covid-19 are just shy of 100 million at 99,257,349 with the death county at 2,130,743, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count has topped 25 million at 25,128,278 with 419,225 deaths.

       Link to Covid Case Tracker
       Link to Our World in Data


— Allergic reactions to the Moderna vaccine are rare, according to the Centers for Disease Control and Prevention. Of more than 4 million doses administered there were 10 cases of anaphylaxis, 9 within the first 15 minutes of administration. That is 2.5 cases per million doses administered.


— Fauci: 'We have to assume now' that British virus strain can 'cause more damage.’ Dr. Anthony Fauci, the nation’s top infectious diseases expert, said recent data reported by the British government suggest a new, more virulent strain of the coronavirus is also more deadly, but said U.S. officials needed to examine the numbers themselves.


— Update on J&J vaccine. Dr. Anthony Fauci said this weekend that if Johnson & Johnson's vaccine is authorized for emergency use, the US could see a significant boost in available doses by May. That vaccine only requires one dose, instead of the two necessary for the current Covid-19 vaccines. "I would anticipate that within a period of likely no more than two weeks, that the data will be looked at by the Data and Safety Monitoring Board," Fauci told MSNBC. If the data is strong enough, the next step would be presenting it to the Food and Drug Administration for an emergency use authorization, he said.


— Biden to reinstate Covid-19 restrictions on non-U.S. travelers from several countries. President Biden today will formally reinstate Covid-19 travel restrictions on non-U.S. travelers from Brazil, Ireland, the United Kingdom and 26 other European countries that allow travel across open borders, according to White House officials. The officials also confirmed Sunday that South Africa would be added to the restricted list because of concerns about a variant of the virus that has spread beyond that nation.


— Mexico's president tested positive for Covid. Mexican President Andrés Manuel López Obrador said he tested positive for Covid. He said his symptoms are mild and he’s receiving medical treatment. López Obrador, 67 years old, has continued traveling around the country and attending public events even after a second wave of Covid infections hit the country over the past month. Mexico has suffered close to 150,000 confirmed Covid-19 deaths.




 House will transmit its article of impeachment to the Senate this evening. Senate leaders say they will start Trump’s trial in two weeks.




—  Indian farmers rejected a government proposal to halt for 18 months controversial reforms to agriculture laws. The plans, which would open farming to more competition, sparked weeks of demonstrations on the outskirts of Delhi, the capital. The government claims the reforms will spur production, but farmers fear their incomes will fall. They want the proposals scrapped completely. What’s next? Indian farmers will intensify protests on India's Republic Day (Jan. 26) in New Delhi after recent talks failed to produce an agreement on the implementation of controversial agricultural laws. With the protests planned for months, thousands of farmers from other states have been traveling to Delhi over the last several weeks to join the protests. Activists say reforms in India's agricultural sector are needed to promote the modernization necessary to ensure India's food security.


— Poland’s president, Andrzej Duda, called on EU leaders to increase sanctions on Russia over the treatment of Alexei Navalny, a leading opposition politician currently imprisoned on spurious charges. Vladimir Putin, Russia’s president, faces domestic heat, too. On Saturday tens of thousands of Russians protested against Navalny’s arrest. These numbers were doubtless suppressed by Kremlin threats. Navalny’s video about Putin’s personal wealth was viewed more than 80 million times since its release on Jan. 19.



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