Gains in Chinese total imports of corn, wheat, and sorghum
In Today’s Updates
* U.S./China trade deal 'fully intact,' Trump says
* Gains in Chinese total imports of corn, wheat, and sorghum
* Brazil, Britain voluntarily halt meat exports to China due to Covid-19
* China approves two new GMO soybean varieties for import
* U.S. imposes restrictions on Chinese media
* Top European Union officials warn China’s leaders
* More than $4 billion in CFAP payments made
* Coming to Starbucks: Plant-based breakfast
* Update on reopening America... and around the world
* MLB set to impose abbreviated 60-game 2020 season
* Coronavirus update
* Dr. Anthony Fauci is returning to Capitol Hill today
* Mexico halts farmworkers to Canada
* Saudi Arabia is limiting this year’s hajj pilgrimage
* President Trump travels to Arizona to inspect the border wall
* Trump signs order temporarily halting access to several employment-based visas
* Some primary contests to watch today
* University of Michigan withdraws from hosting a presidential debate in October
* Biden could lose Wis. or Mich. and still win the election if he were to win Arizona
* House Dems detail text of $1.5 trillion infrastructure plan
* White House economic adviser Kevin Hassett leaves Trump administration
* Fan-Li Chou is joining the American Seed Trade Association (ASTA)
* Experts warn EU-Mercosur trade deal could be at threat
Equities today: Stocks in Asia and Europe gained after indicators showed manufacturing and services sectors around the world starting to recover as pandemic lockdowns ease. U.S. futures edged higher after an initial plunge caused by Trump administration trade advisor Peter Navarro (see related item and special report), suggesting shares could rise after the opening bell in New York this morning.
U.S. equities yesterday: The Dow closed up 153.60 points, 0.59%, at 26,024.96. The Nasdaq rose 110.35 points, 1.11%, at 10,056.47. The S&P 500 moved up 20.12 points, 0.65%, at 3,117.86.
On tap today:
• IHS Markit's preliminary U.S. manufacturing index for June is expected to rise to 52 from 39.8 at the end of May. The services index is expected to rise to 48 from 37.5. (9:45 a.m. ET)
• U.S. new-home sales for May are expected to rise to an annual pace of 640,000 from 623,000 a month earlier. (10 a.m. ET)
• Richmond Fed's June business activity survey is out at 10 a.m. ET.
• St. Louis Fed President James Bullard speaks at the Milken Institute Summer Series at 1 p.m. ET.
Economic activity around the world is stabilizing. Surveys of purchasing managers showed service-sector and manufacturing output recovering in much of Europe and Asia this month. U.K. and French manufacturing returned to growth, but demand remains weak. Japan's service sector showed signs of life but manufacturing output worsened, leaving its composite purchasing managers index in contractionary territory.
"You'll see a big V in terms of the economy going up for the next few months because it's been closed," Blackstone CEO Steve Schwarzman told Bloomberg Invest Global on Monday, though it may "take quite a while before we sync up and get back to 2019 levels." Also at the event, hedge fund manager Bill Ackman said he believes the recovery will begin by year-end and sees a normalization of the economy in the second half of 2021.
Sales of previously owned homes dropped 9.7% in May from the prior month as the coronavirus pandemic kept shoppers indoors during the typically busy spring homebuying season. Sales have plunged since hitting a 13-year high in February. The May closings represent the lowest annualized sales activity since October 2010. But record-low interest rates have lured buyers off the sidelines in recent weeks.
U.S. banks have seen a record $2 trillion surge in deposits since January, a result of the government's response to the coronavirus pandemic and individual decisions to save more money. In April alone, deposits grew by $865 billion, more than the previous record for an entire year.
The SEC and the U.S. Justice Department agreed to a formal partnership that could result in greater scrutiny of the fees charged by stock exchanges for crucial market data.
Shale industry still dealing with impacts of low oil prices. Low oil prices could force the shale industry to write down the value of their assets by as much as $300 billion, with much of that happening this year, according to a new analysis by Deloitte. BP last week became the first U.S. oil major since the pandemic to acknowledge its oil and gas assets are worth less than expected, announcing it is writing down up to $17.5 billion in assets while projecting a lower oil price outlook. About 30% of shale producers are already “technically insolvent” when U.S. oil prices are $35 per barrel, and another 20% are financially “stressed” at that level, according to the analysis. The West Texas Intermediate price is currently trading around $39 per barrel. Result: “The grim financial position of many companies and weak economic outlook could trigger deep consolidation in the U.S. shale industry,” the Deloitte analysis says. About 27% of small-to-medium sized shale producers are good candidates to be acquired by larger rivals, while another 50% are “avoidable” and would be too risky for buyers.
• In other financial markets: The U.S. dollar index is weaker. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.68% level.
• Oil recovers losses after Trump says China Phase 1 trade deal still on. Oil prices resumed gains, clinging to a three-month high as signs of improving demand buoyed a market momentarily roiled by confusion over U.S./China trade brought on by comments from Trump trade policy advisor Peter Navarro. Futures in New York rose 0.4% after President Trump said the deal with Beijing was “fully intact” following remarks from Navarro were interpreted as an end to the agreement. After earlier dropping 2.4%, crude is now back atop $41.40 per barrel, rising nearly 2%. Brent crude has also moved higher, trading around $43.90 per barrel.
• Gold prices approached a new 7½-year high. Front-month gold futures for delivery in June rose 0.6% to $1,756.70 a troy ounce on the Comex division of the New York Mercantile Exchange, closing just below their highest level since October 2012. Prices are up 16% for the year.
• Dairy: The sector’s self-imposed actions to manage supply appear to have worked… perhaps too good. Cheese prices continue to set records as milk supplies have tightened. Washington helped push the price back up when it stepped in to buy $3 billion in agricultural goods as part of stimulus efforts. More recently, the reopening of restaurants and other institutions has led to a sudden spike in demand — milk suppliers are struggling to catch up. And retail sales are still higher than they used to be, as people cook at home more often; some of that shift may be permanent. But already dairy industry reps indicate the sector is poised to get back on the higher production track.
• Transportation: Improved barge traffic is being seen, with huge jumps from year-ago levels. But it’s important to remember that flooding was holding river activity down at this point last year. Still, volumes are rising as export demand is pulling product into the system.
• Rice: Volatility remains a feature in the rice market as crop prospects are solid. The demand side of the equation has to rely on domestic consumption as U.S. supplies remain pricey on the global market, tempering U.S. export opportunities.
• Cotton: Demand for the fiber around the globe is down as the Covid-19 situation has dramatically lowered clothing/textile demand. U.S. Retail Sales figures showed a near-200% rise in clothing sales for May, but overall the sector is far below where it was before the pandemic.
• EU reduces corn and sorghum import duties by 12%. Corn, sorghum and rye imports into the European Union will now be subject to an import duty of EU4.65 ($5.25) a ton, the EU said in its Official Journal. That compares with a duty of EU5.27 a ton in April. New import duties take effect today. The EU is a major importer of corn for livestock use, but not from the United States.
Plant-based breakfast. As part of its summer menu, Starbucks will begin selling a breakfast sandwich made with Impossible sausage at most U.S. locations. "Over the years, in response to customer interest, we have added plant-based milk alternatives such as soy, coconut, almond, and oat milk. We are thrilled to expand our plant-based menu into food with this new breakfast sandwich," said Michael Kobori, chief sustainability officer at the company. Previously, Starbucks partnered with Beyond Meat to offer similar plant-based sandwiches in Canada and China.
A Japanese supercomputer was crowned as the world’s fastest. Fugaku, a system installed in Kobe, carried out 2.8 times more calculations a second than IBM’s runner-up. Chinese and American supercomputers have dominated the top 500.
— Update on China:
- Trump via tweet at 10:22 p.m. ET puts out Navarro fire re: Phase 1 accord with China: “The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!”
Background: It's been a while since White House advisor Peter Navarro raised his usual ruckus, but that is what he did following a brief appearance with Fox News' anchor Martha MacCallum, noting that the president wanted to maintain the agreement and ensure that China made good on its commitments. “But given everything that’s happened and all the things you just listed, is that over?” she asked. “It’s over. Yes,” Navarro, a frequent critic of China, responded. As stock futures plunged, Navarro quickly sought to clarify his comments, telling the Wall Street Journal they had been “taken wildly out of context.”
“They had nothing at all to do with the Phase 1 trade deal, which continues in place,” Navarro said. “I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world.”
Navarro's second take reflected comments made last week before Congress by U.S. Trade Representative Bob Lighthizer who said the trade deal shows no signs of weakening despite differences between the two nations over the coronavirus pandemic, China’s crackdown on Hong Kong’s autonomy and China’s falling behind on purchases of U.S. goods. “Every indication is that in spite of this Covid-19, they are going to do what they say,” Lighthizer said.
From China, Foreign Ministry spokesman Zhao Lijian said of Navarro: "He consistently lies and has no honesty and trustworthiness.” As for the Phase 1 agreement, Zhao told reporters at a briefing, "China's stance on the issue has been consistent and clear."
Perspective: Many analysts believe that tensions with China could ramp up as the U.S. presidential election approaches and Trump adopts a campaign stance. “The trade deal is most at risk in September and October,” Paul Donovan of UBS wrote in a note to clients.
- Gains in Chinese total imports of corn, wheat, and sorghum. China imported 640,000 MT of corn during May, which was a 14.7% dip from the year prior, but its year-to-date corn imports are up 15.9% at 2.78 MMT. The country’s wheat, barley and sorghum were also up impressively from year-ago during May at 810,000 MT (up 292%), 510,000 MT (up 64%) and 270,000 MT (up 6,738%), respectively. Five months into the calendar year, China’s wheat imports have soared 67.8% from year-ago to 2.44 MMT, while its sorghum imports have pushed to 1.09 MMT, which compares to negligible shipments last year. Its total barley imports of 1.95 MMT are down 31.8% from year-ago.
Other China Customs data:
• Pork imports hit 370,000 tonnes in May, up 86% vs May 2019
• Sugar imports 300,000 tonnes in May, down 22.3% vs May 2019
- Brazil, Britain voluntarily halt meat exports to China due to Covid-19. Brazil’s Agra Agroindustrial De Alimentos has voluntarily halted beef exports China after a Covid-19 outbreak at its workforce and Britain’s Tulip voluntarily suspended pork exports to China from its Tipton plan for the same reason, according to reports quoting the General Administration of Customs.
This comes after China suspended imports from a Tyson Foods plant and German processor Toennies.
China has increased testing of meat, seafood and fresh produce after Covid-19 being found in the major Xinfadi wholesale food market in Beijing and asked companies exporting food to China to sign declarations that their products were free of Covid-19. Last week, China customs authorities tested more than 15,000 samples, all of which they declared to be negative.
- U.S. meat industry continues to mull China’s ban on imports from one Tyson Foods plant. China’s action to bar imports of poultry from the Springdale, Arkansas, Tyson Foods plant continues as a discussion point in the U.S. meat industry, with most agreeing that it will not have a significant impact if it is not expanded. "Hopefully it's not going to mean anything," said Jim Sumner, president of the USA Poultry & Egg Export Council. "If it remains at just one plant, it will not have any meaningful impact, but we don't know what's going to happen." He also noted that the product is frozen and spends some 30 days in a container traveling to China. “So there is zero possibility of a live virus from the U.S. showing up in frozen poultry as it has been shipped by ocean carrier halfway around the world.” A spokesman for Tyson said their products are safe and hoped the issue can be resolved in talks between the two countries.
- U.S. Soybean Export Council says China soybean buyers asking exporters to guarantee no Covid contamination in soybean cargoes. China’s soybean buyers are asking exporters to sign a letter guaranteeing their soybean shipments are not contaminated with the coronavirus, according to the U.S. Soybean Export Council. Zhang Xiaoping, China director for the group, said the requests are coming from local customs authorities, not Beijing, and are coming from local authorities asking soybean importers to guarantee shipments are safe. That has prompted the requests of firms that exports to soybeans, Zhang said, adding it was not clear how many had signed such a letter.
- China approves two new GMO soybean varieties for import. China’s Ministry of Agriculture and Rural Affairs said it has approved the import of two new GMO soybean varieties and has renewed safety certificates for six other GMO crops for import. The renewed safety certificates are for five corn varieties and one soybean variety developed by Monsanto Far East, Dow AgroSciences and Syngenta. One of the new soybean varieties approved was developed by China’s Dabeinong Technology Group. The company partnered with Argentina’s Bioceres to help it gain regulatory approval in Argentina for the seed which happened in February 2019. The approval in China now sets the stage for the seed to be marketed for planting in Argentina. All the approvals took effect June 11 and are valid for five years.
- U.S. imposes restrictions on Chinese media. The State Department will require four state-controlled Chinese media outlets to report all personnel and register any property holdings. The U.S. statement said it was not based on content produced by the outlets and it does not put any restrictions on what they can publish in the U.S. This places the entities under “certain administrative requirements that also apply to foreign embassies and consulates in the United States.”
Not surprisingly, China condemned the action, with Foreign Ministry spokesman Zhoa Lijian labeling it "yet another example of the U.S.' flagrant political suppression of the Chinese media.” Zhoa said China wants the U.S. to “abandon the Cold War mentality and ideological prejudice, and immediately stop and correct this wrong practice that serves no one's interest. Otherwise China will have to make the necessary legitimate response.”
- New security laws imposed on Hong Kong by Beijing will also be applied to foreign businesses and media, but businesspeople “need not to worry” as long as they do not violate national security, Hong Kong’s delegate to China’s top legislative body has told the Nikkei Asian Review.
- Top European Union officials warned China’s leaders on Monday that ties between the two trade partners would be damaged if they failed to further open their economy to European companies and treat foreign firms fairly, a clear sign of hardening attitudes toward Beijing. EU officials said they warned China’s leaders in video calls about the new security law for Hong Kong, telling Chinese leaders there will be “negative consequences” if they move ahead with the measure. "The relationship between the EU and China is simultaneously one of the most strategically important and one of the most challenging that we have," European Commission President Ursula von der Leyen said at news briefing. She labeled China a partner and a competitor, saying China had not yet allowed greater access for European companies as it agreed to in 2019. European Council President Charles Michel said von der Leyen said they told Chinese President Xi Jinping and Premier Li Keqiang of their concerns over the security law. "We also conveyed that China risks very negative consequences if it goes forward with imposing this law," von der Leyen said. “The European Union is in touch with our G7 partners on this topic and we've made our position very clear to the Chinese leadership today and urged them to reconsider."
- India wants Russia to accelerate the delivery of a missile defense system following its worst military clash with China along their disputed border in four decades. The two sides have reportedly agreed to disengage in the area, while the Chinese and Indian foreign ministers are due to meet today amid rising nationalism as the countries jostle for regional influence.
— Update on next aid package:
- Regarding the coming economic stimulus measure, just departed White House economic adviser Kevin Hassett said on Monday, "The president is examining all the options and also watching the economic data come in. As the end of July approaches there should be much more clarity concerning the best design of the stimulus.”
— Update on implementation of CARES 1, including CFAP:
- More than $4 billion in CFAP payments made. USDA has issued more than $4 billion in Coronavirus Food Assistance Program (CFAP) payments to 252,489 producers as of June 22, according to an update from the Farm Service Agency (FSA). More than 360,000 applications have been submitted thus far. The payments include $1.04 billion to non-specialty crop producers, $84.27 million for specialty crops, $1.98 billion to livestock producers and $895.31 million to dairy producers.
— Update on reopening America... and around the world:
- MLB set to impose abbreviated 60-game 2020 season. The league said that after failing to reach an agreement with the players' union, it would impose a season at the length of commissioner Rob Manfred's choosing.
- Louisiana Gov. John Bel Edwards said the state wouldn’t move into its third phase of reopening by the end of the week as planned due to increased infections and hospitalizations, and Texas Gov. Greg Abbott said the virus was “now spreading at an unacceptable rate.”
- Delta Air Lines will restart passenger flights to China this week, the first U.S. airline to do so. Major carriers suspended routes in late January as the Trump administration imposed travel restrictions.
— Coronavirus update:
- Summary: Covid-19 cases have reached 9,115,398 with deaths at 472,521, according to data from the Center for Systems Science and Engineering (CSSE) at Johns Hopkins University (JHU). The US case total is at 2,312,302 with deaths at 120,402. Brazil has 1.106 million cases with 51,271 deaths. 27,553,581 tests have been conducted in the United States.
Cases have surpassed 100,000 in Florida. The numbers are creating unease about the restart of the NBA season in Orlando next month and the Republican National Convention in Jacksonville in August. Meanwhile, hospitalizations are rising significantly in Houston, Texas. And more than 20% of those tested in Arizona were positive for Covid-19.
People are flocking to South Carolina's beaches after being cooped up for months. But the coronavirus isn't taking a vacation, according to the Associated Press, which reports the state now has the fourth-highest new infection rate in the nation when adjusted for population, trailing just Arizona, Arkansas and Alabama.
- Dr. Anthony Fauci is returning to Capitol Hill today as Covid-19 cases are rising in about half the states and polarization is competing for attention with public health recommendations. Fauci will appear before the House Energy and Commerce Committee. He will be joined by Robert Redfield, the director of the Centers for Disease Control and Prevention. Stephen Hahn, commissioner of the Food and Drug Administration, and Brett Giroir, assistant secretary for Health and Human Services. Last month, Fauci warned senators that reopening efforts by states need to be done cautiously because it presents a "real risk that you will trigger an outbreak."
- Going to school is costly for another reason... As U.S. schools consider how and when to reopen, many are finding themselves overwhelmed by the potential expenses needed for social distancing: protective equipment, staff for smaller classrooms and additional transportation to keep students spread out on bus rides.
- Gilead Sciences said it would soon begin clinical studies of an inhaled form of the drug remdesivir, with the aim of expanding its use to nonhospitalized Covid-19 patients.
- India has added nearly 15,000 new infections to its caseload as some states that dodged the initial surge of the virus are considering new lockdowns. India’s nationwide tally exceeds 440,000 cases and includes 14,011 deaths.
- Mexico halts farmworkers to Canada. Mexico, which provides half of the guestworkers on Canadian farms, temporarily halted their movement to Canada until officials are satisfied with precautions against the coronavirus following the death of two workers and reports that at least 600 are infected. Mary Robinson, president of the Canadian Federation of Agriculture, said the loss of these workers would be “incredibly unfortunate” and would create “greater uncertainty, not only impacting this year’s harvest but next year’s cropping plans.” Canada’s dependence on the 60,000 temporary foreign workers who arrive each year from countries such as Mexico and Jamaica as part of a federal government program, and without whom hundreds of thousands of tons of blueberries, asparagus stalks and grapes would wither on the vine. They’re so vital that Prime Minister Justin Trudeau declared them essential workers, exempt from the restrictions that have shut the borders to most foreigners. They must quarantine for 14 days; Trudeau gave employers $37 million to cover those costs. Trudeau said he offered condolences to Mexican President Andrés Manuel López Obrador. “We should always take advantage of moments of crisis to reflect,” he said. “Can we change the system to do better?” Link to Washington Post article.
- Saudi Arabia will drastically limit the number of pilgrims to this year’s hajj, with only Saudis and foreign nationals already in the kingdom allowed to take part.
OTHER ITEMS OF NOTE
- As expected, Trump signed an order temporarily halting access to several employment-based visas, affecting hundreds of thousands of people seeking to work in the U.S., although many agricultural and health-care jobs are exempted. The technology industry said the move would hurt the economy. The issuance of new green cards will also remain halted through the end of the year. Trump administration officials say the move, combined with extended restrictions on new green cards, could bar a half-million foreign workers from the U.S. in the rest of this year. The order is likely to be challenged in court by business groups.
- Some primary contests to watch today:
• Rep. Eliot Engel (D-N.Y.), who is 73 and has been in Congress since 1989. He’s been endorsed by Nancy Pelosi, Andrew Cuomo, Hillary Clinton, the Congressional Black Caucus, Planned Parenthood and multiple unions. The challenger is Jamaal Bowman, 44, who grew up in public housing and became the founding principal of a Bronx middle school. He has been endorsed by Alexandria Ocasio-Cortez, Ayanna Pressley, Bernie Sanders, Elizabeth Warren, Democratic Socialists of America and Move On. The New York Times editorial board has also endorsed Bowman.
• The Democratic Senate primary in Kentucky — to decide who will face Majority Leader Mitch McConnell — features Amy McGrath, a former fighter pilot who ran unsuccessfully for the House last year, against Charles Booker, a progressive state representative.
• Ocasio-Cortez faces her own primary challenge, from Michelle Caruso-Cabrera, a former CNBC anchor backed by several Wall Street executives.
- University of Michigan said late Monday that it would withdraw from hosting a presidential debate in October, citing concerns about a large gathering. Meanwhile, the Biden campaign has rejected the Trump campaign’s request to add a fourth presidential debate to the usual three. President Trump heads to Arizona today as his campaign tries to regain momentum after underwhelming turnout at a rally last weekend in Tulsa, Oklahoma. Trump will attend a ceremony celebrating 200 miles of completed border wall construction under his administration. He will visit Yuma, Arizona, for a roundtable briefing with U.S. border officials on trade and travel operations and the progress of the southern border barrier’s construction at the international boundary and then will participate in a wall “commemoration’ ceremony.”
- Biden could lose Wisconsin or Michigan and still win the election if he were to win Arizona. This hypothetical map (link), from the political website 270ToWin, shows how.
- House Dems detail text of $1.5 trillion infrastructure plan. There’s money for more than just roads and bridges: The bill would pump billions of dollars into water projects, broadband development, school upgrades and rural communities. The around 2,300-page package (link) is built on the surface transportation bill that the Transportation Committee passed last week, which would provide $494 billion for roads, bridges and transit projects over five years. The broader package would devote $130 billion to upgrade the poorest schools in the U.S., including better high-speed broadband access. There’s also $46.5 billion for water infrastructure, along with provisions to curb per- and polyfluoroalkyl (PFAS) substances contamination in the water supply. Western water projects and anti-drought measures would garner another $3.5 billion. The legislation would require a set portion of the funds to go to communities with fewer than 10,000 people. Next step: Dems want to bring the measure to the House floor before July 4.
Outlook: The bill faces low odds of passing the GOP-controlled Senate, but the details show what Democrats hope to achieve if they control the White House and Senate as well as the House next year.
- White House economic adviser Kevin Hassett has left the Trump administration — again. President Trump asked Hassett, the former chairman of the White House Council of Economic Advisers, to come back as an adviser in early March as the coronavirus began spreading across the U.S. Hassett agreed to come back for 90 days, which have since passed, he said Monday, his last day on the job, as first reported on Axios.
- Fan-Li Chou is joining the American Seed Trade Association (ASTA) as vice president for scientific affairs and policy, starting on Aug. 10, ASTA announced. Chou is currently an advisor to USDA Sec. Sonny Perdue on agricultural biotechnology.
- Experts are warning that the EU-Mercosur trade deal could be at threat if Brazil fails to curb environmental destruction, as more than two dozen financial institutions around the world demand that Jair Bolsonaro’s government reins in surging deforestation.
- Boon for the energy industry. It's the single-largest energy infrastructure investment in the region, and the biggest in the world in 2020. A consortium of six global investors has entered into a $20.7 billion agreement with Abu Dhabi National Oil Company to acquire a 49% stake in a newly formed subsidiary, ADNOC Gas Pipeline Assets, with lease rights to 38 pipelines. Those involved are Global Infrastructure Partners, Brookfield Asset Management, Singapore's sovereign wealth fund GIC, Ontario Teachers’ Pension Plan, NH Investment & Securities and Snam.