Senate Fails to Advance Jobless Benefits Extension, But White House Makes New Offer

Posted on 07/31/2020 7:30 AM

Trump has no power to delay election; Congress does, and will not

 


In Today’s Updates


 

Top Topics:
* White House offers to extend $600 benefits extension, but Pelosi, Schumer reject
* Big gulf remains between GOP and Democrats' latest aid packages
* U.S. GDP shrinks by record amount in second quarter
* China factory activity expands for fifth straight month
* Japan industrial output rose in June
* Eurozone GDP declined by 12.1% in the second quarter of 2020
* China buys a lot more U.S. corn; China watcher says several million more tons ahead

* China fires warning shot to U.K. over ‘cold war’ with Beijing
* Chinese-backed hackers reportedly targeted Moderna for vaccine data
* Citing coronavirus, Hong Kong postpones legislative elections for a year
* Survey: 73% of U.S. adults have unfavorable view of China
* Crude, heating oil and gasoline starting to break down, technically
* Gold headed for biggest monthly gain in more than four years
* Australia to force Google, Facebook to pay for news


Coronavirus update:
* Southern states report record numbers of Covid-19-related deaths
* Midwest fears a coronavirus surge
* Study: Children can carry as much of coronavirus in noses & throats as adults
* FDA would approve vaccine as long as it's safe and at least 50% effective

* Covid-19 lawsuits begin to hit employers

 

Politics & Elections:
* GOP leaders quickly rebuffed Trump’s suggestion of delaying election
* Democrats unveil partial convention schedule
* Michigan official warns of delay in election results
* Odds rising Senate will vote to eliminate filibuster if Dems gain control of chamber


Other Items of Note:
* Two Republican lawmakers join House Agriculture Committee
* Senate Banking Committee postpones nomination votes
* Procedural vote on DOE nominee set for next week
* ITC determines U.S. industry injured by wind tower imports from four countries
* Rural America could finally get high-speed Internet
* Cotton AWP moves lower

 


MARKET FOCUS


 

Equities today: U.S. stock indexes are pointed toward modestly higher openings. the biggest tech stocks — Apple, Amazon, Facebook and Alphabet — reported quarterly results that beat high expectations. Amazon and Apple are up 65% and 31%, respectively, in 2020, while Facebook and Alphabet each have gained more than 14% over the period. With all four stocks moving higher in after-hours trading, the tech titans likely will add more than $200 billion to their combined market value. The MSCI Asia Pacific Index slipped 1% while Japan's Topix index closed 2.8% lower. The pan-continental Stoxx Europe 600 rose 0.6%.

 

     U.S. equities yesterday: The Dow declined 225.92 points, 0.85%, at 26,313.65. The Nasdaq rose 44.87 points, 0.43%, at 10,587.81. The S&P 500 fell 12.22 points, 0.38%, at 3,246.22.

 

On tap today:

 

     • U.S. consumer spending for June is expected to rise 5% from a month earlier. (8:30 a.m. ET)
     • U.S. employment-cost index for the second quarter is expected to rise 0.6% from the prior quarter. (8:30 a.m. ET)
     • Chicago purchasing managers index for July is expected to rise to 43.5 from 36.6 a month earlier. (9:45 a.m. ET)
     • University of Michigan consumer sentiment index for July is expected to fall to 72.7 from a preliminary reading of 73.2. (10 a.m. ET)
     • Baker Hughes rig count is out at 1 p.m. ET.
     • Commitments of Traders report at 3:30 p.m. ET

 

U.S. gross domestic product fell at a seasonally and inflation adjusted 32.9% annual rate in the second quarter (what would happen to the U.S. economy if conditions continued at their second-quarter level for the entire year), or a 9.5% drop compared with the prior quarter, the Commerce Department said Thursday, the most devastating three-month collapse on record. The drop would have been even steeper had it not been for trillions of dollars in government aid to households and businesses.

 

     GDP quarter

 

     GDP contributions

     NYT coverage

     Booms and busts

 

Last week, 1.43 million Americans filed for unemployment insurance for the first time. It's a sign that the rebound in the labor market has stalled as reimposed limits on some forms of economic activity in coronavirus-hot spot states is leading to new layoffs.

 

     Jobless

     Insurance

 

Eurozone GDP declined by 12.1% in the second quarter of 2020, the largest quarterly decline on record — since records began in 1995. (Eurozone GDP contracted at an annual rate of 40.3%.) The region’s largest economies contracted by two-digits during the period due to strict lockdown measures brought about by the coronavirus pandemic. German GDP contracted by 10.1%; Italy’s sank by 12.4%; France’s fell by 13.8%; and Spain’s shrank by 18.5%. The latter was the worst performing economy over the second quarter. Excluding food and energy, Eurostat reported that inflation in the currency union rose 1.3% in July after a rate of 1.1% in June.

 

     Eurozone drop

 

Japan industrial output rose in June. Industrial output in Japan registered an increase of 2.7%, breaking a string of four months of declines, suggesting the Japanese economy could be showing signs of recovery. The increase came in large part on a rise in motor vehicle production. For the second quarter, however, output still fell 16.7%.

 

One country is showing some economic gains: China. An official gauge of China’s factory activity expanded at a faster pace in July, keeping the recovery of the world’s second-largest economy on track. China’s official manufacturing purchasing managers index picked up slightly from June and remained in expansionary territory for the fifth consecutive month. China’s official nonmanufacturing purchasing managers index remained in positive territory thanks to robust activity in the property and investment sectors, which fueled construction. But the overall nonmanufacturing index decelerated slightly from a month earlier. Taken together, the data suggests that consumer demand continues to lag behind the recovery in China’s industrial capacity.

 

     China growth

 

Market perspectives:

 

     • Crude, heating oil and gasoline are starting to break down, technically — part of the reason metals sold off Thursday. Says one analyst: “Not good news for raw commodity sector.”

 

     • Crude oil prices were firmer in Asian action, with U.S. crude up 14 cents at $40.06 per barrel while Brent crude gained 27 cents at $43.31 per barrel. As the U.S. opening bell approaches, crude prices remain higher, with U.S. crude gaining around 0.8% to trade near $40.25 per barrel and Brent crude up 0.6% to trade around $43.50 per barrel.


     • A benchmark tracking the U.S. dollar may match its worst month in a decade.

 

     • There’s an old markets' adage that the smartest traders are bond traders. U.S. Treasury bond yields this week have moved to near record lows, on safe-haven demand and a flight to quality. The yield on the benchmark U.S. Treasury 10-year note is currently trading around the 0.53% level. Bottom line: Someone has to be wrong: Equity market bulls or bond traders.

 

     • Gold is headed for the biggest monthly gain in more than four years. Gold prices surged to another record high overnight, at $1,981.80, basis August Comex futures.

 

     • Speculative bets on copper continue to climb.

 

     • Coffee prices are rebounding amid improved global demand.

 

Australia to force Google, Facebook to pay for news. Australia will become the first country in the world to force Facebook and Google to pay publishers for the news content featured on its sites. It will give the companies three months to negotiate fair pay with media businesses there, a move to ensure competition and consumer protection as well as a sustainable media landscape. Other companies are likely to be targeted for similar moves by Australia's government later.

 


POLICY FOCUS


 

Senators adjourned until Monday after failing to agree on extending jobless benefits; negotiations continue today; new offer from White House. The $600 weekly federal aid payments officially are set to expire. Senate Majority Leader Mitch McConnell (R-Ky.) forced a vote to continue them at $200 in a bid to compel Democrats, who wanted to maintain the full payments, to go on the record opposing an extension. Republicans blocked Senate Democrats' attempt at their favored approach on the topic.

 

     Mark Meadows, the White House chief of staff, made an offer to extend enhanced unemployment at $600 per week for four months as a stand-alone bill, Politico reports. This is a new offer from the White House, and further than Republicans have gone thus far. But House Speaker Nancy Pelosi (D-Calif.) Senate Minority Leader Chuck Schumer (D-N.Y.) rejected the offer, and countered with extending enhanced unemployment insurance at the same rate —$600 per week — through the first quarter of 2021. Meadows and Treasury Secretary Steven Mnuchin rejected that, but it shows offers are being made behind the scenes.

 

     The Federal Pandemic Unemployment Compensation program currently provides an additional $600 per week to individuals who are collecting unemployment compensation — including through regular state programs, existing federal programs and newly created pandemic-specific unemployment programs. That expires today.

 

     Benefits

 

A big gulf between GOP and Democrats' latest aid packages. The New York Times has a graphic that illustrates the huge differences, as shown below in one of the several graphics. Link to NYT item for more.

 

    Gulf in plans

 

Update on China:

  • USDA said on Thursday that exporters sold 1.937 million tonnes of corn to China for delivery in the 2020-21 marketing year. That topped the previous biggest deal to China of 1.762 million tonnes, reported just two weeks ago. In the Weekly Export Sales report, USDA said soybean sales to China rose to 1.925 million tonnes in the week ended July 23, the biggest weekly total since Nov. 17, 2016.

    Perspective: A China watcher who accurately told Pro Farmer last week that big corn buys were coming, now says several additional million tons are ahead.

    China corn history

     
  • China fires warning shot to U.K. over ‘cold war’ with Beijing. The Chinese ambassador says Britain should not be coerced by the U.S. into taking a hostile stance. Liu Xiaoming, China’s ambassador in London, said disagreements over Beijing’s imposition of a new security law in Hong Kong, as well as the UK’s ban on using Huawei in its 5G mobile networks, had “seriously poisoned the atmosphere” in Sino-British relations. Liu had previously warned there would be “consequences” if the U.K. banned Huawei from its telecoms networks, but on Thursday denied the charge that he had made threats. “We make no threats. We threatened nobody. We just let you know the consequences,” he said. “If you do not want to be our partners and our friends, if you want to treat China as a hostile country, you will pay the price.”
     
  • Citing coronavirus, Hong Kong postpones legislative elections for a year. The postponement is clearly another negative opposition groups since China imposed a national security law on the city.
     
  • China's Politburo met Thursday and announced that the Fifth Plenum will meet in October and will “assess the proposals for formulating the 14th Five-Year (2021-2025) Plan for Social and Economic Development and future targets for 2035.” The readout of the Politburo meeting also stated that the members “studied the current economic situation and made arrangements for the economic work for the second half of the year.” They clearly understand that the current situation is difficult.

    The Xinhua statement summarizing the Politburo meeting did not mention the U.S. directly, but hinted that China was not expecting an all-out conflict with Washington even though the “international environment is becoming increasingly complex”... “Peace and development are still the themes of the times … but there will be changes in opportunities and challenges,” the statement said.

    Chinese President Xi Jinping called for a greater push on reforms to stimulate domestic demand and the economy to ride out mounting risks and challenges, saying conditions remain “complicated and grave.” Xi said China should speed up its “dual circulation” growth model that is primarily driven by domestic demand, while drawing in foreign investment and stabilizing trade.

    Over the past two months, a new catchphrase known as “dual circulation theory” has been gaining currency but also causing controversy. According to the theory explained in official media, Chinese leaders envision a new economic pattern to be dominated by “major domestic economic circulation” and facilitated by circulation between China and the rest of the world.

     
  • Taiwan is mourning the death of former President Lee Teng-hui, one of the key architects of Taiwan’s democracy (president from 1988 to 2000). His funeral may pose thorny diplomatic choices for Taiwan as Japan and the U.S. may want to send senior officials. “China’s goal regarding Taiwan has never changed,” he said in a rare interview with the New York Times, amid efforts by the Chinese government to further isolate the island from the international community. “That goal is to swallow up Taiwan’s sovereignty, exterminate Taiwanese democracy and achieve ultimate unification.”
     
  • Today, 73% of U.S. adults say they have an unfavorable view of China, up 26 percentage points since 2018, according to the Pew Research Center. Since March alone, negative views of China have increased 7 points, and there is a widespread sense that China mishandled the initial outbreak and subsequent spread of Covid-19. Link for details.

    Around two-thirds of Americans (64%) say China has done a bad job dealing with the coronavirus outbreak. Around three-quarters (78%) place a great deal or fair amount of the blame for the global spread of the coronavirus on the Chinese government’s initial handling of the Covid-19 outbreak in Wuhan.

    Pew survey on China

     
  • FBI Director Christopher Wray and other intelligence community officials warned about China’s increased capability to interfere in U.S. elections in separate classified hearings with the Senate Intelligence Committee this week, two sources familiar with the hearings told Axios.
     
  • U.S. blocking more Chinese flights. The Department of Transportation late Thursday issued another order disapproving future flights from Chinese carriers “because of the Chinese government’s own restrictions on international flights.” The two nations have been battling over flight access for months.
     
  • Chinese-backed hackers reportedly targeted Moderna for vaccine data. China rejects charges that hackers linked to its government targeted Moderna to steal data related to research on a coronavirus vaccine. Citing an unnamed U.S. security official, Reuters reported yesterday that Chinese hackers targeted the U.S. biotech firm earlier this year. Moderna said it had been in contact with the FBI and was made aware of the suspected "information reconnaissance activities" by a hacking group mentioned in last week's Justice Department indictment, where two Chinese nationals were accused of spying on the U.S., including three unnamed U.S.-based targets involved in medical research to fight Covid-19. The two other unnamed medical research companies mentioned in the Justice Department indictment are described as biotech companies based in California and Maryland — descriptions that could fit Gilead Sciences and Novavax.
     
  • Smalls farms where cotton is hand-picked still dominate the industry in China's Southern Xinjiang. A new CSIS Brief (link) explores forced labor in the region and what opportunities exist to eliminate Xinjiang-linked forced labor from Western supply chains.
     
  • U.S./China Phase 1 tracker: China’s purchases of U.S. goods. Link.

Coronavirus update:

  • Summary: Source: Johns Hopkins University as of 6:30 a.m. ET.

    — 17,321,394: Confirmed cases world-wide, and 584,556 deaths
    — 67,619: New U.S. cases recorded yesterday
    — 4,495,224: Total confirmed cases in the U.S.
    — 1,233: Deaths in the U.S. recorded yesterday
    — 152,070: Total U.S. deaths
    — 54,644,715: Tests conducted in the U.S.

    Link to Covid Case Tracker

    Link to Our World in Data

     
  • Southern states reported record numbers of Covid-19-related deaths as the nationwide death toll increased by about 1,600 in a single day. The Florida state health department reported 253 new coronavirus deaths Thursday, its third straight single-day record of Covid-19 deaths. The state has confirmed 6,586 deaths.
     
  • Midwest fears a coronavirus surge. Deborah Birx, a leading member of the White House coronavirus task force, told the Fox News channel that the virus was “moving up” into states including Ohio, Kansas, Nebraska, Kentucky, Missouri and Tennessee, “because of vacations and other reasons of travel.” Missouri and Ohio both reported record one-day increases in coronavirus cases on Thursday.
     
  • A new study suggests that children can carry at least as much of the coronavirus in their noses and throats as adults — suggesting they are likely to spread the virus, as well.
     
  • Herman Cain, a businessman and former presidential candidate, died after he was hospitalized with the coronavirus. He was 74. The former chief executive of Godfather’s Pizza ran for the Republican nomination in 2012.
     
  • Food and Drug Administration Commissioner Stephen Hahn said the FDA could make a vaccine available before full approval through an emergency use authorization, in an interview with the Journal of the American Medical Association Thursday.
     
  • U.S. government has agreed to pay $2.1 billion to drugmakers Sanofi and GlaxoSmithKline to support the development of their potential coronavirus vaccine, the companies announced this morning. The U.S. could acquire 100 million doses as part of the deal if the vaccine proves safe and effective, with an option to get an additional 500 million more. Sanofi and GSK are jointly developing the vaccine.
     
  • Covid-19 lawsuits begin to hit employers. Employers across the country are being sued by the families of workers who contend their loved ones contracted lethal cases of Covid-19 on the job, a new legal front that shows the risks of reopening workplaces. Link to WSJ item for details.

 


POLITICS & ELECTIONS


 

  • Links
    2020 Presidential Election Interactive Map
    The Green Papers

     
  • GOP leaders quickly rebuffed Trump’s suggestion of delaying election. The president in a tweet questioned whether the date should be pushed back and criticized universal mail-in voting as inaccurate and fraudulent without providing evidence. “Never in the history of the country, through wars, depressions, and the Civil War, have we ever not had a federally scheduled election on time, and we’ll find a way to do that again this Nov. 3,” said Senate Majority Leader Mitch McConnell (R-Ky.). Later in the day, however, Trump said, "Do I want to see a date change? No. But I don't want to see a crooked election." A president cannot delay the election. Article II of the Constitution empowers Congress to choose the timing of the general election, and a federal law mandates that it must be held on the first Tuesday after the first Monday in November. "What will happen in November — it's a mess," Trump said. "I want a result much, more than you... I don't want to be waiting around for weeks and months."
     
  • Democrats unveil partial convention schedule. Organizers unveiled a partial schedule for the Democratic National Convention in Milwaukee, Wis., beginning next month. Due to the coronavirus, many of the smaller group meetings will be held virtually, while some speakers will be appearing from locations around the country.
     
  • Michigan official warns of delay in election results. Michigan’s top elections official warned that results of the Nov. 3 election might not be known for days in the swing state. Secretary of State Jocelyn Benson called on lawmakers to change a state law that bars officials from even opening mail absentee ballots until the morning of Election Day.
     
  • Odds rising Senate will vote to eliminate the filibuster if Democrats regain control of chamber. Former President Barack Obama says the Senate may need to end filibuster. Obama made the remarks on Thursday while speaking at the funeral of the late Rep. John Lewis (D-Ga.) a civil-rights era icon. The legislative filibuster is a longstanding Senate rule that requires most bills to meet a three-fifths threshold in order to pass — or 60 votes out of 100 when there are no vacancies. It often enables the minority party to block bills they oppose. Obama mentioned the filibuster as he urged lawmakers to honor Lewis’s memory by passing a list of priorities that include automatic voter registration, adding polling places, expanding early voting and making Election Day a national holiday. He called the filibuster an outdated tool of segregationists. “And if all this takes eliminating the filibuster, another Jim Crow relic, in order to secure the God-given rights of every American, then that’s what we should do,” he said. Link to a Wall Street Journal opinion item on the topic. Link to an article in the WSJ on the topic.
     

OTHER ITEMS OF NOTE


  • Two Republican lawmakers joined the House Agriculture Committee. Reps. Chris Jacobs (R-N.Y.) and Troy Balderson (R-Ohio) are the newest additions to the panel’s minority.
     
  • The Senate Banking Committee postponed a vote on the nominations of Hester Peirce and Caroline Crenshaw to the Securities and Exchange Commission and Kyle Hauptman to the National Credit Union Administration Board to August 5. The postponement was announced just hours before the committee vote was scheduled Thursday afternoon.
     
  • Procedural vote on DOE nominee set for next week. A vote to invoke cloture on the nomination of Mark Menezes to be Deputy Energy Secretary has been set for Monday evening as Senate Majority Leader Mitch McConnell (R-Ky.) filed cloture on the nomination Thursday. Menezes is currently undersecretary of Energy.
     
  • ITC determines U.S. industry injured by wind tower imports from four countries. Imports of utility scale wind towers from Canada, Indonesia, Korea and Vietnam have “materially injured” the U.S. industry, according to the U.S. International Trade Commission (USITC). The U.S. Commerce Department had determined they were sold in the U.S. at less than fair value and subsidized by the Canadian, Indonesian and Vietnamese governments. Commerce will issue antidumping duty orders on imports of this product from Canada, Indonesia, Korea, and Vietnam and countervailing duty orders on imports of this product from Canada, Indonesia, and Vietnam. But USITC made negative findings on “critical circumstances” on imports from Korea, Vietnam and Indonesia. Critical circumstances relate to whether imports have surged recently in anticipation of tariffs. That finding means the imports “will not be subject to retroactive tariffs, but will still face duties going forward,” USITC said.
     
  • Rural America could finally get high-speed Internet. Amazon.com's tech ambitions got a boost as the FCC approved its $10 billion plan to put thousands of satellites in the sky to provide high-speed Internet to unserved and underserved areas. The company's Project Kuiper — using 3,200 low Earth orbit satellites — would compete in that area with the Starlink project at SpaceX.
     
  • Cotton AWP moves lower. The Adjusted World Price (AWP) for cotton declined to 47.71 cents per pound, effective today (July 31), down from 49.04 cents per pound the prior week and the third weekly decline. USDA also announced Special Import Quota #15 will be established Aug. 6 for 17,878 bales of upland cotton, applying to supplies purchased not later than Nov. 3 and entered into the U.S. not later than Feb. 1. USDA said that the “cost to market” adjustment for the 2020/21 crop year will be 16.95 cents per pound and will become effective for the week ending Aug. 6, 2020, applying to the week of Aug. 7.

 

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