Biden administration blames China for Microsoft Exchange email hack
In Today’s Digital Newspaper
Market Focus:
• OPEC and Russia clinched deal to increase oil production
• OPEC+ to pump more oil next month, increasing worldwide supplies by 2%...
• But oil supplies are likely to remain tight until at least the fall: analysts
• Crude oil prices under significant pressure in the wake of OPEC+ deal
• Since World War II, six periods when inflation surpassed 5%
• WSJ survey: Economy expanded at 9.1% seasonally adjusted annual rate April-to-June
• WSJ survey: Burst of economic growth is starting to slow, economists say
• Used car prices surging
• Bank of Japan cast inflation rise as temporary
• Ag demand update
• Spring wheat still soaring amid weather woes
• Warm, dry forecast for the western Corn Belt
• Argentina sets aside money to help ease impact of low Parana River levels
• Bread makers in Russia warn of price increases
• Third case of ASF on a German farm
• Three late-week reports of note for cattle complex
• Seasonally tightening hog supplies
Policy Focus:
• Federal judge declares Obama-era DACA program illegal; Biden to appeal
China Update:
• State planner official expects Chinese hog prices to extend rebound near-term
• China’s grain imports soaring vs. year-ago
• China helping alleviate pandemic-driven price pressures
• China continues to focus on commodity hoarding, ‘malicious’ speculation
• Yellen gives Biden administration’s view on Phase 1 trade deal
• Biden administration to blame hackers affiliated with China’s Ministry of State Security
Energy & Climate Change:
• China launches national emissions-trading program
• Impact unclear from court ruling on RFS in favor of environmentalists
Coronavirus Update:
• Unvaccinated Americans are behind rising Covid-19 hospitalizations
• CDC to reveal Covid-19’s toll on life expectancy
• Growing number of Olympic athletes and officials are testing positive for Covid-19
• Biden takes aim at Facebook as the social media titan pushes back
• England to drop almost all Covid-19 restrictions
Politics & Elections:
• 2 more Texas Dems who fled state to block GOP voting bill test positive for Covid
• Democrats voicing “cautious optimism” they can retain Senate control in 2022
Other Items of Note:
• Migrant surge continues along southern U.S. border.
MARKET FOCUS
Equities today: Global stock markets mostly lower overnight. The U.S. stock indexes are pointed toward lower openings. Overnight the MSCI Asia Pacific Index slid 1.3% while Japan’s Topix index closed 1.3% lower. In Europe the Stoxx 600 Index was 1.6% lower in early trading. On the news front, traders are noting the Delta-related surge in Covid cases and news the Biden administration is accusing China of masterminding cyberattacks worldwide.
U.S. equities Friday: The Dow finished down 299.17 points, 0.86%, at 34,687.85. The Nasdaq declined 115.90 points, 0.80%, at 14,427.24. The S&P 500 lost 32.87 points, 0.75%, at 4,327.16.
The major market averages all snapped three-week winning streaks, with the Dow dropping 0.5%, the S&P 500 slipping nearly 1% and the Nasdaq Composite closing 1.8% lower. But the bond market continues to buck inflation fears, as the 10-year U.S. Treasury yield fell to around 1.30%.
On tap today:
• National Association of Home Builders housing market index is expected to hold steady at 81 in July, unchanged from a month earlier. (10 a.m. ET)
• USDA Grain Export Inspections report, 11 a.m. ET.
• USDA Crop Progress report, 4 p.m. ET.
• Treasury Secretary Janet Yellen to hold a meeting of the President’s Working Group on Financial Markets to discuss stablecoins.
Since World War II, there have been six periods when inflation surpassed 5%: |
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Of these six periods, the White House argues the first is the most relevant. “Not surprisingly, supplies were running low or were exhausted entirely during the war,” a group of economic advisers wrote recently (link). “Today’s shortage of durable goods is similar — a national crisis necessitated disrupting normal production processes.” Inflation during that period declined after supply chains normalized and demand leveled off, and the White House argues the same could happen with today’s inflation, too.
Economists surveyed this month by the WSJ, on average, estimated that the economy expanded at a 9.1% seasonally adjusted annual rate in the April-to-June period. That would mark the second-fastest pace since 1983. The survey respondents see growth cooling to a 7% pace in the third quarter and drifting down to a 3.3% rate in the second quarter of 2022.
But that burst of economic growth is starting to slow, economists say. “We’ve moved into the more moderate phase of expansion,” said Ellen Zentner, chief U.S. economist at Morgan Stanley. “We’re past the peak for growth, but that doesn’t mean something more sinister is going on here and that we’re poised to then drop off sharply.” Rather, economists expect the economy to continue growing solidly over the coming year, fueled by job gains, pent-up savings and continued fiscal support. Link to WSJ item.
Used car prices surging. With car companies struggling to keep up with demand and used-car inventory constrained, some car owners are finding their vehicles are worth as much as or more than what they originally paid. Certain popular preowned models, such as the Kia Telluride and Toyota Tundra, regularly sell for thousands of dollars more than the list price of the brand-new versions.
Bank of Japan cast inflation rise as temporary. The Bank of Japan (BOJ) has added its voice to those indicating that while inflationary pressures are being seen, those are likely to be temporary nature. “The underlying increase in commodity prices will worsen Japan’s terms of trade for the time being,” the BOJ said in a report. “But that will be outweighed by positives, such as rising exports and capital expenditure.” Japanese companies tend to lag their Western counterparts in terms of passing along increased prices to consumers. “Looking at past experiences, any rise in consumer inflation driven solely by raw material costs will not broaden, and end up being transitory,” the BOJ noted. Updated forecasts from the bank indicated that they see consumer price inflation rising toward the end of 2021, mostly due to higher energy costs and the base effect of a government effort to lower travel fees late last year. The BOJ stance echoes that of the U.S. Federal Reserve although they have pointed to conditions that are more unique to Japan relative to inflationary responses by Japanese companies.
Market perspectives:
• Outside markets: The U.S. dollar index is firmer ahead of U.S. trading, with the euro, yen and British pound all weaker versus the greenback. The yield on the 10-year U.S. Treasury note has edged down in trading ahead of the U.S. market open, with the yield around 1.23% with a lower trend in global government bond yields. Gold and silver futures are lower, with gold trading around $1,805 per troy ounce and silver around $25.41 per troy ounce.
• OPEC+ agrees to boost oil output as demand roars back, the Wall Street Journal first reported (link). Producers reportedly agreed to increase production by 400,000 barrels a day, moving to restore capacity they cut at the start of the Covid-19 pandemic. The Organization of the Petroleum Exporting Countries (OPEC) said Sunday that the cartel and its allies agreed to begin increasing oil production in August, with the goal of eliminating a 5.8 million barrel-per-day cut by September 2022. The United Arab Emirates, which had objected to a previous plan to phase out production cuts because it wanted to increase its baseline for oil production, expressed its support for the deal. Brent crude futures fell 2.7% to $71.64/bbl on the news, while WTI crude slipped 2.9% to $69.49/bbl.
• Crude oil prices are under significant pressure in the wake of the OPEC+ deal on output. US crude us trading under $69.55 per barrel and Brent under $71.45 per barrel. Futures were weaker in Asian action, with US crude down 74 cents at $71.07 per barrel and Brent down 82 cents at $72.77 per barrel
• CFTC Commitments of Traders report (Source: Barron’s)
• Ag demand: Bangladesh’s state grains buyer is considering offers in its tender to buy 50,000 MT of wheat; the country reportedly withdrew a previous tender to buy 50,000 MT of wheat. The Philippines bought around 50,000 MT of animal feed wheat to be sourced from the Black Sea Region.
• NWS weather: Heavy rain and scattered flash flooding possible between the Southeast and Southern Plains today, with the Southwest Monsoon remaining active as well... ...Excessive heat continues across the Northern Plains... ...Elevated to critical fire weather found throughout the northern High Plains, northern Great Basin, as well as northern California.
Items in Pro Farmer’s First Thing Today include:
• Spring wheat still soaring amid weather woes
• Warm, dry forecast for the western Corn Belt
• Argentina sets aside money to help ease impact of low Parana River levels
• Bread makers in Russia warn of price increases
• Third case of ASF on a German farm
• Three late-week reports of note for cattle complex
• Seasonally tightening hog supplies
POLICY FOCUS
— Federal judge declares Obama-era DACA program illegal; Biden to appeal. A Texas federal judge on Friday ruled that the Deferred Action for Childhood Arrivals (DACA), an Obama-era policy that shields certain illegal immigrants from being deported, is unlawful and blocked new applications from being filed. President Biden said the U.S. will appeal a federal judge’s ruling.
Details: U.S. District Judge Andrew Hanen argued that the policy goes against the Constitution because Congress never provided the executive branch authorization to grant deportation reprieves to illegal immigrants in the United States. DACA, established in 2012 by President Barack Obama’s administration, has granted an estimated 800,000 individuals protection. Hanen ruled in favor of Texas and eight other conservative states that sued to halt DACA — suing alongside Texas were Alabama, Arkansas, Kansas, Louisiana, Mississippi, Nebraska, South Carolina and West Virginia, states that all had Republican governors or state attorneys general. After arguing that the Department of Homeland Security violated the Administrative Procedure Act, Hanen ruled that DHS now needs to stop approving new DACA applications.
The order does not affect the status of current DACA recipients, the judge wrote. Illegal aliens in the U.S. who were 30 years or younger received protection from the program. To receive DACA protection, they must have arrived in the country by 2007 before they turned 16, and they also had to be a student or a graduate with no serious criminal record, among other requirements. This will put more pressure on Congress and the Biden administration to try and pass a permanent law.
Background: The Trump administration announced it was ending the program in September 2017, but the U.S. Supreme Court ruled in 2020 that the administration hadn’t ended the program properly, keeping it alive once more. House Speaker Nancy Pelosi (D-Calif.) vowed in a statement Friday evening that Democrats will continue to push for passage of the DREAM Act and called on Republicans “to join us in respecting the will of the American people and the law, to ensure that Dreamers have a permanent path to citizenship.”
CHINA UPDATE
— State planner official expects Chinese hog prices to extend rebound near-term. Chinese live hog prices “May continue to rebound in stages for a period of time,” Wan Jinsong, the head of the price department under the National Development and Reform Commission, told reporters. Fewer pigs were born in January and February, which should lead to a drop in the number of hogs slaughtered in July and August, according to Wan. Outbreaks of ASF over the winter accelerated slaughter, weighting heavily on prices during the second quarter and in turn triggering panic selling by producers. But prices have risen 15% since the start of June, with China making some domestic pork prices for the first time since 2019. China’s National Development and Reform Commission says it will work with related planners to intensify regulatory measures meant to prevent major swings in hog prices as necessary.
— China’s grain imports soaring vs. year-ago. China imported 3.75 MMT of corn during June, up 305% from year-ago, according to data released by the General Administration of Customs. That pushes its year-to-date (YTD) imports to 15.3 MMT, a 319% surge from last year currently. Its wheat imports at 750,000 MT for June were a bit behind year-ago, but its YTD imports of 5.37 MMT are up 60% from last year at this point. The country also brought in 1 MMT of barley and 1.1 MMT of sorghum during June, a 100% and 61% jump from June 2020, respectively. Halfway through the year, China has imported 5.65 MMT of barley and 4.79 MMT of sorghum, which is up 131% and 169% from year-ago, respectively. Also of note, customs data shows China imported 340,000 MT of pork during June, a 14% dip from year-ago. But its YTD imports at 2.3 MMT are 8.5% ahead of last year’s strong showing.
— China has helped alleviate pandemic-driven price pressures, with many factories absorbing higher costs, and appears likely to keep doing so — at least for a while. Beijing also plans to double down on measures to cool commodity markets.
— China continues to focus on commodity hoarding, ‘malicious’ speculation. Chinese authorities are continuing to focus on commodity prices, with the country’s Ministry of Industry and Information Technology the latest to issue statements about the supply of bulk commodities. Reuters reported that the agency was focusing on the issue. “We will coordinate with relevant departments to ensure the stability of bulk commodities supplies and prices... guide upstream and downstream players in the industrial chain to stabilize production, supply and marketing of raw materials,” ministry spokesperson Huang Libin told a press conference on Friday, according to a transcript on the ministry’s website. “In responding to the risk of the market’s price fluctuation, we must resolutely crack down on hoarding, malicious speculation, and the bidding up of prices.” Other Chinese agencies have focused on commodity prices and have announced efforts to rein in commodity speculation as the country seeks to temper price increases.
— The Biden administration’s view on the trade deal between the U.S. and China was clearly shown by Treasury Secretary Janet Yellen in a New York Times interview (link) where she said it failed to address the “fundamental problems we have with China.” “My own personal view is that tariffs were not put in place on China in a way that was very thoughtful with respect to where there are problems and what is the U.S. interest,” she said at the conclusion of a weeklong trip to Europe. Her comments come as the world’s two largest economies faceoff over a range of issues from Hong Kong to human rights to the pandemic. In Congress, a recently passed House bill which aims to hobble China’s ability to recruit American scientists shows Washington’s willingness to confront the Asian nation’s growing influence. (Note: The Phase 1 agreement did not put the tariffs in place. Meanwhile, the USTR review of China trade policy is still ongoing, with no apparent timeline for it to be completed or at least no signal on when it will be wrapped up.)
— Biden administration today plans to publicly blame hackers affiliated with China’s Ministry of State Security for an unusually indiscriminate cyberattack on Microsoft email software this year. The attribution, in which the U.S. government has “high confidence,” will be part of a broader censure of Beijing’s cyberattacks by the U.S., the European Union, the U.K., Canada, Australia, New Zealand, Japan and NATO, the WSJ reported (link).
ENERGY & CLIMATE CHANGE
— On Friday, China launched a national emissions-trading program, involving 2,225 power sector players that the International Energy Agency says currently make up one-seventh of global carbon emissions. The program started trading carbon allowances between 48 yuan ($7.42) per metric ton and 52.80 yuan per metric ton (a fraction of the European Union’s rate when trading began in early July), according to people familiar with the details, and they rose to their daily limit of 10% within 10 minutes of the launch.
— Impact unclear from court ruling on RFS in favor of environmentalists. The U.S. Court of Appeals for the District of Columbia Friday ruled in favor of environmental groups who challenged EPA’s conclusion that the Renewable Fuel Standard (RFS) levels for 2019 did not pose a danger to the habitats of endangered species. The court said EPA violated the Endangered Species Act by not consulting with the U.S. Fish and Wildlife Service and the National Marine Fisheries Service before setting the 2019 biofuel levels. The ruling orders EPA to reassess the 2019 levels. But the court also rejected claims by the biofuel industry that EPA set the 2019 levels too low and a claim by refiners that the levels were set too high. It is still not clear what impact the ruling will have, and history has shown it may not be a quick turnaround on a reexamination of the issue by EPA.
CORONAVIRUS UPDATE
— Summary: Global cases of Covid-19 are at 190,467,683 with 4,089,900 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 34,080,007 with 609,021 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 337,740,358 doses administered, 1161,232,483 have been fully vaccinated, or 49.1% of the U.S. population.
Out of 157 million people vaccinated by July 6, only 5,186 hospitalized or fatal breakthrough cases have been reported to the CDC, and more than 1,500 of those were asymptomatic, or the hospitalization or death was not related to Covid-19. More than 99% of U.S. Covid-19 deaths in June were among unvaccinated people, and with plenty of vaccines available, death from Covid-19 is preventable.
— Unvaccinated Americans are behind rising Covid-19 hospitalizations. The vast majority of patients driving up Covid-19 hospitalizations in parts of the U.S. are unvaccinated, according to hospitals that are reactivating surge plans used in the peak of the pandemic. As the highly contagious Delta variant spreads nationwide, some hospital and public-health officials said they are preparing for hospitalizations to potentially reach new peaks where fewer people are vaccinated.
— CDC to reveal Covid-19’s toll on life expectancy. Preliminary data due this week could show the expected lifespan of an American suffered its largest drop last year since 1943, during World War II. As well as the coronavirus itself, a surge in fatal drug overdoses during the pandemic likely drove longevity down.
— A growing number of Olympic athletes and officials are testing positive for Covid-19 upon arrival in Japan, demonstrating the difficulty of holding a huge international event during a global pandemic. To limit the risk to the public, officials are deploying strict rules—which could block athletes from participating. The 17-year-old U.S. tennis star Coco Gauff said she has tested positive and will miss the Games.
— Biden takes aim at Facebook. President Joe Biden said Friday that social media platforms like Facebook are “killing people” with misinformation surrounding the Covid-19 pandemic. “They’re killing people -- I mean they’re really, look, the only pandemic we have is among the unvaccinated,” Biden told reporters as he left the White House for Camp David. “And they’re killing people.”
Facebook pushed back. Guy Rose, Facebook’s vice president of integrity, wrote in a post on the company’s website: “President Biden’s goal was for 70% of Americans to be vaccinated by July 4. Facebook is not the reason this goal was missed.”
Dr. Vivek Murthy on Sunday said social media platforms must recognize that they played “a major role” in the spread of misinformation about the Covid-19 pandemic and while they’ve taken some steps to fight back, it hasn’t been enough. “Some of them have worked to try to, you know, up promote accurate sources like the CDC and other medical sources. Others have tried to reduce the prevalence of false sources and search results,” Murthy told CNN’s State of the Union. “But what I’ve also said to them, publicly and privately, is that it’s not enough. That we are still seeing a proliferation of misinformation online. And we know that health misinformation harms people’s health. It costs them their lives.”
— England to drop almost all Covid-19 restrictions. U.K. Prime Minister Boris Johnson is gambling vaccines will prevent another large wave of deaths even as the Delta variant, which is also the dominant form of the coronavirus in the U.S., causes a surge in new cases.
POLITICS & ELECTIONS
— 2 more Texas Dems who fled state to block GOP voting bill test positive for Covid. That is in addition to the three other state Democratic lawmakers on the trip who have already tested positive for Covid-19, the Texas Tribune reported. The infected lawmakers are all fully vaccinated, the report said — and one is experiencing mild symptoms. The Lone Star State Democrats left the state House of Representatives last Monday and flew aboard two chartered flights to the nation’s capital to scuttle a Republican-backed election reform bill by depriving the chamber a quorum.
— Democrats voicing “cautious optimism” they can retain Senate control in 2022. The New York Times reports (link) Senate Democrats “are expressing a cautious optimism that the party can keep control of the chamber in the 2022 midterm elections, enjoying large fund-raising hauls in marquee races as they plot to exploit Republican retirements in key battlegrounds and a divisive series of unsettled GOP primaries.” Recent financial filings show that “swing-state Democratic incumbents, like Senators Raphael Warnock of Georgia and Mark Kelly of Arizona, restocked their war chests with multimillion-dollar sums ($7.2 million and $6 million, respectively).” the NYT adds, “That gives them an early financial head start in two key states where Republicans’ disagreements over former President Donald J. Trump’s refusal to accept his loss in 2020 are threatening to distract and fracture the party.”
OTHER ITEMS OF NOTE
— Migrant surge continues along southern U.S. border. Customs and Border Protection (CBP) reported that its agents had some 188,000 migrant encounters in June. CBP has made more than a million arrests at the U.S.-Mexico border so far this fiscal year, already more than any full-year total since at least 2005. The number of families caught trying to cross reached 55,805 for the month, a 25% increase from May, and unaccompanied children encountered rose to 15,253. These numbers don’t count those who cross illegally and aren’t caught.