Provision on Freight Cars in Infrastructure Bill Will Catch China’s Attention
White House to closely watch EIA energy price data tomorrow
In Today’s Digital Newspaper
Market Focus:
• Several Fed speakers on tap today
• More robots ahead to deal with declining number of workers who want to work
• UAE energy minister defends OPEC+ position
• U.S. Energy secretary hopes gas prices won't reach $4
• Record natural gas exports compound price woes
Policy Focus:
• Biden tweaks former President Trump, saying it is ‘finally transportation week’
• Foreign freight car ban in BIF will catch China’s attention
China Update:
• China’s trade surplus hit a record high last month
• Chinese intelligence officer convicted in America of espionage & theft of trade secrets
• Communist Party’s decision-making Central Committee takes place Monday-Thursday
Energy & Climate Change:
• Carbon tax lacks one key vote for Biden’s climate bill
• EPA rejects a biofuel exemption petition
Coronavirus Update:
• Federal appeals court temporarily blocks Biden admin.’s new vaccine mandate rule
• U.S. opens borders to international travelers
• Japan lifting ban on short-term business travelers and foreign workers
• Covid-19 infections in Germany reached a record high
Politics & Elections:
• Senate GOP campaign chief to help Murkowski against Trump-endorsed challenger
• GOP New Hampshire Gov. Chris to make decision soon re: possible run for Senate
• Biden’s approval rating slumps again, now at 38%
Other Items of Note:
• Suspected foreign hackers breached nine organizations
MARKET FOCUS
Equities today: Global stock markets were mixed in overnight trading. The U.S. stock indexes are pointed to mixed openings. Overnight the MSCI Asia Pacific Index was unchanged while Japan’s Topix index closed 0.3% lower.
U.S. equities Friday: The Dow climbed 203.72 points, 0.6%, to 36,327.95 and advanced 1.4% for the week. The Nasdaq Composite gained 31.28 points, 0.2%, to 15,971.59 and added 3.1% for the week — its best weekly performance since April. The S&P 500 rose 17.47 points, or 0.4%, to 4697.53 and added 2% for the week, marking its biggest weekly percentage gain since June. About 82% of S&P 500 companies that have reported results this earnings season have topped analysts’ earnings forecasts, according to FactSet data.
On tap today:
• Federal Reserve speakers: Vice Chairman Richard Clarida on inflation targeting and prospects for U.S. monetary policy at 9 a.m. ET, Chairman Jerome Powell opening remarks at a conference on gender and the economy at 10:30 a.m. ET, New York’s John Williams at a Bank of Canada conference at 10:55 a.m. ET, governor Michelle Bowman on the housing market at 12 p.m. ET, Philadelphia's Patrick Harker at the Economic Club of New York at 12 p.m. ET, and Chicago’s Charles Evans at an OESA Automotive Supplier Conference at 1:50 p.m. ET.
• USDA Grain Export Inspections report , 11:00 a.m. ET.
• The Milwaukee Bucks will appear with President Biden at the White House to celebrate their NBA championship. 2:50 p.m. ET.
• USDA Crop Progress report, 4:00 p.m. ET.
Here come the robots. Some one-third of firms confronting difficulties in hiring are implementing or exploring automation to replace workers, a recent Federal Reserve survey of chief financial officers found. “Tight labor supply” at Hormel Foods Corp. has seen the maker of Spam spread and Skippy peanut butter “ramping up our investments in automation,” Mark Coffey, a group vice president says.
Market perspectives:
• Outside markets: The U.S. dollar is little changed. The yield on 10-year Treasuries advanced three basis points to 1.48%. Gold futures were little changed.
• Oil is ticking higher again this morning, with a barrel of West Texas Intermediate for December delivery trading above $82 a barrel.
• United Arab Emirates Energy Minister Suhail Al-Mazrouei defended the OPEC+ position saying crude could be “double or triple” today’s prices without the group’s actions. Meanwhile in Europe, the price of natural gas surged again on signs the promised boost in supplies from Russia will not materialize.
• Energy secretary says she hopes gas prices won't reach $4. Energy Secretary Jennifer Granholm said on Sunday that she hopes gas prices will not reach $4 per gallon soon, adding that the Organization of the Petroleum Exporting Countries (OPEC) is “controlling the agenda.” According to AAA, the national average of gas prices is now $3.42 a gallon. Bank of America is predicting crude oil prices could soar another 50 percent by next June. Could the average gas price in America be $4 a gallon in the United States soon?” State of the Union co-anchor Dana Bash asked Granholm on CNN. “Well, we certainly hope not," the Energy secretary answered, saying President Biden "is all over this." She also acknowledged that Americans should expect to pay higher costs for heating their homes in the winter. “We have the same problem in fuels that the supply chains have, which is that the oil and gas companies are not flipping the switch as quickly as the demand requires.” On whether President Biden would consider using the Strategic Petroleum Reserve (SPR) to counteract high gas prices: “That’s one of the tools that he has. And he’s certainly looking at that.” As of Oct. 29, the SPR has a total of 612.5 million barrels of crude stored across four sites. Of that, only about 40% is sweet crude.
• Biden administration will consider energy price info coming out tomorrow as it weighs measures to stem high gasoline prices, including tapping the SPR, Energy Secretary Jennifer Granholm said. The monthly survey by the U.S. Energy Information Administration is the latest marker in Biden’s effort to counter high crude prices and a snub of his request to key producers, including Saudi Arabia and Russia, to increase output more quickly. “The president is all over this,” Granholm said on CNN’s State of the Union on Sunday. “I think we’ll be looking at that forecast that’s coming out on Tuesday.”
• Record natural gas exports compound price woes. American utilities are facing the highest natural-gas prices in years as they build stockpiles for winter. The reason: Exporters are sending more gas than ever to countries starved for the fuel. Pipelines to Mexico and Canada and tankers traveling to Europe and Asia have moved record amounts of U.S. gas out of the country this year as parts of the world fall short of supplies. American frackers, meanwhile, are holding the line on new drilling as investors pressure them to maintain capital discipline and return money to shareholders.
• CFTC Commitments of Traders report (Source: Barron’s):
• NWS weather: There is a marginal risk of excessive rainfall over parts of Northern California through Tuesday morning... ...Rain and higher elevation snow over parts of the Pacific Northwest, Northern/Central California, and Northern Rockies/Great Basin... ...Temperatures will be 10 to 20 degrees above average over the Southern High Plains, Middle Mississippi Valley, and Upper Midwest.
POLICY FOCUS
— President Biden tweaked former President Trump when he said it is “finally transportation week.” President Biden will head to Baltimore on Wednesday “to discuss how the Bipartisan Infrastructure Deal delivers for the American people by upgrading our nation’s ports and strengthening supply chains to avoid disruptions.” White House officials have promised more trips by Biden and other senior administration officials to get out their message on the infrastructure bill in coming weeks and months.
The roughly $1 trillion infrastructure passed late Friday by Congress will modestly help the economy in the short run while priming the country for slightly stronger growth in coming decades, economists say. The law includes roughly $550 billion in additional spending on top of what the gov’t already planned to spend over the next decade on infrastructure. About a fifth of the new spending is earmarked for building and repairing roads. Smaller components will be used to improve broadband networks, subway systems, passenger railways, airports, ports and power facilities. See The Week Ahead for details of the bipartisan infrastructure bill.
— Foreign freight car ban is included in the new bipartisan infrastructure bill, and it will catch China’s attention. Freight cars manufactured one year following enactment could only operate in the U.S. if:
- The manufacturer isn’t owned or controlled by a foreign government of concern.
- Sensitive technology on the freight car doesn’t originate from a state-owned company.
- None of the content of the freight car originates from a country of concern or a company that has violated U.S. intellectual property rights.
The ban would effectively apply to freight cars manufactured by China. Freight cars couldn’t have more than 20% of such content one year after the department issues the new regulations. The maximum would drop to 15% three years after regulations are issued.
Manufacturers could be fined between $100,000 to $250,000 for each freight car that’s in violation. The Transportation Department could prohibit repeat violators from providing additional freight cars for operation on the U.S. freight railroad system. Manufacturers would also have to certify that they meet the requirements annually.
CHINA UPDATE
— China’s trade surplus hit a record high last month. China’s exports rose 27.1% from a year earlier in October, the General Administration of Customs said Sunday, while imports increased 20.6% on year. The trade surplus touched $84.54 billion. Thanks to robust global demand, China’s exports have repeatedly exceeded market expectations since bouncing back last year. The better-than-expected trade data is likely to be one of the few bright spots for the Chinese economy last month as other growth pillars, including industrial production and consumption, may have slowed further.
— A Chinese intelligence officer was convicted in America of espionage and theft of trade secrets. Yanjun Xu is the first spy from China to be extradited to America to stand trial. He had tried to steal technological know-how from leading American aviation firms, including GE. Xu, who was arrested in Belgium while meeting a contact, faces up to 60 years’ jail time.
— High-profile meeting of the Communist Party’s decision-making Central Committee takes place from Monday through Thursday, in which President Xi Jinping could lay the foundation for extending his term as leader. While no economic plans are expected from the plenary sessions, analysts will be watching closely for any signals on future policy. The plenum of the Central Committee, a body comprising 370 members of China’s political and military elite, will vote by Thursday on a resolution on party history. It is only the third such resolution in its 100 years of existence, after ones issued by Mao Zedong and Deng Xiaoping
ENERGY & CLIMATE CHANGE
— Carbon tax lacks one key vote for Biden’s climate bill. The White House and at least 49 senators support a proposal to impose an almost $20 per-ton fee on carbon as part of the reconciliation legislation, Sen. Sheldon Whitehouse (D-R.I.) said Saturday. Under the initiative, the cost on carbon dioxide emissions would start at less than $20 per ton and increase over time, with revenue possibly rebated back to some consumers or dedicated to help fossil fuel workers amid the transition to clean energy, Whitehouse said. Whitehouse is still trying to win over Sen. Joe Manchin (D-W.Va.), who is a swing vote on the legislation and who has said he would oppose a carbon tax.
— EPA rejects a biofuel exemption petition. The Environmental Protection Agency has rejected so far one petition from an oil refiner to be exempted from the nation's biofuel blending laws for the 2019 compliance year, Reuters reported. Link to article.
Renewable Fuels Association President and CEO Geoff Cooper said, “We are greatly encouraged by EPA’s decision to deny this bailout request from an oil refinery that has continually attempted to dodge its legal obligations to blend low-carbon renewable fuels… It appears EPA and DOE are indeed following the criteria for deciding SRE petitions established by the Tenth Circuit Court decision in the RFA et al. v. EPA case,” Cooper said. “Our industry lost more than 4 billion gallons of demand due to the previous administration’s rampant abuse of the SRE program, and we are pleased to see that the days of EPA-induced demand destruction appear to be behind us. EPA’s new leadership appears to be making good on its promises to rein in the SRE program, and today’s decision is consistent with the new policy direction announced by EPA earlier this year and President Biden’s position that the last administration’s SRE abuse was a ‘gigantic mistake.’ “However, 65 exemption petitions are still pending, and we urge the agency to swiftly deny any and all remaining applications that fail to pass the common-sense test established by the 10th Circuit.”
CORONAVIRUS UPDATE
— Summary: Global cases of Covid-19 are at 249,990,033 with 5,051,520 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 46,488,375 with 754,431 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 429,123,720 doses administered, 193,832,584 have been fully vaccinated, or 59.05% of the U.S. population.
— Federal appeals court in Louisiana temporarily blocked the Biden administration’s Covid vaccine mandate for large companies. The U.S. Court of Appeals for the Fifth Circuit granted a temporary stay to a group of businesses, religious groups and several states who argued that the administration had overstepped its authority when it directed big businesses to require their employees to be vaccinated by January. The judges cited “grave statutory and constitutional issues with the mandate.” The ruling came in response to a legal challenge from Texas Attorney General Ken Paxton (R). Attorneys general in 11 states — 10 Republicans and one Democrat — object to new rules requiring employees at companies with more than 100 workers to get vaccinated or test negative weekly, starting Jan. 4. They allege that the federal government lacks the constitutional authority to issue such a requirement. The agency that devised it, they contend, deviated from the proper rule-making process.
Surgeon General Vivek Murthy said President Biden's administration is ready to fight for the implementation of a vaccine requirement for large businesses following the court ruling. “The president and the administration wouldn't have put these requirements in place if they didn't think they were appropriate and necessary," Murthy said during an appearance Sunday on ABC's This Week. "And the administration is prepared to defend them," he added.
— U.S. opens borders to international travelers. Foreign nationals who meet certain requirements will be allowed to enter the U.S. beginning today as the country eases more pandemic-related restrictions. Other than American citizens, nearly everyone had been barred entry since early 2020. Land borders are to open, airlines anticipate an onslaught of bookings and airports will struggle to keep up.
— Japan is lifting its ban on short-term business travelers and foreign workers. The decision to allow these groups to enter the country followed a sharp fall in new Covid-19 infections, with the country now reporting only a few hundred new cases a day. More than 70% of Japan’s population is fully vaccinated.
— Covid-19 infections in Germany reached a record high. New cases hit 201.1 per 100,000 residents in the past week; the previous record was 197.6 last December. Germany’s vaccination campaign has struggled: around two-thirds of the population are fully jabbed. The rise in cases has prompted calls to reinstate free rapid tests, which were scrapped to incentivize vaccination.
POLITICS & ELECTIONS
— Senate GOP campaign chief to help Murkowski against Trump-endorsed challenger. Sen. Rick Scott (R-Fla.), chairman of the Senate GOP campaign arm, said on Sunday that he will help Sen. Lisa Murkowski’s (R-Alaska) re-election efforts, even though former President Trump has already endorsed a challenger against her. Murkowski was one of seven Republican senators to vote to impeach former President Trump earlier this year. In June, Trump announced that he would be endorsing a challenger to the Republican incumbent, saying he supported former Alaska Commissioner of Administration Kelly Tshibaka.
— GOP New Hampshire Gov. Chris Sununu told Fox News that he would likely make a decision about whether he will run for the Senate “in the next week or so. Maybe sooner.”
— President Joe Biden’s approval rating slumped again and is now at 38%, according to a new national poll from USA Today/Suffolk University. Things are worse for VP Kamala Harris, who scores a 28% job approval. Other numbers in the poll:
- 16% of those who voted for him say Biden has done a worse job as president than they expected.
- 44% of independents say he’s done worse than they expected.
- 64% say they don’t want Biden to run for reelection, including 28% of Democrats.
OTHER ITEMS OF NOTE
— Cybersecurity: Suspected foreign hackers have breached nine organizations in the defense, energy, health care, technology and education sectors, including at least one organization in the United States. The National Security Agency and other federal units have been working with cybersecurity experts to track down hackers trying to steal key data from U.S. defense contractors and other sensitive targets.
