$4 gas in U.S. by Memorial Day 2022? | Biden trade policy: Whatever union workers want
In Today’s Digital Newspaper
Market Focus:
• Traders not getting vacation for New Year’s this year due to obscure regulation
• S&P CoreLogic Case-Shiller 20-city home price index climbed 18.4% in October from YA
• CEOs say Covid is the least of their worries
• Inflation watch: Apple issuing big stock bonuses worth $50,000 to $180,000
• Global benchmark Brent crude is up more than 14.5% since the beginning of the month
• $4 gas by Memorial Day 2022?
• OPEC+ resisted U.S. calls to boost output to keep guidance clear: Russia’s Novak
• Forecasters warning of powerful thunderstorms in coming days
• Ag demand update
• Followthrough selling overnight
• January weather to be much like December in South America
• Limited relief from heat, dryness in Argentina
• First half 2021-22 Ukraine grain exports up sharply from last year
• Slow start to cash cattle negotiations
• Pork cutout unable to sustain most of morning price strength
Policy Focus:
• USDA recalculates DMC payment formula
• Tax relief for R&D costs delayed
Personnel:
• WSJ: Biden mulling trio of Fed nominees
China Update:
• Chinese officials promising to add stimulus to stabilize the nation’s growth next year
• Key dates ahead for China
• More than 200 police officers in Hong Kong raided the offices of Stand News
• China warns of ‘drastic measures’ if Taiwan provokes on independence
• Talks underway on possible changes to China’s new aircraft-cleaning requirements
• Is China on a major buying binge (some say hoarding) of ‘strategic products’?
Trade Policy:
• Biden trade policy: Whatever union workers want
• USDA looking to recognize Lithuania as eligible to import egg products to U.S.
Coronavirus Update:
• FDA says rapid Covid tests may be less accurate with Omicron
• Omicron could ‘push Delta out’ by boosting immunity against it, study suggests
Politics & Elections:
• The Hill lists 10 Republicans most likely to run for president in 2024
Congress:
• Harry Reid dies at age of 82, after a battle with pancreatic cancer
Other Items of Note:
• U.S. and Russia agree to hold security talks on Jan. 10
• Talks on reviving Iran nuclear deal in Vienna showing some progress
• John Madden, legendary NFL coach, Hall of Famer and sports broadcasting icon, dies at 85
MARKET FOCUS
Equities today: Global stock markets were mixed overnight. U.S. stock indexes are pointed toward slightly higher openings. Asian equities finished mostly lower as concerns over the Omicron variant continued to weigh on investor sentiment. The Nikkei was down 162.28 points, 0.56%, at 28,906.88. The Hang Seng Index declined 194.02 points, 0.83%, at 23,086.54. European equities are seeing losses in early trading. The Stoxx 600 was essentially steady while most regional markets were down 0.2% to 0.6%; the FTSE was bucking the trend, gaining 0.8%.
U.S. equities yesterday: The Dow registered a gain while the Nasdaq was unable to maintain early gains and the S&P 500 ended weaker, unable to register another record finish — the S&P 500 is now up more than 27% on the year as investors look to close out 2021. The Dow gained 95.83 points, 0.26%, at 36,398.21. The Nasdaq fell 89.54 points, 0.56%, at 15,781.72. The S&P 500 was down 4.84 points, 0.10%, at 4,786.35.
Indexes such as the S&P 500 have a tendency to rise in the last five days of the year and the first two days of the new year, as investors start positioning.
Traders might be surprised they won’t be getting vacation time for New Year’s this year due to an obscure regulation called NYSE Rule 7.2. The law stipulates that the exchange will be closed either Friday, or the following Monday, if a holiday falls on a weekend, unless “unusual business conditions exist, such as the ending of a monthly or yearly accounting period.” It’s a pretty rare occurrence, with Rule 7.2 making its last appearance a decade ago, when New Year’s Day fell on a Saturday in 2011. However, markets closed early on Dec. 31, 2010, but there was no day off.
On tap today:
• U.S. economic data due for release includes advance economic indicators, pending home sales and the weekly DOE liquid energy stocks report.
S&P CoreLogic Case-Shiller 20-city home price index climbed 18.4% in October from a year earlier. The gain marked a slight deceleration from a 19.1% year-over-year increase in September but was about in line with what economists had been expecting. All 20 cities posted double-digit annual gains. The National Association of Realtors reported last week that sales of previously occupied homes rose for the third straight month in November to a seasonally adjusted annual rate of 6.46 million. Meanwhile the FHFA House Price Index showed an increase of 17.5% from year ago, slightly below the upwardly revised rate of 17.8% registered for September.
CEOs say Covid is the least of their worries. CEOs are getting anxious, according to a global survey of 3,000 executives from the management consultancy AlixPartners, but not from the most obvious disruptive force of the past two years: Covid-19. Instead, the vast majority of executives — who hail from companies with more than $100 million in revenue from the US, China, Japan, and other major economies — rank other worries ahead of Covid-19. Even so, many of their fears are, in one way or another, a symptom of the pandemic. Although executives say they aren’t thinking about Covid-19, they’ll be spending 2022 grappling with its consequences.
Wonder if the Fed would call this wage inflation: Apple is issuing unusual and significant stock bonuses worth $50,000 to $180,000 in an effort to stave off defections to rivals like Meta Platforms. That’s according to a report from Bloomberg, which said the perk was given to engineers in silicon design, hardware, and the select software and operations group. Apple’s out-of-cycle bonuses consist of restricted stock units that vest over four years, providing an incentive to stay on at the iPhone maker. Meanwhile, Apple’s $3 trillion market cap record is within reach and could happen before the year’s end.
Market perspectives:
• Outside markets: The U.S. dollar index is higher ahead of U.S. economic reports, with only the euro seeing losses against the greenback. The yield on the 10-year U.S. Treasury note was higher, trading around 1.5%, with a mixed tone to global government bond yields. · Gold and silver are under pressure ahead of U.S. trading, with gold under $1,795 per troy ounce and silver under $22.80 per troy ounce.
• Crude oil futures were lower as traders awaited U.S. gov’t inventory data. U.S. crude was trading around $75.60 per barrel and Brent around $78.50 per barrel. Crude was little changed in Asian action with U.S. crude down eight cents at $75.98 per barrel and Brent crude was up one cent at $78.95 per barrel.
• Global benchmark Brent crude is up more than 14.5% since the beginning of the month, trading near $80 per barrel on Tuesday for the first time since late November. West Texas Intermediate crude is also up nearly 7% over a week ago. National average retail gasoline prices have been in a downward trend since peaking at $3.505 for the week ending Nov. 8, according to the Energy Information Administration (EIA). The week ending Dec. 27 saw the national average fall to $3.375 per gallon, with the agency predicting in early December that prices would drop to $3.01 per gallon in January and average $2.88 per gallon in 2022. But GasBuddy head petroleum analyst Patrick De Haan believes the falling trend has reversed. “With oil back to $76/bbl, it’s becoming more clear that our month-long run with falling #gasprices is likely coming to an end,” De Haan said in a tweet. “Expect a spike soon in the Great Lakes, which could push the national average up a few cents soon. West Coast could see some increases soon too.” Separately, De Haan told CNN that his modeling indicates the national average gas price is likely to rise to $3.41 per gallon for all of 2022, with a peak in May that could go as high as $4 before edging down again. “We could see a national average that flirts with, or in a worst-case scenario, potentially exceeds $4 a gallon,” De Haan told the outlet. Tom Kloza, global head of energy analysis at the Oil Price Information Service at IHS Markit said in a Dec. 27 Twitter post that he, too, believes the falling gas price trend is over — at least for now. “Cash prices for gasoline up 4cts (East of Rockies) to as much as 16cts gal (PNW). Downtrend in retail pump prices probably over for now,” Kloza wrote.
• OPEC+ resisted U.S. calls to boost output to keep guidance clear for market: Russia’s Novak. OPEC+ countries did not heed the urgings of the U.S. to increase oil output as the cartel was seeking to provide markets with clear guidance and not shift from its stated policy, Russian Energy Minister Alexander Novak told the RBC media outlet. “We believe that it would be right for the market to show in the mid-term how we will increase production as demand grows,” Novak said. “The producing companies should understand beforehand which investments they have to plan in order to ensure a production increase.” Novak also said that they release of stocks by the U.S. and other countries would have only a short-term impact on crude markets. Novak indicated global oil demand would rise by around 4 million barrels per day (bpd) in 2022 after increasing by up to 5 million bpd in 2021. He also said he expected crude prices between $65 to $80 per barrel in 2022.
• Ag demand: Egypt tendered to purchase an unspecified amount of wheat from multiple origins; results are expected later today.
• Forecasters are warning of powerful thunderstorms in the coming days, with a 15% chance of severe storms, strong winds and tornadoes in several southeastern U.S. states by Saturday, according to the federal Storm Prediction Center. A slight chance of extreme weather today will increase later in the week, said Liz Leitman, a U.S. gov’t meteorologist based in Oklahoma. “We could see more widespread threats” heading into the weekend,” she said.
• NWS weather: Bitterly cold wind chills in the northern Rockies and High Plains today, more heavy mountain snow from the Sierra Nevada to the central Rockies... ...Slight Risk for Excessive Rainfall in Southern California today and Thursday; urban and flash flooding possible... ...Spring-like weather to stick around in the South; Enhanced Risk for severe storms and a Slight Risk for Excessive Rainfall posted in parts of the Deep South today.
Items in Pro Farmer’s First Thing Today include:
• Followthrough selling overnight
• January weather to be much like December in South America
• Limited relief from heat, dryness in Argentina
• First half 2021-22 Ukraine grain exports up sharply from last year
• Slow start to cash cattle negotiations
• Pork cutout unable to sustain most of morning price strength
POLICY FOCUS
— USDA recalculates DMC payment formula. USDA has recalculated the Dairy Margin Coverage (DMC) feed cost used to determine the program payments to now base it on premium alfalfa versus blended alfalfa. The Farm Service Agency (FSA) has recalculated the national average margin for each month going back to January 2020 to reflect the change. Under DMC, payments are triggered when the difference between the national all milk price and the national average feed cost (margin) falls under margin trigger levels selected by producers, ranging from $4 to $9.50 per hundredweight (cwt) for Tier 1 and $4 to $8 per cwt for Tier 2. Producers will receive any additional payment based on the amount of covered production history and the margin level selected for 2020 and 2021.
Based on the recalculation, it appears most DMC payments would be increased by around $0.20 per cwt per month. The recalculation in some cases triggered a DMC payment for a new margin trigger level. In those cases, the producers will receive the full payment.
— Tax relief for R&D costs delayed. The delay in passing President Joe Biden’s $2 trillion spending plan means companies won’t get some much-sought tax relief on their research and development costs — at least not yet. A new, less tax-friendly way for companies to record their R&D costs is set to go into effect Jan. 1, now that the spending measure has been shelved. A provision in Biden’s plan would have pushed back that change to 2026, staying with the current more tax-favorable method
PERSONNEL
— Biden eyes Raskin as top fed banking regulator. President Biden is considering Sarah Bloom Raskin for a top role at the Federal Reserve as part of a slate of three nominees for central bank board seats, the Wall Street Journal reported (link), citing people familiar with the matter. Raski is a former Fed governor and former Treasury Department official. She would become the central bank’s vice chairwoman of supervision, the government’s most influential overseer of the American banking system, the report said.
Other nominees expected. The WSJ also said Biden is considering nominating Lisa Cook, a professor of economics and international relations at Michigan State University; and Philip Jefferson, a professor and administrator at Davidson College in North Carolina, to be Fed governors. Cook and Jefferson are both black and Cook would be the first black woman to be a Fed governor — there have only been three black Fed board members and all have been men.
The slate of potential nominees would fill one current vacancy on the U.S. central bank and would fill two other spots that will soon open up — Vice Chair Richard Clarida’s term ends Jan. 31 and Randal Quarles announced he would resign by the end of this month — his term as Fed Vice Chair for Supervision ended Oct. 31 while his term as a Fed governor was not due to end until Jan. 31, 2032.
The report cautioned the final mix of nominees could still change before an announcement comes which is expected in January. The nomination of Raskin would be seen as a nod to progressive Democrats who chafed at Biden nominating Fed Chair Jerome Powell for another term leading the Fed.
CHINA UPDATE
— Chinese officials are promising to add stimulus to stabilize the nation’s growth next year, with various ministries vowing more proactive measures to reverse the slowdown caused by a worsening property slump, weak consumption and the coronavirus.
— Key dates ahead for China: The February Winter Olympics and the mid-fall 20th Communist Party Congress.
— More than 200 police officers in Hong Kong raided the offices of Stand News, an independent news outlet, and arrested six people for “conspiracy to publish seditious publications”. It is one of the few remaining pro-democracy publications in the city. In June 2021, Apple Daily, the city’s leading pro-democracy newspaper at the time, was forced to shut down after a similar raid.
— China warns of ‘drastic measures’ if Taiwan provokes on independence. China will take “drastic measures” if Taiwan makes moves towards independence, a Beijing official warned today, adding that Taiwan’s provocations and outside meddling could intensify next year. China claims democratically governed Taiwan as its own territory and in the past two years has stepped up military and diplomatic pressure to assert its sovereignty claim, fueling anger in Taipei and concern in Washington. China was willing to try its utmost to seek peaceful reunification with Taiwan but would act if any red lines on independence were crossed, Ma Xiaoguang, spokesman of the Taiwan Affairs Office, told a media briefing. “If separatist forces in Taiwan seeking independence provoke, exert force or even break through any red line, we will have to take drastic measures,” Ma said, adding that provocation by pro-independence forces and “external intervention” could grow “sharper and more intense” in coming months. “Next year, the Taiwan Strait situation will become more complex and severe,” he said.
— Talks are underway between the U.S. and China on possible changes to the Chinese government’s new aircraft-cleaning requirements that prompted a Delta Air Lines flight to turn back to Seattle, and that could trigger the cancellation of some flights to China. The talks were confirmed yesterday by a State Department official. The new sanitation mandates — spurred by Covid-19 — significantly extend the time planes are on the ground, the industry said.
— Is China on a major buying binge (some say hoarding) of ‘strategic products’? At China’s central economic work conference earlier this month, Beijing identified securing the supply of primary goods such as agricultural products and minerals as one of five significant issues to prepare for amid global challenges. The leader of the Chinese Communist Party (CCP) Xi Jinping said at the conference that China must establish a “strategic baseline” to ensure self-sufficiency in key commodities, for securing the supply of primary products will help advance the country’s long-term agenda. Analysts say that tensions with the U.S. and its allies such as Australia, another major food exporter to China, could prod the communist regime to dramatically raise food reserves.
Another strategic product is computer chips, with some believing China’s nationwide hoarding played a role in the global chip shortage. They note that China’s State Administration for Market Regulation in August launched a probe into hoarding and other speculative practices as the regime found it disrupted its own market. The U.S. Commerce Department requested global major semiconductor manufacturers to provide their sales data in September. The information it sought included who were the top three buyers of the firms’ products in each of the last three years. Some analysts said Washington needed the data to figure out to what extent China’s storing caused the chip scarcity. One China watcher notes that China began hoarding chips in 2019 when the Trump administration imposed sanctions on its telecom giant Huawei. Fearing they could be next, Chinese companies, many of which are state-run, purchased a large number of chips enough to cover their needs for the next few years.
Garnering the world’s cobalt supply is another top China priority. As the leading country in electric vehicle (EV) manufacturing, China is aggressively sourcing cobalt, a key metal in making EV batteries, from overseas. In the past five years, the second-largest economy has acquired most of Congo’s cobalt-producing mines, which produces two-thirds of the world’s supply. As of last year, 15 of the 19 mines in Congo were owned or financed by Chinese companies, according to a recent New York Times report.
Bottom line: The list does not stop with the products mentioned, as China has been on a buying tear for lithium and liquid natural gas, locking up production and/or supply agreements for years.
TRADE POLICY
— Think the Biden administration doesn’t have a trade policy? Think again. It’s whatever union workers want. That is the gist of a Wall Street Journal article (link) on the topic. It reveals that Asian allies like Japan and Australia are increasingly frustrated with the lack of interest from Washington in joining regional trade agreements to counter China’s growing influence. The United Kingdom and Japan are still awaiting lifting of Trump-era steel and aluminum tariffs.
“At the heart of these conflicts is the sway progressive Democrats and labor unions hold with Biden,” economists and others told the newspaper. About 56% of union households voted for Biden, according to AP Votecast, which conducts voter surveys, compared with 42% voted for Donald Trump.
Need more convincing? U.S. Trade Representative Katherine Tai visited the AFL-CIO’s Washington headquarters in June, where she said union workers are “the backbone of our economy and our democracy.” She then said the primary signal of the Biden administration’s trade policy when she told the union workers: “You are the guiding light of trade policy for the Biden/Harris administration.”
— USDA looking to recognize Lithuania as eligible to import egg products to the U.S. USDA’s Food Safety and Inspection Service (FSIS) announced Tuesday (Dec. 28) it is looking to recognize Lithuania as a country eligible to export egg products to the United States. FSIS said it has reviewed Lithuania’s laws, regulations, and egg products inspection system, and that it has audited the system as implemented, determining that it is equivalent to U.S. inspection requirements under the Egg Products Inspection Act (EPIA). The announcement comes years after Lithuania first requested approval to export egg products to the U.S. in 2014 and FSIS is now looking for comments by Feb. 28 on the matter. “Should FSIS make a final determination to list Lithuania as eligible to ship egg products to the United States, only egg products produced in certified Lithuanian establishments would be eligible for export to the United States,” the agency said. FSIS said the country is seeking to certify one establishment at this point to export egg products to the U.S. Any Lithuanian egg products would also still be subject to inspection at the U.S. point of entry, the agency said.
CORONAVIRUS UPDATE
— Summary: Global cases of Covid-19 are at 282,912,372 with 5,417,212 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 53,174,959 with 820,929 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 505,013,980 doses administered, 205,420,745 have been fully vaccinated, or 62.58% of the U.S. population.
— FDA says rapid Covid tests may be less accurate with Omicron. Rapid COVID-19 antigen tests may be less effective at detecting Omicron than earlier strains on the virus, the Food and Drug Administration said Tuesday. Meanwhile, at around three days, the incubation period for Omicron appears to be shorter than for other covid-19 variants, according to a small study by the U.S.’ Centers for Disease Control and Prevention. Six people in a household in Nebraska caught Omicron upon one member’s return from Nigeria; all showed symptoms within 75 hours of exposure. Other variants, by contrast, incubate for four to six days on average.
— Omicron could ‘push Delta out’ by boosting immunity against it, study suggests. New findings from South Africa suggest that the Omicron coronavirus variant could muscle out its highly transmissible predecessor Delta for good, according to researchers studying how the body’s immune system responds to the two variants. Their data, released by the researchers on Monday in a paper that has not been peer-reviewed, indicated that previous infection with the Omicron variant enhances immune protection against the Delta variant, potentially reducing Delta’s ability to reinfect people after Omicron infection. This suggests that the rapidly spreading — already identified in more than 110 countries — could displace the previously dominant Delta, the researchers said, on the basis that Delta could have little room to spread in an Omicron-dominant area.
POLITICS & ELECTIONS
— The Hill (link) lists 10 Republicans most likely to run for president in 2024. The list:
- Donald Trump
- Ron DeSantis
- Mike Pence
- Chris Christie
- Nikki Haley
- Ted Cruz
- Mike Pompeo
- Kristi Noem
- Tom Cotton
- Larry Hogan
Comments: Such lists are sometimes notable for not including the actual nominee. For example, the list does not include someone who some say could have a good chance of winning the office: Sen. Tim Scott (R-S.C.).
CONGRESS
— Harry Reid, who led the Democrats in America’s Senate for 12 years, has died at the age of 82, after a battle with pancreatic cancer. Reid served as the senator for Nevada for three decades and is regarded as one of the most influential recent American lawmakers. He is credited as being instrumental in the passage of President Barack Obama’s most important legislation, including the Affordable Care Act (ObamaCare). The New York Times (link) says that “even by the standards of the political profession...what Mr. Reid overcame was extraordinary. He was raised in almost Dickensian circumstances in tiny Searchlight, Nev.: His home had no indoor plumbing, his father was an alcoholic miner who eventually committed suicide, and his mother helped the family survive by taking in laundry from local brothels.”
OTHER ITEMS OF NOTE
— U.S. and Russia have agreed to hold security talks on Jan. 10, amid tensions over Russian forces deployed near Ukraine, and Moscow’s demands that NATO renounce any expansion eastward into the former Soviet bloc. “When we sit down to talk, Russia can put its concerns on the table, and we will put our concerns on the table with Russia’s activities as well,” a spokesman for President Biden’s National Security Council said Tuesday. “There will be areas where we can make progress, and areas where we will disagree.” Deputy Russian Foreign Minister Sergey Ryabkov said that he expected the talks to focus on security proposals the Kremlin provided the U.S. earlier this month that would preclude NATO’s expansion eastward and Western military activities near Russia’s periphery. “These items are all integral items of our stance,” Ryabkov told the Interfax news agency. “We cannot do without a serious discussion of those exact themes in the course of the forthcoming contacts.”
— Talks on reviving the Iran nuclear deal in Vienna are showing some progress but it’s “far too slow,” a U.S. official said. Tehran “has at best been dragging its feet in the talks while accelerating its nuclear escalation,” State Department spokesman Ned Price said in a press briefing. “We have been very clear that that won’t work.” If Iran continues at that pace, it will be too late to restore the 2015 agreement between Iran and world powers, Price said.
— John Madden, legendary NFL coach, Hall of Famer and sports broadcasting icon, has died unexpectedly at the age of 85. “He was football,” NFL Commissioner Roger Goodell said. “There will never be another John Madden, and we will forever be indebted to him for all he did to make football and the NFL what it is today.” During his 10 years as coach, Madden never suffered a losing season and only missed the playoffs twice. His career regular-season record of 103-32-7 gives him the highest winning percentage in NFL history among coaches with at least 100 victories.