UN Report: 'Code Red for Humanity'; Climate Change 'Unequivocal’
Physical infrastructure on path to successful vote | Next up: Resolution, $3.5 trillion package
In Today’s Digital Newspaper
Market Focus:
• Uber and Lyft prices are at record highs
• Several Fed officials scheduled for speaking appearances this week
• Investors parking over $1 trillion in spare cash overnight at Federal Reserve
• Silver prices set to rally again
• Is gold a good hedge against inflation? Not according to the data
• Oil prices tumble on worries over China Delta variant outbreak
Policy Focus:
• Votes in place for physical infrastructure measure
• Next up: Budget resolution and $3.5 trillion ‘human’ infrastructure bill
Biden Administration Personnel:
• Senate Ag panel to vote on Bonnie and Torres Small
China Update:
• China’s factory-gate prices rose at unexpectedly fast clip in July
• Chinese export and import growth slowed in July
• Blinken will deliver competition with China speech this afternoon
Energy & Climate Change:
• Climate change has hit an 'unprecedented' and dangerous level: UN report
Livestock, Food & Beverage Industry Update:
• Sanderson Farms announces deal to sell itself for around $4.5 billion
• New rules for dogs being imported into the U.S. from certain regions of world
• Farther Farms raises over $10 million for technologies to maintain shelf life of food
• McDonald’s pushes diners to use trays as food bags run tight
Coronavirus Update:
• A look at Americans not vaccinated
• Canada opens to U.S. tourists
• Study: Pfizer booster causes similar side effects to second dose
Politics & Elections:
• Five GOP senators up for re-election voted Saturday for infrastructure bill
• Pelosi to White House: “Get better lawyers”
• Cuomo has until Friday to submit evidence in his defense in impeachment investigation
• Japanese Prime Minister Yoshihide Suga sees support slip
MARKET FOCUS
Equities today: U.S. equity futures are slightly lower. Tyson, Disney and eBay are planning to release their financial results this week. In Asia, most major benchmarks rose. The Shanghai Composite Index added 1.1% and Hong Kong’s Hang Seng Index climbed 0.4%. Japanese markets were closed for a holiday.
U.S. equities Friday: The Dow rose 144.26 points, 0.41%, to 35,208.51. The S&P 500 added 7.42 points, 0.17%, to 4,436.52, setting it 44th record-high close of 2021. The Nasdaq Composite fell 59.36 points, 0.4%, to 14,835.76.
For the week, the Nasdaq (COMP.IND) rose 1.1% to lead the major averages, despite a Friday decline. The S&P rose 0.9% and the Dow gained 0.8%.
On tap today:
• U.S. job openings and labor turnover survey for June is out at 10 a.m. ET.
• USDA Grain Export Inspections report, 11:00 a.m. ET.
• Federal Reserve: Atlanta's Raphael Bostic speaks at a Greater Fort Lauderdale Alliance event and Richmond's Thomas Barkin speaks to the Roanoke Regional Chamber at 11:30 a.m.
• USDA Crop Progress report, 4 p.m. ET
• Mexican President Andrés Manuel López Obrador holds a phone call with U.S. Vice President Kamala Harris on Covid-19 vaccine cooperation efforts.
Several Fed officials are scheduled for speaking appearances in the week ahead. Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin, Chicago Fed President Charles Evans and Kansas City Fed President Esther George are all set to speak this week.
Investors such as money-market funds and banks are parking over $1 trillion in spare cash overnight at the Federal Reserve. That is the most on record since the Fed opened its facility for these reverse repurchase agreements in 2013.
Uber and Lyft prices are at record highs. The average fare in the U.S. rose month-to-month from February through July, touching new highs every time, according to data from Rakuten Intelligence, a market-research firm that based its analysis on e-receipts from more than one million consumers. The sky-high prices, which the companies say are driven by the continuing labor shortage, come despite a recent influx of drivers.
Market perspectives:
• Outside markets: The U.S. dollar index was nearly unchanged despite the euro and yen being slightly weaker against the greenback. The yield on the 10-year U.S. Treasury note has fallen to trade under 1.28% with a mostly lower trend in global government bond yields. Gold and silver futures are under pressure, with gold trading below $1,745 per troy ounce and silver under $23.95 per troy ounce.
• Crude oil prices have seen pressure ahead of U.S. market action, with U.S. crude trading around $65.40 per barrel and Brent around $67.85 per barrel. Concerns on Covid pressured crude prices in Asian trading, with U.S. crude down $1.49 at $66.79 per barrel and Brent was down $1.50 at $69.20 per barrel.
• Silver prices are set to rally again. Silver prices are vulnerable to a wave of selling this month and into September but then are expected to rise, analysts say. Link to Barron’s article for details.
• Is gold a good hedge against inflation? Not according to the data. If gold were a good and consistent hedge, the ratio of its price to the consumer-price index would have been relatively steady over the years. But that hasn’t been the case. Over the past 50 years, the ratio has fluctuated from a low of 1.0 to a high of 8.4. Gold’s real, or inflation-adjusted, price fluctuates no less than that of any other asset over time frames relevant to investors. Link for details via the WSJ.
• CFTC Commitments of Traders report. (Source: Barron’s)
• NWS weather: Heavy rain and severe storms possible in the Midwest and Great Lakes through Tuesday; severe weather returns to the Northern Plains today... ...Above average temperatures and oppressive humidity found across the central U.S., shifting into the Northeast by Tuesday... ...Poor air quality due to wildfire smoke found throughout parts of the High Plains and West.
POLICY FOCUS
— After a coming vote on the physical infrastructure measure, Senate Democrats plan to immediately turn to a resolution to set up the second part of President Joe Biden’s infrastructure plan. The text of that resolution, including how much would be spent in each area, could be released soon. Sen. Bernie Sanders (I-Vt.) told reporters last night that they've be introducing the budget resolution as soon as today. Called the “human” infrastructure plan, the $3.5-trillion package includes progressive priorities such as subsidies for childcare, tuition-free community college, additional Medicare benefits and potentially a pathway to citizenship for people in the country illegally.
Go-it-alone Democratic bill. Because Republicans universally oppose the package, Democrats plan to pass it through a fast-track legislative process that requires a simple majority and doesn’t allow for a GOP filibuster.
Senate Majority Leader Chuck Schumer (D-N.Y.) has committed to holding a vote on the resolution framework before senators leave for their August recess, though the legislation won’t be written and ready for final passage until they return in September.
Pelosi is waiting and watching. In response to progressive Democrats who fear that the Senate won’t be able to pass the second, larger bill, House Speaker Nancy Pelosi (D-Calif.) has agreed to delay voting on the bipartisan infrastructure plan until the Senate acts on the follow-on proposal. “We are going to do this when we can do itall,” Pelosi said.
For now, the Senate focus is on finalizing the physical infrastructure bill ($1 trillion consisting of $550 billion in new funding an $450 billion in existing appropriations). The roughly package cleared a key procedural hurdle on Saturday. Then in a 68-29 vote on Sunday evening, the Senate closed debate on the bill. Sens. Dan Sullivan (R-Alaska) and Roger Wicker (R-Miss.) supported ending debate, after previously voting against moving forward. Sunday’s vote came after senators spent the weekend haggling over amendments and time agreements to consider them. Final passage of the legislation is expected late Monday night, or early Tuesday at the latest. Amendments still on the physical infrastructure table include proposals for new cryptocurrency rules and flexibility for states and localities that choose to use some unspent pandemic relief funds for roads and bridges.
BIDEN ADMINISTRATION PERSONNEL
— Vote on Bonnie and Torres Small to take place this morning by Senate Ag Committee. The nominations of Robert Bonnie to be USDA’s Undersecretary of Agriculture for Farm Production and Conservation and Xochitl Torres Small for Undersecretary of Agriculture for Rural Development will take place by panel members as they gather near the Senate floor when the first vote of the day is held, according to a statement released by Chairwoman Debbie Stabenow (D-Mich.) and ranking member Sen. John Boozman (R-Ark.).
CHINA UPDATE
— China’s factory-gate prices rose at an unexpectedly fast clip in July, matching the highest level in more than 12 years as crude oil and coal prices soared. China’s producer-price index rose 9% from a year earlier, the National Bureau of Statistics said today. The price increases came despite measures taken by Beijing in recent months to cool soaring commodity costs. Fortunately for Chinese policy makers, the high producer prices haven’t fed through to consumers. China’s consumer-price index rose 1% from a year earlier in July, down from June’s 1.1% gain.
— Chinese export and import growth slowed in July as flooding and extreme weather at home disrupted factory and port operations and constrained consumption. Despite the challenges, China’s export sector showed continued resilience, increasing 19.3% in dollar terms in July compared with a year earlier, data from the General Administration of Customs showed Saturday. That marked a retreat from June’s 32.2% year-over-year gain, but was largely in line with the 20% growth forecast by economists.
— Secretary of State Antony Blinken will deliver a competition with China speech this afternoon in which he will connect investments in domestic infrastructure to U.S. competitiveness abroad. “He will make the case that what we do now in terms of our long-term domestic investments will cement for decades to come our global competitiveness, including vis-à-vis China and the rest of the world, and demonstrate that our democracy can deliver for our people,” according to the State Department.
ENERGY & CLIMATE CHANGE
— UN climate report a ‘code red for humanity.’ Earth’s climate is getting so hot that temperatures in about a decade will probably blow past a level of warming that world leaders have sought to prevent, according to a report released Monday that the United Nations calls a “code red for humanity.” The Intergovernmental Panel on Climate Change (IPCC) report (link), which calls climate change clearly human-caused and “unequivocal,” makes more precise and warmer forecasts for the 21st century than it did last time it was issued in 2013.
The earth has already warmed by 1.1 degrees Celsius since the 19th century. Within the next two decades, according to the report, warming to more than 1.5 degrees Celsius above preindustrial levels is virtually inevitable — leading to more frequent heat waves, droughts, and extreme weather events similar to those that have ravaged countries in recent weeks.
The report’s findings will also help inform policymakers as the world prepares to gather for the United Nations Climate Change Conference, known as COP26, in Glasgow, Scotland, in November. British Prime Minister Boris Johnson called the report “sobering reading” and argued “it is clear that the next decade is going to be pivotal to securing the future of our planet,” calling for action before the U.K. hosts the summit.
LIVESTOCK, FOOD & BEVERAGE INDUSTRY
— Chicken producer Sanderson Farms announces sale for $4.53 billion to ag-investment firm Continental Grain, which owns a smaller chicken processor, and Cargill. The deal was first reported by the Wall Street Journal (link). Mississippi-based Sanderson is the country’s third-biggest chicken producer. It runs 13 poultry plants from North Carolina to Texas, processing about 13.6 million chickens a week.
Perspective: Combining Sanderson with Georgia-based Wayne Farms LLC, a poultry company owned by Continental, would form a new competitor representing about 15% of U.S. chicken production, according to data from Watt Poultry USA. Tyson Foods Inc. leads the industry with about one-fifth of the market, while Pilgrim’s Pride Corp. PPC 1.29% represents about 16% of the national total.
The transaction coincides with increasing scrutiny in Washington on consolidation among meatpackers. The chicken industry alone has been the focus of years of antitrust hearings and several civil lawsuits.
— New rules for dogs being imported into the U.S. from certain regions of the world were released by USDA’s Animal and Plant Health Inspection Service (APHIS). They must arrive in cages free of dirt, hay, wood chips or other organic bedding, and be bathed within two days of arriving at U.S. ports of entry. The measures are intended to prevent the spread of African swine fever, a highly contagious illness that is lethal to pigs. It has been found beyond the African continent in places including China and the European Union, and U.S. officials are eager to prevent it from arriving here.
The National Pork Producers Council applauded the move. “Each year, several thousand dogs enter the country for resale or adoption,” Chief Veterinarian Liz Wagstrom said in a statement. “If even one of these animals carried ASF into the country, it could put the U.S. swine herd and other livestock in jeopardy and have disastrous consequences for our nation’s agriculture sector.”
— Farther Farms, a startup in Rochester, has raised over $10 million to develop technologies to maintain the shelf life of food — like a bag of fast-food french fries that lasts 90 days without freezing. Link for details.
— McDonald’s pushes diners to use trays as food bags run tight. The burger chain recently told restaurant owners that they needed to limit orders of bags from suppliers as usage is running ahead of already high numbers last year — the latest supply challenge affecting U.S. restaurants, the Wall Street Journal reports (link).
CORONAVIRUS UPDATE
— Summary: Global cases of Covid-19 are at 205,756,183 with 4,294,608 deaths, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University. The U.S. case count is at 35,764,022 with 616,829 deaths. The Johns Hopkins University Coronavirus Resource Center said that there have been 351,400,930 doses administered, 166,477,481 have been fully vaccinated, or 50.7% of the U.S. population.
— A look at Americans not vaccinated:
— Canada opens to U.S. tourists. The country plans to reopen its borders today for fully vaccinated U.S. citizens and permanent residents, lifting pandemic-related restrictions in place since March of last year, after the government and union negotiators representing Canada's border agents struck a new labor deal.
— Pfizer booster causes similar side effects to second dose, according to study. Most people who got a booster shot of the Pfizer vaccine had similar or fewer side effects than they did after the second dose, according to a preliminary study conducted by Israel’s largest health maintenance organization.
POLITICS & ELECTIONS
— Of the 18 Senate Republicans who voted for the physical infrastructure measure on Saturday, only five are considered likely to run for re-election in 2022: Mike Crapo (Idaho), Chuck Grassley (Iowa), John Hoeven (N.D.), Lisa Murkowski (Alaska) and Todd Young (Ind.). Most of the GOP opposes the bill, citing the high cost and a report by the Congressional Budget Office that revealed half of the measure’s $550 billion in new spending will not be offset and will increase the nation’s deficit. Republicans also oppose a move by Democrats to link the package to a $3.5 trillion social spending bill that no GOP lawmaker supports. The second bill would pay for universal day care, free community college, expanded Medicare benefits, and other liberal wish list items including more funding to implement a New Green Deal package.
— Pelosi to White House: “Get better lawyers.” According to a NYT report (link), that is what House Speaker Nancy Pelosi (D-Calif.) said to a Biden aide after being told that White House lawyers believed a nationwide evictions ban exceeded the government’s legal power.
— New York Democratic Gov. Andrew Cuomo has until Friday to submit evidence in his defense in an impeachment investigation. State officials say they are nearing the end of their probe, which found that Cuomo harassed multiple women on his staff.
— Japanese Prime Minister Yoshihide Suga has seen his support slip to its lowest level since he took charge in September 2020, according to a new poll published by Asahi Shimbun today. Just 28% of those surveyed support Suga’s government, while 60% said they did not want him to stay on as prime minister. The polls will likely be a key consideration as Suga’s Liberal Democratic Party meets on Aug. 26 to set a date for the next general election, which must take place on or before Oct. 22 per the Japanese constitution.
