GOP Signals Possible $900 Billion Infrastructure Counterproposal

Posted on 04/26/2021 7:27 AM

Axios on Biden: ‘Talk like a rosy bipartisan; act like a ruthless partisan’

 


In Today’s Digital Newspaper


 

Market Focus:
• Equities mixed as Covid cases surge in India
• Restaurants serving up signing bonuses and higher pay to win back workers
• Chief execs of big companies in U.S make 320 times typical worker
• EV talk and not the walk

• U.S. restaurants seating and serving customers again
• CP Rail exempted from tougher merger rules
• When, how will Fed signal eventual tightening of the money spigot
• Bitcoin jumps 10% after hitting its lowest in about two months
• Dow Jones Transportation Average up for past 12 consecutive weeks
• Exchange raises margins on wheat futures
• Ag demand update

Grain export prices on the rise for Ukraine
• Institute less optimistic about Ukraine’s 2021 grain crop than the government
• Russian wheat prices also on the rise

Policy Focus:
• Graham signals higher-priced GOP infrastructure possibility
• Agencies identify $38 billion to help coal workers.

 

China Update:
• China’s gov’t has expanded its antitrust crackdown on tech companies
• Light sales at China’s latest auction of wheat reserves
New WTO chief cautions China cannot be made to feel ‘targeted’ on trade

 

Trade Policy:
• Argentina mulling boost in grains export taxes

 

Energy & Climate Change:

• Swiss Re: climate to reduce global economic output by 11% to 14%
• Kerry joins other Biden officials in signaling possible U.S. carbon border tax
• Yellen calls on private sector to mobilize on climate
• Tribes counter DAPL closure costs overstated by pipeline operator


Food & Beverage Industry Update:
Barron’s: Food stocks worth filling up on


Coronavirus Update:
• Total number of vaccine shots given across the world passed 1 billion
• CDC advisers OK resuming use of Johnson & Johnson vaccine
• Michigan is latest Covid-19 hotspot

• India gets U.S. help amid record Covid-19 surge
• Why Taxi and limousine services near tU.S./Canada border are seeing a spike

 

Politics & Elections:
• Troy Carter wins House special runoff election in Louisiana
• Manchin discusses endorsement of Murkowski for re-election
• Cunningham to enter South Carolina gubernatorial race
• Equity legislation for black and minority farmers  
• Is this the real Biden?
• Biden/Putin summit


Other Items of Note:
• DHS will no longer collect fines from immigrants ordered deported
• European parliament members vote Tuesday to ratify EU/U.K. trade agreement

 


MARKET FOCUS


 

Equities today: Global stock markets were mixed overnight. U.S. stock indexes are pointed toward mixed openings. Investors are noting a flare-up of Covid-19 cases in India and Japan triggered concerns about the pace of the global economic recovery. The last week of April will be extremely busy for markets with a third of the S&P 500 reporting earnings — Apple, Microsoft, Amazon, Facebook and Alphabet will be releasing results. Economic reports due in the week ahead include updates on durable goods orders, pending home sales and GDP.

 

     Some $98 billion was added to U.S. mutual funds and ETFs in March alone, the most in a single month ever, according to Refinitiv Lipper.

 

     U.S. equities Friday: The Dow gained 227.59 points, 0.67%, at 34.043.49. The Nasdaq advanced 198.40 points, 1.44%, at 14,016.81. The S&P 500 2as up 45.10 points, 1.09%, at 4,180.17.

 

     For the week, the Dow was down 0.9%, the Nasdaq fell 0.3% and the S&P 500 was down 0.1%.

 

On tap today:

 

     • U.S. durable goods orders for March are expected to increase 2.2% from the prior month. (8:30 a.m. ET)
     • Dallas Fed's manufacturing survey is expected to rise to 31.7 in April from 28.9 a month earlier. (10:30 a.m. ET)
     • USDA Grain Export Inspections, 11 a.m. ET
     • USDA Crop Progress report, 4 p.m. ET
     • South Korea's gross domestic product for the first quarter is expected to rise 0.9% from the previous quarter. (7 p.m. ET)

 

Congressional overpay? Restaurants spent much of the past year trying to win back customers. Now, they are struggling to win back employees, reports the Wall Street Journal (link). Nationwide chains and independent eateries alike said they can’t hire enough workers to staff kitchens and dining rooms, just as Covid-19 restrictions relax and more consumers want to eat out again. Fast-food operators are offering signing bonuses for recruits. Chipotle Mexican Grill is offering free college tuition to employees who work at least 15 hours a week after four months on the job. Taco Bell is giving paid family leave to company-store managers. McDonald’s owners are assessing what pay and benefits its U.S. employees most want, to better pitch the Golden Arches as an employer. Atlanta-based restaurant operator Daniel Halpern, who runs 50 TGI Fridays and other restaurants, recently increased hourly wages and is offering employees immediate pay. He said he is still short about 900 workers, the WSJ article notes.

 

     Breakfast

 

If you are seeking a raise, take note of this: Chief executives of big companies in the U.S. now make, on average, 320 times as much as the typical worker. In 1989, that ratio was 61 to 1.
 

     Exec pay

 

EV talk and not the walk. Americans tell pollsters they are interested in electric vehicles but have so far failed to show similar interest at dealerships. (Teslas are a different story, but they’re also still just a tiny fraction of U.S. auto sales.) Meanwhile, Honda said it expects all cars it sells will be electric by 2040.

 

     EVs by country

 

U.S. restaurants are seating and serving customers again, after a year when quarantining and seating restrictions forced many to launch online-only food brands or rely on takeout business. Sales at bars and restaurants rose 13.4% in March compared with February, the biggest month-over-month increase since June, Commerce Department figures show.

 

     Food customers

 

CP Rail exempted from tougher merger rules. Canadian Pacific Railway (CP Rail) won a petition for its proposed tie-up with Kansas City Southern (KCS) to be exempt from tougher merger rules that the regulator had established in 2001, lowering the burden for winning approval of the deal. The Surface Transportation Board, which is the final authority on rail acquisitions, said it approved the petition in part because a combination of CP and Kansas City would remain the smallest of the large North American railroads. The flurry of offers — including from Canadian Pacific — for the Kansas railroad company “should set off alarms bells,” said Rep. Peter DeFazio (D-Ore.), chair of the House Transportation and Infrastructure Committee. “Multiple railroads are now seeking to acquire KCS, and that flurry should set off alarms bells about a potential new wave of railroad mergers that stifle competition and trigger industry-wide consolidation,” DeFazio said in a statement. “A series of mergers will likely result in a significant reduction of the railroad workforce,” he added, “and will negatively impact the rail network’s ability to provide affordable and reliable access for our nation’s shippers.”

 

Market perspectives:

 

     • Outside markets: U.S. Treasury yields rose amid confidence the Federal Reserve will remain accommodative even as robust growth takes the world’s largest economy back to pre-pandemic levels. Meanwhile, some say the U.S. dollar is at a key chart point.

 

        Dollar chart


     • Crude oil remains under pressure as traders focus on Covid infections and supply increases. U.S. crude is trading around $61.25 per barrel and Brent around $64.45 per barrel. Crude was under pressure in Asian action with U.. crude down 21 cents at $61.93 per barrel while Brent was down 9 cents at $65.12 per barrel.

 

     • Big question for the Federal Reserve: how to signal its eventual tightening of the money spigot. The process of ending the Fed’s giant bond-buying program, and subsequently raising interest rates, will take time unless inflation unexpectedly surges. Its first step down that road will be to start talking about it in the coming months or weeks — Chairman Jerome Powell’s next big test with financial markets. A WSJ article (link) recalls that the last time the Fed started telegraphing a reduction in its asset purchases, in 2013, it sparked a bond-market selloff known as the “taper tantrum.” Yields on 10-year Treasury notes, which directly affect long-term borrowing costs for consumers and businesses, jumped half a percentage point in just one month, rattling Fed officials who worried they might undermine the recovery they had been trying to nurture.

 

        This week, the Fed is expected to hold rates and bond purchases steady at the conclusion of a two-day policy meeting on Wednesday.

 

        So, when will the Fed start signaling? The Federal Reserve is expected to begin trimming its $120 billion in monthly asset purchases before the end of the year as the U.S. economy recovers strongly from Covid-19, according to economists surveyed by Bloomberg.

 

        T Tantrum

 

     • Bitcoin jumped 10% after hitting its lowest in about two months as buyers swoop in after the price drop. Bitcoin prices on Friday ended the week down 18.3%. It was the largest weekly decline since the week ended March 13, 2020, when it fell 40.6%.

 

     • Dow Jones Transportation Average is up for the past 12 consecutive weeks. It is its longest weekly winning streak in a long time.

 

     • Exchange raises margins on wheat futures. CME Group announced it will raise maintenance margins on wheat futures by $200 (10.5%) to $2,100 per contract for May 2021, with the new rates taking effect after the close of business today. Initial margin rates are 110% of maintenance margin rates. This follows hikes to margins for corn and soybeans on Friday, with the Minneapolis Grain Exchange also raising margins on HRS wheat futures.

 

     • Ag demand: Egypt tendered to buy an unspecified amount of wheat from global suppliers. Bangladesh issued an international tender to buy 50,000 MT of milling wheat. The country is also seeking at least 30,000 MT of soyoil and 10,000 MT of sunflower oil. South Korea’s Feed Leaders Committee bought around 65,000 MT of corn in a private deal Friday, reportedly from South America.

 

Items in Pro Farmer's First Thing Today include:

     • Grain export prices on the rise for Ukraine
     • Institute less optimistic about Ukraine’s 2021 grain crop than the government
     • Russian wheat prices also on the rise

 


POLICY FOCUS


 

— Graham signals higher-priced GOP infrastructure possibility. Republicans may be ready to back as much as $900 billion in infrastructure spending, according to a senior senator, though that would still be less than half of Biden’s proposal. “There’s a deal to be done on infrastructure, I think,” Sen. Lindsey Graham (R-S.C.) said on Fox News Sunday. Rather than an increase in the corporate tax rate to 28% that Republican flatly reject, he suggested “to not pay for some of the infrastructure spending, because I think it over time pays for itself.”

 

     “There’s probably an 800-to-900-billion-dollar infrastructure bill that we could all agree on,” Graham said. “Watch Joe Manchin. I think there’s a sweet spot on infrastructure where we can find pay-fors that won’t hurt the economy.” Sen. Joe Manchin (D-W.Va.), who’s a key moderate in the bargaining, said last week that Biden and Congress should focus on traditional infrastructure projects such as roads and bridges, an approach broadly favored by Republicans.

 

     Manchin said he and the coalition of House moderates known as the Problem Solvers Caucus are “working in a bipartisan, bicameral way” on a path forward on infrastructure. The caucus on Friday listed in its 16-page report an array of proposals, such as raising the fuel tax to help pay for roads and bridges, an annual registration fee on fully electric or hybrid electric cars or broadening the current air cargo tax to trucking services.

 

— Agencies identify $38 billion to help coal workers. An inter-agency working group has identified $38 billion in existing federal programs that could help support and revitalize the economies of coal and power plant workers, the White House announced Friday. The report, by the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization, identified 25 communities across the country hardest hit by coal mine and power plant closures and calls for these areas to be priorities for both existing and future federal investment.

 

     Perspective: Some say President Biden’s approach is throw billions of dollars at certain groups who either do not support a change in policy favored by Democrats, or to complaining groups within the Democratic tent.
 


CHINA UPDATE


 

China’s gov’t has expanded its antitrust crackdown on tech companies, launching an investigation into food-delivery behemoth Meituan. Beijing has become increasingly concerned over the growing influence of tech titans over every aspect of Chinese life and has shown through its moves against Jack Ma's empire that it is willing to crack down hard.
 

— Light sales at China’s latest auction of wheat reserves. China sold 311,837 MT of wheat at its latest auction of state reserves, representing just 7.8% of the more than 4 MMT offered. That’s down from 10.2% and 12.8% sold the past two weeks and sales near 4 MMT earlier this year. A trader with an international trading house noted that end users have built ample stocks, enough to cover needs through the end of June. Plus, the government has recently started restricting participation at the auction and raised the floor price. In addition, harvest will soon bring fresh supplies to market.
 

— New WTO chief cautions China cannot be made to feel ‘targeted’ on trade. Chinese cooperation on trade reforms is most likely to come if it is not made to feel targeted by other countries, according to WTO director-general Ngozi Okonjo-Iweala. Several countries have been pushing for reforms on industrial subsidies and state-owned enterprises used by China, with those countries saying the policies distort global trade. "We also have to show China is not being targeted... When China feels it is being targeted, and it's only about China, you get a lot of resistance," Okonjo-Iweala told a European Commission conference. "The dealings I have had with China have been very constructive and I think that if we put the facts on the table about the negative spillovers from such industrial subsidies and share them with China ... they will be willing to look at that." The WTO is working with the World Bank, International Monetary Fund and the Organization for Economic Co-Operation and Development (OCED) to “put some objective facts on the table,” the WTO chief remarked. This comes as the U.S. has continued to seek to build support with allies to take on China’s actions on trade and economic policies.

 


TRADE POLICY


 

— Argentina mulling boost in grains export taxes. Argentina is considering an increase in export taxes, according to Domestic Commerce Secretary Paula Español, who made the remarks to a radio station on Friday (April 23). "An increase in export taxes is being analyzed," she said. "It would not raise my pulse to take measures that are needed to keep prices down." Not surprisingly, the comments were met with opposition from ag interests who decried the potential action as farmers have been reluctant to sell their supplies this year as they have opted to keep them on hand as a hedge against political risk and a currency that has lost around one-third of its value the past 12 months. 

 


ENERGY & CLIMATE CHANGE


 

— Insurance giant Swiss Re released a report (link) saying that climate change is likely to reduce global economic output by 11% to 14% — as much as $23 trillion compared with growth levels without climate change -— in the next three decades as a function of failed crops, the spread of disease and rising sea levels.

 

— Kerry joins other Biden officials in signaling possible U.S. carbon border tax. White House climate envoy John Kerry joined U.S. Trade Representative Katherine Tai and other Biden administration officials in noting President Joe Biden is mulling a border adjustment tax to protect U.S. producers from foreign goods or commodities produced under weaker environmental standards. “President Biden, I know, is particularly interested in evaluating the border adjustment mechanism,” Kerry told Bloomberg in an interview (link). “He wants to look at that and see whether that’s something that we need to deploy.”

 

     The idea has been gaining interest from world leaders as a way to shield domestic workers making energy-intensive goods while encouraging other countries to slash their emissions. The tax would discourage companies from shifting operations to nations with less-stringent rules. “Europe is already looking at that in depth, and they will wind up deploying it if they don’t get satisfaction from China and other countries with respect to the transition off of coal,” Kerry said shortly after participating in a two-day virtual climate summit hosted by the United States. Biden supported a border adjustment on carbon during the presidential campaign last year. U.K. Prime Minister Boris Johnson has urged G-7 countries to enact carbon border taxes. Canadian Prime Minister Justin Trudeau has raised the idea as a possible area of collaboration with the United States.

 

     USTR Tai previously said she favors using U.S. trade policy as a “powerful tool to create incentives” that encourage U.S. trading partners to cut greenhouse gas emissions.

 

     Kerry on climate change

 

— Yellen calls on private sector to mobilize on climate. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde wrapped up a week of international events focused on fighting climate change by renewing their call to financial institutions and investors to mobilize private capital in the effort. “We obviously need a massive amount of private investment to green the global economy,” Yellen said Friday during a virtual panel session on climate change and capital markets organized by Bloomberg LP. Yellen also repeated her pl edge that the Treasury and other regulatory bodies will help private institutions identify climate-related risks and opportunities by taking steps to improve financial reporting and increasing the reliability of climate-related disclosures.
 

— Tribes counter DAPL closure costs overstated by pipeline operator. Tribes in the case over the Dakota Access pipeline (DAPL) filed documents in court that downplay the costs associated with closing the pipeline down while a new environmental assessment is completed. The DAPL owners said in court filings that closing the pipeline could mean billions of dollars in costs to the company and the state of North Dakota. However, the court filing from tribes said such a closure “would involve modest and manageable impacts.” The argued that the “profits of other should not come at the expense of the Tribes, especially when the law has not been followed.” A ruling on whether the pipeline should be shut down while the environmental review is completed is expected in coming weeks.

 


FOOD & BEVERAGE INDUSTRY


 

Barron’s: Food stocks worth filling up on. The weekly investment publication says, “With their cheap valuations and generous yields, packaged-food giants such as Kellogg and Hershey offer an appetizing alternative to bonds. And, they have better growth prospects than many expect.” Link for details (paywall).
 

     Food stocks

     Food appetite


CORONAVIRUS UPDATE


 

Summary: Global cases of Covid-19 are at 147,226,221 with 3,110,245 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 32,077,305 with 572,200 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 228,661,408 doses administered, 86,759,346 have been fully vaccinated, or 26.5% of the U.S. population.

 

— Total number of vaccine shots given across the world passed 1 billion, as Europe said it would allow vaccinated U.S. tourists to travel to the continent this summer, the Bloomberg reported (link). Meanwhile, with 1.2 billion vaccine doses purchased, the U.S. has enough vaccine to cover its population twice over (without even considering the 1.3 billion doses it has the option to buy, according to a count by the Duke University Global Health Innovation Center).

 

    Billion vaccines

 

— CDC advisers OK resuming use of Johnson & Johnson vaccine. Advisers to the Centers for Disease Control and Prevention (CDC) recommended resuming the administration of the Covid-19 vaccine from Johnson & Johnson, which had been on pause for 10 days for safety monitoring. Health officials around the country resumed offering the company’s Covid-19 vaccine this weekend after getting a green light from federal regulators on Friday — there were shipments arriving last week before the vote in some areas (link).

 

— Michigan is latest Covid-19 hotspot, recording 91,000 new Covid-19 cases over the last two weeks — more than California and Texas combined. More contagious variants, a lack of vigilance and average vaccine compliance have been cited as factors.

 

— India’s Covid surge came after loosening restrictions and public complacency set in, with highly contagious variants now spreading around the globe potentially serving as an accelerant. The outbreak threatens to extend the pandemic itself, driving world-wide numbers to new highs and creating an enormous viral pool that could become a breeding ground for new and potentially dangerous mutations. The U.S. joined European countries in offering help to India where the surge in the virus is causing record infection and deaths are overwhelming graveyards and crematoriums. Meanwhile, Twitter has agreed to block tweets in the nation critical of the government’s handling of the pandemic, BuzzFeed reported (link). India Prime Minister Narendra Modi has been harshly criticized for his response to the surge in cases.

 

     India Covid surge

 

— Taxi and limousine services near the U.S./Canada border are seeing a spike in business as travelers seek to circumvent Canada’s strict quarantine requirements. Under current regulations, those flying into Canada must spend up to three days out of a 14-day quarantine period at a hotel. No such restrictions apply to overland travelers, prompting budget-conscious travelers to return to North America via U.S. airports and book a car for the final leg. The Canadian Border Services Agency appears to have measured the phenomenon; border crossings jumped 60% in the last week in March compared to 2020. “They call from six in the morning to 12 at night,” John Arnet, general manager of 716 Limousine in Buffalo, New York, told Reuters (link). “We’ve had so many requests for border crossings that we’re turning them down.”

 


POLITICS & ELECTIONS


 

— Troy Carter wins House special runoff election in Louisiana. The Associated Press projected Carter, the minority leader of the Louisiana state Senate, as the victor over state Sen. Karen Carter Peterson less than three hours after polls closed. He will give Democrats 219 seats in the House, with three more Democratic vacancies to be filled by special elections this year. Carter will serve out the remainder of former Rep. Cedric Richmond’s (D-La.) term in the House.

 

— Manchin discusses endorsement of Murkowski for re-election. Sen. Joe Manchin (D-W.Va.), on CNN’s State of the Union, discussed his endorsement of Sen. Lisa Murkowski (R-Alaska) for re-election. Manchin said, “Basically when you have someone such as Lisa Murkowski that just is solid — and when I say ‘solid,’ looks at the issue, not afraid step out and make a decision — she’s done that and done it so well over many years. Her and I have been friends and we have had great conversations. ... I think people like Lisa Murkowski should be in the Senate, and I’m going to support the people I do.”

 

— Cunningham to enter South Carolina gubernatorial race. The Charleston (SC) Post and Courier reports (link) ex-Rep. Joe Cunningham (D-S.C.) said he will announce his candidacy for South Carolina governor today. The decision “puts an end to months of speculation about whether the ambitious one-term congressman would enter the political arena again.” Cunningham will challenge Gov. Henry McMaster (D) “in a bid to become the first Democrat in the South Carolina governor’s mansion since 1998.”

 

— Equity legislation for black and minority farmers. House Agriculture Chairman David Scott (D-Ga.) told an Agri-Pulse forum that he is working on equity legislation with Ways and Means Chairman Richard Neal (D-Mass.) that would include tax incentives for food and agribusinesses to buy from Black and other selected minority farmers.

 

— Is this the real Biden? Axios notes this: “It's the unspoken Biden formula: Talk like a rosy bipartisan; act like a ruthless partisan.” The analysis group adds, “Biden advisers feel they have a huge opening to raise taxes and pick winners in the energy markets, in part because Republicans and business no longer lock arms — and wallets — in opposition to the reordering of capitalism.”

 

— Biden/Putin summit. President Joe Biden will meet with Russian President Vladimir Putin on June 15-16, according to Russian daily Kommersant. The newspaper, citing unnamed sources, said the summit would be held in a European country. Yuri Ushakov, a foreign policy adviser to Putin, told the Russian news agency RIA that the government had yet to reach a firm decision on whether the summit would go ahead.
 


OTHER ITEMS OF NOTE     


 

— Department of Homeland Security will no longer collect fines from immigrants who were ordered deported but remained in the United States. Secretary Alejandro Mayorkas said the civil penalties are “ineffective and unnecessary punitive measures.”

 

— On Tuesday, April 27, European parliament members vote on whether to ratify the EU/U.K. trade agreement. The vote was delayed in February over translation concerns, and again in March to protest U.K. changes to the Northern Ireland protocol.

 


 

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