U.S. daily coronavirus cases jump by more than 50,000 for first time
In Today’s Updates
* Traders await this morning's U.S. Employment report
* U.S./China tensions continue to escalate
* Key to know when China/U.S. reactions have reached a new negative stage
* Trump says he's very happy with Fed Chief Powell's performance
* Fed's Bullard: Wave of business failures could still trigger a financial crisis
* We aren't in a V-shaped economic recovery
* EPA's Wheeler: No RFS announcement this week; questions on retroactive SREs
* Sen. Cruz also puts hold on EPA nominee Benevento
* WSJ: Don’t expect the USMCA to usher in a new era of North American trade peace
* Saudis are threatening a new oil-price war with their OPEC brethren
* Sen. Grassley ‘skeptical, but open’ to more Covid-19 aid for states, localities
* House clears bill to extend loan program for small business
* U.S. food supply update
* Update on USDA's Farmers to Families Food Box program
* Update on reopening America... and around the world
* Apple and McDonald’s rethink reopening plans
* Coronavirus update
* U.S. daily coronavirus cases jump by more than 50,000 for first time
* Calif., Texas and Arizona set records for Covid cases
* Trump plans to meet with his Mexican counterpart Andres Manuel Lopez Obrador
* Russians paved the way for Putin to stay in power until 2036
* U.S. seeks to seize Iranian fuel bound for Venezuela: WSJ
* House passed $1.5 trillion infrastructure bill yesterday
* USTR announces USMCA enforcement panelists
* U.S. Senate confirms Trump's 200th judicial nominee to 5th Circuit
Equities today: U.S. equity futures are higher after Asian stocks gained, including in Hong Kong where they outperformed after returning from a holiday, despite the recent tensions. European stocks opened higher.
U.S. equities yesterday: The Dow lost 77.91 points, 0.3%, to 25,734.97. The S&P 500 climbed 15.57 points, 0.5%, to 3,115.86. The Nasdaq gained 95.86 points, 0.95%, to 10,154.63.
On tap today:
• U.S. nonfarm payrolls for June, due at 8:30 a.m. ET, are expected to increase by 2.9 million from a month earlier and the unemployment rate is expected to fall to 12.4% from 13.3% a month earlier.
• U.S. jobless claims for the week ended June 27, also due at 8:30 a.m., are expected to fall to 1.38 million from 1.48 million a week earlier.
• U.S. trade deficit for May, due at 8:30 a.m., is expected to widen to $53 billion from $49.41 billion a month earlier.
• U.S. factory orders for May, due at 10 a.m., are expected to rise 8.7% from a month earlier.
• Baker Hughes rig count is out at 1 p.m.
• Congressional Budget Office releases its updated economic outlook for 2020 to 2030 at 2 p.m.
• China's Caixin services index is out at 9:45 p.m.
UPDATE: The jobless rate fell to 11.1% in June as the U.S. regained 4.8 million jobs. Job growth in June followed May’s payroll gain of 2.7 million and showed Americans are slowly getting back to work. The jobless rate, down from 13.3% in May, is still well elevated at historically high levels compared to before the coronavirus drove the U.S. into a deep recession. Until March, the unemployment rate was hovering around a 50-year low of 3.5%.
The number of new applications for jobless benefits fell by 55,000 to 1.43 million last week, the Labor Department said in a separate report this morning. Unemployment claims have come down from a peak of nearly 7 million in late March but have stabilized near a historically high 1.5 million, an indication companies continue to cut jobs.
Two economic reports in focus this morning. (Note: See above items for results of the reports.) The U.S. Labor Department's closely watched employment report is expected to show non-farm payrolls rose by 3.0 million jobs in June, after increasing by 2.509 million jobs in the month of May. Jobless rate is expected to fall to 12.3% in June from 13.3% in May. Initial claims for state unemployment benefits are forecast to decline by 125,000 to a seasonally adjusted 1.355 million for the week ended June 27.
Caveat: Analysts note that the jobs data won't show whatever setbacks the labor market suffered as coronavirus cases began to spike in the final weeks of June, forcing rollbacks of reopening plans.
Trump says he is very happy with Fed Chief Powell's performance. Trump, a previously fierce critic of the Federal Reserve who has shifted to praise as it battled the coronavirus, has voiced fresh satisfaction with Chair Jerome Powell. “I’m very happy with his performance,” Trump said in a Fox Business Network interview yesterday. “I would say I was not happy with him at the beginning” but he’s becoming more happy, he said.
The Fed's James Bullard said a wave of business failures owing to the pandemic could still trigger a financial crisis, as he justified the central bank’s continuing efforts to prop up capital markets. “We’re still in the middle of the crisis here,” James Bullard, president of the Federal Reserve Bank of St Louis, said in an interview with the Financial Times on Wednesday. “Even though we got past the initial wave of the March-April timeframe the disease is still quite capable of surprising us,” he said. “Without more granular risk management on the part of the health policy, we could get a wave of substantial bankruptcies and [that] could feed into a financial crisis.”
“In any crisis, I think we need to keep in mind that there can be twists and turns, there can be another shoe to drop, and that could happen here,” he said. “And for that reason, I think it’s probably prudent to keep our lending facilities in place for now even though it’s true that liquidity has improved dramatically in financial markets.”
We aren't in a V-shaped economic recovery. After signs the economy was rapidly recovering from mid-April through mid-June, it has shown signs of sputtering. Spending dropped last week, especially in states with spikes in coranavirus cases. Recoveries seldom proceed in a straight line and it’s too soon to write this one off, says observers. Its path this time has been especially unpredictable because it depends on the pandemic and the social-distancing measures undertaken to halt its spread.
So what shape is the U.S. economy taking? At the moment, the Wall Street Journal’s Greg Ip writes, the economy appears to resemble the reverse of a square root symbol — that is, an initial rebound followed by a long plateau.
Many ag industry analysts continue to be baffled by USDA's Acreage report estimates. The doubters say the numbers do not add up, with some noting the updated estimates do not make as much sense as those did from March planting intentions. “One of those reports was wrong, but I'm betting its the latest Acreage report, but we will not have any solid clues of that until acreage certification analysis is reflected in USDA numbers come October,” said one analyst. "The reduction from the March Prospective Plantings for 16 major crops was down 6.6 million acres from March intentions and was down 7.4 million acres from the 2018 acreage. It is hard to explain why farmers cut so many acres this year given their historical plantings. Also, some to many farmers probably thought that they may have to plant 2020 crops in order to get a likely additional Covid- or China-related payment ahead."
• U.S. refined product demand continues to improve; distillates (diesel, etc.) demand is back to normal.
• Oil steadied after data Wednesday showed a bigger-than-expected draw on American crude stockpiles. Futures held near $40 a barrel in New York after rising 1.4% Wednesday as the Energy Information Administration reported a 7.2 million-barrel decrease in U.S. inventories last week, the biggest decline this year. Sentiment was also aided by a survey showing OPEC output fell to the least since 1991 in June, while Russia reached near total compliance with its OPEC+ quota.
• The Saudis are threatening a new oil-price war with their OPEC brethren. Saudi Arabia has threatened to ignite an oil-price war unless fellow OPEC members make up for their failure to abide by the cartel’s recent production cuts. Link to WSJ article.
• The ISM Manufacturing PMI, a closely watched indicator of U.S. factory activity, topped economists' forecasts. The headline index saw the biggest monthly increase in June since 1980 as manufacturing returns to growth (PMI > 50).
• The FOMC minutes from the June 9-10 policy meeting underscored the FOMC’s cautious outlook that is dependent on the path of virus, which — in the FOMC’s view — poses considerable risks in the near term. The Fed's monetary policy-setting arm doesn't see the recovery in consumer spending being "particularly rapid beyond this year" and noted a need for "highly accommodative monetary policy for some time.” As for the potential use of yield-curve control — yield caps or targets ("YCT"), nearly all participants had "many questions regarding the costs and benefits of such an approach." Many of the officials, though, didn't see a need for YCT as long as the FOMC's forward guidance, on its own, remains credible.
July 4th statistics... 76% of Americans plan to celebrate Independence Day this year, down from 86% in 2019, as concerns run high over gathering in large groups or attending public events due to the coronavirus pandemic. Those who do have plans for the holiday are forecast to spend over $76 on average for food items — in line with historical trends — for a total of $6.52 billion. More than half of consumers are planning a cookout or BBQ and 28% of those celebrating expect to purchase additional patriotic items.
— EPA's Wheeler: No RFS announcement this week; questions on retroactive SREs. EPA still has not received assessments from the Department of Energy (DOE) on the 52 retroactive small refinery exemptions (SREs) that refiners have filed for the 2011 through 2018 compliance years, EPA Administrator Andrew Wheeler told reporters Wednesday.
Several issues remain. While EPA has submitted the applications to DOE, Wheeler said, “There’s a number of issues around that.” Given that the petitions cover years in which the renewable identification numbers (RINs) have already expired. “There’s questions about whether they can show economic harm and what the remedy would be, but we’re waiting to see what the Dept. of Energy says about small refinery exemptions,” Wheeler said.
As for reports EPA may come with their proposed rule on the 2021 biofuel and 2022 biodiesel levels yet this week, Wheeler flatly stated, “There’s nothing coming out tomorrow.” As of July 1, the EPA proposed rule was still shown as being under review at the Office of Management and Budget (OMB).
— Hurdle for EPA nominee is getting higher. Earlier this week, Sen. Joni Ernst (R-Iowa) said she would not back the nomination of Doug Benevento to be deputy EPA administrator until EPA says how it will handle the 52 retroactive small refinery exemptions (SREs) that it has received for prior compliance years going back to 2011. Now Sen. Ted Cruz (R-Texas) said he will not let Benevento’s nomination move forward until EPA provides relief for refiners on Renewable Identification Numbers (RINs). "The price of RINs has more than quadrupled since the beginning of the year, and now sits around $0.50,” he said in a statement. “These sky-high prices coupled with the energy and economic crises caused by the coronavirus pandemic have wreaked havoc on America's small refineries and blue-collar workers.” Until EPA Administrator Andrew Wheeler “delivers on his promise to take actions that help bring stability to the price of RINs, I will not allow this nomination to move forward."
— WSJ: Don’t expect the U.S.-Mexico-Canada Agreement to usher in a new era of North American trade peace. Ongoing tensions over tariffs and other issues that prolonged negotiations are complicating the rollout of the updated version of the North American Free Trade Agreement this week, the Wall Street Journal reports (link), and ramping up uncertainty for cross-border supply chains. Lingering sore points include rules still being finalized that require auto makers to keep more of their factories in the U.S. and Canada, and concern that the U.S. could impose new levies on metals as aluminum imports from Canada surge. The USMCA keeps much of the groundwork laid by NAFTA but adds provisions for digital trade and safeguards meant to bolster standards in Mexican factories. “U.S. labor groups worry Mexico won’t follow through on those requirements, while lawmakers from farm states question how far Canada will go to open up its dairy market,” the article notes.
— Update on China:
- Key to know when China/U.S. reactions have reached a new negative stage: If and when China's Communist Party media starts attacking President Trump. “That's when the U.S./China relationship has really gone off the rails,” says one China watcher.
- The U.S. has postponed flights for dozens of diplomats who had planned to return to China, after failing to reach agreement with Beijing over issues including Covid-19 testing and quarantine.
- The U.S. is preparing to roll out long-delayed sanctions over human-rights abuses against Uighurs in Xinjiang, China. The targets reportedly will be senior Communist Party officials involved in the internment and persecution of the Muslim ethnic group. Earlier plans for the action were put on hold for trade talks.
- The U.S. House of Representatives passed a bill imposing sanctions on banks that do business with Chinese officials involved in cracking down on pro-democracy protesters in Hong Kong.
- U.S./China media kerfuffle continues. On June 22, the U.S. issued a new determination to designate four additional Chinese media agencies, namely, China Central Television, the People's Daily, the Global Times and China News Service, as foreign missions. China demands in retaliation that the Associated Press, United Press International, Columbia Broadcasting System, and National Public Radio declare in written form information about their staff, finance, operation and real estate in China within seven days from Wednesday.
- China is preventing Canada from consular access to a Chinese Canadian prisoner, sentenced to eight years for practicing Falun Gong, by claiming that she had renounced Canadian citizenship.
- Britain said Wednesday that it would allow almost 3 million Hong Kong citizens to move to the U.K., confirming a plan that riled Beijing earlier this year. Britain’s foreign secretary described the new regime as a “clear and serious violation” of the agreement under which Britain handed the territory back in 1997 — although he admitted Britain could do little if China blocks any emigrants, as it has since promised to do.
- The U.S. is also looking into helping those who want to leave Hong Kong via a bipartisan bill known as the "Hong Kong Safe Harbor Act" that would grant Hong Kongers priority refugee status.
— Update on next aid package:
- Sen. Grassley ‘skeptical, but open’ to more Covid-19 aid for states, localities. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said Wednesday that he is “skeptical, but open to considering options” when it comes to additional aid to states and localities beyond what was included in the CARES Act and other Covid-19 relief packages. He pointed to moves by the Federal Reserve to establish a Municipal Liquidity Facility to lend to “help state and local governments better manage cash flow pressures” and $150 billion in direct aid included under the CARES Act as examples of assistance already made available.
“We’ve heard a number of calls for massive amounts of additional funding. The reason, according to most people asking for more, is that the direct aid for states and localities in the CARES Act is too restrictive, and cannot be used to replace lost revenue,” he explained. The Senate Finance chair said he is “somewhat sympathetic to the idea of giving states and localities more flexibility in how to use the $150 billion of direct relief provided in the CARES Act,” but remains “skeptical, but open to considering options” regarding additional monies in a future Covid-19 aid measure.
- Negotiations on another aid package won’t begin in earnest until the Senate returns from recess on July 20. Economic data over the next month, including today’s jobs report, will shape much of the debate in Washington. “Any phase four economic package must prioritize pro-growth economic measures that incentivize employers and our great American work force for re-employment and a return to the labor market,” Judd Deere, a White House spokesman, said.
— Update on implementation of CARES 1, including CFAP:
- House clears bill to extend loan program for small business. A day after the Senate passed a last-minute extension of the Paycheck Protection Program loan application deadline on Tuesday, the House did the same Wednesday, clearing the bill for the president. It extends the Small Business Administration’s forgivable loan program for coronavirus-impacted companies from June 30 to Aug. 8. Even as lawmakers agreed to extend the current program, members of both parties were demanding more detailed information on how the funds have been spent so far. Others are proposing modifications or calling for new initiatives to help companies that are hardest hit by the pandemic or excluded from PPP.
— Food and beverage supply/industry update:
- USDA's Farmers to Families Food Box program has delivered around 27.5 million boxes of food aid, considerably short of the goal of delivering 40 million in the first round, which ended Tuesday. The Agricultural Marketing Service dropped at least two controversial choices from its list of contractors for the program. CRE8AD8 (“Create a Date”) is out. Another exit: Yegg Inc., a California firm. New contracts went to 16 companies. Gold Star Foods in Ontario, Calif., received the largest at $90.4 million, and Military Produce Group received a contract worth $21.6 million.
— Update on reopening America... and around the world:
- California Governor Gavin Newsom is set to announce new lockdown measures for Los Angeles County that will force restaurants to close their dining rooms again, according to trade publication Eater. The lockdowns will last for at least three weeks and force restaurants to revert to takeout and delivery service, Eater reported, citing an unidentified person in Los Angeles Mayor Eric Garcetti’s office.
- Apple on Wednesday announced that it would re-close 30 U.S. retail stores in seven states — including Florida, Texas, Oklahoma and its home state of California.
- McDonald’s is also postponing plans to reopen dining areas in its U.S. restaurants by three weeks because of the increase in cases. While 99% of McDonald’s U.S. restaurants are open, most are confined to drive-through, delivery and take away. Seating is available in approximately 2,200 outlets — about 15% of the total.
- Baseball, men’s and women’s basketball, hockey, soccer, as well as Formula One racing and cricket are all set to restart in some shape or form this month. Adam Silver, the commissioner of the NBA, said that he was “pretty confident” plans to restart the league in Florida would move forward but that he was monitoring the surge in cases there.
— Coronavirus update:
- Summary: The number of new U.S. daily coronavirus cases surpassed 50,000 for the first time ever on Wednesday, propelled by record rises in some of the most populous states, including California and Texas. The surge in cases has increased concerns about the speed at which the disease is spreading in emerging U.S. hotspots ahead of the July 4 holiday weekend. A further 52,982 people in the U.S. tested positive for coronavirus over the past 24 hours, according to Covid Tracking Project, topping the previous record increase from June 26 by more than 8,600. Throughout the month of June, the daily case rate in the U.S. rose 105%.
• 10,712,304 confirmed cases world-wide, and 516,552 deaths
• 50,655 new U.S. cases recorded yesterday
• 2,686,587 total confirmed cases in the U.S.
• 645 deaths in the U.S. recorded yesterday
• 128,062 total U.S. deaths
• 32,827,359 tests conducted in the U.S.
- Texas posted a record 8,076 new virus cases, pushing the total to 168,062, according to state health department figures. Fatalities jumped by 57 to 2,481 for the biggest one-day increase since May 14. The state’s positive-test rate has been above 13% for four days, the longest stretch above that threshold since the pandemic emerged.
- The number of confirmed infections in India has topped 600,000, with health authorities reporting 19,148 new cases in the past 24 hours. India’s Health Ministry said the death toll from the virus was now 17,834 people.
- An outbreak in Melbourne, Australia’s second-largest city, has continued to grow. Most of the latest cases were in suburbs that were put under a one-month lockdown Wednesday night.
- In the Middle East the number of cases passed the 1 million mark. The World Health Organization said the region (which includes Pakistan) has reached a “critical threshold.”
- Tokyo reported 107 new Covid-19 infections, the most on any one day since Japan lifted its state of emergency on May 25, and the highest number since May 2.
- An early trial of an experimental coronavirus vaccine from Pfizer Inc. and BioNtech SE showed it’s safe and prompted patients to produce antibodies against the new virus. The companies hope to run a much larger study within weeks and have the capacity to manufacture up to 100 million doses by the end of the year.
OTHER ITEMS OF NOTE
- Trump plans to meet with his Mexican counterpart Andres Manuel Lopez Obrador next Wednesday at the White House. The two will celebrate the U.S.-Mexico-Canada Agreement (USMCA). Trump said in a statement he would discuss “trade, health, and other issues central to our regional prosperity and security” with Lopez Oprador on July 8. The Canadian government has not confirmed whether Prime Minister Justin Trudeau will join the other two North American leaders in Washington.
- Putin power. Russians appeared to have paved the way for Russian President Vladimir Putin to stay in power until 2036 by voting overwhelmingly for a package of constitutional changes. The independent monitoring organization Golos called the vote rigged from the start.
- U.S. seeks to seize Iranian fuel bound for Venezuela: WSJ. The attempt to prevent the delivery of four tankers-worth of fuel is the administration’s latest effort to go after shipping networks that help Iran evade U.S. sanctions. Link to WSJ for details.
- The House passed a $1.5 trillion infrastructure bill yesterday, setting up a fight with Senate Republicans over environmental reviews, mass transit funding, and how to pay for roads and bridges. The bill is unlikely to become law in its current form. Republicans in the GOP-led Senate said they don’t support it, and the White House threatened a veto on Monday, saying it shortchanges rural areas.
- USTR announces USMCA enforcement panelists. USTR and the Labor Department detailed the names of the six Americans with backgrounds on labor issues who will serve on the agreement’s “rapid response labor mechanism” to investigate alleged labor rights violations. USTR also announced the names of 10 individuals who will sit on dispute settlement panels to hear other disputes brought by governments under the pact. Those include U.S. Trade Representative Bob Lighthizer’s close ally and former USTR general counsel Steven Vaughn.
- U.S. Senate confirms Trump's 200th judicial nominee to 5th Circuit. On June 24, the U.S. Senate confirmed President Trump’s 200th Article III judicial nominee. According to Ballotpedia, this is the second-fastest time to arrive at a president’s 200th judicial confirmation since Jimmy Carter. Of the past seven presidents, Carter’s 200th nominee was confirmed in the shortest amount of time at 1,126 days into his presidency. Trump’s 200th confirmation landed 1,251 days into his presidency.