China Sanctions 11 Americans in Retaliation for U.S. Move

Posted on 08/10/2020 7:23 AM

U.S. weather heats up and so do natural gas prices


In Today’s Updates


Market Focus:
* A warning from Mpls Fed Reserve Bank's Neel Kashkari
* Goldman Sachs lifts 2021 US GDP forecast to 6.2%
* Economic hit of coronavirus pandemic emerging as particularly bad for millennials
* Natural gas prices up following U.S. heat
* Aramco keeps dividend, sees oil recovery
* U.S. wx forecast keeps showers to rain over the corn belt this week, but not all of Iowa
* Mennonites continue to boost interest in organics, moving away from dairy
* Gold could surge over 90% and hit $4,000


Policy Focus:
* Trump takes executive action on Covid-19 relief
* Federal court dismisses Trump water rule challenge in Oregon
* Some ag and biofuel groups continue to seek aid or more aid
* Farm groups always ask for more time and that's case with CFAP signup
* Peterson, Conaway want USDA to analyze cattle and beef supply chains


U.S./China update:
* China sanctions 11 Americans in retaliation for U.S. move
* U.S. officials arrive in Taiwan
* Chinese fighter jets cross midline in strait separating mainland China from Taiwan
* No surprise: China way behind promised purchases of U.S. products
* Reuters: China to buy around 24 MMT of soybeans in fourth quarter, largely from U.S.

U.S. food & beverage industry update:
* Salmonella outbreak linked onions sickens hundreds in U.S. and Canada

Update on re-opening America... and around the world:
* Disney World to cut theme park hours in September as visits drop amid Covid-19

Coronavirus update:
* U.S. surpassed 5 million confirmed coronavirus cases Sunday
* Australia recorded 100 coronavirus deaths, its deadliest day yet


Politics & Elections:
* China, Iran working against Trump, while Russia seeks to undermine Biden
* NYT: Noem possible USDA secretary in any second Trump term
* Waiting on Biden's VP choice

Other Items of Note:
* Canada to impose 10% retaliatory duty on selected U.S. aluminum products Sept. 16




Equities today: Concerns about a lack of progress in Congress on stimulus spending and rising tensions between the U.S. and China will key initial moves in U.S. equities. Global stock markets were mostly up in overnight trading —the MSCI Asia Pacific Index was flat while Japan's Topix index closed down 0.2%. The U.S. stock indexes are pointed toward mixed openings.


     U.S. equities Friday: The Dow gained 46.50 points, 0.17%, at 27,438.48. The Nasdaq dropped 97.09 points, 0.87%, at 11,010.98. The S&P 500 moved up 2.12 points, 0.06%, at 3,351.28.


     For the week, the S&P 500 was up 2.4% and Nasdaq rose 2.5%, while the Dow outperformed by rising more than 3%.


On tap today:


     • USDA Grain inspections, at 11 a.m. ET
     • USDA Crop Progress, at 4 p.m. ET.
     • Labor Department's "JOLTS" report for June out at 10 a.m. ET. The measure of job opportunities and labor turnover showed 5.4 million job openings as of the end of May.
     • Japan's trade deficit for June is out at 7:50 p.m. ET.


President of the Federal Reserve Bank of Minneapolis Neel Kashkari warns that unless a stricter U.S. lockdown is imposed, the last few months could feel just like a 'warm-up to a greater catastrophe'. "If we aren't willing to take this action, millions more cases with many more deaths are likely before a vaccine might be available." Stringent enforcement of a lockdown would “crush the spread” of Covid-19, Kashkari said in the op-ed item co-written with Dr. Michael Osterholm with the Center for Infectious Disease Research and Policy at the University of Minnesota. “If we aren’t willing to take this action, millions more cases with many more deaths are likely before a vaccine might be available,” they said. “In addition, the economic recovery will be much slower, with far more business failures and high unemployment for the next year or two. The path of the virus will determine the path of the economy. There won’t be a robust economic recovery until we get control of the virus.” They also made a strong pitch for congressional action on the unemployment benefits front. “Congress should be aggressive in supporting people who’ve lost jobs because of Covid-19. It’s not only the right thing to do but also vital for our economic recovery.” Link to NYT op-ed.


Goldman Sachs lifts 2021 US GDP forecast to 6.2% and predicts a Covid-19 vaccine will be 'widely distributed' by mid-2021. The bank now projects the U.S. unemployment rate will decline to 6.5% by the end of 2021, down from a previous 7% forecast.


The economic hit of the coronavirus pandemic is emerging as particularly bad for millennials, born between 1981 and 1996, who as a group hadn’t recovered from the experience of entering the workforce during the previous financial crisis, the WSJ notes (link).


    Mills worry


Market perspectives:


     • Forecasts showing warm U.S. weather is expected for much of August have powered a sharp rise in natural gas prices, which rose 24% last week (don't get too excited as theyare lifting off 30+ year lows in early July). Crude-oil production has also been slow to return, with weekly government data showing U.S. output edged back down to 11 million barrels a day during the week ended July 31, about the same level it has stayed at for seven weeks. In focus this week: monthly reports from OPEC and the International Energy Agency regarding global crude supply and inventory dynamics.

     • Oil prices ticked higher. Futures moved higher in Asian activity on China economic data and improved demand. U.S. crude was up 46 cents at $41.68 per barrel while Brent crude gained 38 cents at $44.78 per barrel. U.S. futures have posted some additional gains as the U.S. open approaches, with U.S. crude trading around $41.75 per barrel while Brent crude is still trading around $44.75 per barrel.

Crude futures


     • Iron ore prices have risen to their highest level in a year on growing demand from China.


     • Aramco keeps dividend, sees oil recovery. Net profit at Saudi Aramco slumped 73% to 24.6B riyals ($6.57 bil.) in the second quarter (vs. estimates of 31.3B riyals), as a plunge in energy demand —due to the coronavirus crisis —weighed on sales of the world's biggest oil producer. Aramco still maintained its Q2 dividend of $18.75 billion, unlike BP and Royal Dutch Shell, which cut their dividends in recent months. "We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies," CEO Amin Nasser declared, helping put a floor under crude above $40/bbl.


     • Weather forecast keeps showers to rain over the Corn Belt this week, with the Northern 1/3 of Iowa having the least chance.


     • Mennonites continue to boost interest in organics, moving away from dairy. The bulk of recent tiling business has been in the organic sector, says one Iowa-based industry participant, largely fueled by a group of Mennonites expanding organic production.


     • Gold could surge over 90% and hit $4,000 so long as these two factors remain under control. The CEO of U.S. Global Investors said central banks are "working together like a cartel and they're all printing trillions of dollars."




Trump takes executive action on Covid-19 relief. President Donald Trump on Saturday signed four executive orders aimed at helping Americans cope with the economic fallout from the pandemic, following the collapse in talks with Democrats Friday over a rescue package. (Link for details in a special report issued Saturday).


     The president said the orders:


     1. Defer payroll taxes for Americans earning less than $100,000 a year.

     2. Implement a moratorium on evictions and give financial assistance to renters.
     3. Add $400 per week in extra unemployment benefits through the end of 2020 and requires states to cover 25% of the additional benefits — States can either use money already appropriated by the federal government to provide the 25% of unemployment benefits. The extra weekly benefits would be available until Dec. 6, about a month after the Nov. 3 general election, or until the disaster fund’s balance drops to $25 billion, according to the executive action.
     4. Postpone student loan interest and payments through the end of 2020.


     Current impasse. Both sides said Friday they’ll only come back to the table when the other side has something new to offer.


     At least one negotiating hurdle was overcome as Treasury Secretary Steve Mnuchin said Sunday that the Trump administration and congressional Democrats had reached agreement on food assistance. Senate Agriculture Committee Ranking Member Debbie Stabenow (D-Mich.) kept insisting she would not agree to any aid to farmers and ranchers if there is not more food assistance to hungry people.


     Comments: Some ag and biofuel groups continue to seek aid or more aid. Meanwhile, farm groups on Friday asked USDA Secretary Sonny Perdue to extend the application deadline for the Coronavirus Food Assistance Program (CFAP) beyond Aug. 28 (link to letter). The 499,156 applications received represent only 24% of all farm operations, the farm groups said. The groups said that the lack of face-to-face interactions between local Farm Service Agency employees and farmers due to the coronavirus pandemic and the eligibility of producers not previously eligible for aid have probably contributed to the low level of applications. In another ask, House Ag Chairman Collin Peterson (D-Minn.) and Ranking Member Mike Conaway (R-Texas) have asked USDA to analyze cattle and beef supply chains, working with university policy research centers to analyze issues related to the cattle industry, especially amid stress related to Covid-19. The lawmakers want USDA’s Office of the Chief Economist to evaluate cattle market structure, price discovery, price reporting, purchasing mandates, and barriers to entry in the packing sector. Link to letter.


Federal court dismisses Trump water rule challenge in Oregon. A challenge brought against the Trump administration’s Clean Water Act rule redefining federal jurisdiction over the nation’s waters from the Obama administration WOTUS rule was dismissed by a federal judge in Oregon. The Oregon Cattlemen’s Association had sued the EPA and the U.S. Army Corps of Engineers in May for bringing non-navigable, small streams and wetlands under Clean Water Act protection in the Navigable Waters Protection Rule. Judge Michael W. Mosman of the U.S. District Court for District of Oregon, ruling from the bench on a preliminary injunction sought against the water rule, dismissed the claims “due to lack of standing” without prejudice. The group can file an amended claim at a later date, said Earthjustice attorney Anna Sewell, who attended the virtual court proceeding on behalf of Columbia Riverkeeper, an intervenor in the case. Mosman also formally denied the cattlemen’s preliminary injunction on lack of standing. The EPA said the decision means the Navigable Waters Protection Rule will continue to be implemented in Oregon. EPA said it developed the rule jointly with the Army Corps to “protect the navigable waters and their core tributary systems for the entire country while respecting our statutory authority.” The two agencies remain confident that “the new rule provides much-needed regulatory certainty for farmers, landowners, and businesses — ending confusion that has existed for decades — while protecting the Nation’s navigable waters and striking an appropriate balance between federal and state authority over aquatic resources,” EPA said.

     The ruling is the first dismissal of more than half a dozen challenges that the EPA and the Army Corps received over its rewrite of the Obama-era definition of waters of the U.S., or WOTUS. Colorado is the only plaintiff that has been successful in staying the Trump water rule from taking effect in the state. A California-led coalition was unsuccessful in preventing the rule from taking effect on June 22. In both instances, the challenges to the rule are continuing.


Update on China:

  • China to impose sanctions on U.S. officials in retaliation for HK measures. China will impose sanctions on 11 U.S. citizens in response to similar measures from Washington on Chinese and Hong Kong officials, as the two sides step up their dispute over Beijing’s imposition of a new security law on the city. China’s foreign ministry said it would impose the measures on Sens. Marco Rubio (R-Fla.) and Ted Cruz (R-Texas). Kenneth Roth, executive director of Human Rights Watch, and Michael Abramowitz, the president of U.S. government-funded organization Freedom House, were also on the list. It did not details what form the sanctions would take. The U.S. last week imposed sanctions on 11 Hong Kong and Chinese officials over the implementation of the security law, including the territory’s Chief Executive Carrie Lam. The move by Beijing came after Hong Kong police detained media tycoon Jimmy Lai on Monday for allegedly breaching the security law. Lai, 72, is the founder of Next Digital, the Hong Kong-listed publisher of newspaper Apple Daily and Next Magazine, which are among the most popular publications in the city.
  • U.S. officials arrive in Taiwan. U.S. Secretary of Health and Human Services Alex Azar touched down in Taiwan on Sunday for the highest-level meeting between U.S. and Taiwanese officials in decades and quickly praised Taiwan’s handling of the coronavirus outbreak. Officials will discuss ongoing pandemic relief efforts and the broader U.S.-Taiwanese relationship in the face of growing assertiveness from China. Chinese officials were not pleased and have threatened “strong countermeasures in response to the U.S. behavior,” though what action they might take remains unclear.

    Chinese fighter jets briefly crossed the midline in the strait separating mainland China from Taiwan, where they were tracked by the Taiwanese air force. It is just the third such crossing since 2016.

  • U.S. Trade Representative Bob Lighthizer will reportedly meet online with Chinese Vice Premier Liu He on or around Aug. 15 to review the Phase 1 trade deal between the two countries. The meeting has not been confirmed by either country.

    Reuters’ sources say China will likely buy around 24 MMT of soybeans in the fourth quarter, largely from the U.S. China will likely import around 8 MMT of soybeans per month in the fourth quarter of 2020, with the bulk of those soybeans coming from the U.S., according to four traders and crushers cited.

    China purchases

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

Food and beverage industry update:

  • A salmonella outbreak linked to onions has sickened hundreds in the U.S. and Canada; incidents have sickened nearly 900 people across the U.S. and Canada, prompting a recall from grocery stores and a producer in California, the likely source of the outbreak. Link to NYT article for details.

Update on reopening America... and around the world:

  • Disney World to cut theme park hours in September as visits drop amid Covid-19.

Coronavirus update:

  • Summary: Source: Johns Hopkins University as of 7:00 a.m. ET.

    — 19,877,261: Confirmed cases world-wide, and 584,556 deaths
    — 46,935: New U.S. cases recorded yesterday
    — 5,045,564: Total confirmed cases in the U.S.
    — 515: Deaths in the U.S. recorded yesterday
    — 162,938: Total U.S. deaths
    — 61,792,571: Tests conducted in the U.S.

    The U.S. surpassed 5 million confirmed coronavirus cases Sunday — about one-quarter of all cases reported worldwide and just 17 days after reaching 4 million cases.

    Link to Covid Case Tracker

    Link to Our World in Data

  • Australia recorded 100 coronavirus deaths in a week, its deadliest weekly tally. However the caseload in Victoria state, the center of the country’s epidemic, looks to be on a downward path.


  • Links:
    2020 Presidential Election Interactive Map
    The Green Papers

  • China, Iran working against Trump re-election while Russia seeks to undermine Biden: U.S. intelligence. China not only wants to see President Trump lose re-election but is also expanding its foreign influence campaign ahead of the 2020 election, according to a U.S. intelligence community assessment. A statement by National Counterintelligence and Security Center Director Bill Evanina (link) also warned that Russia primarily seeks to harm the election chances of Trump's Democratic opponent, former Vice President Joe Biden, and that Iran aims to undermine Trump and divide the country ahead of November.

    At a press conference Friday evening, Trump himself pushed back on the findings of his own intelligence agencies, saying, “the last person Russia wants to see in office is Donald Trump.”

  • New York Times: Noem possible USDA secretary in any second Trump term. The possibility was bandied about several weeks ago, but the New York Times went official, noting that should Trump win re-election, South Dakota Gov. Kristi Noem might want to be Agriculture secretary so that she would have a national credential to run for president in 2024. Link to NYT item.
  • Democratic presidential presumptive candidate Joe Biden is expected to name a running mate this week via a text message. Former National Security Advisor Susan Rice and former presidential candidate Sen. Kamala Harris (D-Calif.) are considered the frontrunners for the job.




  • Canada plans to impose a 10% retaliatory duty on selected U.S. aluminum products on Sept. 16 in response to the Trump administration's decision to reinstate on Aug. 16 a Section 232 national security tariff of 10% on Canadian aluminum products.


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